The Minister of Finance, Mr Nhlanhla Nene, believes that wage negotiators need to examine the living and working conditions of employees and improve productivity rather than focussing on percentage adjustments.   The Minister also warned that any inflationary settlement in the public sector above 1% will ‘compromise the headcount’ despite the need to maintain a moderate increase in the headcount.   But ‘wage increases’ are meaningless unless they match the loss in the buying power of money.

These were some of the points made by the Finance Minister during an interview on the sidelines of the World Bank-International Monetary Fund (IMF) annual meetings in Washington at the weekend.   These remarks comes from an article by Ntsakisi Maswanganyi in BDLive today – Nene appeals for wage talk moderation.

Further extracts from the report

PUBLIC sector wage increases that are well above inflation are unaffordable and will come at the cost of jobs, Finance Minister Nhlanhla Nene warns.

The public sector wage bill is one of the government’s biggest expenditure items, at R439bn for 2014-15.    About 1.3-million people are employed by the national and provincial governments and their wage talks opened recently with a demand for a 15% increase.

Stanlib chief economist Kevin Lings said the wage settlement would be closely monitored.

“Government finances are under strain.    The wage agreement has to come in at a single-digit percentage increase in order to make the fiscal targets that we have agreed to for the next couple of years,” he said.

“If we give up on those targets and allow the deficit to widen, it will hurt us in terms of credit ratings and the cost of funding.   ”

The state purse has been under pressure, with risks that budget deficit targets may be missed as sluggish economic growth weighs on revenue collection.

Mr Nene said the focus of wage negotiations should move from percentage increases to examining the living and working conditions of employees and improvements in productivity.

There was a need to “look at how well we are doing in efficiencies in revenue collection, but also whether there are any new sources of revenue that we should be looking at” — a veiled reference to future increases in taxes.