The majority of the country’s municipalities may not have enough money to fund the Consumer Price Inflation (CPI)-linked increase for the next five years.
The majority of the country’s municipalities may not have enough money to fund the Consumer Price Inflation (CPI)-linked increase for the next five years.
This is according to at least one policy analyst reacting to the South African Local Government Association’s (Salga) announcement that it has reached a landmark agreement with organised labour.
The agreement follows the expiration of a three-year wage deal signed in 2021.
This provides for increases of 3.5% (2021/22), 4.9% (2022/23), and 5.4% (2023/24).
It will come into effect on July 1, 2024 and remain in force until June 30, 2029.
The new “landmark agreement” was reached at the South African Local Government Bargaining Council (SALGBC) following “intense negotiations” held on July 15-19, 2024, July 23-26, 2024, and August 12-15, 2024.
“This Consumer Price Inflation (CPI)-linked agreement spans five years, marking a first in South Africa’s public service history. Salga was mandated by municipalities to negotiate a balanced salary and wage agreement that reflects current economic pressures, particularly in light of several municipalities facing financial distress.
“As part of the agreement, Salga also introduced a revamped exemption process, using a set of financial distress indicators from the National Treasury to assist struggling municipalities,” said Salga.
The agreement provides for a 6% salary increase for 2024/25. For 2025/26 and 2026/27 financial years, municipal workers’ salary increases will be set at CPI plus 0.75%, while 2027/28 and 2028/29 financial years it will be pegged at CPI plus 1.25%.
“The agreement takes into account the challenging economic environment, characterised by high inflation and constrained fiscal resources.
“This deal is expected to provide much-needed stability in the local government sector. Salga, representing 257 municipalities nationwide, along with the South African Municipal Workers’ Union (Samwu) and the Independent Municipal and Allied Trade Union (Imatu), are committed to ensuring the successful implementation of this agreement.”
Policy analyst Nkosikhulule Nyembezi said: “The majority of municipalities do not have enough room in their already stretched budgets to fund salaries and other expense increases from their existing allocations: they require extra money that, in light of this 6% increase, will have to come either from cuts elsewhere or from tax increases.
“The sixth administration sought fiscal savings by delaying and suppressing public sector pay and this administration needs to break away from that bad practice. While the strategy may have reduced the size of the overall pay bill, it lowered morale and created a staffing crisis across municipalities.
“The National Treasury has over the years adopted the arbitrary and over-conservative fiscal rule to forecast falling debt as a share of GDP in five years; it has also adopted a self-imposed limit to borrowing only to fund investment, not day-to-day running costs.
“But it also needs to adopt a more flexible approach to borrowing to fund the public infrastructure without which healthy growth will
Cape Times
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