Misconceptions & an attack on collective bargaining

(First published on Fin24)

A common misconception, encouraged by media reports and rating agency comments, is that South Africa’s civil service is bloated and has continued to grow while the private sector has shed jobs. But official figures reveal that there are now 32,077 fewer employees on the government payroll than there were seven years ago when the decline in jobs began.

It is, however, true that the civil service has grown over the past 20 years, reaching a peak in 2013 before the decline began. Today there are 47,867 more annual pay cheques to “full-time equivalent employees”. These include part-time and contract staff who may not work for a full year; their time at work is added to make up for equivalent annual labour, something that needs to be analysed more closely.

But also at issue is what constitutes the civil service and how much does the state pay, overall. Most frequently quoted are the figures provided by the government’s payroll, now listing 1.29 million employees. But workers in areas such as provincial and local government departments and tertiary institutions are also paid from the government purse.

Such convoluted facts and the calculations involved help encourage the degree of murk and misinformation now circulating about the South African civil service, the unions and the pay deal struck with government. These issues came to the forefront this month when the combined civil service unions took the government to court for refusing to pay agreed increases for 2020.

Much of the media concentration has been on the size and cost of the civil service, with the common implication being that both are “bloated”. But there is a much larger, and generally unreported, principle at stake: the fate of collective bargaining.

Given the admitted shortage of nurses and other health workers, of teachers and police, none of whom, as a group, can be regarded as highly paid, it can be argued that the civil service is probably understaffed. It is also estimated, for example, that more than 30,000 South African nurses now work abroad, fleeing low pay and poor conditions on the home front.

However, it is true that the government wage bill, however it is calculated, and for however many employees, has increased. According the National Treasury figures, quoted by Africa Check and others, 35.4% of government income now goes to wages.

Adjusted for inflation, and based on figures provided by finance minister Tito Mboweni in the medium term budget, a worker on the lowest civil service pay grade of 16, earned R89,705 a year in 2007. Over the next 12 years, this grew to R130,379, an average of a little less than 4% a year. Grade 16 employees, who were paid little over R2m a year in 2007 had their pay increased by R57,600 over 12 years, making for an annual average increase in real terms of little more than 0.6%., arguably an effective pay freeze.

However, a large number of workers have been promoted through the grades over the years, something which is a function not of unions, but of management. While 31% of civil servants were on Grades 1 to 4 in 2007, this had fallen to 19% by last year. In contrast there are now more than double the numbers of employees in the higher grades, those earning more than R500,000 a year.

For the unions, these facts should put paid to arguments that they have been greedy or unreasonable. They also stress that, by reneging on the third year pay deal, the government has undermined collective bargaining, which is the cardinal principle of modern industrial relations.

The unions see the refusal as a clear case of breach of contract between government and labour after reaching, and signing, a properly negotiated agreement. And they maintain that it took nearly a year of “fruitless” and “fobbed off” attempts at negotiation before they resorted to the courts, triggering a great deal of comment, much of it ill informed.

Far from being a “sweetheart deal”, the agreement signed in May 2018 was arrived at after seven months of hard bargaining. A significant minority of the unions also continued to reject the government’s final offer as inadequate, but had to go along with the majority.

The main dispute the unions had was the government’s insistence on a three-year agreement since it would be based, as most such agreements are, on the official rate of inflation, the consumer price index (CPI). Long term deals enable employers to budget ahead and to avoid time spent on annual negotiations.

But the unions often contest the CPI and the manner it is arrived at. Also, because of the volatility in the global economy, they prefer annual negotiations of wages and conditions.

The second sticking point three years ago was what percentage — on a sliding scale — above the CPI should be agreed. The final deal, for the first year, with CPI at 5.2%, was a 7% pay rise for lower grades, 6.5% for middle grades and 6% for the top grades, all below the unions’ apparent final demand of a minimum 2%.

This was a classic example of collective bargaining in practice. And, for the first two years, the agreement was honoured as the government and the fiscus came under increasing pressure, especially from ratings agencies, about its wage bill. With the next round of public sector negotiations scheduled to start late last year, it became obvious that the government was planning to renege and unilaterally freeze pay for 2020.

Ironically, the year, in labour terms, seems to be ending with the same focus with which it began: collective bargaining. In January the first reported labour dispute erupted at the small hi-tech Hisense plant, north of Cape Town. There was a strike and lockout featuring 300 employees and the demand for a 15% pay rise.

This dispute ended on February 10 with a collective agreement granting a 7% wage rise to be phased in over two years. Management and the National Union of Metalworkers both hailed the manner in which the negotiations had been conducted.

Two weeks later, the government, by reneging on the commitment to 2020 pay rises, launched what unions regarded as a frontal attack on collective bargaining. The hope now is that the new year may again see this cardinal principle of industrial relations upheld.