Major S.African union to seek above-inflation wage hikes, raising strike risk

Wed Apr 19, 2017 11:38am GMT

* Treasury vows to block wage hikes above inflation

* Credit downgrades squeezing government borrowing

* Rand has weakened, likely to stoke inflation

By Mfuneko Toyana

JOHANNESBURG, April 18 (Reuters) - South Africa's largest public sector union vowed on Wednesday to seek wage hikes above the inflation rate in coming negotiations, defying the new finance minister's demands for restraint to avoid further credit downgrades.

The tough stance taken by the National Education Health & Allied Workers' Union (Nehawu) raises the spectre of a protest wave seeking President Jacob Zuma's resignation widening into strikes damaging to Africa's most industrialised economy.

The public sector wage bill accounts for nearly half of government revenue and has risen more than 80 percent over the last decade, with yearly increases averaging more than 6 percent above inflation.

The Treasury may struggle to borrow the extra money it needs to plug the wide budget and capital deficits, as well as meet wage demands from civil servants, after damaging downgrades to junk by S&P Global Ratings and Fitch following Zuma's sacking of respected Finance Minister Pravin Gordhan in late March.

Gordhan's successor, Malusi Gigaba, has pledged to oppose above-inflation wage rises for state employees so as to preserve South Africa's fiscal discipline and stave off a third credit downgrade by Moody's. But two of the largest public sector unions have promised to fight his plan.   Continued...

Powered by Reuters AlertNet. AlertNet provides news, images and insight from the world's disasters and conflicts and is brought to you by Reuters Foundation.