Johannesburg - The government has broken off wage talks with 1.3 million state workers seeking above-inflation pay increases that threaten the government’s ability to keep this year’s budget deficit in check at 4.6% of GDP, union officials said on Thursday.

The Congress of South African Trade Unions (Cosatu), representing 14 state unions with an estimated 1.3 million members, has been pushing for an 8% raise, down from 10% initially demanded.

The government has been offering 6.5%, compared with headline inflation at 6.1% in April.

In its February budget, the Treasury allowed for a wage increase of only 5% for public servants, adding that a ballooning state salary bill was crowding out investment in infrastructure and other key productive sectors.  

Any settlement above 5% is likely to undermine the government’s ability to get the budget deficit in Africa’s biggest economy down from the current forecast of 4.6% of GDP.

South African wage negotiations tend to last several weeks in a mid-year bargaining session known as “strike season”, with unions often downing tools to back their demands, disrupting mine production and hitting services in hospitals and schools.

Darul Ihsan Media Desk