Wednesday, 10 October 2001
Madam Speaker
Honourable Members
In January this year we held a Public Service Job Summit and for the first time entered into a series of broad discussions with public sector unions that go beyond the narrow focus on wages and conditions of service. At the summit we discussed issues relating to the restructuring and transformation of the public service within the broader economic and social framework. The outcome of the summit was a framework agreement that set the stage for further constructive engagements on the restructuring of the public service for enhanced service delivery, on improving the conditions of service and on the quality and sustainability of jobs for public servants.
Encouraged by the agreement at the job Summit and the willingness to move beyond the narrow and often antagonistic confines of wage negotiations, we approached this year's negotiations with a renewed sense of partnership and optimism. A partnership, we hoped, in which, government and unions would demonstrate a commitment towards improving the conditions of service, improving the quality and sustainability of public service jobs and extending and improving service delivery through the restructuring of the public service.
In demonstrating the commitment, we have over the last few years not only re-affirmed workers rights but also significantly improved the basic conditions of service of public servants. The 1996 salary agreement was one of the most far-reaching agreements. Amongst others, it unified 17 former apartheid configured administrations with different pay scales onto one single unified pay scale and benefits were extended to all civil servants equally (i.e. medical aid, pension and the homeowners allowance).
While having significant merits, the 1996 agreement was extremely costly.
The wage bill went up by almost 25 per cent in one year (1995/96 to 1996/97). Personnel costs went up from about 45 per cent non-interest spending in 1995/96 to 54 per cent by 1997/98. The dramatic reduction in non-personnel expenditure led to a reduction in spending on capital, maintenance, training and complementary inputs such as textbooks and medical equipment. In general, service delivery was negatively affected by this squeeze.
As a consequence, by 1998 Government adopted a tighter stance on personnel expenditure. Salary increases over the past three years were 7,1 per cent in 1998, 6,3 per cent in 1999 and 6,5 per cent in 2000. This excludes certain specific salary increases for police in 1998 and 2001, for prosecutors in 1999 and for magistrates in 2000. Automatic rank promotions added about 4 percentage points a year to the personnel budgets in police and health or about 1 percentage point for the whole public sector.
The 2001 budget signalled a slightly more expansionary fiscal policy, resulting in real growth in expenditure of about 3 per cent a year. Even with rapid increases in infrastructure projects and an expansion of the social security net, Government can now afford to grow the wage bill slightly faster than inflation over the next three years. With real growth of about 1.5 per cent a year in personnel costs, personnel spending will still decline as a percentage of total spending, enabling government to remain focused on our priorities relating to capital, social welfare and other operational spending.
There are a number of ways in which the wage bill can be expanded in real terms. These are through general salary increases for all civil servants, salary increases for specific categories of civil servants (say police or educators or people with scarce skills like maths teachers) or by increasing the number of people employed in the public sector. Daily, there are reports of overworked nurses, police units that are under-staffed, schools where one teacher still has to deal with 60 children or welfare queues of hundreds, with just three or four officials trying to get by. Giving everyone above slightly inflation salary increases may be now affordable. However, it is not likely to achieve the objectives of improving the efficiency and targeting of Government services. Paying an overworked nurse or police officer more may make him or her feels better for a short while, but will not reduce stress levels and workloads.
Government would like to be in a position to be able to do all of the things it wants to do. Hiring more people, giving larger increases and designing new measures to attract and retain scarce skills are all costly exercises.
Growing capital spending, expanding the welfare net and paying for free municipal services are demands on the same pot. These tradeoffs are difficult but have to be made in a way that best improves the chances of Government meeting its objectives within a finite amount of money. There are many times in public policy when choices have to be made between equally laudable objectives. This is one of those situations. Hiring more people will reduce workloads and allow for an expansion of the services that Government delivers. In keeping with this, government is committed to creating employment over the medium-term in key service delivery sectors, which include amongst others:
While government will be increasing employment in the above sectors, it is also true that there are areas of the civil service that are overstaffed and areas that require fundamental restructuring.
Government and unions needs to have the tools and procedures to deal with this situation. To this end, government remains committed to ensuring a process that complies with PSCBC Resolution 7 of 2001.
The envisaged process provides a framework for ensuring that the rights of public servants and the need to retain jobs are balanced with the service delivery imperatives that emerge across government. The critical imperative is to have a fair process and to ensure that all possible alternatives are exhausted before anyone is retrenched. The current agreement gives unions adequate time to negotiate with us on these issues but insists that in order to have certainty, all parties should agree to binding arbitration in case no agreement is reached. A false impression is being deliberately created that we are forcing unions to agree to retrenchments, in actual fact the agreement gives an opportunity to negotiate, but in a way that will result in certainty.
The agreement that we have striven for is a step in the direction of building a sense of consistency, moderation and balance in our respective approaches. The central objective of the envisaged agreement is a shift away from antagonistic annualised wage increase agreements towards a more sustainable multi-term wage policy agreement. The shift towards a multi-term policy agreement allows for, amongst others, better planning in government and less antagonistic relations between government and unions.
A central benefit of a medium-term agreement on wages and restructuring is that it allows us to focus, with our labour partners, on other strategic transformation and service delivery issues. In line with the multi-term approach, the proposed agreement with the unions anticipates an annual wage increase for 2001/2002 financial year of an average of 6.58%. This constitutes an increase of R5.009 billion. The increases, as anticipated, would have been effected in the following manner:
The annual wage increase for 2002/2003 financial year would be inflation (CPI-X) plus an additional 0.5% and the annual wage increase for 2003/2004 financial year shall be inflation (CPI-X) plus an additional 1 %. (CPIX is an inflation measure that discounts the interest on mortgage). For the periods 2002/2003, and 2003/2004 the wage increase would be implemented on 1 July. To protect employer and employee from wide fluctuation in inflation, the terms of the agreement will be subject to negotiations should the threshold on inflation be higher then 7.5 % or lower then 4%. A multi-year agreement would also be in line with our medium-term expenditure framework and the emerging medium-term strategic framework.
In line with our commitment on a more sustainable pay progression system we have also committed ourselves to pay the R850 (eight hundred and fifty rands) as a once off and final payment in terms of Resolution 7 of 2002.
This, with the expectation that this will pave the way for the implementation of the new pay progression system by the 1st April 2002. In line with this, the employer will allocate 1% of the wage bill for increments affected in terms of the pay progression system. The new pay progression system is essential, as it provides a base for ensuring that pay progression is linked with actual performance and that pay progression can serve as a strategy for improving productivity and performance in the public service.
The shift towards a multi-year agreement and a commitment to the imperatives of restructuring will open the way for most sustained interaction with our labour partners on the critical transformation and conditions of service issues. Of particular concern is the need to prioritise the provision of a compulsory basic health care package for all public servants. This is particularly essential for the treatment of opportunistic infections and to address the needs of employees who do not benefit from any medical assistance. The shift beyond single year agreements will also allows us to focus some our efforts to deal with the consequences of HIV/AIDS in the Public Service.
This, in addition to addressing issues relating to the development needs of public servants and the shortage of critical skills in particular areas of the public service.
As government we believe we have done everything humanly possible to ensure that we negotiate in good faith and that in the process we remain flexible enough to accommodate the concerns and inputs from our labour partners. As of this time, the majority of unions in the PSCBC did not accept the agreement that we presented. This is after a process of negotiations that started in May this year, a period of six months. The negotiating team from government also spent the last three weeks in particular looking for different ways in which everyone's interests can be accommodated.
On Tuesday last week, we offered unions until close of business on Tuesday to sign the agreement. After their Monday caucus, the unions appealed to us to amend certain sections to do with restructuring, on the basis of a commitment that these were the only issue standing between them and the signing of the agreement. As government we acted in the interests of labour peace and effected the changes as was proposed. It is still very difficult and perplexing for us as to the real reasons why the agreement remains as yet unsigned.
Given such a response from the unions and having done everything possible to secure an agreement, we have no option but to implement our initial offer of 5%, backdated to the 1st July 2001, and a once off amount of R850. We do this to ensure that ordinary public servants are not denied an opportunity to improve their take home pay as a result of the intransigence of their unions, but also because the majority of our employees work hard and deserve to be justly rewarded.
We are not in a position to implement our final wage offer because the law as currently exists only allows us to implement the monetary aspects of the agreement. The agreement is a package agreement and the additional amount was offered on condition there is a resolution of the outstanding matters arising from the job summit as well the provision for pay progression.
To conclude, I want to emphasise that we are committed to building a developmental state and a developmental public service to underpin it.
However, a developmental state does not come into being by simple declaration. It requires that we transform the public service in fundamental ways. This includes values and ethos, equity, skills profile, systems and procedures, transparency and accountability, as well as efficiency and effectiveness. We need to restructure and transform the public service we inherited into one that underpins a developmental state. It is a difficult but necessary task. I hope you will understand our process in this context.
SINCERE THANKS TO ALL WHO OFFERED SUPPORT AND TO ALL THOSE WHO WALKED WITH US.
Issued by: Ministry of Public Service and Administration