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South African government faces public-sector showdown

Friday, April 30, 2021

Significance

The negotiations follow the government’s refusal last year to pay the final annual tranche of a previous three-year deal. Containing the public-sector wage bill is seen as key for President Cyril Ramaphosa’s administration to rein in a spiralling debt burden.

Impacts

  • The three main rating agencies may postpone their next assessments until the wage talks gain greater clarity.
  • Government firmness in the face of union demands could undermine Ramaphosa’s hold on the ruling ANC.
  • With unions in a weak political position, they may have to stomach government intransigence due to lack of alternatives to Ramaphosa.
  • Substantial concessions to unions would be divisive amid difficult budgetary choices such as below-inflation increases on social grants.

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