South Africa’s Constitutional Court has upheld the right of the Government to renege on the third stage of a pay deal reached with public sector unions in 2018.
The State implemented wage increases in 2019 and 2020 but said it could not pay the final agreed amount in 2021 due to a lack of funding.
It is estimated that implementing the final year of the three-year agreement would have cost the R38 billion ($A3.3 billion).
The Labour Appeal Court (LAC) had previously found that the cost of the collective agreement could not be covered solely from the Minister of Public Service Administration’s budget and that that the Treasury had not provided a written commitment to guarantee additional funding.
The LAC also stated that the Minister had not followed regulations requiring him to gain Treasury approval to fund the increase.
It also found the clause to be unlawful for violating Sections 213 and 215 of the Constitution, which requires fiscal transparency and effective financial management.
The various public sector unions appealed the matter to the Constitutional Court, arguing that the LAC had failed to consider the doctrine of ‘estoppel’, which prevents the State from seeking to escape its contractual obligations.
However, the Constitutional Court found the Minister’s failure to follow regulations was sufficient to nullify the collective agreement.
While honouring the deal would have cost the government R38 billion at once, it would also have had pay out a further R75 billion ($A6.6 billion) in back-pay.
The Public Servants’ Association, which represents more than 240,000 State workers, said it would now seek increases equivalent to the inflation rate (now at 5.7 per cent) plus two percentage points in a new deal.
Pretoria, 5 March 2022
