Cosatu ready for war over VAT hike

Cosatu backed Cyril Ramaphosa’s bid to become president of the ANC and now expects him to support workers’ demands. The federation hinted at strikes, warning that elections were coming up. (Paul Botes/M&G)

Cosatu backed Cyril Ramaphosa’s bid to become president of the ANC and now expects him to support workers’ demands. The federation hinted at strikes, warning that elections were coming up. (Paul Botes/M&G)

The public sector wage talks, the value-added tax (VAT) increase and the withdrawal of a motion to discuss the Reserve Bank in Parliament has set President Cyril Ramaphosa on a collision course with trade union federation Cosatu.

Its central executive committee recently resolved to go on strike if the government did not zero-rate VAT on all food items, water and electricity, Cosatu’s spokesperson Sizwe Pamla said this week.

The decision to increase VAT by 1% was announced in the budget last month.

Ramaphosa’s newly appointed public service and administration minister, Ayanda Dlodlo, also faces a tense meeting with Cosatu this week, where public sector wage demands will now be higher because of the VAT increase.

“The honeymoon between Cosatu and Ramaphosa never got started. We made it very clear as soon as Ramaphosa was elected [that] you don’t have a blank cheque and there is no honeymoon,” Pamla said.

Cosatu led Ramaphosa’s campaign to be elected president of the ANC and called on then-president Jacob Zuma to resign. In return, Cosatu expects Ramaphosa to be sympathetic to workers’ demands.

“He has to realise that, if he were to fail to provide political leadership in a fight between government and workers, the government will come [off] second best,” Pamla said.

The ANC’s decision to withdraw the parliamentary debate on whether the South African Reserve Bank should be nationalised would also anger workers, Pamla said.

“There are serious tensions on VAT, and the withdrawal of the motion on the Reserve Bank is something that will ignite those tensions. It has made things worse, definitely,” he said.

Cosatu’s central executive committee meeting last month resolved that its affiliates should strike if the zero-rating on VAT is not extended to all food items, water and electricity. The federation made its submissions to the treasury in Parliament on February 28 and expects feedback by the end of March.

“We have said there is no reason why they can’t extend that deadline to consult more people on the zero- rating,” Pamla said.

Mike Shingange, Cosatu’s chief negotiator in the public sector wage talks, said the VAT increase had thrown a spanner in the works, because a deal had seemed possible before Ramaphosa took over.

There are about 1.3-million public servants in the country and the wage bill accounts for more than a quarter of the country’s budget.

According to the treasury’s 2018 Budget Review, South Africa’s government wage bill is one of the highest among developing countries.

The treasury said the consolidated wage bill will remain at about 35% of total expenditure in 2017-2018. That’s about R545-billion of the R1.55-trillion in expenditure.

The government has offered a consumer price index (CPI) inflation-linked increase, plus 1.5% for the lowest salary scale. Cosatu has demanded CPI plus 3%.

The treasury forecasts CPI to average 5.4% over the next three years.

If the parties agree to CPI plus 1.5% for the next three years, it will mean an increase in the wage bill of at least R111-billion over the next three years. If Cosatu’s demand of CPI plus 3% is agreed to, that bill will grow to R138-billion.

According to the Budget Review, the public service wage bill is expected to grow by an annual average of 7.3% over the medium term — a little more than the 1.5% being offered. This week’s meeting between the public sector unions and Dlodlo is expected to be briefed on the treasury’s forecast of CPI over the next three years. The issue of a three-year wage agreement is also expected to be high on the agenda, and Cosatu unions have said they will only agree to that on certain conditions.

“We don’t think we have benefited from a three-year period, that’s why we’re demanding it must be a single term. In the event that they [government] want a single term, they must buy it,” Shingange said.

Buying into a three-year deal means the government would pay workers CPI plus 3% in the first year, 2% in the second and 1% in the final year.

The Cosatu team is led by the South African Democratic Teachers Union general secretary, Mugwena Maluleke, and Shingange, who is also the National Education Health and Allied Workers’ Union deputy president. The government’s mandating committee is comprised of officials from all departments.

But Shingange is not being optimistic about the new administration.

“We will appreciate it if he [Ramaphosa] can play that leadership role. Then there’s less acrimony.

“Because we are going [into an] election year, we need to ensure there is service delivery so that we don’t have the workers on the streets.”

Pamla said Ramaphosa’s administration revealed itself to be anti-poor in the budget.

“It is the most reactionary and political budget in a long time. If you have the guts to increase VAT … even the Gear [growth, employment and redistribution plan] hardliners never touched VAT. Even during the global crisis in 2008 when people were using that as an excuse, we never saw this.”

Shingange said that, although his union firmly backed Ramaphosa’s election, Cosatu had now “reverted to being a trade union”.

“It’s not going to be different to the previous administration. We are part of the alliance and we always have our view on how the leadership of the alliance and ANC should be. But they are the employer and should [that] mean we must fight, we will definitely fight,” he said. — Additional reporting by Lisa Steyn

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