The South African government has increased its salary offer for civil servants to 4.7%

(Bloomberg) — The South African government has raised its proposal to raise wages for the country’s civil servants to 4.7%, well below the demand of unions representing 1.3 million government employees.

The offer was increased from 3% after the government rejected civil servants’ initial demand for a 12% increase in the fiscal year that begins April 1, according to Frikkie de Bruin, secretary general of the Coordination Council for Civil Service Negotiations. The unions lowered their demands to 7.5% after a facilitation process aimed at helping both sides reach an agreement, he said by phone Tuesday.

“Some progress has been made,” De Bruin said. “We think we’re getting closer to a calculation range that could be 5.5% to 6%.”

Containing civil servant wage growth is critical to the government’s efforts to rein in the national debt, which is projected to peak at 75.3% of gross domestic product in the 2025-2026 fiscal year. Reparations account for nearly a third of government spending, crowding out spending on other priorities.

In its proposal, the government proposed a multi-year agreement, as well as increases in housing payments for civil servants and hazard pay, De Bruin said.

The proposal was rejected by the majority of members of the Civil Service Association of South Africa, said Jenny Oosthuizen, its labor relations specialist. PSA represents the interests of more than 240,000 workers.

The government’s latest proposal exceeds South Africa’s inflation rate of 3.8% and is close to the central bank’s estimate of average inflation this year of 4.6%. Price pressures are expected to continue to ease and inflation is expected to remain at the lower end of the Reserve Bank’s target range of 3% to 6% over the next three quarters.

Finance Minister Enoch Godongwana, who has committed to reining in government wage costs, will deliver his medium-term fiscal policy statement on Wednesday.

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