Cape Town - The government sealed an agreement with unions on Tuesday to raise public sector wages by 7% this year, the head of the bargaining council said, averting a potentially crippling strike by 1.3 million workers.
Public sector unions had initially sought a 15% increase before lowering their demands to 10% during lengthy negotiations since September. Workers, including teachers, nurses and policemen, will also get better housing and medical aid allowances under a three-year deal.
"The talks have been tough but this is the best deal we could get," said Frikkie de Bruin, general secretary of the Public Service Co-ordinating Bargaining Council.
The talks had to be referred to independent mediators in March because there was no breakthrough.
Under the deal the government agreed to increase wages this year by projected consumer price inflation, which the Treasury forecasts at 4.8%, plus 2.2%.
In 2016 and 2017 salaries will rise in line with average inflation plus 1%.
The government has also agreed to increase medical aid cover by 28.5% per worker and increase a housing allowance to R1 200 a month, from R900.
"A good deal is a deal that nobody is really extremely satisfied about. There are things that could have been better but under the circumstances this is the best deal that was on the table," said Leon Gilbert, spokesperson for the largest independent union, the Public Servants Association.
South Africa's economy has been hurt by a wave of industrial action in its key mining and manufacturing sectors over the past two years. Economic growth is forecast at a sluggish 2% for this year and any strike action by public sector workers could have hurt investor sentiment and business confidence.
The public sector wage bill has risen more than 80% over the last decade as yearly increases have averaged more than 6% above inflation and the government is under pressure to rein in spending and curb costs as rating agencies flag possible downgrades.