20180418-法国巴黎银行-South_Africa__Waging_a_battle_9页_451kb

Summary of South Africa: Waging a Battle

Core Content

This document discusses the current state and challenges of public-sector wage negotiations in South Africa, focusing on the political and economic implications of the ongoing talks. It highlights the impact of ministerial changes, union fragmentation, and the broader implications for inflation and fiscal policy.

Main Points

• Wage Negotiations in "Injury Time":
  Public-sector wage talks have entered a critical phase after the previous agreement expired on 1 April 2018. These negotiations are expected to conclude with a new three-year deal.

• Compensation Ceiling and Wage Structure:
  The Treasury aims to keep public-sector wage increases within a compensation ceiling. The expected agreement will balance above-inflation raises for lower-paid workers with CPI-linked or sub-CPI increases for higher-paid workers. Additional benefits like housing, education, and healthcare allowances will also be part of the deal.

• Union Fragmentation and Diminished Power:
  Union density has been on the rise again, but the overall power of the labour movement has weakened due to events like the Marikana massacre and strikes in the platinum sector. Cosatu's internal divisions further contribute to this fragmentation.

• Inflation and Monetary Policy:
  Public-sector wage increases are a significant driver of inflation, accounting for nearly 50% of underlying/core inflation. The containment of unit labour costs is crucial for managing inflation and providing the South African Reserve Bank with room to consider rate cuts in the second half of the year.

• Union Inflation Expectations:
  Trade unions’ inflation expectations have slowed to a decade-low of 5.2% for the next year, which is lower than the long-term average of 6.4%. This suggests that unit labour costs are likely to remain well-contained, supporting the Treasury’s inflation control strategy.

• Fiscal Consolidation and Budget Balance:
  Containing the public-sector wage bill is essential for achieving the Treasury’s goal of a primary budget balance by FY2020/21. Public-sector compensation is projected to remain around 40% of non-interest government expenditure.

• Political and Economic Context:
  The appointment of Ayanda Dlodlo as Minister of Public Service and Administration in February 2018, along with the 1pp increase in VAT, has influenced the current wage negotiations. The Treasury may have more flexibility to negotiate due to potential revisions in GDP growth and revenue estimates.

• Wage Agreements as a Benchmark:
  The public-sector wage agreement serves as a benchmark for other sectors, such as the gold industry, which is currently facing significant challenges due to low gold prices.

Key Information

• Document Author: Jeffrey Schultz, Senior Economist at BNP Paribas South Africa.
• Expected Wage Agreement: A three-year deal with tiered pay increases, balancing inflation-linked and above-inflation raises.
• Union Dynamics: Increased density but fragmented movement, reducing their ability to push for high wage increases.
• Inflation Impact: Unit labour costs are a major component of inflation, and their control is vital for monetary policy and fiscal stability.
• Potential for Rate Cuts: The document suggests that the Reserve Bank may have room to ease policy rates in H2 2018 due to contained wage growth.
• Legal and Regulatory Context: The document is a marketing communication from BNP Paribas and is not investment research. It includes disclosures regarding potential conflicts of interest, legal use, and the non-independent nature of the analysis.

Charts Mentioned

• Chart 1: Highlights the spike in real employment costs in H2 2017.
• Chart 2: Shows that unit labour costs account for nearly 50% of underlying inflation.
• Chart 3: Indicates that union inflation expectations have reached a decade-low.
• Chart 4: Demonstrates that trade union density has not recovered to pre-2012 levels.

Market Coverage and Contacts

The document outlines the market coverage of BNP Paribas economists and production teams across various regions, including details of their roles and contact information.

Legal Disclaimer

• The document is non-independent research and may be subject to conflicts of interest.
• It is not intended for retail investors and is directed at professional clients and relevant persons.
• It does not constitute an offer to sell or issue securities and is not a solicitation of an offer to purchase.
• It may include performance data based on back-testing and is not a prospectus or public offering document.
• The information is confidential and should not be distributed without prior written consent.

US Disclosures

• Options: Complex instruments with high risk, only suitable for sophisticated investors.
• ETFs: May involve tracking error, currency, and geopolitical risks. BNPP may have conflicts of interest related to ETFs.
• Convertibles and Unregistered Securities: May not be registered under US securities laws and are considered restricted securities. Only Qualified Institutional Buyers or non-US persons may be eligible to purchase them.

This document provides a comprehensive overview of the public-sector wage negotiations in South Africa, the political and economic factors influencing them, and the broader implications for inflation and monetary policy.