South Africa will struggle to stick to a promise to cut spending if the government fails to agree inflation-linked wage increase with civil service trade unions, Finance Minister Nhlanhla Nene said on Tuesday.
Plans to reduce government spending in Africa's most industrialised economy helped it avoid a damaging credit rating downgrade by Moody's in March, but the promised cuts provoked criticism from unions, civil society and opposition parties.
The government and public sector unions representing teachers, nurses and the police have been locked in negotiations over wage increases since late 2017.
Unions are lobbying for above inflation pay rises of around 12% while government has tabled offers linked to consumer inflation, which currently stands at 3.8%.
"There are risks to maintaining the expenditure ceiling over the medium term, which include the public service wage agreement and the financial position of several state-owned companies," Nene told parliament during a Treasury presentation.
Last month the Public Servants Association, which represents 230 000 public sector workers, declared a dispute with government. Trade union federation Cosatu, the country largest, has also threatened to pull out of negotiations.
In a raft of cost cutting measures to cap ballooning debt, the treasury lifted value added tax (VAT) for the first time in over two decades at its February budget.