Struggling KZN council forced to honour wage hike deal

The Newcastle Civic Centre, which also serves as the local municipality’s council chambers and head office. Picture: Doctor Ngcobo/Independent Newspapers

The Newcastle Civic Centre, which also serves as the local municipality’s council chambers and head office. Picture: Doctor Ngcobo/Independent Newspapers

Published Apr 21, 2024


THE cash-strapped Newcastle local municipality in KwaZulu-Natal has been forced to increase salaries of hundreds of its employees, which it had not done since July last year.

According to the SA Local Government Bargaining Council (SALGBC), the municipality, which posted a net loss of R358 million in the financial year that ended in June last year, has had its application to be exempted from implementing the pay hikes dismissed.

SALGBC commissioner and panelist Nonhlanhla Dubazane last week found that the municipality failed to show that justifiable reasons exist for why it should not comply with the salary and wage collective agreement concluded in September 2021 at the bargaining council between SALGA, Samwu and the Independent Municipal and Allied Trade Union (Imatu).

The municipality had claimed at the SALGBC that it was still suffering from the after- effects of the Covid-19 pandemic, as a number of businesses were forced to close and had not reopened, which affected its revenue.

It also blamed a number of other factors such as generating less revenue, spending the bulk of its money paying back its employees who were reinstated, a high rate of bad debts including monies owed to Eskom and uThukela Water (which is owed R201m), among others.

In September 2022, the municipality was forced by the Labour Court in Durban to reinstate 223 workers who were fired in 2019 after going on strike over unpaid overtime. The reinstatement of the employees led to the municipality adding R60m to its salary bill in 2022/23, while it had already paid R40m in backpay.

The municipality had to budget an additional R103m for employee salaries and allowances, and a further R40m for the last tranche of backpay, which meant it was liable for R253m over financial years (2022/23 and 2023/24) it had not anticipated.

Additionally, the Newcastle Local Municipality told the SALGBC it was still honouring the settlement agreement it concluded with Eskom, pending cases involving high costs, unexpected economic hardships caused by, among other factors, the July 2021 unrest, the 2022 floods, the decline in revenue collection, operating on a deficit, high operational costs, the impact of Covid-19 on its capacity to raise revenue, and further limitations on collection of its debt, which had increased by 123% in June 2020.

However, Dubazane found that it was clear that the problems identified by the municipality had been in existence for a while and therefore the argument that the financial situation was unforeseen or unexpected had no basis.

”The Constitutional Court said that the reliance on the Covid-19 pandemic is a matter of law not valid to excuse the state’s obligations in terms of the clause dealing with adjustment of salaries.”

According to Dubazane, the municipality, which sought an exemption for nearly 1 400 employees whose salary increases were due on July 1, 2023, knew fully well its financial circumstances prior to concluding the 2021 salary and wage agreement.

She also found it not plausible that it had not applied for Eskom’s municipal debt relief programme introduced by the National Treasury.

In July last year, the municipality paid the power utility R127m in full and final settlement of its R342m overdue debt at a time when its liabilities exceeded its assets by more then R265m.

It also wrote off R102.3m of its consumer and indigent debts due to its incentive scheme encouraging payments of municipal bills.

Dubazane found that the municipality’s financial difficulty was self-inflicted and that by not taking the obvious and available remedial step of seeking municipal relief to deal with its situation, it ignored the hardship it faced.

Samwu and Imatu denied that the municipality could not afford increasing its staff’s salaries and indicated that the medium-term 2023/24 budget approved by the council showed that it had planned to comply with the 2021 salary and wage agreement as it reflected a nearly 7% increase in employee-related costs.

Newcastle mayor Xolani Dube and municipal manager Zamani Mcineka did not respond to questions from the Sunday Independent.