According to the latest information, the Newcastle Municipality’s request for exemption from the salary and wage collective agreement for the 2023/2024 financial year was dismissed on Tuesday, 9 April 2024.
The Newcastle Municipality initially pursued exemption from implementing the salary and wage collective agreement, citing its inability to afford the necessary increases due to its current financial situation.
However, this move was opposed by the Independent Municipal and Allied Trade Union (IMATU). Following an extensive legal battle, the arbitrator ultimately ruled in favour of IMATU.
It’s important to note that Clause 6.6 of the 2021 Wages Agreement mandated wage increases for all employees effective from 1 July 2023.
According to the Exemption Application Outcome, in the Municipality’s submissions to be exempt from implementing the salary and wage increase, it was explained that as of 31 December 2022, the financials reflected that the municipality was operating at a deficit of R23 148 327 compared to the surplice of R173 197461 in the previous year.
Additionally, the report showed that when considering the financial statements for the 11 months ended 31 May 2023, the Newcastle Municipality had total assets of R7 651 942 774 and total liabilities of R1 473 560 858, translating to total net assets of R6 178 381 920.
This meant that the Municipality showed a favourable equity position with a net asset effect of R6,2 billion. “The assets however are not convertible into cash and these assets include investments, inventory(stock), consumer debtors and other debtors’ receivable. The majority of the current assets consists of consumer debtors which are not actual cash but what has been billed and not yet collected due to the low collection rate,” the document read.
Furthermore, in the Municipality’s submission, it was highlighted that during September 2022, the Municipality was compelled to reinstate 223 employees whom the previous administration had unfairly dismissed. This resulted in employee costs increasing by R60 000 000 in the current year for the monthly salaries.
The submission from the Municipality revealed that a payment of R40 million had already been made towards back pay. It was noted that the Newcastle Municipality had allocated a budget of R103 million for employee salaries and allowances, in addition to another R40 million set aside for the final instalment of back pay.
Therefore, the Municipality was liable for a total of R253 000 000 in the last two financial years which was not anticipated at the beginning of the 2022 – 2023 financial year.
During the current Salary and Wages Collective Agreement, it was explained that the Newcastle Municipality had faced economic hardships which could not have been anticipated.
Additionally, as per the outcome of the exemption application, during 2021 – 2022, the ability to collect revenue was significantly hampered by the July unrest.
“Businesses in the Eastern Region and Industrial area were either burned down and/or looted. An estimate of the costs involved are approximately R200 000 000. It is estimated that 8 106 jobs were permanently lost and 224 temporarily affected due to the closure if operations. A total of 141 informal traders reported cases of looting and damage in Madadeni, Osizweni and the industrial areas,” the report read.
Moreover, the Municipality also cited the impact of the 2022 floods in the region, which required the reconnection of electricity in various areas and attendance to basic road repairs. This unplanned event significantly impacted the Municipality’s finances as it was not budgeted for.
IMATU explained, “The arbitrator held that the municipality was already aware, at the time the agreement was concluded in 2021, that it was in financial dire straits. It cannot, therefore, claim that its financial situation was unforeseen or unexpected. The municipality, moreover, implemented the agreement for the previous two years, without objection, despite its financial difficulties.”
Additionally, the arbitrator from the South African Local Government Bargaining Council (SAGBL) further held that the Newcastle Municipality was required to show good cause in order to be exempted from the salary and wage agreement. “This municipality would therefore have to prove that it has taken, to the best of its ability, the necessary steps to address its hardships. The municipality failed to apply for relief from National Treasury’s Eskom municipal debt relief support programme and therefore perpetuated its own financial crisis. The municipality, moreover, failed to provide proof that it has implemented other cost reduction measures such as reduced spending on overtime and consultants,” explained IMATU.
The arbitrator advised the Newcastle Municipality to decrease its operating expenditure by reducing its dependency on consultants, investing in employee training, hiring competent staff, addressing poor performance and misconduct, and cutting waste and inefficiency. Building on this, IMATU noted that the Municipality still had the option of applying for debt relief.
Finally, the arbitrator stated that the purpose of the salary and wage agreement was to improve the conditions of service for employees, and fairness dictates that the employees’ economic and living conditions should also be taken into account. “The arbitrator also stressed the need for compliance with Constitutional values and ideals, and that state organs should lead by example,” noted the union.
The municipality’s exemption application was subsequently dismissed.
“This is the second hearing on the Newcastle Municipality’s exemption application. The application was previously dismissed because it was not properly authorised by a resolution of its municipal council. This is last of the three exemption applications opposed by IMATU for the 2023/2024 financial year. All exemption applications have therefore been dismissed,” the union explained.
With the Newcastle Municipality now expected to implement the necessary salary and wage increases, the Newcastillian News attempted to gather comment from the Municipality’s Communications Unit on how this would impact the government entity. Unfortunately, no comment could be provided at the time of publication.
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