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because tax revenue has not recovered fully after a recession two years ago.
The government is currently negotiating wage increases with unions for state workers.
“We are still recovering from the recession. Our tax revenue hasn’t gone back to where it was in 2008,” Gordhan said in a story posted on East Coast Radio’s website.
Gordhan has repeatedly warned about the state wage bill, which takes up about 40 percent of tax revenue.
“We have lots of pressures, both to ensure that public servants are paid reasonably but also to deliver important services . . . and increase our investment in infrastructure in South Africa,” he said.
“We hope that the negotiations will eventually work towards a positive end, and let’s give that a chance,” he said.
State workers are demanding a 10 percent wage rise, more than double the inflation rate of 4,1 percent in March.
The unions have said government has increased its offer to 5,0 percent from an initial 4,8 percent earlier.
More than a million government workers went on strike for three weeks last year, shutting down schools and crippling services at state hospitals.
Unions across sectors have demanded double-digit salary increases and the government’s settlement with state workers is likely to set the tone for other industries.
The central bank has warned about high wage settlements and their impact on the inflation outlook.
So far, the central bank expects inflation to stay within the targeted bank of between 3 and 6 percent until the end of 2012. – Reuters.