By Fran Blandy (AFP) – May 26, 2009

CAPE TOWN (AFP) — President Jacob Zuma's new government faces a tough ride as South Africa slides into recession amid mounting pressure from public servants demanding better wages, analysts say.

Growth figures released Tuesday shocked analysts, who had expected the recession but had forecast a contraction much smaller than the 6.4 percent posted for the first quarter.

Following a 1.8 percent contraction in the last quarter of 2008, the poor showing put South Africa in its first recession in 17 years.

Zuma took office this month after a campaign vowing more jobs and less poverty, but has already faced civil service strikes and protests.

"This really places government under pressure, there is no doubt about it. At the same time, you get this sort of number, your tax collections are going down and salary demands are not going to go down as much," said economist Mike Schussler.

Doctors march Friday to press for a 50 percent increase in their salaries, with some state doctors having staged an illegal strike last month and picketed for weeks during lunch hours as wage negotiations broke down.

Abysmal working conditions in public hospitals, long hours and low pay have been highlighted in the dispute with government.

"Trying to improve doctors' renumeration in a time of recession is challenging in itself," said Denise White of the South African Medical Association, affiliated with the main labour body COSATU, which backs Zuma.

But she added: "It wouldn't in fact change our demands at this point. That's something that they deal with."

The Congress of South African Trade Unions (COSATU) accuses the government of failing to implement an agreement to improve the salaries of skilled workers to prevent resignations, which have hamstrung the public sector.

"It is a ticking timebomb. The workers are getting very angry and are likely to engage in more strikes," COSATU spokesman Patrick Craven told AFP.

On Wednesday, a five-week bus strike was called off in financial capital Johannesburg, a day before 54,000 municipal workers had planned to down tools in support of the wage dispute.

The National Union of Mineworkers also took to the streets Wednesday to demand a drastic interest rate cut ahead of a central bank decision on the repo rate on Thursday. The bank is widely expected to announce a further cut.

COSATU says it understands the global economic crisis will affect the government's ability to implement its plans.

"However, we are also equally aware of the severity this is having on the livelihoods of all workers and their families," it said in a statement.

When the previous government tabled its budget in February, the economy was expected to grow 1.2 percent in 2009, with a ballooning budget deficit to cater for increased social spending and infrastructure development.

Now some economists predict the economy will contract by as much as 1.5 percent this year.

The goverment's financial woes may strengthen its hand in wage negotiations, but ailing public enterprises are also in need of more money.

The national airline South African Airways, energy giant Eskom and public broadcaster South African Broadcasting Corporation are all seeking millions of dollars in support from the government.

"All these guys are going to be clamouring for more government money, and that is not going to be easy to achieve," said Schussler.

Schussler said the government would have to make hard decisions about its capacity to put more people on welfare payments, and the money it gives to regional organisations.

"I think you are going to have a lot more arguments about service delivery now because quite frankly many things the government wants to deliver ain't being delivered," he added.

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