WAGE talks in the public sector have deadlocked, with Congress of South African Trade Unions (Cosatu) affiliates declaring a dispute and accusing the government of reneging on an offer of a 6,9% wage increase.

With an already huge public wage bill causing concern to the fiscus and the markets, the declaration of a dispute brings South Africa's 1,3-million public servants a step closer to industrial action - at a time when key service delivery departments in three provinces are administered by the national government.

Mugwena Maluleke, chief negotiator for Cosatu-affiliated public-sector unions representing health workers, teachers, customs officials and police officers, yesterday expressed anger and frustration over what he described as the government reneging on an offer of 6,9% and lowering it to 6,7%.

Unions are demanding a 7,9% raise, lowered twice from an initial demand of 10%.

The government budgeted for a 5% increase this year, and is stretching its purse with a 6,7% offer - estimated to exceed the budget by about R8,1bn.

Government spokesman Ndivhuwo Mabaya said Public Service and Administration Minister Lindiwe Sisulu had noted the declaration of a dispute and had called for an urgent meeting with union leaders.

He said the department remained committed to reaching a settlement, but did not have the final say on wage increases as multiple departments were involved, including the Treasury.

Chris Klopper, Independent Labour Caucus negotiator representing about 480000 workers, said the government had asked the unions to canvass members on whether a "settlement" offer of 6,9% would be more palatable to them than the 6,7% on the table.

But Mr Maluleke maintained any offer discussed on the record before the bargaining council was a formal one. "Otherwise, it would make negotiation a mockery," he said at a briefing in Johannesburg.

Cosatu was discussing the 6,9% offer with members.

Mr Mabaya suggested Ms Sisulu was willing to mediate - the step after a dispute has been declared - as she had a clearer understanding of public-sector workers' plight.

The parties have 30 days to find common ground through arbitration. Thereafter, a certificate will be issued which could lead to industrial action.