By Peroshni Govender
JOHANNESBURG, Sept 6 (Reuters) - South African public sector workers suspended a pay strike on Monday as it entered its fourth week, union officials said.
The strike by teachers, health workers, police, customs officials and clerks is the public sector's worst since 2007 and has put President Jacob Zuma at odds with his biggest backers.
Strikers have demanded a 8.6 percent pay rise -- twice the rate of inflation -- and a 1,000 rand ($135) a month housing allowance. The government raised its offer to 7.5 percent and 800 rand for housing last week but workers rejected it and unions asked for more time to explain it to their members.
The following scenarios may emerge:
STRIKERS RETURN TO WORK BY MIDWEEK
* It is most likely that workers will only return to their posts midweek. Economists estimate the strike is costing Africa's biggest economy about a billion rand a day.
GOVERNMENT STICKS TO OFFER AND SEEKS UNION LEADERS' HELP
* The government appears not to have much more room in its budget to improve its current offer.
* Union leaders seem to understand there is no more money in the pot. The unions said they had 21 days to finalise discussions with their members on a draft agreement.
* Zuma last week ordered ministers to negotiate a deal to end labour stalemate.
* Unions need to do a lot to convince members to accept a deal. But under the government's "no work, no pay" policy, most strikers would lose more from being off the job then they will win in salary gains over the next two years.
UNION MEMBERS REJECT OFFER AGAIN
* The government could be forced to increase its offer, digging itself deeper into a deficit hole.
* The largest labour federation COSATU may try to force the government's hand by renewing its threat that nearly 2 million members in affiliated unions could stage sympathy strikes.
* A long strike by all COSATU members, who include factory workers and miners, would deal a heavy blow to the economy.
FUTURE BUDGET WOES
* The government has a yawning budget deficit and its wage bill is already a third of total spending. Any deal would add about 1 to 2 percent to state spending.
* State borrowing could rise, worrying ratings agencies and making it more costly to issue new debt.
* The real damage to the economy will be difficult to measure and will come from lost productivity.
ALLIANCE PROBLEMS
* COSATU said, before Zuma intervened, that its longstanding governing alliance with the ANC was near rupture. It could drop the conciliatory tone it has taken since and try to undermine him at a mid-term ANC policy-setting meeting this month.
* But analysts said COSATU risks pushing too hard, with Zuma being perhaps its best available ally, and could lose support for its left-leaning policies.
* If Zuma wants another term in office, he may make another increased wage offer and worry about the budget later.
* But he may try to broaden his support in the splintered ANC and listen to appeals from an anti-union faction which had opposed him but see this as an opportune time to attack labour.
This could lead him to adopt policies opposed by organised labour that would add flexibility to the country's rigid job market. The move would probably be hailed by economists and could help reduce unemployment.