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Ramaphosa could be tested in public sector wage bill talks - economists

In the Budget Speech on Wednesday, Finance Minister Tito Mboweni announced that the wage bill would be cut by just over R160 billion over the next three years.

President Cyril Ramaphosa responds to the State of the Nation debate in Parliament on 20 February 2020. Picture: @PresidencyZA/Twitter

CAPE TOWN - Economists said that pruning the public sector wage bill would put the spotlight on President Cyril Ramaphosa and his ability to negotiate with trade unions.

In the Budget Speech on Wednesday, Finance Minister Tito Mboweni announced that the wage bill would be cut by just over R160 billion over the next three years.

Old Mutual economist Johann Els explained the tricky implementation of this.

"That is significant and a big part of that falls within the first year which starts 1 April but that is still part of the present wage agreement that they have at present which only ends sometime next year. So there is risk and they have to negotiate with the unions, who are unlikely to be happy about it."

An economics lecturer at Stellenbosch University, Nic Spaull, said that the cuts to personal income tax may make these discussions more difficult.

"It's not guaranteed that they'll be able to get this through labour. Just announcing it in the Budget Speech doesn't automatically make it materialise and I think that by not increasing some form of taxes - even if it was symbolic - on the rich like capital gains tax, I think that would have been a signal that the bulk of the measures are being shared."