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MTBPS: Government to slam brakes on public servant wage hikes

Budget guidelines propose a wage freeze for the next three years, among other options – including a new strategy for public sector pay.

Department of Home Affairs. Picture: Sethembiso Zulu/EWN

CAPE TOWN - The government plans to slam the brakes on public servants’ wage increases.

Budget guidelines propose a wage freeze for the next three years, among other options – including a new strategy for public sector pay.

This is a political hot potato for the government - with public sector unions already at the Labour Court over its decision not to honour the last year of a multi-year wage agreement.

Treasury says civil servants’ salaries have grown by about 40% over the past decade. The wage bill accounts for about one-third of the consolidated budget.

Treasury documents say the wage-setting process ‘has become divorced from reality” with above-inflation increases not taking a weaker economy into account.

* READ: Tito Mboweni’s medium-term budget policy statement

What’s proposed is a public service wage bill that will grow by only 1.8% this year and by an average 0.8% over the next three years.

Treasury says this is essential for fiscal sustainability.

Reductions in the public servants’ wage bill will account for the bulk of the spending cuts the government plans to implement to reduce its unsustainable debt burden and shift its spending focus from consumption, to investment in infrastructure.

The next round of wage talks is expected to start soon and the government is formulating its position.

A comprehensive public sector pay strategy is also being developed, which will affect public office bearers, SOEs, public entities and local government.

But Treasury is also warning about fiscal risks – including faltering economic growth, litigation by public sector unions over the wage agreement and the course of fresh wage talks, as well as SOEs and municipalities that don’t have enough money to cover operational expenses.

'COMPENSATION SPENDING UNSUSTAINABLE'

South Africa has 1.3 million employees in national and provincial government who were paid R567 billion in compensation in 2019/20.

Over the last 15 years, public service compensation spending has grown at an unsustainable rate that is almost 1.5 percentage points faster than the rate of growth of GDP.

Treasury documents reveal 95% of public servants earn more than the bottom 50% of taxpayers and those employed in the private sector

The MTBPS documents cite Stats SA data that suggest public sector compensation has grown way faster than salaries in the private sector over the past decade.

The rapid rise in salaries, coupled with an increase in headcount, has pushed government’s wage bill up by 50% since 2008.

Finance Minister Tito Mboweni said this was unsustainable.

"Our compatriots in the private sector have made sacrifices and even negotiated salary cuts to keep businesses afloat.

"Over the past five years, public sector employee compensation grew by 7.2% a year on average – well above inflation."

Mboweni said public service unions and government were meeting to discuss how best to resolve the matter.

"The Minister for the Public Service and Administration and the leadership of the public service unions are meeting to discuss how best we adapt to the reality that we must do more with less, and that we are all in this together."

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