State has to shift infrastructure funds for public wage bill - Godongwana

Before tabling his medium-term budget policy statement on Thursday, Finance Minister Enoch Godongwana said the public wage would be subject of talks with unions.

Finance Minister Enoch Godongwana and his team ahead of his maiden Medium-term Budget Policy Statement in Parliament on 11 November 2021. Picture: GCIS.

CAPE TOWN - The higher-than-budgeted public sector wage agreement means the state has had to shift funds earmarked for infrastructure to pay a once-off gratuity to state employees.

Treasury documents state that the gratuity will be largely funded by additional revenue, and will require shifting funds from the infrastructure fund.

Before tabling his Medium-Term Budget Policy Statement on Thursday, Finance Minister Enoch Godongwana said the public wage would be subject of talks with unions.

Godongwana said aside from the special appropriation bill tabled in August, most of the adjustments would cater for the higher-than-budgeted public wage bill.

The once-off R1,000 gratuity is expected to cost government R20.5 billion in the current financial year.

This followed an agreement with public sector unions and the state.

Godongwana said the public wage bill was receiving attention: "As far as the wage bill is concerned, there is definitely room for engagement with unions, no doubt about it. The question is, what is the content and nature of that engagement? I cannot say... but it is a matter that is getting attention."

Treasury said compensation of state employees remained one of the biggest risks to the government’s finances.

Over the medium term, the national Treasury said it would contain compensation spending, which would also include a headcount of employees with retrenchments a possibility.

SHORT-LIVED BOOST

Godongwana has warned that the R120 billion boost to the country’s coffers thanks to an uptick in commodity prices would be short-lived.

It’s given the government some wiggle room, however, Godongwana has announced an increase of just under R60bn in non-interest spending this year.

But South Africa is sitting with R4 trillion debt and still has a long hard road to travel to get its books in order.

Godongwana took on board his predecessor Tito Mboweni’s playbook to sort out the country’s precarious public finances, telling reporters earlier that he and Mboweni were "on the same page".

He also sounded a caution about recklessly spending the tax windfall from the surge in commodities prices.

"Precious metals prices have started to soften, this means the revenue gains from the commodity price rally are expected to be temporary. Therefore, we should be careful about our spending commitments," he said.

Economic growth is expected to average out at an annual 1.7% over the next three years, mostly because of the drag caused by an unstable electricity supply.

“We now expect the South African economy to grow by 5.1% in 2021 from a 6.4% contraction in 2020," the finance minister stated.

Godongwana said the MTBPS showed the government's "unflinching commitment" to fiscal sustainability, ensuring long-term economic growth by narrowing the budget deficit and stabilising debt.