Public sector wage bill expected to cause more headaches for National Treasury

JOHANNESBURG - The public sector wage bill is again expected to cause headaches for the National Treasury, despite the current positive outlook on public finances.

As Treasury prepares to deliver the medium-term budget policy statement (MTBPS) next week, some economists believe the renewed faith in the country’s macroeconomic picture could be dampened by the public sector.

Public sector unions and government are yet to finalise the ongoing wage negotiations.

In the first round of talks, unions demanded a 12% increase, while government put a 3% offer on the table.

A recent report by the Centre for Risk Analysis ranked South Africa as having the third-largest public sector wage bill as a proportion of gross domestic product (GDP) in the world.

Nedbank chief economist, Isaac Matshego, said although the fiscus would see a windfall in revenue from the two-pot withdrawals, it’s unclear if it would offset expenditure on wages.

"What gives us sleepless nights about expenditure are debt service costs. Those are going to increase further as public debt rises, so the increase in public debt needs to be kept down, and public wages."

Although unions and government are tipped to agree on a deal lower than the 12% demand, the wage bill remains one of Treasury’s biggest expenditure items.

He said the ballooning wage bill remained a pressure point that needed to be addressed.