Treasury sets aside R11bn to encourage early retirement of public servants
South Africa's wage bill is among the highest in the world, accounting for about a third of the government’s expenditure.
JOHANNESBURG - A whooping R11 billion has been set aside to entice public servants into early retirement as the government tries to scale down on its enormous public sector wage bill.
The country’s wage bill is among the highest in the world, accounting for about a third of the government’s expenditure.
Last year, Finance Minister Enoch Godongwana announced plans to reduce the public sector wage bill by offering workers a voluntary early retirement package – targeting at least 30,000 public servants in two years.
During Wednesday’s revised budget speech at the National Assembly, Godongwana doubled down on the initiative, adding it would reduce the headcount and introduce younger talent to the public sector.
Plans to lower the wage bill come after government and public sector unions agreed on a three-year wage agreement that will see public servants earn an extra 5-point-5 percent in 2025.
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Wages will then be bumped up in line with projected inflation for the subsequent two financial years.
This agreement will cost the fiscus an additional R23 billion to settle.
Government will partially draw down on the contingency reserve to meet these costs.
Although the agreement exceeds the 2024 budget and medium term budget policy statement projections, Treasury says the three-year duration reduces uncertainty in budget planning – compared to the usual two years.
Godongwana says money saved on the early retirement initiative will go a long way to offset the cost of the ballooning wage bill.
“The interventions on the wage bill are aimed at ensuring that when key frontline staff are lost through natural attrition and retirement, sectors can fill vacant posts to keep services running effectively.”
This means public servants aged 55 to 59 will be able to apply for early retirement, without a reduction in pension benefits.
Treasury will also draw from the contingency reserve to foot the increase in the wage bill.
Preliminary savings are expected to average R7.1 billion per year over the medium to long term.