South Africa to cut wage bill to help fund Eskom bailout

South Africa plans to cut the state wage bill over the next three years to keep spending under control as the economy flags and it bails out the struggling state power utility.

The amount of money spent on civil servant wages “is unsustainable,” finance minister Tito Mboweni said in his budget speech to Parliament in Cape Town on Wednesday.

“As a gesture of goodwill, members of parliament and provincial legislatures and executives at public entities will not be receiving a salary increase this financial year.’’

State worker’s salaries account for about 35% of the R1.8 trillion ($127 billion) budget. The compensation budget will be reduced by R5.3 billion in the year starting April 1, 11 billion rand following year, and R10.7 billion the year after that, the National Treasury said in the Budget review.

Older workers will be offered early retirement, and the budget sets aside 16 billion rand over the next two years to fund the costs of paying them off. The government expects 25,000 to 30,000 workers to quit, Mboweni told reporters before his budget speech.

South Africa has about 1.23 million workers, down from 1.25 million in 2015, according to the Treasury. New employees tend to be younger and earn less than those who are leaving, it said.

Read: What the 2019 election results would look like if South Africans voted tomorrow

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South Africa to cut wage bill to help fund Eskom bailout