South Africa’s finance minister will honour an over-budget wage increase for public servants despite fiscal constraints while also looking at proposals to cut down the size of government.
The government won’t renege on a two-year wage agreement struck in March to give employees a 7.5% increase, though it had budgeted for a 4.5% raise, Finance Minister Enoch Godongwana told lawmakers when he tabled his mid-term budget statement on Wednesday.
The deal will come at an additional cost to the Treasury of R23.6 billion, Godongwana said. Government departments will have to find the remaining 10.1 billion rand through reprioritization of budgeted funds.
Compensation accounts for almost a third of state expenditure after rising by an annual average of two percentage points above the inflation rate for the past decade, contributing to widening budget deficits.
The government plans to contain the wage bill by encouraging employees to take early retirement and placing restrictions on the filling of non-critical posts.
The government remains committed to plans to “reconfigure” the state by reducing the number of government departments and cabinet positions, Godongwana said.
That would realise savings previously projected at around R30 billion. The actual figure will be determined by how long it takes to implement the changes and the cost of retrenchments.
Labour unions have argued that the wage bill is not responsible for high expenditure but rather the size of President Cyril Ramaphosa’s executive.
Since he came into office in 2018, Ramaphosa has committed to shrinking the cabinet, but it has instead grown with the addition of new departments in order to accommodate his political allies.