The government and trade unions in the Public Coordinating Bargaining Council (PSCBC) have agreed on a two-year wage deal, but Treasury warns this has come at the cost of future jobs and the funding of public programmes as well as tackling overly-generous pay packages.<\/p>\n
On Friday (31 March), the government and associated trade unions officially agreed on a two-year wage deal which came into effect on 1 April 2023.<\/p>\n
The first year (2023) allows for a 7.5% increase (effectively equivalent to another extension of the R1,000 after-tax cash gratuity and a nominal increase of 3.3%), while the increase for 2024 will be linked to National Treasury’s projected CPI forecast.<\/p>\n
The National Treasury has estimated this revision to cost an additional R37.4 billion over the course of the 2023\/24 financial period.<\/p>\n
However, Finance minister Enoch Godongwana noted in his 2023 Budget Speech that unforeseeable expenditures from the wage negotiations were one of the critical risks to South Africa’s financial outlook, and this risk has now materialised.<\/p>\n
Trade-offs<\/strong><\/p>\n “An unbudgeted wage settlement will require significant trade-offs in government spending because the wage bill is a significant cost driver,” said Godongwana.<\/p>\n “It will mean that funds must be clawed back in other ways. Mainly, this will mean restricting the ability of departments and entities to fill posts,” he added.<\/p>\n After the Budget Speech, both Godongwana and the minister of Public Service and Administration (DPSA) Thulas Nxesi said that the government is grappling with a “balancing act” between wage increases and additional headcounts, saying “there’s always competition” between the two.<\/p>\n Frontline services need more employees to keep up with the increasing demand for public services such as education, police and health \u2013 which have not increased in line with the growing population, said the ministers.<\/p>\n “It becomes imperative that the current and future wage agreements strive to balance remuneration increases and the need for additional headcounts.”<\/p>\n The latest wage deal has failed to achieve this objective.<\/p>\n “The government remains committed to reducing the fiscal deficit to more sustainable levels and stabilising debt. Therefore, the government will initiate processes to ensure that the latest wage agreement is implemented through significant trade-offs in the short and medium term,” said the Treasury.<\/p>\n To cushion the wage increase, the following measures are being finalised, as outlined by the National Treasury:<\/p>\n “As outlined in the Budget and by the Minister of Finance, these and other measures will be aggressively pursued during the current financial year.<\/p>\n “The National Treasury reiterates the position that government borrowings will not be increased for consumption expenditure, including paying for wages,” said the Treasury<\/p>\n “Fiscal policy will remain focused on reducing fiscal risks and supporting measures to grow the economy. This will ensure that the overall fiscal path outlined in the Budget is maintained,” it added.<\/p>\n Department of Public Service and Administration Director-General Yoliswa Makhasi noted that the remuneration of the state’s 1.3 million workers accounts for almost a third of total government expenditure, and keeping it in check is vital to the National Treasury’s plans to rein in the budget deficit and bring runaway state debt under control.<\/p>\n\n
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