The reduction of the public sector wage bill is one of the main fiscal measures being implemented in stabilising the country’s debt over the next five years, as it accounts for about one-third of the consolidated budget.
Following the Covid-19 pandemic which led to steep economic decline, the country’s economy is expected to contract by 7.8% in 2020 and to return to real GDP growth of 3.3% in 2021.
This was highlighted in the medium-term budget policy statement (MTBPS) tabled by Finance Minister Tito Mboweni on Wednesday.
The MTPBS prioritises economic recovery and fiscal consolidation following the lockdown which put the brakes on most of the country’s economic activities.
Since the real cost of the public-sector wage bill has risen by 51% due to an increase in unit costs rather than staff, the wage bill process has become economically unrealistic.
The government has proposed a growth in the Public Sector Wage Bill of 1.8% in the current year and an average annual growth of 0.8% over the 2021 medium-term expenditure framework period. The third year of the 2018 Public Sector Wage Bill will not be implemented.
The budget further proposes a wage freeze over the next three years.
“Additional options to be explored include harmonising the allowances and benefits available to public servants, reconsidering pay progression rules and reviewing occupation-specific dispensations,” said the policy statement.
As the back-and-forth disagreement on scrapping the wage bill was before the Labour Court, the government, however, continued to engage with unions to establish a solution to the sustainable costs of employment.
The next round of wage negotiations will start soon while the government is formulating its position.
“In addition, the government is coordinating work relating to developing a comprehensive public-sector remuneration strategy for the medium to long term. This will include public office bearers, state-owned companies, public entities and local government. The strategy will seek to better balance competing interests on the basis of fairness, equity and affordability,” the policy statement said.