Finance Minister Tito Mboweni’s supplementary budget has provided no detail on his controversial move to cut salary increases on public sector wages.
The adjustment budget was necessitated by the Covid-19 pandemic as government spending was reprioritised towards containing the health, social and economic fallout caused by the virus and nationwide shutdown.
In February Treasury made a move to reduce overall government expenditure, particularly targeting the public sector wage bill where savings of R160 billion were expected over the next three years.
Read: Rand strengthens as public sector wage bill is pruned (Feb 2020)
Treasury set out reductions of R37.8 billion in 2020/21, R54.9 billion in 2021/22 and R67.5 billion in 2022/23.
The supplementary budget review document states that cabinet has “reiterated support for the proposed public-service wage bill reductions announced in February, which will improve the composition of spending”.
“This year nearly half of consolidated revenue will go to pay civil servants,” said Mboweni while tabling the budget to parliament on Wednesday.
“I value the important work public servants do, but we are guaranteed a painful reckoning if we continue in this way.”
In February public-sector unions did not respond well to the announcement especially because the 2020 reductions meant that the government would renege on implementing salary increases which were agreed upon in the 2018 three-year wage agreement.
The battle between unions and the government has been ongoing. The dispute is before arbitration, and public-sector unions have also taken this fight to the Labour Court where they are asking the court to order that government should honour the agreement.
On Wednesday Mboweni simply wished Public Service and Administration Minister Senzo Mchunu well in his negotiations with the labour unions in the Public Service Co-ordinating Bargaining Council, where he is leading the discussions on behalf of the government.
“Our overall objective is for a compensation system that is fair, transparent and fiscally affordable and it is within that kind of framework that we hope that the minister will be able to lead the process,” Mboweni told media after his presentation.
Treasury says failure to achieve the envisioned R160 billion wage bill cut as outlined in February will mean wages and other spending priorities will be subject to deeper reductions in outer years of the spending framework. This will also mean higher revenue increases for taxpayers.
Listen to Nompu Siziba’s June 22 interview with Nic Spaull, senior researcher in the Economics Department at Stellenbosch University: