Tito Mboweni begins work to cut the public sector wage bill

Government eyes reductions of more than R160bn over the next three years.
Cosatu rejects the move, but Mboweni says he has political support from his cabinet colleagues. Image: Shutterstock

Finance Minister Tito Mboweni has begun to tackle the political hot potato of cutting the public sector wage bill, with the government eyeing reductions amounting R160.2 billion over the next three years.

Mboweni expects the public sector wage bill to reduce by R37.8 billion in 2020/21, R54.9 billion in 2021/22 and R67.5 billion in 2022/23.

Public wage bill set to get a big cut.

In the 2020 budget review policy document, National Treasury said the medium-term reductions in the wage bill will target public servants in the national and provincial departments and state-owned enterprises (SOEs) that enjoy unfettered access to taxpayer-funded government bailouts.

Read: Tax reprieve for South Africans in 2020

National Treasury lowers 2019, 2020 economic growth forecasts

Mboweni is beginning to make good on his medium-term budget policy statement promise in October 2019, when he said government has a credible plan to stabilise government spending, starting with finding budget savings of about R150 billion. Market watchers expected that the savings would come largely from cuts in the public sector wage bill.

Pressure

Mboweni has faced pressure from the private sector, business lobby groups and credit rating agency Moody’s Investor Service, which is the only major rating agency that has not downgraded SA to sub-investment grade, to reduce the public sector wage bill as it makes up a large portion of government expenditure.

Since 2012/13, the bill has grown strongly without the requisite productivity of public servants, averaging 35.4% of the government’s total expenditure. This has forced the treasury to reprioritise spending in critical areas of service delivery such as health, policing and infrastructure investments to fund the ballooning wage bill.

Treasury said the proposed wage bill reduction of R160.2 billion will reduce government’s spend on compensating public servants by 1% over the medium term.

Although the cuts might create goodwill around government’s commitment to stabilising its finances, they won’t make a big dent in government debt or expenditure.

Gross national debt is expected to increase to 71.6% of GDP over the next three years and the budget deficit is expected to drop by a small margin to 5.7% over the same period from the current 6.8%.

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Underscoring the bloated nature of the public sector wage bill is that the average annual wage growth per worker in the private sector was 2.1% in the first half of 2019, compared to 10.4% in the public sector, according to Treasury’s recent figures.

Balancing act

“Government recognises that public-service employees should be fairly remunerated, but is obligated to balance compensation demands with the broader needs of society as reflected in the budget,” Treasury said in its 2020 budget review document.

“Civil servants’ salaries have grown by about 40% in real terms over the past 12 years, without equivalent increases in productivity. Growth in the wage bill has begun crowding out spending on capital projects for future growth and items that are critical for service delivery.”

Treasury didn’t give details on which government departments and SOEs are targeted for job cuts.

Instead, the government said talks about cutting the public sector wage bill with trade unions at the Public Service Co-ordinating Bargaining Council are still ongoing. To contain the growth in the compensation of public sector workers, government is eyeing several measures – mainly scaling up the early retirement of workers without penalties, adjusting salaries downwards and not offering salary increases from 2020/21.

Treasury is struggling to get buy-in from many government departments to support its drive to cut the public sector wage bill.

Read: Budget 2020: The toughest budget yet

More money for beleaguered SAA

It said the take-up of the early retirement packages has been slower than anticipated, with the Department of Police being the only department to finalise implementation of the initiative during 2019/20. Other departments have submitted proposals, which are currently being processed.

The government will be on a collision course with public sector unions, which have been fiercely opposed to any job cuts.

‘Direct attack’ on collective bargaining

Cosatu has already caught wind of Mboweni’s unpopular plan, as the labour federation said it rejects the proposed cut in the wage bill. In a statement, Cosatu said the government has already begun the work of not offering public servants salary increases for the year 2020/2021 – a move it has described as a “direct attack on collective bargaining.”

“If the government attempts to smuggle this review in the budget speech, the Cosatu Central Executive Committee will regard it as a declaration of war and there will be [a] parting of ways with government going forward,” said Cosatu.

Read: Greater focus on rebuilding Sars

“This reckless destabilisation of the public service is not informed by the state’s delivery programme but is an ideologically driven programme aimed at pandering to the rating agencies. This does nothing for staff morale, motivation, and productivity.”

In a press briefing with journalists, Mboweni said he is confident that the government and trade unions will “find each other for the credibility of the fiscal stance”.

Mboweni also said he has political support from his cabinet colleagues to cut the public sector wage bill.

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Dum dum, Dum dum, Dum dum. The sharks are circling Mr.Mboweni. The unions are going to rip you a new orifice. They are waiting for you.

Pretty words, now for the action.
We will see – BUT I don’t see this happening.

Totally agree – I’m too lazy to do it but it’d be interesting all the talk in last year’s budget with where we are now. I’m guessing you’d see an Action defection to at least match the Busget defection.

Ok – So what should he have done??? Increase taxes even more or raid retirement funds – Easy to complain not so easy to come up with solutions.

Easy,

stop AA/BEE and get back to getting competence into every place of government!!!

Stop the bailouts perhaps? Get rid of some government and SOE emloyees even? Get rid of half the cabinet ministers? Try to stop stealing the money is a bit difficult to do.

You speak as though he is an individual vainly battling circumstances. He is a senior member of the ANC government who, under the banner of collective responsibility, embodies the dire circumstances the country finds itself in. There isn’t enough room to list the solutions the ANC should have come up with – perhaps not funding SAA and spending the money on schools and housing might be a good starting point? Or tackling corruption in Municipalities? Or…….get the point???

It seems Government took heed and listened to sound advice. Well done !

As for the unions, it’s time they start towing the line in the interest this country.

Cosatu was heard saying “ They find the government’s continuous attacks on public servants silly and tiresome. Little recognition is given to the conditions facing public servants, like being overworked and underpaid,”

When your wage bill increased by 40% in 12 years, when it consumes 36% of your revenue, when State Departments are over staffed, somethings got to give

Obviously they don’t get out much! When towns and cities are degraded and filth lines the streets and parks, sewage flows in the streets, roads in a state , sub standard service and terrible attitudes toward tax payers. and so much more, how and where are the overworked? Show me a hard working underpaid civil servant and i shall show you a First World Country.

Pristine. Disciplined and Functional!

What a ludicrous stupid and dumb statement to make. Many work when and how the want, so going on strike won’t make a difference because they are

ALWAYS ON A GO SLOW ..

Cosatu is only concerned about the decline in their revenue, nothing else, don’t be fooled!

What did the Unions say when Zuma created more State Departments and overinflated staff in the State Departments.

You were all to stupid to realize that eventually we’re going to hit a brick wall with his brazen policies. Now that the chickens have come home to roost, our Communist run Unions are up in arms!

Bring it on Cosatu, bring it on. Tax payers are tired and resilient .
We don’t have a Union negotiating on our behalf when OUR TAX money is looted by the very “hard working” people you supposedly represent!

I know, we know and you know how corrupt many civil servants are due to the positions they hold. Be gone with them. Let them rather be jobless than sit in a cell

How about going on a strike to end BEE so as to restore the skill in the Parastatals?

I’d much rather live with a strike for a year, perhaps two, or even three than face a downgrade to junk and a bankrupt country!

Definitely stimulate the building industry. The unions will incite violence and will now destroy the infrastructure. Next will be the rebuild.

So whats your solution??????

Trying his best to please Mr. Moody.

Yaa. They can use the money saved to “fly the flag”

Here is start : ghost workers.

Get 500 terminals with facial recognition and biometrics. Cost of a smartphone.
Get 500 eager youngsters or even better borrow them from audit and law firms for pro bono service for a week.
Attend every place of work in the government service during that week.
Workers to bring Feb payslip. If you don’t attend you are automatically in the suspense account.
Scan the payslip and biometrically record the person presenting the payslip.

Start prosecution.

Reap benefit of thousands of people scratched from March payroll.

Gemini – good question – so what should he have done ?

One suggestion – there are many many people in both private and public sectors who are over 50 and have lots of money in their pensions funds. Allow these people specifically to opt to withdraw 1/3 of their pensions early whilst still working (and pay tax on the withdrawal). Suddenly a lot more tax will come in.

End of comments.

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