Supplementary Budget 2020

Budget 2020 | Treasury announces three-year R160bn proposal to cut state wage bill

Finance Minister Tito Mboweni told reporters ahead of his 2020 Budget Speech that he enjoyed the full political support of Cabinet in his drive to contain the public service wage bill.

National Treasury has announced an ambitious plan to cut the public sector wage bill of provincial and national departments by R160.2 billion over three years, a move labour unions have warned will spark protest action.

Mboweni tabled his 2020 Budget Speech in Parliament on Wednesday afternoon.

In its Budget Review, Treasury has proposed cuts to the wage bill of R37.8 billion in 2020/21, R54.9 billion in 2021/22 and R67.5 billion in 2022/23.

During a briefing that took place ahead of the Budget, Mboweni said his colleagues in Cabinet were unusually supportive of his proposals to come to grips with his public service wage bill.

'Nicest' Cabinet meeting

"There is political support to contain public service wage bill. I had one of the nicest Cabinet meetings this morning.

"It’s very rare that it’s so nice, actually. There is full support of the direction that we are taking and appreciation for the need to take a tougher stance," Mboweni said.

Mboweni said it was to be expected that contesting interests would jostle over allocations. 

Rump steak vs. pilchards

"Some programmes have to be modified and moderated, so we won’t necessarily get all that we need.

"It’s the same at home. You have to modify consumption and it is down to choosing between rump steak and pilchards.

"As for me and my house, we will choose the pilchards," said Mboweni.

Deputy minister of finance, David Masondo, told reporters that government submitted a proposal to the Public Service Coordinating Bargaining Council on Tuesday to formally table the proposal for discussion with unions, following numerous informal discussions. 

"The cost of doing public service work is increasingly high. The money we have and expenditure in providing public service is increasing. The wage bill is one of the cost drivers in the rise of expenses in providing services," said Masondo.

Since 2016, the state's policy has been to allow natural attrition of older public servants retiring from the public service to reduce total numbers. This was combined with a freeze in non-essential appointments and salary increases where possible.

But public servants are not retiring fast enough for the attrition to add up to meaning savings in the public service wage bill, according to Treasury.

"Take-up of the early retirement initiative has been slower than anticipated and only the Department of Police has finalised implementation during 2019/20," Treasury said. 

Declaration of war

A proposed cut in the state's compensation bill has already been slammed by Public Servants Association and labour union federation Cosatu.

Cosatu's Central Executive Committee said on Tuesday evening that reducing wages to cut costs could "never be accepted" and amounted to a 'declaration of war'.

Some form of cut to the state's wage bill was largely anticipated by analysts, who noted ahead of the Budget that the state had struggled to reduce spending by others means to stop the gap caused by weaker-than-expected tax revenues.

"Urgent additional actions to stabilise the debt outlook and improve the composition of spending are thus vital, with a reduction of the public wage bill a priority," said Investec in a preview.

In its Budget Review, Treasury said that civil servants' salaries had grown by 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 crucial for service delivery'.

During a separate briefing on Monday, Democratic Alliance MP Leon Schreiber said freezing the wages of supervisors and managers among public servants would yield R138.6 billion in adjustments for the national fiscus. He said a freeze on appointments would free up an additional R29.4 billion.

"We can achieve the cuts we need while protecting hard working public servants. A third of public service is management and administrative staff and they must face the freeze because that is where the highest increases have been," Schreiber said. 

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Yes. We need the money.
11% - 931 votes
It depends on how the funds are used.
74% - 6246 votes
No. We should have gotten the loan elsewhere.
15% - 1285 votes