Budget 2023

Budget 2022 | Govt grapples with public service wage bill, as Godongwana eyes 'restructure'

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Finance Minister Enoch Godongwana.
Finance Minister Enoch Godongwana.
  • Finance Minister Enoch Godongwana is optimistic that compensation spending will increase "marginally", from R665.1 billion in 2021/22 to R702 billion in 2024/25.
  • Godongwana said government allocated R20.5 billion in 2022/23 for the 2021 public service wage agreement.
  • He warned that upcoming wage talks and a Constitutional Court ruling were potential headwinds.

Finance Minister Enoch Godongwana has warned that while Treasury hopes to contain the growth of the public service wage bill to 1.8% in the next two years, there are plenty of headwinds up ahead that could impact government's plans. 

Godongwana was tabling his first budget speech in a joint sitting of Parliament on Wednesday afternoon.

South Africa remains beset with low growth, while household expenses, such as rising inflation and high fuel costs, will set the stage for pressurised public wage talks. After last year's deal left public service unions in the ANCs' own labour federation ally Cosatu feeling slighted, the talks are on track to remain adversarial.

The budget review said government would continue working to reduce pressure on the budget from public service wages, and that it had reduced the wage bill from 7.3% between the 2014/15 and 2019/20 financial years to 2.1% in 2019/20. 

A fresh round of public service wage negotiations is set to begin in March.

Godongwana said National Treasury remained committed to controlling permanent parts of the budget such as "arresting historically rapid increases in the public sector wage bill".

"Compensation spending will increase marginally, from R665.1 billion in 2021/22 to R702 billion in 2024/25, at an average annual rate of 1.8%," said Godongwana.

During a briefing to reporters ahead of the budget speech, Godongwana said government preferred to contain the wage bill's growth through "wage restructure" rather than wage freezes.

He said Treasury allocated additional funding of R20.5 billion in 2022/23 to meet the cost implications of the 2021 public service wage agreement, and that these matters would be addressed at a Public Sector Labour Summit that is scheduled to take the place in late March.

According to the 2022 budget review, government has allocated additional funding of R20.5 billion for 2022/23 to meet the cost implications of that 2021 public service wage agreement. 

"No provision is made over the medium term for spending increases on compensation above this level. Departments are required to continue adhering to their compensation ceilings and, if needed, reduce personnel numbers to sustainable levels," the budget review said.

In the foreword of the budget review document, National Treasury director-general Dondo Mogajane said government still grappled to keep budget items including the escalation of the public service wage bill in check.

"We also face large spending pressures, including the risk of higher-than-budgeted public service wages, demands for additional funding from financially distressed state-owned companies, and calls for permanent increases in spending that exceed available resources," said Mogajane.

National Treasury analyst Marumo Maake said fiscal consolidation efforts in the 2020 medium term expenditure framework and wage freezes in the public service put government in the position to reach the 1.8% compensation increase target.

"We don't have an agreement for the coming years yet and we have to put down a number, although inflation will be accounted for in the outer years," said Maake.

According to the budget review document, the bulk of the spending in the 2022 budget was allocated to learning and culture at R1.3 trillion, social development at R1 trillion and debt service costs also at R1 trillion over the medium term expenditure framework.

"Total consolidated government spending will amount to R6.62 trillion over the next three years, and the social wage will take up 59.4% of total non-interest spending over this period," the budget review said.

The budget review said that a decision by the Constitutional Court to uphold public service unions' appeal of government's bid to be excused from implementing a previous public service wage agreement could also upend government's efforts to contain the wage bill's growth.

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