Budget 2022

Mboweni spies public service savings as court battle looms

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Minster of Finance, Tito Mboweni delivers the mid-term budget review in Parliament on October 28, 2020 in Cape Town.
Minster of Finance, Tito Mboweni delivers the mid-term budget review in Parliament on October 28, 2020 in Cape Town.
Gallo Images/Jeffrey Abrahams
  • Finance Minister Mboweni said general public service spending is expected to reach an estimate of R68.4 billion in 2021/22.
  • Government opted not to implement the public wage deal for 2019/20, anticipating it would add more than R37 billion to the 2020/21 wage bill.
  • The Department of Public Service and Administration will reprioritise R19 million for personnel expenditure reviews from. 2021/22 to 2022/23.

Finance Minister Tito Mboweni said during his Budget speech that government would continue to pursue public service savings through headcount cuts, early retirement, attrition, pay freezes as well as abolishing non-critical posts and certain benefits.

This is while government contests labour's case in the Constitutional Court around the public sector wage saga.

Mboweni tabled his 2021 Budget speech in Parliament on Wednesday afternoon in a hybrid joint sitting. This speech comes a year after his 2020 Budget speech which outlined proposals to cut considerable spending in the payment of public service salaries over three years.

The wage bill accounts for R1.97 trillion or 32% of consolidated government expenditure over the medium term, according to the Budget Review document.

At least two unions legally challenged the failure to honour an earlier wage agreement and the case is currently before the Constitutional Court, after the Labour Appeals Court dismissed an application for government to be compelled to honour that agreement.

"The Minister for the Department of Public Service and Administration, Minister Senzo Mchunu, is working with our partners in organised labour to achieve a fair public-sector compensation dispensation when negotiations on a new multi-year wage settlement begin later this year," Mboweni said during his speech.

Spending on public services to go up

The revised budget spending estimate for general public services from the 2020/21 financial year to the 2023/24 financial year is set to grow by 3.4%, with the 2020/21 estimate standing at R62.5 billion and the estimate for 2021/22 standing at R68.4 billion.

In the 2019/20 financial year, government opted not to implement public service wage increases for that year, as that would have added more than R37 billion to the 2020/21 wage bill.

According to the Budget Review spending programmes circular, the fastest growing functions over the medium term are economic development, community development and general public services, with spending on health amounting to R248.8 billion in the 2021/22 financial year.

"Government has been working to address these risks with the broader public service and social partners – including forums with trade unions and the private sector, the Presidency, the Budget Council and the Budget Forum.

"These efforts are underpinned by a fiscal policy stance that aims to reduce fiscal risks while supporting growth. A longer-term fiscal risk statement appears annually in the Medium-term Budget Policy Statement," the Budget Review said.

Public service spending cut proposals in 2020 were immediately rejected by organised labour in the public service, particularly those in the ANC-allied Congress of South African Trade Unions, and as government reneged on a 2018 agreement to pay CPI plus 1% wage increases.

The Budget Review said compensation at the consolidated budget level is projected to grow by 2.1% in the current year and 1.2% per year over the medium term.

How savings can be achieved

The review said savings could be achieved through doing away with annual cost-of-living adjustment in the public service until 2023/24, reduced head counts, early retirement, natural attrition and freezing or abolishing of non-critical posts.

"A three-year inflation-linked agreement would raise the total shortfall to R112.9 billion by 2023/24. And an agreement similar to the one achieved in 2018 – one percentage point higher than inflation – would create a compensation shortfall of R132.7 billion (or 2.2% of GDP) by 2023/24," the review said.

The Budget Review said over the 2021 medium-term expenditure framework period, 48.7% of nationally raised funds will be allocated to national government, while 41.9% is allocated to provinces and 9.4% is allocated to local government.

"Because reductions to the public service wage bill affect only national and provincial government, local government's share of revenue has risen in relative terms," the Budget Review said.

The Budget Review indicated that government would contest the unions' Constitutional Court application to compel government to honour the previous wage agreement, saying the agreement was "unlawful" and, even if lawful, would compromise government's capacity to meet other obligations.

Meanwhile, the Budget Review said the Department of Public Service and Administration will reprioritise R19 million to conduct personnel expenditure reviews from the 2021/22 financial year to the 2022/23 financial year.

The Budget Review showed that general public services would amount to 3% of estimated expenditure over the Medium-term Expenditure Framework, amounting to over R206 billion.

The Budget Review said government would continue with wage negotiations under the auspice of the Public Service Coordinating Bargaining Council "on the basis of fairness, equity and affordability".
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