Supplementary Budget 2020

Ramaphosa says key state wage bill savings will stem from lower wage growth, not job cuts

President Cyril Ramaphosa says that the state's plan to cut the costs of the public sector wage bill does not mean that it also intends to "dramatically" cut the size of the civil service.

In his weekly newsletter on Monday, Ramaphosa weighed in on Finance Minister Tito Mboweni's Budget announcement last week that Treasury is seeking to save R160.2 billion over three years by reducing the cost of the public sector wage bill.

"The figures make it plain that unless we act now to turn things around, there will be even more difficult times ahead. Put simply, we are spending far more than we are earning," wrote the president. 

The announcement of cuts to the wage bill angered unions, with trade union federation Cosatu arguing government was attempting to "dump the bill for industrial-scale looting on public servants".

"Our approach is not to dramatically cut the size of the public service, but to examine the rate at which wages grow," Ramaphosa wrote on Monday. "Public service wages have on average increased at a much higher rate than inflation over many years, and we need to fix this if we are to get public finances under control."

The president said that public servants were not the only state sector facing cuts. In total, the Budget outlines combined savings of about R261 billion over three years, which includes cutting the budgets of several departments.

For public servants, Ramaphosa said the state would aim produce "a large part of the savings" from reducing the rate at which the wage bill grows.

"This will require focused discussions among all social partners, but particularly with public sector unions. These engagements need to be conducted in a spirit of seeking solutions. I am heartened by the willingness of all parties to engage in serious negotiations aimed at finding a solution," Ramaphosa said.

In the wake of the Budget, Cosatu's Parliamentary Coordinator, Matthew Parks, accused the government of not engaging with labour union in good faith.

"What really provoked our members was the slipping under the door at the public service bargaining council on Tuesday afternoon a note from government saying we want to withdraw form this year's wage agreement," Parks told News24's post-Budget Frontline panel discussion on Thursday.

Parks told Fin24 last week that government was trying to balance its finances with the salaries of teachers, police and nurses instead of addressing corruption and state capture. 

In his newsletter, Ramaphosa acknowledged that trade unions are right in urging government to "prevent leakages of public funds by addressing corruption, ending irregular, fruitless and wasteful expenditure". The president said this will be addressed.

Capital expenditure  

Ramaphosa noted that the public sector wage bill was crowding out spending meant for capital projects and items for critical service delivery.

Speaking at a post-Budget briefing last week, senior FNB economist, Siphamandla Mkhwanazi, said that growing public wages came at the expense of government spending on capital projects. 

"The wage bill was one of fastest growing expenditure items in SA, it accounts for about 35% of expenditure right now," Mkhwanazi said. 

He added that means to reduce the wage bill do not have to be "draconian". "There are many ways to skin this cat," he quipped.

Government's national attrition rate of about 5% will also be effective in reducing the bill.

Noting that there was a fair amount of duplication of skills within government departments, Mkhwanazi suggested that redeployment of staff to departments where their skills were needed would be effective in reducing the wage bill too.

Apart from addressing the public wage bill, Ramaphosa said there would be no increases in the salaries of senior public office bearers. Ministers have already seen some of their benefits reduced due to changes in the Ministerial Handbook.

A new law will also be published, introducing a remuneration framework for public entities and state-owned companies to prevent excessive pay for board members and executives, Ramaphosa said.

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