SOUTH AFRICA - Cape Town - 28 October 2020- Minister of Finance Tito Mboweni delivered the Mid Term Budget speech in Parliament . Photograph; Phando Jikelo/African News Agency(ANA)
SOUTH AFRICA - Cape Town - 28 October 2020- Minister of Finance Tito Mboweni delivered the Mid Term Budget speech in Parliament . Photograph; Phando Jikelo/African News Agency(ANA)

MTBPS: Public sector wage bill to be reduced by R36.5bn

By Siphelele Dludla Time of article published Oct 29, 2020

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JOHANNESBURG - The government has promised to freeze senior public sector salary increases for the next three years to support fiscal consolidation and economic recovery plans.

Finance Minister Tito Mboweni said yesterday that the public sector wage bill would be reduced by R36.5 billion as part of sweeping fiscal adjustments in government spending amounting to R300bn over the medium-term period.

Mboweni said that the salary freezes would form part of a five-year fiscal consolidation pathway that promotes economic growth while bringing debt under control.

He said returning public finances to a sustainable position required large adjustments.

Mboweni said the government would explore harmonising the allowances and benefits available to more than 1.2 million civil servants with pay progression rules reconsidered and their occupation-specific dispensations reviewed.

He said the government was also developing a comprehensive public-sector remuneration strategy for the medium- to long-term period.

“Over the past five years, public sector employee compensation grew by 7.2 percent a year on average - well above inflation,” Mboweni said.

“Over the next five years, it will need to grow much, much slower.”

The public sector wage bill accounts for about one-third of the government’s consolidated budget as salaries for civil servants have grown by about 40 percent in real terms over the past decade.

The government has not implemented the third year of the 2018 wage agreement, arguing that the 3.6 percent salary increments were unaffordable amid the deepening recession and the impact of Covid-19.

Instead, the government has proposed growth in the public-service wage bill of 1.8 percent in the current year and average annual growth of 0.8 percent over the 2021 medium-term expenditure framework period.

Mboweni said that employee compensation as a share of total spending would decrease from 32.7 percent estimated in February to 31.3 percent over the medium-term, largely due to baseline reductions.

He said more than 80percent of the total compensation reductions would occur in the learning and culture, health, and peace and security functions.

He said spending in the peace and security function would decrease mainly due to reductions to the special defence account and will mainly affect staff.

Mboweni said all government departments will be required to control wages and head counts over the medium-term expenditure framework period.

In addition, he said the departments will have to review and rationalise their organisational structures to minimise the effects on front line services and ensure that they remain within their compensation expenditure ceilings.

“Consideration should be given to the proposal for across-the-board compensation pay reductions to management-level positions, across national, provincial and municipal governments, state-owned entities and all other senior public representatives,” Mboweni said.

The government also proposed reducing spending by the National Skills Fund and sector education and training authorities, including changes in the pace of enrolment at universities and TVET colleges, as well as the coverage of the National Student Financial Aid Scheme bursaries.

It said large spending reductions in the provincial equitable share will require significant restructuring of provincial health services while reductions to departmental baselines may delay the introduction of efficiency-enhancing initiatives such as e-Cabinet.

However, funding for buildings and other fixed structures, provincial and local capital grants, and the Infrastructure Fund will be protected.

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