Labour talks hinder pace

Despite the tough talk by President Cyril Ramaphosa and his cabinet colleagues about drastically slashing the bloated public sector wage bill to reduce government expenditure, there is still little progress.

Finance Minister Tito Mboweni announced during his February 2019 budget speech that the government would take additional steps to manage growth in the compensation of public sector workers over the medium term – mainly by scaling up the early retirement of workers without penalties.

This effort alone was expected to generate a saving of R12 billion per year for the fiscus from 2020 until 2022. However, according to the 2019 medium-term budget policy statement, the expected savings on compensation “have been reversed” due to impending negotiations between government and labour.

Dondo Mogajane, National Treasury’s director-general, said the R12 billion was a forecast, which could be revised down or reversed when the government restructured the wage bill.

It appears that negotiations with labour are fraught and labour is holding court over the process – delaying government’s plan to reduce the bill.

Government’s wage bill currently accounts for 46% of the gross tax revenue in 2019/20 of R1.36 trillion, which is “primarily because of above-inflation increases in average remuneration over the past decade”.

Underscoring the bloated bill is that the National Treasury said the average annual wage growth per worker in the private sector was 2.1% in the first half of 2019, compared to 10.4% in the public sector.

The compensation of workers has been revised to R630.7 billion, which is expected to rise annually by an average of 6.3% until 2023.

Treasury said there are a number of measures it is considering to reduce the wage bill, including “pegging cost-of-living adjustments at or below inflation, halting automatic pay progression and reviewing occupation-specific dispensations for wages”.

Earlier in 2019, the government has decided to scale up early retirement of workers without penalties.

However, before it can embark on these initiatives, Treasury said the government has to discuss these matters with labour.

Treasury review showed 29 000 public servants, plus MPs and members of the provincial executive, each earned more than R1 million last year.