Cost of wage bill to be pruned

The finance minister is determined to cut the cost of the public sector wage bill, following what he reported in the Budget Review as “several years of across-the-board salary increases above the rate of inflation”.

While many of these improvements were necessary, he said, compensation of employees grew from 35.7 percent of non-interest spending in 2008/9 to 38.7 percent in 2011/12. This had resulted in fewer resources available for social and economic infrastructure and other priorities. The Treasury director-general, Lungisa Fuzile, said that since 2009, the government had been running a sizeable current deficit, “meaning the state has been borrowing to finance spending on recurrent costs such as compensation of employees and goods and services”.

Borrowing to finance recurrent spending created debt obligations. Over the next three years, the government had prioritised closing the current deficit. It was envisaged that the gap, currently at R8 billion, would be closed in 2014/15, so that new borrowing would finance investment rather than consumption. “This shift in the composition of expenditure by the outer year will enable government to begin redirecting spending towards growth and job creation,” Fuzile said. South Africa has about 1.3 million public servants. Last year, they were paid R346bn of a total consolidated expenditure of about R1 trillion. – Donwald Pressly