Ballooning wage bill puts huge pressure on fiscus
FINANCE Minister Tito Mboweni has warned that the burgeoning public sector wage bill had put further pressure on the country’s already struggling fiscus. Mboweni yesterday told Parliament in his maiden Medium-Term Budget Policy Statement (MTBPS) address that the wage bill had exceeded expectations with above inflation increases.
He said the new agreement reached with unions had caused the fiscus a R30.2 billion shortfall.
“These pressures need to be managed within departmental baselines,” Mboweni said.
Last week Mboweni told a Kader Asmal memorial lecture in Cape Town that the country needed hard discussions on the exorbitant public sector salary bill in the wake of an unabated demand for service delivery.
Mboweni said the government spent eight out of every R10 on wages, leaving the government with only 2 percent to advance its development programmes.
Yesterday the National Treasury said that baseline allocations to compensation amounted to R1.8 trillion over the Medium Term Expenditure Framework (MTEF)
The Treasury also said that the wage bill had grown quicker than the overall budget to the current 35.2 percent of total expenditure.
“Over the period compensation has been one of the fastest growing items on the budget, increasing at an average of 11.2 percent a year,” it said.
Significant wage hikes, the Treasury argued, and other employee benefits, rather than employment, was the main driver of increased spending as wages increased most rapidly in the lowest ranks of the public service, suppressing wage distribution.
Last month Moody’s said that the public sector wage agreement for fiscal years 2018/19 to 2020/21 would bring extra and unbudgeted costs to the fiscus.
Government employees agreed that for 2018/19 workers on level 1 to 7 would get consumer price index (CPI) plus 1.5 percent hikes this year, those on salary 8 to 10 would get CPI plus 1 percent and those on level 11 to 12 CPI plus 0.5 percent.
Mboweni said South Africa’s public service was larger than its emerging market counterparts’ services.