Public sector wage bill could eat up additional R40 billion of state fiscus

Strike action continues unabated from the Public Servant Association, which was preceded by lunch-hour picketing after public-service wage negotiations failed.

The employer, the South African government, initially offered a 3% increase and a continued R1 000 cash gratuity until 31 March 2023, but was rejected by workers who say that they last received a salary increase in 2019. The PSA – that represents around 1 million members working within the public sector – have deemed the offer an insult.

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A 7.5% increase put on the table

The Department of Public Service and Administration claimed that it then put forward an offer of a 7.5% increase, but the PSA said that this offer never happened.

In a statement, it said: “The Public Servants Association (PSA) condemns the unethical conduct of the Acting Minister of Public Service and Administration, who is deliberately misleading the public regarding the implementation of a 7.5%”

But according to KPMG’s astute economist, Frank Blackmore, it is not surprising that government would come forth with a 7.5% offer, as this, he says, is in line with the increases agreed upon with Transnet and Eskom.

Wage bill figure pushed up to around R700 billion

Currently, the government pays around R665 billion in wages to its public sector employees. A 7.5% increase will likely push this figure up to R700 billion.

“Public sector wages are set to be increased by 7.5%. This is more than doubling of the initial offer of 3.5% when negotiations begun, but in line with the increases seen at two other state-owned entities earlier in the year (7% increase for Transnet and 6% increase for Eskom),” explained Blackmore.

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“It was always going to be difficult to settle at a value lower than those given to the state power utility as well as Transnet. The bad news is obviously that it eats up more of the national budget. The public sector wage bill is likely to hit R700 billion – that is up around R40 billion from where it was prior to these negotiations. And that is obviously not good for the health of the fiscus,” he said.

No plans regard where they additional R40 billion will come from

Government has not yet indicated where the extra R40 billion will come from. But during the mid-term budget speech, Minister of Finance Enoch Godongwana, said that the country has seen better-than-expected revenue collections of R1 682 billion, an increase from R1 598 billion.

Meanwhile, Business Leaders South Africa CEO, Busiswe Mavuso, earlier this week criticised union leaders for making demands without coming to the table to contribute to discussions when plans that would help ensure economic recovery were being brainstormed.

“When unions demand a 10% across-the-board increase as they have, in response to the 3% offer from government, what is the plan they have to mitigate the impact on fiscal sustainability? I would be quite open to a realistic and effective plan, one that, perhaps, promises improvements in public sector productivity to stimulate economic activity and ultimately improve tax collection.

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“If such plans were put on the table as labour’s contribution to ensuring our economic recovery, then I would have much greater sympathy for the 10% demand. Yet I’ve not seen any such suggestions from labour,” she said.