Mboweni: Economy class only, while ministers, premiers and MECs may be paid less

Delivering the medium-term budget policy statement on Wednesday, Finance Minister Tito Mboweni made it clear that government is serious about tightening its belt and reining in spending.

“Our problem is that we spend more than we earn. It is as simple as that. How will we fix our problem?”

He said that to stabilise debt, government would target a primary balance by 2022/23. The target measure excludes support to Eskom, because that is part of a separate process.

“As a first step, we have identified spending reductions of R21 billion in 2020/21 and R29 billion in 2021/22 mostly in the area of goods and services, and transfers. In addition, non-interest spending in the outer year of the framework is constrained in line with consumer price inflation.

“That said, if we want to achieve our target, we will need to find additional measures in excess of R150 billion over the next three years, or about R50 billion a year.”

He acknowledged that 29,000 public servants, plus members of the national executive, members of parliament, members of provincial executives, “and so forth, each earned more than R1 million last year”.

After adjusting for inflation, he said that was more than double the number of civil servants earning more than R1 million in 2006/07.

“The average wage increase across government was 6.8 per cent in 2018/19, or 2.2 per cent above inflation. After adjusting for inflation, the average government wage has risen by 66 per cent in the last 10 years.”

He said since “we are all in this together”, he was “looking forward” to “robust discussions in the relevant bargaining structures and with other stakeholders to achieve a sustainable arrangement” while sending a message to state-owned companies, public entities and the private sector about reducing spending. He said board and executive management compensation and benefits should be reduced.

He said President Cyril Ramaphosa had agreed to the following guidelines which would apply to members of the Cabinet and members of provincial executives:

1. For the foreseeable future, Cabinet, Premiers and MECs’ salaries will be frozen at current levels, with the likelihood of an adjustment downwards

2. The cost of official cars will be capped at R700,000 VAT inclusive

3. A new cellphone dispensation will cap the amount claimable from the state

4. All domestic travel will be on economy class tickets

5. There will no longer be payment for subsistence and travel for both domestic and international trips

He also “encouraged” the leadership in parliament to think about how they can further contain their compensation and benefits.

In the 2019 budget, some measures were announced. These included, he said:

1. Early retirement without penalisation

2. The national macro reorganisation of government

3. Reducing performance bonuses

4. Freezing of salaries for members of the executive and parliamentarians, among others

“Unfortunately, these have not realised as much savings as we hoped. Early retirement savings are coming through slower than we originally thought. We will reinvigorate the early retirement programme.”

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