Enoch Godongwana still faces an uphill battle in cutting the public sector remuneration bill

Enoch Godongwana’s first main budget as the recently appointed financial minister underscores that he has a tough job ahead in cutting, or what he prefers to call “restructuring”, the ballooning public sector remuneration bill. 

The total cost of remunerating SA’s public servants is still heading in the wrong direction as it continues to rise and crowd out the government’s spending on things like crucial service delivery. 

From March 2022, Godongwana and Ayanda Dlodlo, the public service and administration minister, will begin negotiations with trade unions representing public servants about salary/remuneration adjustments for this year. A showdown is expected because trade unions will probably expect above-inflation salary increases, while the government doesn’t want to implement increases because it wants to reduce the remuneration bill.  

Godongwana’s 2022 budget shows that it will be a long time before the remuneration bill decreases, which eats up a huge chunk of the government’s expenditure. Godongwana plans to spend R682.5-billion in the government’s 2022/23 fiscal year to compensate SA’s 1.2 million public servants — just less than 2% of the country’s population. The expenditure on paying public servants makes up about 34% of the government’s total expenditure, which will be about R2-trillion in 2022/23.

In the next three years, the public sector remuneration bill will fluctuate and resemble a rollercoaster ride. It will be R682.5-billion in 2022/23, then drop to R675-billion in 2023/24, and then rise to R702-billion in 2024/25. 

But the remuneration bill for 2022/23 is much higher than the picture presented during the medium-term budget policy statement in November 2021. At the time, the government was expecting the remuneration bill to be R665.3-billion, which is about R17-billion lower than the actual spend for 2022/23. 

National Treasury officials said the increase in public sector compensation in 2022/23 is due to the government’s decision to hire more public servants in the health sector — beefing up the state’s human resource capacity to respond to the Covid-19 pandemic. There were also more people hired in the basic and higher spheres of education in the state. 

In a press briefing with journalists on 23 February, Godongwana said the government is no longer prepared to enter into costly multi-year salary increase agreements with public servants. He asked trade unions to moderate their salary adjustment expectations in 2022 because public finances are weak. Failing this, Godongwana issued the threat of reducing headcounts, through retrenchments,  in the government to cut the remuneration bill.

But Godongwana is willing to consider other forms of adjustments to the remuneration of public servants such as offering them once-off cash bonuses or allowances.  For example, in 2021, the government embarked on a pay freeze. But public servants were offered a monthly cash allowance of between R1,220 and R1,695. 

This sliding scale ensured that all public servants received R1,000 per month in their pockets after-tax, regardless of their salary level or the number of years in service. This wasn’t budgeted for by the government; it was a new expense. This cash allowance has cost the government R20.5-billion in 2021 and is expected to be a norm in the future. 

Godongwana now has two big hurdles in maintaining the stability of the public sector salary bill. 

The first is the next round of salary negotiations for 2022, which start in a couple of days. The second is trade unions that have dragged the government to the Constitutional Court to force it to implement inflation-beating salary increases in 2020 of more than 5% that were promised by the government but were never implemented. 

The earlier court (Labour Appeal Court) has already ruled in the government’s favour, saying it cannot implement salary increases that were not affordable in the first place. Trade unions are appealing against this ruling.  If the Constitutional Court rules in the favour of trade unions, the government would be forced to retroactively pay public servants 2020 salary increases. This is a large bill that the government will have to pay even though it cannot afford it.  DM/BM

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