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Performance bonuses out‚ early retirement in as Tito Mboweni cuts wage bill

Finance Minister Tito Mboweni delivered his maiden Budget Speech in Parliament, Cape Town on Wednesday, February 20 2019.
Finance Minister Tito Mboweni delivered his maiden Budget Speech in Parliament, Cape Town on Wednesday, February 20 2019.
Image: Ruvan Boshoff

Finance minister Tito Mboweni has introduced measures to trim the public sector wage bill by R27bn over the next three years.

Tabling the budget in parliament's National Assembly on Wednesday‚ Mboweni said the measures to rein in the burgeoning civil service salary bill would include offering early retirement packages to about 30‚000 public servants between the ages of 55 and 59.

Mboweni said national and provincial departments would be phasing out the payment of performance bonuses to civil servants over the next four years‚ which amounted to R2bn per year.

This comes as government operates in a tough economic environment in which its spending for the 2019/2020 financial year (R1.8-trillion) outstrips its revenue collection (R1.5-trillion)‚ leaving a budget deficit of R243bn.

Public sector salaries currently stand at R585bn a year. According to the Budget Review document‚ they are projected to cost R627bn by 2020.

Mboweni said allowing older government employees to retire early would save the government R4.8bn in 2019/2020‚ rising to R8bn per year by 2022.

"(At) times‚ this will complemented by limits on overtime and bonus payments as well as pay progression‚" said Mboweni.

Mboweni‚ a former Reserve Bank governor and former labour minister‚ said he was also targeting the hiring of civil servants deployed to South African embassies across the world. "The system of staffing our diplomatic missions is unjustified and should be reviewed urgently‚" he said.

There would be no increases for MPs the 2019/2020 financial year. "As a gesture of goodwill‚ members of parliament and provincial legislatures and executives at public entities will not be receiving a salary increase this financial year‚" he said.

"My colleague‚ minister Ayanda Dlodlo [of public service and administration] will outline the details of the early retirement framework during the course of the work." he added.

The Budget Review document states that there would no penalties for those who take up the early retirement offer‚ with government absorbing the related costs.

"Government has decided to scale up early retirement without penalties. Where feasible‚ older employees will be allowed to retire early‚ with younger employees taking their place‚" he said.

"Departments are required to realise permanent savings of 50% of the cost attributable to early retirement.

"In December 2018‚ there were 126‚710 public service employees between the ages of 55 and 59 years old. This initiative is expected to save an estimated R20.3bn over the 2019 MTEF [Medium Term Expenditure Framework] period‚ assuming that 30‚000 take up the offer. This measure contributes to a more sustainable wage bill."

- TMG Digital

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