Godongwana cautions about unsustainable public wage bill

Godongwana said continuously taking money from other infrastructure projects would lead to the government taking longer to tar roads, install bulk infrastructure and conduct electrification projects

Finance minister Enoch Godongwana is having his tie fixed by President Cyril Ramaphosa ahead of his first medium term budget speech at parliament, Cape Town on Thursday.
Finance minister Enoch Godongwana is having his tie fixed by President Cyril Ramaphosa ahead of his first medium term budget speech at parliament, Cape Town on Thursday.
Image: Esa Alexander

Better than expected tax revenue and slashing the infrastructure fund, that is how the government managed to scrape together R20bn to increase salaries of public servants.

Tabling his first medium-term policy speech, finance minister Enoch Godongwana said the government had found the R20bn in the fiscus but cautioned that the increasing public wage bill was unsustainable.

Godongwana said continuously taking money from other infrastructure projects would lead to the government taking longer to tar roads, install bulk infrastructure and conduct electrification projects.

“To cover the increase in wage bills, the government will be using the high tax revenue it received to cover this,” he said.

“Government will use part of the higher tax revenues associated with the recent commodity price surge to narrow the deficit, while increasing non-interest expenditure to support economic growth, job creation and social protection, and cover the higher costs of the public service wage agreement.”

The 2018 wage bill agreement that deals with salary increases is currently before the Constitutional Court awaiting an outcome.

He said the fiscal outlook was highly uncertain, including the durability of the economic recovery plan, the legal process associated with public service compensation, and future wage negotiations.

“In the broader public sector, several state-owned companies and municipalities have insufficient funds to cover operational expenses.”

Godongwana said should the outcome of the ConCourt judgment be in favour of unions and compel the government to implement it, the increases would have an adverse effect on the fiscus.  

Meanwhile, the public wage bill accounts for 35% of the government's spending.

Economists were divided on the policy speech, with some calling it a balancing act and others agreeing with Godongwana that it was unsustainable.

Forget Kapingura, an associate professor in the economics department at Fort Hare University, said Godongwana's budget was a balancing act, adding that he attempted to give workers a salary increase as opposed to watching them take to the streets and bring the country to a standstill.

“It’s a bit of a challenge because some of the funds could have been channelled to projects that could be productive for the economy instead of paying salaries and become revenue generating projects.

“But also the government has to cater for the welfare of its employees. This will prevent strikes from happening and bringing the country to a standstill. It's a balance,” Kapingura said.

Nelson Mandela University economics professor Charles Wait said the public wage bill was unaffordable.

“The speech must be taken for what it is – it’s the government giving us pointers on how they're thinking and what they’re intending to spend money on,” Wait said.

Cosatu national spokesperson Sizwe Pamla accused Godongwana of resorting to shifting blame in the “uninspiring” speech to the ballooning public wage bill.

“The wage bill has been stable at 35% of the budget for more than a decade. What has changed is that politicians, their friends and families have looted municipalities and SOEs to the brink of collapse.

“We demand that the government abandon an unhelpful four-year wage freeze and engage organised labour at the Public Service Central Bargaining Council on wage increases for workers,” Pamla said.

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