Several economists CNBC Africa spoke to have argued that austerity is required when it comes to South Africa’s ballooning public wage bill to contain the country’s budget deficit. Even National Treasury warned in its Medium Term Budget Policy Statement (MTBPS) on Wednesday that “the 2015 public-sector wage settlement continues to limit the availability of funds for crucial public services”.

Although the national and provincial employee headcount has stabilised since 2011, see graph, wages are growing. In 2014/15 fiscal year, public wages for national and provincial employees excluding public entities stood at about R396bn; in 2015/16: R425.3bn and 2016/17 R461.7bn. In 2017/18 it is expected to grow to R492.1 and in 2018/19 R525.3bn depending on how wage negotiations pan out.

The current public-sector wage agreement expires in March 2018. If government and public-sector workers are able to reach a balanced agreement on wages and productivity, compensation pressures could moderate beginning in April 2018, states the MTBPS. This it claims would allow departments to plan for additional staff and make resources available to fund new policy priorities.

 

Unfortunately MTBPS was short on ideas to reduce the wage bill. The statement argues that to stay within budgets over the next three years, all national departments will have to moderate headcounts. This it reckons will be achieved through natural attrition and ensuring the wage agreement negotiated in 2017/18 is aligned with inflation.

The MTBPS states that most departments are on track to stay within the compensation ceilings set out in this year’s Budget.  It also reveals that discussions are under way with some departments that face significant wage pressures to ensure that the compensation ceilings remain intact.