The nature of the problem
20 April 2023
On 31 March, public servants accepted a 7.5% wage increase following an agreement reached in the Public Sector Bargaining Council. The increase affects the bottom 12 of the Public Service’s 16 salary bands - and includes a non-pensionable cash gratuity of 4,2% and a nominal increase of 3,3% across the board. This will push up expenditure on public service remuneration by R51,8 bn to R741bn in 2023/2024 - but will cost the Treasury only R37,4 bn extra – because of additional taxation on the increased salaries. This represents 33% of total government expenditure and 11% of GDP.
This expenditure is, however, already an increase of 22% over the estimate for 2023/24 for public service remuneration announced in the National Treasury’s 2022 Medium Term Policy statement. All of this creates enormous problems for the very competent, but beleaguered, public servants at the Treasury.
They will now have to juggle the need to find money for the wage increases, national debt interest payments and the burgeoning costs of social transfers with the need to wrestle the budget deficit down to 3,2% of GDP by 2025/26. They have been assisted by the announcement earlier this month of record tax revenues for 2022/23 - that have for the first time exceeded 2 trillion rand.
According to the 2022 Medium Term Policy statement, public service remuneration does not, by any means, cover all public sector wages. It includes the 395 267 employees of national departments and the 912 856 employees of the provinces in 2021/22. However, it does not include 342 048 municipal employees or the 117 619 employees of national public entities. Neither does it include expenditure on political office bearers in the provincial and national governments.