DA MP David Maynier. Picture: TREVOR SAMSON
DA MP David Maynier. Picture: TREVOR SAMSON

Managing the wage bill will be one of the biggest challenges for provincial budgets over the next three years, Treasury deputy director-general for inter-governmental relations Malijeng Ngqaleni said in parliament on Thursday.

This year’s above-inflation, public-sector wage agreement will add R30bn to government expenditure over the next three years, with R6.9bn added to costs in 2018-2019. But national departments, and provincial and local governments were not  allocated additional funds in the medium-term budget policy statement (MTBPS) to cover this additional cost.

The Treasury has told the three spheres of government that they will have to fund the shortfall by “adjusting within their compensation baselines”. The medium-term budget indicated this would mean increasing efficiency and carefully managing overtime and performance incentives.

Finance minister Tito Mboweni has stressed the need to put a brake on the consistently high, real growth in the public-sector wage bill if the budget deficit is to be cut back.

Ngqaleni noted in a briefing on the Division of Revenue Amendment Bill to parliament’s two appropriation committees that no reductions had been proposed in the medium-term budget to the provincial equitable share — that is, the share of national revenue allocated to provinces. This would give the provinces the fiscal space to manage the pressure caused by the higher wage bill.

“Provinces need to continue to improve the balance between administrative and front-line staff as a way of slowing the growth of the wage bill,” Ngqaleni said. “Attrition and an ageing staff profile (and increased retirements) provide scope for provinces to contain growth in compensation spending.” Members of staff leaving the public service were not being replaced.

She noted that provinces are working hard to manage the pressures caused by the higher-than-expected increase in the wage bill.

DA finance spokesperson David Maynier pointed out that that provinces had not participated in the national public-sector bargaining council or in the agreement on the above-inflation wage increase that they were required to finance. The opportunity cost of this wage increase was the employment of an additional 37,000 more nurses or 60,000 more teachers.

He questioned whether the additional financial cost was not an unfunded mandate in terms of the Public Finance Management Act, which would require the Treasury to follow a specific procedure. This would require the Treasury to introduce a memo into parliament with the Division of Revenue Amendment Bill, which would give a projection of the financial implications of the mandate for provincial governments.

Ngqaleni did not agree that it was an unfunded mandate, pointing out that provinces did, indeed, participate in the process of negotiating the public-sector wage increase.