Wage bill crisis will be solved, Cyril Ramaphosa vows
President Cyril Ramaphosa says he is confident a solution will be found to reduce the public service wage bill, which poses a risk on the fiscus.
During a question-and-answer session in the National Assembly on Thursday, Ramaphosa reiterated his support for finance minister Tito Mboweni’s economic growth strategy document, which contains proposals to kick-start the ailing economy.
On Wednesday Mboweni said at a media briefing before delivering the medium-term budget policy statement that he hopes for “a serious conversation that was patriotic, country-loving, showed awareness of the difficulties; and involved no grandstanding”.
The wage bill, which is almost R600bn, represents about 35% of projected annual spending of about R1.67-trillion.
The public servants’ salary bill is regarded is one of the biggest threats to SA’s finances and cutting it will be vital for the country to dodge a rating downgrade from Moody’s Investors Service, the only agency still ranking government debt on investment grade.
Public service unions have rejected calls for wage restraint on the grounds that it is unfair to expect workers to take the pain of the previous excesses and corruption committed by the government.
Ramaphosa said the wage bill is “too high”. The state has about 1.2-million public servants who have received above-inflation pay increases in recent years.
“Right now the public wage bill takes about 46% [of tax revenue], that is a high figure. We have had [salary] increases above inflation and other benefits and that needs to be looked at ... we will look at it with labour. We will have thorough discussions with labour about this situation so that we understand what needs to be done. We will find solutions,” said Ramaphosa.
In 2018, 29,000 public servants, including members of the national executive, MPs and members of the provincial executive, each earned more than R1m a year. After adjustments for inflation, this was more than double the number of civil servants earning more than R1m in 2006-07. The average wage increase across the government was 6.8% in 2018-19, or 2.2% above inflation. After adjustments for inflation, the average government wage has risen 66% in the last 10 years.
Mboweni said if the state is to achieve its cost-cutting targets, it will need to find additional measures in excess of R150bn over the next three years, or about R50bn a year. Most of the cuts will focus on the wage bill. The finance minister said that slashing the wage bill does not necessarily mean cutting the number of “warm bodies”. It is about dealing with the level of compensation, he said.
On the economic strategy document, Ramaphosa said it showed that the government was serious about implementing reforms to boost growth.
Growth in SA’s economy has been sluggish since 2011, when it recorded 3.3%. Since then, it has generally been trending downwards, falling below 2% from 2014.
In the medium-term budget policy statement on Wednesday, Mboweni painted a bleak picture of SA’s growth prospects. The Treasury revised growth for 2019 to 0.5% from 1.5%, lower than the Reserve Bank’s 0.6% prediction, with the government expecting only a “gradual recovery in confidence and investment” in coming years.
The economy is projected to grow 1.2%, 1.6% and 1.7% in the three years through to 2022, well below the levels that economists say are needed to tackle the unemployment rate which is fast approaching 30%.
Mboweni’s strategy document, which was released in August, proposes the privatisation of state-owned enterprises that do not serve a developmental purpose, and the sale of some of Eskom’s coal-fired power stations as part of efforts to stabilise the ailing power utility, which supplies virtually all of SA’s energy.
With a mounting debt of R450bn, which it cannot service from revenue, Eskom is regarded as a risk to SA’s finances.
However, Ramaphosa has all but ruled out the sale of some of Eskom’s coal-fired power stations, saying his government is not in the business of selling power stations.