Finance minister Tito Mboweni. Picture: ESA ALEXANDER
Finance minister Tito Mboweni. Picture: ESA ALEXANDER

Finance minister Tito Mboweni gave little indication of how the supplementary budget will affect the public wage bill,except for saying nearly half of all consolidated revenue will go towards the compensation of workers.

“We value the important work public servants do. [Public service and administration] minister Senzo Mchunu is negotiating with our partners in the labour movement to find a balanced solution that sets compensation at an appropriate, affordable and fair level,” he said.

Mboweni on Wednesday delivered the supplementary budget where he laid out the full extent of the damage the Covid-19 crisis had on the state’s already weak finances. He confirmed expectations of a substantial rise in debt levels and a widening budget deficit.

Mboweni said public finances were dangerously overstretched.

In February, the minister pencilled in huge cuts to the public-sector wage bill in an attempt to trim the budget deficit. The government wanted to slash the total public wage by R160.2bn over the next three years, but the public sector unions were not on board when this decision was made and took it as a declaration of war.

Since then the government initially maintained that it had no money to pay the agreed increases, but then it made another offer which the unions rejected.

The increases in the final year of the three-year wage agreement signed in 2018 would have taken effect on April 1, if the agreement had been honoured.

Public-sector unions have since taken the government to court over its refusal to implement a standing wage agreement.

In the supplementary Budget Review, Mboweni said the cabinet had reiterated support for the proposed reduction in the public-sector wage bill announced in February, which would improve the composition of spending.

He said main budget expenditure was projected to peak at 37.2% of GDP in 2020/2021. Over the medium term, main budget non-interest expenditure was expected to decrease as a share of GDP. Spending reductions amounting to about R230bn were required in 2021/2022 and 2022/2023, followed by further reductions in 2023/2024. 

“These measures are in addition to proposed medium-term reductions of R160.2bn to the public-service wage bill set out in the 2020 budget, which are yet to be finalised. Failure to achieve these reductions will require larger reductions to wages and other spending areas in the outer years of the spending framework, and higher revenue increase,” Mboweni said.

He said the government would ensure sufficient capacity in front-line services — health, social protection and municipal services — to manage the evolution of Covid-19.

quintalg@businesslive.co.za