Cape Town – Finance Minister Nhlanhla Nene says the public sector wage bill settlement has put additional pressure on the fiscus which will warrant revenue measures to be implemented.
He said the growing public sector wage bill left little room for government to employ new staff, leading to a compensation budget shortfall of R12.2 billion on the current fiscal year, 20.6 billion in 2016/ 17 and R31 billion in 2017/ 18.
In June, government and labour unions representing public servants agreed to a 7% salary adjustment for the 2015/16 financial year and CPI plus 1% in 2016/17 and 2017/18 financial years.
The agreement with public sector unions means the National Treasury will need to help departments re-allocate funding from other priorities to ensure that they are able to meet costs.
Tabling the Medium Term Budget Policy Statement (MTBPS) in the National Assembly on Wednesday, the Minister warned of tough times ahead.
“The main change in the fiscal framework by comparison with the February budget arises from this year’s settlement of salary adjustments and benefits of public servants.
“The agreement provides for additional costs of 10.1% this year, and improvements that will be at least two percentage points higher than consumer inflation in the next two years.
“The shortfall in the compensation budgets is accommodated in the expenditure framework largely by drawing down on the contingency reserve,” he said.
Minister Nene said departments would need to reallocate spending from other priorities.
“For the period ahead, the improvement in compensation means that there is no room for expanding government employment. This is not a sustainable situation. We recognise the need to improve the negotiating process and reform public sector remuneration,” he said.
The National Treasury said, meanwhile, that it would work with national and provincial departments to avoid any compromises on service delivery, or the diversion of resources from capital budgets to pay for compensation.
“Nevertheless, it is likely that the agreement will have adverse consequences for the quality and composition of the public finances.
“The shortfall in compensation budgets has significant consequences for the public finances, absorbing resources that had been set aside for other priorities.
“A moderating factor is that the number of personnel employed on government’s payroll has declined since 2012,” the National Treasury said.
According to National Treasury, in March 2015, national government departments employed 402 748 staff – down from 404 496 in March 2012.
Most national government employees are in the Justice, Crime Prevention and Security Cluster departments such as police, defence and correctional services, where employment levels have also declined over the past three years.
This, National Treasury said, has been offset by the expansion of managerial personnel in administrative and policy departments in central government.
“A recent National Treasury review showed that across 13 departments analysed, 1158 posts were added in the last five years. Aggregate compensation across these departments more than doubled between 2008 and 2014.”
“Provincial staff headcount has, meanwhile, declined from 923 553 in 2012 to 913 033 in March 2015, with a decrease of more than 10 000 since the start of the current financial year.
Doing more with less
The National Treasury said it was seeking reforms aimed at strengthening a link between pay and performance of public servants, as well as measures to improve payroll systems, simplify remuneration policies, streamline bonuses and allowances, and ensure that institutional arrangements for collective bargaining are effective.
“Human resources management strategies are being refined to ensure a suitable mix of frontline, technical and support staff. There is also a need to ensure that public servants are working where they are most needed,” the National Treasury said. – SAnews.gov.za
