The National Treasury says the wage agreement between unions and government will cost the state R37.4 billion and this has necessitated cost-cutting measures to accommodate the situation.
The Treasury said while the government had expected an increase in wages for employees, it did not expect the deal to be 7.5% and this has severely affected the budget.
Finance Minister Enoch Godongwana had warned in the Budget speech in February that if the wages shot above their projection, this would put a strain on the fiscus.
The state had offered the unions 4.7% but they rejected it.
After negotiations a majority of the unions have agreed to the 7.5% increase. The wage agreement is for two years.
“The National Treasury notes the outcome of wage negotiations at the 2023 Public Sector Co-ordinated Bargaining Council. A majority of parties have agreed to a two-year agreement, which encompasses a 7.5% increase (that is, translation of the current cash allowance into a pensionable salary plus an increase of 3.3%) in 2023/24 and a CPI-linked increase in 2024/25. The cost of the agreement is estimated at R37.4 billion in 2023/24, with carry-through effects also applicable for subsequent financial years,” said the Treasury.
“The 2023 Budget did not pre-empt the outcome of the wage negotiations. In this regard, the outcome of the wage bill negotiations was identified as one of the key risks to the fiscal outlook presented in the Budget. This risk has now materialised,” it added.
In light of this, a number of cost-cutting measures will be implemented to accommodate this increase.
This will include freezing some non-critical posts in the public sector.
In addition, they will not replace employees who go on retirement.
The National Treasury said these measures will be pursued aggressively to ensure that they remained within their fiscal targets.
Current Affairs