MTBPS: Govt sets aside R11bn for early retirement of 30 000 employees to bring down the wage bill
The government has allocated R11 billion to implement early retirement measures over the next two fiscal years for an estimated 30 000 public sector employees and bring in younger talent into the public service in a bid to contain the escalating wage bill.
This is contained in the documents of the National Treasury's 2024 Medium-Term Budget Policy Statement (MTBPS) tabled in Parliament today.
The MTBPS documents state that Cabinet has approved an early retirement programme to reduce government employment costs while retaining critical skills and promoting the entry of younger talent into the public service.
Finance Minister Enoch Godongwana confirmed this during a pre-Budget Speech media briefing and gave more details during his speech.
Godongwana said this was a measure to build a capable State - one of four pillars aimed at lifting the economy to a higher and more inclusive growth path - that delivers a reasonable and reliable standard of public service that will foster the necessary environment for more growth and jobs.
“We are also implementing initiatives like early retirement, not to merely reduce the size of the workforce, but also to introduce younger talent to the public service,” Godongwana said.
“This is part of building a capable, ethical and developmental government. We will be harnessing digital infrastructure to roll out critical systems in the provision of service delivery in the following focus areas: digitising and simplifying the application and disbursement process for social grants; broadening access to employment pathways; rolling out digital identification documents; building a centralised and accessible website for all government services; and digitising health records management for the rollout of National Health Insurance.”
This is a move that will likely be received with hostility by public sector workers’ unions who are currently anxious over possible job cuts in the public service, particularly in the health and education sectors, due to budget cuts.
Public sector unions are currently locked in wage negotiations with the government.
South Africa is thought to have one of the highest costs for compensation of government employees, with the general government wage bill constituting 13.6% of the GDP in 2022 - the third highest in the world after Iceland and Denmark, according to the Organisation for Economic Co-operation and Development - while the general government employment is the seventh in the world at 18.6%.
The MTBPS documents state that the government is proposing to reactivate early retirement without penalties in 2025/26 and 2026/27 in a bid to further contain public service wage costs amid a deteriorating fiscus.
“To support this initiative, an additional R11 billion will be allocated over the next two fiscal years. Details will be set out in the 2025 Budget,” state the documents.
“Accounting officers and executive authorities will have the authority to approve early retirement applications that do not reduce the pool of highly skilled individuals within government agencies.”
According to Treasury, the wage bill has decreased as a share of consolidated spending over the past decade, falling from 35.7% in 2013/14 to 32.1% in 2023/24.
By 2027/28, the wage bill is projected to decrease to 31.4% of consolidated spending.
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