News24.com | Budget 2023 | Uncertainty hangs over wage bill

Finance Minister Enoch Godongwana.

• Public sector unions and government are still in talks over wages.
• Treasury has removed the R1 000 cash gratuity from the Budget.
• Treasury wants wage growth to rise with inflation.
• For more financial news, go to the News24 Business front page.

Finance Minister Enoch Godongwana's commitment to negotiate with trade unions first before inking in a wage increase has left a hole at the heart of the Budget, leaving economists and analysts guessing whether the fiscal framework will hang together.

The Treasury has pencilled in a 3.3% increase in the wage bill over the medium term. However, this is unlikely to be the final outcome as government last week tabled a 4.5% increase offer for 2023/24 in the Public Sector Coordinating Bargaining Council. 

Head of the budget office Edgar Sishi said that Treasury wants the wage bill to rise with inflation – estimated to be 4.5% -  in each of the three years of the framework. While this is what it has pencilled into the framework for each of the three years, the phasing out of the R1 000 a month cash gratuity - and allowance given to public servants in 2021 and 2022 - has the effect of decreasing budget allocations in the first year and therefore decreases the average increase over the three years. The R1 000 cash gratuity was a non-pensionable monthly payment to all public servants instead of pensionable wage increases. It was done as a concession to employees when the government stepped in to arrest the rising wage bill.

Sishi said in the absence of certainty over the actual increase for 2023/24, Treasury had taken it out of the framework. Finance Minister Enoch Godongwana said in a briefing to journalists that it would have to be reinstated if no wage agreement was reached. 

Public sector unions have said they will put up a fight if the R1 000 is unilaterally removed. This is because, according to the previous agreement reached in 2021, the gratuity must remain in place until a new agreement is reached. 

Sishi said that the treatment of the R1 000 cash gratuity made estimating the cost of the wage bill for the first year of the medium-term very difficult. The outer two years were also uncertain as there was a risk that inflation would come in higher than anticipated. 

"It is very difficult to estimate inflation right now. We can hold down whatever we need to in budgets, but we will have a problem if inflation comes in higher. This is mostly because of the public sector wage bill, but in general, all government consumption is hard to hold down if there is inflation that is higher than anticipated."

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