South Africa plans to slash its wage bill over the next three years, including a proposed pay freeze, as it earmarks massive expenditure cuts to reign in a soaring budget deficit, national treasury said on Wednesday.
The consolidated budget deficit is projected at 15.7% of GDP in the current 2020/2021 fiscal year, up from a 6.4% of GDP shortfall in the previous year. The economy is seen contracting 7.8% in 2020, while public debt is seen ballooning to more than three quarters of GDP.
South Africa has proposed a public sector wage freeze for the next three years as it looks to reduce its massive salary bill as part of measures to arrest a ballooning budget deficit, treasury said.
The economy was already in recession before the Covid-19 pandemic struck in March and restrictions on households and businesses to curb the spread of the coronavirus have exacerbated its socioeconomic woes.
To narrow the budget deficit, the Treasury is targeting a total of nearly R311-billion in wage bill reductions by 2023/2024 as part of the expenditure cuts.
It is pinning an economic recovery on increased spending on infrastructure investment – the cornerstone of President Cyril Ramaphosa’s growth plan.
Three years
“To achieve these targets, which are essential for fiscal sustainability, government has not implemented the third year of the 2018 wage agreement,” treasury said in the medium-term budget policy statement. “Furthermore, the budget guidelines propose a wage freeze for the next three years to support fiscal consolidation.”
South Africa has 1.3 million public sector employees, with compensation now equivalent to 11% of GDP, up from 9% in 2004/2005. — Reported by Olivia Kumwenda-Mtambo, Mfuneko Toyana and Wendell Roelf, (c) 2020 Reuters