BL Premium reports that Finance Minister Enoch Godongwana told MPs on Tuesday that the macrofiscal position presented in his February budget had changed “adversely and significantly” and the “risks into the future remain high”.
A major contributor was the higher than expected public sector wage increase agreed to with trade unions earlier this year. High inflation also increased the government’s borrowing costs. Godongwana indicated in a speech on the Treasury budget vote that headcounts in the public sector would have to be restricted in a bid to save R37.4bn and cushion the blow of the wage agreement on the fiscal framework. In terms of the two-year deal, government employees got a 7.5% increase for the first year, which started on 1 April, followed by an increase in line with consumer price inflation for the second year. In practice the first year’s increase is just 3.3% because it wraps in the two-year-old R1,000 monthly cash gratuity, which the government had intended to fall away once a new settlement was signed. The agreed increase is still much higher than the 1.6% for 2023/24 in the February budget. Godongwana indicated: “Simply put, as I indicated in the budget speech, a higher-than-budgeted wage agreement means less space for the recruitment of staff. The Treasury is working with the department of public service & administration [and] the provinces, to co-ordinate the process of identifying ways of restricting headcounts, among others, so that the ... wage increase can be recouped.”
- Read the full original of the report in the above regard by Linda Ensor at BusinessLive (subscriber access only)
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