South African Treasury Revises Approach to Control Public Servants' Wage Bill

The South African government has unveiled a new approach aimed at reining in rising costs associated with paying public servants. National Treasury has allocated a sum of R111.4-billion for the next three years to adjust the pay of public servants in departments and professions considered crucial such as education, health, police, defence and correctional services.

This strategy marks a significant shift in how the Treasury approaches remuneration in the public sector. In previous years, all public servants, regardless of their departments, were eligible for a pay rise. Of the R111.4-billion earmarked by Treasury, about R24-billion will immediately fund a 7.5% pay increase for public servants in the current fiscal year (2023/24), as it was not fully budgeted for leading to a gap in public finances.

The balance will be directed towards remuneration in personnel-heavy sectors including health, education, and the police service over the succeeding three years. Since 2020, the Treasury has sought to implement a pay freeze in the public sector in a bid to stabilize the cost of paying South Africa's 1.2 million public servants. However, resistance from public sector trade unions spearheading several strikes thwarted these efforts.

The cost of paying public servants, pegged at R646.4-billion in 2023/24, is the single largest component of government expenditure, cornering 30% of the total expenditure of R2.26-trillion in the current fiscal year.

Treasury's analysis of public sector pay contained in the 2023 Medium-Term Budget Policy Statement documents revealed the unsustainable pay levels since 2013 have prompted more public servants to ascend into higher-earning categories.

Going against the tide, Treasury aims to limit above-consumer inflation percentage increases in public servant pay, which has been the main driver of growth in compensation costs since 2013. As a part of this strategy, Treasury is prepared to allocate new funds to frontline and labour-intensive professions. On the flip side, it is gradually urging provincial government departments to provide for pay increases within their existing budgets.

Trade Unions and federations have issued mixed responses towards Treasury's new compensation approach.