Public sector wage freeze mooted for the next three years

Finance minister Tito Mboweni has proposed a public sector “wage freeze” for the next three years, in a move that's likely to spark a new political battle between him and trade unions.

Mboweni made the announcement in parliament on Wednesday as he tabled the National Treasury's 2020 medium-term budget policy statement (MTBPS), telling MPs that the public sector wage bill has risen by 51% since 2008.

This has resulted in 1.3 million government employees in national and provincial departments earning R567bn in salaries and other benefits by the end of March 2020.

The government is already embroiled in a court battle with public sector unions over its refusal to implement the third year of the 2018 wage settlement, saying it was simply unaffordable given the current state of the public purse.

Mboweni's latest measures, which are expected to deepen the running battle between the Ramaphosa administration and the unions, include:

• assessing the allowances and benefits of civil servants;
• reconsidering pay progression rules; and
• reviewing the occupation-specific dispensations.

The MTBPS documents presented to parliament by Mboweni showed that public office-bearers such as ministers, their deputies, MPs, mayors, councillors and judges would also be affected by the proposed pay freeze.

Public office bearers such as President Cyril Ramaphosa earn just more than R3m a year, ministers R2.4m, and an ordinary judge R1.9m. On top of that, public office bearers also receive other generous taxpayer perks such a vehicle and cellphone allowances, as well as free state housing for those with offices in Cape Town and Pretoria.

“In addition, government is co-ordinating work relating to developing a comprehensive public-sector remuneration strategy for the medium to long term.” This will include public office bearers, state-owned companies, public entities and local government.

“The strategy will seek to better balance competing interests on the basis of fairness, equity and affordability,” states the MTBPS.

Mboweni said among the factors that led to a runaway public sector wage bill was the introduction of the occupation-specific wage dispensation in the 2000s that produced “one-off large” skilled staff, such as health and legal professionals in the employment of government, as well as above inflation pay hikes.

He said this was no longer sustainable in an environment with debt service costs expected to peak at just over R353bn by 2024.

Mboweni's documents also showed that the “average remuneration” in the public service had more than tripled between 2006 and 2020, from R136,000 per annum to R415,000.

“The contributions of hard-working public servants are essential for national development, and government is committed to providing fair and sustainable compensation.

“But with much state borrowing funding consumption, the wage setting process has become divorced from economic reality," he said.

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