Public sector wage bill not sustainable: Gordhan

25 October 2011 - 15:57 By Caiphus Kgosana - Politics LIVE
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Finance Minister Pravin Gordhan. File picture
Finance Minister Pravin Gordhan. File picture

Finance Minister Pravin Gordhan has announced additional spending of just over R10-billion in his medium-term budget, with almost half of it going towards financing the state’s increasing wage bill.

According to the medium-term budget, an extra R4.4-billion has been set aside for higher-than-expected public sector personnel remuneration costs.

State debt service costs – the interest that the government pays on its borrowings – have shot up to R285-million, making this the fastest-growing expenditure item on the budget.

The increase in the public sector wage bill comes as the state battles to collect taxes. Tax revenue has shrunk by R13-billion to R729-billion, while the budget deficit has increased to 5.5% of South Africa's gross domestic product (GDP).

The deficit is expected to contract back to 3.3% of GDP by 2014.

The National Treasury has now warned that the state's burgeoning wage bill – especially at senior management level – is not sustainable and has proposed a wage increase target of 5% over the next three years for state employees.

“The extent of public sector wage settlements must be balanced by the crucial consideration of the share of spending allocated to social and economic priorities such as infrastructure and social security,” the Treasury said in its overview of the budget.

Gordhan warned that spending growth will have to be arrested over the coming years while tax revenue is increased to bring the country back into the black.

“Can we do more and more smartly with less?” he asked

He said the government wanted to invest more money in infrastructure rather than on consumption.

“We must borrow to invest in infrastructure, not for government consumption,” he said.

Current infrastructure spending of R223-billion is expected to increase to R802-billion over the three-year budget cycle. This includes a R292-billion investment in the energy sector, and a further R226-billion towards transport and related logistics. Another R71-billion will be spent on new schools, clinics and hospitals during that period.

Education receives R190-billion, the biggest share of government spending, followed by health at R113-billion.

The government will also spend R25-billion over the next six years to support industries, help create jobs and minimise retrenchments.

>>Read Pravin Gordhan's full speech here

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