We are not cutting government employees' salaries: Treasury

27 February 2020 - 17:02 By CAIPHUS KGOSANA
Treasury director-general Dondo Mogajane.
Treasury director-general Dondo Mogajane.
Image: Esa Alexander/Sunday Times

The National Treasury said it was not planning to cut the salaries of public servants or freeze their increases when it proposed a R160bn reduction in the public sector wage bill.

Treasury director-general Dondo Mogajane said the government’s intention to review the existing multiyear wage agreement with public servants was aimed at curbing runaway expenditure rather than cutting people’s pay.

“We are slowing down the rate of growth [of expenditure]. We are not decreasing or cutting any wage. People will actually take home the same amounts that they would have taken,” he said.

Mogajane said because the current wage agreement was unaffordable, the government was seeking to renegotiate the portion that gives certain public servants increases that are a couple of percentage points above inflation. They are seeking to do this before the new round of pay increases in April.

“We are not in anyway cutting wages ... that money is not in people’s pockets. For middle category [civil servants] the current increase is around CPI (consumer price index/inflation), plus 2% ... but we are capping it at inflation, so it’s still an increase,” Dondo said during a presentation by finance minister Tito Mboweni and his team to the joint finance committees on Thursday.

Public sector unions have warned that the move to reduce the public sector wage bill amounted to a declaration of war. In terms of the 2018 wage agreement, public servants on salary bands 1-7 were given a 7% increase in 2018, while in 2019 and 2020 their increases were aligned with inflation, plus 1%. Civil servants on salary bands 8-12 received increases aligned to inflation plus 0.5%, while those at senior levels 11-13 received cost adjustments on a par with inflation. The government has set an inflation target of between 4% and 6%.

However, to narrow the wage gap, some public servants, such as low- and middle-ranking policemen and nurses, would get an additional 1% pay progression increase each year for three years.

Meanwhile, the Treasury defended its R16.4bn allocation to SAA, which is in business rescue, saying those who had lent to the airline in the past wanted to be paid back, with interest, because of the airline’s precarious financial position.

“SAA had legacy debt. This debt is old, it’s not new. It’s been sitting in their books. They are not able to pay it and it is guaranteed by the state. It has got to a point where lenders are saying we are no longer going to roll over this debt because this entity is insolvent. We want to be paid our money,” said Tshepiso Moahloli, acting head of asset liability and management.

Mboweni told MPs the main theme of his budget was debt stabilisation because the government was forced to borrow more each year to plug the gap between revenue and expenditure. The budget deficit for 2020 was R380bn, while national debt would account for 71% of GDP by 2022/23.

He said the National Treasury was looking at reducing spending on high-ticket items such as bailouts to state-owned entities (SOEs) and the wage bill, reducing wastage in procurement and litigation against government, and rooting out theft of state money.