BUDGET 2025 | Public wage bill requirement to reach R450.6bn in 2025/26

Documents in minister of finance Enoch Godongwana's Budget said after a 5.5% wage increase for public services, the total public wage bill will reach R450.6bn in 2025/26.

Godongwana could not table the budget in parliament on Wednesday as the government of national unity's cabinet could not approve it. The budget will now be tabled on 12 March. 

This follows a wage deal that was struck between the government and public service unions representing public servants including teachers, nurses, and police officers. This is projected to bring spending on public service to R23.3bn in the medium term.

The budget documents, which were not tabled but have been seen by reporters and economists, said though the three-year public wage agreement exceeds the 2024 budget and Medium-Term Budget Policy Statement (MTBPS) projections, its duration reduces uncertainty in budget planning.

“This agreement will cost an additional R7.3bn in 2025/26, R7.8bn in 2026/27 and R8.2bn in 2027/28.”

“The wage agreement will cost the government an additional R7.3bn in 2025/26, R7.8bn in 2026/27, and R8.2bn in 2027/28, but will ensure budget certainty for the next three years,” a budget document read.

The Budget Review, which was shared with journalists and economists but not tabled, said the risk to the fiscal outlook remained balanced following the conclusion of wage negotiations with a multiyear agreement and early retirement initiatives, which reduce compensation risks over the period ahead.

The document added that the government would continue to implement an early retirement policy while keeping a freeze on the filling of non-essential vacancies. The 2025 budget covers the cost of the first three-year public service wage agreement since 2018.

“After the approval of the 2024 MTBPS, provisional allocations were increased by R75.6bn. These amounts are provisionally allocated mainly for goods and services and compensation of employees in critical frontline services.

“This funding will address significant pressures in provincial health and education, expand access to and improve the quality of early childhood development, support the employment of doctors after their community service, increase the availability of medicines and medical supplies, and strengthen capacity within the department of home affairs and the Border Management Authority.”

The public sector borrowing requirement sits at R397.2bn for the 2025 budget, compared to R332.5bn in the 2024 budget, marking a R64.7bn deviation. This is expected to peak at R450.6bn in 2025/26 and cool to R334.4bn in 2026/27, and R360.6bn in 2027/28.

The budget flagged “new and persistent spending pressures” in areas including educator costs, early childhood development, and healthcare, which it says necessitated the tax increases it proposes.

Of the social services, which are expected to cost a total of R1.52-trillion, learning and culture are allocated R508.7bn and health R298.9bn. The 2025 budget also proposes spending of R11bn to implement early retirement measures in 2025/26 and 2026/27.

Meanwhile, the 2025 budget also proposed spending additions over the medium-term including R35.2bn to extend the Covid-19 social relief of distress (SRD) grant until March 2026 and R23.3bn to increase the value of social grants by more than inflation.

Starting in April, the old age grant, war veterans grant, disability grant and care dependency grant will increase by R150 while the foster care grant will increase by R80 to R1,260. The Covid-19 SRD grant was extended to March 2026 with an allocation of R35.2bn to continue the R370 monthly grant.

The number of social grant beneficiaries, excluding SRD grants, is expected to rise from 19 million in 2025/26 to 19.3 million in 2027/28, according to the Budget Review.