Government’s plan to cut 30,000 jobs

Up to 30,000 state employees are expected to opt for early retirement under the National Treasury’s early retirement incentive programme, which is expected to result in savings of R7.1 billion per year. 

This was revealed in Finance Minister Enoch Godognwana’s Budget Speech on 12 March, which outlined the government’s dire finances. 

Godongwana revealed that the National Treasury plans to hike VAT for the first time since 2018 to raise R42.5 billion in revenue over the next two financial years. 

The increase is intended to fund key public services such as education, health and infrastructure development. VAT will be hiked by 0.5 percentage points on 1 May and another 0.5 on 1 April 2026. 

To ease the impact on poor households, the above-inflation increases in welfare grants will be implemented, more food items will be exempted from VAT, and the fuel levy will remain unchanged.

The increase in VAT is combined with spending cuts, with the country’s bloated and unproductive public sector identified as one area where significant savings can be made. 

The government’s wage bill accounts for more than a third of its total expenditure, crowding out spending on other priorities.

Godongwana said the government remains committed to the current three-year wage agreement with public servants, which exceeds projections in the 2024 Budget. 

The agreement will cost the government an additional R7.3 billion in the current financial year, R7.8 billion in 2026/27 and R8.2 billion in 2027/28. 

Last year, the National Treasury announced a plan to reduce the public sector wage bill through an early retirement incentive. 

Godongwana’s 2025 Budget provided R11 billion in funding to incentivise older public servants to retire early, resulting in the state’s workforce being younger and relatively cheaper.

Those wishing to pursue this option will have to apply, with approvals given only by the relevant executive authority, the Full Budget Review said. 

Up to 30,000 state employees are expected to opt for early retirement. The programme aims to manage staff headcount in a targeted manner and revitalise the public service.

The R11 billion will also be used to attract younger employees into the public sector workforce to ensure that when key staff are lost due to natural attrition, these posts are able to be filled. 

It is unclear how the incentive will work in practice. State workers aged between 55 and 60 are likely to be offered two weeks’ pay for every year they have worked up to a maximum of 20 years and one week’s pay for every year they have been employed after that. 

Any penalties usually incurred by those taking early retirement will likely be waived. 

Godongwana estimated the early retirement incentive will result in average annual savings of R7.1 billion per year over the medium-to-long term. 

However, previous early retirement offers had limited take-up, casting doubt about the projected savings.