Government’s plan to cut 30,000 employees

The National Treasury’s plan to cut South Africa’s budget by letting some government employees retire early will not affect service delivery or be a “free-for-all”.

This is according to Finance Minister Enoch Godongwana in a response to a Parliamentary question from EFF MP Omphile Maotwe.

Maotwe asked whether the National Treasury’s strategy of allowing early retirements to align public servant’s headcount with the government’s budget will affect service delivery.

This comes after Godongwana announced in the Medium-Term Budget Policy Statement (MTBPS) that the Cabinet has approved an early retirement program to reduce government employment costs.

The National Treasury allocated R11 billion over the next two fiscal years to fund a plan to offer early retirement to senior civil servants as it seeks to reduce its wage bill. 

“Cabinet has approved an early-retirement program to reduce government-employment costs while retaining critical skills and promoting the entry of younger talent into the public service.”

The budget stated that it would approve applications that “do not reduce the pool of highly skilled individuals within government agencies”.

In response to Maotwe’s question, Godongwana said the government is incentivising early retirement to achieve two broad objectives.

The first is rejuvenating the public service through employment of graduates and younger professionals and the second is aligning public service headcounts with the budget. 

He said the current allocation of R11 billion in the 2024 MTBPS is based on an assumption of approximately 30,000 employees exiting the public service. 

However, the final number will depend on the respective salary levels of the employees who would be approved for early retirement.

He further said that executive authorities are required by law to approve early retirement applications and ensure that the initiative does not reduce the pool of highly skilled individuals within their respective government departments. 

“Therefore, the programme would not be a ‘free’ for all employees in the identified age categories as such decisions will rest with the executive authorities taking into account the impact on service delivery,” the minister said. 

“Further details about the implementation of the programme will be communicated once the discussions with labour at the Public Service Coordination Bargaining Council have been concluded.”

In South Africa, the government’s wage bill – which refers to the salaries and benefits paid to public sector employees – is a significant portion of the national budget. 

Historically, it has been one of the largest expenditure categories, often accounting for a substantial percentage of government spending. 

This is due to the large size of the public sector, which includes employees in education, healthcare, law enforcement, and other state institutions.

For years, the government has struggled to manage this wage bill, balancing the need to pay public sector workers while addressing fiscal sustainability and other spending priorities.

Therefore, containing personnel costs will be key to the government meeting its objectives of reining in state debt and the fiscal deficit. 

Bloomberg reported earlier this year that reducing headcount may be an easier option than taking on powerful labour unions who have consistently demanded and won inflation-beating raises.

“Public-service remuneration is a complex issue that requires a delicate balancing act between attracting and retaining skilled personnel, ensuring fiscal sustainability and promoting economic growth,” the Treasury said. 

The latest MTBPS projects the wage bill to cost more than R298 billion by 2027.

The government sees the wage bill accounting for 31.4% of total government expenditure in the year through March 2028.

Recently, Godongwana addressed questions in the National Assembly, stating there is no guarantee that the projected public sector wage bill will stay within the budget. 

The government is in ongoing wage negotiations with unions, with a proposal of a 4.5% salary increase – which was later raised to 4.7% – currently under consideration. 

TimesLive reported that the minister said past negotiations had resulted in legal battles and varying outcomes, including years without increases and adjustments made to base salaries.

Over the past few years, the government has been criticized for the size of the cabinet, which grew following the formation of the Government of National Unity earlier this year.

In response to questions about the cabinet size in Parliament, Godongwana explained that the increase in cabinet positions was necessary to form the GNU.

However, TimesLive reported that he assured MPs that there was a plan to reduce the number of cabinet posts before the elections, and part of that included restructuring public entities.

“That programme of reducing public entities is in place, but the necessity of the GNU requires that there is accommodation of some of the critical players in the formation of the GNU, and therefore, that necessitated the increase in the number of cabinet posts,” he said.

“The strategic thrust of reorganizing the government remains on course.”