The National Treasury notes the outcome of wage negotiations at the 2023 Public Sector
Coordinated Bargaining Council (PSCBC). A majority of parties have agreed to a two-year
agreement, which encompasses a 7.5 per cent increase (ie translation of the current cash allowance
into a pensionable salary plus an increase of 3.3 per cent) in 2023/24 and a CPI-linked increase in
2024/25. The cost of the agreement is estimated at R37.4 billion in 2023/24, with carry-through
effects also applicable for subsequent financial years.

The 2023 Budget did not pre-empt the outcome of the wage negotiations. In this regard, the outcome
of the wage bill negotiations was identified as one of the key risks to the fiscal outlook presented in
the Budget. This risk has now materialized.

During the tabling of the 2023 Budget the Minister of Finance stated as follows:
“An unbudgeted wage settlement will require very significant trade-offs in government spending
because the wage bill is a significant cost driver. It will mean that funds must be clawed back in other
ways. Mainly, this will mean restricting the ability of departments and entities to fill non-critical posts.
It will also mean achieving cost-savings from major rationalisation of state entities and programmes.
As indicated by the President in the SONA, the National Treasury has already identified where large
savings can be achieved.”

Government remains committed to reducing the fiscal deficit to more sustainable levels (i and
stabilizing debt. Therefore, government will initiate processes to ensure that the latest wage
agreement is implemented through significant trade-offs in the short-term and over the medium-term.
Moreover, the National Treasury reiterates the position that government borrowings will not be
increased for the purposes of consumption expenditure, including paying for wages. Fiscal policy
will remain focused on reducing fiscal risks and supporting measures to grow the economy. This will
ensure that the overall fiscal path as outlined in the Budget is maintained.

Details in respect of the following measures are being finalized for implementation:

a) Containing as much of the wage increase within the compensation ceiling by restricting
recruitment of non-critical posts. In this way, headcount attrition will cushion the blow of the
wage agreement;

b) Restricting previously-planned recruitment in certain areas;

c) Delaying projects and programmes funded within the budget and allowing departments to
shift funds towards the increased compensation costs;

d) Implementing rationalization measures, including as it relates to public entities; and

e) Reducing out-of-line remuneration in public entities. The National Treasury is concluding a
process to identify public entities that receive transfers from government where remuneration
policies promote exorbitant or overly-generous pay packages, particularly for entities that do
not raise significant own revenue.

As outlined in the Budget and by the Minister of Finance, these and other measures will be
aggressively pursued during the current financial year. In addition, medium-term measures to
rationalize the operations of the state will be finalized and will be announced during the 2023
Medium-Term Budget Policy Statement.

Issued by National Treasury
Date: 31 March 2023

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