Finance Minister Enoch Godongwana on Wednesday said the three-year public sector wage agreement signed between the government and the labour unions will cost the taxpayer R23,4 billion over the next three years.T
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The three-year public sector wage agreement signed between the government and the labour unions will cost the taxpayer a whopping R23,4 billion over the next three years.
Tabling the 2025-26 financial year budget in Parliament on Wednesday, Finance Minister Enoch Godongwana said the budget covered the costs of the first three-year public-service wage agreement since 2018.
“R23,4 billion is made available for the 2025 public-service wage agreement, which secures certainty for the fiscus for the next three years,” he said.
Godongwana said although the outcome of the agreement required additional allocations for compensation, it was notable that government has secured certainty for the largest item in the budget, without delaying debt stabilisation.
The allocation for the public service wage bill remained unchanged from the amount that was proposed when the budget was postponed when the parties in the Government of National Unity did not reach consensus.
At the time the budget was postponed, the Public Sector Coordinating Bargaining Council announced that it had held successful negotiations after securing a majority party agreement of 83,34% after parties were given a 21-day period to consult on the draft wage agreement.
Godongwana said the salaries of civil servants will increase by 5,5 % in 2025-26 and 1% above projected consumer price index in the two following financial years.
“This agreement will cost the fiscus an additional R7,3 billion in 2025/26, R7,8 billion in 2026/27 and R8,2 billion in 2027/28,” he said.
The Minister stated that the government will partially draw down on the contingency reserve to meet the wage agreement costs.
“Although the agreement exceeds the 2024 budget and MTBPS projections, its three-year duration reduces uncertainty in budget planning,” he said.
Godongwana announced that the early retirement incentive announced in the 2024 Medium Term Budget Policy Statement would be rolled out to rationalise and rejuvenate the public service.
He said the government was reactivating early retirement without penalties, to help manage wage costs while attracting talented younger employees into the public service.
“Over the next two years, the 2025 Budget provides R11 billion in funding to incentivise public servants to retire early.”
The government, according to the plan, seeks to manage headcounts by incentivising employees over 55 years old to retire amid moderate compensation spending as younger employees join the public service at entry level salary grades.
“Preliminary savings are expected to average R7,8 billion per year over the medium to long term. Savings will be retained by departments.”
In terms of the early retirement initiative, R4,4 billion is allocated in 2025/26 and R6,6 billion in 2026/27.
“These amounts are set aside for departments to access during each financial year if they meet the relevant requirements, such as the minimum age of each applicant and confirmation that each application has been approved by the relevant executive authority.
“Departments will be allowed to retain their savings from this initiative, and may use them to address existing compensation pressures and support capacity building.”
Those wishing to pursue this option will have to apply, with approvals given only by the relevant executive authority.
Up to 30,000 state employees are expected to opt for early retirement.
mayibongwe.maqhina@inl.co.za