South Africa to Cut Wage Bill to Help Fund Power Utility Bailout

(Bloomberg) -- South Africa plans to cut the state wage bill over the next three years to keep spending under control as the economy flags and it bails out the struggling state power utility.

The amount of money spent on civil servant wages “is unsustainable,” Finance Minister Tito Mboweni said in his budget speech to Parliament in Cape Town on Wednesday. “As a gesture of goodwill, members of parliament and provincial legislatures and executives at public entities will not be receiving a salary increase this financial year.’’

State worker’s salaries account for about 35 percent of the 1.8 trillion-rand ($127 billion) budget. The compensation budget will be reduced by 5.3 billion rand in the year starting April 1, 11 billion rand following year, and 10.7 billion the year after that, the National Treasury said in the Budget review.

Older workers will be offered early retirement, and the budget sets aside 16 billion rand over the next two years to fund the costs of paying them off. The government expects 25,000 to 30,000 workers to quit, Mboweni told reporters before his budget speech.

South Africa has about 1.23 million workers, down from 1.25 million in 2015, according to the Treasury. New employees tend to be younger and earn less than those who are leaving, it said.

To contact the reporter on this story: Paul Vecchiatto in Cape Town at pvecchiatto@bloomberg.net

To contact the editors responsible for this story: Karl Maier at kmaier2@bloomberg.net, Ana Monteiro, Mike Cohen

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