No More Cash to Give South African State Workers' Pay Increases

(Bloomberg) -- After approving an inflation-busting pay increase for public servants, South Africa’s government failed to allocate additional funds to pay for it, instead ordering state departments to find the money within existing budgets.

The pay deal will cost an extra 30.2 billion rand ($2.1 billion) over a three-year time frame, the National Treasury said in its mid-term budget statement presented to lawmakers on Wednesday. The public-sector wage bill already accounts for 35 percent of government expenditure.

“Your sweet spot should be 30 percent,” Finance Minister Tito Mboweni told reporters in Cape Town before delivering his mid-term budget address. “These things require a huge amount of negotiation with the trade union movement.”

The wage bill for the government’s roughly 1.3 million employees has grown at an average rate of 11.2 percent a year since 2007, outpacing inflation and crowding out spending on services and infrastructure. Although employment numbers peaked in 2013 and have fallen 1 percent since then, that’s not enough to contain real spending growth, the Treasury said.

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