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Wage bill driving health departments' overspending

The growing public-sector wage bill is eating away at provincial budgets, forcing them to run up huge debts to keep services running, according to Treasury. Business Day reports that nowhere is this more apparent than in the public health sector, which accounted for R13.8bn of the R26.4bn in accruals accumulated by the provinces by the end of the 2016-17 fiscal year.

The report says the worst offender was the Gauteng Health Department, which had accruals of R7bn by 31 March, followed by the Eastern Cape (R1.9bn) and KwaZulu-Natal (R1.3bn). "Compensation is driving the overspending in provinces, particularly in Gauteng and KwaZulu-Natal," said the Treasury’s deputy director-general for intergovernmental relations, Malijeng Ngqaleni.
Trade unions and the government are gearing up for a crucial round of wage talks. Unions have tabled a demand for a general salary increase of 10%-12% with the Public Sector Co-ordinating Bargaining Council. The medium-term expenditure framework provides for an overall increase of 7.3% a year.

"It is in the interest of labour, the public and government that a balanced compromise is reached," Treasury budget office head Michael Sachs said. "Many national departments are going to struggle to come in on budget next year. There is a major risk facing the fiscus on their compensation budgets alone and that’s with no headcount growth and a CPI [consumer price index] adjustment."
The Treasury gave detailed figures on public sector employment trends over the past decade. Sachs said this was intended to inform the debate on remuneration.

The report says the medium-term budget policy statement released last week by Finance Minister Malusi Gigaba contains an additional annex on public sector compensation. Between 2008-09 and 2016-17, compensation spending grew 37% in real terms – or about 4% a year. Teachers and nurses accounted for a large part of this growth: their remuneration has on average outpaced inflation by more than two percentage points for the past seven years, according to the Treasury.

Provincial health department spending on staff grew from 57% of their total expenditure in 2008-09 to 63.2% in 2016-17. Limpopo’s personnel spending ballooned from 58.9% to 71% of its budget over this period.

[link url="https://www.businesslive.co.za/bd/national/2017-10-26-wages-threaten-public-services/"]Business Day report[/link]

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