<p>South Africa plans to freeze public-sector wages for the next three years to help cut its salary bill and contain a yawning budget deficit.</p>.<p>The proposal raises the risk of widespread strikes by the 1.3 million-strong public-sector workforce.</p>.<p>Here is why the government wage bill is a problem.</p>.<p><strong>What is the Public Wage Bill?</strong></p>.<p>South Africa spends around a third of its budget on the salaries of its civil servants, including national and provincial officials, doctors, teachers and police.</p>.<p>In the fiscal year that started in April, the government projects it will spend around 639 billion rand ($39.54 billion) on their wages.</p>.<p><strong>How did it get so large?</strong></p>.<p>After the end of apartheid in 1994, the governing African National Congress (ANC) sought to empower millions of disadvantaged black people, including by placing them in public- sector jobs. Government spending on salaries more than tripled between 2007 and 2019.</p>.<p>The main reason was above-inflation wage deals with powerful unions, which are allied with the ANC and can shut down parts of the economy if they don't get their way.</p>.<p>Civil servants' salaries rose by about 40% in real terms over the past decade, while their number grew by 180,000. The fastest wage increases were in high-skilled professions, including doctors and teachers.</p>.<p><strong>How will government make the cuts?</strong></p>.<p>The Treasury is seeking nearly 311 billion rand in wage bill reductions by 2023/24. It has chosen not to implement pay increase this year that were agreed in 2018. It has further proposed a wage freeze for the next three years.</p>.<p>Previous efforts to cut compensation costs, including offering early retirement, have not been successful.</p>.<p>Some analysts think the government won't be able to deliver the promised cuts because the ANC needs its union allies to help mobilise support at local elections next year.</p>.<p><strong>Are the proposed cuts enough?</strong></p>.<p>Even if the cuts materialise, the budget deficit will remain high at 10.1% of GDP in the next fiscal year, from 15.7% in the current year. The debt-to-GDP ratio will still exceed 92% in 2023/24.</p>.<p>Public-sector pay would still account for a greater share of government spending than it does in many advanced and emerging economies in Europe and Asia.</p>.<p>The problem for South Africa is that it has so little revenue to spare after the coronavirus crisis ravaged the economy.</p>
<p>South Africa plans to freeze public-sector wages for the next three years to help cut its salary bill and contain a yawning budget deficit.</p>.<p>The proposal raises the risk of widespread strikes by the 1.3 million-strong public-sector workforce.</p>.<p>Here is why the government wage bill is a problem.</p>.<p><strong>What is the Public Wage Bill?</strong></p>.<p>South Africa spends around a third of its budget on the salaries of its civil servants, including national and provincial officials, doctors, teachers and police.</p>.<p>In the fiscal year that started in April, the government projects it will spend around 639 billion rand ($39.54 billion) on their wages.</p>.<p><strong>How did it get so large?</strong></p>.<p>After the end of apartheid in 1994, the governing African National Congress (ANC) sought to empower millions of disadvantaged black people, including by placing them in public- sector jobs. Government spending on salaries more than tripled between 2007 and 2019.</p>.<p>The main reason was above-inflation wage deals with powerful unions, which are allied with the ANC and can shut down parts of the economy if they don't get their way.</p>.<p>Civil servants' salaries rose by about 40% in real terms over the past decade, while their number grew by 180,000. The fastest wage increases were in high-skilled professions, including doctors and teachers.</p>.<p><strong>How will government make the cuts?</strong></p>.<p>The Treasury is seeking nearly 311 billion rand in wage bill reductions by 2023/24. It has chosen not to implement pay increase this year that were agreed in 2018. It has further proposed a wage freeze for the next three years.</p>.<p>Previous efforts to cut compensation costs, including offering early retirement, have not been successful.</p>.<p>Some analysts think the government won't be able to deliver the promised cuts because the ANC needs its union allies to help mobilise support at local elections next year.</p>.<p><strong>Are the proposed cuts enough?</strong></p>.<p>Even if the cuts materialise, the budget deficit will remain high at 10.1% of GDP in the next fiscal year, from 15.7% in the current year. The debt-to-GDP ratio will still exceed 92% in 2023/24.</p>.<p>Public-sector pay would still account for a greater share of government spending than it does in many advanced and emerging economies in Europe and Asia.</p>.<p>The problem for South Africa is that it has so little revenue to spare after the coronavirus crisis ravaged the economy.</p>