The Treasury has sought to protect the provision of front-line services by allocating extra funds to help cover the budget shortfall created by 2023’s wage agreement for public servants.
The 7.5% wage deal reached by the state with unions in April came in higher than the Treasury anticipated in the February budget, a development it estimated would cost the government an extra R37.4bn above the compensation budget set aside for 2023/2024.
The Treasury has allocated an extra R24bn to help fund the wage increase in personnel-heavy sectors including health, education and the police service in the current fiscal year, finance minister Enoch Godongwana said in his medium-term budget policy statement (MTBPS) to parliament. A total of R74bn has been set aside over the medium term to fund the wage increase and the associated carry-through costs, he said.
However, the health and education sectors still face a funding crunch, as their budgets shrink in real terms.
Consolidated health expenditure grows by a nominal 3.1% over the medium-term expenditure framework, thus failing to keep pace with the consumer price index (CPI). The Treasury estimates CPI will come in at 6% this year, and forecasts it will be 4.9% in 2024, 4.6% in 2025 and 4.5% in 2026.
In line with its directive to government departments to cut back on programmes that are underspending, R1bn has been shaved from the HIV/Aids conditional grant in 2023/2024. The HIV/Aids conditional grant is about R25bn a year, and is augmented by a further R10bn a year in donor funding. A further R445m has been cut from the health facilities infrastructure grant this year.
The Treasury has set aside a revised estimate of R264.5bn for health in 2023, rising to R268.4bn in 2024/2025. The consolidated health budget then increases to R277.6bn in 2025/2026 and R290bn in the outer year.
Maintaining service delivery amid budget constraints would require health to improve efficiency in areas such as overtime payments, medical supplies and security services, and to delay infrastructure projects, the Treasury said.
Funds for oncology services are to be shifted from the National Health Insurance (NHI) grant to the National Tertiary Services grant, and a single grant is being proposed to consolidate the personal and nonpersonal services components of the NHI indirect grant. Indirect grants are managed by national departments on behalf of provinces.
Consolidated government spending on basic education is set to rise by a nominal 3.1% over the medium term. It increases from a revised estimated of R319.7bn in 2023/2024 to R322.8bn in 2024/2025, and then rises to R335.4bn in 2025/2026 and R350.8bn in the outer year.
The Treasury warned that provincial education departments would remain constrained in hiring additional teachers, which was likely to lead to larger class sizes, higher learner-teacher ratios and weaker educational outcomes.
The budget for school infrastructure has been reduced by R1.78bn in 2023/2024, according to the adjusted estimates of national expenditure. Lobby group Equal Education said the scale of the cut was alarming and it could have a devastating effect on children in under-resourced schools.
“R1.7bn could have provided 991 additional classrooms, 12,516 toilets, 3,686 school libraries, and 1,180 sustainable water sources — facilities that the sector desperately needs,” Equal Education said.
While spending on basic education had hovered at about 4.5% of GDP for the past decade, teacher remuneration had increased 7.5% over this period. The number of teachers had declined, leaving spending relatively stable.
The upcoming retirement wave, which will see higher-earning teachers exit the system, should lead to a decline in the wage bill for teachers, the Treasury said. Almost half the teachers employed in the public sector are older than the age of 50 and will retire in the next decade.
Updated: November 1 2023
This article has been updated with additional information
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