Provinces are projecting to overspend their 2023/24 budgets by a total of R24.8bn mainly due to the implementation of the wage agreement reached between government and public sector trade unions.
The wage agreement provided for a 7.5% increase from April 1 at an unbudgeted cost to government of R37.4bn.
Provincial governments are expected to accommodate the wage increase from their existing budgets as the wage agreement had not been concluded by the time of the February budget and was not factored into it. The February budget provided for a 1.6% wage increase for 2023/24.
Finance minister Enoch Godongwana warned in a speech on the Treasury budget vote in parliament earlier this year that headcounts in the public sector would have to be restricted in a bid to save R37.4bn and cushion the blow of the wage agreement on the fiscal framework.
Identifying savings could entail a rationalisation of staffing levels and the deployment of headcount management strategies to curb the wage bill. Trade-offs would be necessary, Godongwana said.
National Treasury said in a statement on Thursday on the provincial budgets and expenditure for the first quarter to end-June that the projected overspending by all provinces “mainly emanates from current payments” with compensation of employees and goods and services projecting budget pressures of R18.9bn and R3.5bn respectively.
“In addition, all other economic classification items are projecting to overspend at the end of the financial year.
“All provinces are projecting overspending on the compensation of employees. The … projected overspending mainly emanates from the social sectors, largely due to the payment of the implementation of improvement in conditions of service (ICS) for employees on salary levels 1 to 16 and those covered by occupation specific dispensations from April 1 2023.”
Health departments
The education sector is projecting to overspend by R10.3bn, mainly relating to the compensation of employees, with eight provinces projecting to overspend their compensation of employees’ budgets due to the impact of the wage agreement.
Provincial health departments are projected to overspend their main budgets by R12.2bn with the bulk of the projected overexpenditure being compensation of employees and goods and services, which have budget pressures of R8.3bn and R3.4bn respectively.
Regarding social development, provinces overall are projecting to overspend by R356m mainly on the compensation of employees.
The Treasury statement said provinces tabled a main budget of R438.2bn for compensation of employees, which accounts for 60% of the total provincial main budget.
“Spending on compensation of employees as at June 30 amounts to R111bn or 25.3% of the main budget. The current compensation of employees spending accounts for 61% of the total provincial expenditure as at June 30.”
By end-June, provinces had spent 25%, or R181.7bn, of the R728.2bn provincial main budgets. Spending has increased 10.1% (R16.7bn) compared with the first quarter of the previous financial year.
Provincial own revenue collected in the quarter was R5bn, or 24.1% of the R20.9bn main budget. Provinces are projecting to overcollect a total of R2.2bn. This collection trend shows an improvement of 14% compared with the previous year’s collections, Treasury said.
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