The DA-led Western Cape government has declared an intergovernmental dispute with national government to secure funding from the Treasury for the public sector pay increase, a large chunk of which provinces have to fund from their existing budgets.
The unbudgeted increase of 7.5% cost the government R37,4bn, contributed to government’s fiscal squeeze and resulted in a R2.9bn rise in the Western Cape’s wage bill this year.
Premier Alan Winde and provincial finance and economic opportunities spokesperson Mireille Wenger said in a joint statement the dispute was declared with the national government represented by finance minister Enoch Godongwana and public service & administration minister Noxolo Kiviet in terms of the Intergovernmental Relations Framework Act.
The act provides a framework for the establishment of intergovernmental forums and mechanisms to facilitate the settlement of intergovernmental disputes.
“The dispute relates to the centrally negotiated and agreed-to public-sector wage bill, which was implemented after the Western Cape provincial parliament approved the annual budget, leading to unprecedented in-year budget cuts,” they said.
“Through this action, we are trying to avoid dramatic reductions in service delivery spending to cater for the wage liability. We have tried to engage with national government to avoid this situation, to no avail. And for this reason, we have taken the difficult but necessary step of declaring an intergovernmental dispute.”
DA Western Cape budget spokesperson Deidré Baartman said that the increase in public wages has an almost R2.9bn impact on the Western Cape’s budget for this financial year.
Vital programmes
“Despite this, the national government has only allocated an additional R1.7bn to the Western Cape in the 2023 division of revenue, which will only partially cover the wage increase for education and healthcare.
“All other departments’ wage increases will have to be self-funded. The about R1.1bn shortfall would have to be found within the existing budget, meaning cuts to vital programmes that impact our residents directly.”
Baartman said the national government is also cutting R640m from the Western Cape’s conditional grants and not providing any funding for disaster relief to repair damage from this year’s flooding in the Western Cape.
Winde and Mereille said that the shortfall in funding would have a direct effect on critical service delivery such as schools, clinics, hospitals and the roads network.
“From the start of this process it was evident we could not afford this wage deal, and all warning signs of the irrationality of the agreement were seemingly ignored. This is an issue that affects all provinces and every government department. What is desperately needed is prudent fiscal consolidation, management and discipline. This appears to be lacking in national government” said Winde.
Wenger said that the national budget process has collapsed. “There is no certainty over the next three years of the medium-term expenditure framework and now there is no certainty in the current financial year, with cuts being made in an unprecedented way, in-year. The failings of the national budget process mean that we aren’t budgeting for three years, we aren’t even budgeting for one year any more. We are working on pay-as-you-go budgeting.”
The medium-term budget policy statement reported a revenue shortfall of R57bn compared with the February budget. Spending pressures included higher wage bill costs and higher projected debt service costs. Spending was revised downwards by R21bn this year with further reductions of R64bn in 2024/25 and R69bn in 2025/26.
The medium-term budget provides for R23.6bn this year for sectors that are personnel heavy such as health, education and police services and R74bn extra over the medium term to fund the 2023/24 wage increase and associated carry-through costs in these sectors.
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