Early Retirement To Help Cut Wage Bill

The Free State provincial government could significantly reduce its wage bill in the next few years if it successfully retires staff eligible for early retirement and replace some of them with younger staff.

Treasury MEC Gadija Brown said this when she presented the R367.6 Budget Vote Speech for her department in the Provincial Legislature on Wednesday.

She said the growing provincial wage bill remains a major challenge as it has to be cut in line with the national government plan to spend less on labour and direct more funds towards projects.

“The government is mindful that the growing wage bill is a thorny issue that is pushing its financial health to the precipice of fiscal indebtedness, hence the need to take tough but life-saving decisions,” noted Brown.

She indicated the Department of Public Service and Administration has begun the process of introducing the prescribed “voluntary early retirement without penalties policy” targeting public employees between the ages of 55 and 59 years, among a host of cost cutting measures.

“Presently, in the province, we have about 8 733 employees within the stipulated age group, while about 1 978 employees are above the age of 60, who are due for retirement,” she said.

Brown was however quick to point out that different departments should be careful not to release critical staff where internal capacity has not been built.

She said the provincial government aims to meticulously manage the voluntary retirement process in a responsible, humane and sensitive manner.

“The success of this process – in the event that all identified employees retired willingly – will not only reduce the growing wage bill but also generate substantial savings by replacing the retired officials with new young employees at much lower notches of public servant’s salary,” she explained.

Brown said the provincial government is also adhering to its fiscal consolidation strategy by taking concrete steps to rein in the government’s growing wage bill.

The Executive Council of the province had resolved to: reduce the number of “out of adjustment” expenditure, minimise the number of contract posts, enforce adequate regulatory oversight on the appointment function and improve adherence to the adopted stringent cost-containment measures aimed at efficiency savings on non-core items spending, across all provincial departments.

The MEC said her budget speech was guided by among other principles, the need to protect and grow the Free State economy, promote job creation through new industries and government expenditure, the utilisation of the Free State Fiscus to address the challenges facing the province and implement effective oversight, measurement, monitoring and evaluation.

She said the Free State Provincial Government spent R5.9 billion in 2018/19 and R908 million in the first quarter of 2019/20 on goods and services, of which 47 percent were sourced from local suppliers and 46 percent on suppliers from outside the province.

In order to ensure improved audit outcomes, the provincial treasury reviewed the draft annual financial statements of all departments in May before they were submitted to the Auditor General.

The provincial treasury is also expected to focus on strengthening and capacitating the Supply Chain Management teams on contract management, supply chain management compliance, monitoring and support.

One of the focus areas of the programme is the payment of suppliers within 30 days.

Brown said late payment of suppliers continues to seriously undermine the sustainability of Small Medium and Micro Enterprises and in an effort to deal with the non-compliance of late or non-payment, the provincial treasury has established a grievance process where suppliers can register complaints on outstanding payments or non-payment.

“It remains a priority for the Free State Provincial Government to settle all contractual obligations and pay all the money owing within the prescribed or agreed period. As part of the provincial treasury’s oversight role, the following interventions are undertaken to address this concern and to improve on departments paying suppliers:

Departments are required to report to the provincial treasury on their performance regarding payment of suppliers on a monthly basis and this report is submitted to national treasury…” she said.

On a monthly basis the provincial treasury engages with departments and entities before submitting exception reports to National Treasury on payment of suppliers in 30 days.

Departments are required to develop and implement internal control processes to ensure compliance with the requirements pertaining to the payment of suppliers within 30 days.

By: Martin Makoni