Budget 2022 offers a nominal increase on the government wage bill.
In his 2022 Budget speech to parliament, finance minister Enoch Godongwana suggested that spending priorities could shift from tackling Covid-19 to addressing rampant unemployment. In the third quarter of 2021, unemployment rose to a record 34.9 percent.
The budget provides immediate support for creating jobs. Of the R227.1 billion allocated to economic development, R24.8 billion is to be spent on job creation and labour affairs through job creation initiatives for young people, as mechanisms aimed at mitigating the impact of lockdowns on livelihoods.
The budget states that stubbornly high joblessness has emerged as a key weakness in economic performance. In light of this, post-Covid recovery strategies have centred around job creation and income support. Measures include stimulating the economy through public employment programmes and tax incentives, while implementing reforms that ease the skills constraint and make it easier to do business.
The minister said that the country had seen more than a decade of economic stagnation, noting that “Only through sustained economic growth can South Africa create enough jobs to reduce poverty and inequality, enabling us to reach our goal of a better life for all.”
Addressing youth employment
An amount of R18.4 billion is allocated in the 2022-23 and 2023-24 financial years to support youth employment and the creation of short-term jobs. The budget review noted that more than 840 000 people had already provided support. It further aims to create more than 500 000 targeted short-term jobs each year over the next two years.
“Reforms that lead to job creation and expand entrepreneurship would raise incomes and consumption expenditure over time, and lead to growth of the middle class … As confidence and investment rise, bolstered by reforms, employment is expected to recover,” the minister said.
Godongwana said the government had allocated R20.5 billion in 2022/23 for the 2021 public service wage agreement, but warned that upcoming wage talks and a Constitutional Court ruling were potential hurdles.
The budget review said the government would continue working to reduce pressure on the budget from public service wages.
The minister stated that the National Treasury remained committed to controlling permanent parts of the budget such as “arresting historically rapid increases in the public sector wage bill”.
“Compensation spending will increase marginally, from R665.1 billion in 2021/22 to R702 billion in 2024/25, at an average annual rate of 1.8 percent,” he said.
He added that, “No provision is made over the medium term for spending increases on compensation above this level. Departments are required to continue adhering to their compensation ceilings and, if needed, reduce personnel numbers to sustainable levels.”
Incentives and support
The minister announced that the budget would add R24.6 billion for provincial education departments to address the shortfalls in the compensation of teachers.
R3.3 billion is allocated to absorb medical interns and community service doctors, whom the minister acknowledged had made tremendous sacrifices in the battle against Covid-19.
He said that R8.7 billion has been added to the police budget. The department is allocated R1 billion to implement personnel reforms and he indicated that another R800 million may be available next year, subject to satisfactory progress.
The minister reported that UIF TERS had paid out R61.5 billion in relief to about five million workers affected by Covid-19. An additional R10.1 million had been paid to 2,700 workers affected by the 2021 July unrest by the end of January.
The employment tax incentive will be expanded through a 50 percent increase in the maximum monthly value to R1,500.
The minister said he expected the expansion to provide additional support worth R2.2 billion.
