Mid-term budget: Godongwana introduces early retirement plan

The treasury said on Wednesday that it is re-introducing an early retirement programme to reduce government employment costs. 

It will cost R11 billion and this amount will be allocated over the next two fiscal years, with details to be set out in the 2025 budget review in February.

Public servants aged 55 to 59 will be able to apply for early retirement, without a reduction of pension benefits. 

Tabling his 2024 medium-term budget policy statement (MTBPS) on Wednesday, Finance Minister Enoch Godongwana said this move will cut government spending on salaries and promote the entry of younger talent into the civil service.

This is not a new initiative; it was initially implemented from 1 April 2019 to 30 September 2019. 

In a question and answer session with the media, the treasury said it was targeting a      30 000 uptake, which will result in a R2 billion cost saving a year because people in higher income bands will be replaced by those earning less. 

Government employment takes up 18% of total employment in the country, which was 16.7 million in the second quarter of 2024, according to Statistics South Africa. 

The treasury said early retirement was a voluntary project but added that it would be up to executive authorities and accounting officers to approve applications so that highly skilled people would be retained. 

“We are implementing initiatives like early retirement not to merely reduce the size of the workforce, but also to introduce younger talent to the public service. This is part of building a capable, ethical and developmental government,” Godongwana said in his speech. 

The public sector wage bill has weighed heavily on the fiscus for years with attempts of reigning it in proving largely unsuccessful. 

In 2019, former finance minister Tito Mboweni introduced a public sector salary freeze for three years in an effort to control the ballooning wages. But, in the 2023-24 financial year, public service wages increased.

Over the past 30 years the public service wage bill has increased as a share of South Africa’s GDP from 5.6% in 1994-95 to 10.4% in 2023. This is a result of the fast-growing average remuneration Of public service employees over the past three decades. 

On Wednesday the treasury said that as the demand for services such as healthcare, education and security increased, it put pressure on the limited number of public service workers. This meant the government needed to attract and retain skilled professionals in the public sector by way of higher wages, benefits and allowances. 

“Public service remuneration requires a delicate balance between attracting and retaining skilled personnel, ensuring fiscal sustainability and promoting economic growth,” the treasury said.

“It will be essential to implement reforms that align public service compensation with broader economic growth while addressing the pressing issue of growing public service employment.”