Minister of Finance Enoch Godongwana is exploring options to raise revenue to cover the R60 billion shortfall before he tables the 2025 Budget Review next week after his proposal to raise value-added tax (VAT) by 2 percentage points from 15% to 17% was rejected outright.
Image: Armand Hough / Independent Newspapers
The ongoing debate surrounding the South African government’s proposed pause on employer pension contributions at the Government Employees Pension Fund (GEPF) has sparked significant discord among workers' unions.
As Finance Minister Enoch Godongwana seeks measures to address a staggering R60 billion shortfall ahead of the upcoming 2025 Budget Review, the proposal to temporarily halt these contributions has been met with both support and opposition from major labour organisations.
The Cabinet convened a meeting on Monday to explore various strategies for addressing financial pressures while considering inputs from its members. The tensions within the unions reflect broader concerns about the impact of fiscal policies on public servants and their long-term financial security.
The Presidency on Tuesday said a team led by Deputy President Paul Mashatile and supported by National Treasury tabled a variety of options that were considered by Cabinet.
“Cabinet mandated the Minister of Finance to select from the discussed options and fund the Budget in a manner that takes into consideration the fiscal constraints of the country; mitigates the impact on the poor and middle income households; and supports economic growth,” The Presidency said.
The Congress of South African Trade Unions (Cosatu) has urged the National Treasury to initiate discussions with the GEPF in a bid to raise about R53bn through withholding the employer portion of pension payments for one year.
Cosatu said fund managers were the real beneficiaries of the GEPF and the fund was funded at 110% of its capacity, was overfunded and there was space for the government to have a one-year contribution holiday.
The GEPF is a defined contribution benefit scheme, it is the largest pension fund in South Africa and one of the largest in Africa and the world, managing more than R2-trillion for more than 1.2 million members.
However, the Federation of Unions of South Africa (Fedusa) on Tuesday opposed any suggestion to reduce government spending by pausing pension contributions at the GEPF.
Fedusa said public servants' pensions should not be used as a solution for budget shortfalls in the national budget or any future financial plans.
“Fedusa understands that South Africa is facing tough financial decisions. While it is important to cut wasteful spending and improve efficiency, workers' pensions should not be the answer to balancing the budget,” said the union.
“A temporary break in pension contributions raises serious concerns about the long-term security of public servants' retirement funds. Even though some argue that the GEPF is well-funded at 110%, Fedusa warns that any action that weakens the fund could create future financial risks. If the GEPF’s funding drops below 90%, taxpayers would have to step in to cover the shortfall.”
Fedusa said South Africa needed a serious discussion about government spending as efforts to cut unnecessary costs have been blocked by corruption, political challenges, and a growing bureaucracy over the years.
Given these developments, Fedusa called on the government to be transparent about its financial plans and to consult with organised labour before making any decisions that could harm workers and their families.
The South African Teachers Union (SAOU) also concurred with rejecting the government's proposal to introduce a so-called “contribution leave” in the Public Service Pension Fund to be considered.
“From SAOU ranks there is definite opposition to this proposal. The SAOU understands that the Government of National Unity (GNU) is currently facing critical financial decisions stare, but these decisions cannot negatively affect public service workers' salaries and benefits,” it said.
“The SAOU wants to recommend that the government should enter into discussions with stakeholders to find sustainable solutions to investigate. Proposals should focus on increasing baseline expenditures and on objectives that do not is not currently feasible, to postpone until a later stage.”
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