How government plans to cut its wage bill without firing anyone

The South African government is overburdened with a massive wage bill – but it also sits in a position where it cannot fire staff without drawing the ire of the unions.

Speaking to the City Press, Public Service and Administration Minister Senzo Mchunu says his department has at least identified one avenue that will help matters.

According to Mchunu, government has been working on its restructuring programme since May, after the national elections, which has included the offer of early retirement for employees aged 55 to 60.

He stressed that the offer of early retirement wasn’t about downsizing or cutting staff in any way, but rather as a means to get younger staff in.

This way, the government is able to cut its wage bill without cutting jobs – as younger employees at the start of their careers earn a lot less than experienced workers who have been in the job for years.

High wage bill

Economist Mike Schussler recently highlighted that, including state-owned companies, government’s wage bill accounts for 33% of all wages paid in South Africa, while it only employs around 13% of all workers.

This means that government workers are very well paid – despite the need for taxpayers to constantly bail out state-run companies and departments.

When looking at how these wages have increased over time, Schussler said that government salaries have increased more than inflation, the JSE all share, and the average commercial salary over the past ten years.

One of the factors that can be attributed to these high numbers are the number of departments in South Africa, which was reduced to 39 after the 2019 elections (from 46 before).

According to Mchunu, the chopping and changing of departments is one of the causes of high wages as well, noting that every time cabinet is restructured this way the number of support staff needs to be increased to help administer the changes.

Of the 39 departments, 31 spend more than 30% of their compensation budgets on support staff, when this number shouldn’t be higher than 20%, he said.

He described department and cabinet size as a political issue that is dealt with at the president’s discretion. Previous proposals were to bring cabinet in line with the size it was between 1994 and 2008 (28 departments).

Read: 2 graphs that show South Africa’s government spending problem