While the debate on whether public servants are overpaid or underpaid, Finance and Fiscal Commission Deputy Chairperson says the top brass actually get paid less than CPI, and cutting the wage bill will only be a disservice to public competitiveness and erode public services.
Amid South Africa’s widening budget deficit, the National Treasury proposed drastic steps to rein in spending as the government has run out of money and faces a debt trap – including a freeze on new public service jobs, stopping procurement contracts for all infrastructure projects, and keeping public servant salary increases in check.
The Finance Minister’s Medium-Term Budget Policy Statement showed the government employee wage bill has skyrocketed from R408 billion in 2013/2014 to R724 billion in 2023/2024.
Despite this, the majority of South Africa’s public sector unions agreed to a 7.5% wage increase earlier this year after five months of strike action.
The two-year, multi-term deal is significantly higher than what the government had factored into its 2023 budget. The deal will come at an additional cost to the Treasury of R23.6 billion, Godongwana said, and government departments will have to find the remaining R10.1 billion through reprioritisation of budgeted funds.
Treasury noted in this 2023 budget review that, from 2008/09 to 2021/22, consolidated government spending, on average, consistently grew faster than GDP and consolidated revenue, mainly driven by the public-service wage bill, rising debt-service costs and transfers to households.
It also listed the public wage bill as one of the main risks to the fiscal outlook.
Cutting the wage bill is a bad idea
Despite the wage bill often being considered bloated and excessive, Finance and Fiscal Commission Deputy Chairperson Micheal Sachs said that this is because South Africa’s government provides services that it shouldn’t be able to afford.
South Africa’s government employee wage bill is one of the highest among emerging markets. As a share of GDP, it is 3.5% greater than the OECD average. Some experts have suggested the government cut its workforce or even whole departments.
However, Speaking with Newzroom Arika, Sachs said it is actually hard to find employees that the country can go without. He said the vast majority of public servants are teachers, police officers, nurses and doctors – none of which we can afford to cut.
Additionally, he noted the wage bill is large because South Africa has a state that provides extensive services, such as education, policing, and healthcare, to a poor population that can’t afford to pay for those services themselves or the taxes to help finance it.
In addressing the amount of remuneration of public servants, and salary increases, Sachs added that it isn’t often the lower-level employees that get the increases, while top managers and directors haven’t actually received above-inflation increases – which is hurting the competitiveness of the public sector compared to the private sector.
” Remuneration packages of senior management in the public sector are severely blow that in the private sector, and this is not something that will attract competent professionals that you need for proper governance,” he said.
“In my view, across-the-board and blunt caps or ceilings on compensation spending in the public sector is not the way to go and is very likely to erode the quality of public services,” said Sachs.