South Africans are paying more for less
From 2019 to 2023, more South Africans have avoided using government services due to the state’s inability to deliver quality services despite paying more for the services every year.
PwC’s South African Economic Outlook 2024 outlined the major challenges facing businesses in the country.
The report highlighted that financial troubles coupled with the growing demands on the state and available fiscal resources have put pressure on the government.
Fiscal revenues are under pressure in South Africa, as evidenced by years of budget deficits and rising public debt.
Finance Minister Enoch Godongwana said he expects gross government debt to stabilise at 77% of GDP by 2025/26, but this is higher than the level we forecasted in February (73.6%).
The increase in government debt is especially concerning when we consider that, in 2009, debt was only 23% of GDP. According to budget projections, for every R1 the government spends, 22 cents are allocated to paying off debts, which is a significant rise from 7 cents in 2009.
This, in turn, adds more challenges to public service delivery during a time of elevated socioeconomic strain. The public sector is overwhelmed and stretched in every direction to cope with these and other challenges.
Not surprisingly, the state is unable to deliver the quantity and quality of services that it previously could. As a result, the South African population’s use of public services declined across the board between 2019 and 2023 and could continue on this trend in 2024.
This is because many South Africans have turned to private companies – at considerable extra expense – that provide services similar to those expected of state institutions, such as private security, healthcare, education, and refuse services.
This is on top of the rates and taxes the majority of South Africans pay for these services – which saw increases of between 5.3% for refuse removal and 15.1% for electricity in the 2023/24 financial year – and will likely increase again in April this year.
Compounding these rates is the immense expense of private medical aid to avoid the unreliable and often under-resourced public hospitals.
The cost of these plans ranges from R2,600 to over R10,000 per month under the biggest medical aid scheme in the country, and these have seen an increase of between 3% and 12.9% for the year ahead.
These additional expenses are on top of the taxes South Africans pay for the same service – which they’re literally paying to actively avoid.
The degradation or failure of key state institutions, from hospitals to the police and education, has severe implications for the economy and well-being of South Africans.
In response, South Africans are turning away from government-run institutions and are simply not engaging with the public sector.
The latest Governance, Public Safety and Justice Survey published by Stats SA found that the share of adults using public hospitals in the 12 months declined 6.3% from 19.9% in 2019/2020 to 13.6% in 2022/2023.
This decline can be seen across all public sector services, including relatively well-run public institutions such as SARS.
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