{"id":821314,"date":"2025-04-17T10:17:49","date_gmt":"2025-04-17T08:17:49","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=821314"},"modified":"2025-04-17T10:17:55","modified_gmt":"2025-04-17T08:17:55","slug":"south-africa-must-cut-government-salary-bill-by-50","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/821314\/south-africa-must-cut-government-salary-bill-by-50\/","title":{"rendered":"South Africa must cut government salary bill by 50%"},"content":{"rendered":"\n

Political economist Moeletsi Mbeki said South Africa\u2019s civil service is the highest paid globally as a percentage of gross domestic product (GDP) and should be cut drastically.<\/p>\n\n\n\n

Mbeki, who chairs the South African Institute of International Affairs, is a highly respected intellectual on local economic and political affairs.<\/p>\n\n\n\n

He explained that the South African government invited the International Monetary Fund (IMF) to study public service salaries a few years ago.<\/p>\n\n\n\n

He said the IMF concluded that public service salaries in South Africa consume a large percentage of the country\u2019s gross domestic product.<\/p>\n\n\n\n

The IMF and World Bank studies estimated that South Africa’s public sector wage bill has consistently consumed between 12% and 13% of GDP.<\/p>\n\n\n\n

A Centre for Risk Analysis report showed that South Africa has the third-highest government wage bill as a share of GDP among 20 major economies.<\/p>\n\n\n\n

The public sector wage bill is 3.5% higher than the Organisation for Economic Cooperation and Development (OECD) average.<\/p>\n\n\n\n

\u201cSouth Africa\u2019s wage bill is about 10.5% of the GDP and towers over economic powerhouses such as the United States, United Kingdom, Australia, and Japan,\u201d the report noted.<\/p>\n\n\n\n

While the percentages differ due to the complexity of what constitutes public sector wages, it is not disputed that South Africa spends too much money on civil servants.<\/p>\n\n\n\n

Countries in similar stages of development, like Chile and Thailand, only spend 6% of their GDP on public service salaries.<\/p>\n\n\n\n

The IMF highlighted that the government wage bill accounted for most of the state\u2019s expenditure increase in South Africa. This, in turn, caused a rapid increase in public debt.<\/p>\n\n\n\n

In 2008\/09, South Africa\u2019s gross loan debt amounted to R627 billion, or 26% of GDP. It has now ballooned to R5.21 trillion, or 73.9% of GDP.<\/p>\n\n\n\n

Another problem with the large wage bill and big salary increases is that they have prevented money from being invested in productive activities.<\/p>\n\n\n\n

The IMF said that if resources devoted to wage increases and debt service payments had been invested in more productive outlays, it would have helped economic growth.<\/p>\n\n\n\n

Under the Thabo Mbeki administration, South Africa\u2019s economic growth averaged 4.2% due to the country\u2019s sound economic policies and financial management.<\/p>\n\n\n\n

This growth slowed to 1.7% under the Jacob Zuma administration, and it declined further to 0.6% under the Cyril Ramaphosa administration.<\/p>\n\n\n\n

Cut the state salary bill and increase productive investments<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Mbeki said South Africa needs to cut the civil service pay back to a level comparable to similar countries and invest the money it saves in productive assets.<\/p>\n\n\n\n

Finance Minister Enoch Godongwana\u2019s 2025 Budget showed that the state will spend most of its money on salaries, grants, and debt repayments.<\/p>\n\n\n\n

It will spend R823 billion on employee compensation, R433 billion on debt interest repayments, and R285 billion on social grants.<\/p>\n\n\n\n

That means the government will spend 59% of its R2,592 billion total on these three non-productive expenses.<\/p>\n\n\n\n

To get money for these high costs, the government levies very high taxes on the private sector, including company tax and personal income tax.<\/p>\n\n\n\n

In an interview with BusinessTech<\/a><\/strong>, Mbeki explained that moving money from the private sector, through taxes, to the public sector is not productive.<\/p>\n\n\n\n

\u201cThis means that the private sector does not have the resources to develop and reinvest in the South African economy,\u201d he said.<\/p>\n\n\n\n

Simply put, the government takes money from the private sector to pay exorbitant salaries to state employees and people working for state-owned enterprises.<\/p>\n\n\n\n

He said to ignite economic growth, the government must cut public sector salaries to 6% to 7% of GDP. This means around a 50% cut in the civil service salary bill.<\/p>\n\n\n\n

This will free a lot of money to invest in the economy, taking South Africa back to the early 2000s when the economy showed strong growth and the state recorded numerous surpluses.<\/p>\n","protected":false},"excerpt":{"rendered":"

Political economist Moeletsi Mbeki said South Africa\u2019s civil service is the highest paid globally as a percentage of gross domestic product (GDP) and should be cut drastically.<\/p>\n","protected":false},"author":10,"featured_media":821336,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[17448,21799,22028,22324,22325,4423],"class_list":["post-821314","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-enoch-godongwana","tag-finance-minister-enoch-godongwana","tag-international-monetary-fund-imf","tag-moeletsi-mbeki","tag-south-african-institute-of-international-affairs","tag-world-bank"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/821314","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=821314"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/821314\/revisions"}],"predecessor-version":[{"id":821318,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/821314\/revisions\/821318"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/821336"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=821314"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=821314"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=821314"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}