The nature of the problem
20 April 2023
On 31 March, public servants accepted a 7.5% wage increase following an agreement reached in the Public Sector Bargaining Council. The increase affects the bottom 12 of the Public Service’s 16 salary bands - and includes a non-pensionable cash gratuity of 4,2% and a nominal increase of 3,3% across the board. This will push up expenditure on public service remuneration by R51,8 bn to R741bn in 2023/2024 - but will cost the Treasury only R37,4 bn extra – because of additional taxation on the increased salaries. This represents 33% of total government expenditure and 11% of GDP.
This expenditure is, however, already an increase of 22% over the estimate for 2023/24 for public service remuneration announced in the National Treasury’s 2022 Medium Term Policy statement. All of this creates enormous problems for the very competent, but beleaguered, public servants at the Treasury.
They will now have to juggle the need to find money for the wage increases, national debt interest payments and the burgeoning costs of social transfers with the need to wrestle the budget deficit down to 3,2% of GDP by 2025/26. They have been assisted by the announcement earlier this month of record tax revenues for 2022/23 - that have for the first time exceeded 2 trillion rand.
According to the 2022 Medium Term Policy statement, public service remuneration does not, by any means, cover all public sector wages. It includes the 395 267 employees of national departments and the 912 856 employees of the provinces in 2021/22. However, it does not include 342 048 municipal employees or the 117 619 employees of national public entities. Neither does it include expenditure on political office bearers in the provincial and national governments.
In the Medium Term Policy Statement, the Treasury observed that “South Africa’s public-sector wage bill is substantially higher than that of its peer countries, and one of the highest among emerging markets.” In fact, according to the OECD’s Data Library, the public wage bill accounted for 14,8% of GDP in 2021. This was one of the highest ratios – not only among emerging markets - but in the world.
As the OECD pointed out, the high expenditure on public sector wages was not due primarily to the excessive size of the public sector - which was 18.6% of the work force, compared with the OECD average of 17,9%. It was due rather to the fact that the public sector wage bill, as a percentage of GDP, was 5,1% higher than the OECD average. This, in turn reflects public sector wage increases that have consistently outpaced inflation. Generous increases are also inextricably linked to the fact that two of the largest public service unions, SADTU and NEHAWU, are members of COSATU – which is part of the ANC’s ruling tripartite alliance.
The average salary of the +/- 1,3 million public servants this year will be a staggering R47 500 per month. This is almost twice the average monthly South African salary of R 24 813 and 46 times the R1 025 monthly income of the bottom 50% of the population.
88% of public servants would now be regarded as part of the middle class – which according to UCT’s Liberty Institute of Strategic Marketing, requires a monthly income of around R 20 000. The largest salary band, including 306 703 public servants, earns R411 227 per annum. 38 000 public servants earn more than R1,147 million – and a fortunate 712 earn more than R2,13 million.
According to Intellidex there has been a steady progression of public servants away from the lower to the middle and higher salary bands. The percentage of public servants in an inflation-adjusted R20 000 per month band has declined from 85% in 2006/7 to 48% in 2018/19. The number of public servants in an inflation-adjusted band of R30 000 per month increased by 500% during the same period.
This rank inflation is reflected in the fact that the South African National Defence Force now has more than 400 officers of general rank for a force with 71 235, members. This represents a ratio of one general to 178 troops. The ratio for the United States armed forces is one general for every 1 400 troops (considerably down from one general for 6 000 troops during World War II).
In the past, it was generally thought that public servants’ salaries should be a little lower than those of the private sector because of the greater job security they enjoyed and the satisfaction they derived from providing courtious, effective and essential public services. Few, if any, lost their jobs during COVID - and it is notoriously difficult to be fired. Indeed, there are 305 public servants on suspension who nevertheless receive full pay – at an average of R430 000 per annum – at a total cost to the state of at least R131 million per annum.
High expenditure on public service salaries is perhaps justifiable in advanced social democracies where the state provides excellent cradle-to-grave public health, housing, education, security and social services. However, as we are all too painfully aware – and as we are reminded in the annual reports of the Auditor-General - South Africans receive among the worst public services in the world.
Despite the best efforts of many outstanding teachers, policemen, doctors and nurses our education outcomes are amongst the worst in the world; we have amongst the highest murder and rape statistics in the world; and our public health services – in many parts of the country – are in disarray or terminal decline.
Clearly, South Africa cannot continue on this trajectory. We need urgent reform of the public service to ensure that we receive value for our enormous investment in public service salaries. We must bring our expenditure on public servants into line – not with the advanced OECD countries – but with other middle income emerging economies. Government must ensure that public servants provide the effective education, health, social and police services that South Africans so desperately need.
It is little consolation to note that we are not the only country with expensive public servants. In the United States, in 2021, the median income of federal public servants was $72 790 compared with a median income in the private sector of $ 40 510. In the European Union the median income of EU public servants was Euro 73 529 compared with a median private sector income of Euro 27 840 in the 27 EU countries.
In modern adminstrative states public servants enjoy increasing power – and we have learnt that those who possess disproportionate power will, sooner or later, use it disproportionately for their own benefit. In today’s world political leaders come and go – but the public servants remain, increasingly entrenched and entitled, from one generation to the next.
Footnotes:
1 It takes 11 days to count to a million; 31,7 years to count to a billion; and 31 709 years to count to a trillion.
2 Stats SA, Quarterly Employment Survey, 3 rd Quarter , 2022
3 World Inequality Report, 2022
