State tackles the civil servant debt trap

2015-02-22 15:00

The department of public service and administration wants help in tackling the massive debt burden of civil servants and has put the process out to tender.

Fifteen bidders, among them KPMG and Summit Financial Partners, responded to the department’s call before bidding closed earlier this month.

Crippling debt levels among civil servants are partly responsible for a huge wage bill that continues to consume significant chunks of public funds.

The government wage bill is likely to get a mention in Finance Minister Nhlanhla Nene’s Budget Review, a set of documents released at the same time that he delivers his budget speech on Wednesday.

In 2007, the Public Service Commission (PSC) found that 20% of civil servants were drowning in debt, evidenced by the emolument attachment, or “garnishee” orders, being deducted from their salaries each month.

The data showed that in the 2006/07 year, the total cost of payments made through these attachment orders was R1.01?billion, the bulk of which was made up by public servants based in provincial departments. The amount attributed to employees in national departments was 23% of the total.

Commission spokesperson Ricardo Mahlakanya said this week that newer statistics were not available.

But the terms of reference for the tender show that government was spurred into action because of the administrative burden posed by implementing the attachment orders.

The department says in its terms of reference that financial distress is also making some employees sick, diminishing productivity and leading public servants to moonlight or do other jobs during their work hours, which raises ethical questions, among them conflict of interest.

Now the department wants a programme that will introduce in-house financial wellness management initiatives, payroll deduction filtering and review, and outsourced financial-based interventions for debt relief and rescue.

Civil wages have comprised one of three main areas of spending in the national budget since 2005, and the government is in talks with unions on a new multiyear wage deal, which it hopes will be inflation linked. It warned that if it was not able to do this, government would be forced to curtail service delivery.

But rising debt levels among civil servants could make negotiations tougher for government.

Sizwe Pamla, spokesperson for the National Education Health and Allied Workers’ Union (Nehawu), said the union took debt levels and emolument attachment orders into consideration when entering negotiations.

“Considering that members get indebted because their salaries cannot meet their daily demands, we factor that [in] when talking about the adjustment of their salaries,” he said.

“In fact, we are calling for a new remuneration policy to lift the salary base of public servants.”

Nehawu is one of the largest unions active in the public sector.

Pamla said the average nurse, police officer or teacher earned between R8?000 and R13?000 a month, and had to contend with living expenses that outpaced this salary – including average rental in a back room of R1?200 for a single person, or R4?800 for a flat that could accommodate a family.

“They don’t earn enough to afford houses and don’t qualify for RDP houses,” he said.

“There’s food, transport, electricity and school fees, and most of them support extended family members in a nation with 25% unemployment.

“Because they are desperate, they are also victims of predatory lending, not only from unregistered and unregulated mashonisas, but banks and financial institutions.”

But the PSC study showed even accounting officers – who earn packages running into just more than R1?million each year – were slapped with attachment orders, although they accounted for the lowest debt repayments, a collective R21?000. The collective payment for nurses, police officers, teachers and others in lower salary brackets was R269?million.

The department did not respond to requests for comment.

An expensive lesson to learn

Oupa Moloto*, a groundsman at a provincial department of health, borrowed R16?000 from microlender Bayport to extend his house.

This is his story:

“In 2010, I was garnished by a strange company. They never told me. They went to my HR and started to deduct R1?000 a month from my salary without contacting me,” he said.

When Moloto followed up on the emolument attachment order, his HR department told him to contact the company. He did, and the company agreed to reduce the amount attached to R500 a month.

The company gave him a letter to that effect for HR to implement, which he found surprising because both parties took action without initially involving him.

“I gave HR the letter. The next month, they reduced it to R500. The department made me feel very bad because they never knew my side of the story, so that year I struggled badly until I finished paying.”

The money remaining after the deductions was not enough to live on and Moloto scraped by with the help of his siblings.

He learnt an expensive lesson. He paid back R23?000 to Bayport, with an extra R7?000 in charges and levies, over five years.

“When I got a bonus, I deposited extra money in their account. That’s why I finished fast,” he said.

*?Not his real name

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