Tough decisions to be taken on public wage bill, or face a fiscal crisis - study

The average remuneration of public servants in SA is high by international standards, a study shows.
The average remuneration of public servants in SA is high by international standards, a study shows.
  • Business Unity South Africa commissioned Intellidex to conduct a study on various aspects of the public sector wage bill.
  • South Africa's public sector wage bill outweighs that of some of its global counterparts, but there is no indication that productivity increases justify increase in remuneration.
  • Business has warned that unless tough decisions are taken by means of a social compact – we could ace a fiscal crisis.

South Africa needs a "social compact" on the public servants wage deal conundrum – or risk a fiscal crisis which would negatively impact all sectors of society, Business Unity for South Africa has warned.

The country's apex business organisation on Monday released a study which it commissioned to Intellidex, to look into certain aspects of the public servants' wage bill. It found that payroll costs are too high, they are rising too quickly, and public sector employment is increasingly unproductive.

This is in light of National Treasury's decision to take steps to stabilise the country's growing debt burden, partly through expenditure cuts. A large proportion of these cuts are to come from the public servants' wage bill, which labour unions are resisting. Unions have taken government to court for not honoring the third year of the 2018 wage agreement.

Government, however, has saved R36.5 billion this year, Fin24 previously reported.

BUSA CEO Cas Coovadia said the report is to be seen as a contribution to the public debate on the public sector wage deal.

The study, which uses data from National Treasury and Statistics South Africa, shows that between 2006 and 2018 there has been a near 70% increase in real, inflation-adjusted spending on compensation. Of this, more than three quarters (78%) is attributed to increases in real wages, while under a quarter (22%) is attributed to increases in personnel.

Remuneration increases over the past 15 years have been in excess of 4% per year, for officials who have remained in the public service between 2006 and 2019. The report notes that there is no indication that productivity increases justify the increases in average remuneration.

"Critically, the increase in payroll costs has outstripped the rate of growth of the economy, with the result that these costs consume a larger and larger share of GDP," the report read.

The study also showed that payroll costs in South Africa are higher than the global norm. "The main driver of high payroll costs is that average remuneration of public servants is high by international standards and when compared to private sector employees and per capita GDP," the report read.

It noted that the public sector wage is high by international standards and compared to private sector employees and per capita GDP.

Commenting on the report, Coovadia said that this was a matter of national importance. "You know the fiscal cliff we are on currently, and this (public sector wage bill) being a contributor to it makes it a national problem - not  just a government problem or a labour problem," said Coovadia.

He warned that if it is not addressed, the country may find itself in a fiscal crisis, having to borrow from the International Monetary Fund, and losing its sovereignty.

"We have come to a stage in the country where decisions need to be taken and there needs to be strong leadership from the president," he said.

The public sector wage bill will have to be reduced, and this should be done "sensitively and responsibly", he added.

Busisiwe Mavuso, CEO of Business Leadership South Africa, echoed warnings of the looming fiscal crisis. She pointed out that SA would bee at risk of further credit downgrades. Mavuso said there appeared to be political will from the finance minister. "The right sections of government are making the right noises," she explained.

Business for South Africa steering committee chairperson Martin Kingston stressed that SA is running out of time and money and that SA was facing a financial crisis. But the public sector wage bill is one such an area to alleviate strain.

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