Finance Minister Enock Godongwana. Photo: Mlungisi Louw/Gallo Images
A new study has found that South Africa has the third-largest public sector wage bill as a percentage of GDP in the world.
The Risk Analysis Centre report highlights the cost of public sector wage expenditure in the country – about R721 billion per year – and the resulting shortfalls in service delivery.
The report, written by Tamara Dimant, Chris Hattingh and Nicholas Lorimer, found that South Africa has the third highest total government payroll as a percentage of GDP compared to the world's 20 largest countries.
“Although South Africa has a much smaller economy, its total wages as a percentage of GDP (around 10.5%) is far higher than that of larger economies such as the United States, the United Kingdom, Australia and Japan,” the report said.
Only Iceland and Denmark spend more on public sector salaries as a percentage of GDP than South Africa, closely followed by Brazil, but the other BRICS countries (Russia, India and China) spend less than 10% on their bureaucracies.
“With 95% of personal income tax paid by 30% of taxpayers and 97% of corporate income tax paid by 3.5% of corporations, the South African government will have a rare opportunity to examine and change how it spends limited taxpayer funds after the 2024 general election,” the report said.
According to Treasury statistics, 37,839 civil servants earn more than R1 million a year. Total civil servant compensation is set to rise from R408 billion in 2013-14 to R721 billion in 2023-24.
“This puts further pressure on already strained finances, which are being exacerbated by rising debt-servicing costs and rising wages for civil servants, with unions calling for further pay increases,” the report said.
“There is an increased risk that funds will be diverted from other ministries and national priorities, such as infrastructure, to service the national debt and pay civil servant wages.”
The number of government employees grew rapidly during former President Jacob Zuma's term, peaking towards the end of his administration, and the number of provincial employees is also set to soar from 700,000 in 1994 to 1.2 million by 2023.
“Most of this growth has happened under Zuma's administration. [President Cyril] “The Ramaphosa government has been largely unable to deliver on this expansion, with service delivery having generally regressed or only improved marginally since around 2010,” the report said.
The report found that under former President Thabo Mbeki's government from 1999 to 2008, a period when South Africa experienced economic growth and improved service delivery, compensation averaged 8 percent of GDP. Over the next decade, compensation rose to 10.5 percent and has remained at that level today.
“This is consistent with declining economic growth and government performance. Public sector employment peaked in 2014 and only increased in 2023, suggesting that rising public sector remuneration levels have been driven primarily by wage increases,” the report said. “This trend suggests that South Africa has been getting more for less from government.”
The country may soon see a change in policy direction under a new government of national unity made up of 10 parties, including the market-oriented Democratic Alliance, and the ANC, but the new government, with 32 ministers and 43 deputy ministers, is larger than the previous one.
“This change in policy direction will make little sense unless the size and role of the civil service changes. The politicization of the civil service should be replaced by the professionalization of the civil service,” the report said.
The report highlights a lack of professional and technical skills among civil servants, with many seeing their role as enforcing rules rather than achieving outcomes that lead to the delivery of quality services.
The largest number of employees in the national public sector are the police (186,143), the judiciary (21,672) and prisons (37,650), accounting for 74% of the total number of national civil servants (332,394). The next largest number are in the higher education and training sector (29,295) at 8.8%.
The ministry's 851,280 employees are made up mostly of medical staff and teachers at basic education level.
The most populous provinces, Gauteng and KwaZulu-Natal, also have the highest number of employees, with 179 702 and 174 990 respectively, but the Western Cape, the third most populous province, is ranked fifth in terms of provincial employee numbers, behind the Eastern Cape and Limpopo.
According to the report, employees in pay brackets 7 to 9 make up almost half of the government workforce and will cost the state R211 billion per year in 2023-24. Their average monthly salary is between R27,300 and R38,600.
By comparison, the average income in non-agricultural formal employment in the country was about R25,000 per month in 2023.
“The next largest group are those earning between R10,800 and R22,900 a month, costing the country R108 billion a year,” the report said.
“The third group of people earn between R47 900 and R90 000 a month. This group makes up 10% of the total civil service and costs the country R93 billion a year.”
By comparison, a member of parliament earns about R100,000 a month.
The final four pay levels are for senior management, numbering just under 10,000, and ranging from R102,000 to R180,000 per month, giving a total payroll of R12.7 billion.
“The bulk of the costs to the nation fall on the middle levels of the public sector, not on the senior levels that tend to attract the most public attention,” the report said.
Commenting on solutions to bloated wage expenditure and whether public servants' consumption spending could stimulate economic growth, Hattingh, one of the authors of the report, said this week that there were many arguments in favour of reducing wage expenditure, given the inefficiency of the state and its institutions.
“The question is whether that wage spending can be put to more productive use, to enable higher economic growth and job creation, rather than just higher wages for a shrinking number of people who are in the public sector and who may have the necessary political connections,” he asked.
“Cutting public servant salary expenditure would send the right signal about fiscal responsibility, but I'm not sure it would be enough to address some of the underlying issues of why salary expenditure is so high in the first place.”
“What should the role of the public sector be? Are public sector employees accountable? Are they getting what they're paid to do?”
Co-author Lorimer said wage payments are paid for with taxes from the most productive sectors of the economy and, combined with government inefficiency, have little to no positive impact on the country's economic growth.
“Public sector personnel costs are a higher proportion of expenditure than in many much wealthier countries, producing much worse outcomes in terms of service delivery. Reducing personnel costs is key to avoid rising government debt,” he said.
“The government should fire underperforming employees and hire based solely on merit, not on other factors such as race or political loyalty.”
“Currently, the government is overstaffed with numerous community liaison and redundancy posts that are used for political patronage. All of these roles should be reconsidered.”
Lorimer said the government should prioritise value for money in hiring and procurement and have a “zero tolerance attitude towards corruption and inefficiency”.
“The government should also make efforts to improve the working environment to attract skilled workers and managers from the private sector.”
“Government salaries are already higher than comparable private sector salaries. Creating a merit-based, corruption-free work environment will help attract top talent from the private sector.”
Lorimer added that the Civil Service Reform Bill and the Administrative Management Reform Bill, currently before state legislatures across the country, are “a first step in untangling the civil service from the web of political patronage that has stymied attempts at reform.”
