R12 or every R100 in economy goes to pay civil servants
JEANNE VAN DER MERWE
NEARLY R12 of every R100 generated by the South African economy is spent on paying for civil servants – nearly three times as much as Brazil.
In the past financial year, our bureaucrats were responsible for costing more than 11% of SA’s gross domestic product, making the SA civil service among the most expensive in the world by this measure.
Fellow BRICS countries like the Russian Federation spend 3,7% of GDP on its civil service with Brazil’s ranging between 4.4% and 4.8% over the past decade.
Finance Minister Pravin Gordhan admitted this week that the growth in government wages has outstripped all other categories of state spending in the last four years.
“In order to afford this [latest pay hikes] we will need to set specific three-year targets for personnel numbers and remuneration costs. We need to see improvements in productivity and more effective use of existing staff establishments,” he said, presenting his mini-Budget this week.
European Union and International Monetary Fund figures show that South Africa outspends first-world governments such as the UK and USA, and most of Sub-Saharan Africa on its civil service as a proportion of GDP.
Government wages as a percentage of GDP is one of the few ways of directly comparing state wage costs across different countries.
Mike Schussler of economists.co.za estimates, using StatsSA data, that the state wage bill is actually at 12.9% of GDP – and could be as much as 14% if state-owned entities are factored in.
The Treasury, however, puts the figure at 11.5%.
In 2011 the state pay packet was R346 billion and this year it is estimated to reach R378.3 billion.
A recent International Monetary Fund study estimated South Africa’s civil service cost on average 10% of GDP between 2006 and 2010.
Nigeria, considered to be South Africa’s closest African economic rival, spent 4%, Egypt 6.9% and Rwanda 3.5%.
Schussler said in the mid-2000s the state’s wage bill had dropped to around 9% of GDP, but then started climbing again to its current level.
Economist Iraj Abedian said the labour intensity (the amount of manpower needed to deliver a service), efficiency of civil servants and the size of a country all played a part in national wage bills.
“If a country is large, like South Africa, Brazil or Canada, the public wage bill tends to be higher than if you’re a small country, because the wage bill would also depend on how wide you have to stretch yourself and what technology you use.
“Another factor is the productivity of the public sector; if you have a more productive public sector, that obviously reduces the percentage spent on wages.”
Treasury spokeswoman Phumza Macanda said comparative data ought to be treated carefully as it “might easily create a wrong or misleading impression”.
“The size of the public service is influenced by a host of factors. Major economic sectors, such as health or education, are administered by the state in some countries, while in others they are entirely private. In South Africa many of these large labour intensive public services are administrated by national and provincial government.
“That said, we are satisfied that in comparative terms, South Africa’s public service is not unusually large.”
The Treasury estimates that the public service wage bill compared to GDP will peak next year at 11.6% before gradually dropping to 10.4% in 2015.
Macanda said government would take “a more deliberate approach to managing overall employment and wage trends”, in particular by curtail[ing] unwarranted growth in personnel numbers”.
Stellenbosch economics professor Estian Calitz said technological advances could make it possible for these costs to drop in areas such as education, health and defence sectors.
“Salaries of government employees have risen substantially in real terms during periods of rising protest about poor service delivery. Normally one would expect real increases in remuneration to be coupled with increased productivity,” he said.
“From the 2012 medium-term budget it appears that the rising wage pressure on the national budget has not been stemmed.”
Adcorp labour economist Loane Sharp said it was unlikely government would be able to rein in wage costs, as 76% of civil servants were unionised.
South Africa performed poorly against all major international indicators of government efficiency, which showed that the civil service salary bill was inordinately high in South Africa, he said.