Wage Rage – South Africa’s civil servants earn more than our doctors
South Africa’s civil servants are the highest paid in the world, when taken as a percentage of gross domestic product (GDP).
According to studies by the IMF and World Bank, paying our civil servants consumes between 12% and 13% of GDP – that’s 3.5% higher than the Organisation for Economic Cooperation and Development (OECD) average, and significantly more than economically strong countries such as the UK, US, Japan and Australia.
In the past 30 years, the government salary bill has exploded from R55 billion in 1995 to R724 billion in the 2023/24 financial year – far above normal, inflation-related increases.
Much of this happened under Jacob Zuma’s watch, and it put massive pressure on government finances. In fact, the state had to borrow money to fund this inflated wage bill, increasing government debt from R627 billion to R5.21 trillion in fifteen years.
Today, the average salary of someone in the South African civil service is over half a million Rand a year – that’s more than the average salary of a newly qualified physician.
I’m all for rewarding a job well done, but you don’t have to look very far to see that South Africa’s civil service is not doing its job very well at all.
As Marcel Nagar writes in an article for The Conversation, “Over the past 30 years, the South African public service has not been able to put into practice the policies designed to end poverty, inequality and unemployment.
“[It] has failed to uphold the values and principles governing its operations as outlined in the constitution, and has not done what Section 195 of the constitution requires:
- Maintain professional ethics
- Use resources in an economically efficient way
- Operate in an impartial and equitable manner
- Adopt a development-oriented vision and approach
- Strive for inclusivity, accountability and transparency.”
A equally damning report in the Sunday Tribune cites a study conducted by the Public Service Sector Education and Training Authority (PSETA), in partnership with the Tshwane University of Technology’s (TUT) Institute for the Future of Work (IFOW).
It shows that although “most South African government officials were familiar with the technologies of the Fourth Industrial Revolution, they were not familiar with how these technologies could be used to improve the efficiency of the state. In addition, officials in government departments that interact directly with citizens – such as home affairs and social development – lacked the technological tools and devices that could improve service delivery.”
It’s thus not surprising that many of the country’s leading economists, including chairman of the South African Institute of International Affairs, Moeletsi Mbeki, and former South African Reserve Bank economist and founder of the Efficient Group, Dawie Roodt, are calling for drastic change.
“We have approximately 1.3 million civil servants in South Africa, and they are mostly overpaid and underworked,” Roodt said recently in an interview with Newzroom Afrika. “The big question is, what can be done to improve government efficiency? We spend a huge amount of money on the whole state machinery and this economy simply cannot keep on carrying this massive burden.”
According to Mbeki, here’s what that burden actually looks like:
30% of the budget goes on satisfying the immediate employment demands of less than 4% of the population.
“This excessive expenditure uses the tax system to tax the private sector and transfer those resources to the state,” he says.
Dawie Roodt agrees and says, “the solution is not to suck more money out of the system, but rather to put policies in place to spend less.”
Mbeki believes reducing civil service pay to around 6% to 7% of GDP – a level comparable to that of similar countries – and investing the savings in productive assets will ignite economic growth. That all sounds excellent on paper, but it translates to cutting the salary bill in half. I don’t know about you, but I personally can’t imagine how well that would go down with our civil servants.
Clearly, though, something drastic has to be done – and soon.
Our gross loan debt currently sits at an eye-watering 73.9% of GDP. In other words, almost three-quarters of all the money our country earns is not spent on you or me, on our children or the elderly, on healthcare, education, service delivery, housing or job creation.
It’s spent on servicing government debt and paying government employees.
But wait, there’s more…
Don’t forget to add the debt from state-owned enterprises and local authorities. This increases the country’s debt-to-GDP ratio to 95%.
Just take a moment and let that sink in.
Only 5% of South Africa’s GDP finds its way into areas that benefit us, the everyday, hardworking citizens of this country, in some way.
Five. Percent.
The rest we never see because it gets thrown into the bottomless hole our leaders have dug with the solid gold spades you and I have paid for.
But there’s more than righteous indignation at play here.
The ongoing lack of investment in services and infrastructure for the majority of our people significantly reduces the creation of a skilled, motivated and healthy workforce – a critical ingredient of sustainable economic growth.
Mbeki believes the only way to stop this slow but inevitable economic decline is to cultivate new entrepreneurs from historically disadvantaged populations. The problem, though, is a lack of incentives – South Africa’s current policies rely on shoring up the existing structures that favour public sector employment.
“This focus on personal enrichment and maintaining a high standard of living for themselves and their close networks comes at the cost of investing in the essential needs of the wider population,” he says.
So, what should we be doing instead?
Some feel we could do worse than emulate many countries in Asia, which focus largely on developing the majority of the population – often at the expense of the more affluent classes. Instead of prioritising their own needs, many Asian governments invest heavily in high quality housing, healthcare and education.
The cynic in me feels that might be a somewhat lofty goal for South Africa right now, however. We’d likely do better with more tangible, practical targets.
Ronald King, head of public policy and regulatory affairs at PSG Wealth, believes this starts with increasing the primary budget surplus – essential for economic growth.
“South Africa’s growth rate has been lower than the interest rate on government debt since 2018,” he says. “Debt-to-GDP levels can only stabilise if the primary budget is zero or in surplus.”
Unless this happens, interest payments on government debt will continue to increase the debt burden faster than economic growth can reduce it.
As a natural optimist, I feel there must be something more we can do.
In the wake of the recent reversal of the proposed 0.5% VAT increase, we now wait eagerly for “Budget 3.0”, due to be tabled on May 25.
Negative Nancys say the VAT reversal leaves a R13.5 billion hole in the budget, but Dawie Roodt feels this is not significant in the context of South Africa’s total budget of R2.6 trillion.
“South Africa has enough money,” he said in an interview with the Daily Investor. “The problem is not the amount of money; it’s excessive state spending. We have to look where the state can save money – the government is a huge destroyer of capital.”
Personally, I love the brutal simplicity of his solution:
“The only way we can get politicians to spend less money is to give them less money,” Roodt said.
That gets my vote.