State wage bill boosts economy, but troubles analysts

Lisa Steyn

The state has once again taken centre stage in spurring on South Africa's economic development.

State wage increases continue to exceed inflation. (Lisa Skinner, M&G)

Figures released by Statistics South Africa this week showed third-quarter gross domestic product growth easing to 1.2%. Government services is the second-largest sector after the finance, real estate and business services sector.

Although mining and quarrying contracted by 12.7% in the third quarter and growth slowed in industries such as agriculture and manufacturing, general government services grew from 1.8% in the first quarter to 2.7% in the third quarter.

State wage increases continue to exceed inflation and have helped to address inequality, because 40% of the country's high-earning black workers are government employees.

However, analysts continue to warn of an unsustainable wage bill and foreign investors are observing this trend closely.

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