State wage bill boosts economy, but troubles analysts

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

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

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

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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