Let them eat taxes

Wage increases for some public sector workers may be well over 50% this year, according to figures from the South African Reserve Bank.

Economists have called on the government to assess the public sector’s productivity in the wake of its wage increases in recent years and of continued strikes.

Interrogating numbers from the Reserve Bank, Investec economist Annabel Bishop noted that some public sector workers have recorded increases of up to 57.4% year on year in remuneration for 2009-2010, while an average increase of 29.4% year on year was recorded. This was well in excess of the 6.4% inflation rate during the period. Workers in national government saw an increase of 17%.

“The rise in remuneration is also reflective of the substantial swelling in the number of civil servants — the government is South Africa’s largest employer,” she said in a research note. Employees in national government saw an increase of 18.7% in 2010, while provincial government gave workers an increase of 17.8% and local government employees received increases of 18.1%.

Employees of financial public enterprises received increases of 57.4%, and non-financial public enterprise employees received 13.6% increases. Workers employed at extra-budgetary institutions received increases of 10.4%, while those employed at social security funds received a 5.3% increase. At provincial level, the Reserve Bank says, it was education and health workers who received the largest share of wage increases at an average of 17.7% year on year.


According to the Reserve Bank, employment numbers in the private sector contracted by 4.8% in 2009, while public sector employment increased by 3.7%, “partly mitigating the impact of the recession on the overall level of employment”. When measured since 2004, the increases show significant leaps, according to Bishop.

“In the year ended March 2010 the biggest jump has been in the remuneration of provincial government employees, which jumped by 1 462% since 1994,” she said. ‘The estimated increase in inflation in that time period was 156%.” But while the number of publ ic sector workers has increased, Bishop noted that the higher level of worker remuneration is “only efficient if the productivity level rises meaningfully”.

“Productivity is real GDP as a percentage of employment, or the production of a [domestic] employee,” she said. Productivity rose by only 1.6% year on year in 2009 and by 1.9% in 2008, which coincided with the beginning of the downturn in the business cycle in December 2007.”

She noted, however, that the productivity measures do not separate the government and private sector contributions. This was an “exercise government should undertake before continuing to swell its ranks and grant wage increases well above inflation”, she said.

The government has stated that it cannot move from its 7.5% wage offer and an R800 housing allowance, because this would place too much strain on the already stretched fiscus. Unions are asking for 8.6% and a R1 000 housing allowance.

An additional R6.5-billion that is not budgeted for will have to be found should the 7.5% wage offer be implemented. The government had, through the budget, already allocated an increase for staff compensation from the revised estimate for 2009-2010, which stands at just over R270.85- billion, to around R294.4-billion for 2010-2011.

According to treasury spokesperson Jabulani Sikhakhane, the budgeted compensation of employees includes provision for wage increases, the 1.5% cost-of-living adjustment, other compensation-related items such as occupation-specific dispensation (OSD) and night-shift allowances, as well as provision for growth in the number of civil servants to support service delivery.

This R6.5-billion that forms part of the current wage offer is over and above the R23.5-billion budgeted for the increase in compensation of employees for 2010-2011, he said. Where the government will find the money is unclear, as South Africa’s small tax base is already stressed.

Bishop noted that the real increase in civil servant remuneration ‘places a heavy burden on state coffers, particularly as only around 10% of the population are taxpayers”. However, the government will not be using its contingency reserves, said Sikhakhane, but will instead be looking for efficiencies and savings within departments in a bid to find the cash.

The strike has been suspended, but unions have warned that this is by no means a settlement. Meanwhile, South Africa has been named as one of the most prodigiously striking nations in the world.

According to the Economist magazine, in 2009 South Africa lost an estimated 1.5-million working days to strikes, beaten only by Canada, which lost around 2.2-million working days to industrial action

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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