Finance Minister Enoch Godongwana. Photo: Mlungisi Louw/Gallo Images
South Africa has the third-largest public sector wage bill as a proportion of GDP in the world, a new study has found.
The report by the Centre for Risk Analysis highlights the cost — about R721 billion a year — of the country’s public sector wage bill, and the lack of service delivery that has accompanied it.
Written by Tamara Dimant, Chris Hattingh and Nicholas Lorimer, the report said South Africa has the third-highest government wage bill as a share of GDP compared with 20 major global economies.
“Although South Africa has a much smaller economy, its wage bill as a share of GDP (about 10.5%) towers over economic powerhouses such as the United States, United Kingdom, Australia and Japan,” it said.
Only Iceland and Denmark spend more on their public service wage bill as a share of GDP than South Africa, followed closely by Brazil. But other Brics nations — Russia, India and China — spend less than 10% on their bureaucracies.
“With 95% of all personal income tax paid by 30% of taxpayers and 97% of all corporate income tax paid by 3.5% of companies, the South African government after the 2024 general election enjoys a rare opportunity to investigate and change where it spends limited taxpayer resources,” the report said.
According to treasury figures, 37 839 public sector workers earn more than R1 million annually. Total compensation for civil servants climbed from R408 billion in 2013-14 to R721 billion in 2023-24.
“This places significant pressure on an already constrained fiscus. Adding to the fiscal pressure are rising debt servicing costs, along with public sector wage increases with further raises being pushed for by labour unions,” the report noted.
“There is a growing risk of funding being diverted from other departments and national priorities (such as infrastructure) to service the country’s debt and to foot the public sector wage bill.”
The number of people employed by the government accelerated under former president Jacob Zuma’s tenure and peaked at the end of his administration. Provincial government staffing levels have also ballooned, from 700 000 employees in 1994 to 1.2 million in 2023.
“Most of this growth occurred under the Zuma administration and into [President Cyril] Ramaphosa’s administration. There has been little to show for this expansion in terms of service delivery, which has generally seen regression or only mild improvement since around 2010,” the report said.
It said that under former president Thabo Mbeki’s administration from 1999 to 2008 — a time when South Africa experienced most of its economic growth and improvement in service delivery — compensation averaged 8% of GDP. During the next decade, this rose to 10.5%, a level at which it has remained.
“This coincides with a reduction in economic growth and government performance. The number of people employed by the public sector peaked in 2014, and only increased in 2023, which suggests the higher level of public sector remuneration was driven primarily by wage growth,” the report said. “This trend suggests that South Africa has been paying more for less from its government.”
The country could soon move in a different policy direction with the newly formed government of national unity, which the ANC has established with 10 other parties, including the market-friendly Democratic Alliance. But the new executive is bigger than previous iterations, comprising 32 ministers and 43 deputy ministers.
“This change in policy direction would mean little should the size and role of the public service remain unchanged. The politicisation of the public service should be replaced by the professionalisation thereof,” the report said.
It highlighted the lack of professional and technical skills in the public service, where many officials see their role as enforcing rules rather than achieving outcomes that lead to quality service delivery.
National public sector employment numbers mostly represent the police (186 143), justice (21 672) and prison system (37 650), with 74% of all 332 394 national government employees located in these departments. The next-biggest share is the 8.8% employed in the department of higher education and training (29 295).
Most medical staff and basic education-level teachers are counted among the 851 280 provincial employees.
The most populous provinces — Gauteng and KwaZulu-Natal — also have the largest number of employees, with 179 702 and 174 990 staff, respectively. But the third-most populous, the Western Cape, is fifth in the size of its provincial workforce, surpassed by the Eastern Cape and Limpopo.
People in salary bands seven to nine, who comprise nearly half of all government employees, cost the state R211 billion a year in 2023-24, the report noted. They earn on average R27 300 to R38 600 a month.
By comparison, the average earnings in non-agricultural formal employment in the country were about R25 000 a month in 2023.
“The next largest group is of those who earn between R10 800 and R22 900 per month, costing the state R108 billion per year,” the report noted.
“In the third group, people earn between R47 900 and R90 000 per month. This group accounts for 10% of all public sector employees and costs the state R93 billion per year.”
By comparison, an MP earns about R100 000 a month.
The last four salary levels are for senior managers, who number just under 10 000 and range from R102 000 to R180 000 a month, with a total salary cost of R12.7 billion.
“The middle ranks of the public sector are where the bulk of the costs for the state are to be found, rather than the more senior levels, which tend to draw most public attention,” the report said.
Commenting on the solution to the bloated wage bill and whether the consumer spending of government employees helps to stimulate economic growth, Hattingh, one of the report’s authors, said this week that there are many arguments in favour of cutting the wage bill, given the ineffectiveness of the state and its institutions.
“The question is, can there be more productive uses for that wage bill, for that spending to capacitate higher economic growth and more job creation, not just the concentration of wealth and higher wages for a dwindling number of people who are within the public sector and who might have the necessary political connections?” he asked.
“It would send the right kind of signal around fiscal responsibility if the public wage bill were cut. But I don’t know if that goes far enough to address some of the underlying issues as to why is it so big in the first place.
“What should the role of the public sector be? Are our public sector employees held to account and do they perform well for the salary they earn?”
Co-author Lorimer said the wage bill is paid for with taxes from some of the most productive sectors of the economy, and when paired with the inefficiency of the government there is little to no positive effect on the country’s economic growth.
“The public sector wage bill is higher as a proportion of spending than many much wealthier countries and yet produces far worse outcomes in terms of service delivery. Cutting it is important to avoid growing government debt,” he said.
“Government should fire non-performing employees and hire only based on merit, not other considerations such as race or political allegiance.
“Government is currently overstaffed with numerous community liaisons and redundant positions often for the purposes of political patronage; all these roles should be re-examined.”
The government should prioritise value for money in hiring and procurement, with a “zero tolerance approach for corruption or inefficiency”, Lorimer said.
“Government should also make efforts to improve the work climate to begin attracting skilled workers and managers from the private sector.
“Government salaries are already higher than many equivalent private sector salaries. Creating a positive merit focused and non-corrupt work environment will attract skills from the private sector.”
Lorimer added that the Public Service Amendment Bill and the Public Administration Management Amendment Bill, which are currently sitting with the National Council of Provinces, are the first steps “in untangling political patronage and the civil service which has poisoned attempts to reform” it.