Busa raises concerns about debt as a consequence of South Africa’s high public sector wage bill.
Business Unity SA (Busa) has warned that South Africa will slide into serious debt if it does not decrease its public sector wage bill. Busa commissioned Intellidex to research various aspects of the public sector wage bill, resulting in a report titled “The Public Sector Wage Bill: An Evidence-Based Assessment and How to Address the Challenge”.
Cas Coovadia, CEO of Busa, said the report suggests that downward adjustments to the payroll could be made either by reducing wages, reducing headcount, or doing both.
“If we assume a drop in nominal GDP of four percent this year and increases of four percent in each of the next two years, and we want to decrease payroll costs by 10.5 percent by 2025/26, aggregate payroll costs can increase by no more than 1.8 percent a year in nominal terms. This is the hard decision that needs to be made,” Cas said.
Busa asserts that as the country considers the path towards recovery and risks the government’s fiscal policy posed to that recovery, the public sector wage bill is a crucial factor.
The Intellidex report found that South Africa’s public service was not large in per capita terms, but unusually well remunerated when compared to a basket of other countries. The report reveals that the average remuneration of public servants in SA was high by international standards when compared to private sector employees and per capita GDP. It also outlines that compensation spending went up from R154 billion in 2006/07 to R518 billion in 2018/19, a 78 percent inflation-adjusted increase, while increases in headcount went up by 22 percent.
Additionally, public sector wage increases as a percentage of tax revenues had grown from 31 percent before the global financial crisis to 41 percent in 2009/10, in the face of a global slowdown, and had stabilised at about 37 percent.