Africa-Press – South-Africa. South Africa’s public servants will receive a 5.5% increase in the current financial year, costing the government R7.3 billion.
Over the next three years, with the National Treasury honouring the public sector wage agreement, the government will spend R23.3 billion to implement the agreed-upon increases.
This puts immense strain on the government’s finances as the public sector wage bill has consistently increased faster than headline inflation.
Crucially, the increased wage bill has not come with improved productivity and has not coincided with faster economic growth.
As a result, the public wage bill as a share of GDP has skyrocketed from below 6% in 1994 to above 10% in the past financial year.
The National Treasury said this is largely due to the fast-growing average remuneration costs of public-service employees over the past few years.
The government has justified this in several ways, saying the wage increases reflect the growing burden on public servants over time.
The ratio of the number of people served per public servant has increased from 32 in 1994 to 48 in 2024. As demand for services increases, it adds pressure on the public servants.
However, this does not justify why the bulk of the salary increases in the past decade have gone towards middle management and senior employees rather than increasing the size of the public service.
According to the Treasury’s data, a trend in government employees’ compensation over the past decade is that higher earners receive a greater share of the wage bill.
This is primarily due to an increase in the cost-of-living adjustment and the need to attract and retain skilled professionals in the public sector.
The Treasury said these higher average remuneration costs have become more expensive over time, limiting the government’s ability to effectively grow the public servant headcount due to affordability constraints.
The growth in the public servant wage bill and the number of people per public servant can be seen, courtesy of the National Treasury’s Budget Overview.
One step at a time
The National Treasury has made some progress in managing the growth of the public sector wage bill by trying to keep increases to below headline inflation and implementing an early retirement programme.
Since 2022, the Treasury has begun separating funds allocated for wage increases from those needed for additional capacity.
The government has also been prioritising key services and sectors for additional funding to address growing wage pressures and constraints.
As a result, billions in additional funding have been allocated to basic education, healthcare and the security cluster to address wage pressures in 2023 and 2024.
These efforts, particularly those keeping wage increases below or in line with headline inflation, appear to be bearing fruit.
As a result, the public sector wage bill as a share of government expenditure has declined in the past few years.
However, the National Treasury was not clear about whether its decline as a share of spending is due to limiting the growth of the wage bill or the rapid growth in expenditure in other areas.
The government’s latest plan is to implement an early retirement programme to make the state’s workforce younger and relatively cheaper.
This programme specifically targets high-earning, senior employees near retirement age and incentivises them to retire.
The government has reduced the funds allocated to this programme to R5.5 billion from R11 billion in March due to the reversal of the VAT hike and a weaker economic outlook.
Those wishing to pursue this option will have to apply, with approvals given only by the relevant executive authority.
Up to 30,000 state employees are expected to opt for early retirement. The programme aims to manage staff headcount in a targeted manner and revitalise the public service.
The money will also be used to attract younger employees into the public sector workforce to ensure that when key staff are lost due to natural attrition, these posts are able to be filled.
It is speculated that state workers aged between 55 and 60 are likely to be offered two weeks’ pay for every year they have worked, up to a maximum of 20 years, and one week’s pay for every year they have been employed after that.
Any penalties usually incurred by those taking early retirement will likely be waived.
Godongwana estimated that the early retirement incentive will result in average annual savings of R7.1 billion per year over the medium-to-long term. Previous early retirement offers had limited take-up, casting doubt on the projected savings.
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