New data from the Organisation for Economic Co-operation and Development (OECD) shows that South Africa’s civil servants are some of the best paid in the world when considering the relative size of the economy.
The report shows that public sector wage increases are the main driver of government spending rather than increases in employment.
In the last decade, the number of public sector employees rose only by around 100,000, but public sector employment is close to OECD average but relatively high when compared to emerging economies.
“In real terms, per capita remuneration in the public sector rose by 3.1% on average annually, and by even 4.1% for civil servants with long tenure (more than 10 years) in the last decade.”
It added that wage negotiations have systematically granted above-inflation increases.
“Moreover, promotion policies contributed to wage bill increases. In 2006/07, 31% of public servants were in the salary levels 1–4 and 10% in the levels 9–16; by 2017 the respective figures were 19% and 21%.
“In addition, occupation-specific salary dispensations (OSD) have been introduced for specialised personnel, including medical doctors, nurses, teachers, police officers, lawyers, magistrates and engineers allowing for extra pay for these categories.
“In some cases, this led to substantial increases in remuneration in the year of their introduction,” the OECD said.
The OECD said that top managers in the South African civil service earn an average revenue corresponding to nine times of the GDP per capita in 2017, while the ratio is below six for the OECD average.
Compared in terms of US dollar purchasing power parity (PPP), the remuneration of South African public sector managers is comparable to their counterparts in Norway.
Even for non-management senior officials, teachers and education personnel, South Africa has one of the highest levels of remuneration both in terms of GDP per capita and US dollar PPP, the group said.
Finance Tito Mboweni recently suggested that members of parliament should also take a salary cut.
“If we were to be frank to ourselves, all of us, we are in a period where even our own incomes are shrinking and we should be considering reducing our salaries because of the nature of the situation.
“The GDP is going to shrink. It’s going to be less than before the Covid-19,” he said in a parliamentary presentation.
While the idea has been dismissed by opposition parties, government is looking at new measures to limit its wage bill growth, the OECD said.
“In the 2019 budget, the government announced an early retirement plan targeting 30,000 employees aged between 55 and 59 years old, targeting around R20 billion in savings.
“Take up of the early retirement plan has been slow and the targeted savings will not be realised.
“The government has announced in the 2020 budget its intention to cut the wage bill by R160 billion over three years, mainly through a combination of modifications to cost-of-living adjustments (wage increase), pay progression and other benefits.”
The OECD said that the government should also consider indexing public sector wages below inflation for three years.
It said that an inflation minus two percentage points in the public service could generate around R30 billion savings over three years.
“As inflation has receded and given the wage gains of recent years, the real cost to civil servants would be limited as they would still benefit from annual progression in the pay scale. Such a measure could create fiscal space for government investment in infrastructure and education,” it said.
“Furthermore, wage indexation should be linked to productivity developments, taking into account practices in Australia and Nordic countries.”