Business Unity SA (Busa) has warned that South Africa will be ‘well on its way to becoming another failed African state’ if it does not trim the bloated public sector’s wage bill.
Businesslive quoted Busa as saying that it regretted that ‘business hasn’t been firm enough on government’s unsustainable fiscal stance’.
The report said a Busa report benchmarking South Africa’s bloated public sector wage bill against international norms showed that between 2006 and 2018, the wage bill exploded from R154 billion to R518 billion – a compound annual average growth rate of 10.5% – almost entirely due to excessive wage increases.
While the public service was not unusually large, it was unusually well remunerated. The report found that teachers earned nearly 50% more than the Organisation for Economic Co-operation and Development average, and that public servants were better paid than the median South African taxpayer at every point of the income distribution, bar the 95th percentile.
According to the report, the public service wage bill in South Africa is the largest of the 46 countries surveyed, as a share of state spending. With more than 35% of the budget devoted to salaries, it is a third larger than the international average of 26.1%. At 11.6% of GDP, the wage bill was about 25% greater than the global norm of 9.4% in 2017.
Busa said the country had to confront ‘the real issues’ by creating a competitive, business-friendly environment to boost growth while slamming on the spending brakes to avoid a fiscal crisis.
The wage bill had ballooned because of the collective bargaining system. South Africa is one of the few countries that still conducts collective bargaining at a sectoral level, a bargaining system that arose in Europe and the UK in the early 20th century.
[Picture: Colin Behrens from Pixabay]