Wages threaten public services
• Provincial health departments are especially vulnerable as their spending on staff has been increasing steadily
The growing public-sector wage bill is eating away at provincial budgets, forcing them to run up huge debts to keep services running, according to Treasury.
Nowhere is this more apparent than in the public health sector, which accounted for R13.8bn of the R26.4bn in accruals accumulated by the provinces by the end of the 2016-17 fiscal year.
The worst offender was the Gauteng health department, which had accruals of R7bn by March 31, followed by the Eastern Cape (R1.9bn) and KwaZuluNatal (R1.3bn).
“Compensation is driving the overspending in provinces, particularly in Gauteng and KwaZulu-Natal,” said the Treasury’s deputy director-general for intergovernmental relations, Malijeng Ngqaleni.
Trade unions and the government are gearing up for a crucial round of wage talks. Unions have tabled a demand for a general salary increase of 10%-12% with the Public Sector Co-ordinating Bargaining Council. The medium-term expenditure framework provides for an overall increase of 7.3% a year.
“It is in the interest of labour, the public and government that a balanced compromise is reached,” Treasury budget office head Michael Sachs said. “Many national departments are going to struggle to come in on budget next year. There is a major risk facing the fiscus on their compensation budgets alone and that’s with no headcount growth and a CPI [consumer price index] adjustment.”
The Treasury gave detailed figures on public sector employment trends over the past decade. Sachs said this was intended to inform the debate on remuneration.
The medium-term budget policy statement released on Wednesday by Finance Minister Malusi Gigaba contains an additional annex on public sector compensation.
The data show a rapid expansion of the civil service until it reached a peak of 1.33million employees in 2012-13, after which there was a modest decline to 1.30-million employees in 2016-17.
Yet remuneration per employee continued to rise steadily, driving up the wage bill and commanding an evergrowing proportion of budget allocations. Between 2008-09 and 2016-17, compensation spending grew 37% in real terms — or about 4% a year.
Teachers and nurses accounted for a large part of this growth: their remuneration has on average outpaced inflation by more than two percentage points for the past seven years, according to the Treasury. Its analysis shows promotions and pay-scale progressions have increased the state’s wage bill by 1.5% a year.
“While progressions and promotions are intended as performance-linked incentives, in many sectors they have become automatic,” says the policy statement.
Provincial health department spending on staff grew from 57% of their total expenditure in 2008-09 to 63.2% in 2016-17. Limpopo’s personnel spending ballooned from 58.9% to 71% of its budget over this period.
IT IS IN THE INTEREST OF LABOUR, PUBLIC AND GOVERNMENT THAT A COMPROMISE IS REACHED