Trimming Zuma-era bureaucratic bloat could mean big savings

● As much as R3-billion could be shaved off the public sector wage bill if a department such as the Department of Women were to be dissolved, a senior National Treasury official said.

The department is one of several added by the Zuma administration, lifting the number of departments above 30 and making South Africa’s public sector wage bill among the highest for a developing country.

Public sector consolidated compensation is forecast to expand by 7.3% over the next three years. Together, the wage bill and debt costs are projected to constitute 45.9% of the state’s total expenditure in the medium term, crowding out capital investment.

Salaries constitute 35% of government expenditure.

Ian Stuart, acting head of budget at the National Treasury, said a new wage agreement was being negotiated. Adjustment for the cost of living would be a major driver and the wage hike was expected to be in line with inflation. “This will make it difficult for departments to meet their compensation ceiling unless they are able to reduce headcount at a faster rate,” he said.

There are about 1.3 million civil servants. In the 2016 budget, the government reduced the compensation ceilings of national and provincial departments by R10-billion in the 2017-18 financial year and R15-billion in 2018-19, according to the Budget Review.

“The consolidated wage bill is about R350-billion. If you were to close something like the Department of Women, as an example, you could save R2-billion to R3-billion.”

Another department proving a concern is defence. Where it once spent 38% of its revenue on wages, it now spends 68%.

Stuart said merging departments seemed a good idea but this was unlikely to change the fact that the bulk of the headcount comprised unionised employees “across many departments in a certain part of the income distribution. That’s what drives the wage bill.” Management had received low inflation adjustments to compensation in recent years, he said.

Public Servants Association general manager Ivan Fredericks said: “Cutting the wage bill should start at the top and should not impact on services to the public. Government needs to reduce the inflated cabinet and contain that wage bill. As far as public-service salary increases are concerned, it should be noted that the demand remains for an inflation-related increase that will address public servants’ real needs.”

Sanisha Packirisamy, an economist at Momentum Investments, said: “Reducing employment growth in the public sector is likely a tough task in the run-up to the elections, but it remains imperative to curb the overall wage bill.”