Public services eroded
CORE public services – basic education, health care and criminal justice – account for a large share of the consumption basket of poor South Africans. They are provided largely free to any user. The public provision of these services is widely recognised as a cornerstone of social and economic development in any society.
Together, they account for three quarters of the government’s wage bill and half of spending on goods and services – the medicine, books and cars that doctors, nurses, teachers and police officers need to do the job.
Over the last decade, there has been a chronic and deepening erosion of the resource base on which public services depend.
Users of these public services have been caught in the middle of the government’s need to consolidate the fiscus on the one hand, and the demands of public sector unions for better pay on the other.
In a recent report, we appraise the choices made in the government’s budget statements, and numbers that are tabled as part of those statements. We argue that the fiscal consolidation as currently proposed will significantly reduce real spending on core public services.
It will erode the quality and reach of these services, and widen income inequality in South Africa. These
choices are at odds with the Constitution. They will lead to a retrogression in socio-economic rights.
The government has provided no evidence that suggests a contrary conclusion. Nor has it presented any plans or policy interventions to alleviate the damaging effects of fiscal consolidation on public services.
The report gauges the quantitative aspects of public policy in three respects. First, we identify the trends in real spending over the last two decades. Second, we use the budgets approved by Parliament and provincial legislatures to gauge the impact of budget choices on real resource allocation over the next three years. Third, we present analysis of the government pay and employment trends, which are strongly concentrated in the core public services that are our interest.
We find that over the last decade, there have been significant reductions in the real value of basic education and criminal justice. Health-care budgets have been under increasing pressure.
In basic education, the government spent about R20 000 per learner in 2009, but this had fallen to about R16 500 per learner by 2021.
If provincial governments’ budgets are executed without adjustment, the next three years will see a large negative shock to the real value of spending per learner. In a worst-case scenario spending could fall to R14 000 per learner.
The government employs one educator for every 33 learners enrolled in the public school system. This could rise to as high as 39 over the next three years because the budget can only be realised with significant reductions to employment in the sector.
In health care, expenditure has stagnated in real terms relative to the population who depend on government services. In 2012, there were more than 720 health-care sector workers per 100 000 uninsured people. This ratio has steadily fallen since then, reaching 632 by 2018.
Spending and employment increased in response to the Covid-19 pandemic in 2020. But current budgets imply a reversal of these increases, and a reduction of spending per capita at an historical low. Health-care workers per 100 000 citizens could fall as low as 590.
For the criminal justice sector, our analysis shows by 2010 the level of spending had increased to more than R2 000 per citizen. By the time the Covid-19 pandemic hit in 2020, however, spending had fallen below.
Police employment reached about 200000 in 2010 but was reduced by around 15000 personnel by 2020. If current budget plans are executed, police spending and employment levels will fall even further, reaching their lowest point over the last 20 years.
The 2022 budgets of national and provincial governments imply large reductions in government employment in all these services under any reasonable assumptions about pay improvements. Even if the assumptions made in the budget for average pay increases of 1.5% a year were to be realised, large and damaging headcount reductions are required to meet expenditure limits.
We show that the government wage bill is dominated by core public services. The professionals who provide these services – teachers, doctors and nurses, and police officers – dominate government employment. Within the core public services, the balance between professional and administrative staff appears stable and sensible.
The emphasis of the government’s programme is to reduce average pay. It is sometimes believed that government employees are overpaid and unproductive, and therefore reductions in their numbers and pay can be achieved without negative impacts on public services. Evidence presented in our report questions these assumptions.
It is true that over the last 20 years, most government employees have enjoyed significant improvements in pay. However, these improvements are strongly concentrated in the period 2007–2010. Since then the average pay of most government employees has grown at a moderate pace, largely in line with pay trends for similar workers in the private sector. Forcing real incomes of government workers below their private sector counterparts could erode the human resource base of public services.
For many years, budget allocations have not kept pace with pay increases agreed to by the government. Spending on compensation of employees has been contained within strict limits for many years. In effect, the Cabinet has been increasing civil service pay while adopting budgets that effectively invalidate its own decisions.
These pressures have resulted in “crowding out” that have eroded state capabilities.
Most damaging has been the reduction in the number of employees. Employment in core public services has fallen relative to broad measures of public demand for services (such as the size of the population or enrolled users). In basic education and criminal justice, there have been absolute falls in employee numbers.
The real incomes of government employees who fall outside the bargaining unit – senior managers and judges – have been forced down consistently over the last decade.
This, combined with successive bargained agreements that give higher pay increments to lower-level employees, has contributed to a compression in the government wage structure.