MIDTERM BUDGET | Vital spending crowded out as public service creates 45,000 new millionaires

01 November 2023 - 15:03
By Khulekani Magubane
Escalating public sector wages contributed to higher budget deficits and debt over the past decade, according to the latest medium-term budget policy statement, tabled on Wednesday. Stock photo.
Image: 123RF/INSTINIA Escalating public sector wages contributed to higher budget deficits and debt over the past decade, according to the latest medium-term budget policy statement, tabled on Wednesday. Stock photo.

The number of government employees earning more than R1m per year has increased from 10,000 to 55,000 in the past 10 years.

This is due to higher than inflation salary increases that government employees have been enjoying between 2013/14 and 2023/24.

The figures were revealed in the medium-term budget policy statement (MTBPS) on Wednesday, which warns that the escalation of the public service wage bill was beginning to crowd out funding to support vulnerable households and investments to kick-start the economy.

The document says escalating public sector wages contributed to higher budget deficits and debt over the past decade. Finance minister Enoch Godongwana tabled the statement in parliament on Wednesday.

South Africa’s general government wage bill, with the public sector and state-owned companies included, was among the highest in emerging markets despite public sector employment being lower as a share of total employment than in other countries with high wage bills, according to the MTBPS.

“The number of employees with annual earnings in excess of R1m per year has also increased from just above 10,000 in 2013-14 to over 55,000 in 2023-24. Almost half (48%) of employees will earn between the annual ranges of R350,001 and R600,000 in 2023-24,” said Godongwana.

“Above-inflation increases in one year raise average remuneration per person and compound the effect of any future increases. Above inflation, growth has hindered the government’s ability to allocate funds to other critical areas, such as social services and infrastructure development.

“Over the past decade, the wage bill has declined as a share of consolidated spending from 35.7% in 2023-14 to 32.1% in 2022-23. In 2023-24, its share increases to 32% in comparison to 31.3% at the time of the 2023 budget.

“This is mainly due to additional funding allocated for the 2023-24 wage increase for select labour-intensive departments, including the carry-through cost over the medium-term expenditure framework period. In 2026-27, it is projected to decrease to 31.6% of consolidated spending.”

Godongwana said the current financial year’s spending was revised down by R21bn, with reductions of R64bn proposed in 2024-25 and R69bn in 2025-26. He said this would be done by implementing control over the payroll systems in line with the directive issued by the department of public service & administration.

“Additional funding of R24bn this year and R74bn over the medium term will be used to fund the 2023-24 wage increase and the associated carry-through costs in these sectors.”

About R111.4bn will be added to the public service wage bill over the 2024 medium-term expenditure framework to assist labour-intensive departments in the public service such as education, health, police, defence and correctional services.

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