DUMA GQUBULE | Time and again it’s workers who bear the brunt of state ineptitude

Whenever there is an economic or financial crisis in SA the first thing lazy analysts do is scapegoat workers for having caused it. Workers, who had little to do with creating the catastrophe, are then expected to be the only ones to take the pain. This is not fair.

At Eskom, employee benefit expenses declined to 16.5% of revenues in 2020 from 23.6% in 2007. This was the only item on the Eskom income statement that declined over the same period. By comparison, primary energy costs increased 8.6 times between 2007 and 2020. Everyone says Eskom must cut its wage bill, but nobody says what must be done to reduce other costs, which accounted for 97% of revenues in 2020.

Over the past few years the National Treasury has been scapegoating workers, blaming them for the country’s economic problems, including the rising debt to GDP ratio. But public workers are not the cause of the country’s economic crisis. In the 2020 medium-term budget policy statement the Treasury said above-inflation increases in the public sector wage bill contributed R174bn to the increase in compensation between 2006/2007 and 2019/2020.

However, over the same period public debt soared to R3.3-trillion from R553.7bn, an increase of R2.6-trillion. Therefore, above-inflation public sector wage increases contributed only 6.6% to the country’s soaring public debt burden during this period.

In 1996/1997 the public sector wage bill was 40.8% of government spending. The ratio fell to 32.9% in 2008/2009 as the economy grew faster than the growth of the public service wage bill from about 2004. The wage bill increased to 35.2% of government spending in 2010/2011 as the government implemented the occupation-specific dispensation (OSD).

Many of the problems in the public service are due to a failure to make sufficient investments in people and infrastructure.

Between 2010/2011 and 2019/2020 the public service wage bill declined to 34.1% of government spending. Therefore, if you look at the period after the implementation of the OSD the growth of the wage bill was contained. It grew at a slightly lower rate than the growth of the economy.

Union leaders say the OSD was a government initiative to improve the competitiveness of public service salaries. Many analysts, who have the image of a rude pen-pusher, do not appreciate the level of skills in the public sector and the costs that are required to obtain them.

The department of health says there were 157,440 skilled workers, including medical practitioners and specialists, dentists, pharmacists and nurses, employed in the public health sector in 2019. There were 4,827 medical specialists who earned an average of R1.3m a year and 16,046 medical practitioners who earned an average of R981,843. They accounted for 10% of the public sector wage bill, according to my calculation.

Public service employment increased by 123,364 people, or 9.7%, between 1994 and 2019. This increase of public service employment has not kept up with the 46.7% increase in the population to 59.6 million in 2020, from 40.6 million in 1994. Many of the problems in the public service are due to a failure to make sufficient investments in people and infrastructure.

SA needs to equalise its education and health systems. For public schools to have the same pupil-teacher ratio as private schools they will need to employ nearly 400,000 teachers, about double the current number. The tertiary education sector must also double its size to achieve international benchmarks.

In 2019 per capita spending in the private health sector of R19,459 was almost 4.5 times the figure of R4,370 in the public sector. With economies of scale the public sector could provide the same level of service as the private sector with two thirds of its resources. The annual budget shortfall to achieve this benchmark is about R400bn.

SA needs a much higher rate of GDP growth that can absorb the required significant increase in the size of the public sector. 

• Gqubule is founding director at the Centre for Economic Development and Transformation.