Government salaries will kill the economy

South Africa has too many civil servants and government is running out of money to pay them.

South Africa’s civil servants make up just 12% of its labour force, but earn a cool 30% of salaries, laments economist Mike Schussler. This follows news of the economy’s steady decline, despite the efforts to reopen the economy in a post lockdown Covid-19 reality. Statistics SA shows an estimated 1.5 million people have lost their jobs in the past five months of lockdown. Unemployment has risen to 30.1%, from a high of 27.7% in February. As government scrambles to revive its shrunken Gross Domestic Product (GDP) which lost 51% of its value year-on-year in the second quarter, Schussler argues that...

South Africa’s civil servants make up just 12% of its labour force, but earn a cool 30% of salaries, laments economist Mike Schussler.

This follows news of the economy’s steady decline, despite the efforts to reopen the economy in a post lockdown Covid-19 reality.

Statistics SA shows an estimated 1.5 million people have lost their jobs in the past five months of lockdown. Unemployment has risen to 30.1%, from a high of 27.7% in February.

As government scrambles to revive its shrunken Gross Domestic Product (GDP) which lost 51% of its value year-on-year in the second quarter, Schussler argues that government’s massive salary bill would lead to the next blow on the economy.

This as he also predicts that by next year, 600 000 more job-seekers would be on the market, bringing unemployment up nearer to 40% and extended unemployment to 50%.

He warns that government is far too indebted to afford all of its workers and that the economy would be better off focusing on improving business confidence and encouraging a revival of all the sectors which has suffered the most over the lockdown period.

The economy is in dire straits, said Schussler, beginning with the fact that this year 58% of all the money government is spending will be borrowed.

“That is a big ask and nobody can sustain that. There could be some other countries doing it now because of Covid-19 and the lockdown but in general it is not sustainable,” he added.

“What has happened is that you can’t say government must stimulate the economy by making higher taxes and other people must spend money. You can do it better by making sure that some people can earn the money by producing goods and services which are sold and bought. If you have 30% of the salary bill and the other 70% is carried by the private sector you have to find the taxes to pay those salaries. Personal income tax does not do anything for government salaries and it hasn’t done so in a while.”

With all sectors having shed jobs from the beginning of this year and escalating the cuts over the harsher lockdown period, it would be months before any positive growth could be seen in South Africa’s employment numbers.

Member of parliament’s portfolio committee on labour for the DA, Micheal Bagraim echoed Schussler’s sentiment, arguing the practice of hiring with no chance of retrenchment, and workers that were overpaid will have hit the government’s purse even harder during the lockdown, when much of its workforce was on leave.”

Before Covid-19, we were almost 100% over what we needed. What is even worse is that civil servant jobs are among the highest paying. You can get up to triple what you would get doing the same job in the private sector, and not to mention the perks,” he said.

“When you have been really naughty you can get suspension even up to a year with full pay. What has gone on has almost bankrupted this country and it’s getting worse and never mind that, taking up a whole 30% of the economy’s salaries, which is unsustainable by any stretch of the imagination.”

According to Bagraims, the labour department was 90% on leave or at home on full salaries in the first two months of lockdown and the next month about 30% had returned to work.

Economist Bonke Dumisa argued that, given the need to reprioritise funds, government needed to go against the union’s wish for higher salaries. It was also a terrible time to suggest government could somehow create more public sector jobs on taxpayer’s money.

“We are facing a serious problem and I don’t know how government will go about fixing it. President Cyril Ramaphosa said a few weeks ago that government has no money. So when you do not have money how do you go about saying that you have got new jobs just in order to absorb all these people. We have an unemployment of over 30% so how do you try to absorb all of those people when you can hardly afford the one’s you have.”

– Simnikiweh@citizen.co.za