SOUTH Africa’s general government wage bill – made up of the public sector and state‐owned companies – is one of the highest among emerging markets. The bill has now ballooned to R723,4 billion in the 2024/25 budget year.
2. In a report titled “Compensation and employment data national Treasury”, the government sets out various statistics, in particular, those that relate to compensation, such as compensation of employees are as high as R723.4bn in the 2024/25 budget year.
The further interesting aspect lies in several other details within this number. To start with, there has been virtually no growth in the number of employee numbers over the past five years. Basic Education Minister Angie Motshekga revealed in a written parliamentary reply recently that there are currently 31 462 teacher vacancies in the country.
There has been a trend of entry-level salaries over the past decade, where almost 80% of employees fell in this bracket, but now only 30% of workers are in this bracket.
3. It is stated on https://www.gepf.co.za/retirement-benefit that “60 years is the normal retirement age for the Government Employees Pension Fund (GEPF) members. The average life expectancy of a 60-year-old is 16.5 years, therefore, once the 55 000 go on pension, the GEPF is responsible for paying a pension equivalent to 75% of their earnings. In addition, the government will replace them with other workers who will now be earning the R1 million plus per annum. It is a scary thought. The benefits paid depend on whether a member has less than 10 years of pensionable service or 10 or more years of pensionable service. Members with less than 10 years of service receive a gratuity – a once-off cash lump sum that is equal to their actuarial interest in the fund. Members with 10 or more years’ service receive a gratuity and a monthly pension annuity.”
The above numbers beg the question of how affordable the pension liability of these employees is to the GEPF. In a conservative calculation, the pension liability of the millionaire earners indicates that the GEPF has a liability of R680bn and together with interest over, the interest plus capital will add up to as much as R976bn. This assumes that each million earner will receive at least 75% of their earnings.
This does not include the 600 000 employees that have moved from the R350 000 and under bracket to the level of between R350 000 and R650 000 per annum. Every three years, the GEPF In terms of the Government Employees Pension Law and the rules of the fund, is obliged to obtain an actuarial revaluation of its projected liabilities and compare that with the assets which must back these liabilities. In the case of a shortage, the employers must make up for the shortage.
The employer, being the South African government, has no money of its own and will need to raise the shortfall from sources such as higher taxes and/or cuts in other budget items.
Another option is to borrow even more money. Gross loan debt is now expected to stabilise at 77.7% of GDP in 2025/26, compared to 73.6% in the 2023 Budget. This number is already at an unsustainable high level due to the structurally high-interest rate levels in South Africa. We already pay way more interest as a percentage of total expenditure than America, with a much higher debt-to-GDP ratio. (The US is at 123% debt to GDP, but interest rates are more than half that of South Africa.)
4. The funding level of liabilities taking contingencies into account was already only at 74.3%, and this information was reported in the 2021/2022 report. The latest report may perhaps have deteriorated due to the stagnant new employees’ position, and the huge upward shift in salaries takes its toll.
The employer currently contributes at a rate of 16% of pensionable salary in respect of “services” members and 13% in respect of “other” members. All members of the fund contribute at a rate of 7.5% of pensionable salary.
According to Statistics South Africa, the youth (15-34 years) remain vulnerable in the labour market. The fourth quarter of 2023 results show that the total number of unemployed youths increased by 87 000 to 4.7 million, while there was a decrease of 97 000 in the number of employed youths to 5.9 million. This resulted in an increase in the youth unemployment rate by 0.9 of a percentage point from 43.4% in Q3: 2023 to 44.3% in Q4: 2023.
It states: “The above changes in employment and unemployment resulted in the official unemployment rate increasing by 0.2 of a percentage point from 31.9% in the third quarter of 2023 to 32.1% in the fourth quarter of 2023. The unemployment rate, according to the expanded definition, decreased by 0.1 of a percentage point to 41.1% in Q4: 2023 compared to Q3: 2023.
People between the ages of 15 and 65 derived from the above equals 37.5 million people. The young guys (0-15) total 17 million and the elderly, hopefully retired, make up 3.7 million. From the calculations, the total population is therefore 58.5 million. Numbers of up to 62 million are often also mentioned and perhaps they include foreign nationals.
5. The current numbers are extremely disappointing, and it is obvious that whatever policies or methods the government is employing are not working now nor have they been working for a long time as far as job creation is concerned. There is no trend of any improvement.
The 10 years before 2013 do not look any better and confirm that in 20 years no inroads have been made. No plans are working either, because we have no good plans or there is a lack of political will to implement the plans.
In light of the above numbers, one can only be concerned as to how the government makes its choices and priorities. In March 2022, Health Minister Joe Phaahla said public hospitals had more than 10 000 vacancies for nurses and 1 330 unfilled posts for doctors. In a written reply to parliamentary questions posed by Freedom Front Plus MP Philip van Staden, Phaahla said there were 10 831 vacant nursing posts in state hospitals.
The South African Post Office has received more than R10bn from taxpayers since 2014, yet 6 000 jobs have been lost since. Under business rescue, a further 7 000 job losses were approved by the Cabinet to commence this year.
In the private sector, mining company Impala Platinum Holdings (Implats) is contemplating cutting 3 900 jobs, and various other companies are also considering downsizing their workforce.
* Kruger is an independent analyst
** The views expressed herein are not necessarily those of Personal Finance or Independent Media.
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