Answer to Question #199133 in Microeconomics for Khula

Question

Why is the public sector bill a problem for South Africa and why is large? An example country with a public sector like South Africa and how they dealth with it

Answer 1

In South Africa, the public sector wage bill is a problem because nearly a third of the national budget is spent on the salaries of civil servants which mainly include national and provincial officials, doctors, teachers, and police. In the fiscal year that began in April, the government projects it will spend about 639 billion Rand, equivalent to $39.54 billion on wages alone.

The public sector wage bill in South Africa is large and this can be attributed to the measures put in place by the government at the end of Apartheid in 1994 in which it sought to empower millions of blacks who had served the brunt of racial discrimination by placing them in public sector jobs. the rising wage bill between 2007 and 2019 is also attributed to the deals between the SA government and the powerful unions allied to the ruling ANC that threatened to shut down the economy should the government fail to heed their demands. This led to a sharp rise in civil servants' salaries by about 40% following the absorption of more than 180,000 of them into service.

Kenya is one such country that has a similar public sector wage bill as South Africa. Her (Kenya) wage bill soared between 2008 and 2013, following the establishment of the grand coalition government after a disputed general election outcome that plunged the country into civil strive that lasted for 3 months. The hike in the public sector wage bill was also attributed to the increased employment of public servants, mainly teachers and nurses, and the push by trade unions for a pay rise for their members. As a result, the wage bill rose from Ksh.239 billion in 2008/9 fiscal years to Ksh. 464.9 billion in the fiscal year 2012/2013.

To deal with this rise in public sector wage bill, the Kenyan government adopted the following measures

(i) Streamlining of payroll handling and control to curb the problem posed by ghost workers and double payment of civil servants.

(ii) Review of recruitment practice to be purely on merit rather through fraud and corrupt deals.

(iii) Institution of performance contract to ensure optimum service delivery.

(iii) freezing of employment to curb the periodic increase in wage demand for recruits.

(iv) Revision of wage and labor policies to be in line with the prevailing economic situations in the country.

(v) Streamlining of the job description to avoid duplication of responsibilities resulting in unnecessary employment.

Note: To achieve this, the government of Kenya established a commission referred to as Salaries and Remunerations Commission (SRC) and tasked it with mandates outlined above.