- The number of government employees has increased steadily over the past two decades.
- Between 2005 and 2012, total employment in central and provincial government rose 27%.
- These employees’ average annual per capita remuneration doubled in that period, from R10 1980 to R21 1788.
- Between 2008 and 2012, total state employment rose by 13%, but the remuneration bill went up 76%.
- Compensation for inflation was an obvious contributor to this increase, but the total bill for the civil service in the same seven-year period increased by 145%, against an accumulated inflation effect of 54%.
- Other factors were changes in remuneration notches; promotions and appointments at more senior levels; and adjustments in favour of more senior staff — the package of a director-general increased by 76%.
- A continuation of the recent growth trend will crowd out other public-sector spending priorities.
- The SA version of a fiscal cliff is looming large – that is, “the danger that the SA government might run out of income to cover growing government expenditure”.
- Comparing expenditure on social grants and civil service remuneration since 2008 with government revenue over the same period:
o Social grants as a proportion of total government revenue rose from 12,6% in 2008 to 14,2% in 2012.
o In the same period, the total civil service remuneration bill increased from 31,7% of revenue to 42,2%.
o Combined, grants and remuneration went up from 44,3% of revenue to 56,4%.
o That leaves just 43,6% for everything else.
- The numbers suggest that if these trends continued, social grants and state jobs together would account for all government revenue by 2026 – just a dozen years away.
- And that is assuming average yearly revenue growth of between 9,7% and 9,9% between 2012 and 2030.
- Even if there were sharp increases in personal tax (such as a 50% marginal rate on income above R2m); in Vat from 14% to 15%; in company tax from 28% to 31%; and a rise of 10% for the fuel levy and excise duties, the SA version of the fiscal cliff would merely be deferred for two or three years.
- As it is, SA’s tax base is both too small and unbalanced.
- Only 4,5% of earning individuals produce a taxable income of more than R600000 a year — yet they deliver 37% of the amount derived from personal tax.
Prof Deon Pretorius
Ph.D (Warwick, UK)