Government’s 55,000 millionaires set to get even richer 

Government employees are set to get even richer in the coming years, with the National Treasury pencilling in significant increases in the public sector wage bill until 2027. This will accelerate the trend of the state’s highest earners taking home a larger slice of the pie each year.

South Africa’s public service has long been described as bloated and overpaid, with the National Treasury taking measures to slow the growth of the public sector wage bill in recent years.

This wage bill includes the compensation of government employees at the national, provincial, and local levels. It also includes the wages of employees at public entities and state-owned enterprises. 

The government’s attempts to rein in spending on the public sector wage bill appear to be bearing fruit, with state employees receiving a below-inflation increase for the current financial year.

Public servants received a 4.7% salary increase effective April 1, 2024, following an agreement reached between the government and unions in March 2023.

This is below the average headline inflation in South Africa over the past year, which has been above 5% since 2021.

However, over the past decade, the wage bill’s growth has far outpaced inflation, and an increasing share has gone to the highest earners.

Earlier this year, Minister of Public Service and Administration Noxolo Kiviet revealed the number of government employees in the highest salary brackets.

She said in response to a question in Parliament that 28,343 employees make an average of R1.08 million annually, followed by 6,754 earning R1.23 million and 1,994 earning R1.24 million.

At the very top, 631 employees boast an average annual salary of R2.16 million, with another 117 averaging R1.74 million. The total cost to the government for the 37,839 employees earning over R1 million is over R45.35 billion annually.

This figure is different to that of the National Treasury, which includes the compensation of employees from state-owned enterprises (SOEs) in its figures.

Treasury’s data shows that, inclusive of employees of SOEs, over 55,000 public servants earn over R1 million annually.

This is reflective of a trend within the compensation of government employees, where the highest earners are receiving a greater share of the wage bill due to increases in the cost of living adjustment.

The trend is not showing any sign of slowing down despite the government’s attempts to rein in spending on the public sector wage bill. 

Over time, this has resulted in employees earning more than R1 million per year, increasing from around 10,000 a decade ago to over 55,000 in the 2023/2024 financial year. 

Nearly half of all government employees will earn over R350,000 per year. The shift to higher-earning categories is shown in the graphs below. 

Treasury’s uphill battle

The government’s efforts to reduce spending on the public sector wage bill seem successful. National Treasury data shows that as a share of government spending, it has declined from 35.7% to 32.1% in the past decade. 

However, this is not because the wage bill has not grown but because other expenditure items, particularly debt-servicing costs, have grown even faster. 

In absolute terms, the public sector wage bill jumped from R407 billion in the 2014 financial year to R724 billion in 2024.

This increase is significantly above the average inflation rate of the past decade, making it unsustainable without significant economic growth. 

Such large increases in public sector wages are partially due to how the salaries of government employees are calculated. 

National Treasury said the inclusion of a higher cost-of-living adjustment, which was agreed upon in previous wage negotiations, has driven up employee salaries. 

This has pushed many government employees into higher-earning wage categories and is showing no signs of ending soon.

Treasury’s Medium-Term Budget Policy Statement outlined employee compensation trends, revealing that public servants will receive significant increases until 2027. 

According to its forecasts, the wage bill will rise to R805 billion by the end of the 2026/27 financial year – a nearly R100 billion increase from the most recent financial year. 

It warned that managing growth in the wage bill is vital for fiscal sustainability and that continued above-inflation increases threaten the country’s finances. 

These increases have limited the government’s ability to spend on more critical areas, such as social services, infrastructure development, and education. 

The National Treasury also explained that rising public sector wages have contributed significantly to higher budget deficits in the past, resulting in the country’s current huge debt pile. 

This will begin to drag on economic growth, further inhibiting economic growth. 

The graphs below show the National Treasury’s forecasts for the public sector wage bill in absolute terms and as a share of government spending. 

In a double blow for South Africans, these increases have come at a time when they are using government services less than ever before.

While government employees have received repeated increases, the quality and availability of public services have declined. 

This has resulted in many South Africans turning to private sector alternatives, particularly private security, healthcare, and education. 

Financial services firm PwC said the state’s ability to provide services has been withered away due to corruption and general incompetence. 

Stats SA’s Governance, Public Safety and Justice Survey report released last year showed a significant decline in the share of South Africans engaging with government services. 

It said this is because of a lack of access to services, a lack of trust in the government, and corruption impacting the state’s legitimacy. 

The report showed that the decline in the usage of government services is widespread and spans all sectors. 

This decline is shown in the graph below.