NO REDUCTION IN WAGE BILL IN PAST DECADE

MBABANE – For a decade, government has failed to do one thing and one thing only, to reduce the wage bill.

The Minister of Finance, Neal Rijkenberg, when delivering his maiden budget speech, said in the last decade, the wage bill had grown by 125 per cent.
“In contrast, volatile SACU receipts have made government’s fiscal position untenable, in the medium term, SACU receipts are expected to decline due to South Africa’s worsening economic position,” the minister had said.

According to global lender, the International Monetary Fund (IMF) Eswatini ranked 2nd highest spender on civil servants among the 53 captured countries.
Currently, estimates of the wage bill are said to be E8.44 billion which corresponds to 37 per cent of government’s expenditure. This figure, despite the advice of the IMF, has been escalating over the years.

Since the 2010/11 fiscal crunch in the kingdom, the IMF gave pointers on what government had to do in order to deal with the bloated civil service’s salaries.
Instead, whatever means are implemented seem to have been countered by their execution and or flipping on them immediately there was an extra Lilangeni to spare.

Assistance

For the 2012/13 financial year budget, government, with the assistance of the African Development Bank (AfDB) developed a fiscal adjustment road map (FAR) which aimed at addressing both the fiscal and structural challenges.
Through implementation of the FAR, government planned to reduce the civil service by 7 000 workers by 2015 and this was set to put the wage bill on a more sustainable path.

However, according to the IMF, given the political sensitivities surrounding the civil service reform, the authorities adopted a more cautious approach which sought to foster a buy in from key stakeholders.

The IMF further reported that government was also preparing to implement a voluntary retirement scheme. To facilitate these processes, government requested assistance from the World Bank for a civil service audit which would provide a basis for retrenchments.

The retrenchments never took place as that would have thrusted upon government socio-economic challenges. However, during this period, government had to cut the wage bill by E300 million (1¼ per cent of GDP) on an annual basis, while protecting pro-poor spending, as a first step towards restoring fiscal sustainability.

Government, at the time, claimed to prefer a more gradual approach, based on reducing the civil service through an audit of the civil service roster, attrition, a reduction in the retirement age, and possibly a revised voluntary retirement scheme.

In 2017, government released a report citing that there were no ghost employees contrary to reports and allegations made by those who were in the civil service. This was just a year after hefty increments were awarded to the civil servants, including politicians.

The increments saw politicians, judges, and senior bureaucrats being awarded as high as 32 per cent increments. The salaries of low-paying occupations were increased by between 15 and 18 per cent.

This was viewed to be imprudent in keeping the wage bill in check. But there is more to the compensation costs than meets the eye.
Meanwhile, in 2017, the IMF reported that its directors underscored that steps to contain the public wage bill, prioritise capital outlays, reduce transfers to extra-budgetary entities, and boost tax revenues would be critical to the adjustment effort.

The IMF encouraged government to improve budget formulation and expenditure controls, and strengthen the governance of extra-budgetary entities to ensure the credibility of consolidation plans. The IMF reported that for the 2016/17 financial year, the public wage costs for central government employees peaked to 13.8 per cent of the gross domestic product (GDP).

Growth

This was a 2.5 per cent growth from the 2012/13 financial year as it was 11.3 per cent of the GDP and it amounted to 99 per cent of domestic revenue (45 per cent of domestic primary spending).
While already on a rising path, in the 2016/17 financial year, the wage bill sharply increased as a review of public sector salaries reformed, among others, the pay structure and resulted in about two per cent of GDP in additional wage expenses.

It was then projected that the public wage-to -GDP ratio was expected, under current policies, to increase further and exceed 17–18 per cent of GDP (about 49 per cent of domestic primary spending) by 2021/22, largely above domestic revenue collection.

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