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South Africa to Curb Hiring, Staff Perks to Rein in Spending

Oct. 23 (Bloomberg) -- South Africa’s government said it will curb hiring, wage increases and perks such as entertainment budgets for state workers to rein in surging staff costs.

The “government aims to maintain staff numbers at a constant level over the next three years,” the National Treasury said in its mid-term budget report released in Cape Town today. “Exceptions will require a compelling explanation.”

Finance Minister Pravin Gordhan has pledged to narrow the shortfall on the budget by keeping spending limits in check over the next three years. Wages for more than a million government workers increased an average 14 percent annually in the five years through 2012, more than double the inflation rate of 6.3 percent in that period.

“Over the medium term, government will ensure that growth in employment and earnings does not threaten the expenditure ceiling,” the Treasury said.

Government ministers, provincial premiers and mayors will also have to cut costs, with limits on the amount they can spend on official vehicles and car hire and a ban on first-class flights, Gordhan told reporters. Credit cards will no longer be issued to officials and existing ones will be cancelled, while alcohol will no longer be served at most official functions, he said.

The government is the largest employer in Africa’s biggest economy, accounting for almost a quarter of all jobs. The number of public servants has grown by 251,331 since 2005 to 1.25 million, according to the Treasury.

Wage Deal

Under a three-year pay deal reached in 2011, state workers won a 7 percent increase for the year through March, and 1 percentage point above inflation in the next two fiscal years.

Wages for national and provincial government employees will cost the state an estimated 365 billion rand ($37.2 billion) this year, or 35 percent of total spending, according to the Treasury. An additional 12.2 billion rand was added to the salary costs over the next three years to account for inflation.

The South African Chamber of Commerce and Industry, the country’s biggest business organization, has called on Gordhan to reduce the state wage bill, rather than delay its growth.

“Merely paying public servants has now become a major influence on fiscal policy, as opposed to building school, expanding infrastructure and providing basic services,” Neren Rau, the chamber’s chief executive officer, said in an e-mailed statement yesterday. “This trend is unsustainable.”

To contact the reporters on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net;

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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