Views Article – Sharenet Wealth

South Africa

The Fat Uncle In Our House

SA’s finances are abysmal – to put it lightly. The nuances of writing in a public sphere and on behalf of an employer restricts me from using more “emotive” language. All the issues surrounding the finances are too complex than what can be discussed in a short article, but nonetheless I shall summarise it in a simple list. The remainder of the article will unpack only one of those issues: the government wage bill.


  • Debt will cap out at 71.3% of GDP by 2022/23 (drastically revised upwards from the February budget speech). This excludes any financial support for Eskom.
  • Interest payments on debt are the fastest growing part of the budget (growth of 13.7%/year).
  • No plan for Eskom
  • SAA is insolvent and will likely never be anything more than a money pit
  • Tax revenue growth was significantly lower than expected and budgeted for 3.7% actual vs 10.4% budgeted.
  • Government wage bill sit at 35% (!!!) of consolidated revenue (more than R500 billion).


Minister Mboweni enjoys employing the use of analogies. In his February budget, he likened South Africa to an aloe, saying it had to be nurtured. Yesterday, he reported that the aloe was not doing well and needs urgent attention. I too will use an analogy. If South Africa is the aloe in our home, the civil wage bill is the fat, lazy unemployed uncle who has been living rent-free in our house; eating all our food; capping-out our internet; and not washing his dishes. Most significantly, he has not been watering our aloe and has moved it to a dark unlit corner in our house to make way for his takeaway pizza box.

“The problem is that we spend more than we earn. It is as simple as that”

Tito Mboweni

Earlier this year, popular economist Mike Schussler highlighted some alarming statistics. Since 2008, the growth of the government wage bill has “outperformed” inflation, commercial salaries, and the JSE All Share. I have updated this graph for the latest available data (June 2019). In addition, I’ve compared the growth of the government wage bill to that of the mining sector.

  • Even when adjusted for inflation, the public wage bill has risen more than 66% since 2008.
  • 29 000 government employees earned more than R1 million in 2018.


It really doesn’t take anyone of the calibre of Jeff Bezos to understand that there is unsustainable over-expenditure and wastage on the government’s part. This isn’t breaking news. The real question that arises is what is being done or what will be done about it? Nothing.

I am not trying to vent frustration but rather highlight the gigantic quagmire the nation finds itself in. Mboweni treaded carefully around the topic stating that cutting the bill does not mean getting rid of “warm bodies”, but rather reviewing their compensation. The issue that makes addressing government expenditure particularly difficult is – unsurprisingly – the unionisation of workers. Almost 70% of public sector workers are union members vs 36% in the private sector.

It is hardly a secret that the influence unions hold over the state have resulted in inflated wages and bargaining power for their members. found that the average real monthly wage of the private sector is R7 822 vs R11 668 in the government sector. No prizes are won for guessing which sector has the better productivity-to-wage ratio.

Why aren’t wages just slashed or surplus employees axed like the data suggest? Well, the unions who oppose this movement have strong influence where it matters. Nehawu, a key union backer of President Ramaphosa, has previously labelled job cuts as a “neoliberal” agenda (had to Google the meaning). Clearly, union heads have spent significantly more time in philosophy and political science lectures as opposed to economics. An almost identical problem of union opposition is faced at Eskom (which is 66% overstaffed). Eskom and its strain on our fiscus is arguably the largest problem faced by South Africa since 1994 and yet common sense is not prevailing.


Most commentary on yesterday’s budget speech was regarding the lack of proposed plans or initiatives to address these issues. These sentiments were echoed by the markets which saw a weakened Rand. Similarly, the Eskom saga seems from an actionable plan and is likely facing tonnes of push-back behind the scenes. From a macro perspective, there is very little on the horizon in the form of a solution. Besides for promises of discussions with unions, government is not offering a plan to turnaround the ship as the economy and the stock market continues to be lacklustre. With a Moody’s rate announcement on Friday it seems extremely likely that at the very least Moody’s will change our credit outlook from stable to negative – paving the way to junk status. But hey, there is money to be made if there was a listed ETF that tracks the government wage bill as it’s the only indicator showing consistent growth.

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Aidan van Niekerk

Junior Investment Analyst

Aidan is responsible for quantitative research and stock-market analytics. He has a keen interest in all things numbers and - in addition to working for Sharenet -  is a full time BSc Mathematics and Statistics student at Unisa. Aidan has represented South Africa at a professional level in road cycling where the rigorous demands and self-discipline has prepared him for the markets. He aspires to one day complete a Master's degree in statistics and delve deeper into the world of algorithmic trading, market analytics, and financial modelling.