THE PERILS OF RISING WAGE BILL

It has been stated repeatedly that, despite its size, Eswatini has an unsustainably high public wage bill and the longer the problem is ignored, the deeper the hole grows, making it much more difficult to climb out.

Our enormous public sector wage bill is impeding economic growth and limiting the country’s ability to spend in critical sectors such as infrastructure, reducing the cost of doing business and providing adequate social services. A recent World Bank Public Finance Review (PFR) exposed one of the major causes for this high wage bill. It has revealed the stark reality that government employee salaries are, on average, 50 per cent higher than those in the private sector. This was reported at the launch of the World Bank’s Eswatini Public Finance Review(PFR).

Analysed

It was the first PFR since 1996, which examined and analysed solutions for improving the efficiency and effectiveness of public expenditure and revenue mobilisation in support of long-term and inclusive economic growth. The PFR was officially launched on Wednesday at the Hilton Hotel by Dr Thambo Gina, Minister for Economic Planning and Development, in collaboration with the World Bank, the Ministry of Finance and the Ministry of Health. Minister Gina stated that the PFR offers government an important opportunity to evaluate its policies, challenges and possibilities. 

This finding has been a persistent concern for years, yet no significant action has been taken. The best attempt made by the finance minister was to implement a hiring freeze, which prompted an outcry from various public sectors claiming staff shortages and compromised service delivery.
The ministry of public service also conducted a civil service audit, with the goal of right-sizing the public sector and aligning skills with applicable positions.

It has recognised the need to offload some employees, but voluntary exit packages have failed to provide the expected outcomes, leaving us with an overburdened government whose poor service delivery cannot justify the necessity for every position. As a result, we continue to pay higher wages than the private sector. The implications of this imbalance are severe. A disproportionately large share of public money is going towards salaries, leaving insufficient resources for capital spending, which drives economic diversification and creates long-term prospects. Eswatini’s dependence on volatile Southern African Customs Union (SACU) receipts worsens the situation.
Struggle
When these revenues fall, as they always do, government struggles to meet its salary obligations, resulting in a risky financial situation. This hand-to-mouth culture keeps the country from effectively planning for the future. The World Bank report emphasises the urgent need to solve this systemic challenge. While the SACU Stabilisation Fund provides a temporary buffer, it is not a long-term answer. Eswatini cannot continue to rely on changing income to cover an unsustainable wage cost. The country must diversify its economy, establish a more competitive business environment and attract private-sector investment.

However, progress is limited by the high cost of doing business, which is caused in part by the high wage bill highlighted by the PFR. Essentially, government is raising taxes on businesses in order to pay more for civil servant salaries than on investment in the economy. And we will soon need more for salaries as, according to the recently presented national budget, around E1 billion will be distributed to the public in various forms, while E2 billion will be invested in capital projects. Half of this E1 billion comprises a E500 million salary review for civil officials, which public sector unions and Members of Parliament (MPs) have deemed insufficient. They also want the E100 supplementary grants for the elderly raised. However, these calls never explain where the money will come from other than higher taxes, which we cannot afford. The PFR emphasises the importance of tight budgetary control.
Cases
Year after year, the auditor general’s (AG) findings expose cases of irregular spending and mismanagement of public monies. The past year alone, the AG found about E4 billion of taxpayers’ money mismanaged. This not only wastes precious resources but also undermines public trust. A firm commitment to fiscal discipline, transparency and accountability is required to guarantee that each Lilangeni is utilised successfully and efficiently.
The time for discussion is over.

Eswatini must address its public salary bill problem head-on. This necessitates a comprehensive plan, including a thorough examination and rationalisation of public sector remuneration. We recognise the critical need for civil servants, but the current disparity is unsustainable. A balanced approach is required to provide fair remuneration while limiting costs and this should be one of the solutions that the continuing salary review exercise should provide.

To ensure long-term economic growth and diversity, we must invest more in infrastructure, education and technology. Experts consistently advise that lowering business costs and encouraging private sector expansion can achieve this. This is what will generate new jobs and broaden the tax base. However, greater revenue will have little influence on the economy and can rise to strife and instability unless we undertake serious measures to adopt better controls and accountability mechanisms to avoid the misuse of public funds, particularly due to corruption.

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