Wage bill threatens fiscal stability
JANA-MARI SMITH
Government’s politically motivated refusal to thin out its costly civil service, and an 84% civil service wage bill hike over three years, could potentially lead to unpaid salaries due to empty government purses and the neglect of critical national projects meant to boost the economy.
“The reason for this is simply that there are a number of additional financial demands on government, which if not serviced, will result in revenue collapse and ultimately an inability of government to either pay salaries or conduct other affairs,” stated a budget review, titled ‘Prioritising Personnel’, issued in the latest Democracy report.
Compiled by the Institute for Public Policy Research (IPPR), the review found that a major reason for the expansion of the civil service wage bill was the salary adjustments made between 2012/13 and 2014/15, in an effort to align civil service wages “to those of the private sector in order to attract and retain skills”.
However, the IPPR found that “because of the large size of the civil service and the magnitude of the adjustment, over the three-year period from the end of 2011/12 to the end of 2014/15, the civil service wage bill expanded by 84.4%.”
In the subsequent three-year period, the wage bill is expected to expand by another 27.8%.
“The end result “being that in total, the civil service wage bill has doubled in the five years to 2016/17.”
Red alarm
The budget review described the continued increase in personnel expenditure as “highly concerning”, in particular when compared to the most recent budget where “the majority of expenditure lines have been cut, while strong growth has been seen in the line of personnel expenditure”.
The watchdog writes in the review that the government has, due to political pressure, repeatedly “reiterated its intention to not make civil servants redundant”.
This stance is often defended by citing the claim that public sector employment “is critical as a solution to Namibia’s high unemployment levels”.
The IPPR however warns that political defence, “coupled with the fact that we already have an exceptionally bloated civil service, is likely to create major issues for Namibia in the long term”.
The IPPR warns that while the civil service wage bill continues “to mop up the vast majority of the budget, directly and indirectly” critical infrastructure, including the decades long-neglected water supply troubles, and other projects that are required to create wealth, jobs and tax revenue, “becomes ever more undersupplied”.
And while there has been insistence that a hiring freeze has been put in place, the budget documentation suggests that some 113 positions were filled in 2016/17 and that more than 11 000 positions are to be filled in the next financial year, the review stated.
“Whether this is correct or not is currently unclear, and it appears more likely that current staffing numbers and / or budgeted staffing numbers are not correct – a potentially worrying issue.”
The IPPR argues that creating employment directly through government “is exceptionally inefficient and the unit cost is far higher than would be the case if government finances were used to create an investment environment for businesses, to provide support for businesses and to create a conducive tax environment.”
Government’s politically motivated refusal to thin out its costly civil service, and an 84% civil service wage bill hike over three years, could potentially lead to unpaid salaries due to empty government purses and the neglect of critical national projects meant to boost the economy.
“The reason for this is simply that there are a number of additional financial demands on government, which if not serviced, will result in revenue collapse and ultimately an inability of government to either pay salaries or conduct other affairs,” stated a budget review, titled ‘Prioritising Personnel’, issued in the latest Democracy report.
Compiled by the Institute for Public Policy Research (IPPR), the review found that a major reason for the expansion of the civil service wage bill was the salary adjustments made between 2012/13 and 2014/15, in an effort to align civil service wages “to those of the private sector in order to attract and retain skills”.
However, the IPPR found that “because of the large size of the civil service and the magnitude of the adjustment, over the three-year period from the end of 2011/12 to the end of 2014/15, the civil service wage bill expanded by 84.4%.”
In the subsequent three-year period, the wage bill is expected to expand by another 27.8%.
“The end result “being that in total, the civil service wage bill has doubled in the five years to 2016/17.”
Red alarm
The budget review described the continued increase in personnel expenditure as “highly concerning”, in particular when compared to the most recent budget where “the majority of expenditure lines have been cut, while strong growth has been seen in the line of personnel expenditure”.
The watchdog writes in the review that the government has, due to political pressure, repeatedly “reiterated its intention to not make civil servants redundant”.
This stance is often defended by citing the claim that public sector employment “is critical as a solution to Namibia’s high unemployment levels”.
The IPPR however warns that political defence, “coupled with the fact that we already have an exceptionally bloated civil service, is likely to create major issues for Namibia in the long term”.
The IPPR warns that while the civil service wage bill continues “to mop up the vast majority of the budget, directly and indirectly” critical infrastructure, including the decades long-neglected water supply troubles, and other projects that are required to create wealth, jobs and tax revenue, “becomes ever more undersupplied”.
And while there has been insistence that a hiring freeze has been put in place, the budget documentation suggests that some 113 positions were filled in 2016/17 and that more than 11 000 positions are to be filled in the next financial year, the review stated.
“Whether this is correct or not is currently unclear, and it appears more likely that current staffing numbers and / or budgeted staffing numbers are not correct – a potentially worrying issue.”
The IPPR argues that creating employment directly through government “is exceptionally inefficient and the unit cost is far higher than would be the case if government finances were used to create an investment environment for businesses, to provide support for businesses and to create a conducive tax environment.”
Comments
Namibian Sun
No comments have been left on this article