In South Africa’s post-coronavirus budget, more than half of tax revenue goes to public servant salaries

South African finance minister Tito Mboweni delivered his supplementary budget review speech on 24 June 2020. 

Rich with comparisons between South Africa and the Aloe ferox, a single-stemmed plant indigenous to Southern Africa, Mboweni announced changes to the February 2020 budget, made necessary by the Covid-19 pandemic. 

In the new budget, 58 cents out of every R1 paid in tax is used to pay the salaries of public servants, Leon Schreiber, the Democratic Alliance’s shadow minister for public service and administration, claimed in a statement.  

Schreiber said this wage bill plus debt repayments, which take 22 cents of every rand, made 80% of all tax revenue unavailable for spending on everything from social grants to education, healthcare and infrastructure development. 

Do the figures support Schreiber's claim about public pay? We pulled out the balance sheets. 

How much tax is collected?

When Africa Check asked Schreiber for the source of his claim, he referred us to a table in the supplementary budget review that showed the main budget revenue for the 2020/21 financial year would drop from February’s projected R1.398 trillion to R1.099 trillion. 

“At the same time, expenditure on compensation of employees will remain at the R638 billion projected in February 2020,” he said. This is 58% of the R1.099 trillion main budget revenue, or 58 cents out of every R1 in tax. 

But revenue in the main budget comes from a number of sources, including non-tax revenue, the national treasury told Africa Check. To calculate how much tax money goes towards paying public servants, it is better to look at gross tax revenue – the total amount of tax collected by the government. 

Gross tax revenue was pared back to R1.121 trillion, the treasury said, although this was not published in the supplementary budget review. In February, the government expected to collect R1.425 trillion in tax. It is now anticipating R304 billion less than that.  

How much of the gross tax revenue goes towards paying public servants? 

Out of every R1 in tax, 51.4 cents for public servants

The government planned to spend R638 billion on public servant salaries, Schreiber told Africa Check, as shown in a table of expenditure by economic classification in the February budget. 

But this table includes all entities of government, some of which collect taxes, treasury said. For example, the South African National Roads Agency collects tax in the form of toll fees. But exactly how much tax this entity and others will collect will only become clearer in October when the medium term budget policy statement is published. 

In the meantime, in order to compare apples with apples, a more appropriate measure would be the “consolidated national, provincial and social security funds” found in the statistical annexure of the February budget, the treasury said. This provides a more detailed breakdown.

The breakdown estimates the government will spend R576 billion on paying public servants in the 2020/21 financial year. This is 51.4% of gross tax revenue (R1.121 trillion), or 51.4 cents of every R1 paid in taxes.  

Without the projected R304.1 billion loss in tax revenue, this figure would have been 40%, or 40 cents out of every R1 paid in taxes. 

The public servant wage bill dropped by just R519 million in the June 2020 supplementary budget. The saving was mainly due to vacancies not being filled and funds being suspended for Covid-19 purposes. “Further adjustments may be considered in October,” the treasury said.

‘Debt is our weakness’

While the budget for public servants salaries remained largely the same, debt repayments were projected to increase to R236.4 billion in 2020/21. This is 21% of gross tax revenue (R1.121 trillion) or 21 cents of every R1 in taxes. 

Since February, the amount South Africa has to borrow for the 2020/21 financial year has grown from R433 billion to R777 billion. The money will come from short and long-term loans from local lenders, and from foreign-currency loans. 

The increase is almost entirely due to the projected shortfall in tax revenue, Daniel McLaren, budget analyst for the Budget Justice Coalition, told Africa Check. “A similar increase is being experienced in every country in the world, as they too battle the economic fallout from Covid-19,” he said. 

The higher debt repayments were increasingly crowding out the government’s spending plans, the treasury told Africa Check.  

Conclusion: In revised budget, 51.4 cents out of every R1 in tax revenue goes to public servant salaries.  

Leon Schreiber, Democratic Alliance shadow minister for public service and administration, recently claimed that out of every R1 paid in tax, 58 cents goes towards paying South Africa’s public servants. 

The national treasury told Africa Check that it aims to collect R1.121 trillion in tax during the 2020/21 financial year and R576 billion of that will go towards paying public servants. 

This is 51.4 cents out of every R1 paid in tax. The extra 7 cents represents R80 billion in tax revenue that has been allocated elsewhere, the treasury said.

Public servant salaries and increased debt repayments, which cost 21 cents in every rand, together take up 72.4% of South Africa’s gross tax revenue – leaving 27.6% for everything else.  

We rate this claim as mostly correct.