Public sector wage bill must drop

Economists say that if the wage bill doesn't drop, SA could find itself hurtling towards a fiscal cliff.

South Africa is facing a "fiscal cliff" in the coming years if the state does not drastically reduce the growth of social assistance payouts and government employee wages. Should current trends in this spending continue unabated, all the government's revenue will be eaten up by grant payments and civil servant pay by 2026.

This is according to research done by Professor Jannie Rossouw, Fanie Joubert and Adèle Breytenbach of the Unisa college of economic and management sciences, which was presented at a public economics workshop held by Economics Research Southern Africa on Thursday.

The research also shows that, even if additional tax revenue could be sourced, for example by increasing personal income tax, corporate tax and other types of taxes, the fiscal cliff would be staved off only for a further two years.

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