SA’s ‘path of least resistance’ is a dead end’ – Moeletsi Mbeki

Courageous leadership is required to reduce South Africa’s bloated public sector wage bill, which is crippling the economy, according to prominent political economist Moeletsi Mbeki.

He says the total spend on state salaries and state-owned institutions as a percentage of GDP is at least double that of other middle-income countries.  

Instead of confronting this threat, however, the current administration is travelling the same ‘path of least resistance’ as its predecessors, thereby retarding growth prospects, Mbeki told the Cape Chamber in an exclusive interview last week.

Average salaries within the public sector exceed the private sector, Mbeki says. “What that is telling us is that we have a lot of fat in South Africa that is being eaten by somebody, and the guys eating the fat are the public service.”

South Africa is getting a dismal return on this investment due to poor service delivery, according to Mbeki. Conversely, reducing public sector spend – estimated to be between 12-15% of GDP – would allow government to invest more in efforts to combat unemployment.

“There is wiggle room in our economy. If we cut the cost of public service so that it is the same as similar middle-income countries, we would save about 10% of GDP, which we can then invest in job-creating activity rather than consumption. Then our economy will start to grow, and then people who are not productive will start to be employed,” Mbeki says.  

Reducing unemployment could also help break the current cycle of dependency, with 42,7% of the total population receiving some form of social grant.

Mbeki believes current leadership, across the political spectrum, is perpetuating a ‘path of least resistance’ economic policy rooted in South Africa’s past. Rather than invest in the country’s human resources, South African governments are in the habit of relying on the extractive mining industry, and agriculture. “South Africa is one of the richest mineral countries in the world, but this has encouraged South African leaders to choose the path of least resistance -- just dig the stones out and export them.”

“The disadvantage of this path is it actually employs very few people in real terms -- it is why our economy is only employing at best half of the economically active population.”  

“To abandon the path of least resistance means you have to invest in your whole population -- in their healthcare and skills.”

Mbeki says South Africa has largely failed to follow the example of countries with similar histories which reshaped their economies in favour of human development. He believes current efforts to reshape the South African economy lack urgency. “There’s a lot of talk about we must do X, Y and Z, but that is all talk. The real change gets kicked down the road.” ENDS