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Overpaid consultants and bosses distort the public sector wage bill and fuel legalised corruption

4 Nov 2024

Government entities are paying excessive amounts to 'consultants' and top bureaucrats, so much so that in our opinion this amounts to legalised corruption.

The Alternative Information and Development Centre undertook an exercise earlier this year that ended up revealing an inconvenient truth: we compared statistics on Eskom’s personnel presented in government expenditure documents with the same information presented by Eskom in its corporate report.

Our conclusion is that government entities are paying excessive amounts to “consultants” and top bureaucrats, so much so that in our opinion this amounts to legalised corruption.

How do we get to that conclusion? The government every year publishes something called the Estimates of National Expenditures.

The Estimates of National Expenditures is a more than 1,000-page publication annexed to the Budget Review. You can strike a horse unconscious with it.

Every year Parliament approves its chapters in 41 votes. They decide budget allocations to over a hundred state agencies and outfits, big and small. It also sets the budget for labour costs of staff employed nationally with projections for the following three years.

For example, this includes the whole police force, all staff at prisons, post offices, the courts, South African Revenue Services, etc. After the February Budget speech, these allocations should be fiercely debated and impertinent questions asked of the Finance Minister.

But if past experience is anything to go by, this is unlikely because very few Members of Parliament (MPs) bother to read the Budget Review and the Estimates of National Expenditures.

The estimates appeared to show that six directors at Eskom were paid some R13.3-billion in the 2023 financial year at an average pay of R2,209,900,000, and nine directors about R14.5-billion at an average wage of R1,607,800,000 in the 2024 financial year.

We enquired from the Treasury about how this could be, and it responded in March this year that the Estimates of National Expenditures had lumped together “bonuses, severance packages, employer costs, etc.” with the remuneration of directors in salary group 19, and put it all in “Salary group 22”. The cost for six directors was about R18.1-million in 2022/23, R38.5-million in 2023/24 for nine directors, and so on.

We have below reproduced the relevant wage levels in our Table 1 below based on the response to us from National Treasury.

But there is a problem; Treasury’s response doesn’t square up with Note 34 ‘Employee benefit expense’ in the 2023 Annual Report of Eskom.

The Estimates of National Expenditures and Eskom both report 39 601 employees in 2022/23. Then there is a difference in labour costs of over R1 billion between the totals reported by the ENE compared to Eskom’s Annual Report.

But leave that aside for the time being. The main problem is that Eskom reports that total bonus payments and a range of other smaller costs were way below “R13.3-billion” in 2022/23. Eskom reports no severance costs at all as suggested by the Treasury (and Estimates of National Expenditures projects that Eskom employment will increase).

Until the Treasury gives an answer consistent with the 2023 Annual Report of Eskom, we will conclude that a battalion of consultants has been hired for many years at Eskom at exorbitant costs. Instead of being accounted for under a cost item “services”, we suggest that the R13.2-billion they are paid is included in the salaries accounted for in Eskom’s Note 34.

This is why the lump sum amount is increasing every year in the Estimates of National Expenditures. You don’t budget “bonuses” like that.

They seem to be regarded as permanent. They are probably included in the 39,601 number of employees, but we are not sure and the Treasury needs to clarify this.

We make this conclusion based on another table in the Estimates of National Expenditures, which is hardly unquestionable but points in this direction. It pertains to the personnel costs of the National Lotteries Commission. Here, too, we have six directors paid at presidential levels. Of the other 310 workers employed at the National Lotteries Commission, 226 persons are employed at an average labour cost of R1-million, thereabout and more.

During the budget lock-up before the budget speech in February, the Alternative Information and Development Centre asked the Treasury for an explanation. The answer was that they are “consultants”.

The public sector union negotiators should study the Estimates of National Expenditure to sharpen their arguments in wage negotiations and stop inadvertently enabling examples of legalised corruption in the form of the excessive wages paid to “consultants” and top bureaucrats.

As for the MPs, we have lost hope. They will probably vote in favour of legalised corruption. DM

• Ashley is a member of the management collective and Forslund is economist at the Alternative Information and Development Centre.

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