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July 20, 2016

Managing the Wage Bill in Southern Africa

AFRITAC South

Posted by Imran Aziz[1]

AFRITAC South[2], in collaboration with the Fiscal Affairs Department of the IMF, held a regional seminar on Government Compensation and Employment from June 20 to 23, 2016.  The event was hosted by the Africa Training Institute in Mauritius, and brought together government officials from Botswana, Comoros, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Zambia and Zimbabwe.

The seminar focused on the conceptual framework presented in the IMF’s recently published board paper “Managing Government Compensation and Employment – Institutions, Policies, and Reform Challenges”. The lectures and group sessions were structured on strengthening the key institutions that underpin the effective management of wage bill spending. A well-designed system requires adequate fiscal planning to ensure appropriate financing of the wage bill, competitive compensation to attract and retain skilled staff and incentivize performance, and the flexibility to adjust the level and compensation of employment to reach efficient levels.  

IMF staff and short term experts[3] presented and discussed with seminar participants the cross-country findings and options to adapt and strengthen the key institutions. Country case studies enabled peer discussion of specific challenges and the feasibility of reform measures, given the economic, social and political context within the region. 

Wage bill spending accounts for a growing share of government expenditures across the southern Africa region. The ratio has risen by six percentage points since 2008, and wage bill spending now accounts on average for over one-third of these countries’ total budget. In some countries the ratio is much higher – in the extreme case, 80 percent in Zimbabwe. A number of countries are facing difficult tradeoffs, with pressure to expand the coverage of public services while also experiencing severe revenue and financing constraints, and the need for higher public investment. In this context, the regional seminar was very timely in offering approaches to effectively manage the wage bill given the challenges faced in the region. 

Despite the diversity between countries, common challenges and potential reform measures were identified by the group. These included; (i) the need for timely and comprehensive wage and employment data to support fiscal planning and forecasting; (ii) the inadequacy of human resource, payroll and auditing systems; (iii) the excessive and opaque use of allowances to top up salaries which make comparisons with the private sector difficult; and (iv) a lack of transparency in comparing the negotiating positions of the government and the public service unions in their annual negotiations on wages and the terms and conditions of employment.     

AFRITAC South will continue to provide technical assistance on wage bill management, an area in which countries have received relatively little support, despite the topic’s fiscal importance. Support is likely to span across the PFM cycle to cover both upstream areas such as fiscal planning and the setting of expenditure limits, to downstream areas of systems, audits and the utilization of payroll information.    

[1] Resident PFM advisor, AFRITAC South.

[2] AFRITAC South is an IMF regional technical assistance center that provides support for capacity building and regional integration in core macroeconomic and financial management areas for 13 countries in sub-Saharan Africa.  http://www.southafritac.org/

[3] The seminar was facilitated by Ms. Teresa Curristine (Fiscal Affairs Department), Mr. Søren Langhoff, Mr. Franck Mordacq, Ms. Anam Shahab (all IMF short-term experts), and Mr. Aziz. 

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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