Charles Lee Mathews

I’ve got two words for ineffective government…

Zuma’s performance agreements with government ministers are a toothless tiger. What’s needed to drive performance and service delivery is bite.

Economist Mike Schüssler certainly didn’t mince his words when he spoke at the 9th UASA South African Employment Report held in Johannesburg recently. His message was twofold.

1. The government has failed the country in the employment stakes.

2. Government is the biggest employer in South Africa and is being paid too much, to the detriment of growing employment.

The tragedy, as pointed out in Schüssler’s talk, is the anomaly that South Africa is at once Africa’s biggest economy and yet has the highest rate of unemployment with some 60% of the population jobless.

“If South Africa was just able to up its employment numbers to the average ratio in Africa of 64%, adult employment in the country would have grown with seven million jobs,” Schüssler said.

Government has failed on job creation
But wait for the punch line. iAfrica reports that Schüssler said government employees are being paid a premium of 40% more than the private sector. This as government continues to fail the country on job creation — an issue vital to the creation of social and economic stability.

Schüssler goes on to say that the government payroll is costing the country too much and that: “SA can’t create jobs but it can give big wage increases to government employees and this leads to the problem that a lot more people become economically inactive.”

I’ve got two words to say to government in response to this and they’re not “Schüssler’s right”, which of course he is. Those two words are: variable pay.

The concept is very simple. Variable pay is essentially a “pay for performance” system that has become increasingly popular in the corporate world where a recessionary environment has limited salary increases yet demanded that business increases performance without increasing resources.

Recent research by Hewitt Associates showed that as many as 80% of companies surveyed will use variable pay this year. The survey covered 6 000 organisations in 46 different countries.

Variable play increasingly popular globally
The reason why variable pay is becoming increasingly popular is that it works to boost productivity and accountability. Blanket salaries hardly incentivise people to go that extra mile. Variable salaries linked to the achievement of clear goals encourage under-performers and non-performers to work harder and get things done.

Then there’s the matter of self-determination. On a variable pay structure people feel they have some control over what they could get paid. As long as there is transparency in the measurement of goals and people see that performers are rewarded and non-performers are not rewarded, the variable pay system is both effective and credible.

To extend the accountability established by a variable pay system, politicians who err should be made to pay for their misdemeanours. For example Jacob Modise, CEO of the Road Accident Fund, would be forced to pay back the R693 000 he received for serving on the Blue IQ board because National Treasury forbids employees who work at one government job being paid for work done with another state entity.

Zuma’s performance agreements a toothless tiger
Interestingly enough Jacob Zuma has signed performance agreements with all of his ministers that have stated outputs, but there are absolutely no penalties for defaulting. In fact, the person responsible for overseeing the “efficacy” of this toothless tiger — Collins Chabane — said that the performance agreements would not be used “as a stick”.

If there’s no incentive for performance or penalty for non-performance, what’s the point?

It’s about time government got to work for the people who voted them into power and the taxpayers who pay their salaries. Variable pay may just make them do that.

  • Siobhan

    I wish SA could so something like the variable pay system but as the naked Emperor’s “Performance Agreements” demonstrate, the ANC will find a way to make any form of accountability fail. The ANC doesn’t want to govern; it just wants to rule which translates as “dog and pony shows’, ‘smoke and mirrors’, and ‘hide the penny’.

    If you can count on a single issue electorate (promises of a free ride if you vote ANC), you don’t need to govern. It is sufficient to build a superstructure of cronies supported at ‘grass roots level’ by an illiterate, semi-literate, and gullible population who have no frame of reference by which to judge ‘governance’ and no experience of true democracy beyond the ballot box.

    The entire structure depends on the taxes of 8 million or so income earners. If that population leave or otherwise ‘opt out’, the gravy train grinds to an abrupt halt until–“Aid” can be wrangled out of the perennially vilified ‘West’ –or the current economic colonisers of Africa, the Chinese. The Chinese are not, however, famous for their largesse in the “Aid” sphere. And they drive a very hard ‘bargain’ that amounts to creeping hegemony in essential industries.

    It seems clear that the current leadership of the ANC and YL are interested only in power and wealth. In other words, they want to prosper without creating wealth. Creating wealth is someone else’s job. The ANC/YL are here as consumers only.

  • Judith

    If only we could all be paid these amazing salaries, what wonders could SMEs create! Whilst I and my partner take home about R10 000 a month between us as we build our business, the government, ministers, SOEs etc fail to deliver and get paid over ten times that. There is something very wrong with our political society when it leeches onto business and drains it of resources that should be being used to create jobs and increase the wealth of all. The proposed road tolling system is yet another drain on companies’ precious resources and will destroy many SMEs and possibly larger companies who cannot afford to pay more and more for less and less.

  • http://southafricana.blogspot.com Dave Harris

    Its foolish to naively equate a government worker to a corporate worker. The issues of QUANTIFYING performance is highly debatable and unclear – this is true everywhere in the world. In the corporate sector, its easy to quantity performance in terms of revenue, profit, customer satisfaction etc. Governments are not motivated by the profit motive, but driven by a far higher vision of creating our new democracy from the tatters of the legacy of the despicable apartheid regime.

    You speak about unemployment yet conveniently forget that we are in the midst of a worldwide recession where entire countries are going bankrupt!. The effects of this recession, especially in SA have been minimized by the World Cup, an event opposed by most of the previously privileged naysayers like you.

    Your performance argument against government workers is similar to the meritocracy argument used by the DA to defend their anti-Affirmative Action policies with the result that even today, almost two decades after our liberation, over 90% of the CEOs are still white.

  • Atlas Reader

    Three words work much better: “I’ll vote DA.”

  • Steve

    With the greedy and belligerent unions running amok, threatening and striking, is it any wonder civil servants are paid well beyond their worth? Accountability is something that does not sit well with civin servents, especially those who got their jobs as a favour of for reward (AKA Cadre Deployment). They don’t care about the job they just care about the salary.

  • X Cepting

    Interesting thought, variable pay, but, I cannot see this working in public service. They would probably continue to work for 2 hours a day (10am-12pm) and find excuses why they should be paid for 10.

    Public service is not supposed to compete on the free market with other private business.
    Its job is to provide infrastructure, defense (from outsider attacks), justice, education and basic healthcare and to make sure that everyone play nicely together on the free market.
    It is supposed to do this in the most economical way (within tax budget so they don’t have to borrow from the imperialist west). This performance should best be rated by an independant treasury department.

    The tradition used to be to pay performance bonuses for targets reached. Now, it seems, a bonus is a right, not something to work for, which is why the parastatal CEO’s pay themself huge bonuses after delivering the shoddiest services (PRASA is an excellent example), only to force their staff to strike since there is no money left for even an inflation-linked increase.

    It is not government’s job to create jobs but to protect the free market from unfair competition, monopolies and corruption so that the private sector can prosper enough to create the jobs. It is not governments’s job to create corruption.

    The problems is, South Africa is not just becoming a one party state, but fast becoming a one company market with justice available only to an elect few.

  • brutus

    Well said Siobhan…sums it all up completely! Absolutely spot on. Government employees are just there to milk the system and get an early take on government contracts through their wives, husbands, girlfriends, etc. I have lost all respect for this government, they are all self-serving individuals who couldn’t give a toss for the poor. There does not seem to be a single uncorrupt official in government. Show me one!

  • Peter L

    @Siobhan

    The ANC government operates on patronage and buys votes from its’ key constituencies:

    – Government employees (you vote for me, I give you above private sector wages, and cushy sheltered employment, with effective job reservation for blacks)

    – The poor and unemployed (you vote for me, and I give you social grants, free basic housing, free basic electricity, free basic water)

    IPSOS markinor poll: The breakdown of ANC voters education levels show that:

    •Only 8 percent of ANC supporters have higher education qualifications.

    •23 percent have graduated from high school.

    •69 percent either have no education at all or have not completed high school.

    What this illustrates is that the primary constituency that votes for the ANC is made up of poor, black South Africans.

    This is confirmed by the income analysis of ANC supporters, which shows that 46 percent of all ANC supporters earn less than R2 500 a month.

    The 8 million (the actual number is slightly less, according to SARS) taxpayers that Siobhan refers to include juristic persons – companies, trusts etc.

    Private taxpayers number around 5 million if my memory is correct, which roughly equated to the total number of non-ANC voters.

    Yes, of course a few middle class people vote ANC, and a few township residents vote for the opposition, but these are the exceptions that prove the rule.

    Funny how history repeats itself – the previous regime used to buy patronage and votes from the civil service and paratstals, too.

    What is it now – tragedy or farce?

  • Mad McMax

    Look at any economy, 80% of the economic activity comes from companies with less than 50 employees. Economic growth in SA will come from the SMME sector, not by creating another Anglo.

    What is stopping the SMME sector providing much needed growth is a welter of bureaucracy, an unresponsive and uncaring financial sector and a repressive tax regime. In short SA penalises sucess and demonises failure.

    I attend small business seminars, support groups and other organisations. What I hear from all SMME owners is that they are sick and tired of local and national government interference.

    They are gatvol of working for the Government as an unpaid tax collector, statistician, form-filler and money pit. They are gatvol of being told by them who they can employ, how to employ them, what they are to be paid, what they can make and how to make it.

    As with me, most are now refusing to hire new staff, instead shedding staff by preferring to automate and outsource. Where it can be done electronically, that is how it will be done in future.

    If we are to see economic growth we need to move away from the Stalinesque centrally managed economy and let the SMME sector do what it does best, innovation and creation.

  • tottie

    The paradox is that the very government that is supposed to deliver service to the public has to rely on the private sector to deliver those services. SA has BEE policy providing a vehicle for delivery of such services within a redistributive regime.

    Suppose the BEE partnerships were functioning, we would still not be heartened to discover that the role of government is now completely different from the traditional repository of power and wealth redistribution.

    The collapse in time and space has put a question mark on authority and legitimacy, necessary components for power and wealth redistribution. New mobility of capital and information easily bypasses national controls. State commands (in the interest of one party) cannot be enforced, and so has the already bloated and dysfunctional bureacracy been stretched beyond the limits of its implosion.

    The structural logic of bureacracy has become an albatros around the neck of the society that is largely illiterate.

    The selfish capitalist will continue to pretend that everything will be OK “if only just”!, because it suits him to profit within a “kept” market, where he can easily enter in collusion with fellow business to strip the very poor of his meagre gains

    Trapped in a political enclave of the globe, at the mercy of traditional nationalists, the poor are “on their own”, literally

  • Peter Joffe

    What do you get when you motivate an idiot? You get a motivated idiot!
    A performance contract (that none of us have seen) has the same effect. If you don’t know what you are doing, a performance contract will just make you perform better at not knowing what you are doing and mess up twice as fast.

  • http://www.pieto.com Piet Opperman

    Sorry, “Dave Harris,” the issue of QUANTIFYING (sorry about the shouting, vuvuzela outside) performance is not “highly debatable.” Even the ANC government has cracked this little problem, as has just about every non-trivial institution on the planet. The problem with our government is not that they do not know how to set targets for employees, or how to measure performance. The problem is that there is no consequence if the targets are not met — the employees are STILL (sorry, another vuvuzela) paid a 40% premium over private sector, even though they have underperformed.

  • Antony

    The irony and paradox of the situation is that the generally condemned ‘Colonialists’ were for the most part highly educated, highly motivated in leaving their ‘comfort zones’ and by bringing in their own finance, became citizens committed to building the country of their choice.
    How many African born people are prepared to be pioneers in their own country ?

  • http://www.hardcopyink.com MLH

    Dear Dave Harris,
    DoT has had ‘performance agreements’ since Arrive Alive began in 1997. Although I’m not sure what the present goals are, provinces were initially to reduce road deaths by 5% a year. As a performance indicator, I believe that’s far too broad, an aim or goal might describe it better, but the point is surely that the only heads rolling have been those of road users?
    DoH, to take another example, has a goal to distribute a particular number of ARVs, only an interim point on the journey of saving lives. And we all know that without a reasonable diet ARVs can be too strong to tolerate.
    And today, a minister in the education sector said yet another programme would improve the Matric pass rate. Is that the point? I would be glad to think that the few who do pass were numerically, alphabetically and functionally literate. Oh, and are keen and able to study further to fill the scarce-skills gaps. Is that too much to ask?
    If you aim low enough, you can’t miss. Think of the thousands of youngsters who say with glee, that one day they want to be president. All that takes is a Std 3.

  • Antony

    Surely a task for the Auditor-General and related President’s assessor of ‘performance’ should be an audit of the proportion of time / personnel / salaries for Administration against action – which is limited in the private sector / donors grants

  • Panchetta

    The government that robs Peter to pay Paul can always count on the support of Paul.

  • Bovril24

    I’ve got 3 letters – ANC

  • Hugh Robinson

    The problem I have with the idea of performance bonuses and such is that the people are employed to perform a task to the best of their ability.

    If I am awarded a contract to build a house and the house is not built correctly or I under perform I get sued.

    Conversely if I build the house and all is okay I get paid what I asked. Similarly if one is employed to do a task his salary is for the future benefit he brings to the company. So what is with the performance bonus rubbish?

    As far as I can see, it is an excuse to get paid more for less. Not more as should be the companies / governments due anyway for the salary paid when initially employed.

    If truth be known all these people do to increase profit, is fire the underlings and find new ways to increase prices or charge for services that morally should be free. For that they are paid by performance.

  • X Cepting

    The current system of paying bonuses upfront for nonperformance later would be a stunning example of how not to do it.

  • ian shaw

    The crux of the matter is the captive voters, who are on social grants. They are told that this is due to the ANC largesse for having voted for them. They know that if they don’t vote ANC they will not get the social grant and will not survive. They have no other ambitions beyond that. This is unfortunately true becaUse thEre are no jobs around. So it seems that high unemployment is in the ANCs interest to get the votes they need. Have you ehard of catch 22?