Where government really spent your taxes

According to an analysis on government spending by Statistics SA, compensation of government employees increased by R35.3 billion to nearly R800 billion in the 2021/2022 tax year. Students also got more by way of the National Student Financial Aid Scheme (NSFAS).

These figures are contained in the annual Financial Statistics of Consolidated General Government report published by Stats SA.

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The report provides good insight into how tax money is really spent, but is not widely studied and reported on because the figures refer to the previous financial year.

However, a few calculations unearth a few gems.

Interest on debt

According to the report, the largest contributor to total expenditure of R2 186.9 billion by the general government sector for the 2021/2022 fiscal year was general public services, absorbing R565.2 billion or 25.8% of the cash.

Education was second at R431 billion (just below 20%) and social protection third with spending of R342 billion (15.6%).

Significant amounts were also spent on health (R267.7 billion or 12.2%), economic affairs (R208.8 billion or 9.5%) and public order and safety (R190 billion or 8.7%), according to the analysis by Stats SA.

The smallest contributors to spending were housing and community amenities at R71.5 billion, defence (R51.7 billion), recreation, culture and religion (R45 billion) and environmental protection (R13.4 billion).

However, according to the classification used by Stats SA, interest on government debt is added to spending on general public services – with interest comprising nearly half of general public services.

Showing interest paid as a separate category changes the picture a bit, as the following table shows …

Source: Based on Stats SA figures

This shows that interest expense is the fourth largest expenditure by the SA government. Interest payments exceed the total spent by several state departments.

We paid more in interest than we spent on public healthcare and far more than on public order and safety. The spending on public order and safety includes the police, courts and jails.

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The largest expenditure item by far remains the R431 billion spent on education, followed by R342 billion on social grants.

In the 2021/2022 fiscal year, government spent only 3% of its total cash expenditure on housing and community amenities.

Maybe spending only R71 billion on service delivery close to people’s homes and hearts explains the many service delivery protests.

Economic classification

Looking at government spending through an economic eye rather than the different functions of government also gives insight into the government’s priorities.

The Stats SA reports notes that the economic classification of expenditure is a general measure of the nature and economic effect of government operations on the country’s economy.

The seven main economic classification categories of expenditure for operating activities are compensation of employees; purchases of goods and services; interest; subsidies; grants; social benefits; and other payments.

Source: Stats SA

“Expense cash flows for operating activities increased by R74.5 billion from R1 982 billion in 2020/2021 to R2 057 billion in 2021/2022,” according to the report.

“The increase was mainly due to increased payments on purchases of goods and services, interest paid and compensation of employees.

“The largest contributor to total cash payments for operating activities for the 2021/2022 fiscal year was compensation of employees (R799 billion), followed by purchases of goods and services (R401 billion), social benefits (R306 billion), interest (R284 billion) and other payments (R185 billion).”

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The report lists the significant changes in government spending over that of the previous fiscal year, as well as the main reasons for big increases.

The interesting among these are:

• Increase of R37 billion in interest from R247 billion to R284 billion was due to increased interest payments on public debt by the National Treasury.
• The increase of R35 billion in compensation of employees was mainly due to increased payments by the Gauteng and KwaZulu-Natal provincial governments and the SA Police Service.
• Other payments increased by R4.2 billion, mainly because of higher payments to households by the National Student Financial Aid Scheme (NSFAS).
• Additional higher spending by NSFAS was included under education, an increase of R33 billion.
• The decrease of nearly R29 billion in social benefits was actually good news – it was as a result of fewer Unemployment Insurance Fund (UIF) claims after the spike in the previous year due to Covid-19.
• The decrease of R16 billion in grants paid was mainly due to a decrease in those paid to the South African Customs Union.
• The increase of more than R12 billion in cash payments included under executive and legislative organs was the result of higher capital transfers to public corporations.

Stats SA says the increase in government revenue of R346 billion – from R1 558 billion in 2020/2021 to R1 904 billion in 2021/2022 – was as a result of higher tax revenue across all categories of taxpayers.