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< What the Big Mac index says about the value of the rand
Economics Main Page >

How much does South African businesses spend on its employees?

Category: Employees and business expenses
Date: 26 October 2018

Related Topics

We take a look at a data story published by Statistics South Africa regarding employee costs in the formal business sector. We must admit we do like the data stories the official statistics organization of South Africa are publishing. 
Picture
  • South Africa's formal business sector

Data story published by Statistics South Africa (Stats SA)

About 14% of total spending, according to recent figures. A quick review of the data shows that this proportion has remained relatively stable over the last decade. In the second quarter of 2009, employment costs contributed 15% of total expenditure in the formal business sector. Although there hasn’t been a major change over time for the sector as a whole, there are notable differences between industries. Let’s take a look at the breakdown of total spending.

The formal business sector spent a total of R2,39 trillion in the second quarter of 2018, according to the latest Quarterly financial statistics (QFS) report (excluding capital expenditure). A rundown of the expenditure data, collected from a sample of about 4 500 businesses, shows that 60% was spent on purchases of goods such as raw materials, consumables, goods for resale, fuel and building materials.

Picture
Employment costs, as mentioned earlier, contributed 14% (or R340 billion). The bill here includes salaries and wages, bonuses, medical aid, life insurance benefits, pension benefits, and other employee-related costs.  How do employment costs differ across industries? The QFS provides data for eight industries in the formal business sector. The community, social and personal services industry recorded the highest proportion of spending on employment costs (32%) in the second quarter of 2018. Community, social and personal services includes activities related to private health services and social work, recreational activities, sport, radio, and television.
Picture
The real estate and other business services industry – which includes the country’s consultancy services, estate agents, lawyers and advertisers – also devoted 32% of total expenditure to employment costs.  Why the relatively high contribution to employment costs? Activities taking place within these two industries are often focused on selling intellectual knowledge rather than physical goods. As a result, purchases contribute  relatively less to total spending. On the other side of the coin, notice the low contributions of employment costs in industries such as trade and manufacturing. Think of the factory that requires large amounts of raw material or the corner café that requires stock to fill its shelves. These industries spend a higher proportion on goods and materials.

You might be wondering how this all compares with government. If the formal business sector spends 14% of its budget on its employees, what is the current situation in the state? The proportion is much higher. The South African government spent 41% of total expenditure on employee-related costs in 2015/16, according to Stats SA’s latest Financial statistics of consolidated general government report.2 In 2009/10, the proportion was also 41%.

For more information, download the latest Quarterly financial statistics (QFS) report here. An annual review of performance in the formal business sector will be published in November 2018 in Stats SA’s Annual financial statistics report (for financial 2017). So watch this space!

Original article found here:  
http://www.statssa.gov.za/?p=11661
End data story
​
For more on South Africa's formal business sector see our South African Formal Business Sector Page or visit our South Africa's manufacturing industry page if more details regarding South Africa's manufacturing industry is required.

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