Report No. 13071-MAI Malawi Civil Service Pay And .
Public Disclosure AuthorizedReportNo. 13071-MAIMalawiCivil ServicePayand EmploymentStudySouthernAfrica DepartmentAfrica RegionPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedDecember6, 1994¶K 08.d,. . . .
ABBREVIATIONSDPDDepartment of Data ProcessingDPMTDepartment of Personnel Management and TrainingESAMIEastern and Southern Africa Management InstituteFYFinancial YearGDPGross Domestic ProductGOMGovernment of MalawiICIndustrial ClassID IInstitutional Development Project IID IIInstitutional Development Project IIILOInternational Labour OrganizationMASTEPMalawi Special Teachers' Education ProgramMOAMinistry of AgricultureMOEMinistry of EducationMOFMinistry of FinanceMOWMinistry of WorksMPSRMalawi Public Service RegulationMSDManagement Services DivisionOPCOffice of the President and CabinetPERPublic Expenditure ReviewPSCPublic Service CommnissionSPCSecretary to the President and CabinetUSAIDUnited States Agency for International Development
This report is based on the findings of two missions to Malawi in February/March andOctober/November 1993. The team for both missions comprised Ladipo Adamolekun (PrincipalPublic Sector Management Specialist and Team Leader), Noel Kulemeka (Economist, BankResident Mission, Malawi), Kithinji Kiragu (Consultant, KK Consulting Associates) and HaroldKuchande (Management Development Consultant at the Malawi Institute of Management). TheLead Advisor was Malcolm Holmes and the peer reviewer was Michael Stevens (both inOperations Policy Department). The report was reviewed by Luis de Azcarate, Senior Adviserand Gene Tidrick, Lead Economist (both in Southern Africa Department). Ms. Sylvie Lelievreprovided support in compiling and processing the report.
Table of ContentsEXECUTIVE SUMMARYvi.112CHAPTER 1: BACKGROUND AND INTRODUCTION .The Macroeconomic Context .Significance of Government Pay and Employment .5CHAPTER 2:A.B.C.CIVIL SERVICE WAGE BILL .Size and Growth of the Wage Bill .The Structure of the Wage Bill .Major Issues Arising from the Evolution of the Wage Bill .CHAPTER 3:A.B.C.D.E.F.G.H.l.CIVIL SERVICE EMPLOYMENT .Defining the Civil Service .The Problem of Data on the Size of the Civil Service .Current Structure of Civil Service Employment .Growth of Civil Service Employment .Recent Trends in Civil Service Establishment .Recent Initiatives to Curtail Employment .Retirement and Attrition in the Civil Service .Overmanning and Low Productivity .Summary of Problems and Issues .CHAPTER 4:A.B.C.D.E.CIVIL SERVICE PAY .The Salary Structure .Trends in Basic Salary Levels .Use of Non-Salary Benefits for Compensation .Non-Monetary Employment Benefits .Summary of Main Issues .333336444752CHAPTER 5: COMPARATIVE ANALYSIS OF PAY LEVELS IN DIFFERENT.SECTORSIntroduction and Overview .A.Comparison with Pay Levels in the Private and Parastatal Sectors .B.C.Comparison with Pay Levels in the Donor Sector .D.Comparison of Pay Levels with other Countries in the Region .CivilServicePayStructureE.Comparative Efficiency of theF.Conclusions .56565860616466CHAPTER 6:A.B.C.MAIN ISSUES IN PERSONNEL MANAGEMENT .Introduction .The Legal and Institutional Framework .Underdevelopment of the Personnel Management System .5.CHAPTER7: POLICY OBJECTIVES AND IMPLEMENTATION OPTIONS .A.B.Policy Objectives .Implementation Options .POSTCRIPT .912151518192123262627276767677172727382
List of TablesTable 1.1:Table 2.1:Table 2.2:Table 2.3:Table 2.4:Table 3.1:Table 3.2:Table 3.3:Table 3.4:Table 3.5:Table 3.6:Table 3.7:Table 4.1:Table 4.2:Table 4.3:Table 4.4:Table 4.5:Table 4.6:Table 4.7:Table 4.8:PERCENTAGE DISTRIBUTION OF PAID EMPLOYEES,BY SECTOR,1985 - 1989 .GOVERNMENT EXPENDITURE ON SALARIES AND WAGES .GOVERNMENT EXPENDITURE ON WAGES AND SALARIES ASPERCENTAGE OF TOTAL EXPENDITURE AND LENDING MINUSREPAYMENTS MALAWI COMPARED TO SELECT SSACOUNTRIES, 1980 - 1989 .PERCENT COMPOSITION OF THE WAGE BILL BY MINISTRIES ANDDEPARTMENTS - FY 1992/93 .COMPOSITION OF THE WAGE BILL BY MAJOR CATEGORIES OFEMPLOYMENT AND BENEFITS, AS BUDGETED FYs 1990/911993/94 .CIVIL SERVICE ESTABLISHED POSITIONS, 1980/81 - 1992/94 .SUMMARY DISTRIBUTION OF CIVIL SERVANTS IN ESTABLISHEDPOSITIONS BY SALARY GRADES .GROWTH IN CIVIL SERVICE EMPLOYMENT 1980/81 - 1993/94 .CIVIL SERVICE EMPLOYMENT DISTRIBUTION AND GROWTH BYMINISTRIES, 1987/88 to 1992/94 .THE MALAWI CIVIL SERVICE ESTABLISHMENT: VACANT POSTS.IN TERMS OF ESTABLISHED POSTS, MARCH 1993 .AGE DISTRIBUTION OF CIVIL SERVANTS IN THE MOA BY BROADJOB GROUPS .YEARS OF SERVICE OF CIVIL SERVANTS IN THE MOA BY BROADJOB GROUPS .CURRENT SALARY GRADES AND STRUCTURE .NOMINAL LEVELS OF MAJOR SALARY SCALE ADJUSTMENTS FORSELECT SALARY GRADES 1982 - 1993 .REAL LEVELS OF MAJOR SALARY SCALE ADJUSTMENT, FORSELECT SALARY - GRADES 1982 - 1993 .SALARY COMPRESSION FACTORS BY GRADES IN THE YEARS OFADJUSTMENT, FOR SELECT SALARY GRADES: 1982-93 .AVERAGE GROSS MONETARY PAY BY SALARY GRADES ONPAYROLL, JAN 1993 .VARIANCES OF CURRENT GROSS AV.BASIC PAY FROM MEDIANBASIC SALARY ON SCALE, FOR SELECT SALARY GRADES, JAN1993 .COMMON DIRECT MONETARY ALLOWANCES FOR GOM CIVILSERVANTS (EXCLUDING HOUSING ALLOWANCE ANDRETIREMENT BENEFITS) .PROPORTIONS OF BASIC SALARY AND ALLOWANCES IN TOTAL.PAY BY GRADE FOR SELECT SALARY GRADES .3571011192122242930303436374042434546
iiiTable 4.9:Table 4.10:Table 4.11:Table 5.1:Table 5.2:Table 5.3:Table 5.4:Table 5.5:Table 5.6:Table 7.1:Table 7.2:ANNUAL ESTIMATES OF TOTAL VALUE OF THE MAJOR NONMONETARY BENEFITS FOR SELECT JOB GRADES IN THE CIVILSERVICE .SALARY STRUCTURE COMPRESSION RATIOS FOR MALAWICOMPARED TO RATIO FOR A SAMPLE OF COUNTRIES IN THESSA REGION, IN 1975 AND 1985 .52COMPARISON OF EFFECTIVE PAY COMPRESSION FACTORSAFTER MONETIZATION OF BENEFITS FOR SELECT JOBGRADES IN THE CIVIL SERVICE .53SUMMARY OF COMPARISON OF REMUNERATION FOR GOM, ANDOTHER SECTORS, JUNE 1993.57COMPARISON OF CIVIL SERVICE PAY LEVELS WITH THOSE INTHE PRIVATE SECTOR, BASED ON SALARY SURVEY DATA FORA FEW SELECT PRIVATE SECTOR POSITIONS, SEPT 1992 .58COMPOSITION OF PAY LEVELS FOR SELECT JOB POSITIONS INTHE DONOR SECTOR WITH MATCHED CIVIL SERVICEGRADES .COMPARISON OF TOTAL CONSUMPTION PER CAPITA AMONGCOUNTRIES IN THE REGION Current U.S. dollars .COMPARISON OF BASIC SALARIES BETWEEN MALAWI ANDKENYA CIVIL SERVICE .63COMPARISON OF SALARY COMPRESSION RATIOS FOR VARIOUSSECTORS .65SUMMARYOF PRIMARYPOLICYOBJECTIVESANDIMPLEMENTATION OPTIONS .73ESTIMATED REQUIRED INCREASE IN CURRENT SALARIES TORESTORE 1986/87 VALUES .51616281
ivList of Figures and BoxesFigure 1.1Figure 2.1Figure 2.2Figure 2.3Figure 2.4Figure 2.5Figure 4.1Figure 5.1Figure 5.2Figure 5.3BOX 2.1BOX 2.2:BOX 3.1:BOX 3.2:BOX 4.1:BOX 4.2:BOX 4.3:BOX 7.1:BOX 7.2.46781314396264.67WAGE BILL EXPENDITURES ON TREASURY FUNDS.AND NON-COMMERCIAL STATUTORY BODIES .THE RECENT TEACHERS' CAMPAIGN FOR PAY INCREASES .CLASSSTATUS OF INDUSTRIALTHE AMBIGUOUSEMPLOYEES .THE EMPLOYMENT SITUATION IN SUB-VENTED PARASTATALSTREASURY FUNDS AND TRUST FUNDS .INTRODUCTION OF HOUSING ALLOWANCE FOR CIVILSERVANTS .47SUMMARY OF GOM RETIREMENT BENEFITS SCHEMES .48CIVIL SERVANTS STRIKE FOR PAY INCREASE BUT AGITATEAGAINST SALARY INCREASES FOR PRINCIPAL SECRETARIESABOLISHING THE INDUSTRIAL CLASS - WATER SECTOREXAMPLE .75ENCLAVE APPROACH FOR TAX AND CUSTOMSADMINISTRATION .791112173250
vSTATISTICAL leTableTable1.11.22.12.2Appendix Table 2.3Appendix Table 2.4Average Number of Paid Employees, by Sector, 1985-1987Average Earnings per Employee by Sector, 1985-1989Salaries and Wages on Treasury FundsSalaries and Wages as Percentage of Government Subventions for aSelect Number of Statutory Bodies, 1992/93Statutory Bodies - Subventions for 5 YearsGovernment Expenditure on Wages and Salaries as Percentage of TotalExpenditure and Lending minus Repayments. Malawi Compared toSelect SSA Countries, 1980 - 1989.Appendix Table 2.4(a) Personal Expenditure on Revenue Account for 1991/92Appendix Table 2.4(b) Personal Emoluments Expenditure on Development Accountfor 1991/92Appendix Table 2.4(c) Total Personal Emoluments Expenditure for 1991/92The Size and Structure of the Nominal Wage Bill, FYs 1990/91-1193/94Appendix Table 2.5Government Expenditure on Salaries and Wages compared with GDP andAppendix Table 2.6Total Government Consumption, 1982-1993Effects of Recent 1991/92-1993/94 Salary Increases on the Wage BillAppendix Table 2.7BudgetExpenditures on Salaries and Wages Compared to those on Goods andAppendix Table 2.8ServicesGovernment Expenditure other Goods and Services. Percentage of TotalAppendix Table 2.9Expenditure and Lending minus RepaymentsThe Malawi Civil Service Establishment: Current Structure by MinistryAppendix Table 3.1and Department, March 1993Number and Distribution of Established Positions in the Civil Service byAppendix Table 3.2Salary Grade, April 1993Civil Service Salary Structure in Select Years, 1982-19924.1TableAppendixMedian Annual Basic Salary on Scale by Grade at constant Prices (1980)Appendix Table 4.2Computer Payroll Summary, Jan. 1992 and 1993Appendix Table 4.3JobsbetweentheCivilServiceAppendixTable 5.1ComparableAppendix Table 5.2Private/Parastatal/Donor SectorComparison of Salary Scales Widths for Various EmployersAppendixTable 5.3ComparativeMinimumWage LevelsAppendix Table 5.4Appendix Table 5.5Appendix Table 5.6andtheComparison of Pay Levels for select Job Positions in a fewRepresentatives Donor Organizations in MalawiSalary Ranges for Select Jobs in the Manufacturing SectorComparison of Pay Levels for a Select Number of Employers in thePrivate Sector, Sept. 1992
viEXECUTIVE SUMMARY1.The Pay and Employment Study (PAES) was undertaken in 1993 as a follow-up to thePublic Sector Management Review (PSMR) completed in 1991 and published in 1993. TheBank study team worked with counterparts designated by the Government in each of the keyministries and departments responsible for issues relating to civil service pay and employment:Economic Planning and Development, Finance, Personnel Management and Training, Labourand Public Service Commission. Against the background of the problems of pay andemployment highlighted in the PSMR report, the following were adopted as the objectives ofPAES:*****gather and analyze data on pay and employment policies and practices;review employment growth trends and examine alternative compensation andemployment arrangements;assess the impact of Government personnel policies and practices on the sizeand composition of Civil Service establishment;formulate proposals that would provide both sustainable and capable systemof attracting and retaining skilled technical/professional staff and seniormanagers in the Civil Service; andmake recommendations on how best to link improved pay and otherincentives to increased efficiency and productivity, including somecomparisons with pay and employment policies and practices in the privateand parastatal sectors.2.The report of the Study comprises chapters focused on: (i) Civil Service Wage Bill;(ii) Civil Service Employment; (iii) Civil Service Pay; (iv) Comparative Analysis of PayLevels in Different Sectors; and (v) Main Issues in Personnel Management. There is aconcluding chapter on policy objectives and implementation options.A.Civil Service Wage Bill3.PAES found that measured as a proportion of total Government expenditures (minusdebt service charges), the civil service wage bill nearly doubled between FY 1988/89 and FY1993/94, from 19.74 to 33.39 percent. Furthermore, in 1993/94, the civil service wage billrepresented 43.87 percent of total Government recurrent expenditures compared to 26.7percent in 1988/89. These developments were due essentially to the substantial salaryincreases approved in 1992/93 and 1993/94. Significantly, non-established employees (mostlyof the industrial class) and employees of commercially-oriented Treasury Funds constituted 17percent and 9 percent respectively of the wage bill in 1993/94.4.Two salient issues underscored by the evolution of the wage bill are: (a) the strikinginability of Government to maintain control of the wage bill (due, in part, to lack of effectiveestablishment control) and (b) a creeping imbalance between the wage bill and non-wageexpenditures with the former crowding out expenditures on operations and maintenance.
viiB.Civil Service Employment5.PAES was unable to determine the size of the civil service in a definitive manner.The most reliable set of figures adopted in the study are: a total of 143,790 positionsof which91,819 were established; 75,663 of the established positions were filled, leaving about13percent vacant. Established positions increased at an annual rate of over 14 percentbetween1989/90 and 1992/93, a significantly higher rate than the 2 percent growth rate projectedbythe Government. The huge number of industrial class employees underscores theineffectiveness of existing staff control methods. PAES found that the high concentrationofthis category of staff in the Ministry of Works is linked, in part, to certain types of seasonalfunctions undertaken by the Ministry that could be contracted out or privatized.C.Civil Service Pay6.PAES found that the distortions identified in the salary structure since the mid-1980shave remained largely uncorrected, notably excessive number of grades, inconsistenciesin thegrading structure and absence of schemes of service. There are also significant distortionsinpay levels arising from ad hoc salary adjustments, characterized by declining compressionratios (from 1:42.9 in 1982 to 1:23.9 in 1993). Furthermore, the increasing salience ofnonsalary benefits, especially housing allowance, has resulted in a reward system that isneithertransparent nor equitable. Total value of non-monetary benefits for top civil servants isestimated at 147 percent of the total monetary pay (basic salary plus monetary allowances).For junior officials with access to government housing, the total value of the direct nonmonetary benefits can be as high as 364 percent of the total monetary pay. PAES concludesthat monetization of benefits and consolidation of the entire compensation package areessential steps toward the removal of distortions and the achievement of a transparentandequitable pay structure.D.Comparative Analysis of Pay Levels in Different Sectors7.The conclusion from a comparison of pay levels among all sectors -civil service,parastatal, private sector and donor sector- is that those in the civil service are generallylower, except at the lower salary grades. However, after monetization of the benefits enjoyedby the most senior civil servants, their total compensation package would be only slightlybelow the level of their counterparts in the other sectors. In contrast, the middle-leveltechnical and professional civil servants remain significantly worse off than their counterpartsin the other sectors with adverse consequences for Government's ability to recruit andretainstaff in these positions. Comparison with some of the neighboring countries in EasternandSouthern Africa shows that Malawi civil servants have consistently been better remuneratedthan their counterparts except at the junior levels where only the huge salary increasesof1992-93 pushed pay levels ahead of those of their counterparts.
viiiE.Main Issues in Personnel ManagementThe salient features of the legal and institutionalframeworkfor managingcivil service8.pay and employmentinclude a multiplicityof institutionswhose roles are not clearly defined.Coordinationamongthe institutionsare also generallypoor in respect of both pay andemployment. Furthermore,the poor managementof the personnelfunction is manifestedinthe form of inadequaciesin systemsand procedures relatingto: manpowerplanningandtraining, recruitment, deploymentand utilization,promotionsand career progressionandpersonneldata. There are strong linkagesbetweenthe institutionalweaknessesand the poorsystems and procedureson the one hand and the pay and employmentproblemsexaminedinthe study on the other.F.Policy Objectives and Implementation OptionsGiven the findings and conclusionsin the study, three policy objectivesare proposed:9.control of the civil service wage bill, rationalizationof the pay structure and of payenhancement, and improvementof the quality and performanceof the civil service. Toachieveeffectivecontrol of the civil service wage bill, the actionsthat Governmentcouldtakeincludefirmly linkingestablishmentcontrol to the budget process; developingdepartmentalmanpowerplans and targets; abolishingthe industrialclass; and abolishingall the existingvacanciesin the establishment. Regardingthe rationalizationof the pay structure andenhancementof pay, it wouldbe necessaryto establisha committeethat would undertakeannual review of salaries; reverse the drift to non-transparentand inequitableremunerationoptions; and progressivelyintroduceperformance-relatedpay. Finally, to improvemorale,performanceand productivitywould require, in addition to pay reform, implementationofmerit-basedrecruitmentand promotionand increasedbudgetary allocationfor operationsandmaintenance.
CHAPTER 1BACKGROUND AND INTRODUCTIONThe Macroeconomic Context1.1HistoricalPerspective. Duringthe 1960sand 1970s, Malawi's developmentstrategyemphasizedinfrastructureand estate agricultureas prime vehicles for increasedproductionand growth. Over two decades, Malawi's economywas open and world market prices for itsmajor exports (tobacco,tea, coffee, and cotton) were relativelyhigh, real GDP more thandoubled, and real per capita incomegrew by 3 percent per year. The period of strong growthended in the early 1980swith the onset of economicproblemsand external shocks, includingdeteriorationof terms of trade, oil crises, disruptionof external transportroutes throughMozambique,and weather-relatedshocks. In combination,these shocks led to an economiccrisis culminatingin 1986/87with a decline in per capita incomeand policy setbackswhichreversed the opennessof the economyand discouragedprivate sector investmentand output.1.2The adoptionof a strategy in
Civil Service Pay and Employment Study December 6, 1994 Southern Africa Department Africa Region . MOA Ministry of Agriculture MOE Ministry of Education MOF Ministry of Finance . 37 Table 4.4: SALARY COMPRESSION FACTORS BY GRADES IN THE YEARS OF
1 Malawi profile 5 1.1 Country profile 5 1.2 Key facts & figures 5 2 Investing in Malawi 6 2.1 Overview 6 2.2 Specific investment incentives 7 2.3 Risk assessment 9 3 Key sectors 11 4 Investment prospects 13 4.1 Introduction 13 4.2 Summary table of all prospects 13 5 Next steps 59 5.1 Investment forum in Malawi 59
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Chapter 2: Political and Socio-economic Situation in Malawi In 1994, the presidential election was held with multiple parties for the first time in Malawi. Since then, the country has enjoyed a period of relatively stable domestic political environment.
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