Siyabonga Mkhwanazi and Babalo Ndenze
SOUTH AFRICA’S gloomy economic outlook has again forced the government to cut expenditure on non-essential items while pushing for value for money, with Finance Minister Nhlanhla Nene lowering the budget by R10 billion across departments.
Yesterday Nene delivered his maiden Medium Term Budget Policy Statement – commonly referred to as the mini-budget – and told Parliament there was little room to manoeuvre and they had been forced to contain costs.
Nene said South Africans and the government would have no choice but to “take the pain” of having to do without things that were “otherwise nice to do” like the use of government consultants and catering.
Nene was following in the footsteps of his predecessor Pravin Gordhan, who in the last two years of his term cut unnecessary spending and introduced austerity measures for government to save billions.
One of the major shake-ups will be a freeze in funded vacant posts, which is expected to save the state billions.
Nene was, however, unable to indicate the number of unfunded vacant posts. The state will also cap allocations for the use of consultants.
He said that in order to reduce the budget deficit from 4.1 percent this year to 2.5 percent over the next three years, “the expenditure ceiling will be lowered by R10 billion in 2015/16 and R15bn in 2016/17”.
To effect spending cuts, national government will:
l Freeze budgets of non-essential goods and services at 2014/15 levels.
l Withdraw funding for posts that have been vacant for some time.
l And reduce the rate of growth of transfers to public entities, particularly those with cash reserves.
“Across national departments, planned expenditure on travel and subsistence, conference venues and catering has been cut. Advertising and communications budgets have been reduced. Allocations for consultant services have been capped. These steps will contribute to savings of about R1.3bn over the next two years. They supplement the cost-containment measures adopted at the start of this year, which have already achieved substantial savings,” said Nene.
He said lower government consumption also required “prudent management” of the public-sector wage bill, while maintaining the real value of public service salaries. Nene added that new posts would have to be funded from existing allocations and natural attrition. “Posts that remain vacant will be reviewed,” said Nene.
Addressing a media briefing shortly before delivering his speech, Nene said they were again looking at the issue of where they cut goods and services that would not “necessarily harm service delivery”.
“That is where the focus is. And we have quantified this, we’ve been working with various departments, building on what we already have achieved with the cost containment measure we have put in place in the past which is in excess of half a billion already in the past eight months,” said Nene.
They would get provinces and municipalities to stick to their line budget cuts.
The government had reached a point where it would not be able to keep up with some of the rising costs.
Nene did not rule out the possibility of austerity.
“In the 2013 budget, the government reduced its spending plans and cut the unallocated contingency reserve. The 2014 budget indicated that additional measures would be required if the economic outlook were to worsen… We have reached that turning point. Fiscal consolidation can no longer be postponed,” said Nene.
In the foreword to the 57-page policy statement, Nene stated that South Africa had reached a “turning point” as the world recovery remained shallow with structural challenges having contributed to weak economic growth.
This year GDP growth is expected to be 1.4 percent, while growth is expected to move slightly to 3 percent in 2017. “The 2014 Medium Term Budget Policy Statement provides a road map to safeguard public finances. The choice we face in considering these proposals is a difficult one.
“But we believe that this course can no longer be postponed,” said Nene.