JOHANNESBURG - The National Treasury’s response to President Jacob Zuma’s announcement of free education for 90 percent of students raised further speculation that the Presidential Fiscal Committee (PFC) has usurped Treasury’s budgetary powers.
In a terse statement released on Saturday, the Treasury said it "notes the announcement by the Presidency ... and is in the process of reviewing the details of the higher education proposals, as well as possible financing options.
“The proposal will also be considered by the Ministers’ Committee on the Budget (MinComBud) and the Presidential Fiscal Committee. Any amendments to existing spending and tax proposals will be announced at the time of the 2018 Budget," Treasury said.
Last month, its erstwhile budget chief Michael Sachs left the role in a huff amid allegations that Zuma was undermining the Treasury and not properly consulting them over decisions regarding the free tertiary education plan.
Minister of Communications Mmamoloko Kubayi-Ngubane said last month that the PFC was tasked with considering proposals prepared by the Treasury to bring public finances back onto a sustainable path: “The advisory role of the presidential fiscal committee does not in any way interfere with the institutional arrangements of the budget cycle, which is the strength of our democracy".
While Treasury held back on providing details on the funding of the president’s decision, the Department of Higher Education and Training shed more light on the issue.
Gwebinkundla Qonde, director-general of the department, said: “It will cost R12.4 billion in 2018 and then be phased out over a period of five years. The determination has been made and affirmed by the Minister of Finance ... that there is no borrowing that will be undertaken in respect to... this matter.
“It will be worked out though the current budget ceiling of government,” Qonde said.
Treasury, in the medium-term budget policy statement, (MTBPS) said there were substantial risks to the ceiling from the expenditure side. Acrimonious public-sector wage negotiations were under way, with a large divergence between trade union demands and MTBPS wage bill projections.
It also noted that capital injections for other state-owned enterprises (SOEs) were likely, as profitability had declined sharply and lenders were reluctant to roll over maturing debt, but these factors were not included in fiscal projections.
Cas Coovadia, managing director at the Banking Association of South Africa, called on Zuma to make his plans for free education available for public scrutiny: “The president clearly lacks any understanding of South Africa’s economic predicament. Given the lack of economic growth, a growing fiscal deficit, ongoing falls in tax revenues and increasing demands on the fiscus from other pressing social needs, it is not clear how promises will turn into action.
“The impact of this policy on public finances requires that it should have been presented to the standing committee on finance in Parliament and ultimately tabled in the National Assembly before adoption. Sneaking it in as the president has done can only be viewed with suspicion,” Coovadia said
Under Zuma’s plan, students categorised as poor and working class will be funded and supported through grants.