The government has started a process of aligning its “planning and budgeting processes” with the National Development Plan (NDP), according to Finance Minister Pravin Gordhan.
The NDP, launched in August last year by Planning Minister Trevor Manuel, is the target of attack from trade union federation Cosatu. But it has been well received by business, economists and others who are eager to see its implementation.
Presenting a lecture yesterday at the University of Johannesburg, Gordhan said “the first tentative links” between the NDP and government delivery were made in the February Budget. And, later this year, the government would produce a medium-term strategic framework to advise departments on “how to align their activities even further with the delivery of the NDP”.
He said, at the same time, an alignment would take place between budgeting and departmental planning. “So, by this time next year, we will see a lot more coherence and synergy between what government departments do and what the NDP says in respect of various areas of activities we are required to pursue.”
He noted that the next question is: do we have the money? “My job is to say, ‘yes we do’ and your job is to pay your taxes,” he told his audience.
The challenge, Gordhan said, was to implement the NDP in a “sustainable way”. He reminded the audience that on May 10, 2009, when the cabinet of President Jacob Zuma was announced, it was “smack in the middle” of a recession.
“Within one month, we realised we were going to have a shortfall of some R50 billion to R60bn in revenue. Within one month, we had to make a decision to either impose austerity on South Africa and cut spending across the board. Or make a different choice based on the excellent work by my predecessor [Manuel] in preceding administrations of the ANC.”
He said Manuel had delivered a surplus of 1.5 percent of gross domestic product (GDP) in 2007/08, which allowed the government to pay down debt to about 22 percent of GDP. The ratio peaked at 45.2 percent in 1994/95.
Gordhan said these decisions had created the “fiscal space” to borrow in the difficult years that followed, avoiding the need to cut back expenditure growth. “Even today we have 2.3 percent real growth in expenditure.”
This is in contrast with austerity measures in many countries where governments are slashing expenditure.
However, Gordhan stressed the government’s determination to ensure policies were fiscally sustainable. In other words, borrowing will not be allowed to grow to a point where the cost of debt erodes the economy’s potential to grow.
“In the short term, we are saying to government departments, meet all your budget requirements from savings efficiencies and reprioritisation.
“Over the past three years, more than R50bn has been reprioritised within the government system. We have decided to undertake some expenditure reviews, analysing patterns of public spending, including personnel spending.
“The reviews will also identify opportunities to improve value for money, enhance procurement controls and the phasing out [of] certain projects, while we begin to support new policy priorities.”
He noted that, in the Budget this year, “we cut the contingency reserve; we cut another R10bn over three years, and we cut growth in public spending from 2.9 percent to 2.3 percent to ensure we remain within sustainable levels”.
He repeated his commitment to shifting the pattern of spending from consumption to investment to improve the country’s ability to be productive.