Cape Town - Finance Minister Nhlanhla Nene’s promise that the budget would not be “balanced on the backs of the poor” sounded reassuring at the time.
Cuts in spending projections would be aimed at the trimmings, he said, like travel, catering and the use of consultants, while provision for basic services would continue to grow.
But Nene’s pledge has not been taken at face value.
Searching questions were asked about figures when Parliament’s appropriations committees held public hearings this week on Nene’s medium-term budget policy statement, delivered last month.
Cosatu and the National Union of Metalworkers of South Africa slammed the plan to freeze, and possibly scrap, vacant posts in the public service. They said this would inevitably affect service delivery.
They argued that cutting government expenditure at a time of weak economic growth would dampen demand, potentially tipping the country into a negative spiral.
Predictably, they reserved their greatest scorn for Nene’s opening gambit in the wage negotiations – a 6.6 percent increase, as opposed to union demands for 15 percent.
“There are glaring wage inequalities between what senior officials and politicians make and what the average nurse, teacher and police officer take home,” said Cosatu’s Matthew Parks.
“Yet while these public servants, who work under often horrendous conditions, are blamed for increased spending, we have seen the cabinet grow with each administration.”
The Equal Education and the Public Service Accountability Monitor noted decreases in spending in real terms on education infrastructure and school transport and nutrition, despite education being an apex priority.
Partly this is a result of the Treasury’s “use it or lose it” approach to programmes, in which underexpenditure is “punished” by the lowering of the budget for the next cycle.
From a financial point of view this makes sense, as underexpenditure indicates a department hasn’t planned properly or doesn’t have the capacity or skills to deliver a service at the level anticipated.
But underexpenditure can perversely become a justification for cutting targets for important programmes. When the reduced targets are met and all or most of the budget is spent, this is recorded as a success.
This appears to be the case with school infrastructure. A grant to do away with schools built from mud or zinc and lacking piped drinking water, sewerage and electricity has been trimmed and the deadline pushed back because the department at provincial level has failed to meet its targets.
Hopolang Selebalo, of Equal Education, told MPs the grant intended to replace 496 mud schools by this year had been allocated R8.2 billion in 2011. This was cut by R1.2bn in February’s Budget.
The department failed to spend 89 percent of this grant in 2011/12 and 58 percent in 2012/13, prompting the cut to align the allocation more closely with the sector’s ability to deliver infrastructure.
Although R5bn had been the projected allocation for 2013/14 when the grant was introduced in 2011, only R1.9bn was provided for that year. The deadline has been moved to 2016/17.
The education infrastructure grant for backlogs has been scaled back over successive budget cycles and is projected to decrease in real terms.
The biggest reductions are to be in provinces like the Eastern Cape, where the need is greatest, but the capacity to spend efficiently is weakest.
Equal Education noted similar trends in transport and the nutrition programme, despite more pupils being in need.
Zukiswa Kota, of Equal Education, said even if a child was at a good school, little would be achieved if he or she was hungry.
“We’re frightened by reports of reductions in this budget and by reports of learners being cut off in provinces.”
Fanie Joubert, of Unisa’s economics department, said his research with two other academics found spending on social assistance and public servants’ pay would continue to absorb a growing share of revenue, leading to a point where no money was left for anything else – a “fiscal cliff”.
While the rate of growth in spending on these items had tapered off, the central government’s compensation account had increased from R195bn in 2007/08 to R440bn in 2014/15, an average annual growth rate of 12.4 percent that far outstrips inflation or economic growth.
Even if Nene limited pay hikes to inflation plus 1 percent and kept the headcount stable, the wage bill would be R596.8bn in 2017/18 – R136bn more than he had projected for the next three years, Joubert said.
The unions’ demand for a 15 percent rise would lead to the wage bill and social assistance accounting for 70 percent of revenue by 2017/18.
The academics said there was no scope to increase salaries by more than inflation plus 1 percent, while the size of the public service and “ideally” the cabinet should be reduced.
There was also not much room to raise extra revenue through new or higher taxes to balance the books.
That leaves what Paul Mashatile, chairman of the standing committee on appropriations, described as “the elephant in the room” – faster economic growth – as Nene’s last hope. But given that Treasury growth forecasts have proved overly optimistic, no one should hold their breath.
Political Bureau