Finance Minister Enoch Godongwana on Wednesday said the country’s public finances were currently in a difficult position that was increasing in complexity and uncertainty.
“The short-term risks to the local and global economy that we predicted in the February budget have now materialised,” he said.
In his address at the 2023 Public Finance Management Conference, Godongwana said government has collected much lower-than-expected tax revenue.
“At the same time, tighter financial conditions have made it difficult to borrow more and at affordable rates.
“Continued load shedding, the poor performance of our logistics sectors, and the lasting damage done by state capture to our institutions, have made the difficult fiscal situation even more challenging.
“These and other factors have put tremendous strain on the financial resources we have available to address our most urgent service delivery priorities,” he said.
The National Treasury has stated that the ﬁscal challenges arose mainly from an exceptional decline in government tax revenue collections, estimated at R22 billion for the first five months of the year and tighter financial conditions that have constrained government’s borrowing programme.
It has said the constraints were exacerbated by the wage agreement for the public service, which was signed in March 2023.
Godongwana said it was important to note that the government has faced similar challenges in the past and managed to make the necessary policy decisions and trade-offs to navigate the storm.
“Right now, being innovative, adaptive, agile and solutions-driven during these volatile, uncertain, complex and ambiguous (or VUCA) times is important.”
The minister stated that a crucial element for responsible fiscal governance was consequence management.
“Accountability, transparency, and ethical financial stewardship are the pillars upon which we build and nurture trust with our fellow South Africans.
“It is imperative that we hold individuals and entities accountable for financial misconduct,” he said.
“Without swift and fitting consequences, we risk eroding public trust in our capacity to manage public funds effectively, with less and less funding available to deliver much-needed services to our people,” Godongwana said.
His virtual address to the conference came three days after the National Treasury released guidelines on cost-cutting measures following a letter sent to state institutions on August 31.
Acting director-general Ismail Momoniat had instructed heads of departments to freeze hiring of new employees, freezing non-essential travel and advertising new infrastructure procurement as well as spending on catering, conferences, workshops and other services and goods not contracted, among other things.
Reports on Momoniat’s letter have suggested that the government planned to increase VAT or close a number of programmes in order to continue with the R350 social relief of distress (SRD) grant in April 2024.
In its latest guideline, the National Treasury said the August letter summarised key elements of the fiscal challenges faced by the government in the current financial year.
“It advises accounting officers and accounting authorities on specific measures required to achieve much-needed savings and prevent the materialisation of potentially crippling resource constraints in the latter part of the 2023-24 financial year.”
The National Treasury said both the August letter and guidelines issued on Monday were advisory and not an instruction in terms of Public Finance Management Act.
The guidelines were only applicable for the remainder of the financial year and applied to national departments, schedule 3 entities and provinces.
“These guidelines intend to assist accounting officers and accounting authorities to significantly reduce the pace of expenditure within their portfolios in the current financial year,” it said, adding that the implementation of cost-measures should result in a reduction in spending over the next six months.