This is where government plans to cut spending

File Picture: Philimon Bulawayo/Reuters

File Picture: Philimon Bulawayo/Reuters

Published Nov 1, 2023


Finance Minister Enoch Godongwana has outlined areas that will be targeted to cut spending to avoid a fiscal crisis in government.

The Medium-Term Budget Policy Statement said government would embark on fiscal consolidation measures, and this could leave some departments with the same budget allocations as last year.

It said provincial budgets will not increase in line with inflation, and this will lead to a funding gap for core services. The National Treasury urged provinces to reprioritise spending.

But at the heart of spending reduction will be the reduction of the size of government.

“Together, these targeted measures are expected to result in savings and long-term gains from improvements in the efficiency of public spending and budget allocations. This is key to managing the public finances in a prudent and responsible way and will also support longer-term economic growth,” said the MTBPS.

However, National Treasury said it would still keep the social wage, which is currently at 61%.

President Cyril Ramaphosa told the nation this week that in spite of cost-cutting measures being implemented, they will not reduce spending on social grants.

They will also not compromise funding for the police, health, and education.

“Spending revisions are targeted to protect critical frontline services, including Basic Education, health, and police services,” said the MTBPS.

"Labour-intensive departments have been allocated additional funding amounting to R23.6 billion in 2023/24 to help implement the 2023 public service wage agreement. Other departments will have to reprioritise funds to implement the agreement. Departments need to manage headcounts proactively,” it said.

However, National Treasury has warned against a spike in spending in key departments and called for reprioritisation.

On higher education, Treasury said the National Student Financial Aid Scheme will need to be brought in line with the budget of the Department of Higher Education.

National Treasury said infrastructure spending at universities must also be brought in line with the “institution’s ability to spend.”

On health, Treasury has proposed that the department “will need to improve efficiency in areas such as overtime payments, medical supplies, security services, and delayed infrastructure projects.”

Treasury also wants the Department of Health to contain spiralling medical claims, which are over R100 billion.

It said they constitute a financial risk.

But legal reforms were under way to deal with this issue.

“Provincial budget allocations will not increase in line with inflation, leading to a funding gap for core services and transfers to non-profit organisations. The sector needs to reprioritise and realign resources to avoid adverse effects on service delivery,” said the MTPBS.