Cabinet has confirmed that Finance Minister Enoch Godongwana will soon be publishing the guidelines for the proposed budget cuts as the National Treasury looks to austerity measures on the back of rising constraints on the fiscus ahead of the Medium-Term Budget Policy Statement (MTBPS) on November 1.
This comes after leaked reports of Treasury’s circular to all government departments and provinces instructing them to slash budgets by up to 15%, freeze all vacancies and infrastructure roll-out programmes as part of policy of fiscal consolidation.
Treasury’s Public Finance Management Office, headed by Dr Mampho Modise, has been consulting extensively about the Cabinet directive compelling government departments to cut down on spending in the face of an economic downturn precipitated by load shedding.
Minister in the Presidency Khumbudzo Ntshavheni yesterday stated the government’s position on the fiscal constraints at a post-Cabinet media briefing in Pretoria.
Ntshavheni said that the Cabinet appreciated the current fiscal constraints, saying that though they were not unique to South Africa they had resulted in in a budget shortfall.
“The Cabinet has iterated that measures to address the budget shortfall must not impact negatively on service delivery.
“The minister of finance will shortly issue guidelines clarifying the unintended misunderstanding arising from the cost containment letter issued on 31 August 2023.
“In addition, as part of the in-year performance review of progress in implementation priorities agreed to with ministers, the president and deputy president will meet with individual ministers to ensure that fiscal management does not derail the agreed to priorities.”
The proposal by Treasury aims to rein in spending as national debt has risen to R4.7 trillion, while facing a tax revenue shortfall, which would widen the fiscal deficit above the estimated 4.0% of gross domestic product for the 2023/24 fiscal year.
The ongoing government-wide budget constraints and proposed cuts have already caused much consternation as government entities such as the National Prosecuting Authority was forced to suspend the 2024 intake of Aspirant Prosecutors Programme.
However, Ntshavheni yesterday said the government was yet to identify the programmes that would be impacted by this proposed stricter fiscal consolidation.
“At the moment there are no specific projects that the Cabinet is looking to cut, but we have acknowledged that there are inefficiencies within the systems, that if those inefficiencies are improved, they can be both in the short-, medium-, and long-term serious improvements in the budget,” Ntshavheni said.
“And also the fact that the current fiscal constraints are not domestic, they are global. So we can’t plan only for the short-term, we must also plan for the medium- and long-term given that we don’t have control on the external factors causing the fiscal constraints.”
Ntshavheni reiterated that individual ministers would engage with President Cyril Ramaphosa and his deputy Paul Mashatile as part of the mid-year performance and progress review of the implementation of their departments’ priorities.
Anchor Capital’s co-chief investment officer, Nolan Wapenaar, warned of tax increases and feeble promises of cutting expenditure and leveraging up the country, particularly with US dollar-denominated debt, in the MTBPS.
Wapenaar said the Treasury had sounded the alarm bells about a shortfall in tax revenue and an extremely limited appetite from investors to increase lending to the government.
“The government will need to rein in spending so close to an election year, which will be highly unpopular with the politicians, in an attempt to keep the ship afloat,” Wapenaar said.
“Increasing taxation in an already highly taxed country with poor government service delivery will be difficult, but we should expect the government to try.
“Finance Minister Enoch Godongwana has a difficult balancing act, and the market will react extremely negatively to any budget based on wishful thinking and promises of economic growth that the government has been unable to deliver for over a decade.”
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