Opposition to government spending cuts coming from within too

National Treasury Director-General Dondo Mogajane says the government’s bid to reduce its expenditure in line with its fiscal consolidation plans often faces opposition from officials and as well as from the wider political arena.

Some government programmes, including the underperformers, have “vocal” defenders among politicians and beneficiaries, making it difficult to implement targeted cuts, he said on Thursday. 

“We are spending money on programmes that may not be good for us and may not put us in a good position … we are spending money on programmes that may not be positioned to expand the productive sectors of the economy and we are spending on consumption,” he said. 

Spending reviews

Mogajane’s remarks were made during the opening ceremony of a conference on government spending reviews, with the reviews prepared by National Treasury as well as provincial treasuries to inform decisions that would ensure that state funds are spent efficiently.

One way the government has attempted to cut spending is by placing a freeze on public sector wage increases, a move that has faced fierce opposition from public sector unions.

The contentious wage increase freeze saw the government unilaterally deciding to not implement the last leg of the 2018 wage agreement. 

Talks between unions and government at the Public Service Coordinating Bargaining Council have reached a deadlock, with some unions threatening to embark on a widespread strike over the matter.

Mogajane on Thursday defended the government’s move saying that although it is a “painful” decision , it “is less painful than some other options that would impact more on service delivery to the poor and the vulnerable”.

“If you cut compensation spending by reducing remuneration growth, everyone’s budget is cut in proportion to the amount of officials they employ. It spreads the pain across government and means that some internal politics is less challenging for us,” he said.

Unlike during the “seven years of plenty” between 2000 and 2007 when the country experienced rapid growth and its debt-to-GDP ratio was at its lowest, the current budget is expected to be under “severe pressure” for a protracted period. 

Read: SA economy contracts 7% in 2020

Mogajane said the government is spending more on debt servicing costs than on the health budget – something that is undesirable during a pandemic.

“Our debt has the potential to destabilise the economy and to slow growth, so unless we get our spending under better control, we will not achieve the growth and prosperity that the county and its people deserve,” he said.

Rental accommodation

Speaking at the same event, Deputy Minister of Finance David Masondo noted how the spending reviews have revealed that the government is paying 60% above market rates for rental accommodation and that the average premium being paid on these leases is about 45%. 

“Extrapolating to the full lease portfolio, that means of the R3 billion that was being paid to lease office accommodation in 2015, as much as R700 million might have been saved if the rents had been at market rates,” he said. 

The spending reviews are expected to be the basis for the implementation of zero-based budgeting, which will be piloted by National Treasury and the Department of Public Enterprises. 

Zero-based budgeting is a budgeting process whereby funding is allocated based on programme efficiency and necessity rather than budget history.

Read: Treasury and DPE to pilot zero-based budgeting