Finance minister Nhlanhla Nene tried to apply the brakes on “non-critical” activities, but opened the throttle somewhat on core service delivery in his medium-term budget tabled in parliament on Wednesday.
Nene said earlier measures to contain cost and improve the efficiency of government expenditure are yielding positive results. Economic growth however remains sluggish and substantial debt repayments are approaching.
Apart from tax measures to increase revenue, Nene therefore announced several measures to limit expenditure.
He reduced the total expenditure ceiling by about R25 billion over the next two years, compared to the 2014 expenditure. The consolidated non-interest expenditure will rise in 2015/16 to R1.4 trillion, up from R1.123 billion in the current year, which is an average increase of only 2.1%.
Spending plans have been revised over the whole of government to ensure greater efficiency, reduced waste and an improved composition of spending.
The swelling of staff numbers in the public service will be stopped. Public sector salaries will remain about 40% of government’s non-interest spending over the medium term.
Nene repeated that state-owned companies will not be financed in a way that raises the country’s budget deficit. He did not, as was generally expected, shed further light on the assets to be sold to fund government’s R23 billion contribution to the struggling Eskom. He earlier said it will be a combination of non-strategic holdings in listed companies, property and other assets still to be identified.
Budget allocations for non-critical actvities are being reduced. Nene plans to limit growth in allocations for goods and services to 5% per year through cost containment and reprioritisation. This includes cutting the budgets for catering, entertainment and venues by 8% per year. Travel and subsistance budgets will be cut by 4% per year in real terms.
Expenditure on critical items like school books and medicine, fuel for police vehicles and infrastructure maintenance will however grow faster than inflation, Nene said.
Compliance to the austerity measures will be measured by the Auditor-General.
Nene did provide for a contingency reserve of R5 billion unallocated funds for 2015/16, increasing to R15 billion and R45 billion in the next two periods. This, he said, was done against the background of an uncertain economic outlook and possible weaker growth and rising interest rates. He also noted that public service wage negotiations have not yet been concluded.