Gloom ahead as government treads water ahead of an election

Cuts to programmes but not to politicians’ benefits, and repeated promises to “reconfigure” departments and entities…. sometime.

Minister of Finance Enoch Godongwana painted a gloomy outlook of the country’s financial position, and that’s putting it mildly.

The 1 November Medium-Term Budget Policy Statement (MTBPS) shows us that our government spends more on debt-service costs (up from R340.5 billion to R354.5 billion projected for 2023/24) than on any other single vote (Social Development is next at R260.9 billion). The increase on the debt-service costs in the adjusted budget (about R14 billion) is more than the individual allocations for 27 of the 41 votes in the budget.

There is a cautionary mention of forthcoming, yet unspecified, tax measures due in the Budget in February 2024. These measures are designed to generate an extra R15 billion in revenue, however, the lack of specific details leaves citizens and businesses uncertain about the potential impacts on their financial well-being.

Even more gloomy than the economic outlook is the government’s failure to grasp the need to cut frivolous, unproductive or inefficient spending, or possibly even to recognise it, along with the lack of accountability when it comes to blatant corruption.

Glaringly missing are the results of National Treasury’s efficiency reviews and the previously promised introduction of zero-based budgeting, which we would like to see implemented in local government in particular. The MTBPS spending cuts seem devoid of focused efforts for better value, appearing as mere reductions.

The repeatedly promised “reconfiguration” of departments and entities remains vague, leaving us with more questions than answers.

OUTA CEO Wayne Duvenage rates the MTBPS at a low three out of 10. “And it’s a generous three,” says Duvenage.

The gloom

Crucial areas like education and health took significant budget cuts. The National Prosecuting Authority and the Special Investigating Unit took cuts, although these actually require more funding to tackle crime and corruption and save us more in the long term.

This MTBPS highlights how poorly we do in managing and maintaining our infrastructure, along with the lack of accountability for those who trash our rail networks and systems at Transnet and Prasa. We seem happy to allocate additional funds to fix that which should not have been broken in the first place.

Glimmers of good news

While challenges persist, there are a few positive developments in the budget. The extension of the Social Relief of Distress Grant which should now be taken as a permanent line item, and increased funding for SARS to achieve improved revenue collections from illicit trade and other areas, along with additional funds for provincial governments show promise. We also appreciate the tightened conditions for the Eskom bailout and those attributed to municipal debt write-offs, however, these have been spoken about in the past and never properly implemented.

Water and wastewater

Finance Minister Enoch Godongwana addressed a critical issue, the state of water provision, management, and wastewater systems in the nation. This is what the minister says on this: “To address this challenge, the government is making changes to conditional grants, starting with the urban settlement development grant, the integrated urban development grant, and the municipal infrastructure grant. These changes include reconfiguring of grants and revising the grant conditions to align them with the Green Drop, Blue Drop, and No Drop assessments relaunched by the President in as part of efforts to ramp up the performance of water service authorities.”

This should improve water service performance, but we have lost faith in government’s ability to apply conditions to payments and transfers.

However, we have concerns about the grants the minister specified, based on information elsewhere in the MTBPS documents:

• The Urban Settlements Development Grant to municipalities faces a cut of R553 million;
• The Integrated Urban Development Grant remains unchanged; and
• The Municipal Infrastructure Grant sees a significant cut of R1.173 billion.

These reductions raise questions about how they address the water and wastewater challenges. The MTBPS shows that the City of Johannesburg, facing water delivery issues, now faces cuts in six out of seven of the grants it receives this year from the national government.

These budget changes makes us wonder whether the national government genuinely prioritises water and sanitation infrastructure.

It is encouraging is to hear the introduction of public-private-partnership funding mechanisms for capital expenditure projects on matters such as water and sanitation. The challenge, however, will be the transparency of these partial privatisation plans for services normally provided by municipalities.

Questions loom around parliament’s rebuild and payouts for an absent past deputy president

Parliament’s budget undergoes restructuring, with an overall cut of R215 million. Within this, about R1 billion appears to be redirected to capital expenditure, seemingly the start of Parliament’s reconstruction which is long overdue.

Furthermore, there’s a controversial R6.227 million “leave gratuity” payment to former Deputy President David Mabuza, who was largely missing in action during his term. The value of this leave gratuity does not make sense and appears to be a golden handshake. “R6.227 million is allocated to the salary of the deputy president for the former deputy president’s leave gratuity payment,” says the Presidency vote in the Adjusted Estimates of National Expenditure.

Hints of election 2024

Election hints emerge, with an extra R15 million allocated for Presidential Imbizos. Home Affairs puts an additional R300 million into the Represented Political Parties Fund, nearly doubling its allocation. This funding is  for parties already represented in legislatures, potentially favouring incumbents. We hope these payments go to parties with proper tax compliance.

Overall, the minister speaks of generating growth in the economy and creating jobs, yet the MTBPS had little input and explanation as to how this was to happen. He revealed a mixed economic outlook with budget cuts and unclear strategies, whilst highlighting the need for transparency and responsible financial management, items we’ve heard repeatedly before but which never seem to be introduced effectively.