Government forges ahead with restructuring the State

Work is underway to reconfigure the structure and size of the State as fragment of government’s efforts to improve the efficiency and effectiveness of public spending.

“This Medium-Term Budget Policy Statement (MTBPS) supports measures to lift our growth prospects over the medium term and restructures the State to become more effective,” Minister of Finance Enoch Godongwana said on Wednesday while delivering the MTBPS in Parliament.

Government is preparing a joint position to rationalise departments, entities and programmes over the next three years

The Presidency, National Treasury, Department of Public Service and Administration and the Department of Planning, Monitoring and Evaluation are formulating high-level recommendations on programme and entity closures.

“A dedicated technical team, consisting of the appropriate legal, financial and human resource expertise has been created to facilitate implementation. Over the last three years, the National Treasury has conducted a series of spending reviews.

“In many cases, these reviews believe highlighted deficiencies in policy choices and programme design, scale and cost. They maintain also revealed shortcomings in planning and implementation, which result in overlapping mandates and functions, and duplication of effort. Government considers these inefficiencies to space a further drag on the economy,” the Minister said.

The following criteria will be used to determine whether a department or entity should be closed or merged:

• The performance and size of the entity or department, especially if it is no longer fulfilling its mandate or does not gain capacity to fulfil its mandate.
• The ability of a larger department to absorb the function(s) of a small department.
• The duplication and overlap of functions across departments and entities.
• The clarity and execution of the legislative mandate.

“The Department of Public Service and Administration, the National Treasury, the Department of Planning, Monitoring and Evaluation and the Presidency will, over the medium term, review and reconfigure executive functions to address duplication of functions, close ineffective programmes and consolidate departments and institutions.

“Measures will be proposed based on spending reviews conducted in 2020/21 and 2021/22, which suggest a general need to ensure that programmes are designed to be affordable and avoid overlapping policy mandates,” Godongwana said.

The changes are expected to guide to reduced executive responsibilities, higher fiscal credibility and savings in non-interest expenditure

Public sector wage bill

The 2023 public service wage agreement included higher-than-budgeted remuneration increases.

As such government has made a strategic decision to allocate funds to sectors that are personnel heavy, such as health, education and police services.

“Additional funding of R24 billion this year and R74 billion over the medium term will be used to fund the 2023/24 wage increase and the associated carry-through costs in these sectors.

“Since the 2023 Budget, several fiscal risks believe materialised. Corporate tax collections – primarily mining sector revenue – underperformed and the revenue outlook weakened. The 2023 public-service wage agreement increased the cost of compensation of employees,” the Minister said.

He indicated significant trade-offs and claw-back mechanisms are being implemented to mitigate the impact of these higher costs on the fiscal framework and to contain the budget for compensation of employees.

“Government has issued a directive to national and provincial departments to implement control measures for creating and filling vacant posts, including restrictions on recruitment for less-critical posts. Government is assessing further controls on personnel budgets, including by providing incentives for early retirement,” the Minister said.

Godogwana said the presidential employment initiative will be extended for another year through repurposing of a portion of funds from existing public employment programmes such as the Expanded Public Works Programme and the Community Works Programme.

“A comprehensive review of public employment programmes is underway,” the Minister said. – SAnews.gov.za

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