Spot­light on ex­pen­di­ture as S African bud­get comes un­der strain

Kuwait Times - - BUSINESS -

JOHANNESBURG: Craft­ing South Africa’s bud­get has be­come a headache for Fi­nance Min­is­ter Nhlanhla Nene: la­bor union al­lies ac­cuse him of be­ing tight-fisted, while op­po­nents say he’s pour­ing too much money into ar­eas like the civil ser­vice that don’t help grow the econ­omy.

Africa’s most in­dus­tri­al­ized econ­omy has strug­gled to bal­ance its fi­nances since com­ing out of a re­ces­sion in 2009. Growth re­mains too hes­i­tant to gen­er­ate ad­e­quate rev­enue, lead­ing to a deficit seen at nearly 4 per­cent of GDP this year. The huge gov­ern­ment wage bill is likely to be a key fac­tor next week when Stan­dard & Poor’s and Fitch re­view South Africa’s credit rat­ing, which is hov­er­ing just above junk sta­tus.

A re­cent wave of protests by an­gry univer­sity stu­dents de­mand­ing cheaper ter­tiary ed­u­ca­tion has put the spot­light on whether Pre­to­ria is al­lo­cat­ing its lim­ited re­sources ef­fi­ciently. The stu­dents stormed the par­lia­ment precinct as Nene read out his medium-term bud­get state­ment last month, de­mand­ing that the gov­ern­ment sub­si­dize univer­sity costs and veto planned in­creases in 2016 tu­ition fees. As learn­ers clashed with riot po­lice out­side par­lia­ment, Nene un­veiled ad­di­tional gov­ern­ment spend­ing of 10.1 per­cent on top of lev­els an­nounced in the main bud­get in Fe­bru­ary, to cater for salary in­creases for gov­ern­ment work­ers.

The size of the civil ser­vice has al­ways been a bone of con­tention be­tween the gov­ern­ing African Na­tional Congress (ANC) and op­po­si­tion par­ties who feel it is an un­nec­es­sary drain on the na­tional purse.

The op­po­si­tion Demo­cratic Al­liance is an­gry that the ANC, which has a com­fort­able ma­jor­ity in par­lia­ment, this week shot down pro­pos­als to re-as­sign money from non-core sec­tors to­wards ter­tiary ed­u­ca­tion. The pro­pos­als, which in­cluded cut­ting spend­ing on for­eign em­bassies, VIP pro­tec­tion, the se­cu­rity ser­vices and min­is­te­rial ve­hi­cles, would have freed up 904 mil­lion rand ($63 mil­lion) to help fund uni­ver­si­ties, the DA said.

“When it comes to a choice be­tween more money for stu­dents or more money for min­is­ters, the ANC chose more money for min­is­ters,” the party said in a state­ment. PUB­LIC WAGES 40 PCT OF BUD­GET Crit­ics have long ar­gued that the gov­ern­ment spends too much on wages in the pub­lic sec­tor, which gob­ble up about 40 per­cent of the roughly $70 bil­lion na­tional bud­get.

This year, Nene also set aside 200 mil­lion rand in prepa­ra­tion for a con­tro­ver­sial mul­ti­mil­lion-dol­lar nu­clear en­ergy pro­gramme which the op­po­si­tion says South Africa can ill af­ford.

“Gov­ern­ment spends too much of the tax take on wages and salaries for pub­lic sec­tor work­ers. A smaller pub­lic ser­vice would free up fis­cal re­sources for other pri­or­i­ties,” Bar­clays Africa econ­o­mist Peter Wor­thing­ton told Reuters. —Reuters

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