‘It is pilchards in place of steak, not austerity’
Despite huge spending cuts of R261bn, this is not an austerity budget, finance minister Tito Mboweni says. Rather it is a case of choosing to eat pilchards and not rump steak.
For the first time since the late 1990s, non-interest expenditure will contract in real terms at a rate of 0.4%. SA has been able, through most of the democratic period, to strongly grow spending on social services and even in recent years ensure that education and health grow faster than inflation, while welfare has been spared budget cuts.
But without any increase in taxes and some moderate tax relief for bracket creep, Mboweni said the budget could still not be classified as austere.
“We are not at a point of austerity; we are cleaning house.
We are still spending but not at the rate we would like to. If this was austerity we would be closing schools and hospitals and retrenching people,” he told the media in a prespeech briefing.
He likened the spending cuts to a family choosing to eat pilchards — known to be one of his favourite foods — rather than rump steak.
The R261bn of cuts are made up of an estimated R160bn of savings from a renegotiated wage settlement and R100bn revisions to baseline budgets. However, additional allocations to other budget items, particularly Eskom, means that the overall expenditure envelope falls by about R150bn.
Provinces and municipalities will be particularly affected by the expenditure cuts, which will see reductions in conditional grants for a range of government programmes. Allocations to the human settlements sector have again been reduced, this time by R14.6bn over the medium-term period. This will mean “fewer subsidy houses, serviced sites and related bulk infrastructure”.
Public transport grants and subsidies have also come under fire, with the Passenger Rail Agency of SA (Prasa) losing R13.2bn over the medium-term period. While Prasa’s infrastructure is in a dire state, it has nonetheless accumulated large cash surpluses, in the main due to chronic underspending of its capital budget. Integrated transport networks — or rapid transit bus services — will be suspended in Buffalo City, Mbombela and Msunduzi, as these cities have made the least progress in rolling out the services.
Basic and higher education as well as health also come in for substantial baseline budget reductions over the medium term.
The Treasury has slashed R2.3bn from the infrastructure allocation to technical and vocational education training colleges and R621m from the university infrastructure. It has also cut R1.85bn from the education infrastructure grant and reduced the school infrastructure backlogs grant by R122.8m, which is likely to delay progress in ensuring all schoolchildren learn in safe classrooms with appropriate sanitation facilities.
Spending on basic education will not keep pace with inflation, growing on average by 3.8% over the medium term. While health spending narrowly outstrips inflation at 5.1%, cuts to the baseline budget of R3.9bn over the three years have been made.
“This implies that some activities related to National Health Insurance will be phased in over a longer time frame,” the Budget Review said.