Cabinet rejects treasury’s cuts
The proposal suggested the bloated cabinet be cut and departments trim their expenditure
President Cyril Ramaphosa’s cabinet has allegedly sent the treasury back to the drawing board, rebuffing its proposal to cut spending and reconfigure state departments.
The cabinet met on Wednesday after Ramaphosa received a document by the treasury that allegedly recommended consolidating government departments to free up the country’s beleaguered public purse.
According to one insider close to the talks, the cabinet was concerned that the changes punted by the treasury could not be concluded with the current government. It is also said to have been non-committal on the proposed budget cuts, instead telling the treasury to relook at its numbers.
Minister in the Presidency Khumbudzo Ntshavheni suggested the proposed restructuring would not go ahead during a media briefing on Thursday. “At the moment there are no specific projects that the cabinet is looking to cut. But we acknowledge that there are inefficiencies within the systems.”
Ntshavheni also said the country’s fiscal constraints were not domestic. “They are global. We can’t plan only for the short-term.”
It has come to light that the country’s public finances are in a far worse position than they were when Finance Minister Enoch Godongwana delivered his budget speech in February — prompting the treasury to make urgent proposals to cut spending.
The treasury has already instructed government departments to pare back their budgets in the lead-up to the tabling of the medium-term budget policy statement, which usually takes place in late October each year but is now expected to happen at the beginning of November.
The treasury allegedly outlined various measures to Ramaphosa that may need to be taken to make room for big expenditure line items, such as a larger-than-budgeted-for public sector wage bill and extending
‘We don’t have money, that is the reality. Where do we get the money?’
the Covid-19 social relief of distress grant.
Key among these alleged measures was to cut down the size of the cabinet. Other far less palatable measures include increasing VAT by 2% and closing various government programmes to raise the more than R40billion needed to fund the grant.
Trade union federation Cosatu hit out at the treasury’s proposed spending cuts, first reported on by the Sunday Times. The ANC’S labour ally raised its concerns about the treasury’s plans to Ramaphosa in a meeting on Tuesday.
Acting Cosatu spokesperson Matthew Parks told the Mail & Guardian that Ramaphosa was warned that plans to cut costs stand to weaken the state when the economy needs quality public services. “We shared our opposition to any cuts which hurt workers, the economy or the state’s capacity to deliver public services,” Parks said.
“We agreed we need to work closely together to address the many issues facing workers, the economy and the state. This was an initial engagement and will be followed up by further engagements before the medium term budget policy statement.”
The ANC’S head of economic transformation, Mmamoloko Kubayi, told the M&G the measures to achieve fiscal consolidation are continually discussed, both in the government and in the governing party. Government’s spending choices require thorough analysis amid the tough economic conditions, Kubayi said.
“These choices are still under discussion and no final decision has been made as yet.”
Kubayi further noted that as the country approaches the national elections, “the time is appropriate for an assessment of the current configuration”. Whatever new configuration is decided on can be implemented in the new administration, she said.
Parks said the treasury’s plans had the potential to create mass strike action by labour unions. The unions
and their members would have to discuss that at an appropriate time and workers would have to decide on that, he said, adding: “No formal proposals have been made. These are treasury options.
“But any cuts to the state’s capacity to deliver public services and any cuts that harm workers will strain the alliance and workers’ faith in the ANC and government. This is something we can’t afford in the run-up to the most difficult elections since 1994,” Parks said.
High-ranking treasury insiders who spoke to the M&G prior to the cabinet meeting said they relied on Ramaphosa to sign off on the recommendations.
“We will show him our recommendations and we will rely on him. For this thing to happen, he has to make a decision,” one insider said.
“We can’t say anything in the medium term budget policy budget speech but it may mean that the departments want to start transitioning between now and the new government. Politically, at that point in time when you change the structure of the cabinet it will coincide with the new administration.”
Another treasury insider said part of the decision by the department to make these proposals was about signalling the change to the markets — which will be looking for a strong hand from Godongwana to prevent the state of the public purse from deteriorating any further.
“Closing certain entities is not an event. You either say by the end of this financial year, this entity would have been closed, just as an example,” they said.
“It doesn’t have to be a wholesale reconfiguration but you can begin to be concrete and much more direct on what you are going to do in the next financial year, and you are not broad and you are not laying out principles, you are just direct.”
A second insider said the government would need to be clear on the restructuring and not repeat ideals. They said Ramaphosa would need to make these tough decisions as a matter of urgency.
“What we have in mind, you can talk about relocation of people, some of them you take them to municipalities … We don’t have money, that is the reality. Where do we get the money?”
Speaking to the M&G this week, independent economist Thabi Leoka said the proposal to restructure the state would have been a good one — if done right. Ramaphosa raised the idea of cutting cabinet in his first State of the Nation address back in 2018.
“For the longest time, South Africans have been saying that we have a bloated cabinet. We thought that when Ramaphosa became president, the first thing he would do was to shrink the government. And he actually did the opposite,” Leoka said.
According to her, the government could not embark on a restructuring to the detriment of state capacity, a predicament that would only lead to more mismanagement of public funds.
Leoka suggested that the current fiscal conundrum is the result of the government kicking the can down the road on spending cuts, thanks in large part to the politics involved.
The treasury has recently been relaying the urgency of South Africa’s fiscal crisis through the media, she said. In doing so, the treasury stands to raise the market’s expectations of the government’s willingness to make a change. “Then they don’t and it’s almost like a disappointment.”