State cost-cutting ‘will come after Sona’
● The long-promised reconfiguration of the state will gather significant pace after President Cyril Ramaphosa’s state of the nation address (Sona) next year, National Treasury director-general Duncan Pieterse told Business Times this week.
He said the Treasury, the Presidency and the department of public service & administration (DPSA) were working with the department of planning, monitoring & evalua-tion (DPME) on a template for a cabinet with reduced costs and enhanced efficiencies.
“We flag this issue, but you will recall that in the Sona the president said that the Presidency, Treasury and the DPSA were working day and night on this. Now, we can’t finalise the conclusion before we finalise the medium-term budget policy statement [MTBPS], because the president will be finalising it in February,” said Pieterse.
“In terms of finalising the timelines for plans to reconfigure the state, we are working between now and Sona. GTAC [the government technical advisory centre] … is helping us,” he added.
“We have in the past six months done quite a lot of technical work between the Presidency and the Treasury and we are bringing in the DPME and DPSA as well as a technical team that can build on that work.”
The reconfiguration of the state is expected to gather pace after next year’s Sona as this will be Ramaphosa’s last major public platform as president before the general election.
However, while Ramaphosa will want to have something to tell voters regarding a promise as old as his term when seeking re-election, the policy is expected to get some pushback from cabinet ministers and heavyweights in the ANC.
Tabling the MTBPS this week, finance minister Enoch Godongwana said government spending in the medium term would focus on reconfiguring the structure and size of the state while strengthening its capacity to deliver quality public services.
“A joint plan to review government departments, entities and programmes over the next three years is being prepared. This plan will address overlapping mandates and functions, including in public entities, and ensure that we create standards for more sustainable remuneration of executives who serve public entities receiving transfers from the fiscus,” said Godongwana.
“We propose a strategy of spending adjustments based on policy priorities, and a reconfiguration and rationalisation of the state, which includes closing or merging ineffective entities and programmes, and enhancing the complementarity of its functions.”
Free Market Foundation (FMF) CEO David Ansara said while he welcomed Godongwana’s sense of fiscal responsibility, his cabinet colleagues “do not want the gravy train to stop”.
“The current gross deficit is R54.7bn higher than forecast in the February budget, and could well be much higher if current budget trends are realised. Taxpayers simply cannot afford the extent of government spending. Serious cuts need to be made urgently,” he said.
Ansara said Godongwana was unable to announce anything substantive that would introduce real fiscal responsibility in the public service and that his promises would not be binding on whoever follows him as finance minister.
“The FMF urges the government to start limiting state spending by cutting any cabinet portfolio and department that is not clearly required by the constitution or is not essential to the functioning of the economy,” Ansara said.
However, Duma Gqubule, independent economist at the Social Policy Initiative, said while there was a need to reconfigure the state, cost-cutting would deplete its resour-ces without improving spending outcomes.
“This was the president’s thing. In one of his earlier Sonas, it was touted as his signature policy and that he was going to reconfigure the state. But when it came it was a damp squib. Now the Treasury is looking at it and, for me, the starting point is wrong because it is not about better service but about cutting costs,” said Gqubule.
He said it had been clear that Ramaphosa would embark on cutting government costs since reports emerged of his meetings with the Treasury about cutting government programmes to make room for items such as the social relief of distress grant.
Gqubule said the Treasury should not be involved in reconfiguring the state because it lacked the expertise to do it in a way that improved service and was concerned only with cost-cutting. He said the solution to South Africa’s challenges was economic growth, not cutting costs. He called the reconfiguration of the state “a vicious downward spiral with no possible positive outcome where the endgame is the decimation of the public service”.
“They said hundreds of programmes might go. They wanted to do this in one fell swoop and there was a pushback from the cabinet and the ANC, and they will do it over the years. But I don’t imagine this particular leadership will be around for long enough to see it through,” he said.
The Treasury’s deputy director-general in the budget office, Edgar Sishi, told MPs that the government aimed to handle the reconfiguration of the state and the containment of the public service wage bill sensibly and sustainably.
Parallel to these processes, Godongwana announced during the MTBPS that he would soon table an omnibus bill which would include key amendments to the Public Finance Management Act of 1999, the Municipal Finance Management Act of 2003 and the South African Revenue Service Act.