Buckle up for a slash-a-thon!
Mboweni’s aggressive drive to cut state salary bill
At least R23bn a year. That is the bill taxpayers will pick up as the government steps in to help knock into shape South Africa’s broke power utility Eskom.
Finance minister Tito Mboweni announced in his budget speech on Wednesday that the government would start a major saving drive to reduce its salary spend – by R27bn over three years.
Politicians will forfeit salary increases for the 2019/2020 financial year, bonuses and overtime pay will be limited, and older civil servants will be nudged to retire early.
“My colleague, [public administration] minister Ayanda Dlodlo, will outline the details of the early retirement framework during the course of the week,” Mboweni said in parliament.
“The system of staffing our diplomatic missions is unjustified and should [also] be reviewed urgently,” he said.
Delivering what economist Prof Ronney Ncwadi, from Nelson Mandela University, termed a budget that has positioned the country to attract investors, Mboweni spoke strongly on public enterprises.
On Eskom, he made it clear that the bailout money was conditional – there would have to be an independent chief reorganisation officer to oversee the process.
This person would be selected by Mboweni and public enterprises minister Pravin Gordhan.
“The explicit mandate [will be] of delivering on the recommendations of the presidential task team.
“We will make announcements in this regard in the coming weeks.
“I want to make it clear – the national government is not taking on Eskom’s debt.
“Eskom took on the debt. It must ultimately repay it.
“We are setting aside R23bn a year to financially support Eskom during its reconfiguration,” he said.
Mboweni said the division of Eskom into three parts would set the electricity market on a new trajectory and allow for more competition, transparency and a focused funding model.
While all three companies would be state-owned, the transmission company – expected to be the most profitable and least indebted – would seek an equity partner.
Mboweni told journalists that an equity partner did not amount to privatisation.
“What logically follows from the division is that on the generation side, you will have as many players as possible.
“The monopoly will remain for the national grid.
“On the distribution side, there will also be many more players,” he said.
Introducing more players into the electricity market would lead to competition that would result in lower prices.
It would also ensure that when it came to providing electricity to SA, it would “no longer have all its eggs in one basket”.
“Everybody, including the working class, should be happy there are more players on the generation side,” Mboweni said. He said the state was reviewing its support of other state-owned enterprises (SOEs), questioning whether they were still necessary.
“The SOEs pose very serious risk to the fiscal framework.
“Funding requests from SAA, the SABC, Denel, Eskom and other financially challenged state-owned enterprises have increased, with several requesting state support just to continue operating.
“Isn’t it about time the country asks the question: do we still need these enterprises?
“If we do, can we manage them better? If we don’t need them, what should we do?” he said.
The cabinet is considering a proposal to end the issuing of guarantees for operational purposes.
However, it anticipates that SOEs would be needing more money and thus the contingency reserve is being increased by R6bn.
Ncwadi believes the announcements on Eskom and SOEs were necessary to avoid downgrades by credit rating agencies.
“The minister identified areas where we have experienced inefficiencies in our economy – the so-called leaking pocket.
“And one of those identified is SOEs – particularly Eskom.
“Now that they are going to tie up the operations there, they made it clear that they are not taking the debt of Eskom.
“And that is precisely what the rating agencies are looking for, because we would again be in danger of being downgraded,” he said.
“I admire the minister because he has managed to present a very balanced budget against the conditions in which we find ourselves. I think it’s an open and honest budget.
“The minister makes it clear that we are working on a deficit,” Ncwadi said.
Nelson Mandela Bay Business Chamber CEO Nomkhita Mona said while the budget brought some good news for business, the chamber was concerned about certain urgent issues and priorities that were omitted from the speech.
She said she had hoped to see funding to support further development of the
‘I want to make it clear – the government is not taking on Eskom’s debt’ Tito Mboweni
FINANCE MINISTER
automotive sector. She was also disappointed that there was no mention of money allocated to improving the ease of doing business in SA.
“While we certainly welcome minister Mboweni’s promise that the national government will not adopt Eskom’s debt, the funding provided to support its transition is still worrying.
“It is our hope that the independent chief reorganisation officer that will be appointed to assist in the process will ensure that the funds are spent properly and productively.”
Eastern Cape finance MEC Oscar Mabuyane spoke on the staggering provincial wage bill, which ranges from between 60% and 65% of the budget.
“The issue of government becoming much more conservative in terms of being the sole creator of jobs in the province – [we must look at] how do you diversify that economy from the automotive sector into other economic centres and build capacity so that we can create more jobs,” he said.
“But at the same time, encourage those who can no longer be productive in the public sector system to create entry for the young ones who are educated and can help the government improve effectiveness and efficiency.
“It’s a very difficult exercise that we are currently managing. In the public sector, the cost of employees must be about employing people who need to deliver services to millions who are not employed,” Mabuyane said.
Asked how the province would roll out the early retirement process in the province, he said he would leave it to Dlodlo to give details.
“This must happen in a much more structured manner.
“What we have seen is people resigning this year and coming back the next year – doing the same job.
“Because the government is desperate [for their skills],” he said. –