State looks at provinces to contain costs

● Duplicated functions, nonessential staff in sights

The government is considering merging or closing provincial entities with duplicated functions and reducing nonessential administrative personnel to help contain costs.

According to the 2019 Budget Review, provinces continue to balance rising costs and growing demand for services within tight budgets.

Sound financial management by provincial treasuries, and national interventions where necessary, have ensured that provincial finances remain sustainable, the document says.

“Provinces continue to implement cost-containment measures agreed with the minister of finance in January 2016.

“These measures focus on improving revenue collection, merging or closing provincial entities with duplicated functions, and cutting spending on non-core goods and services,” the Budget Review states.

The purchase of buildings under lease is also being considered.

In addition, provinces have identified new initiatives that can boost revenue, such as selling redundant vehicles.

However, compensation, which accounted for 61% of provincial spending in 2018/2019, continues to increase above inflation.

Provinces have managed these costs by limiting growth in personnel and other savings.

The number of provincial employees fell from 923,646 in 2012/2013 to 881,228 in 2017/2018.

But the cost of those employees rose from 58.5% to more than 60% of provincial spending over the matching period, the Budget Review says.

Finance minister Tito Mboweni said taxes raised in wealthier areas fund poorer provinces and municipalities.

In the coming year, the government expects revenues of R1.58-trillion and spending of R1.83-trillion. In the budget, 47.9% of nationally raised funds are allocated to national government, 43% to provinces and 9.1% to local government over the medium term.

Over the past eight years, after taking inflation into account, provincial allocations have grown 2.1%, compared with average annual population growth of 1.8%.

Allocations to provinces are calculated largely on the basis of demand for public services such as schools and clinics.

“The different rates of growth in the provincial equi- table share allocation for each province respond to changes in these demographic factors.

“Together with provincial treasuries, the National Treasury is reviewing the formula to ensure it is responsive to data and policy developments, and balances the needs of all provinces,” the review says.

According to the review, local government gets the smallest share of the division of nationally raised revenue because it has significant own revenueraising powers.

But in 2017/2018, almost half of all municipalities collected less than 80% of their billed revenue.

“We need to build a strong culture of payment in our country,” Mboweni said in his budget speech.

“It is our duty to pay for services, especially if we can afford to do so.

“National Treasury will lead a process to encourage those, including government departments, who owe money to municipalities to pay for services.”

The National Treasury’s state of local government finances report found that 128 municipalities were in financial distress at the end of 2016/2017, with problems in revenue management the largest contributor to this.

Households, followed by commercial customers and government, owe the largest share of outstanding municipal revenues.

‘We need to build a strong culture of payment in our country’ Tito Mboweni

FINANCE MINISTER