Cape Town - Finance Minister Nhlanhla Nene today tabled the 2014 Medium Term Budget Policy Statement (MTBPS) which signals a shift in the country’s fiscal policy.
Government proposes a series of measures to reduce the country’s budget deficit and to stabilise public debt.
“Our government therefore proposes a package of fiscal measures on both the expenditure and revenue side to re-establish the sustainable foundation for the public finance and to build a platform for investment led growth in the future,” Minister Nene told journalists ahead of the tabling of the MTBPS in Parliament.
“These measures are in line with the Constitution of South Africa which requires government to act within its available resources to progressively realise fundamental social and economic rights,” he further explained.
These steps, according to the MTBPS, are necessary to ensure the sustainability of the country’s most important public spending programmes in a weaker economic environment.
The proposals complement reforms underway to moderate consumption, boost savings and expand productive investment.
Challenges
However, challenges stand out over the next several years with one issue being to encourage greater private-sector investment in the economy. Private sector investment has remained subdued since the onset of the financial crisis in 2008.
Another challenge highlighted in the mini budget is the improvement of the state’s capacity to plan, manage and maintain its programmes and infrastructure.
In recent times the country has seen supply failures in electricity, water and postal services for example which hurt the economy and public confidence.
Earlier this year, South Africans experienced load shedding which was partly caused by wet coal stockpiles, while parts of Gauteng experienced water shortages.
Government has said that it will support power utility Eskom to ensure energy supply. This support will take several reforms, including a direct allocation of at least R20 billion raised through the sale of non-strategic state assets and this will have no impact on the budget deficit.
National government will also work with municipalities to ensure that the equitable share is targeted to help poor households cope with increased electricity tariffs.
Greater state capacity and efficiency are prerequisites for more rapid development.
Medium Term Strategic Framework (MTSF)
For the period of 2014 to 2019 government’s Medium Term Strategic Framework (MTSF) provides a roadmap to address these challenges as it is the first five-year policy framework designed in sync with the 2030 vision of the National Development Plan (NDP).
The MTSF was launched in August this year by Minister in the Presidency, Jeff Radebe.
At the launch, Minister Radebe said Cabinet will use the MTSF to monitor the implementation of the NDP across government in the next five years.
The aim of the MTSF is to ensure policy coherence, alignment and coordination across government plans as well as alignment with budgeting processes.
Among the MTSF priorities for structural reform over the period ahead is building the capacity of the public sector, particularly at local government through a “back to basics” approach as well as reshaping South Africa’s urban environment through integrated spatial planning.
On Wednesday, government announced that it will spend R4.4 trillion over the next three years.
Restoring sustainability to the fiscus, while protecting core social and economic programmes requires a combination of spending and revenue adjustments over the next two years.
Moderating expenditure growth combined with tax measures to increase revenue will improve the fiscal position by R22 billion in 2015/16 and R30 billion in 2016/17.
Proposed cuts
Proposed reductions to planned expenditure ceilings will be targeted to avoid cuts in front-line service delivery.
Budgets for non-essential goods and services will be frozen which will result in substantial savings over the next two years. In an example, the National Treasury said that across national departments, planned expenditure on travel and subsistence has been cut by R555 million, while advertising and communications budgets have been reduced by R240 million.
The office of the Auditor General had previously flagged government spending on consultants.
On Wednesday, National Treasury said that lower spending on consultants will generate savings of R370 million, while spending on venues and catering will be R150 million lower than previously planned.
“Building on the cost containment guidelines, government at all levels will need to identify opportunities to increase efficiency and reduce waste.”
On the issue of government’s wage bill, it said restraining was an important aspect of this rebalancing.
“If increases in public sector wages significantly outpace inflation, government will be forced to curtail service delivery either by reducing social spending or capital budgets or by trimming staff number,” noted the mini budget. - SAnews.gov.za
