Govt outlines cost cutting measures

Tuesday, October 27, 2009

Pretoria - A preliminary report by the Ministerial Task Team, established to look into government expenditure in response to the current economic downturn, was today released by Finance Minister Pravin Gordhan.

According to the report, government is determined to work collectively in reviewing spending plans, reprioritising the budget, reducing wastage and inefficiency, identifying and eliminating corruption and getting better value for each rand spent across all spheres of government.

The task team was borne out of the idea that government needs to achieve more with less, minimise bureaucratic structures and rethink how it works.

This process will involve three phases, it said. In the first phase, government will cut wasteful spending, including on unnecessary conferences, travel, entertainment, consultations and luxuries.

The second phase will look at rationalising entities and agencies, shift resources from back-office operations to frontline services and reform procurement processes. Phase three involves the comprehensive expenditure review, which will fundamentally reshape the way in which public services are delivered.

In the report, the task team said that the first set of savings proposals for the 2010 Medium-Term Expenditure Framework (MTEF) at national level amounts to R14.5 billion, and at provincial level amounts to R12.6 billion.

Last year, national and provincial departments spending on procurement and travel amounted to more than R97 billion, according to the report, which said that the task team had identified numerous other instances of wastage and inefficient spending.

Over the next three-year period, the task team identified potential areas of savings at national government level where better financial systems which could lead to savings of R14.5 billion.

These savings relate to all national departments, but four in particular including the Departments of Social Development, Defence and Military Veterans, International Relations and Cooperation and Trade and Industry.

Savings of R1.5 billion can be acquired from the Department of Social Development from increased collections from wrongly paid or overpaid grant beneficiaries and an adjustment of the means test.

Savings can also be found as a result of slower than anticipated uptake of social grants from the implementation of the extension of the Child Support Grant to 15 years of age, which was approved in last week's Cabinet meeting.

Detailed analysis of monthly spending in the Department of Defence and Military Veterans showed that the department can realise savings of R1.4 billion by better financial management.

Some savings have been realised on the Strategic Defence Procurement Programme, due to a more favourable exchange rate.

The Department of International Relations and Cooperation could save R700 million over the next three years mainly as a result of revised foreign exchange rate assumptions from those used at the time of the 2009 Budget, which were based on the assumption of a weaker rand.

The Ministerial Task Team further found that the Department of Trade and Industry could save R700 million by making changes related to reductions in transfers and subsidies, due to underspending and the rescheduling of certain projects.

This action by government requires cooperation, commitment and engagement from all political principals and their respective departments, reads the report.

It further said these measures would not only apply during this time of crisis but should become the blueprint for how government does things and manage public resources in future.

Regarding the medium to long-term saving proposal, the report noted that some of the proposals by the team may require changes in policy and decisions on whether to terminate non-performing programmes, projects or entities.

In these areas, a review of the performance, the workings and/or the necessity for continuing the specific programmes and entities, needs to be undertaken," said the report.

This included the review of the Ministerial Handbook, which will look at the issue of unnecessary spending and will seek to ensure that the responsibilities of ministers are adequately supported.

The report said that finding savings was not only about reducing budgets and reprioritising expenditure; it was also about combating wastage, leakage and corruption in government, specifically in the procurement system.

With regards to procurement and good services, the report said a set of guidelines and policies must be developed which is aimed at reducing these costs. Government has in many instances been a victim of higher prices than the market value

The service costs charged by the State Information Technology Agency (SITA) need to be reviewed, and departments should be considering better coordination when they contract information technology services to maximise leverage.

Government will also be intensifying its fight against corruption and fraud. An interdepartmental working group was set up to strengthen compliance and enforce uniform norms and standards in managing tenders.

The working group comprises the National Treasury, South African Revenue Service, Financial Intelligence Centre, Auditor General and the Special Investigations Unit and it will report to the Minister of Finance.

The report noted that emphasis would be placed on preventing fraud and corruption before it actually happens.

Further to this, a range of enforcement sanctions are being considered including internal disciplinary procedures, civil recovery, tax collection, criminal sanction and blacklisting from doing government business.

The work of this Task Team lays the basis for the envisaged Comprehensive Expenditure Review which will be a thorough analysis of how and where government spends its money, and whether it receives value for the money it spends.

The review will further investigate which spending programmes are delivering on their mandate as well as whether the same service can be delivered better and more cheaply.

The task team, set up by Cabinet in July to investigate wastage and inefficient spending, comprises Gordhan, Minister if the Presidency responsible for Performance, Monitoring and Evaluation, Collins Chabane and Minister of Public Service and Administration, Richard Baloyi.