Govt to save over R27bil through cost cutting programme

Tuesday, October 27, 2009

Cape Town - Government aims to save over R27 billion a year by cutting down on wastage and slashing inefficient spending.

Minister of Finance Pravin Gordhan said on Tuesday that the first set of savings proposals for the 2010 Medium Term Expenditure Framework will involve the saving of R14.5 billion at a national level and R12.6bn at a provincial level.

The savings relate mostly to expenditure on non-core goods and services.

The steps follow the setting up of a ministerial task team to look into ways government could achieve more with less resources

The task team is headed by Gordhan and includes the Minister of Public Service and Administration Richard Baloyi and the Minister in the Presidency responsible for Monitoring and Evaluation, Collins Chabane.

The biggest savings are expected to come from reducing administrative spending in departments, which will save government R2 billion.

It is expected that government would save about R1.5 billion on social development, as a result of increased collections from wrongly paid or overpaid grant beneficiaries, an adjustment of the means test and as a result of a slower than anticipated uptake of social grants from the extension of the Child Support Grant to 15-year-olds.

Government is also expected to save R1.4 billion from the Department of Defence and Military Veterans. Some savings have also been realised on the department's procurement programme, as a result of a more favourable exchange rate.

The Department of Trade and Industry would save R700 million, largely as a result of reductions in transfers and subsidies of certain projects.

A further R700 million would also be saved through the Department of International Relations and Co-operation - mainly as a result of a revised foreign exchange rate.

Government's cost-cutting exercise will involve three phases.

The first phase involves changing spending habits such as cutting costs on unnecessary spending - targeting areas such as consultants, entertainment, travel, luxuries and conferences.

Phase two will look at back-office operations to frontline services and reform procurement processes.

The third phase will involve a comprehensive expenditure review which will reshape the way in which public services are delivered and resources allocated.

In these latter two phases government is expected to terminate non-performing programmes, projects or even entities.

The Presidency will conduct a review, together with the National Treasury, on which programmes are working and whether the same services can be delivered at a more affordable cost.

A review of the ministerial handbook, will also take place.

A selection of potential saving areas for investigation in the medium term is expected to be finalised by December, while the first set of investigations and recommendations would be completed by March next year.

The review may see spending increase in certain areas, for instance boosting spending on quality education.

Government will also cut down on tender fraud to reduce wastage.

To this effect, an interdepartmental working group, comprising the National Treasury, South African Revenue Service, Financial Intelligence Centre, Auditor General and the Special Investigations Unit, was set up to look into whether there are leakages in the procurement system or weak management in place, which results in cost escalations.

The working group would report to the Minister of Finance.

Government acknowledged that there were already some leakages in the government feeding scheme, school construction and the procurement of office equipment and other goods and services.

In the past six weeks, intense work has already been done to improve compliance levels within the Supply Chain Management policies and procedures of government and already a large number of public officials have been identified as suspects in defrauding the state.

A range of steps would be taken against these suspects, including criminal sanction, internal disciplinary measures, tax collection and blacklisting.

Government was also looking at cutting back in information technology procured from the State Information Technology Agency (Sita) by allowing departments to procure information technology services at market-related prices.

The government was also looking at saving costs at Sita by among other things, slashing its spending on temporary and contract workers, by 20 percent from R400 million to R320 million.

It would cut non-labour operating costs at Sita by 10 percent from R428 million to R385 million, while halving the budget for capital expenditure from R598 million to R300 million.

All spending on capital expenditure at Sita would have to be approved by the Capex Review Committee.

Most Read