Johnathan Paoli
Minister of Finance Enoch Godongwana has warned that unless spending cuts were introduced, the government ran the risk of running out of money by March next year.
Godongwana said debt servicing costs alone were averaging a massive R366 billion per year.
While he argued that his department’s cuts were below last year’s underspending of R28 million, and due to the country’s capacity problems, the government needed to increase its borrowing to prevent drastic reductions in expenditure.
“First thing we’ve done is to manage this thing in a more prudent way, do a combination of cutting expenditure, and bumping up borrowing,” Godongwana said.
However, Godongwane warned of the current state of government borrowing, saying that imminent debt repayments could deplete the fiscus by the end of this financial year.
This comes as Godongwana is expected to deliver on Wednesday the Medium-Term Budget Policy Statement (MTBPS) in Parliament which will reveal the real state of public finances.
Due to uncertainties surrounding load shedding, transport bottlenecks, fading global growth momentum, subdued international commodity prices and the slowdown in domestic demand due to higher interest rates; real gross domestic product (GDP) growth is expected to be slightly lower than the National Treasury’s February forecast of 0.9% and 1.5% in 2023 and 2024, respectively.
Nedbank economist Isaac Matshego said they were forecasting aggregate expenditure growth of 6% in nominal terms in 2023/24, overshooting the 3.4% projected in Budget 2023, as a result of higher-than-budgeted public sector wage bills and social transfers.
“The National Treasury faces the challenging task of ensuring that the higher public sector wage bill and debt service costs do not significantly widen the budget deficit and push the public debt stock even higher,” Matshego said.
Godongwane and leaders from various sectors gathered at the Kgalema Motlanthe Foundation Annual Drakensberg Inclusive Growth Forum held in Drakensberg, KwaZulu-Natal on Saturday, where leaders from various sectors gathered to discuss issues affecting the country.
The Auditor-General Tsakani Maluleke flagged municipalities and their reliance on consultants even for basics such as the compilation of financial statements saying this has increased their spending to a staggering R1,6 billion across the country over the last year.
Maluleke said the problems of municipalities’ decision to not invest in their own capabilities but rather employ consultants to do the very basics such as compiling the financial information has grown significantly over the last decade.
“Ten years ago when we started understanding that this was happening more and more, we decided to start looking at it in terms of how much municipalities across the country are spending just on this basic thing. The number, 10 years ago, was about R100 million. Last year it was R1.6 billion across the country,” Maluleke said.
Former President Kgalema Motlanthe said data provided by the Minister in the Presidency for Planning Monitoring and Evaluation, revealed that almost 90% of the 257 municipalities are in trouble with 163 of them currently distressed and 66 totally dysfunctional.
Motlanthe said many of the municipalities failed to fully spend their infrastructure grants.
“A case should be made therefore on how to improve efficiency and capacity of local government and local economies through the informal sector and tourism,” Motlanthe said.
INSIDE METROS
