Government development goals for SA may suffer if the Treasury’s proposed cost containment measures such as a freeze on hiring and suspension of new projects are implemented, says minister in the presidency Maropene Ramokgopa.
Ramokgopa, who is responsible for planning, monitoring and evaluation in the presidency, says the Treasury should not apply a blanket approach as it moves to stabilise public finances amid unprecedented lower than estimated revenue and spending pressures stemming from high debt and stagnant growth.
The Treasury issued a government-wide memorandum in August telling departments to implement a raft of measures to rein in public spending, including cutting the number of government departments amid weakening of macro fiscal conditions.
Figures released by the Treasury show the budget deficit hit R143.8bn, the largest since 2004 and greater than economists’ forecasts of R115.5bn.
The proposals were rejected by labour unions who recently met President Cyril Ramaphosa. Business Day understands that Ramaphosa is due to meet organised business within the next month when cost containment measures will be on the agenda.
“Increasing VAT may not be what we need,” Ramokgopa told Business Day on Thursday.
“It cannot only be Treasury that decides on the budget,” she said. The Treasury should consider using expertise located in the national planning commission (NPC), the presidential advisory body, to devise other proposals to cut costs.
Finance minister Enoch Godongwana is due to deliver the medium-term budget policy statement in November, when he is expected to elaborate on SA’s constrained fiscal position and measures in which the Treasury plans to rein in spending.
Godongwana is expected to release updated guidelines clarifying the “unintended misunderstanding” arising from the cost-containment letter issued on August 31.
Ramaphosa and Deputy President Paul Mashatile are expected to meet ministers “to ensure fiscal management does not derail the agreed to priorities”, minister in the presidency Khumbudzo Ntshavheni said in a post-cabinet briefing on Thursday.
The Sunday Times reported that Ramaphosa and his ministers were told that the government would have to raise VAT or close dozens of state programmes to cut spending enough to continue with the R350 social relief of distress (SRD) grant beyond March next year. By one Treasury projection, the SRD grant could cost the country R129bn a year by 2030/31.
Civil society organisations and the ANC have touted the grant as the basis of a proposed basic income grant. The SRD grant is also expected to feature in the ANC’s general election campaign. Ramokgopa, who is also second deputy secretary-general of the ANC, said that taking it away next year will deepen hunger and poverty in SA.
He did not say how the extension should be funded. “The grant is a necessity irrespective of the fiscal conditions,” she said.
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