State-owned logistics company Transnet and power utility Eskom have been excluded from the National Treasury’s updated set of cost-containment measures affecting national departments and provinces.
However, the Treasury urges the two entities to take into consideration the guidelines, which include cuts on hiring, capital spending, travel and conferences, and catering. “While [the guidelines] do not apply to schedule two public entities, the executive authorities and accounting authorities of these entities are strongly urged to take these guidelines into account and implement similar measures,” the Treasury said in a note published on Monday.
The guidelines are intended to assist accounting officers and authorities “to significantly reduce the pace of expenditure within their portfolios in the current financial year”. The Treasury is reining in public spending due to an estimated revenue shortfall of R22bn for 2023/24.
“These constraints are worsened by the wage agreement for the public service, signed in March 2023, which was not accommodated in the Budget Review 2023 and for which clawback mechanisms have not yielded results that would mitigate potential negative impacts,” said the Treasury.
The explanatory note does not detail how much the government estimates it could save through the cuts, but says the cuts apply only to spending over the next six months.
“The implementation of these (and other institution-specific) measures should result in a reduction in spending over the next six months,” it says.
The explanatory note comes after outrage from civil society and labour unions about the initial cost-containment guidelines sent to government departments in August. In the letter, the Treasury noted that the government faces “unprecedented” challenges for the current fiscal year and instructed departments and provinces to implement a hiring freeze.
It also halted the advertising of new procurement contracts for infrastructure projects unless approved by the Treasury, and called for drastic cuts on spending for travel, catering, conferences and workshops.
Unions rejected the proposals, and met President Cyril Ramaphosa and cabinet members last Wednesday.
Business Day understands Ramaphosa is due to meet organised business within the next month when cost-containment measures will be on the agenda. Business Leadership SA has warned the government against implementing growth-sapping policies that are likely to deter business from investing.
“There is a significant risk of populism dominating, leading to a reckless expenditure splurge exactly when the country can least afford it. That would be sharply negative for the business environment, sucking money out of the economy to fund the government ... and raising fears of a financial crisis when government could no longer pay its debts,” CEO Busi Mavuso said in a statement on Monday.
“In the February budget, the National Treasury planned to raise more than R2bn in debt every working day this year. That number will have to rise, but pushing it up significantly would have dire consequences.”
In the updated guidelines, the Treasury says projects already in the pipeline are exempt from the cuts, but provinces and departments should consider postponing new spending on projects until March 2024. “When deciding on which projects to postpone, accounting officers and accounting authorities must facilitate the delayed implementation and manage any legal risks and ensure government will not be liable for claims due to any such decision.”
Finance minister Enoch Godongwana is expected to announce more cost-containment measures in his medium-term budget on November 1.
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