The government could save R12bn a year by 2029/30 through a three-year phase-out of inefficient and underperforming programmes, parliament’s appropriations committee was told on Wednesday.
Wastage in expenditure has been put under intense focus by opposition parties since the tabling of the budget last week as they argue that reducing this could obviate the need for the proposed VAT increase.
They have demanded expedited spending reviews, though the government has largely failed to implement the 240 spending reviews that have taken place.
Deputy finance minister Ashor Sarupen said questions needed to be asked as to what had happened to these reviews.
Finance minister Enoch Godongwana said in his budget speech last week the consolidated recommendations of the spending reviews undertaken would be resubmitted to cabinet for endorsement in April.
President Cyril Ramaphosa has undertaken to establish a mechanism to identify waste and inefficient and underperforming programmes.
The Treasury has promised to conduct an audit of ghost workers and to consolidate the multiplicity of labour market activation programmes across the government.
Ronette Engela, acting head of the Government Technical Advisory Centre, an independent unit in the Treasury, said there was a potential for the government to identify 1% of total spending — about R20bn per year — on programmes that deliver below-average social value.
Restructuring or eliminating such programmes could save about R12bn a year by 2029/30. “These programmes could be subject to a phased reduction in funding over the medium-term expenditure framework,” Engela said.
Spending reviews could assess whether the identified programmes should be permanently eliminated or restructured. Half of the savings could be placed in the contingency reserve allowing for their reinstatement if this was justified by the spending reviews.
Engela warned that strong political decisions were needed.
Spending reviews conducted by Treasury officials in 2020/21 and 2021/22 identified potential savings of R40bn over three years on total expenditure of R306bn in several government clusters using data from 2017/18 to 2019/20.
These included justice and crime prevention services, urban development and infrastructure, learning and culture, health, social development, economic services and general public services. This initiative would have to be repeated using updated data.
Treasury acting head of public finance Rendani Randela cited a number of savings and reprioritisations had already been effected. He added a number of the low-hanging fruit of the spending reviews had been implemented.
Engela said the government’s budgeting process was being redesigned and assumptions informing budget allocations reassessed. Spending reviews had shifted from a focus on efficiency savings (less money, same output) to strategic savings which focused on cuts (less money, less outputs) of lower-priority programmes.
She cited ways in which the government wasted money — for example by spending on procurement that did not deliver least-cost solutions. The cost of goods and services procured was unduly high due to the cost of middlemen or intermediaries, corruption, skills deficiencies and multiyear contracts which are not well managed.
Engela noted policies were often designed with little or no consideration of costs and trade-offs. Less successful projects and ineffective programmes were seldom closed down.
“The growth in the number of public entities (100 to 279 from 1999-2019) and the expansion in the number of programmes has resulted in an expansion in the cost of running government.”
Institutions had overlapping mandates and policy goals for example in the economic development and heritage sectors.
But Engela noted that while shared services could result in savings this could require caution as they could involve independent constitutionally created institutions.
She cited the rise in compensation spending as the most potent driver of rising costs in the government growing more quickly than nominal GDP.
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