The relationship between the Treasury and the rest of government has never been easy. As the former attempts to rein in spending and stick to budget projections, ministers and provinces plead for resources to fulfil their mandates to the public. This year, in the run-up to finance minister Enoch Godongwana’s midterm budget, tensions are likely to reach a new high.
In a document that came to light last week, further elaborated on this week, the Treasury sounded the alarm on South Africa's public finances, which have come under increasing pressure. Inflation, rising energy prices, the Covid lockdown and the continued slump in the rand’s value against the dollar have all exacted a toll.
In addition to exogenous factors, President Cyril Ramaphosa’s government faces a raft of challenges that are arguably of the government’s own making. The collapse of state logistics utility Transnet, which last week reported a R5.7bn loss, is an example of a self-inflicted wound that has landed the country on skid row, incapable of fully capitalising on the recent commodities boom and losing out on much-needed tax revenue.
Ramaphosa came into office in 2018 promising a slimmed-down cabinet. But the expected cuts to executive bloat never took place. The cabinet remains one of the world’s biggest, and, some might argue, the least effective.
Previous attempts to limit luxuries for cabinet ministers, in the form of cars, ministerial houses and other perks, had little success.
In addition to exogenous factors, the government faces a raft of challenges that are arguably of its own making
The wage bill for public servants increasingly consumes resources that might be better deployed elsewhere, and while some say that the public service is too big, there are hundreds of unfilled posts. Other spending areas that consume enormous amounts of public funds include social grants, especially the relief of distress grant that was introduced during the Covid lockdown.
The Treasury wants departments to fund increases through their own budgets, which is a steep ask.
One thing is clear: as a country we are living way beyond our means. Worse still, while government expenditure has climbed exponentially, the services provided are of indifferent quality, forcing greater numbers of people to cough up for private-sector alternatives.
Treasury’s call on departments to cut luxuries and perks must be supported, although its freeze on new infrastructure will raise concerns about the impact on much needed economic growth.
The option of raising taxes to fund a projected shortfall is likely to be unpopular, especially with a middle class that would pay such taxes already under strain. But it will have to be considered.
The only variable that would make a real and lasting difference would be a significant increase in growth, which is being held back by policy uncertainty and failure of critical public entities, such as Eskom and Transnet. Only growth can dramatically expand the fiscus and if that means slaughtering a few sacred cows of ruling-party policy, so be it.
Without that, we risk becoming a country that is effectively bankrupt, providing a semblance of services to the people while the politicians continue to live as if money grows on trees. It’s time they internalised that fact that it doesn’t.
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