Gordhan cracks whip ahead of 2012 budget

2012-02-18 13:36

Even before the 2012 national budget has been delivered, Finance Minister Pravin Gordhan has already fired the first salvo against wayward spending, and corruption and fraud in the public service.

On Wednesday, Gordhan is expected to deliver a R1 trillion budget – the first time the government will spend such a gigantic amount – and the Treasury’s political boss is likely to remind his colleagues to refrain from misusing public funds at a time when many countries were teetering on the brink of bankruptcy.

Gordhan ordered the Treasury to intervene in Limpopo after five departments, including the province’s Treasury, became technically bankrupt. The central government is now running the province’s finances after the National Treasury found it was in deficit to the tune of R2 billion due to reckless spending.

Gordhan is also dealing with tackling head-on the problem of ever-growing expenditure on social grants. There is suspicion that the grants system is riddled with fraud and corruption, hence there is a drive to reregister 15.2 million grant recipients.

Last October, the Treasury estimated that spending on social protection would rise from R160 billion in 2012 to R182b illion in 2014.
Monica Rubombora, senior director at consultancy Accenture, said the reregistration cost of grant recipients was likely to be huge.

“The abuse and maladministration of the current social security system emanates from the application and verification processes,” she said.
“That’s where all the syndicated fraud and grants being issued to the wrong people – or dead people – emanates from,” she said.

The state could save handsomely if ghost beneficiaries are cleared from the system.
Gordhan is also watching closely the rising state debt.

In an interview with City Press last October, Treasury director-general Lungisa Fuzile warned that taxes could go up if state debt did not come down.

“The government debt levels remain manageable for now. We expect it to be manageable
even when it peaks at around
40% of the gross domestic product. We expect government debt to level off beyond 2015 if economic growth accelerates.

“But if growth does not reach projected levels, we may have to cut spending on things that do not induce growth. We may also look at increasing taxes,” said Fuzile.

Recent developments, where the Treasury had to intervene in Eastern Cape, Gauteng, Limpopo and Free State, make the ground fertile for taxes to rise.

Economist Mike Schussler said Gordhan was likely going to announce tough control measures that would curb state wastefulness.

“We could see the minister putting in place control measures to deal with government departments and provinces that have misspent their state finances,” said Schussler.

“This announcement could have the biggest political implications,” he said.

Schussler urged Gordhan to roll out the controversial wage subsidy.
He predicted that Gordhan would announce measures resulting in the government paying for the toll routes controversially erected by the SA National Roads Agency.

Eskom economist Kabelo Masike said it was unlikely that taxes would go up because the economy was in a bad shape.

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