Cape Town – With very little fiscal manoeuvering space, government departments will have no choice but to cap spending on non-core and non-performing programmes, according to Minister in the Presidency Jeff Radebe.
Announcing details of the Department of Planning Monitoring and Evaluation’s so-called Mandate Paper on Thursday, which sets out the priority areas for the upcoming budgets, Radebe listed a number of areas in which government departments will have to reduce spending immediately. This can be done by:
- Limiting the use of consultants;
- Placing strict limits on contingency liabilities and litigation costs through developing a mechanism with the Department of Justice to determine cases to be defended or for arbitration;
- Setting pricing parameters and centralising procurement of major items, as well as improving contract management and procurement compliance;
- Helping to combat collusion and strengthening project management of infrastructure projects to prevent cost escalations due to delays; and
- Insisting on good governance and penalise lapses in governance by withholding transfers and/or guarantees.
The notion of a Mandate Paper was first mooted at a Cabinet meeting in August 2016, where ministers acknowledged a greater need for budget prioritisation.
The Department of Planning Monitoring and Evaluation was instructed to develop on an annual basis the Mandate Paper to guide the budget process to ensure a "focused implementation" of Government’s plans, Radebe said.
On August 16 this year, Cabinet approved the Mandate Paper 2018, which will serve as a prioritisation framework for next year’s budget.
Radebe’s department identified the following priorities for the 2018 Budget:
- job creation and small business development;
- youth development;
- infrastructure expansion and maintenance;
- land reform, smallholder farmer and agriculture development;
- comprehensive social security, education and skills;
- an integrated plan to fight crime; and
- advancing the South African national interest in Southern African Development Community, the African continent as a whole, BRICS and Indian Ocean Rim Association.
Radebe pointed out that in the light of slow economic growth and lower government revenues, and in order to limit the growth of debt and remain within prudent fiscal limits, the overall medium-term budget allocations cannot be increased in 2018.
“Therefore, urgent priorities for the 2018 Budget will have to be funded from reprioritisation. In reprioritising, the interests of youth, women, children, small business, the informal sector and the environment must be factored in. Consideration must also be given to high-risk areas such as higher education, public transport and land reform,” he said.
He emphasised that the budget processes will continue to be managed by the National Treasury in terms of the Public Finance Management Act.
Radebe earlier said the Mandate Paper would not “usurp” South Africa’s well-established and highly-respected budgeting processes, or the National Treasury’s overall authority in determining how funds should be allocated.
He acknowledged though that the process of drawing up a Mandate Paper was a significant change in the budget process that will in future consist of two parts – a prioritisation process led by the Department of Planning Monitoring and Evaluation and the Presidency, culminating in the compilation of the Mandate Paper, and the standard allocation process led by the National Treasury, in consultation with departments.
Finance Minister Malusi Gigaba is expected to deliver his maiden budget speech when he delivers the spending framework over the medium term on Wednesday October 25.
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