Finance Minister Pravin Gordhan is scheduled to present the medium term budget on 26 October. Nobody should be under any illusions: the economy is facing severe challenges, and Gordhan will face a tough balancing act allocating government spending in a way that benefits all South Africans.
It’s no surprise that ordinary South Africans are being told to tighten our belts. We’re told not to be extravagant and to try do more with less. That’s fair enough, but isn’t it fair to expect the same of government? When revenue is scarce, shouldn’t they also make every effort to do more with less?
One word crops up repeatedly when we talk about President Zuma’s cabinet: ‘bloated’. Critics argue that there are too many ministries and that they don’t offer adequate value. In addition, large amounts of money are spent on luxury ministerial vehicles, travel and VIP security.
Of course, ministers and their deputies do important work, and need the means to do their jobs safely and efficiently, but there are limited amounts of cash available: there’s money for prestige projects like a new presidential jet or to increase the education budget, but not both.
Conspicuous spending at the highest level makes for sensational headlines, but some of the most significant expenditure is more mundane. The South African government employs a staggering number of civil servants (more than 2.6 million), who earn higher wages on average than private sector employees.
Government employees comprise a huge range of specialisation and skill levels – refuse collectors, teachers, directors general – and they do vital work keeping the country running. However, given that so much of the budget goes to public service salaries (33%), shouldn’t we spend at least as much time demanding real value from our civil service as we do scrutinising the ministerial parking lot?
In his budget speech in February, Gordhan undertook to cut the wage bill by reducing managerial posts and hiring fewer non-essential workers. Hopefully, the medium term budget will show progress towards efficiently managing government salaries.
State Owned Excesses
Economists differ on the value State Owned Enterprises offer to citizens. Some insist that state companies should be privatised. Others hold that SOEs offer the public better value services and help further public policy objectives. But everyone can agree that these companies need to be run efficiently and not waste public cash. It’s one thing for a public electricity utility to run at a modest loss in the service of providing everyone with cheap and reliable electricity. It’s quite another for a public airline to incur massive losses for no good reason at all.
An investigation by BusinessTech reveals that in the 2014/15 period, passenger rail service Prasa posted an operational loss of R1.2 billion. Over the same period, SAA lost R2.5 billion. Arguably, a reliable rail train service is important to the functioning of the South African economy. But what possible reason is there to lose billions on a state airline?
Complaining about corruption is a national sport. It’s really hard to find accurate data about how much is really lost to corruption, but it’s clearly a serious problem. Every cent that gets diverted away from its official purpose is money that is effectively lost from the budget.
Corruption also creates secondary wastage. Awarding tenders to providers that pay the biggest kickback, rather than selecting service providers based on quality and cost effectiveness, leads to wasted expenditure and inefficient services.
A full 12% of the budget goes towards servicing the national debt. If South Africa is downgraded to junk status in December, this cost of interest will only grow. As any household that needs to meet mortgage and car repayments knows, creditors are always first in line and the higher your interest burden, the less you have to spend on essentials. We simply cannot afford the financial cost of gratuitous political instability.
What is to be done?
Public discussions about the budget are often superficial. We tend to either consider the budget as an abstract economic treatise for experts to debate amongst themselves or we think no further than whether we will have to pay a few rand more for a pack of cigarettes or a can of Coke. In fact, the allocation of state spending – and how efficiently that spending is used – has profound and far-reaching consequences for the health of our nation. The shortfall of funding at universities, and the resulting disorder, is a dramatic example.
How do you think Pravin Gordhan should spend your tax rands? Let us know on Facebook or send us a message. We’ll include the most interesting suggestions in our upcoming feature, Guidance for Gordhan. Let’s make our voices heard.