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Cabinet has moved to allay concerns over the country's fiscal constraints after National Treasury issued a letter to national departments, provinces and public entities proposing radical cost-cutting measures due to a budget shortfall in the collection of revenue.
Minister in the Presidency Khumbudzo Ntshavheni addressed the media on Thursday morning on the outcomes of the Cabinet meeting held the previous day. She addressed concerns over the budget shortfall, saying there was no crisis in government and that South Africa's finances were not on the brink of collapse.
Ntshavheni said:
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The minister's remarks come after Treasury issued a cost-containment letter to all levels of government on August 31, proposing cost-cutting measures, such as a freeze on advertising new positions and awarding procurement contracts for all infrastructure projects.
The letter has raised concerns that government will intensify its austerity measures, with public sector unions warning that service delivery to ordinary citizens is likely to be affected, as departments that are already reeling from previous budget cuts will be further strained.
President Cyril Ramaphosa met with National Treasury officials at a Stellenbosch wine farm last week to discuss the budget shortfall ahead of Finance Minister Enoch Godongwana's Medium-Term Budget Policy Statement (MTBPS) in November. The presidency insists that the meeting was a routine gathering ahead of the MTBPS.
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Ntshavheni said that the budget shortfall was not unique to South Africa, given the state of the global economy, the country's struggling domestic economy, and its debt problem. However, she has added that the Cabinet has instructed Treasury to ensure that fiscal constraints do not negatively impact service delivery.
She stated:
Ntshavheni said Godongwana would soon issue guidelines to clarify the unintended misunderstanding arising from the cost-containment letter issued last month.
“We are hoping that by no later than tomorrow, the guidelines will be out.”
Ntshavheni declined to disclose the specific figures related to the budget shortfall, stating that the finance minister would announce this during the MTBPS presentation in Parliament.
She said:
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Ramaphosa and Deputy President Paul Mashatile will soon meet with individual ministers to review their progress in implementing agreed-upon priorities and ensure that fiscal constraints do not derail these plans, Ntshavheni said. This is part of government's in-year performance review process.
She said that government was not considering scrapping any projects or programmes due to the state of the country’s finances, adding:
Ntshavheni said that Godongwana would announce the full measures that government would take to address the budget shortfalls during MTBPS. She added that the presidency was in discussions with Treasury about reducing the size of the Cabinet to tackle the budget shortfalls.
“There is work to review the entirety of government, which is the work that is being undertaken by National Treasury and the presidency.”
