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Nene lowers spending ceiling

Nicola Mawson
By Nicola Mawson, Contributor.
Pretoria, 22 Oct 2014
A clamp-down on spending will not affect service delivery, says recently-appointed finance minister Nhlanhla Musa Nene.
A clamp-down on spending will not affect service delivery, says recently-appointed finance minister Nhlanhla Musa Nene.

As SA's economy continues to come under pressure, the state is set to clamp down further on spending, and the bulk of the revised budget will go towards social services such as education, health and social security.

The government aims to create 11 million jobs by 2020, but the current economic growth rate - projected at 1.4% for the year and rising to 3% by 2017 - is too slow to fill this need. As a result, spending will focus on key interventions that will boost employment levels, with a focus on doing more, with less.

Recently-appointed minister of finance, Nhlanhla Musa Nene, presenting his first budget speech in Parliament this afternoon, noted the country faced several challenges, including slower than expected economic growth, unemployment (officially at 25%) lower tax collections and state spending that achieves "less than it should".

"The budget framework we table today is focused on restoring balance to the nation's finances, bolstering investment and achieving better value for money in public expenditure."

The medium-term budget policy statement comes mid-way through the state's financial year and provides it with an opportunity to shuffle spending to meet new priorities.

Spending focus

Government's three spending priorities are on supporting cities to improve living conditions and improving transport and communications infrastructure, reinforcing support for export competitiveness, and expanding the skills base, said Nene.

Although education and health get the bulk of state spending, the adjusted budget focuses heavily on infrastructure spending.

Government will continue to roll out its capital investment programme, says National Treasury, and will encourage private sector participation in infrastructure delivery.

It also notes telecoms investments such as the completion of FibreCo's 2 000km fibre-optic network, Vodacom and Cell C's network upgrades, and the rollout of municipal WiFi hotspots will expand broadband access and speed.

Has to happen

However, in a bid to increase investment and productivity, there will be "difficult short-term adjustments", said Nene. He noted government will spend about R6 billion less than was anticipated in the February speech and said the state was now forced to look at additional measures to improve the economy. "The choice we face in considering these proposals is a difficult one. But we believe that this course can no longer be postponed."

Nene said government would introduce measures to trim the budget deficit, currently at R180 billion, as well as encourage savings and increased "productive" investment. The spending ceiling will be lowered to R10 billion next year, and R15 billion the year after, through freezing the budget of non-essential items, withdrawing funding for posts that have been vacant for some time, and reducing the rate of growth of transfers to public entities that have cash reserves.

Additional measures include capping allocations for consulting services, as well as cutting spend on travel, catering and conference venues, said Nene. However, he emphasised the state would not "balance the budget on the backs of the poor" and service delivery would not be compromised.

"Two years of fiscal consolidation will put the public finances on a sustainable footing," says the policy statement.

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