Cape Town: The Minister of Finance Pravin Gordhan today detailed several initiatives to reign in the widening deficit and improve the impact of spending by, among other things, investing the balance of resource allocation in new infrastructure.
Presenting his Medium Term Budget Policy Statement in the National Assembly, Gordhan said the budget deficit was expected to widen from 4.2% in 2011/12 to 4.8% in 2012/13, before falling to 4.5% of GDP in 2013/14 and narrowing to 3.1% of GDP by 2015/16.
The National Treasury has proposed reforms that will focus on developing a procurement system that prioritises value for money and that strengthens the fight against corruption.
These initiatives will be led by a Chief Procurement Officer in the National Treasury.
Gordhan said the National Treasury had completed the preparatory work needed to set up the position, drawing on international best practice, and key appointments would be announced shortly.
The National Treasury also plans to introduce safeguards, such as reviews by the Auditor-General and the Parliamentary Standing Committee on Public Accounts, for tenders above a certain amount.
It also wants to assign authority and improve capacity within the National Treasury to investigate the value for money associated with tenders.
The National Treasury also wants to institute a series of detailed expenditure reviews to consider the outcomes that are achieved from the use of public finances.
There is also a plan to strengthen the anti-corruption system by providing additional
resources to agencies such as the Office of the Public Protector, the Anti-Corruption Task Team and others, he said.
The government is expected to spend R1.06 trillion in the current financial year, rising to R1.1 trillion in 2013/14, R1.2 trillion in 2014/15 and R1.3 trillion in 2015/16.
Of the government’s R1.1 trillion expenditure for 2012/13, the bulk will be spent on health and social protection (R246 billion) and education (R220 billion).
The biggest rises in spending between 2012/13 and 2015/16 are in employment and social security (9.1%) and local government and housing at nine percent.
The government had decided not to make any upward adjustment of the spending projection set out in the 2012 Budget, tabled in February, over the next two years – namely in 2013/14 and 2014/15.
In preparing their medium-term plans – for spending over the next three years – departments have been required to reprioritise spending away from underperforming programmes and identify savings within existing budgets.
Over the next three years the real growth in compensation of state employees would average 1.3%, while capital payments would grow at 4.3%.
The wage agreement reached this year between the government and public-sector unions was higher than projected in Gordhan’s 2012 Budget tabled in February, and will cost the R37.5 billion over the next three years.
This will absorb a large portion of the allocations the National Treasury had made available through reprioritisation.
Gordhan wants the government in coming years to take a more deliberate approach to managing overall employment and wage trends across the public sector, including state-owned entities, by in particular curtailing unwarranted growth in personnel numbers.
To free up additional allocations, the National Treasury has also reprioritised R40 billion in funds, which combined with drawdowns from the contingency reserve will allow budget baselines to be revised without effecting an increase in government spending.
The funds will be shared between national, provincial and local government, to help pay for the higher cost in the public-sector wage bill and to meet government priorities.