Budget decisions impacting key public institutions
The Public Service Accountability Monitor (PSAM) notes the tabling of the Medium Term Budget Policy Statement (MTBPS) and Adjusted Estimates of National Expenditure (AENE) by the Minister of Finance, Enoch Godongwana on 11 November 2021.
Given the context in which the COVID-19 pandemic exacerbated existing public service burdens and placed increased pressures on public finance management systems (PFM), actions to safeguard public resources and optimise social spending are ever-vital. In his Budget Speech, Minister Godongwana acknowledged the adverse impact on social expenditure resulting from government bailouts to dismally managed state enterprises
in excess of R 290 billion since 2013. These bailouts have drawn funds away from social services and seriously undermined constitutional rights, commitments and responsibilities. Bailouts have also occurred despite serious and extended PFM failures within many state enterprises. Meaningful consequence management for such failures is long overdue.
The resourcing of key public institutions tasked with revenue collection, data collection and preventing or addressing PFM abuses is vital to achieve national development objectives. Despite this – in the February 2021 budget, institutions that foster state capability collectively had their budgets reduced by 21.8% from the 2019/20 budget. A further decrease by 40.1% in 2022/23 was projected. This included reductions of R 1.3 billion and R 996.7 million to the South African Revenue Services (SARS) and Statistics
South Africa budget respectively over the Medium Term Expenditure Framework (MTEF).1 The allocation to the Special Investigating Unit’s (SIU) is expected to be cut by R134.2 million over the MTEF. This is despite the SIU’s existing capacity constraints and its vital role of recovering public money lost through acts of corruption in state institutions. The SIU’s own 2021/22 Annual Performance Plan cites its current funding context as a risk to its ability to sustain operations for its investigative work. No adjustments were made to the SIU’s budget in the 2021 AENE.
There is need for decisive consequence management to confront ongoing fruitless and wasteful expenditure incurred by state-owned entities. This includes inefficient procurement practices, contract management and overpayments by entities like Eskom as revealed by the Auditor-General in the recent Budget Review and Recommendations Reports deliberations.
The PSAM is deeply concerned by these trends and calls on the Cabinet and National Treasury to take steps to mitigate the risks of budget reductions to the baselines of key institutions tasked with amongst others, revenue collection and recovering funds used for illegal purposes. Weakened state institutions and poor oversight boost opportunities for rampant corruption.
By ensuring that the above public institutions are adequately resourced (budgets and expertise) and by engaging those most affected by failures in public resource management, South Africa will be in a better position to enhance the social benefits of public spending. This includes concerted efforts to deepen transparency and public participation in fiscal policy. The PSAM is encouraged by initial progress in the introduction of the pilot pre-budget consultations held in September 2021.2 We urge the National Treasury to ensure continued momentum and inclusion of multiple stakeholders as the pilot grows.
The stalling of the Draft Public Procurement Bill is a cause for concern. We note Minister Godongwana’s assertion that the National Treasury is reaching “final stages of finalisation of the Bill”. While we’re encouraged by this, we caution against processing the Bill without fully considering and engaging with public comment made to date in a transparent and inclusive manner.
Lastly – we reiterate calls by the the Budget Justice Coalition for the government to fulfil its obligation to utilise the maximum of its available resources to fulfil socio-economic rights in South Africa.
For media enquiries please contact PSAM Programme Head for South Africa Zukiswa Kota: email@example.com / 064 870 5700.
- These budget figures relate to allocation of revenue from the National Revenue Fund which excludes revenue generated from other sources (the consolidated budget).
- Further information available via www.vulekamali.gov.za