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 26 October 2022. Notable adjustments and policy commitments announced include increased allocations to key institutions tasked with implementing recommendations of the Zondo Commission of Inquiry into State Capture (Zondo Commission), restoring financial health in municipalities, efforts to avoid greylisting and procurement reform. While the MTBPS shows some commitment to solving persistent challenges, there is very little detail on how this will actually be achieved. Many of the important decisions, including long term plans for the SRD grant, the public sector wage bill, and the Eskom debt burden have been deferred to the 2023 Budget.


The MTBPS emphasises National Treasury’s commitment to “improving state capacity, project planning and preparation, procurement practices and contract management” while acknowledging dire governance challenges. Reportedly, 43 municipalities are in crisis. Intervention plans include
prioritising, revenue management, audit outcomes, supply chain management and the Municipal Standard Chart of Accounts. Importantly, strengthening monitoring and enforcement of financial recovery plans is highlighted. The question, however, is how this will be resourced and implemented.


Additional funds have been allocated to stabilise municipalities and improve capabilities to ensure long term sustainability. To this end, local government allocations increase by an average of 2% per year over the MTEF. We further note a commitment from the government to strengthen the capacity of the state, including funding investigative and prosecutorial agencies which will, according to these efforts, aid in rooting out corruption and bolstering financial management in  municipalities.


The Public Procurement Bill will supposedly be introduced in Parliament in March 2023. This is one of many interventions that has been proposed to improve public procurement and prevent maladministration. The delays in finalising this Bill, and the lack of transparency in the final stages of the process are a cause for concern. We reiterate the points made by members of the Public Procurement Reform Working Group (PRWG) here, and urge National Treasury to treat the matter with the urgency that is required to safeguard funds and restore confidence in the state.


The recommendations of the Zondo Commission have also been highlighted in the MTBPS, indicating that additional funds have been allocated to the National Prosecuting Authority (NPA), Special Investigating Unit (SIU), Financial Intelligence Centre (FIC) and SARS to enable the investigation and
prosecution of sophisticated financial crimes. These entities play a vital role in the efforts to address state capture, corruption, and abuse of the procurement system. The quantum of these increases is not available and will likely be elaborated in Budget 2023. The NPA appears to be the only entity receiving additional budget through the 2022/23 appropriations bill, where an additional R721 000 was reallocated within the Department of Justice and Constitutional Development to assist with the new backlog court in Colesberg. This is certainly insufficient given the existing constraints at the NPA, illustrated in the 2022/23 performance, where they fell short on many of their targets. The MTEF allocations for Peace and security, which includes defence & state security, police services, law courts and prisons and home affairs equate to a 2% decrease in real terms on average each year to 2025/26.


National Treasury reports that higher-than-expected revenue collection resulted in an additional R85 billion which will be allocated to health, education and local government amongst others. However, based on the revised CPI projections, these increases are likely to be eroded by inflationary pressure. The Minister indicated that a proportion of this revenue will be used to narrow the budget deficit and address fiscal and economic risks posed by state owned enterprises (SOEs). The continued strain on the fiscus resulting from SOEs is unacceptable. In the 2021 MTBPS, Minister Godongwana acknowledged the adverse impact on social expenditure emanating from bailouts to dismally managed state enterprises, amounting to more than R 290 billion since 2013.
A Special Appropriation Bill was tabled to provide additional funding to the various SOEs. The PSAM reiterates concern with weak management of public resources. Bailouts to SOEs continue to draw funds away from critical social services and are detrimental to constitutional rights and national development plan objectives and Sustainable Development Goals. Previous commitments to holding SOEs accountable and imposing stringent conditions on additional allocations have not proved effective at ensuring that these entities are self-sufficient and well managed.


The MTBPS 2022 indicates a continuation of the same fiscal planning approach evident in previous years. While the shift in focus to structural impediments to growth and stated commitment to reform is welcome, there is very little concrete detail to show how this will be achieved. This is concerning given that the approach to date has not resulted in sustained improvement in conditions. Economic growth remains constrained, and socio-economic indicators are declining across sectors. While the
PSAM appreciates that the MTBPS is delivered in a constrained fiscal environment, we would like to see a firm commitment to safeguarding public funds and bolstering accountability. We contend that this should include the adequate resourcing of state institutions, and urgent implementation of procurement reforms (taking public comments into consideration). Cabinet must show genuine commitment to addressing systemic weaknesses to improve the quality of spend, in the absence of
availability of additional funds to support the realisation of human rights.


ENDS
For media inquiries please contact:
Lindokuhle Vellem, PSAM Research and Advocacy Analyst: lindokuhle.vellem@ru.ac.za or Lisa Higginson, PSAM Budget Advocacy Coordinator: lisa.higginson@ru.ac.za