No election splurge as expenditure ceiling is sustained

26th February 2014

By: Terence Creamer

Creamer Media Editor

  

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Despite slower economic growth in 2013 of 1.9%, Finance Minister Pravin Gordhan announced on Wednesday that the 2013/14 Budget deficit was projected to be 4% of gross domestic product (GDP), a modest improvement on the October projection of 4.2%.

He also stressed that expenditure had been reprioritised to ensure that it remained within the overall ceiling set in the October Medium Term Budget Policy Statement - putting paid to concerns that expenditure could be accelerated in the run-up to the May 7 elections.

It was also announced that the deficit for 2014/15 should be contained at 4%, which would translate to expenditure of R1.25-trillion against revenue of R1.1-trillion. The deficit was expected to fall to 3.6% and 2.8% in 2015/16 and 2016/17 respectively.

The associated Budget Review, which was released alongside the speech, said the reduction of the deficit was the combined result of government’s expenditure ceiling, strong revenue collection and underspending by national departments, provinces and public entities.

The ceiling commits government to spending limits of R1.03-trillion in 2014/15, R1.11-trillion in 2015/16 and R1.18-trillion in 2016/17. Excluding interest payments, real spending is set to grow at an annual average of 1.8% over the three-year period. Net debt would stabilise at about 45% of GDP in 2016/17.

Gordhan said the focus was on rebuilding, over the longer term, the fiscal space to enable government to support business growth and extend a social wage to the country’s most vulnerable citizens. However, more immediately, fiscal consolidation would be pursued to reduce the deficit, while sustaining the social-wage component at 57% of overall expenditure during 2014/15.

The Minister said the emphasis would shift from government spending to sustain growth to facilitating a growth cycle led by the private sector – a process that would require a social compact between government, business and labour that was supportive of job-creating investment.

Attention was also being given to improving the composition and efficiency of spending, while clamping down on leakages, including corruption.

PROCUREMENT REFORM

Major procurement reforms were envisaged, under the aegis of the National Treasury’s chief procurement office (CPO), which is led by Kenneth Brown.

Gordhan said the office had been established, and had made progress in the following areas:
• The development of a standard lease agreement to address defects in government property transactions.
• The standardisation of infrastructure procurement processes and documentation.
• The creation of an inspectorate to monitor procurement plans and audit tender documents.
• Enhanced processing of vendors’ tax clearance certificates to ensure compliance.
• The centralised procurement of health equipment, drugs and medicines, and
• Analysis of the business interests of government employees.

Gordhan said the procurement reforms were guided by the National Development Plan’s vision for an improvement in the quality of outcomes and would be supported not only by the CPO, but also by other organs at various levels of government. It was also possible that members from religious, business and other civil society groupings could be brought in to improve oversight over government contracts and tenders.

Various expenditure reviews and forensic audits were also being undertaken to improve oversight and transparency of tenders and project implementation, with the forensic audit of the Department of Public Works’ lease agreements having guided the reform agenda in that area.

The reviews, which were being undertaken by the National Treasury and the Department of
Performance Monitoring and Evaluation, aimed to provide a greater understanding of performance and identify ways to improve value for money in housing, education and industrial policy. Initial findings would be released during 2014/15.

Gordhan said continued vigilance was required so that wasteful expenditure and corruption could be rooted out, arguing that government tenders and contracts needed to become “no-go zones” for corrupt individuals.

Edited by Creamer Media Reporter

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