MTBPS: Cutting government spending, keeping the SRD grant

Government spending has long been identified as a major contributor to the country’s financial woes and the MTBPS contained some plans to cut government spending that has been revised down by R21 billion, with further proposed reductions of R64 billion in 2024/2025 and R69 billion in 2025/2026.

Minister of Finance, Enoch Godongwana said the implications of these adjustments will be partially offset by departments implementing the cost containment guidelines issued by the National Treasury as well as the implementation of control measures on payroll systems and the recommendations from the spending reviews conducted in the past two fiscal years.

He said government made a strategic decision to allocate funds to sectors that are personnel heavy, such as health, education and police services with additional funding of R24 billion this year and R74 billion over the medium term to fund the 2023/2024 wage increase and the associated carry-through costs.

Government decided to allocate R34 billion to extend the Covid-19 Social Relief of Distress (SRD) grant for another year. Godongwana said a provisional allocation is retained while a comprehensive review of the entire social grant system is finalised over the medium term.

The presidential employment initiative will also be extended for another year by repurposing a portion of funds from existing public employment programmes, such as the Expanded Public Works Programme and the Community Works Programme while a comprehensive review of public employment programmes is underway.

Additional allocations for the current year was also made for unforeseeable and unavoidable events. R1,6 billion goes to disaster relief that will include repairing flood damage in various provinces.

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Division of revenue in MTBPS

Turning to the division of revenue, Godongwana said government proposes allocating 48% of available non-interest spending to national departments, 42.1% to provinces and 9.9% to local government over the next three years.

Noting that financially stable municipalities are the foundation of the nation’s economic prosperity, Godongwana talked about water provision and the management and state of the country’s wastewater systems.

“To address this challenge, government is making changes to conditional grants, starting with the urban settlement development grant, the integrated urban development grant and the municipal infrastructure grant. These changes include reconfiguring grants and revising the grant conditions to align them with the Green Drop, Blue Drop and No Drop assessments relaunched to ramp up the performance of water service authorities.”

He said Treasury will also work with local governments and the department of cooperative governance and traditional affairs to develop new funding models, so that municipalities can continue to earn revenue through the transition to more self-generation of electricity by firms and households.

With growing pressure from climate change on infrastructure, especially at the local level, Treasury created a resource pool to specifically respond to future disasters and added R372 million to the municipal disaster response grant and R1,2 billion to the municipal disaster recovery grant to cover the repair and rehabilitation of infrastructure damaged by flooding in February and March 2023.

Godongwana said mitigating the environmental risks posed by climate change must go hand-in-hand with addressing the financial and economic risks posed by climate change and Treasury is making progress to develop a disaster risk financing strategy to enhance existing risk financing instruments.