Godongwana says budget cuts won’t go over government’s underspending

Finance Minister Enoch Godongwana has defended the government’s planned expenditure cuts ahead of the medium-term budget policy statement (MTBPS).

Officials from the National Treasury appeared before Parliament’s Standing Committee on Finance on Tuesday to present the department’s 2022/2023 annual report.

The presentation comes less than a few weeks from the MTBPS, which Godongwana will deliver on 1 November.

Expenditure cuts

Godongwana told the committee on Tuesday that National Treasury will announce budget cuts in the medium-term budget.

He said the budget cuts were necessary because raising taxes or the funds borrowing ceiling would make it difficult to deal with the fiscal gap between revenue and expenditure.

The minister explained that raising taxes would be burdensome to do in a year.

He also said increasing borrowing was also a strenuous pathway as South Africa’s borrowing costs have already reached a high level, and this could negatively affect the budget.

In light of the circumstances, Godongwana said the last alternative was expenditure cuts.

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“We have been quite careful as we are going to show on the 1st [of November] in dealing with expenditure cuts,” he said.

The minister indicated that the budget cuts would not exceed the underspending of government departments of nearly R30 billion from the last financial year.

“The departments in all spheres of government underspent by R28 billion in the last financial. I can assure you as we are going to demonstrate on 1st November that expenditure cuts are even below that normal underspending of R28 billion [because] in the previous year it was R36 billion.

“So if you look at that our approach has been moderate of combining expenditure cuts but [bumping] up some borrowing, but in a sustainable way,” Godongwana said.

Watch the meeting below:

‘SA not running out of money’

Earlier this year, Godongwana denied that the government would soon run out of funds.

“Government is working to manage public finances in a prudent and sustainable manner.

“This includes appropriately responding to the materialisation of risks, including unforeseen economic and financial conditions. To be clear, the government has not run out of money,” Godongwana said in response to a parliamentary question by Economic Freedom Fighters (EFF)MP Mzwanele Manyi.

The government has recently come under fire from political parties and unions over the Treasury’s planned budget cuts as the cost-cutting measures would impact service delivery.

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