Treasury proposes drastic cuts in government spending

In the guidelines on cost-containment measures for the 2023/24 financial year, Treasury advises accounting officers and accounting authorities on specific measures required to achieve much-needed savings.

In the guidelines on cost-containment measures for the 2023/24 financial year, Treasury advises accounting officers and accounting authorities on specific measures required to achieve much-needed savings.

Published Sep 20, 2023

Share

The National Treasury has proposed drastic cuts in government spending relating to recruitment, travel, accommodation, catering, capital projects, and replacement of working equipment, including computers and cellphones, in the next six months as part of fiscal consolidation as the government forecasts a R22 billion tax revenue shortfall.

In the guidelines on cost-containment measures for the 2023/24 financial year, Treasury advises accounting officers and accounting authorities on specific measures required to achieve much-needed savings and prevent the materialisation of potentially crippling resource constraints in the later part of the financial year.

In the document, Treasury said the current fiscal challenges originate mainly from an exceptionally large year-to-date decline in government tax revenue collections and tighter financial conditions that have constrained the government’s borrowing programme.

“These constraints are exacerbated by the wage agreement for the public service, signed in March 2023, which was not accommodated in the Budget Review 2023 and for which claw-back mechanisms have not yielded results that would mitigate potential negative impacts,” it said.

“The guidelines outlined here are therefore only applicable for the remainder of the 2023/24 financial year and apply to national departments, schedule 3 entities and provinces.

“While they do not apply to schedule 2 public entities, the executive authorities and accounting authorities of these entities are strongly urged to take these guidelines into account and implement similar measures.

“These guidelines intend to assist accounting officers and accounting authorities to significantly reduce the pace of expenditure within their portfolios in the current financial year.”

On recruitment, Treasury drafted a directive to assist executive authorities to operate within the medium-term expenditure framework (MTEF) and financial ceilings for their departments when creating and filling vacant posts, in line with its structure after consultation with the Minister for the Public Service and Administration.

For the next six months, an executive authority must consult with the Minister for the Public Service and Administration on all changes to the organisational structure affecting all units or posts regarding the creation of units and posts and functional reorganisation within the key programme.

“Before creating a post for any newly defined job, or filling any vacancy, an executive authority must confirm the need for the post to meet the department’s objectives, in line with specific criteria as advised by the Department of Public Service and Administration (DPSA),” reads the guidelines.

“An executive authority must submit a motivation, for creating or filling of a post on Persal or Persol to the Minister for the Public Service and Administration for concurrence.”

On travel, the guidelines state that the relevant accounting officer or accounting authority should consider alternatives to travel, including the possibility of attending meetings through virtual platforms, or delaying the need for travel, where possible.

“All accounting officers and accounting authorities should submit pre-planned consolidated travel plans as part of the in-year monitoring (IYM) to the National or Provincial Treasury (where relevant) and the executive authority, on a monthly basis, for monitoring purposes,” the document states.

For conferences, workshops and catering, Treasury said no catering should be provided where a meeting, conference or workshop is arranged by a department or government component, unless approved by the accounting officer.

Spending cuts will also extend to capital projects as Treasury said that accounting officers and accounting authorities should consider postponing the implementation of capital projects that have not yet commenced until March 31, 2024.

However, projects that are already under way or projects for which procurement processes have been completed and contract(s) awarded should proceed.

Accounting officers have also been advised to consider postponing the replacement of machinery and equipment until March 31, 2024.

This includes items such as desktop and laptop computer equipment, telecommunications equipment, vehicles and construction equipment.

“The implementation of these measures should result in a reduction in spending over the next six months,” Treasury said.

“The resulting surplus as at March 31, 2023 will, for schedule 3A public entities, be subject to the requirements of National Treasury Instruction 12 of 2020/21 on Retention of Surpluses. Departments, on the other hand, will be required to surrender any unspent voted funds to the relevant revenue fund as required by Treasury Regulation 15.8.1.”

BUSINESS REPORT