The weaker-than-expected economic growth outlook for 2016 compelled Finance Minister Pravin Gordhan to revise some of the spending plans announced in the mini-budget in October last year.
As a departure point, National Treasury has reduced expenditure by R25bn over the next three years. This is done by and large through curbing departments’ compensation budgets so that funds can be allocated elsewhere for higher education, drought relief and funds for the New Development Bank.
“At the time of the Medium Term Budget Policy Statement spending on compensation was expected to grow by 8,2% over a three-year period,” Gordhan said. This increase reflected the public sector wage agreement that was concluded in the middle of last year, which was in excess of inflation.
This will demand from government departments to revise their human resource plans, Gordhan said, which means there will be a block on non-critical vacant posts, while the payment of performance bonuses and promotions of staff will need to be balanced against the need to retain critical staff.
Government has allocated R16,3bn to make provision for the freeze in tuition fees at universities in 2016 and clear student debt through the National Student Financial Aid Scheme (NSFAS) for the years between 2013 and 2015.
South Africa will contribute close to R12bn towards the New Development Bank (also known as the Brics Bank), while R3bn has been set aside as a contingency reserve, should emergencies arise.
Source: Fin 24
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