Nene gets ready to zip up the money bag

A rude awakening awaits South African Airways and other state entities hoping for easy government bail-outs.

Finance Minister Nhlanhla Nene will this month announce major cuts to the budget as the government grapples with the financial constraints South Africa finds itself affected by.

The full details of what will be slashed will be made known when Nene delivers his maiden medium-term expenditure framework, on October 22.

But at an extended cabinet meeting on Wednesday, ministers, deputy ministers, provincial premiers and MECs were given a glimpse of the grim outlook, which includes slashing billions from provincial budgets.

It is understood that state-owned enterprises such as Eskom and SAA will be under strict orders to rein in expenses and that parliament will be told to forget about its massive expansion plans.

Provinces with a history of fruitless and wasteful expenditure will not find it easy to access money that is not ring-fenced for specific programmes.

Alarm bells began to sound in political circles this week when the usual post-cabinet press briefing was not scheduled.

Tensions heightened when Western Cape premier Helen Zille tweeted some ominous notes: "Budget cuts embargoed for announcement by the Minister of Finance in adjustment budget."

She followed this with: "Drastic cuts indeed but embargoed till the announcement by the Minister of Finance."

Her spokesman, Michael Mpofu, said the contents of the discussions were confidential.

Cabinet spokesma n Phumla Williams confirmed that the cabinet had discussed the medium-term budget.

A spokesman for the National Treasury, Jabulani Sikhakhane, said he could not comment on the content of Nene's medium-term budget policy statement until the minister delivers it in 17 days' time.

"Treasury manages the budget process and promotes the country's fiscal framework. But the fiscal framework and budget allocation decisions are made by cabinet based on the recommendations of the ministers' committee on the budget, which is chaired by the minister of finance, approved by cabinet and ultimately voted on by parliament," Sikhakhane said.

Nene will be under pressure to find money for big new projects such as nuclear power plants, for which no requisite budget has yet been approved.

SAA and SA Express are seeking another state bail-out following a tough financial year.

Public Enterprises M inister Lynne Brown this week said it would be "premature to speculate about what kind of assistance" would be given. She said her department was working on a government aviation model that would make such entities financially viable.

"Both airlines are in financial distress and I believe the ultimate aviation model will determine what financial assistance they will need," she said.

Nene's planned budget cuts are likely to further strain the government's relations with the ANC's trade union allies.

A day after the extended cabinet meeting was told of Nene's plans, President Jacob Zuma reassured teacher union Sadtu that the government would "review" salaries in the sector.

This has given the union hopes of high salary increases for public sector teachers in the new financial year. Cosatu president Sdumo Dlamini told delegates at the Sadtu congress this week that the federation would abandon three-year wage agreements with the state in favour of annual increases.

News of the good times being over for civil servants has begun filtering through, with Arts and Culture Minister Nathi Mthethwa first off the starting blocks.

Mthethwa's spokesman, Sandile Memela, confirmed yesterday that departmental delegations travelling locally and abroad would be cut by 75%.

Earlier projections showed the borrowing requirement for the main budget likely to increase from R168.5-billion in 2013/14 to R183.9-billion in 2014/15. Interest payments were projected be the fastest growing expenditure item, reaching R140-billion in 2016/17. Compensation of public servants accounts for 39.4% of the budget of non-interest spending, and continues to outpace inflation. - With additional reporting by Isaac Mahlangu

joubertj@sundaytimes.co.za