Treasury will reject 'unnecessary' funding requests from departments

The National Treasury has warned government departments that it will reject funding requests that do not make sense, and will put each item of state expenditure through a rigorous process before it is approved as part of its zero-based budgeting policy.

“Programmes that have very little impact on economic performance or service delivery will be phased out,” said Treasury said in the Budget Review document.

It has also cautioned state-owned enterprises that requests for bailouts or additional funding from the fiscus will only be entertained if they contribute to improving the balance sheet of these companies.

Around R145bn has been diverted from existing programmes towards the fight against Covid-19 through:

• removing funds that have underspent by departments due to delays caused by the lockdown;
• suspending financial allocations for departmental projects that can be delayed or rescheduled to 2021/22 or later; and
• suspending financial allocations to programmes with a history of poor performance or slow spending.

According to the Treasury, this money is being redirected to education and will be used for the provision of water, sanitation and personal protective equipment (PPE) to schools, as well as the deep-cleaning of school facilities.

It will also go towards providing water to households and sanitising public transport facilities in municipalities that do not receive a public transport network grant.

The government is tightening its belt and urging major restraint on spending as it seeks to return the country to a budget surplus by 2023/24.

This will entail freezing debt at 87.4% of GDP, increasing tax collection and implementing R250bn in spending cuts and other revenue adjustments.

Finance minister Tito Mboweni has announced a R300bn tax revenue shortfall for 2020/21 in his adjusted budget — and debt that is fast approaching R4-trillion.

“Even as South Africa responds to the current health and economic crisis, a fiscal reckoning looms. The public finances are dangerously overstretched. The wide gate is a passive country that lets circumstances overwhelm it. If we remain passive, economic growth will stagnate. Our debt will spiral inexorably upwards and debt‐service costs will crowd out public spending on education and other policy priorities,” he said.

Mboweni said SA risked fiscal and sovereign debt crises similar to those faced by Zimbabwe, Argentina and Greece if things continued in this fashion.

“The results are devastating. Interest rates sky‐rocket. Spending has to stop. Inflation takes hold and people grow much poorer. This is what happened to Germany in the 1920s, to Argentina and to Zimbabwe in the early 2000s, and to Greece in the past few years. Argentina had its ships attached. Greek civil servants and pensioners had their salaries and pensions slashed. In short, it is doom and despair,” he said.

“We have been there before: in its closing days, the apartheid government had to declare a debt standstill. We firmly reject this gate.”