CAIPHUS KGOSANA | The piggy bank is empty — Uncle Enoch either reduces spending or we’re doomed

Phew! What a bullet train of a week we’ve just had.

IFP founder Mangosuthu Buthelezi’s death ignited mixed reactions and emotions. A butcher to some, a respected statesman and peacemaker to others. The Springboks began their defence of the Rugby World Cup with a convincing victory over Scotland. Except for wishing them well over the tournament and crossing fingers they bring the Webb Ellis cup back home, I won’t be commenting much on their performances. Colleagues in the sports department are best placed for that and are already doing a fine job. 

Let me confine myself to what I know and understand best: the political economy.

We have consistently warned that profligacy was going to catch up with South Africa. This country has been spending like a reckless individual with multiple credit cards and loans, drowning in debt but still knocking on the doors of credit providers for another extension on the overdraft to waste on electronic gadgets, designer clothes, alcohol, furniture and other frivolities. 

The National Treasury — the only adult in the room — is calling out the nonsense and closing the taps. It has sent a memo to departments and provinces seeking drastic cutbacks that include a freeze on advertising new appointments and undertaking new procurement on infrastructure — unless approved by them. Also on the chopping block is non-essential travel and those useless banquets and functions the government is so fond of.

But the purse string holders were just getting warmed up.

At a two-day bosberaad with President Cyril Ramaphosa and his team at the Spier Wine Estate in Stellenbosch, a difficult trade-off was put on the table. If you want to keep the R350 social relief of distress grant beyond March 2024, the extra R40bn will have to be compensated by a two percent increase in VAT or closure of 118 critical front line delivery programmes.

A serious reconfiguration of government is another area where savings can be realised, according to the Treasury. Close the department of tourism and incorporate its functions into the department of trade, industry and competition; take small business development back to the DTIC where it was all those years before the Zuma administration irresponsibly tinkered with and increased the size of government.

Move the performance, monitoring and evaluation function — now in the Presidency — to public service and administration. Incorporate the useless sports, arts and culture (South Africans call it the department of congratulations and condolences) into basic education. Government’s sleepy propaganda arm, GCIS, must become a division in the Presidency.

I hope wine was on the menu at Spier because this is enough to drive spendthrift bureaucrats to drink.

Also proposed were voluntary severance packages for 200,000 civil servants over the age of 55. Early retirees to be offered two weeks compensation for every year worked, and their retirement savings not heavily penalised on withdrawal.

Since there’s unlikely to be a 100% take-up, the Treasury reckons that if just 10% of the 55-59-year-olds and 20% of 60-64-year-olds take up VSPs, the state will incur a one-off cost of R17.3bn but realise annual savings of R14.3bn on the wage bill.

Look, the Treasury has every right to put the brakes on spending. National debt has ballooned from just R500bn in 2006 to R4.7-trillion. It is projected to hit R6-trillion by 2025. The deficit is widening from estimates of 4% when the budget was tabled in February, to 6.5%.

Countries, just like individuals, are judged on their level of indebtedness and creditworthiness when lenders decide the interest to levy on further credit extensions. The junkier the creditworthiness, the higher the interest.

SA is now spending R1bn a day paying interest on what it already owes. We spend more on debt service costs than we do on health and policing. If South Africa were a person, they’d be in debt review. 

Social grants and public sector wages consume a huge chunk of our non-interest spending. I know some economists believe such consumption spending has a stimulatory effect on the economy. But borrowing money to dole out cash to the unemployed because you haven’t grown the economy enough for them to find work, and to pay salaries to an oversized and underperforming public service, is a sure way to end up at the door of the International Monetary Fund with begging bowl in hand.

We are living way beyond our means. We haven’t cut our cloth to fit our size. We are dressed in expensive, oversized garments.

But with less than a year before the elections, expect major pushback. Already there’s opposition in the cabinet to the proposed cuts. ANC NEC members will also have a fit when they are presented formally by party deployees in government. 

Good luck to Enoch Godongwana — this is going to be a hard sell.