Efficiency, efficiency, efficiency was the order of the day for both public and private players in Finance Minister Pravin Gordhan’s maiden Budget on Wednesday.
In line with promises by President Jacob Zuma to improve service delivery and performance, he came down hard on the civil service, who have been content to receive large salary increases over the past five years while departmental waste and poor performance has increased.
Reforms did not halt at the public sector, however, with treasury announcing the start of consultations with the private banking sector regarding issues such as remuneration levels in the industry. Gordhan also noted that he would be interacting with the major banks to “discuss firm deadlines to respond to the recommendations of the Banking Enquiry Panel of the Competition Commission”.
Included in measures to improve efficiencies and tackle corruption, the budget sets out extensive outcomes targets for government on key priorities such as health, education and skills training, and crime.
In a bid to better spend the government’s tightly allocated revenue pool, he signalled to public service unions that wage settlements over the past year had been too high and that they could not expect similar increases in light of the country’s financial constraints.
Government workers received between 6% and 13% over 2009, which required that an additional R12-billion be allocated to fund the increases. Including payouts for the occupation-specific dispensations, this has seen government’s wage bill rise from R154,7-billion in the 2006/07 financial year to R258,1-billion in 2009/10.
“The 2009 round of salary increases has placed immense pressures on the Budget,” said Gordhan.
“Now that a major revision to public service remuneration is behind us, it will be necessary to moderate salary increases going forward.”
Gordhan said that the major site of waste and inefficiency was government’s procurement system.
He said that corrupt practices, inefficient procurement, poor planning and, “in some instances, collusion with the private sector” meant that government was not getting the value for money out of its purchases that South African citizens deserved.
“Even when there is absolutely no corruption, we sometimes give contracts to people who cannot implement them and so houses are left without roofs, roads crumble when it rains, water schemes break down and school books fail to get delivered,” he said.
Calling corruption a “cancer” that all South Africans must root out, he said more management capability, governance, enforcement and oversight in government and the business sector was needed.
In October last year government set up a ministerial task team to analyse public-sector cost cutting and at the time announced savings of R14,5-billion at national level, with a further R12,6-billion at provincial level.
The Budget Review highlighted additional savings of R25,6-billion that will be made in the next three years, with another R13,4-billion that has been identified within provincial budgets to be reprioritised towards education and health.
Savings would come from, among other things, departments decreasing spending on non-core goods and services, rescheduling expenditure, reduced transfers to public entities and improved financial management.
Departments where savings had already been made included Defence and Military Veterans, which saved R4.5-billion through the cancellation of the A400M military aircraft contract; Correctional Services, which saved another R4.5-billion through rescheduled prison building plans; Transport, which saved R3,4-billion through deferring the design and planning of infrastructure projects; International Relations and Co-operation, which saved R1,5-billion through revised foreign costs and deferred construction of the Pan-African Parliament building; and Social Development, which saved R1,2-billion through rationalising the payment of social grants.
An interdepartmental working group looking at tender-related fraud and strengthening compliance had also “made significant progress” in closing in on officials and companies involved in corruption.
The group, chaired by Minister in the Presidency Collins Chabane, found that a large number of irregular deals involved black economic empowerment fronting, where enterprises were created to ostensibly meet procurement requirements, but where the real identities of participants were hidden.
It found that other malpractices also included tenders awarded without due process being followed, goods and services bought at inflated prices, officials benefiting from contracts, and unnecessary purchases and payment for services that were not delivered.
In a briefing to the media, Gordhan noted that around R16-million had been spent on services that were never actually provided.
More than R500-million in government contracts have been suspended, while this week alone five officials in KwaZulu-Natal were arrested.
In line with the effort to improve budget accountability, the Budget Review noted that “government is shifting to target outcomes”.
In light of this, the presidency had established a set of 12 measurable outcomes that would become the focus of policy and implementation.
These included improved quality of basic education; the creation of decent employment through inclusive economic growth; developing a skilled and capable workforce; improved healthcare and life expectancy, and the support of an efficient, competitive and responsive economic infrastructure network.
Further work to refine these outputs will continue in the coming months and specific departmental performance targets will be finalised “once service delivery agreements are concluded in support of the identified outcomes”, said the Budget Review.
While the Budget emphasised the marked move towards tighter oversight of the public purse, it also hinted at a larger move to drive efficiencies within the economy.
The Budget stressed better economic efficiencies and improved growth prospects as one of the most important ways to fight unemployment. The inflexibilities within the labour market were seen as one of the major impediments to efficiency, particularly “slow and cumbersome” dispute.
The Budget Review noted that real wage growth needed to be linked to productivity and argued for a role for government to “work with business and labour to explore ways of aligning wage setting with productivity growth”.
It intimated that possible “adjustments to [labour] regulations, where required, would contribute to better outcomes for both employment and industrial development”.