Charlene Smith
Trevor Manuel’s budget speech was littered with wisecracks, designed to lighten the serious business of balancing the country’s pressing priorities – creating jobs, cutting a bloated bureaucracy, accelerating infrastructural development and attacking corruption.
But behind the gentle banter of the amiable finance minister were tough policies and strategies that spoke directly to investors backpedalling from South Africa.
Ignoring the protests of the African National Congress’s left-wing allies, including the Congress of South African Trade Unions, which walked out of the budget process, Manuel maintained a tough line on government spending. “We can only plan to spend what we collect in taxes and what we borrow. There will be no bail-outs.”
Politically, Manuel knows that the ANC has to give more this year if it wants the disaffected voters who swept it into power in 1994 to return to the ballot booths. Indicators already suggest that the second democratic election will reflect a stayaway poll. But economically – and for different reasons – foreign investors are also showing signs of the stayaway syndrome.
Government and business were shaken by the World Economic Forum’s competitiveness report which ranked South Africa seventh in a list of 23 African nations. More damaging was the recent downgrading by Standard & Poor of South Africa’s credit rating.
Standard & Poor said the government’s structural reforms were unlikely to boost the gross domestic product (GDP) and criticised economic growth, poor domestic savings, the labour market and a debt burden that limits policy flexibility. Its view of South Africa’s inability to attract foreign investors was gloomy.
Manuel’s first task was to take the knife to state spending. He said bloated bureaucracies were hampering development. “Excessive increases in administrative and personnel expenditure and weak financial administration characterised many [local and provincial] budgets, squeezing their capacity to deliver on Reconstruction and Development Programme objectives,” he declared.
Clearly, the ability of the ANC to get it right at provincial and local level will determine the overall success of its economic policies.
Manuel said growth demanded that private and government consumption should be kept in check. He noted that personnel costs and social security benefits account for 80% of provincial expenditure and that “in many cases, limits on numbers of employees or administrative costs have not been enforced”.
In the Eastern Cape, 23 400 civil servants “do not even go to work, but are still paid each month”. The rigidity of the public service makes their dismissal difficult. Their salaries amount to R1-billion of taxpayers’ money and renders the province less able to render quality services.
Local government has to be trimmed, provinces have to become streamlined and both must ensure better revenue collection and financial administration. Without that, the magic word “delivery” is rendered meaningless. The Johannesburg Metropolitan Council manages one of the wealthiest cities in Africa, but has had four budget cuts in one year and staff have to bring their own toilet paper to the office.
The MEC for public works in the Northern Cape recently resigned because 97% of his budget went to salaries. The remaining 3% was barely enough to pay for administration, and nothing was left for the infrastructural projects Standard & Poor said South Africa needs, particularly if it is to create jobs. The situation is little different in the Eastern Cape, where 80% of the public-works budget is spent on wages.
Manuel cautioned that, though the country is four years into democratic rule, it remains bedevilled by its inherited problems. For example, Department of Public Works representative Zaid Nordien disclosed it saved R70-million by cancelling many of the 5 000 leases the old government had held for years.
A new register of state properties found 126 000 properties in 1997, and that figure is now up to 214 800. “We may never know what the real figure is,” Nordien said. “The previous government kept no records of these assets.”
Bureaucracy still rules the day. A R70-million road project between Middelburg and Graaff-Reinet has been halted since November, but the workers still get paid.
Manuel recognises that the government cannot fund all development alone and that public/private-sector partnerships are the key to solving some of its fiscal challenges. “Business partnerships between municipalities and the private sector in 18 pilot projects in urban and rural areas saw the private sector spend R5 for every R1 spent by the government,” he said.
The wild card is corruption. Manuel spoke of management tools and monitoring systems that have become “a top priority” to increase efficiency and make corruption more difficult. The Department of State Expenditure has developed an early-warning system for provincial budgets. A supplementary allocation of R2,8-billion for provinces “will be disbursed on condition that provinces prepare budgets that accommodate all statutory and contractual expenditure”.
Improved management systems in provincial education will cost R200-million; R100-million has been set aside to enhance financial management; another R10-million has been set aside for the welfare department for the development of information systems to ensure pension fraud and mismanagement are eliminated.
Manuel echoed President Nelson Mandela’s words at the opening of Parliament that the government was not an employment agency and civil service jobs would have to be cut. But at the same time he had to concur that job creation elsewhere in the economy was imperative.
A R2,3-billion trade-and-industry budget includes increased support for small-business development. Small farmers will be primary beneficiaries of R737-million expenditure from the agriculture department, and tourism promotion, a key job creator, will receive R71-million.