/ 1 October 2023

The Fiscal Cliff | Treasury is working against the National Development Plan

Medium Budget 2022
South Africa’s treasury is guilty of bad budgeting, and its budgets are criminally incongruous with the vision, policy objectives and goals of the 2012 National Development Plan. (David Harrison/M&G)

My first part-time job was at a shoe store in Korsten, Gqeberha. I was paid R15 a day. I coveted a pair of Court King takkies that cost R80 back then 1987. I placed a R20 deposit on lay-by and every week paid R10 towards my sneakers.

In principle there is nothing wrong with austerity or saving. I knew what I wanted, cut my spending and saved enough money every week and in six weeks I achieved my goal. The sacrifice would make little sense if the price of the takkies increased every week by more than my weekly payment.

South Africa’s treasury is guilty of bad budgeting, and its budgets are criminally incongruous with the vision, policy objectives and goals of the 2012 National Development Plan (NDP). Every budget presented by the treasury should be taking us closer to achieving the goals of the NDP, yet the treasury seems more focused on servicing debt and reducing departmental spending to supposedly stop corruption and theft within the government. There are events that could irrevocably change the material reality, such as the Covid-19 pandemic, but the plan could be amended and timelines lengthened. For example, we can say a goal will now be achieved in 2028, instead of 2023. 

In June the Public Economy Project (PEP), a project of the Southern Centre for Inequality Studies at the University of the Witwatersrand, released a study entitled: Austerity Without Consolidation: Fiscal Policy and Spending Choices in Budget 2023.

The study pulls no punches, notwithstanding Finance Minister Enoch Godongwana’s protestations that the 2023 budget was not an austerity one. The PEP document says, “Continuous austerity over the last decade has eroded the quality and value of public services on which the majority of South Africans rely … Despite intensifying austerity, South Africa appears no closer to consolidating its fiscal position.”

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While some experts contend that the health budget is big enough, research shows that spending on this vital line item has stagnated in real terms. Cutbacks have been intensified since the pandemic. In the second episode of our podcast series, the Mail & Guardian talks to the spokesperson of the Democratic Nursing Organisation of South Africa about how healthcare workers are feeling the spending pinch.

The February 2023 total budget is R2.2 trillion. Health’s share is R259.2 billion, or 11.56% of the budget. Education, inclusive of basic and tertiary education and training, is R445.1 billion (19.85%). Essentially health and education takes up just less than a third of the budget.

But does it take us closer to realising the goals of the NDP? The NDP sets out the goals that all of government should be working towards. 

The NDP envisions a South Africa with a seamless education system by 2030 — no arbitrary distinction between early childhood development, basic education and post-school education. There would be high levels of access to education comparable to countries similar to South Africa. South Africans would be able to compete with the best in the world in the various international standardised tests. It would be an education system equipped to cater for the diversity of needs and produce highly skilled individuals, as well as a greater output in research, innovation and development.  

The NDP’s key points regarding education are that the system must be results oriented achieved by the government working with people so that “human capacity, school management, district support, infrastructure” are prioritised.  The expected outcome would be the different types of education institutions collaborating with each other to improve the overall quality of education. The government’s regulatory bodies and advisory institutions must help the sector to achieve these goals.  

For the NDP, it is not a choice but a fait accompli that a National Health Insurance (NHI) must be introduced. For the private sector to be integrated into the NHI, it’s expected that it would take 10 to 15 years. The NHI is supposed to be implemented in phases, complemented by reducing the cost of private medical care and an improving public health sector, especially human capacity and systems. 

When we look back at what the NDP envisioned for the country in 2012, it is impossible to avoid being disheartened. Not a single budget presented by the treasury gives us a sense that there is an overall plan the government is working towards. The budget seems to be about saying that this amount of revenue has been collected in this financial year, and this is how it has been split up between the departments and the presidency. And then the departments and presidency go to parliament and say we got this amount of money from the treasury and we have shared it between our programmes like this. There is very little detail about what informed the treasury and how it arrived at these figures.  

If we scratch the surface we can easily see the ridiculousness of the so-called policy choices the treasury forces the health and education departments to make. The PEP study stated: “Funding is made available for teacher assistants in schools, even while funding for teachers and textbooks is cut, without any policy statement about what this implies for the future of the public education system. The budget implies a significant contraction in the public healthcare system, with hospitals facing the largest cuts. NHI funding is focused on the construction of new hospitals even while spending on healthcare workers, medical equipment, and operational budgets are cut. Universities and colleges are having core funding and infrastructure finance cut, yet the minister of higher education is committed to a programme of ‘massification’, which includes the construction of two new universities.” 

These obvious contradictions make it abundantly clear that the budget is far removed from the NDP and its vision.

The treasury does not seemingly have an interest in achieving the NDP goals. It seems that the stated policy objectives and legislative mandates are mere suggestions for the treasury. The PEP study says, “Treasury has begun to see the MTEF [Medium Term Expenditure Framework] as a bargaining position rather than an accurate costing of government’s programme.”

South Africans want an NHI and fully funded basic and further education system. But they are also worried about the levels of theft and corruption in the government. Most baulk at the wages of public sector staff, especially in the light of declining standards and the overall deterioration of public infrastructure. But another study by the PEP, released in October last year and titled Public Services, Government Employment and the Budget, has found that senior managers’ salaries in the government have been falling for the past decade. Yet the overwhelming belief among South Africans is that the size of the cabinet means there are too many public servants earning fat cat wages in flailing government programmes. 

The treasury exploits these negative perceptions and accords itself the role of guardian and places major limits on government spending that results in the NDP goals and milestones, such as the NHI, becoming pipedreams. There is a lack of acknowledgement that South Africans’ confidence in the government could be restored if they know what is being spent and how it will result in a better life for everyone. The treasury has become “penny wise and pound foolish” in such a way that the major changes required are not done properly, which in turn results in insufficient resources dedicated to these major changes, thus having no meaningful effect on the overall goals. For instance, instead of dedicating resources for the rapid upgrading of further education colleges, those budgets are cut and money is thrown at building two more universities.  

There is no clarity, other than consistent fear mongering that spending is out of control, that we cannot stop theft and corruption, and that we are heading for disaster unless we sell everything to the highest bidder. Our mandarins at the treasury need to accept that the plan comes first and the budget fits into the plan; not the plan needing to fit into the budget.  

The folly of the treasury’s sado-monetarism is felt every day in the health and education sectors, and South Africans should not be forced to tolerate its dictatorial tendencies. 

Donovan E Williams, a social commentator.

This article forms part of the second instalment of The Fiscal Cliff, a monthly series by the Mail & Guardian on the state of South Africa’s public purse. The series looks into the effect of fiscal consolidation on public services — which have steadily deteriorated over the years — and considers this policy’s impact on the country’s growth prospects. You can read the other article in part one of the series here.