Public services slashed, with some departments losing 4%

General public services budget allocations have been pared to the bone, with many government departments due to lose 4% a year — given inflation — for three years. Others will barely keep pace with inflation, while some key departments will outpace it.

General public services include the Treasury, the Department of Home Affairs, the Presidency, Parliament and provincial legislatures.

As part of the government’s austerity package, their budgets will grow at only 2.1% over the next three years. Most other departments will lose a little ground to inflation while key services such as education, social services and housing will grow at slightly more than inflation.

The provinces’ allocations will be cut from the 2015-16 financial year. The ceilings on provincial budget baselines have been lowered which means a reduction in the provincial equitable share. The cut is R2.6bn in the first year and R4bn in 2016-17.

Conditional grants to the provinces will also be cut over those two years, by R1.8bn and R2.6bn.

Reductions in provincial and local conditional grants will target patterns of under-expenditure, Finance Minister Nhlanhla Nene said in his maiden medium-term budget policy statement. Mr Nene said the local government equitable share will be protected to ensure the provision of free basic services.

The medium-term budget policy statement also noted that provincial governments “retain considerable authority to allocate their own resources, but it is anticipated that they will follow a similar approach in adjusting their budgets to accommodate the reduction in the equitable share”.

“National government will work with the provinces to ensure pro-poor social services are fully protected. Adjustments to local government spending will take place mainly through reducing allocations to conditional grants that do not finance operations, some of which have recorded significant under-spending,” it said.

Despite the findings of the Defence Review that the South African National Defence Force (SANDF) was in critical decline which would take money and time to arrest, there is no extra money for the SANDF. Indeed the defence budget will grow at less than inflation, meaning the SANDF is effectively getting a budget cut.

Defence, public order and safety spending will grow at 5.6% over three years and “within the function, group resources will be shifted to priority programmes and institutions, including the public protector, the Financial Intelligence Centre, family advocates, public defenders and the prosecution service”.

Housing development and social infrastructure is one area where an above-inflation increase has been provided. “The government aims to transform SA’s urban spaces, encouraging greater integration of residential areas, employment and trade,” the medium-term budget policy statement said.

“Over the three-year spending period, more than R560bn will be allocated to this function, with most of the funds supporting municipal services and infrastructure.”

Mr Nene also announced that a modernised procurement system for the government was on target to be introduced in April next year. “Modernising procurement systems will lead to more cost-effective operations in the public sector.

“Design of a national pricereferencing mechanism is complete. Piloting with selected provinces and large national departments will begin in the next few months and the system should be fully operational by April 1 2015,” the statement said.

The main features of the new procurement system include national norms and standards for procurement; creating a national database to enable public monitoring of procurement plans and tenders; creating a data base of suppliers, service providers and contractors to streamline compliance requirements and reduce costs for small business; and establishing a formal process to consider complaints and refer cases to the appropriate legal authorities. – Business Day