The South African government on Monday released its cost containment measures recommendations in an effort to balance the country’s fiscal position.
The National Treasury declared in the guidelines that the South African government is facing “fiscal challenges. “The current fiscal challenge originates mainly from an exceptionally large year-to-date decline in the government’s tax revenue collection and tighter financial conditions that have constrained the government’s borrowing program.”
On Aug. 31, the National Treasury wrote to government departments about the need to reduce spending as it sought to balance its budgetary condition, blaming the state’s wage deal reached in March and declining revenue collection.
It also urged the national and provincial governments to reduce expenditure on hiring, travel, and infrastructure projects, as well as refrain from spending money on event catering.
According to the National Treasury guidelines, the wage deal the state agreed to in March was not budgeted for the current fiscal year. Therefore, it was required to implement the guidelines. “Accounting officers should take specific actions to make much-needed savings and avoid the materialization of potentially crippling resource constraints in later 2023,” the guidelines suggested.
Khumbudzo Ntshavheni, the minister in the Presidency, however, expressed hope Thursday that the rules would not have an impact on the provision of services. Authorized travel would be allowed for the delivery of important services.
The moves by the government are considered wise because it is obvious that weaker economic growth will have an impact on tax collection, according to Jannie Rossouw, a professor at Wits Business School.
“In any household, if the income is less than what they had budgeted for, it’s simply good and responsible financial management to cut on non-essentials,” Rossouw said in an official statement.
He also warned that because commodity prices are low, the mining industry, which had previously assisted tax collectors to raise more money, will bring in less money this fiscal year.
According to the National Treasury said these guidelines would only apply to the current financial year and would be in place until the end of the current financial year.