Finance Minister Enoch Godongwana has explained reasons behind the proposals to cut expenditure ahead this year’s Medium Term Budget Policy Statement (MTBPS). Godongwana was criticised in some quarters for these cuts that are aimed at funding a shortfall in revenue collection.
He says their approach is moderate and the expenditure cuts are below the total figure of under spending for government departments. The Minister briefed the Standing Committee on Finance on the Treasury’s annual report.
Godongwana will deliver his MTBPS on the 1st of November and says he will on the day, deliberate further on the austerity measures. He told MPs that it’s difficult to raise taxes in the middle of a financial year and that he’s also concerned about the costs and levels of borrowing.
And that the other option left to fund a fiscal gap is to implement austerity measures balancing it with underspending. He says in the past two financial years, under spending by all government departments totalled to R64 billion.
“Expenditure cuts are even below that normal underspending of R28 billion which we did last year in the previous year it was R36 billion. So, if you look at that our approach has been moderate in combining expenditure cuts but bump up some borrowing, we will show that in a sustainable way,” says Godongwana.
In another development, the Minister says his intervention in municipalities is limited. He’s attributed the financial mismanagement in some municipalities to the lack of political oversight. He says the situation has become dire, especially in those municipalities that pass unfunded budgets that are crowded by personal expenditure.
“We need the support of the political parties in each municipality to work with us to clean. The thing is it’s getting to a level even Metros are running out of cash, which is becoming a serious problem,” Godongwana added.
The National Treasury added that it’s working with law enforcement authorities to correct deficiencies regarding the monitoring of money laundering that led to South Africa being grey listed.
