By THE PUBLIC SERVICE ACCOUNTABILITY MONITOR (PSAM)
The Public Service Accountability Monitor (PSAM) notes the tabling of the Medium Term Budget Policy Statement (MTBPS) and Adjusted Estimates of National Expenditure (AENE) by the Minister of Finance,
Enoch Godongwana on 26 October. Notable adjustments and policy commitments announced
include increased allocations to key institutions tasked with implementing recommendations of the
Zondo Commission of Inquiry into State Capture (Zondo Commission), restoring financial health in
municipalities, efforts to avoid greylisting and procurement reform.
While the MTBPS shows some commitment to solving persistent challenges, there is very little detail on how this will be achieved.
Many important decisions, including long-term plans for the SRD grant, the public sector wage
bill, and the Eskom debt burden, have been deferred to the 2023 Budget. The MTBPS emphasises National Treasury’s commitment to “improving state capacity, project planning and preparation, procurement practices and contract management” while acknowledging dire governance challenges.
Reportedly, 43 municipalities are in crisis. Intervention plans include prioritising, revenue management, audit outcomes, supply chain management and the Municipal Standard Chart of Accounts. Importantly, strengthening monitoring and enforcement of financial recovery plans is highlighted. The question, however, is how this will be resourced and implemented.
Additional funds have been allocated to stabilise municipalities and improve capabilities to ensure long-term sustainability. To this end, local government allocations increase by an average of 2% per year
over the MTEF.
We further note a commitment from the government to strengthen the state’s capacity, including funding investigative and prosecutorial agencies, which will, according to these efforts, aid in rooting out corruption and bolstering financial management in municipalities.
The Procurement Bill will be introduced in Parliament in March 2023. This is one of many interventions
that have been proposed to improve public procurement and prevent maladministration. The delays in
finalising this Bill and the lack of transparency in the final stages of the process are a cause for concern.
We reiterate the points made by members of the Public Procurement Working Group (PRWG) here
and urge National Treasury to treat the matter with the urgency required to safeguard funds
and restore confidence in the state.
The recommendations of the Zondo Commission have also been highlighted in the MTBPS, indicating
that additional funds have been allocated to the National Prosecuting Authority (NPA), Special Investigating Unit (SIU), Financial Intelligence Centre (FIC) and SARS to enable the investigation and prosecution of sophisticated financial crimes. These entities play a vital role in addressing state capture, corruption, and abuse of the procurement system.
The quantum of these increases is unavailable and will likely be elaborated on in Budget 2023. The NPA appears to be the only entity receiving additional budget through the 2022/23 appropriations bill, where a further R721 000 was reallocated within the Department of Justice and Constitutional Development to assist with the new backlog court in Colesberg. This is undoubtedly insufficient given the existing constraints at the NPA, illustrated in the 2022/23 performance, where they fell short on many of their targets.
The MTEF allocations for Peace and security, which includes defence & state security, police services, law courts and prisons and home affairs, equate to a 2% decrease in real terms on average each year to 2025/26. National Treasury reports that higher-than-expected revenue collection resulted in an additional R85 billion, which will be allocated to health, education and local government, amongst others. However, based on the revised CPI projections, these increases will likely be eroded by inflationary pressure.
The Minister indicated that a proportion of this revenue would narrow the budget deficit and
address the fiscal and economic risks posed by state-owned enterprises (SOEs). The continued strain on
the fiscus resulting from SOEs is unacceptable. In the 2021 MTBPS, Minister Godongwana acknowledged the adverse impact on social expenditure emanating from bailouts to dismally managed
state enterprises, amounting to more than R290 billion since 2013.
R290 billion has been used to bail out dismally managed state enterprises since 2013.
PSAM
A Special Appropriation Bill was tabled to provide additional funding to the various SOEs. The PSAM
reiterates concern about the weak management of public resources. Bailouts to SOEs continue to draw
funds away from social services and are detrimental to constitutional rights and national development
objectives. Previous commitments to holding SOEs accountable and imposing stringent conditions on
additional allocations have not proved effective at ensuring that these entities are self-sufficient.
The MTBPS 2022 indicates a continuation of the same fiscal planning approach evident in previous
years. The shift in focus to structural impediments to growth and stated commitment to reform is
welcome. However, there is very little concrete detail to show how this will be achieved, given that
the approach has not resulted in sustained improvement in conditions over time.
Economic growth remains constrained, and socio-economic indicators are declining across sectors. While the PSAM appreciates that the MTBPS is delivered in a constrained fiscal environment, we would like to see a firm commitment to safeguarding public funds and bolstering accountability. We contend that this should include the adequate resourcing of state institutions, and urgent implementation of
procurement reforms (taking public comments into consideration).
Cabinet must show genuine commitment to addressing systemic weaknesses to improve the quality of spend in the absence of additional funds to support the realisation of human rights.
