Home / News / Finance minister scores desperately needed goal for team SA
Finance Minister Pravin Gordhan?s assurances that the South African government would not spend more than it had budgeted scored a desperately needed goal for team South Africa. ?The minister has used the opportunity of the Medium Term Budget Policy Statement to steady the ship ? moving to restore the confidence of the business community, international analysts and investors as South Africa continues to weather the gales of global economic slowdown and domestic labour crisis? said AJ Jansen van Nieuwenhuizen, Head of Tax, Grant Thornton.
Striking the right notes on growth and projecting an incremental improvement in South Africa?s budget deficit while identifying efficiency gains and savings as likely sources of additional revenue, ?the minister, nonetheless, reserved the right to change tack should the economic situation deteriorate further? added Jansen van Nieuwenhuizen.
Certainly, if efficiency gains and savings are to account for additional revenue other references to the South African public sector in the Medium Term Budget Policy Statement may prove instructive.
On this front the minister?s mention of ?aligning municipal spending plans to predetermined objectives while promoting transparent systems of governance over expenditure is most welcome and, if implemented, will assist the administration?s clean audit objectives? says Terry Ramabulana, Public Sector Specialist, Grant Thornton. Other mentions that should drive public sector efficiency gains and savings include:
- A greater requirement for treasury to outsource training to local government on IT governance and financial management.
- Long overdue cash flow management efforts alongside stringent project management discipline at all levels of government. Certainly, ?for earmarked infrastructure development projects to succeed in providing the efficiency, skills and employment dividends that government projects, a greater deal of financial management, facilitated by adequate monitoring systems, are a prerequisite? adds Ramabulana.
- Welcome creative tax measures,? including a real time tax clearance certificate system will streamline the process, reduce the incidence of tender fraud and, importantly, allow for the verification of tender revenue in recipients tax returns.
Notable for Jansen van Nieuwenhuizen was the minister?s failure to specifically mention funding options for the NHI, even though previous Medium Term speeches included the proposal. Although there was mention of health infrastructure spend, the annual increase in health spending over the next three years is put at around 7.5%. This is unlikely to cover NHI aspirations in the medium term. As such, more definitive insight into NHI funding mechanisms is crucial. While mention was made of various NHI documents which are to be released in November this year and January 2013, ?one can only hope that clarity will be provided in the budget speech in February next year? said Jansen van Nieuwenhuizen, adding that ?funding the NHI through VAT or an employer levy or a payroll tax or a combination of the three is a bit vague for my liking.?
While the minister committed more effort and resources to upgrade infrastructure at both local and provincial level, ?we hope that the managers entrusted to spend the allocated budgets apply business intelligence tools and methodologies to make informed decisions. This is important as lack of capacity, especially in local government, has frustrated much of South Africa?s infrastructure spend in the past? cautions Ramabulana.
Since the minister forecasts that the bulk of infrastructure funding is to come from parastatal balance sheets this, in effect, means that users will likely pay for the recovery of these costs over time, ?similar to Eskom?s 16% tariff increases and toll road funding which add to the pool of stealth taxes we already suffer ? says Jansen van Nieuwenhuizen.
The commitment to plan procurement and planning is also most welcome from a public sector perspective, ?but needs to result in actual delivery if the infrastructure spend is to create skills and drive growth and job creation? says Ramabulana.
Though the minister expected the budget deficit to narrow from 4.8 percent to 3.1 percent of GDP in 2015/16, this is based on annualised increases in tax revenue collections of about 10% up to 2013/2014. ?If the level of economic activity required to support these levels of collections are not achieved, both spending reductions and tax increases may need to be considered? said Jansen van Nieuwenhuizen.
The Medium Term Budget Policy Statement repeatedly refers to DISCIPLINE, the importance of QUALITY of spending, and the reduction of WASTE ? to be achieved by linking future cash flows to actual project delivery. ?As much as Finance Minister Gordhan is committed to lead by example, the challenge will be for his fellow ministers follow his lead ? says Jansen van Nieuwenhuizen.
So, while as ever the devil may lie in the detail, ?on the whole the minister has proved his mettle and met a difficult challenge head on, sending a message of fiscal discipline and policy consistency at a time critical to the reputation and future prosperity of South Africa? concluded Ramabulana.
Source: http://www.budget2011.co.za/2012/10/finance-minister-scores-desperately-needed-goal-for-team/
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