Undermining of the budget process and National Treasury threatens the stability of public finances and critical areas of government spending
The resignation of the Deputy Director-General of the Budget Office at National Treasury, Michael Sachs, is a further signal that the system of open, consultative and responsible decision-making - as required by our constitution - is being undermined. The deliberate weakening of state institutions and democratic processes, which we are in no doubt has extended to National Treasury, deepens concerns about policy uncertainty and fiscal management that is threatening South Africa’s existing social spending, let alone its expansion.
This comes at a time of rising poverty and economic hardship for many South Africans and levels of unemployment not seen in fourteen years. If this situation is to be reversed, attempts must be resisted by failing and captured leaders to pull National Treasury into the downward spiral which has affected SARS, state-owned enterprises and other government institutions.
The recent Medium Term Budget Policy Statement (MTBPS) did not convincingly outline an agenda to effectively deal with current challenges. At the same time, it confirmed that shortfalls in revenue collection by SARS, economic recession and rising debt service costs may now put frontline service delivery at risk. For example, allocations to basic education have declined by R20 billion since the 2015 MTBPS, despite an upward revision in population estimates1. Of particular concern is the R50.8 billion revenue shortfall highlighted in the MTBPS, arising from, among other factors, anaemic economic growth, political instability, mismanagement of SARS and policy uncertainty.
In this context, we question the motives behind the Presidency’s reported attempt to dramatically adjust the budget, through cuts in critical social spending, allegedly to finance free higher education for one year. While we support the project of making higher education accessible to all, we urge citizens and particularly students to consider the implications of this move, if short-term political expediency rather than sustainable economic planning and budgeting is driving it forward.
As civil society organisations (CSOs) and individuals working for social justice and better access to quality social services, we have on many occasions disagreed with decisions of the National Treasury. Indeed, a number of CSOs were at the forefront of opposition to Treasury-led economic policies, such as the Growth Employment and Redistribution (GEAR) policy.
Importantly, and irrespective of the merits and criticisms of budget allocations, Treasury has followed a specified procedure in the implementation of the budget, which includes ensuring that the budget is spent as planned and holding departments to account when it is not. Diverting budget allocations outside of the established processes opens the gate for arbitrary and irregular reallocations in the future. The resulting policy uncertainty, with its negative impact on the economy and fiscal framework, alongside actual reallocation (some reports indicated that funds would be shifted from housing and social grants to higher education), put the sustainability of social spending at risk.