The Purpose: South Africa's National Treasury released guidelines detailing cost containment measures for government departments to rein in spending ahead of the mid-term budget in November.
South Africa's public finances have been in rapid decline as tax collections year to date were 22 billion rand ($1.16 billion), less than the government had forecast in its February budget, according to the guideline document.
These guidelines aim to help manage government spending in response to fiscal challenges for the remainder of the 2023/24 financial year. It is essential for government entities to carefully consider these guidelines across the following key areas and take appropriate actions to ensure fiscal sustainability.
Recruitment:
· Prudence in recruitment practices including establishing control mechanisms to operate within the medium-term expenditure framework (MTEF) and financial ceilings for their departments to ensure that each new hire aligns with departmental objectives.
· Executive authorities must consult with the Minister for the Public Service and Administration on organisational changes and post-creation.
· A motivation must be submitted for post-creation or filling to the Minister for concurrence.
· Departments must indicate possible savings in the compensation budget.
Travel:
· Streamlining travel arrangements by prioritising virtual meetings, delaying the need for travel where possible.
· When meetings are initiated by a department, and where travel is unavoidable, a hybrid option could be explored as an alternative.
· Submission of pre-planned consolidated travel plans, on a monthly basis, for monitoring purposes.
Conferences, Workshops, and Catering:
· Arranging meetings outside of government premises should be avoided.
· Where a meeting, conference or workshop is arranged by a department or government component, no catering is to be provided, unless approved by the accounting officer.
Capital spending on buildings and other fixed structures; machinery and equipment on other assets):
· Accounting authorities should consider postponing the implementation of capital projects that have not yet commenced until 31 March 2024.
· When deciding on which projects to postpone, accounting authorities must facilitate the delayed implementation, manage any legal risks and ensure that the government will not be liable for claims due to any such decision.
The Impact: Delaying capital projects as per the guidelines may entail short-term cost-savings, however, in the long run, it could lead to ** negative consequences on economic development and infrastructure improvement. ** Therefore, it is crucial to strike a balance between the country’s immediate fiscal concerns/needs and its medium to long-term growth prospects.
Country: South Africa 🇿🇦
Nature: Capex + Opex
Source: September 18, 2023 | Reuters | https://www.reuters.com/article/safrica-economy-idAFL8N3AU481
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