We are all aware of the difficult times for most of the world and for South Africa. The recession has wreaked havoc across the world. But as the National Finance Minister Pravin Gordhan said, “it is also a time of opportunity, a time to face down adversity and proclaim that we will overcome its challenges. “We will adapt to the new circumstances. We will not hesitate to do things differently, to act boldly!”
These are the steps we have taken to deal with the spending pressures:
Reprioritisation
Following intense discussions, Cabinet approved that departments’ spending be cut back by R2,065 billion, through reprioritisation. Departments have been asked to focus their energies on their core functions, and in this way the province will achieve the agreed to cut-back in spending.
Cost-cutting measures
In addition to the agreed reprioritisation mentioned above, Cabinet has also approved the following cost-cutting measures to ensure further savings:
* Freezing of all posts (in exceptional circumstances, the executive authority can approve the filling of essential/critical posts with a report being sent to the Office of the Premier and the Provincial Treasury)
* Freezing of all capital projects for which tenders have not yet been awarded (excluding those that are funded by conditional grants)
* No furniture or equipment to be bought where orders have not already been placed (excluding those that are funded by conditional grants)
* Essential training must be done in-house (exceptions to be approved by the HOD)
* Overseas trips be rationalised
* Business class travel only for MECs and HODs (and MPLs, where applicable)
* Car hires bookings class of vehicle to be lowered
* Catering for meetings must be stopped
* Kilometre controls be implemented on travelling (1750 kilometres per month per official unless there are exceptional circumstances the exceptions should be approved by the HOD)
* Officials to travel together unless absolutely unavoidable
* Only essential trips must be undertaken
* Meetings, strategic planning sessions and workshops to be held in departments’ offices instead of private venues
* Air travel must be limited to important meetings with only one representative to attend on behalf of the department, unless otherwise required
* No team building exercises or year-end/Christmas functions (only permitted if paid for by the staff themselves)
* Cut down on unnecessary overnight accommodation. Staff to sleep over only if the total distance to and from the destination is more than 500 kilometres
* Where there are one-day meetings in other provinces, officials must travel there and back on the same day (where possible)
* No performance bonuses to be paid from 2010/11
* No promotional items to be purchased (t-shirts, caps, bags, etc)
* No leave conversion payments (leave to be taken)
* Strict control of overtime
* Re-evaluate the hosting of provincial events (including budget dinners).
All departments are to take immediate steps to eradicate fraud and corruption which continues to be a drain on the provincial fiscus.
Additional cost-cutting measures:
* In addition to these, the Office of the Premier has commenced negotiations with regard to cell phone contracts, with the view of reducing cell phone costs * The province is also in the process of extending this to all other departments
* The province is also in the process of exploring the reduction of air flights and hotel accommodation costs
* Bulk buying of media space to effect cost savings
* Policy to be reviewed on the use of subsidised vehicles by officials.
Impact of the 2009 wage agreement and the OSD agreements:
The provincial fiscus is also being impacted on by the recently agreed to higher than anticipated 2009 wage agreement, as well as the OSD for doctors and for educators.
The higher than anticipated 2009 wage agreement is expected to cost the province R1,425 billion. The indicative allocation from National Treasury for this is R949 million, which results in a shortfall of R476 million.
The OSD for educators will cost the province R1,477 billion. The indicative allocation from National Treasury for this is R880 million, which results in a shortfall of R597 million
The OSD for doctors will cost the province R273 million. The allocation available to the province is R256 million, resulting in a shortfall of R17 million.
These items all exert severe pressure on the provincial budget.
Measures taken to reduce the projected over-expenditure:
The indications at this stage are that the projected year-end over-expenditure is R5,681 billion. It should be noted that this number does not take into account the additional funding to be received from National Treasury, or the reprioritisation and cost-cutting measures already spoken about.
The additional funding from National Treasury for the OSD and the higher than anticipated wage agreement is R1,829 billion. Some commitments had not formed part of the R5,681 billion and are then also brought into the numbers here. This then brings the projected overspending to R3,891 billion. The departments’ agreed to cut back in spending of R2,065 billion through reprioritisation and the projected higher than expected revenue collection of R105,884 million bring the projected year end over expenditure down to R1,720 billion.
The list of cost-cutting measures listed above will further reduce the spending of departments, which will bring down the R1.720 billion even further. These have not been fully calculated yet, but it is expected that it will result in substantial savings.
Issued by: Department of Finance, KwaZulu-Natal Provincial Government
3 November 2009
