Gordhan must rein in wasteful expenditure

The Democratic Alliance (DA) has called on the finance Minister, Pravin Gordhan, to place a firm hand on the tiller and provide the leadership to cut through the mixed messages of the ANC government on the economy when he delivers his medium term budget policy statement (MTBPS) this week.


“He needs to send a strong signal that debt will not be allowed to rise to unsustainable levels and that wasteful expenditure will be cut across government,” said the DA’s shadow minister of finance, Tim Harris yesterday.


A struggling economy


The DA pointed out that the projected budget deficit of 5.2% for the 2012/2013 financial year is the second highest budget deficit since 1994. Government debt is approaching 40% of GDP or 1.6 times government tax revenue and since January 2011 there has been a net sell off of R26 billion in South African equities by foreign investors.


The party added that there was also a massive increase in the trade deficit from R8.7 billion in 2011 to R69.9 billion for this year. There is a current deficit of R168.78 billion or 6.4% of GDP. The first round effects of the recent mining and transport strikes are estimated to have cost national revenue collectors around R2.5 billion.


National departments squander billions


The Annual reports of national departments show that they collectively squandered R3.8 billion on irregular expenditure, R2.44 billion on unauthorised expenditure and R444 million on fruitless and wasteful expenditure during the 2011/2012 financial year.


“Collectively the annual reports show that national departments achieved only 52% of their targets,” said Harris. “To restore investor confidence in the South African economy and provide a foundation for job-creating growth, Finance Minister Pravin Gordhan must rein in wasteful and unproductive government expenditure and reassure investors that government will not bow to populist pressures.”


More challenges ahead


The DA said Gordhan also needed to announce a programme of wholesale policy reform and the implementation of proposals contained in the National Development Plan starting with the departmental budgets announced in February 2013. It said Gordhan also needed to align public sector pay with productivity to incentivise efficiency in government spending.


Harris said policy steps needed to be implemented to address the systematic drivers of strike action and that the government must recognise that current levels of state investment in social support programmes cannot be sustained unless economic opportunities were expanded and South Africans were empowered through education.


“In essence, he must tighten the purse strings whilst persuading investors that investment in the South African economy still offers great and reliable returns with low levels of risk,” concluded Harris.


Gordhan will deliver his speech on the MTBPS tomorrow.