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Last year this time then-minister of finance Pravin Gordhan impressed the nation when he delivered his medium term budget policy statement (MTBPS). Gordhan announced, among other developments, that severe austerity measures were to be put in place to cut down on wild spending.
Today his successor Nhlanhla Nene presents his first medium-term budget, also known as the mini budget. Ahead of the speech, experts have warned that Nene must be as strict as his predecessor.
“The real test in the mini budget will be whether – given higher inflation views – real expenditure growth can be reduced to less than 1%, namely a true cut in the nominal expenditure ceiling,” said emerging markets economist Peter Attard Montalto of Nomura.
Economists Annabel Bishop of Investec and Mike Schüssler, founder of economists.co.za, said that with recent credit rating drops and a lower revenue intake, Nene would have to keep a tight rein on spending.
"Unlike Gordhan he does not have much fiscal room to move in," said Finance24."That means he can’t afford to borrow much more and politically it will be difficult to either raise taxes or cut spending to close the big gap between government’s income and expenditure."
Public servants told to stop flashing the cash
Official credit cards would be stopped immediately, Gordhan revealed in October 2013, and other plans to curb wasteful expenditure would also be implemented. They included strict new guidelines for the purchase of cars, overseas and local travel, housing, the use of consultant services, and catering and advertising.
There were “many opportunities to cut or minimise costs and stop abuse" of public money, Gordhan said.
"As government, we acknowledge that we too must provide value for money. Although most government spending is effectively managed, there are many opportunities to cut or minimise costs and stop abuse."
