Despite promises by President Cyril Ramaphosa in the recent State of the Nation Address that
to overall expenditure and improvements to its composition in the 2020 budget, we do not see how he can achieve sufficiently large spending cuts in the upcoming fiscal year without damaging essential service delivery.Notably, about 55 percent of budgetary expenditure comprises interest payments on the debt , social grants and employee compensation.
With total public sector compensation amounting to about 14 percent of GDP — only a handful of countries elsewhere in the world report a higher ratio — some restraint on public sector pay seems warranted. However, the government has promised there will be noin the public sector, and its early voluntary retirement initiative had very poor take-up. In fact, the number of public sector workers at the national and provincial government level increased by 32,000 in the first half of this fiscal year.
The painful truth is that cutting expenditure is always hard, and spending has already been trimmed quite a lot to make room for theFurther spending cuts somewhere in the strained budget will also have to be made to honour the Sona promise to “top-slice” 1 percent of the budget to fund measures to tackle youth unemployment.Thus, we believe it will be very hard for Mboweni to front-load much of the targeted R150-billion net expenditure cuts.
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