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Nene directed his traditional fighting words at civil servants, whose salary bill had inevitably been the major wild card in his February budget.
The wage deal with public service unions this year amounted to 10.1%, while the national budget had in February put aside money for a strictly inflation-linked increase of less than half of that.
“This is not sustainable. We recognise the need to improve the negotiation process and reform public sector remuneration,” said Nene.
“The improvement in compensation means there is no room for expanding government employment,” he added.
That is not news, though, as a “freeze” on hiring new civil servants was announced exactly a year earlier.
The freeze seems to be working in some places – personnel numbers in provincial departments have dropped by 2% since 2012, according to Nene.
The provincial departments are where the majority of teachers and health workers are employed.
The recent and unusual drop in civil servant numbers has been largely blamed on panicked resignations related to misunderstood pension reforms.
Despite the audible chaos of riot police forcibly ejecting protesting students from the parliamentary precinct, Nene stuck to the script on education funding.
The minister deferred to his Cabinet colleague, Higher Education Minister Blade Nzimande, who had made a number of open-ended commitments on Monday to increase funding for poor students.
Incentives
Nene’s budget was not without news, though. Among the new announcements was a plan to evaluate all the subsidies and tax incentives for private companies that cost about R24 billion a year in forgone taxes – and R7 billion in collected tax revenue. Treasury will be evaluating them separately from the Davis Tax Committee, which also has the incentive system on its long list of subjects to interrogate.
These incentives include the Economic Competitiveness Support Programme and the Automotive Production and Development Programme, which supports the local vehicle-manufacturing industry.
The controversial Employment Tax Incentive, sometimes still called the youth wage subsidy, is also up for evaluation. Between January last year and July this year, the tax incentive cost R3.9 billion, said Nene.
He said there “has been active debate around its impact” – a reference to criticisms that much of that money is a pure subsidy to companies that would have hired the targeted low-waged young people anyway.
The incentive has now been used by 36 000 employers to subsidise the wages of 250 000 workers, but there are no estimates yet after January this year.
The total Employment Tax Incentive bill shows that the subsidy continues to blow the budget that was allocated towards it.
Originally, it was meant to cost R1 billion in the first year, but instead cost R2 billion. Now it has cost another R1.9 billion in little over half of its second year.
South Africa will be making its first contribution to the new development bank it is creating with Brics partners Brazil, Russia, India and China. Treasury is using the spare change from the sale of government’s Vodacom shares to pitch in R2 billion out of the R27 billion in “paid-up” capital it has agreed to contribute.
The rest of the Vodacom money – R23 billion – is going to Eskom.
The proposed design for the longanticipated carbon tax would be released this month, said Nene. Large and infamously dirty industrial giants in South Africa, including ArcelorMittal, have long warned that the tax will be the death knell for steelmaking and other industrial sectors in the country.
Nene also announced the first details of Treasury’s crusade against public sector spending on consultants, travel, entertainment and events, which was announced at the end of December 2013.
A significant 47% reduction on spending on events and catering was apparently achieved between 2013 and 2014.
At the same time, the bill for consultancy service fell by 3%, while travel expenses dropped 6%.
In rands and cents, this means R364 million less spent on consultants, R571 million less on travel and a full R1 billion less on parties.
Nene was also able to brag about the pace at which the new chief procurement officer’s office had been put into practice. The government now has a central eTender website, where all tenders – and their winners – are to appear. The central buying site for small items such as stationery is up and running and the central supplier database has been populated at a rapid rate since last month.
Treasury would further reform the tender system through a new Procurement Bill, which would standardise how the vast and diverse government bureaucracies bought things, said Nene.
