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Cape Town - President Jacob Zuma told provincial leaders that the government will make deep cuts to budget allocations in the coming fiscal year, requiring spending curbs on personnel and infrastructure, Western Cape Premier Helen Zille said.
Zuma convened a meeting in the capital, Pretoria, two weeks ago “where premiers were told in plain language that urgent and far-reaching budget cuts are needed,” she said in an e-mailed statement on Tuesday.
“Cabinet has resolved that money committed to national and provinces for the new financial year will be substantially cut across the board.”
Finance Minister Pravin Gordhan, who will deliver his budget plan on February 24, is seeking to avoid a credit-rating downgrade to junk in the face of plunging commodity prices, weak demand from China and the worst drought in more than a century. While a slowing economy has prompted the government to put a cap on spending growth, it has so far avoided expenditure cuts.
Phumza Macanda, a spokesperson for the Treasury, said Zille had been given confidential information and it was regrettable that it had been made public.
Gordhan “is already on record that we’re in a tough fiscal environment and that we will continue in the path of fiscal consolidation to demonstrate our credibility,” Macanda said in an e-mailed response to questions.
The World Bank on Tuesday cut this year’s growth projection for South Africa to 0.8% and said the economy is at risk of falling into recession. The government had pledged in October to narrow the fiscal deficit to 3.3% of gross domestic product in the year beginning April 1.
Zille said the Western Cape will be required to make “substantial budget cuts, running into hundreds of millions of rand” over the next three years. That may affect the province’s spending on infrastructure projects and salaries, she said.
Additional funds that the National Treasury had earmarked to provinces to cover above-inflation wage increases will now be diverted to other spending items, Zille said.
The government last year awarded civil servants pay raises of 7.2% compared with original budgeted estimates of 5.5%.
