Zero-based budget approach should apply to whole Government – OUTA

Government must cut very deep to avoid sovereign debt crisis.

24/06/2020 16:30:08

                                                                                                                                                                                                        Zero-based budget approach should apply to whole Government – OUTA  


                                                                                                                                                                                                        The Organisation Undoing Tax Abuse (OUTA) believes that the only way for the economy to survive is by cutting down on state expenditure and making it more attractive for private investment to stimulate the economy through policy certainty.

                                                                                                                                                                                                        The new budget reflects billions in lost tax revenue due to the lockdown, and large sums of extra money have been committed to support the economy and its citizens during the crisis. A major concern is where this money will come from and at what cost to taxpayers in future.

                                                                                                                                                                                                        “We are pleased that Minister Mboweni has emphasised a zero-based budgeting approach for the medium term, but we are concerned that it will be mainly targeted at large programmes which have not been clearly defined. Instead, we suggest that the whole of government should be taking this approach to act more efficiently and effectively with taxpayers’ money,” said Matt Johnston, Parliament Engagement Manager at OUTA

                                                                                                                                                                                                        “A zero-based approach will be a massive exercise, and the South African government is lacking the resources and skills to do this on its own. There is not enough tax revenue to cover the expenses from stale programmes that fail to deliver year after year. High levels of indebtedness mean that interest rates are burgeoning. Therefore, OUTA supports zero-based budgeting but calls on government to use this process to eliminate tax leaching programmes. For this to work, we will need political will to cut unnecessary and corrupt spending,” Johnston added.

                                                                                                                                                                                                        Public finances are dangerously overstretched. OUTA agrees with National Treasury’s sentiment that it cannot be business as usual. A passive plan for spending over the next three years is no longer an option. Spiralling debt-servicing costs can cause a sovereign debt crisis that will undermine the livelihood of each and every South African.

                                                                                                                                                                                                        Until now, state owned entities (SOEs) have posed the most significant risk to the South African economy. Now, additional expenses demanded by Covid-19 related needs compounds the problem. The National Planning Commission recently published a position paper with comprehensive recommendations for reform in the largest state-owned entities and companies which need to be accelerated. 

                                                                                                                                                                                                        OUTA has consistently been advocating for government to refrain from increasing existing taxes and tariffs on South Africans due to known patterns of waste and abuse in the public sector. 

                                                                                                                                                                                                        OUTA also questions how capital-intensive expenditure plans for mega projects like a revived nuclear energy agenda can be justified. Especially since more and more households struggle to afford basic goods and services, and government cut electrification programmes.

                                                                                                                                                                                                        The excessive public wage bill has also squeezed the public purse. The impasse over this between the Minister of Finance and the unions has been a feature of post-budget discourse. In addition, the Auditor-General of South Africa announced today that municipal spending outcomes have continued to regress. 

                                                                                                                                                                                                        “We haven’t seen government cutting deep on costs as promised in the budget speech earlier this year. We have seen numerous municipalities budgeting for revenue increases whilst awarding councillors and municipal workers with salary increases. The minister has also urged communities and local associations to hold municipal councils accountable for the expense of Covid-19 related allocations. OUTA strongly supports this call and intends to facilitate its realization. Our teams are also analysing the budget and we will do a formal submission on the adjustment budget before Tuesday next week,” said Julius Kleynhans, Strategy and Development Executive at OUTA. 

                                                                                                                                                                                                        “Government does not have the capacity or capabilities to do this on its own, and OUTA calls on minister Mboweni to engage with private entities or NGO’s to assist. Oversight and accountability will be crucial in reducing debt and avoiding a sovereign debt crisis, and all South Africans will have to play a part in holding Government to account,” Kleynhans added.

                                                                                                                                                                                                        OUTA is a proudly South African civil action organisation, that is purely crowd funded. Our work is supported by ordinary citizens who are passionate about holding government accountable and ensuring our taxes are used to the benefit of all South Africans.