While there has been much written about the need for structural reform in the economy and the need for government to have more investment friendly policies, it is also useful to look at where government can cut costs in order to prevent South Africa falling off a fiscal cliff in the medium term. South Africa must adopt a philosophy similar to how car manufacturers make cars go faster; build better engines (investment friendly policies) and reduce the weight (cut the size and expenditure of government) of the car. The country needs both to both get onto a path of economic and job growth, and to stabilize our out-of-control public finances.VIP securityIn a 2018 Cape Talk interview Gareth Van Onselen (then at the Institute of Race Relations) commented that, between 2000 (the first time that VIP protection appeared as a line-out within the budget) and 2018 the budget for VIP protection ballooned from just over R100 million to just under R3 billion. In the first two years of President Ramaphosa's tenure, R5.3 billion was spent on VIP security; an enormous amount of money which is spent without proper explanation and oversight into why it costs so much. These numbers also exclude the cost of chartered flights. Establishing oversight mechanisms as to the full cost of VIP security, and then slashing the cost by extending VIP security only to the most senior members of the government would save Treasury a lot of money, especially when taken together with a reduction in the size of the executive.Reducing the size of cabinetDespite President Ramaphosa's reduction of the size of his cabinet ministers from 36 to 28 - saving the taxpayer R21 million per year -South Africa still has more cabinet members than the US (15 ministers) and the UK (21 ministers); and this is not counting South Africa's 37 deputy ministers. Cutting all 37 deputy ministers would immediately save over R70 million per year, which would make sense both financially and constitutionally as deputy ministers are not part of the cabinet and executive and do not ordinarily sit in on cabinet meetings. Section 85 of the Constitution states that executive authority is only exercised by the president and cabinet, and section 98 directs the president to pick a substitute or stand in minister form among other cabinet members when a minister is absent or unable to carry out their duties.While deputy ministers are accountable to parliament for the exercise of their functions, only ministers need to submit full and regular reports to parliament. This lack of oversight leaves deputy ministers unchecked even though they earn more than parliamentarians. It is a massive waste of public finances and serves no real purpose for forwarding any of the governance objectives.Public sector wagesThe biggest item that needs cutting is the public wage bill, which takes up about a third of government expenditure. This has become even more pressing as the devastation of the coronavirus and the lockdowns has caused havoc with the country's finances. It is useful to note even here there is a lot of unnecessary expenditure. An Intellidex Report commissioned by Business Unity South Africa notes that public sector compensation is 11.6% of GDP -about 25% higher than the Organisation for Economic Co-operation and Development(OECD) average. The report also found there was no indication of productivity increases to justify wage increases from 2006 to 2019, as wages outstripped economic growth and productivity.One way to control the unjustified yearly increases in public sector wages is to find a workable system that pegs public sector wages growth to economic growth and productivity which will incentivise public sector stakeholders to prioritise reforms that allow real economic growth and productivity. This, along with cuts to wages that Finance Minister Tito Mboweni has promised, would help to ease government's financial woes and encourage an approach that would lead to policy that champions growth and productivity. It would align government actors' self-interest with the economic interests of the country. The ballooning of public sector wages (which have more than tripled between 2007 and 2019) is simply unsustainable. Minister Mboweni needs civil society to back him as he seeks to implement these cuts which would amount to more than R160 billion in the next three financial years.ConclusionTaken together, cutting expenditure in these areas would be a good start to setting South Africa on the right course to prosperity. The government needs civil society and the public to pressure them to follow through on such measures as ratings agencies, such as Moody's noted in October 2020 that Finance Minister Tito Mboweni's plan to contain growth in public sector salaries at 1.8 percent was likely to be met with resistance from the unions – "The government expects further cuts on the wage bill beyond 2020, but negotiations with social partners will be difficult."This article was first published on City Press on 18 February 2021.
Sindile Vabaza is an economics associate at the Free Market Foundation.
Publish date: 26 February 2021
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.