TREASURY has warned the Eastern Cape’s finances are in the danger zone and if cost-cutting measures are not put in place now, the province could end the financial year R1.8-billion in the red.

Finance MEC Phumulo Masualle said the dire state of the province’s finances had been reported to the executive council.

“We went to the executive council to say the environment is pointing in a dangerous direction. We will have to do further cost-cutting to mitigate that environment,” said Masualle.

The province already cut the budget by 10% at the beginning of the financial year. Now another 5% will be cut next month when budgets are adjusted.

Masualle said the main offenders were health and education, which received R15.1-billion and R26.2-billion budgets respectively.

When the provincial treasury assessed spending patterns recently, it projected the province would be more than R1.8-billion in the red. It found:

The health department alone would overspend by R1.3-billion, largely on personnel posts not budgeted for;

Treasury has to source R450million to finance an out-of-court settlement in which the education department agreed to fill all vacant teaching posts even though this had not been budgeted for; and

Over 54 000 Eastern Cape pupils might have to walk to school in November as an extra R130-million is needed to finance the programme until the end of the financial year.

“If certain things do not happen in health, these are the projections,” said Masualle. “[Understand one thing], we don’t have a right to borrow money.

“An overdraft is illegal. So it’s a projected amount which we have to avoid.”

The executive council has now resolved treasury goes ahead with belt-tightening across departments. Each department would now have to cut telephone bills, travelling costs, government vehicle usage, conferencing and catering.

“We have officials who travel for meetings that could have been convened over the phone,” said Masualle. “Why is it we don’t want to consider tele-conferencing, video conferencing? [Travel is] expensive, let alone the fatal accidents.”

Some of the major decisions were made right at the beginning of the financial year, as treasury prepared budget allocations.

“When we tabled the budget, exco took a decision to revise downwards departmental budgets by 15%.

“Ten percent of it was immediately effective, 5% is going to be derived when we table the adjustments. That’s an exco decision,” he said.

The UDM’s Max Mhlathi said one reason health would overspend is it had no organogram.

“There are no internal controls – it won’t help the province to just throw money in those departments. There must be controls in place.”

DA leader Bobby Stevenson said it was bad news for the province and it was unlikely to get a bailout from the national government.

“This will result in departments cutting back on service delivery in the next financial year and really what we need in this province is financial discipline – that when budgets are introduced we stick to them.”