The Medium-Term Budget Policy Statement delivered by Mr Tito Mboweni on Wednesday, 28th of October 2020, made it very clear that the country is on the brink of a fiscal cliff. Mboweni painted a grim picture of an economy that has been decimated by the aftermath of the COVID-19 pandemic, expected to contract by as much as 7.8% year-on-year. Gross debt is also set to rise from R4 trillion to staggering R5,5 trillion or 95% of GDP by 2023/2024.
Decreasing revenue for the state as a result of a decimated economy, an inability to curtail government spending as well as bulging debt servicing costs will inevitably lead to less money being available for service delivery to ordinary South Africans.
Without an ability to raise additional revenue or borrow more money, government will be forced to start tightening its belt or suffer the reality of a sovereign debt crisis. The aforesaid will unfortunately bode nothing well for the Eastern Cape as the poorest province in the country.
Against the most trying of economic times, this house is considering the adoption of the Eastern Cape Money Bills Amendment Procedure and Related Matters Bill.
The Democratic Alliance welcomes the bill before us and wishes to emphasize the fact that this new piece of legislation can play a pivotal role in navigating the province through some very treacherous and turbulent economic times.
One must, however be mindful of the fact that the enactment of this legislation in itself does not guarantee that the Eastern Cape will have a more prudent or austere approach to fiscal matters in future.
For the Eastern Cape to charter a new course of fiscal discipline, there must be a mind shift by the legislators in this very house that fiscal reform is necessary. This mind shift should also be coupled with a willingness to take the difficult and very often, unpopular decisions.
Put differently, Speaker, the Budget Committee that will be established under the new Act, will bring nothing new if there is an unwillingness of the members of that committee to impose fiscal reforms. And even that may not be enough.
Members of the Ad Hoc Committee have already repeatedly raised concerns that the Budget Committee, in essence, will only be successful if Provincial Treasury, but more importantly the respective government departments, act on their advices.
Unfortunately, the Budget Committee in itself will have very little teeth to impose reform onto our departments, and that is why we will look to this house to support the forthcoming Budget Committee in its all-important work. It is thus up to you honourable members to support the committee when fiscal reform proposals are made and to also provide the committee with your unfettered backing when it comes to enforcing such reform proposals on government.
It is my considered opinion that the establishment of this committee comes at the right time when National Treasury has indicated that there is a need for both government departments as well as state-owned entities to move to a zero-based budgeting approach. This is going to prove to be very bitter medicine for both our provincial departments as well as our provincial entities alike. Still, I think we are all in agreement that the patient requires this medicine to be administered, now more than ever before.
Speaker, some of the difficult fiscal reform considerations will include:
- The Rising Cost of Employment (COE) which remains one of the biggest risk factors to the financial sustainability of the Eastern Cape. COE is currently standing at a whopping 67% of total budget whilst the administrations’ targeted total COE in relation to budget is actually 60%. This means that 6 7cents out of each provincial government Rand is being spent on Cost of Employment;
- The urgent and much needed rationalisation process of our Provincial Entities. This is a commitment the Honourable Premier made on numerous occasions and of which Treasury and the forthcoming Budget Committee will remind him frequently;
- The implementation of forced cost containment through a rigorous austerity program;
- Increasing investment in Capital Infrastructure development. In the 2020/21 budget we proposed spending only 5,4 cents of each provincial government Rand on infrastructure development such as roads, hospitals and schools. We cannot have an infrastructure-led growth agenda without the ability to build that infrastructure;
- Containing contingent liabilities such as medico-legal claims.
The aforesaid is but some of the very difficult issues which the proposed Budget Committee and indeed, also this house will have to consider in the very near future.
What we need is real fiscal reform that can put protect the province and its government against the onslaught of very uncertain economic and financial times in our country. We must embrace the opportunities that present itself with the enacting of this new piece of legislation.
We must, however, remember that ultimately, the success of the work of the forthcoming budget committee will depend solely on whether this house supports the work of that committee. A piece of legislation in itself means nothing if the lawmakers don’t have a willingness to ensure that the reform brought by such legislation is enforced.
The Democratic Alliance supports the adoption of this bill and also wishes to thank everyone that has been part and parcel of the drafting thereof. In specific, we wish to thank Adv Beja for her dedication and hard work in crafting the bill. Without her, this bill would not have become a reality.
I thank you.