South Africa will be starting the process to merge and close a number of government departments and entities over the next three years as part of reconfiguring the structure and size of the State.
This comes as government finances stand on the edge of a fiscal cliff due to the unsustainable national debt burden, widening borrowing costs and elevated expenditure, in relation to dwindling tax revenue.
Finance Minister Enoch Godongwana yesterday said the reconfiguration of the government was one of the National Treasury's approaches to fiscal consolidation, which includes spending reductions, efficiency measures across the government and moderate revenue increases.
Tabling his Medium-Term Budget Policy Statement (MTBPS) in Parliament, Godongwana said The Presidency, Treasury, the departments of public service and administration, and planning, monitoring and evaluation were formulating high‐level recommendations on programme and entity closures.
Godongwana said a dedicated technical team consisting of the appropriate legal, financial and human resource expertise had been created to facilitate implementation.
“In this regard, the MTBPS also announces that action is being taken to review and reconfigure the structure and size of the State, in line with the President’s commitment in the 2023 State of the Nation Address,” Godongwana said.
“A joint plan to review government departments, entities and programmes over the next three years is being prepared.
“This plan will address overlapping mandates and functions, including in public entities, and ensure that we create standards for more sustainable remuneration of executives that serve public entities receiving transfers from the fiscus.”
Godongwana also said the government intended to leverage this plan to better direct its scarce resources to priority areas.
President Cyril Ramaphosa is expected to make further announcements on the reconfiguration in his State of the Nation Address next year.
Ramaphosa has previously indicated that the Department of Public Enterprises would be dissolved after the general elections next year, with State-owned companies under it absorbed by their line departments.
Meanwhile, Godongwana said the MTBPS also recognised that the government must respect the budget constraint as the decisions taken included spending reductions and reprioritisation, while also taking concrete steps to support growth.
He said that limited public sector capabilities eroded public trust in public institutions and wasted scarce public resources, affecting service delivery and economic growth.
“Treasury has conducted a series of spending reviews over the last three years, and these highlighted deficiencies in policy choices and programme design, scale and cost,” he said.
“They also revealed shortcomings in planning and implementation, which resulted in overlapping mandates and functions, and duplication of effort, thus the government considered them to place a further drag on the economy.”
As a result, the government will merge the Small Enterprise Finance Agency, Small Enterprise Development Agency, and Co-operatives Banks Development Agency to improve cohesion and support to small businesses.
Work is also underway to merge the Trans-Caledon Tunnel Authority and the Water Trading Entity under the new National Water Infrastructure Agency in a bid to allocate risk more efficiently and ensure transparency in the long-term water financing.
This restructuring of the government and the potential job losses are expected to raise the ire of public sector unions who are very powerful within the governing party’s decision-making bodies.
Asked during a pre-speech media briefing whether this configuration could possibly result in a number of civil servants being retrenched, Godongwana was non-committal.
“I cannot make that judgement until that reorganisation is complete. That reorganisation needs to readjust how the government functions. There are more people you need elsewhere than elsewhere,” he said.