As is the case for most middle-class families, to enjoy their hard-earned Madibas, they will eat out two to three times a week, take their children to watch a 3D animation movie at least once a week and maybe go away on a mini-get away once every three months.
And as I have observed with people I know, they will go as far as using their credit cards for consumption for the sake of enjoying the finer things in life.
But, when earnings appear to shrink due to a need for school fees or to replace a burst pipe or geyser, families often have to take away their luxuries and turn their spending to things that have a higher priority.
Priorities change over time due to external factors.
And Finance Minister Pravin Gordhan without a doubt views the public service as a household that needs to adapt to external factors when he revised spending based on demand and economic indicators.
When he tabled the 2013 Medium Term Budget Policy Statement in Parliament this week, Gordhan said that though South Africa has several strengths – a sound macro-economic policy, deep and liquid financial markets and robust corporate and public balance sheets – the economic and fiscal outlook has weakened in recent months.
Coupled with weaker economic growth, commodity export prices have declined during the first nine months of this year, bond yields have begun to rise placing added pressure on interest costs and reliance on foreign investors to finance the budget deficit has increased.
While a spending ceiling has been set for 2016/17, which will hold real non-interest expenditure growth to an annual average of 2.2% over the three-year spending period, net national debt is projected to stabilise at 44%, said Gordhan.
As a result, the total expenditure for 2013/14 has been revised down to R1.05 trillion, R5.7 billion less than the estimate table in the 2013 budget.
An indication of the slowdown in spending by the government is that main budget non-interest spending grew at eight percent a year in real terms between 2003/4 and 2011/12, but is budgeted to grow at just 2.1% over the next three years.
While the areas of economic services, public services, higher education and environmental affairs and science and technology are all projected to grow over the period of 2013/14 to 2016/17 at less than half the rate they did during 2010/11 to 2013/14, those for economic infrastructure, policing, basic education and health will see only marginally less of an increase over the latter period.
The Department of Health has reduced the allocation to the national health grant after the grant had R200 million in unspent funds in the last financial year.
This has freed up an additional allocations which will allow for the purchase of new equipment for forensic chemistry laboratories, he said.
Funds have also been reprioritised to the Department of Social Development to help set up shelters for victims of gender-based violence and to establish more substance-abuse centres – with an additional R20 million set aside for the latter.
The budget deficit is expected to come in at 4.2% for 2013/14, declining slightly to 4.1% in 2014/15, before falling to three percent in 2016/17.
Interest payments are the fastest growing expenditure item over the next three years, growing to R140 billion in 2016/17 – higher than current spending on health care.
Compensation of public servants now accounts for 39.4% of the budget of non-interest spending and will continue to outpace inflation, but grow at a slower rate than over the past three years.
With tough times, comes a need to focus on your bare essentials. And the government has had to take those decisions while not compromising the quality of service delivery. – SAnews.gov.za
