Category: MIL-OSI

Government’s assessment over the last few months on budgeting effectively and efficiently, shows that the state could save R6.7 billion by removing low-priority or underperforming programmes over the medium term.

This is according to the Targeted and Responsible Savings (TARS) initiative, which systematically identifies duplication, eliminates waste, and reorganises programmes to deliver value for money.

“Honourable Members, eliminating waste and inefficiency in government is non-negotiable if we are to maintain public trust that tax money is spent responsibly. We are implementing medium-term savings of R6.7 billion by closing or scaling down low priority and underperforming programmes immediately,” Minister of Finance Enoch Godongwana said on Wednesday.

Presenting the Medium-Term Budget Policy Statement (MTBPS) at a sitting of the National Assembly at the Good Hope Chamber in Parliament, the Minister said more than half of this involves identifying people who are double-dipping and defrauding the social grants system.

“We are also scaling down the public transport network grant. The grant has failed to meet the objective, and some cities have failed entirely to get the projects off the ground,” the Minister said.

The reforms that have been identified, coupled with performance-oriented frameworks and stronger oversight mechanisms, are intended to bolster efficiency, protect frontline services and create space to increase spending on government priorities, including growth-enhancing infrastructure.

A programme assessment matrix has been introduced to enable the systematic review of programmes so that departments can identify low-priority or underperforming programmes to be considered by Cabinet for review and rationalisation.

The matrix uses standardised metrics to measure the degree to which programmes: 

• Are aligned with legislation and policy, and do not duplicate effort.
• Perform effectively, delivering the desired outputs and outcomes.
• Use resources efficiently, with staffing, administrative overheads, institutional capacity and delivery models that deliver value for money.
• Are financially sustainable, exhibit sound budget discipline and have potential for external funding.

Changes are being implemented in phases in the 2026 Medium-Term Expenditure Framework (MTEF). 

Additional measures undertaken in the budget reform process include the following: 

• Implementing the recommendations of the Department of Public Service and Administration’s personnel expenditure review.
• Reviewing the sector education and training authorities.
• Assessing incentives managed by the Department of Trade, Industry and Competition.
• Reviewing several local government conditional grants to address inefficiencies in infrastructure service delivery.
• Reducing administration costs, including through expanding the use of transversal contracts – bulk-buying arrangements negotiated by the National Treasury to reduce costs – in high-value areas. – SAnews.gov.za

Despite the introduction of the municipal Eskom debt relief programme in 2023, municipalities are still battling to address ballooning debt to the power utility.

According to the department’s Medium Term Budget Policy Statement (MTBPS), the debt has grown to some R94 billion as of the end of March this year – up from some R55 billion.

“While 24 municipalities have qualified for the first one-third write-off after 12 consecutive months of payments and 21 have generally maintained payments, as of 7 May 2025, 47 municipalities remain in default. 

“This is the combined result of weak collections, excessive electricity and water losses due primarily to a lack of maintenance, and inadequate credit control. Measures are being taken to assist municipalities in raising revenue, including expanding smart prepaid metering,” Treasury said.

As an interim measure, struggling municipalities will “transition, where appropriate, to distribution agency agreements (DAAs)”.

“Under these agreements, Eskom will operate municipal electricity services for a defined period, support cost-reflective tariff setting and loss reduction, and assist with collections. 

“During this period, municipalities will be required to select the most appropriate service delivery mechanism, phase in cost-reflective tariffs and limit rebates,” the department said.

Municipalities are urged to direct funding from grants like the Municipal Infrastructure Grant (MIG) to rehabilitating existing water and electricity infrastructure, which are conduits for revenue generation.

“Additional conditions include strict adherence to pro-poor policies to ensure that local governments are providing the required amounts, doing so within national limits and ring-fencing electricity revenues.

“The DAA pathway is intended to stabilise cash flows, improve payment discipline and create a bridge to longer-term structural reforms in the local government fiscal framework.

“The interim measure does not rule out stronger interventions where failures persist,” National Treasury said.

Municipal Infrastructure Grant

At the same time, National Treasury has announced reforms to the Municipal Infrastructure Grant in a bid to cut out underspending, misuse of funds and capacity constraints.

The reforms include a split delivery model aimed at assisting municipalities to accelerate service delivery infrastructure delivery.

“Where municipalities demonstrate proven capacity, funding will continue to be allocated directly. However, in cases of persistent capacity and governance failures, delivery will shift to an indirect model through institutions such as the Municipal Infrastructure Support Agent and the DBSA [Development Bank of South Africa]. 

“This will be accompanied by time-bound capability plans aimed at restoring municipalities to direct funding. The shift to a split-delivery model balances the urgent need to accelerate service delivery with building resilient, capable local government that can sustainably meet the infrastructure needs of their communities,” Treasury noted.

Added to that, a performance-linked incentive is also being introduced to “reward municipalities that deliver fit for purpose infrastructure on time and budget, at reasonable cost, with funded maintenance plans and climate-resilience measures”.

“The reform will be supported by clearer criteria for determining funding modalities, stronger oversight through annual delivery compacts and embedded technical support to build municipal planning, procurement and asset management capability.

“The necessary conditional grant framework amendments will be tabled in the 2026 Division of Revenue Bill, with pilot implementation commencing in 2026/27,” the department added.

Furthermore, a municipal utility reform programme will also be piloted at the Mbombela, Govan Mbeki, Lekwa and eMalahleni municipalities later this year.

“The National Treasury, working with the African Development Bank [AfDB] and donor partners, is implementing a pilot Municipal Utility Reform Programme, under a results-based AfDB concessional loan of up to US$400 million.

“It aims to stabilise and professionalise core municipal utilities [water and electricity] by reducing losses, introducing cost-reflective tariffs with protections for poor households, ringfencing revenues, improving asset care, and enhancing governance and reporting,” Treasury said.

Lessons drawn from the pilot will be used to expand the programme to “municipalities in other provinces facing severe delivery challenges”.

“The scale-up will align with conditional grant reforms and, where appropriate, will disburse grants linked to independently verified milestones to safeguard delivery and fiscal sustainability,” Treasury said. – SAnews.gov.za

National Treasury expects South Africa’s economy to grow by some 1.2% this year – marginally down from the 1.4% forecasted in the 2025 Budget.

This according to the Medium Term Budget Policy Statement (MTBPS) released by National Treasury on Wednesday.
The department noted that the outlook reflects a moderate improvement with steady progress in structural economic reforms.

“Government is meeting its fiscal targets and continued strengthening of macroeconomic stability will increase confidence and reduce borrowing costs across the economy, helping to revive investment and employment.

“Over the past year, domestic growth has been affected by greater global uncertainty and volatility, logistical constraints and low levels of business and consumer confidence.

“However, inflation has fallen, and together with prudent fiscal policy, this has reduced the risk premium – the additional return that investors demand to hold South African assets. As a result, borrowing costs have declined and growth prospects have improved,” the department noted.

The real Gross Domestic Product (GDP) is expected to reach some 1.2% in the same period – also reduced from the 1.4% in Budget 2025.
“The revision reflects weaker growth outcomes in the first half of the year, a subdued external environment and low levels of consumer and business confidence.

“Household consumption remained resilient, supported by moderating inflation, lower interest rates and improved credit conditions, but weaker investment, state spending and exports tempered overall expenditure growth,” National Treasury noted.

Over the medium term, however, GDP is expected to average some 1.8%.

“Investment is expected to strengthen over the medium term as measures to lift infrastructure spending take effect and reform implementation gains traction.

“Investment will also benefit from the reduced cost of capital, supported by lower interest rates and the country’s improving risk premium,” said Treasury.

Risks to domestic growth are on the downside.

“Further delays in implementing reforms, particularly in energy and logistics, would impede much-needed growth-enabling investment.

“Conversely, lower inflation and interest rates, and improvements in infrastructure spending would support higher growth,” the department said.

Government has focused the economic growth strategy on four elements: maintaining macroeconomic stability, implementing structural reforms, building state capability and supporting public infrastructure investment.

National Treasury emphasised that raising the growth trajectory “depends on continuing to strengthen macroeconomic stability, accelerating structural reforms, building a capable state and improving public-sector infrastructure investment”.

“Progress is evident but delays in key structural reforms have held back investment, limiting potential opportunities offered by resilience in the global economy.

“This underscores the importance of continued efforts to improve policy certainty, deal decisively with economic blockages and bolster capacity in infrastructure and service delivery,” it said.

A look abroad

On the global front, growth is expected to slow to 3.2% in 2025 with the outlook weaker than a year ago due to tariff shocks and geopolitical challenges.

“Tariffs have not risen as sharply as expected when the US administration made its announcements in April of this year. However, the delayed price effects of such measures, growing protectionism and supply chain disruptions may increase costs, reduce productivity growth and weigh on medium-term economic growth.

“The prospect of higher tariffs buoyed trade in the first half of the year as companies brought forward imports and exports, but this is expected to wane over the remainder of 2025 – as is the impact of deficit spending in advanced economies.

“Global inflation is expected to continue easing over the next two years, led by lower energy and food prices. However, renewed trade disruptions, higher energy costs or the delayed effects of tariff measures could increase price pressures,” Treasury noted. – SAnews.gov.za

In a landmark moment for South Africa’s monetary policy agenda, government has decided to reduce South Africa’s inflation target to 3%, with a 1 percentage point tolerance band.

This will reduce the cost of living and borrowing costs for households, businesses and government, supporting higher long-term economic growth and job creation. 

Presenting the Medium-Term Budget Policy Statement (MTBPS) at a sitting of the National Assembly at the Good Hope Chamber in Parliament, the Minister said the 1 percentage point band provides flexibility to accommodate any unexpected inflationary shocks

“This decision follows agreement between the Governor of the South African Reserve Bank and my consultations with the President and Cabinet. This new target immediately replaces the previous target range of between 3% and 6% and will be implemented over the next two years,” Minister of Finance Enoch Godongwana said on Wednesday.

This is in line with South Africa’s approach to inflation targeting, which has always been a flexible one, looking beyond short-run deviations in inflation. 

“The Reserve Bank will pursue the target on a continuous basis and clearly communicate any deviations from the target. Over time, the lower target will decrease inflation expectations and inflation, creating room for lower interest rates.

“The short-term fiscal costs of a lower target, which include lower nominal Gross Domestic Product and revenue growth, will make achieving fiscal targets more challenging. 

“Yet the long-term benefits of taking this step far outweigh these costs. We remain committed to ensuring that our macroeconomic policies serve the best interests of all South Africans,” the Minister said.

A lower target aligns the country with international best practice and makes the cost of borrowing cheaper by reducing the inflation risk premium that investors demand to lend to South Africa.

The Minister of Finance and the Governor of the Reserve Bank will closely coordinate policy settings to maximise the economic benefits of the new target and enhance fiscal and monetary policy alignment.-SAnews.gov.za