Gordhan cans state credit cards, puts lid on bling cars

Credit card debt

Cape Town – Finance Minister Pravin Gordhan drew a line in the sand on state spending on Wednesday, announcing cuts to official perks and giving half of government departments not a cent more in his mid-term budget review.

In a last-minute agreement with cabinet, the state is to impose tighter guidelines on cars, accommodation and travel for all government leaders, from ministers to mayors.

Gordhan said these would apply from December 1 and would spell an end to official credit cards, million rand vehicles, luxury hotel stays and expensive home upgrades for cabinet members.

He told reporters it would also apply to the presidency. Asked about plans to purchase a new presidential jet, Gordhan said if this was necessary, it would be done.

The finance minister said he expected the downgrading of official perks with regard to cabinet ministers would save only about R15m, but if applied across all tiers of government it could bring savings of R2bn.

The announcement dominated a medium-term budget Gordhan said stuck to his counter-cyclical approach of “supporting growth and job creation and fiscal moderation”.

He gave assurances that the budget deficit would decrease in coming years, and added: “We think we have what we need to manage any turbulence that might arise.”

Where the minister did open the public purse for adjusted appropriations, most of the additional funding went towards the state’s rising wage bill, at an added cost of more than R2bn.

At a national level, Treasury is handing out R1bn to cover salary increases, inflation related and otherwise.

Another R1.25bn is going to the provinces to pay for a R690m upgrade in clerical posts and R563m higher-than-expected salary increases.

The police ministry received a sizeable budget adjustment, of which R202m will pay for improving detective services and R20m will go towards the embattled crime intelligence division.

A further R444m will be spent on increasing visible policing.

Gordhan reiterated Treasury’s firm commitment to the National Development Plan – which remains contested in the ruling alliance – and also called on the labour movement to come to the party in stabilising the investment climate in South Africa.

Without making any firm pronouncement on privatisation of state-owned enterprises, he repeated that the state had to rationalise its assets, including selling off those that served no useful purpose.

Wednesday’s mid-term budget review also saw an increase for the department of public enterprises, but the only parastatal to benefit was arms manufacturer Denel.

This includes R57m to cover penalties on its onerous production contract to make parts for Airbus. However, this is a considerable decrease compared to payments of around R200m in recent years from the state’s R1.6bn indemnity cover to Denel linked to the contract.

Gordhan said there was no indication of a new state guarantee for South African Airways because the implications of the recently-announced turnaround strategy for the national carrier were still being considered.

The defence ministry received an additional R150m for sending troops to the Democratic Republic of Congo as part of the UN intervention force in the conflict-ridden central African nation.