New National Treasury director-general Dr Duncan Pieterse reports that recommendations arising from a joint review by the National Treasury and the Presidency regarding the configuration of government and its programmes could be made ahead of the November 1 Medium-Term Budget Policy Statement (MTBPS).

Pieterse, who took up the position on September 1 having previously been the deputy director-general for asset and liability management, told editors on Tuesday that work on the “reconfiguration of the State” has been ongoing since President Cyril Ramaphosa initially announced the review in his 2018 State of the Nation Address.

While the reconfiguration has been flagged several times thereafter, there have been few visible developments, with new Ministers having been introduced to Cabinet following the most recent reshuffle in March.  

“That [reconfiguration] work has continued, and the outcomes of that work will be announced either at the time of the MTBPS, at the latest, or even sooner,” Pieterse reported, while refusing to be drawn on the details.

A recent Sunday Times report indicated that the reconfiguration could result in the cutting of several programmes to sustain the R350-a-month social relief of distress grant, amid a weakening revenue collection outlook. The report also stated that it could result in the long-awaited reduction in the size of Cabinet, which is widely regarded as bloated.

“What that [review] is really about is about identifying the areas in which the way the State is organised is no longer fit for purpose, and that includes both the structure of the State but also includes the various programmes,” Pieterse explained.

A failure to reconfigure the State and cut inefficient programmes, he added, would result in either higher taxes or increased borrowings, or both, with media reports indicating that the National Treasury is already considering an increase in the Value Added Tax rate to address part of the shortfall that is arising because of prolonged low growth and exacerbated by loadshedding and the collapse in freight rail services.

Pieterse confirmed that there had been an underperformance in revenue collection relative to the forecast provided in the February Budget and also revealed that government’s borrowing programme had been ramped up since August to compensate.

He is, thus, having to lead a rethink at the National Treasury on what will constitute a credible fiscal framework in the context of lower-than-forecast revenue, increased borrowings and continued low growth.

“We started heading in the direction [of a credible fiscal framework], I would say, over the last two or so years, and then of course this year we've had an underperformance in our revenue collection, which has meant that we have to think very differently now about what a credible fiscal framework looks like.”

Besides the traditional tools of adjusting debt, taxes and spending, Pieterse said the National Treasury was also looking at other measures to strengthen the fiscal framework over the medium term.

He did not provide details, but these are likely to focus primarily on growth-enhancing reforms, such as those envisaged for the electricity and freight logistics sectors, which are aimed at facilitating an injection of private investment and skills.

VGBE REPORT ON ESKOM COMPLETE

In the electricity sector, where Eskom is being supported by a R254-billion debt relief package, Pieterse expressed optimism that a VgBE-led review of the utility’s coal fleet will make concrete recommendations on how to improve skills, maintenance and procurement outcomes.

The report would be shared with Finance Minister Enoch Godongwana this week and the National Treasury would then decide on how best to communicate the findings within and outside of government and Eskom.

While the scope of the study did not initially include the prospect of prolonging the life of certain coal stations, Pieterse indicated that it would make high-level inputs in this regard.

“In our view, it's quite a good report [and] we think that these kinds of reports should become the norm for State-owned companies.”

He also stressed that the debt-relief being offered to Eskom should provide it with the wherewithal to push ahead with grid investments, but he acknowledged that its balance sheet might not be sufficient to support a much-needed scale-up.

Given that the grid investment requirement exceeded Eskom’s financial capacity he said initiatives were being considered to “crowd the private sector into transmission investment” and that an update in this regard could also be provided in the MTBPS.