Call for Endorsements: Civil society statement on resignation of Head of Budget Office, National Treasury

Dear Subscribers

Please see this statement put forward by Equal Education, Section 27, PSAM and the Rural Health Advocacy Movement. It argues that the resignation of the Head of Treasury's Budget Office signals unprecedented efforts by the presidency to seize control of the public purse.  Rather than being about free education, this intervention opens the gates to arbitrary and irregular reallocations in future.

If your organisation would like to endorse the statement, please indicate so in an email to Ms Kay Sapto ([email protected]) no later than 5pm today, 16 November 2017.
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Undermining of budget process and National Treasury threatens the stability of public finances and critical areas of government spending

The resignation of the Deputy Director-General of the Budget Office at National Treasury, Michael Sachs, is a signal that the system of open, consultative and responsible decision-making - the hallmark of the country’s budget process since 1994 - is being undermined. The deliberate weakening of state institutions and democratic processes, which we are in no doubt has extended to National Treasury, deepens concerns about policy uncertainty and fiscal management that already threaten the sustainability of South Africa’s existing social spending, let alone its expansion.

This comes at a time of rising poverty and economic hardship for many South Africans and levels of unemployment not seen in fourteen years. If this situation is to be reversed, the attempts by failing and captured leaders to pull National Treasury into the downward spiral of SARS, state-owned enterprises and other government institutions must be resisted.

The recent Medium Term Budget Policy Statement (MTBPS) served only to delay important budgetary decisions while confirming that shortfalls in revenue collection by SARS, economic recession and rising debt service costs may now put frontline service delivery at risk. For example, allocations to basic education have declined by R20 billion since the 2015 MTBPS, despite an upward revision in population estimates1. Of particular concern is the R 50.8 billion revenue shortfall highlighted in the MTBPS, arising from, among other factors, anemic economic, political unpredictability and policy uncertainty.
In this context, we question the motives behind the Presidency’s purported attempt to dramatically adjust the budget, allegedly to finance free higher education for one year. While we support the project of making higher education accessible to all, we urge citizens and particularly students to consider the implications of this move if short-term political expediency rather than sustainable economic planning and budgeting is driving it forward.
As civil society organisations (CSOs) and individuals working for social justice and better access to quality social services, we have on many occasions disagreed with decisions of the National Treasury. Indeed, many CSOs were at the forefront of opposition to Treasury-led economic policies such as the Growth Employment and Redistribution (GEAR) policy. Yet, until now, Treasury has always been respected for maintaining a transparent and rigorous budget process based on robust engagement with stakeholders both in and outside of government. It is this process which has allowed social spending to increase every single year since the democratic transition.

Importantly, and irrespective of the merits and criticisms of budget allocations, Treasury always followed proper procedure in the implementation of the budget, which includes ensuring that the budget is spent as planned and holding departments to account when it is not. Diverting budget allocations outside of the established processes opens the gate for arbitrary and irregular reallocations in the future. The resulting policy uncertainty, with its negative impact on the economy and fiscal framework, alongside actual reallocation (some reports indicated that funds would be shifted from housing and social grants to higher education), put the sustainability of social spending at risk.

The Presidency’s attempts to by-pass the established budgeting process have created an untenable situation which undermines the role played by experienced officials like Sachs in mediating between the competing interests that want to take their share of the budget. It is this procedural undermining of the budget that led to Sachs’ resignation. Access to the public purse cannot be a free for all in which those with the most power simply take without regard for costs or consequences. It is this kind of approach that opens to the doors to disastrous moves to indebt future generations through massive, behind-doors procurement of nuclear power, for example.

In this regard, the National Development Plan cautioned against a hasty decision on nuclear build. Business, civil society, state research bodies and advisory bodies, academia and labour have all questioned the necessity and desirability of nuclear energy expansion. Three finance ministers, including the current minister, have indicated that the plan is unaffordable. On April 26th 2017 the Western Cape High Court ruled that government’s Nuclear Procurement Programme was unlawful, non-transparent and unaccountable. Despite these vociferous rejections, the president and his closest political allies continue insisting, with Minister Mahlobo committing to shortening the consultative process on the energy mix from a few months to a few weeks.
Allegations and evidence of the ‘capture’ of SARS, criminal justice and security agencies as well as SOEs mount on a daily basis. While the need to be seen to be ‘doing something’ about higher education funding is being used to justify the current interference in the budget process, the presidency’s intrusion cannot be seen as divorced from this context. In this regard, we note with concern recent credible reports suggesting that some leaders of the #FeesMustFall movement were co-opted by the State Security Agency.

Civil society organisations thus call on the Presidency to:
● Reaffirm the central, legislated role that Treasury plays in the budget process, balancing the wide range of demands on the public purse, especially at this time of economic and fiscal crisis.
● Immediately release the ‘Mandate Paper’ that purportedly envisions a different budget process in which the Department of Planning, Monitoring and Evaluation (DPME) is central.
● Undertake to subject all major policy proposals, such as for funding higher education, to the rigour and consultation that is the hallmark of SA’s budget process.
● Provide full details of the President’s proposals for higher education funding and the process that is envisaged for putting those proposals into action, including opportunities for the public and the student movements to provide input into that process.
● Commit to working constructively with Treasury to restore confidence in the state’s capacity to reverse the current dire economic and fiscal situation.
We also call on Parliament to:
● Investigate the circumstances behind the growing number of senior officials that have resigned from National Treasury and closely monitor the filling of existing vacancies.
● Show its support for credible and sustainable budget processes, including by using its powers under the Money Bills Amendment Act to reject any new proposals that emanate from the undermining of that process.
● Support National Treasury in its investigation into the failures at SARS which have led to the largest revenue shortfalls in decades.