Cutting wasteful government spending to curb the debt crisis

Martin van Staden / Midjourney
Martin van Staden / Midjourney

This article was first published by Business Brief on 13 November 2024

Austerity doesn’t have to mean suffering. Cutting public spending is become an increasingly more urgent and necessary measure to curb South Africa’s ballooning debt; cuts need to be made sooner. And the longer we wait, the larger the debt becomes, the larger the interest payments, and then the greater the cuts that will become necessary to recover.

But cutting public spending and embracing austerity doesn’t have to mean that South Africans must suffer. There is untold wasteful spending currently baked into the budget that can be cut out. In fact, billions could likely be shaved off the budget without negatively affecting South Africans.

In 2023 the Democratic Alliance (DA) identified that African National Congress (ANC) governed departments wasted an estimated R40 billion in the 2022/23 financial year. I suspect that the total wasted spending year-on-year is far greater every year. This is especially true when we take into account the expensive, grandiose vanity projects like keeping SABC and SAA afloat (two state-run institutions that shouldn’t exist anymore), and the ongoing support of incompetent parastatals that not only cost a fortune to keep afloat, but also deliver subpar service to South Africans.

The tax income shortfall for 2024 was R22 billion. This may seem large, but there is so much wrong with South Africa’s government that fixing only a little bit of it will be enough to cover this shortfall. Welfare, social spending, law enforcement and genuinely crucial functions of the state don’t even need to be touched.

Scrap tax-payer subsidised monarchs

South Africa is a democracy and should not be subsidising the lavish lifestyles of so-called traditional leaders. There is no place for kings and queens in our republic. At least not state-sponsored kings and queens.

As of 2024, kings and queens are estimated to be paid around R1.38 million. Other traditional leaders are paid around R1.27 million, with the lowest paid title (headmen and headwomen) being paid R130 thousand apiece.

These salaries, paid to unelected leaders and funded by taxpayers, have increased year-on-year. And these salaries are not the only example of wasteful spending. The Limpopo government spent R55 million buying 102 bakkies as gifts for traditional leaders. In 2017, Durban paid R1.6 million funding a reed dance that took place at the Zulu King’s palace. Additionally, the King Goodwill Zwelithini’s dance venue is currently budgeted at R1 billion.

There is no genuinely good reason why these monarchs and traditional leaders should receive a share of the budget. Eliminating their state-funding will not only free up a lot of money for key functions, but also get rid of another avenue for corruption and overspending.

Privatise parastatals

If a function can be performed better by the private sector it must be privatised. Eskom, while it has sorted out many of its pressing issues, still has many underlying flaws that can be fixed if it was de-bundled and split into many private entities – competing for a profit.

From the 2023/24 to 2025/26 financial year Eskom is slated to receive debt relief amounting to R254 billion. Imagine if this debt was paid off by the sale of Eskom assets to companies that would then take over the running of the utility. Not only would tax payer money be spared, but a more effective institution would now be running electricity production.

The same goes for the Post Office, which recently demanded R3.7 billion to avoid financial collapse. In 2023 it received R2.4 billion. The Post Office has already mostly been replaced by private couriers, and many South Africans don’t expect the Post Office to deliver on its basic functions. Privatising its remaining infrastructure and privatising its key functions will save a lot of money.

All parastatals should be audited and their viability assessed to determine if they can be privatised effectively. And if they can, they must.

Eliminate unnecessary ministries

The Free Market Foundation (FMF) has conducted in-depth, and proposes that the current 31 ministries, containing a confusing horde of sub-ministries and departments, be cut down to 10 ministries. Doing so would save a fortune on civil servant salaries, and the overly inflated cost of government busy-work.

At the end of the day, the cabinet should contain only the President, and a minister of Finance, Defence, International Relations, Justice, Home Affairs, Cooperative Governance, Public Works, and Social Development. These ministries contain within them every single function that a government should reasonably perform.

Generate more wealth

The budget doesn’t have to be cut completely to make up for the shortfall. South Africa has a lot of potential to become a rich country. The economy only needs to be deregulated, with harmful legislation like BEE, and the aggressive dominance of trade unions ending. If businesses feel it safe and worth their while to become established and grow, they will generate more wealth, they will create more jobs. South Africans will prosper, and they will produce more income that can then be taxed.

By embracing free market policies, and cutting wasteful expenditure, we can balance our budget without the need to cut out crucial public spending. All it takes is political will and a willingness to embrace sound policy over inane ideology and corruption.

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The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.

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