Premier

(a) The National Treasury instituted cost containment measures in NT Instruction 01 of 2013/14, in response to economic pressures and in order to reduce wastage in the public service. These measures were implemented by the Western Cape Government departments.

The additional costs occasioned by the Public Service Wage Agreement negotiated by the Department of Public Service and Administration (initially R3.7 billion to the Western Cape Government’s MTEF wage bill over three years) dwarfed the savings that were being achieved through the cost-containment measures. Departments were forced to institute drastic measures to contain expenditure, especially personnel expenditure, so as not to overspend.

The National Treasury has subsequently sacrificed the bulk of the national contingency fund to assist public service departments. This has eased the pressure on departments, but leaves the country without a fiscal buffer and vulnerable in the event of disasters, such as the droughts currently being experienced in KwaZulu-Natal.

(b) Between 2013/14 and 2015/16 efficiency savings within the personnel environment amounted to R726 million with approximately R53.6 million in 2013/14; R190.7 million in 2014/15 and R481.7 million in 2015/16.

These savings were necessitated by budget shortfalls in personnel expenditure that are brought about by higher than inflation increases in conditions of service for public service. The wage bill is 53% of the Western Cape Government’s overall budget, and these shortfalls are therefore substantial and have to be carefully managed by departments.

Table 1 below shows the actual need of departments which was not funded, for the last three financial years, pertaining to the annual cost of living increases of employed personnel. 

Table 1:  Cost of Living Increases not funded from PRF

Vote		2013/14	2014/15	2015/16	Total
		R'000	R'000	R'000	R'000
1	Department of the Premier	549	2 427	8 728	11 704
2	Provincial Parliament	-	-	-	-
3	Provincial Treasury	150	824	2 678	3 651
4	Community Safety	430	655	2 778	3 863
5	Education	28 372	94 105	279 803	402 280
6	Health	20 576	78 149	125 469	224 194
7	Social Development	1 076	3 909	17 524	22 509
8	Human Settlments	248	1 040	1 788	3 076
9	Environmental Affairs and Development Planning	297	1 012	2 975	4 284
10	Transport and Public Works	875	4 442	21 456	26 773
11	Agriculture	499	1 804	8 216	10 519
12	Economic Development and Tourism	101	537	1 702	2 340
13	Cultural Affairs and Sport	249	1 002	5 242	6 493
14	Local Government	212	763	3 425	4 400
Total		53 636	190 667	481 783	726 085

*Excludes Provncial Parliament - salary negeotiation mechanism differs to Povincial Government staff

The austerity measures introduced by the NT Instruction referred to above assisted departments in making the necessary savings. These savings were achieved through the reprioritisation of expenditure, cost containment and elimination of wastage as far as possible; in addition strategies such as the delayed or staggered filling of posts, the freezing of posts and other measures. By applying these measures, departments are able to remain within budget despite the shortfalls.

(c) The savings are not appropriated as such, but contribute towards the overall effort of remaining within the allocated budget, and in 2013/14 – 2015/16 have been broadly absorbed in the budget item “Compensation of Employees”.

The cost-saving measures introduced by the NT Instruction create an austere environment of fiscal discipline and careful management of expenditure, which incentivises cost-savings, efficiency and the elimination of wastage as far as possible.