KwaZulu-Natal’s (KZN) 2023/24 mid-year budget performance hearings have revealed a province in a precarious fiscal space, the likes of which have not been seen in the last decade.
The hearings show KZN is sitting with a projected over-expenditure of more than R9 billion. While some of this will be offset by national treasury’s additional funding of R3.775bn – as part of the 2023 wage agreement – this money is only for Education and Health.
The funds will also only cover about 78% of the total required by these two departments, leaving a shortfall to the tune of R800million. KZN’s other provincial government departments will not receive any additional funding for the negotiated wage agreement.
With a projected overspend of R9.7 billion, less the Treasury allocation of R3.7 billion, KZN is still facing a R6 billion deficit.
Treasury has advised that some additional funding will be allocated to departments from provincial cash resources in the 2023/24 Adjustments Estimate however, this will only help with a portion of the projected over-spend.
The question is: Where will the additional funding come from given that KZN’s contingency reserve is sitting at an all-time low of R138 million?
One of our province’s biggest problems is that this ANC-run government continues to budget for a projected wage increase before national wage negotiations are concluded. A classic case of putting the cart before the horse.
In the past, national treasury has been in a position to fund wage agreements. This year, KZN has been left exposed.
This is not the first time our province has faced an unfunded mandate, compounding an already fragile provincial budget. Added to this are the below inflationary increases and in certain cases a reduction in the province’s equitable share – as seen over the MTEF.
Despite current spending pressures, KZN’s Finance MEC, Peggy Nkonyeni, will have to find an additional R2.2 billion in her adjustment estimate to balance the books. And that figure only applies if departments can further cut expenses by R3.8 billion during the second half of the budget period.
These budget cuts cannot come at the expense of service delivery – which is already feeling the impact of the province’s fiscal challenges.
The reality is that KZN has become beholden to national treasury and the weaker and more constrained treasury becomes, the more it will impact on our province and its people.
The DA has warned KZN’s ANC-run government of the looming fiscal cliff on numerous occasions. Yet, we have been ignored with former Finance MEC, Ravi Pillay, referring to us as naysayers and doomsday theorists.
Had the province’s ANC government heeded the many warnings – not only from the DA but also from Treasury – it could have, to some extent, mitigated the crisis we are now facing. Equally, had KZN’s ANC government heeded the DA’s long-held concerns over a ballooning public service wage bill, it may have been able to stop the runaway train we now find ourselves on.
The DA is already in the process of preparing to govern in 2024 – we have a proven track record and where we govern, we govern well. The DA has the ability to create a capable and ethical state.