National Treasury reviews government property leases

Posted On Wednesday, 24 February 2016 16:35 Published by
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A government expenditure review has found that government could save 20% on its current property leases over the next three years.

Lungisa Fuzile

National Treasury and the Department of Planning, Monitoring and Evaluation have continued the project started in 2013, to review expenditure and make recommendations that improve spending quality.

According to Treasury, an additional 10 performance and expenditure reviews were completed in 2015/16, bringing the total to 30.

“Among them was a review of accommodation leases, which found that savings of as much as 20% of the current expenditure on property leases could be realised over the medium term if they were renegotiated to market rates.”

An exercise to model remuneration trends is also underway. Preliminary results indicate that increases in the remuneration bill in central, administrative and policy departments are partly driven by increases in employee numbers or salary levels, without a commensurate increase in productivity, Treasury said.

Government will also reduce its expenditure ceiling by R10 billion in 2017/18 and by R15 billion in 2018/19 to respond to new spending needs.

National Treasury said the reductions have been distributed to compensation budgets across national and provincial government.

“The changes are designed to minimise the impact on frontline service delivery personnel.”

Treasury said in addition to this, R7.2 billion has been shifted out of the compensation budgets of national departments over the medium term as part of government’s reprioritisation exercise.

When National Treasury tabled its 2015 Medium Term Budget Policy Statement (MTBPS) in October last year, spending on compensation was expected to grow by 8.2% over the three-year period.

This reflected the allocation of significant resources to pay for the public sector wage agreement concluded in May 2015. Revised compensation budgets will grow at 7.4% – although earnings growth will average 8.5 %, in line with the agreement.

Upward revisions to inflation will be absorbed within these lower compensation budgets.

The 2015 Budget indicated that if increases in costs associated with the wage agreement were to depart significantly from inflation, more stringent controls on public employment would be implemented.

Treasury said to continue operating within budget limits, as required by the Public Finance Management Act (1999), government departments will need to adjust their human resource plans significantly. 

Last modified on Wednesday, 24 February 2016 23:27

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