Guidelines on Cost Containment Measures announced by the National Treasury for the 2023/24 Financial Year

Tags

---

04-10-2023
Read : 523 times
National Treasury
Source

EXTRACT from Guidelines on Cost Containment Measures announced by the National Treasury for the 2023/24 Financial Year

INTRODUCTION

On 31 August 2023, the National Treasury issued a letter to national departments and provincial treasuries (the August letter). The August letter summarises key elements of the fiscal challenges faced by government in the current financial year. It advises accounting officers and accounting authorities on specific measures required to achieve much-needed savings and prevent the materialisation of potentially crippling resource constraints in the latter part of the 2023/24 financial year.

This document provides a guide to accounting officers and accounting authorities on the implementation of the measures outlined in the August letter. Please note that both the August letter as well as these guidelines are advisory and not an instruction in terms of Section 76 the Public Finance Management Act (PFMA), 1999. Its status has also been shared with the Auditor-General. For any queries regarding these guidelines, please contact your budget analyst in the relevant Treasury.

PURPOSE

The current fiscal challenges originate mainly from an exceptionally large year-to-date decline in government tax revenue collections (estimated at R22bn for the first five months of the year) and tighter financial conditions that have constrained government’s borrowing programme. These constraints are exacerbated by the wage agreement for the public service, signed in March 2023, which was not accommodated in the Budget Review 2023 and for which claw-back mechanisms have not yielded results that would mitigate potential negative impacts.

The guidelines outlined here are therefore only applicable for the remainder of the 2023/24 financial year and apply to national departments, schedule 3 entities and provinces. While they do not apply to schedule 2 public entities, the executive authorities and accounting authorities of these entities are strongly urged to take these guidelines into account and implement similar measures. These guidelines intend to assist accounting officers and accounting authorities to significantly reduce the pace of expenditure within their portfolios in the current financial year.

GUIDELINES

4. Capital spending

Spending on buildings and other fixed structures:

• Capital projects for which the procurement process has been completed are exempt from these guidelines.

• Capital projects for which a contract award has been recommended by a bid adjudication committee are exempt from these guidelines.

• All valid invoices for projects and purchases underway are exempt from these guidelines and must be paid.

4.1 Accounting officers and accounting authorities should consider postponing the implementation of capital projects that have not yet commenced until 31 March 2024.

 4.2 When deciding on which projects to postpone, accounting officers and accounting authorities must facilitate the delayed implementation and manage any legal risks and ensure that government will not be liable for claims due to any such decision.

4.3 Projects that are already underway or projects for which procurement processes have been completed and contract(s) awarded should proceed.

Spending on machinery and equipment on other assets:

4.4 Accounting officers and accounting authorities are advised to consider postponing the replacement of machinery and equipment until 31 March 2024. This includes items such as desktop and laptop computer equipment, telecommunications equipment, vehicles, and construction equipment. 

The full document can be accessed on The national Treasury Website