A range of cost-cutting measures are planned to be implemented by the South African government to curb government spending, following a shortfall in revenue collection, the National Treasury said.
The treasury sent a letter, defining the projected measures designed to reinforce the economic situation in the country, to national departments, provinces and public entities, media reported. Among the listed steps, there are advertising new procurement contracts for all infrastructure projects and a hiring freeze, according to the outlet.
However, the national body stressed that "the measures articulated in the letter will not by themselves fully restore fiscal sustainability," therefore all local authorities and public entities are expected to cooperate to determine further actions to consolidate budgets, the media revealed.
The treasury explained that the cost reduction plan was developed "due to the weak performance of the economy and the shortfalls in revenue collection," the media said.
The implementation of the measures will reportedly start on September 15.
One of the main reasons for the ailing economy is rolling power cuts, which hindered the country's development and harmed local businesses, according to the media.
State power utility Eskom was forced to resort to load-shedding, which implies imposing scheduled blackouts to protect the national grid whenever demand exceeds supply. This year, the company reported an intensification of these blackouts in comparison with 2022.
However, the situation with power supplies in South Africa seems to be improving. On August 20, the country's President Cyril Ramaphosa announced that the state will overcome the energy crisis by 2024 as it is "ramping up more and more generation of energy."
Despite a shortfall in revenue collection, the South African economy experienced growth of 0.2% in annual terms in the first quarter of 2023, which could have been more (up to 2%) if not the power cuts, according to the country's central bank.
In October, in its medium-term budget policy statement, the authorities plan to define further steps to increase revenues, the media said.
On Sunday, commenting on the cost reduction measures proposed by the treasury, the country's leader noted that cutting spending is not necessarily the response to the problem, adding that "seeing how best [the country] focus on [its] key delivery areas" could be one.