Bankruptcy of the Gauteng Provincial Government (GPG) , R6 Billion Debt @KASIBCNEWS
Background
The Gauteng Provincial Treasury (GPT) has noted, with great concern, articles in the media making claims about the alleged imminent bankruptcy of the Gauteng Provincial Government (GPG) and a R6 Billion shortfall by June 2025. While these assertions are not new, and have previously been refuted, there is need to provide a comprehensive response in the public interest.
These articles merit correction as they are grounded on an erroneous premise that will only serve to sow despondency among the residents and businesses in the province. 2024/25 GPG Expenditure Performance As at the end of November 2024, overall expenditure for GPG stood at R115.238 billion or 68 percent of the adjusted budget of R169 213 billion, leaving an amount of R53.9 billion available to be spent until end of March 2025.
This expenditure is mainly driven by education and health departments, which account for 80 percent of the total expenditure. The Gauteng Department of Health expenditure is R46.1 billion or 69.8 percent against the adjusted appropriation of R66.017 billion. This is attributed to the main programmes: Central Hospital Services, District Health Services and Provincial Hospital Services. The department received additional R600 million during the recent adjusted budget to partially offset pressures in the Compensation of Employees.
The Gauteng Department of Education expenditure is R45.9 billion or 69.5 percent against an adjusted budget of R66.142 billion, with high spending emanating from the Public Special Schools and Early Childhood Development programmes. Expenditure for Goods and Services at the end of November 2024 amounts to R5 billion of the adjusted allocation, on account of accruals from the previous financial year. Due to in-year pressure, the department received an additional R300 million during the adjustment budget to partially offset pressures in the Compensation of Employees. Overall GPG budget increased by R3.4 billion during the 2024/25 adjustment budget which comprises of function shifts, surrenders and suspensions (R92.9 million), rollovers (R1.2 billion) and provincial additional funding R2.1 billion. While the 2024/25 Adjustments Budget saw a net injection of R3.4 billion in the form of additional funding and approved rollovers, there is still pressure in a few other departments. This will necessitate further reprioritisation to avoid unauthorised expenditure at the end of the financial year.
E-Toll debt and impact on provincial fiscus On the 11th of April 2024, gantries of the Gauteng Freeway Improvement Project, popularly known as e-tolls, were officially disconnected from the e-toll system across the province. Following the initial announcement by Finance Minister Enoch Godongwana during his 2022 mid-term budget policy statement (MTBPS) that e-tolls would be scrapped, the South African National Roads Agency SOC Limited (SANRAL), the National Department of Transport, the National Treasury and the Gauteng Provincial Government finalised a Memorandum of Agreement. To resolve the funding impasse, the Gauteng Provincial Government agreed to contribute 30 per cent to settling SANRAL’s debt and interest obligations, while the national government would cover 70 per cent. Congruent with this, in the Budget Speech in March 2024, the GPT announced that as part of the province’s arrangements to service the debt, a provision for honouring this commitment had been pencilled into the 2024 fiscal framework.
The obligation to service this debt has necessitated the implementation of a host of reforms and measures to maintain a healthy fiscal environment that will be both sustainable and manageable in the long term. True to our commitment, in September 2024, we made the first instalment amounting to R3.8 billion. This amount consisted of R3.2 billion historical debt and the maintenance portion of R546 million.
As the GPG, we have a full appreciation of the implications that repaying the e-toll debt will have on our financial position. The debt of R20.1 billion, inclusive of interest, is a substantial bite into our already stretched and limited resources. To meet our obligations to repay this debt, we have had to make very difficult decisions and re-orientate our budget priorities, which, necessarily, will have an impact on the fiscus. But we have remained steadfast in the commitment that service delivery priorities will not be negatively impacted.
The 2025 Budget will see a conclusion of the national fiscal consolidation strategy, with debt‐stabilising primary surplus achieved in 2025/26, a reduction in the fiscal deficit to pre‐COVID levels and a stabilisation of debts service costs as a percentage of revenue. The GPT is therefore confident that through the measures and reforms mentioned above, the province will be able to service the e-toll debt, simultaneously providing much needed services to the citizens of Gauteng, whilst reaping the benefits of the spinoffs of economic infrastructure initiatives. It is in this context that the department would like to assure residents of Gauteng that we will not compromise our priorities on social services such as health and education which, as outlined, are receiving a significant share of the provincial budget as it is. Provincial Equitable Share Funding over the 2025 Medium-Term Expenditure Framework (MTEF) Budget In the Medium-Term Budget Policy Statement (MTPBS) speech, I provided an overview of the state of the South African and provincial economy and said the following: “While the national macroeconomic and fiscal environment shows cause for cautious optimism, there are still concerns over elevated risks to the outlook in the short- to medium-term that cannot be ignored. These include lower revenue growth due to an unexpected global or domestic slowdown; a higher-than-anticipated public-service wage settlement; higher borrowing costs driven by a prolonged elevation of the risk premium and a slower-than-expected reduction in global interest rates; and persistent deficits and the accumulation of liabilities in other areas of the public sector, such as state-owned companies, potentially leading to increased demands for budgetary support.
This will be particularly pronounced in the 2025 Medium-Term Expenditure Framework (MTEF) given developments in the Provincial Equitable Share formula which is recalibrated annually using data from Statistics South Africa and other administrative sources such as the national departments of Health and Basic Education. The formula ensures equitable resource allocation. Unfortunately, due to a decline in Gauteng’s share of the national population, the province faces further budgetary reductions. Key components such as education, health, and poverty alleviation, which collectively account for 91 percent of the PES formula, will be affected, creating additional fiscal pressure. The MTEF is a three-year rolling budget, which means that the budget in a particular year is tabled, and there are indicative allocations for the following two years. When there are revisions to the PES, then the indicative allocations are recalculated, and revised upwards or downwards. In the case of Gauteng, there has been a downward revision, phased-in from 2025/26 of 2025 MTEF.
This will cumulatively amount to R6.236 billion. However, it must be emphasised that this is not money currently sitting with the GPG, as the 2025 MTEF Budget has yet to be appropriated. The issue of possible bankruptcy by June 2025 has no merit as the budgets for the 2025/26 financial year have not yet been finalised. The Roadmap to the Finalisation of the 2025 MTEF Budget The approach for finalising the budget builds on key events in the provincial planning and budgeting processes to work towards optimally funding government priorities. The guidelines specifically provide guidance to provincial departments on how to effectively prepare for the second round of Medium-Term Expenditure Committee (MTEC) engagements and outline the process toward finalising the 2025 MTEF Budget.
The process involves two specific processes. The first round of MTEC technical engagements held in October 2024 focused on planning for the 7th administration. The 2024 GPG Budget Lekgotla was held on 12-13 November 2024 and was aptly themed Approach and Strategies to Respond to Fiscal Risks and Ensure the Sustainability of Public Finances. The outcome of the 2024 GPG Budget Lekgotla paved a way for the 2024/25 Provincial Adjustments Budget to achieve in-year fiscal sustainability and for the 2024 MTBPS that provided the framework for the formulation of the 2025 Budget.
The second round of MTEC technical engagements are scheduled for January 2025. These engagements will focus on the response of the GPG to the reduced fiscal envelope and related pressures over the 2025 MTEF. The key objectives of these engagements include the: • stabilisation of provincial finances through the implementation of the Gauteng five-year budgeting approach for the 7th administration in the context of constrained fiscal environment. • funding of the three priorities of the Medium-Term Development Plan and the five nonnegotiable focus areas of the 7th administration given the reduced fiscal envelope. • evaluation and review of the sustainability of the Gauteng provincial budget while identifying risks and mitigating measures.
The Premier’s Budget Committee will convene early in February 2025 to consider the outcome of the second round of MTEC engagements and other provincial strategies and plans to finalise the allocation of the 2025 Budget. This will culminate into the tabling of a credible and technically sound 2025 Budget scheduled for March 2025. Conclusion The matter of possible bankruptcy, even in the current financial year, should be refuted. Gauteng’s budget of R169 billion is substantial, but its impact depends on how wisely it is spent. Departments and entities must adopt a disciplined approach to spending, ensuring every rand translates into meaningful progress. Efforts to improve spending efficiency are already underway. This includes standardising pricing for frequently procured items, and the introduction of a comprehensive raft of practice notes that reinforce fiscal discipline, eliminate wastage, improve accountability, and enhance the province’s ability to meet its development goals.
I wish to once more reiterate that while the GPG is operating under a strained fiscus environment, the province is not facing imminent bankruptcy. Members of the media have an obligation to report the truth, and to do so with an appreciation of the impact that untrue and subjective reporting can do to the provincial and national economy. Beyond the panic that such reports can cause to residents of Gauteng, they have the potential to also impact businesses and diminish investor confidence at a time when the provincial government is working hard to strengthen the provincial revenue. We look forward to more engagements with the media on the work of the GPG and the GPT, in particular.
This is very important as we draw closer to the 2025 Budget that will articulate the financial and economic future of a Gauteng that is the nerve-centre of the regional and national economy.
