Cost Containment Measures in Government Agencies 2024-2025

PRESENTED BY: OAG & OCPO TREASURY INSTRUCTION NO 1 OF 2024-2025 13 Aug 2024 REVISED COST CONTAINMENT MEASURES DEPARTMENTAL CFO FORUM

2 OUTLINE Background Research Summary of expenditure analysis Summary of survey results Revised cost containment measures Repealed Instructions and Effective date of Instruction 1 of 2024/2025

3 BACKGROUND On 23 October 2013, Cabinet resolved that all PFMA institutions must implement measures to contain operational costs and eliminate all non-essential expenditure. Government committed in the Medium-Term Strategic Framework for 2014 2019 to urgently implement cost saving measures across all three spheres of government to assist in re-prioritizing expenditure and free up resources which should be targeted towards service delivery. These measures were intended to eliminate wastage of public resources on non-service delivery items. In its quest to limit non-essential expenditure, Cabinet requested the Minister of Finance to introduce cost saving measures in institutions. This led to the National Treasury amending the Treasury Regulations dealing with cash, banking and investment (15 and 32) to introduce limitations on the use of debit and credit cards. Thereafter several Treasury Instructions where introduces dealing with travel and subsistence, limitation of debit and credit cards, procurement of vehicles for members of the executives and other measures such as cell phones allowances, data facilities, catering, entertainment and few other more. The Ministerial Handbook was also amended to cater for some of these changes, and the revised handbook was issued in 2019

4 Cost containment measures issued to date Sphere of Government National and Provincial level Description Instruction No. 3 of 2017/2028 Areas Division responsible OAG Engagement of professional service providers (Consultants). Catering expenses. Entertainment expenses. Alcohol expenses. Social functions and corporate branded items. Newspapers and other publications. Telephone, cellular phones and data facilities. Advertising costs. Hiring of venues. Hosting of and attendance at conferences or events. National and Provincial level Treasury Regulations 15 and 32 Instruction 06 of 2022/2023 National Travel Framework Instruction 06 & 07 of 2022/2023 Cost Containment Measures related to Travel & Subsistence Limitations to issuance of debit and credit cards OAG National and Provincial level National Travel Framework (NTF) OCPO National and Provincial level Travel agency fees Accommodation Air Transport Car Rental Allowances Incidental cost Road Transport Determination of price threshold for procurement of official vehicles for members of the Executive OCPO National and Provincial level National Treasury Instruction 06 of 2019/2020 BO

5 RESEARCH Completed Phase1: Conduct research into expenditure items and conduct a survey - Expenditure analysis conducted over the last 10 years by IGR - A circular was issued on 20 July 2023, seeking inputs from institutions subject to the PFMA (survey) Phase 2: Drafting commenced - Develop the revised cost containment measures - Provide comment to the Minister of DPSA on proposed measures for the Ministerial Handbook (Guide for Members of the Executives) 137 responses was received at national and provincial level. Phase 3: Address outstanding issues (2024/2025 FY) Instruction on procurement of vehicles for Members of the Executives Treasury Regulations 15 and 32 on the limitations set for use of debit and credit cards Local Government Regulations Completed In Progress

6 Analysis of expenditure spent in National Departments

7 Analysis of expenditure spent in Provincial departments

8 Summary of the Survey results Summary of the Survey results 80% 71% Do you think the cost containment measures must be reviewed, amended or repealed in totality? 70% 60% 50% 40% 30% 19% 20% 8% 10% 2% 0% Review and amend Maintain Repeal Issue as a guideline National/Provincial

9 Summary of the Survey results Summary of the Survey results Summary of the Survey results Summary of the Survey results National Treasury Instruction No. 3 of 2017/2018 deals with other cost containment items such as catering, consultants, venue hire, advertising, hosting of conferences, corporate branded items and other. Please indicate if the Instruction should be amended or repealed? 70% 61% 60% 50% 40% 30% 18% 20% 15% 10% 6% 0% Review and amend Maintain Repeal Issue as a guideline

10 Summary of the Survey results Summary of the Survey results 91% Would you rather have the approval of exceeding rates for hosting or attendance at conferences obtained from the AO or AA than the relevant treasury? 9% Yes No

11 Summary of the Survey results Summary of the Survey results In respect of the measures relating to expenses to the attendance of conferences of events outside the borders of South Africa may not exceed R60 000 per employee per event. Should these be reviewed and amended, repealed or maintained? 70% 63% 60% 50% 40% 30% 24% 20% 13% 10% 0% Review and amend Maintain Repeal

12 Summary of the Survey results Summary of the Survey results Would you rather have the NTF repealed? 40% 36% 35% 28% 30% 25% 20% 20% 15% 15% 10% 5% 0% Yes No Maintain Issue as a guideline

13 NEW COST CONTAINMENT MEASURES SUMMARY - Institutions subject to the PFMA must comply with Instruction 1 of 2024/2025 - The Instruction require accounting officers and accounting authorities to develop and implement policies on these cost containment measures - Further provincial treasury instructions may be issued to further legislate any other cost containment measures - List of bodies prescribing for consultancy fees, is not prescribed in the Instruction - The rates for hosting of conference is also not prescribed as institutions will be required to follow a normal SCM process when acquiring such services from Hotels and etc - Attendance at conferences by officials must be done line with the internal policies, subject to limitations that may be imposed in the policy - Accounting officers and accounting authorities to develop and implement travel policy using the National Travel guideline which is not binding but customized to their operational needs

14 Section 4.3.1 of the Instruction indicates: An AO / AA must develop and implement a Travel Policy considering National Travel Guide (NTG). Operational Requirements. Section 12.2.1.1 (Annexure A), It is recommended that the institutional travel policy pronounce on the allowable air travel class taking into consideration 12.2.1.2 to 12.2.1.4 below. Section 13.1.4. (Annexure A), It is recommended that the institutional travel policy pronounce on the allowable accommodation rates for the institution. Any exceptions to this rule must be approved by the AO/AA or delegated official. Section 14.6.2.1 (Annexure A), The Institutional Travel Policy must make provision for the acceptable vehicle group(s) that will be allowed in the institution. 15.1.3. (Annexure A), It is recommended that travel expenses be properly documented and approved according to the institutional travel policy (or any other policy that prescribes claim National Travel Guideline Page 37 of 53 and reimbursement procedures). Regarding the Breakfast, Lunch and Dinner rates Section 15..1.6 to 15.1.8 of Annexure A must be considered. Travel and Subsistence

15 Repealed Instructions and Effect date National Treasury Instruction No. 3 of 2017/2018 (other cost containment measures- catering, social events, entertainment allowances and etc.) National Treasury Instruction No. 6 of 2022/2023 (National Travel Policy) National Treasury Instruction No. 7 of 2022/2023 Travel and Subsistence EFFECTIVE DATE OF Instruction No. 1 of 2024/2025 1 September 2024

16 THE END THANK YOU Queries on consultants and conferences to be submitted to OAGQueries@treasury.gov.za National Travel Guideline Queries submitted to CPO@treasury.gov.za