After the Bell — sorry, but DOGE is not what South Africa needs

One of the comments I have been hearing a lot since the Budget was delivered last Wednesday is that South Africa needs DOGE, the Elon Musk-run organisation in the US called the Department of Government Efficiency. It just seems to chime with the call of the DA and other political parties for a spending review, particularly given South Africa’s mounting debt. But I think it’s worth pointing out that what South Africa needs and what Musk is doing in the US are entirely different propositions. 

They are different in different ways. DOGE is different in intention and motivation. But most importantly, it’s different in a primary philosophy, if you want to call it that. 

Importantly, there is a general acceptance that South Africa’s spending needs much closer examination and is long overdue. As has been mentioned often now, Finance Minister Enoch Godongwana devoted only two pages of his 27-page Budget speech to cost cutting, as opposed to two sentences in his initial speech. 

The process of negotiations around the Budget by political parties seems to have stung Godongwana, as it should. He said the government knows “we must earn the taxpayer’s trust every day, by spending public money with care and ensuring that every rand collected is spent on its intended purpose”. And he pointed out that Treasury and the provinces had, in fact, conducted 240 spending reviews since 2013, sadly without pointing out how many of these reviews had led to actual spending cuts.

I know you are holding your breath at this point, so allow me to suggest how many did. Would you be surprised if I said the answer is none? Zero. Zip. Nada. Nix. But, good news: The spending reviews are gathering dust in someone’s bottom drawer and could still be brought up, brushed up and implemented!

Anyway, Godongwana did specify that the recommendations of these reviews will be taken to Cabinet in the next month. He also hinted that more reviews could take place, like auditing ghost workers. Or, in another example that was a bit obscure, Godongwana mentioned “labour market activation programmes”. He did point out that there are more than 100 active “labour market programmes” in more than 20 public institutions.

In the discussions, apparently the DA has pressed for an examination of the Sector Education and Training Authority (Seta); it’s not clear if this is what Godongwana is talking about or not, but presumably it’s included. Theoretically, companies with an annual payroll of more than R500,000 have to pay 1% of payroll as part of the Skills Development Levy which is then channelled to learnerships and bursaries. The total allocation in 2023/24 was R14.5-billion.

Some Setas claim to be well run, but to me, the whole thing is a boondoggle. The process is bureaucratic and inefficient, and students still struggle to find jobs after training because employers don’t always recognise Seta qualifications. Some Setas don’t even manage to spend their allocations. And then, of course, there is corruption, as there is everywhere now in government. 

But the point is that South Africa’s government expenditure is just running riot, which even Treasury acknowledges – and it should know.

DOGE, on the other hand, is an ideological intervention mainly aimed at reducing the overall size of government as part of a small-government Reaganism. Economist and commentator Noah Smith suggests that the true purpose of DOGE – or at least, the main purpose – is to change the ideological character of the federal workforce, and of federal programmes, rather than to eliminate them. 

He points out that most Republicans are generally not deficit hawks (Trump has not, historically, been that concerned about fiscal deficits). He writes: 

“Trump and his people are signing off on everything Musk does, and they don’t actually seem to care that much about deficits – Trump’s promised tax cuts far outweigh any spending cuts that DOGE would be able to carry out, and Trump increased the deficit in his first term.”

Research suggests that Democrats made up about half of the federal workforce, while 32% are Republicans, and they are heavily represented in the ranks of upper management jobs, topping out at 63% of senior executives, the level just below presidential appointees. This all leads Smith to the idea that the rather brutal chainsaw that Musk is applying to the federal government is as much about political orientation as it is about fiscal rectitude.

Because interest rates are so low in the US, federal debt repayments are not, comparatively, a huge concern. In the 2023 fiscal year, the federal government paid about $875.5-billion in interest on the national debt. With total federal spending about $6.3-trillion, interest payments accounted for about 13.9% of total expenditures.

Compare this with South Africa where debt repayments are now 16.4% of total expenditure, even though South Africa’s total debt-to-GDP ratio is much lower than the US. General government gross debt is about 120% of GDP, compared with 70% in South Africa. 

That 120% sounds like a lot – it is a lot and would certainly make me nervous if I were a US citizen. But the US is not in a fiscal crisis. By way of example, Japan’s 260% debt-to-GDP ratio has existed for years without triggering a debt crisis, partly due to its ability to borrow at low interest rates and the fact that most of its debt is held domestically. 

South Africa, however, is facing a fiscal crisis; the most obvious evidence of this is that the government is raising tax rates during a period of low economic growth, which is such a counterintuitive thing to do, it can only be forced. Another indicator is that South Africa is probably paying about a 7% interest rate on its debt, compared with the US, which is paying 1.3%. 

I, for one, would certainly like to see, in principle, a smaller government in South Africa. But the first priority is to get rid of wasteful expenditure. This is so obviously apparent everywhere in government that it would be its own kind of victory. That is not DOGE; it’s just common sense. DM