A potential revenue shortfall of as much as R60-billion means more prudent and mainly domestic borrowing, a pruning of unnecessary spending and reprioritising of spending plans, said Finance Minister, Pravin Gordhan, on Wednesday.

Speaking to the National Council of Provinces, Gordhan emphasised that government's service delivery problems must be faced "head on" without any favour or prejudice.

He highlighted that education and health delivery were particularly bad, while the poor remained marginalised. But he said new departments would not be getting more funding; rather that spending plans needed to be re-prioritised and that the previous way of "doing things" must change. The hard-working Gordhan cautioned the ministers that "many long hours lie ahead" in light of these challenges.

"The slowdown is putting additional pressure on ensuring that value for money remains tantamount for all spending decisions. Spending pressures are being felt at all levels of government," he said.

Importantly for the fixed income market, he said that the approach to addressing the borrowing requirements should be ensuring that as much as possible of the borrowing requirements be met domestically, instead of relying on foreign inflows.

"This means increasing domestic savings and investment levels. July is known as Savings Month in South Africa, and is aimed at promoting a savings culture in the country. There are positive indications that South Africans are taking this message to heart, as the gross saving rate as a proportion of GDP rose to 17.1 percent in the first quarter of this year, up from an average of 15.4 percent in 2008. However, our saving rate remains low by international standards," he said.

"There is more that can be done to improve this, even in tough economic times. The crisis has highlighted the importance of making responsible decisions for the future," concluded Gordhan.

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