Ahead of tabling the 2013 Medium Term Budget Policy Statement in Parliament on Wednesday, Gordhan told journalists that in order to restore fiscal stability, Cabinet had taken difficult decisions aimed at curbing wasteful consumption and reprioritising spending on infrastructure investment among other government priorities.
Gordhan's stance will send a message to citizens, financial markets and ratings agencies that signals that while the economic forecast is expected to grow, discipline when managing the public purse is the backbone of economic stability.
"On the expenditure side, we are maintaining a rate of 2.2% but we are still imposing the right kind of discipline by sticking to the expenditure ceiling that we have talked about before," he said.
As part of the radical measures Gordhan said public servants will no longer be given credit cards for official and personal use, and those already in possession of these cards must discontinue using them with immediate effect.
In the light of the Auditor General's findings that several government departments spent billions of rands on consultants, Gordhan said Cabinet had decided that all departments across all spheres will be instructed to cut back on the use of consultants.
Other measures include restrictions on air travel, car hire, accommodation, catering, entertainment and conference budgets. Gordhan said these measures - which government plans to impose by December - will result in billions of rands being saved.
Cabinet has also taken a decision to review the amount of money spent on ministerial cars. The minister announced that all cars purchased by government ministers will have to be more or less the equivalent of a BMW530 series.
His announcement will set the scene for next year's budget, which is expected to focus on expenditure on infrastructure investment while lowering consumption spending.
Gordhan's announcement also comes against the backdrop of concerns raised in last year's budget about the increasing public service wage bill.
He said government was committed to rebuilding the fiscal space by stabilising and then reducing the ratio of public debt to Growth Domestic Product.
This, he said, will allow government to respond to future economic shocks by bringing down spending on debt-service costs and creating counter-cyclical borrowing opportunities.
"Parliament and members of the public would be invited to play the role of a watchdog to monitor compliance," said Gordhan, adding that similar regulations would be applied at the local government level.
He said pressures emanating from the public sector wages were a threat to fiscal stability.
Over the next three years, the government - which remains the biggest employer in the economy - would ensure that growth in employment and earnings does not threaten the expenditure ceiling.
Since 2005, more than 250 000 people have been added to the national and provincial payroll database, with most appointments coming from education, health care and the criminal justice departments.
Currently, over R350bn is spent on government salaries.
The minister said there was a growing concern about the managerial and administrative staff increase across government. In a bid to maintain staff numbers at a constant level, senior officials will be asked to provide a compelling case before hiring more people.
To this end, the National Treasury and the Department of Public Service and Administration will work hand-in-hand to monitor wage bill trends and to enforce discipline in hiring.
Government was also working towards reaching a sustainable public-sector wage agreement.
Gordhan has, in the meantime, appointed a Tax Review Committee to look at how the country's tax system can play a role of promoting inclusive economic growth, create jobs and contribute to fiscal sustainability. Gordhan forecast that the South African economy would grow by from 1.4% to 3.5% over the next three years.
The Gross Domestic Product (GDP) had slowed down from 3.5% in 2011 to 2.5% in 2012 and falling again to 2.1% for this year.
Gordhan said the combination of austerity measures, economic growth and the government's actions to restore fiscal stability through fiscal policy reforms over the past four and a half years should send a message to ratings agencies that they should do their homework before rating the country's outlook.
Tabling his Medium Term Budget Policy Statement, Gordhan anchored his speech on the National Development Plan, the government's framework of eliminating poverty, creating jobs and achieving government's priorities. He said the mini budget recognised the need to implement the plan and monitor it constantly.
"In many cases, it builds on initiatives that were already under way. In other areas, new programmes or reform are being introduced," he said.
Gordhan said that the Consumer Price Index (CPI) was expected to average about 5.9% this year and remain within the 3% to 6% target band next year.
"A trade deficit of 2.6% of GDP was recorded in the first half of this year, contributing to a deterioration in the current account of the balance of payments to about 6.5% of GDP.
"Muted economic growth has translated into limited gains in job creation. The quarterly labour force survey indicates an increase in employment of about 275,000 in the year to July, but formal non-agricultural employment growth has been slow," he said.
SAnews.gov.za is a South African government news service, published by the Government Communication and Information System (GCIS). SAnews.gov.za (formerly BuaNews) was established to provide quick and easy access to articles and feature stories aimed at keeping the public informed about the implementation of government mandates.
Go to: http://www.sanews.gov.za
