Budget reform South African experience: 1994 - 2000 October 1999 - - PowerPoint PPT Presentation

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Budget reform South African experience: 1994 - 2000 October 1999 - - PowerPoint PPT Presentation

Jun 03, 2023 163 likes •500 views

Budget reform South African experience: 1994 - 2000 October 1999 Department of Finance 1 Budget systems & expenditure management - key tensions Macroeconomic management fiscal discipline promoting growth & development

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October 1999 Department of Finance 1

Budget reform

South African experience: 1994 - 2000

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October 1999 Department of Finance 2

Budget systems & expenditure management - key tensions

  • Macroeconomic management

– fiscal discipline – promoting growth & development

  • Allocative efficiency

– competition for scarce resources – coordination of public spending

  • Technical efficiency

– fostering managerial discretion – effective regulation & control

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October 1999 Department of Finance 3

Elements of budget reform

  • Macroeconomic coordination

– economic analysis – medium term planning

  • Budget process & systems

– improved relations with spending agencies

  • Robust financial management systems
  • Transparency & public accountability
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October 1999 Department of Finance 4

South Africa: systems in transition

  • Apartheid background:

– Central control; a fragmented state – Inequality of public services – Stagnant economy

  • A new Constitutional order

– Cooperative governance

  • Changed priorities:

– The reconstruction & development programme

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October 1999 Department of Finance 5

Budget problems

(everywhere the same?)

  • Unrealistic plans
  • Institutional complexity; hidden agencies
  • Weak information systems
  • Conflicting priorities
  • Poor planning & management
  • Unclear political mandates
  • Unstable budgetary process
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October 1999 Department of Finance 6

South Africa’s budget reforms

  • Pre-1994

Activity-based budgeting

  • 1994-96

RDP Fund

  • 1995-96

Growth & development plans

  • 1996

Macroeconomic strategy

  • 1997

Medium term statement

  • 1998

Three-year budgets

  • 1999-00

Wider public sector

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October 1999 Department of Finance 7

Evolving reform…

  • New intergovernmental system
  • Public service management reforms
  • Public Financial Management Act
  • Wider public sector coordination
  • Restructuring public enterprises & agencies

Budget reform white paper

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October 1999 Department of Finance 8

Medium Term Expenditure Framework

Re-engineering the planning process

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October 1999 Department of Finance 9

First MTEF

  • Treasury analysis: 1994-1996

– “top-down” model – complex spreadsheets – sectoral analysis and identification of cost- drivers – presented to Cabinet – outcome: decision to proceed

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October 1999 Department of Finance 10

First MTEF

But:

  • No departmental involvement
  • Inadequate focus on choice
  • Weak links to budget & expenditure process
  • Too technical
  • No political buy-in
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October 1999 Department of Finance 11

1998 MTEF

What is it?

  • Three year spending plans for each

department

  • A rolling budget planning process
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October 1999 Department of Finance 12

1998 MTEF

How did it work?

  • Departments asked to submit 3-year

projections

  • Analysis by review teams
  • 3-year recommendations to Cabinet by

MTE Committee

  • Support for provincial budget planning
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October 1999 Department of Finance 13

Benefits of multi-year budgets

  • Links policy design and spending

allocations

  • Promotes medium term planning
  • Provides context for assessing proposals
  • Gives credibility to fiscal strategy
  • Improves understanding of priorities &

costs

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October 1999 Department of Finance 14

Budget process

March April May June July August Sept National agencies 3 year plans Provincial agencies plans l Baseline allocations Treasury examines budgets Provincial treasury compiles MTEF Review teams analyse plans

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October 1999 Department of Finance 15

Budget process (cont.)

Sept October November December January February Draft MTEF compiled Cabinet

Budget Council Cabinet review of plans Provincial Council Cabinet finalises budget Preparation of budget papers

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October 1999 Department of Finance 16

Indicative allocations

  • Baseline allocations provide point of

departure:

– Division between national, provincial & local authorities – Expenditure ceiling for each department based

  • n previous year’s forward estimates

– Standard allowance for increase in 3rd year – Framework agreed by Budget Council & Cabinet

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October 1999 Department of Finance 17

Treasury review process

  • Informed by Cabinet priorities
  • Examination of expenditure & budgets
  • Focus on changes to baseline allocations
  • Identify activities to discard
  • Identify new commitments
  • Review spending by agencies
  • Inform Cabinet of risks
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October 1999 Department of Finance 18

Budget framework

R b 1999/00 2000/01 2001/02 Revenue 191,7 207,4 222,3 Expenditure 216,8 230,7 247,3 State debt 48,2 49,8 52,6 Reserve 1,1 3,5 8,0 Allocated 167,6 177,4 186,6 Deficit 25,1 23,4 25,0

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October 1999 Department of Finance 19

Division of resources

R b 1999/00 2000/01 2001/02 Available 167,6 177,4 186,6 National 78,7 81,1 84,5 Provincial 86,3 92,1 96,8 Local 1,7 2,5 2,6 Supplementary 0,9 1,8 2,7

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October 1999 Department of Finance 20

Provincial grants

Social grants 18% Tax share 7% Equitable share 64% Conditional grants 11%

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October 1999 Department of Finance 21

Main spending trends

  • Av. Growth

95/96-98/99 98/99-01/02 Protection 8,7% 4,3% Social services 12,0% 6,3% Economic services 6,0% 3,6% Administration

  • 0,7%

7,8% Interest 12,6% 6,4% Total 10,2% 6,5%

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October 1999 Department of Finance 22

Main spending trends (cont.)

  • Av. Growth

95/96-98/99 98/99-01/02 Personnel spending 12,2% 5,1% Other current spending 5,0% 4,8% Capital spending 20,4% 6,7% Total 10,2% 6,5%

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October 1999 Department of Finance 23

MTEF: summary lessons

  • Political commitment to make it work

– emphasis choice; enhancing delivery

  • Keep framework simple

– 3 year plans – changes to baseline

  • Make it matter

– build into budget process – stick to allocations – keep expenditure discipline

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October 1999 Department of Finance 24

Budget Reform and Service Delivery

Next steps in improving the quality of budget information

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October 1999 Department of Finance 25

Why more change?

  • Improved service delivery requires:

– Ability to reprioritise spending – Linking planning with budgeting – Examining outputs in relation to inputs – Better framework for personnel budgeting – Greater transparency in functioning of government – Transforming finance management Budget reform agenda aims to address these issues

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October 1999 Department of Finance 26

Budgeting and services

  • Traditional budgets highlight finance
  • Measures of service delivery also vital
  • Consideration of services can be improved

using

– objectives – service delivery indicators – targets

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October 1999 Department of Finance 27

Complementary management reforms

  • Management information & statistics
  • Improved accounts - allocation of costs
  • Puts service delivery information alongside

financial data to

– improve resource allocation – make service delivery better – greater transparency in reporting

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October 1999 Department of Finance 28

Budgeting for investment

  • Investment a priority

– as it promotes future service delivery – complements private sector investment

  • Need to ensure

– investment planned to meet service objectives – able to operate and maintain assets created... – ...including ability to meet future operating costs so the assets actually deliver services

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October 1999 Department of Finance 29

Budgeting for personnel

  • Personnel biggest category of spending
  • But largely outside managers’ control
  • New regulations decentralise management
  • Budgeting also has contribution to make

– reviewing ICS vote – improving capacity to forecast pay costs – improving determination of mandates

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October 1999 Department of Finance 30

Budgeting for the wider public sector

  • Important flows of revenue & spending outside

the budget

  • Need to manage the PSBR
  • Oversight role of Treasury & departments
  • Protocol on corporate governance
  • Tax & dividend policies
  • Review of guarantees
  • Oversight of pay & procurement policies
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October 1999 Department of Finance 31

Indicators and targets

  • This Budget’s National Expenditure Survey

began to put service information alongside traditional budget material

  • Plan by 2004/05 to have comprehensive set
  • f objectives, indicators and targets across

public services

  • By 2002/03 aim to reflect indicators and

targets in Estimates

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October 1999 Department of Finance 32

In sum

  • Sound budget framework & decentralised

planning

– promotes discipline while identifying priorities for growth & development – balances coordination & competition for funds – encourages management capacity & forward planning within regulated framework

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October 1999 Department of Finance 33

Budget reform in practice:

stronger accountability… …more clearly assigned responsibility