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25 May 2017
 

 

For well-considered comment and analysis on the issues and trends shaping the South African business landscape, read Real Economy. From macro- and micro-economic developments through to black economic empowerment and trade negotiations, Real Economy offers a weekly insight into the challenges associated with growth and transformation.

 

 
 
   
 
 
Article by: Terence Creamer - Creamer Media Editor
 
 
 
 
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Government processes for setting the yearly Budget are well established and are held in high regard both domestically and internationally. On one measure – transparency – South Africa consistently appears near the very top of global rankings. For this reason, any change to the process is likely to be heavily scrutinised – doubly so, when the change follows the removal of a highly respected Finance Minister.

However, Minister in The Presidency Jeff Radebe has confirmed that Budget reform is indeed on the way, with the greater upfront involvement of the Department of Performance Monitoring and Evaluation (DPME), which he oversees, and The Presidency. The intervention will take the form of what is referred to as the ‘Budget Priorities’ paper – a document that should be finalised by the end of May for presentation at the mid-year Cabinet Lekgotla.

Officially, the paper is meant to ensure better alignment between the Budget and the National Development Plan (NDP). As the chairperson of the National Planning Commission, Radebe is the custodian of the NDP, which he goes so far as to describe as the implementation plan for “radical economic transformation”. However, the Minister has also confirmed that it could be used to influence resource-allocation decisions in the context of rising budgetary demands, weak economic and revenue growth, as well as a commitment to fiscal consolidation.

Radebe insists there is no intention to usurp the National Treasury’s overall authority in determining how funds are allocated, while acknowledging that the intervention, nevertheless, represents a significant “Budget reform”.

DPME acting director-general Tshediso Matona goes so far as to describe it as a “historical” policy shift, as it departs from the previous approach whereby all decisions on priorities and allocations were the prerogative of the National Treasury, in consultation with departments.

The change is justifiable, Matona says, on the basis that decisions on what gets funded have become more difficult, as a consequence of the tighter fiscal balance. In addition, prioritisation is seen as increasingly necessary as a result of the emergence of pressure groups, such as the Fees Must Fall movement, which are vocal advocates for increased distributions to certain sectors. “In that context, Cabinet decided that, before dealing with the specific allocations, let’s have a rigorous engagement on the priorities,” Matona explains.

An inaugural “mandate paper” was prepared in 2016, but its release was not fully aligned with the Budget process. In 2017, therefore, a more “methodical approach” has been adopted to ensure that the document is published in time to influence a process that typically begins as early as June.

Radebe insists the overall Budget process will continue to be managed by the National Treasury, overseen by the Ministers’ Committee on the Budget, and that the paper will simply offer broad recommendations about spending and savings priorities. Nevertheless, it is a development that should be closely monitored for any potential unintended consequences.

Edited by: Terence Creamer
Creamer Media Editor
 
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