Budget Reform and Policy Implementation

1. Budget Reform and Policy Implementation General Course on Good Governance Centre for Human Rights 8 July 2002

2. What is the MTEF? • MTEF sets out 3-year rolling spending and revenue plans for national and provincial government • 2002 Budget is the 5th MTEF budget tabled in Parliament

3. Advantages of a MTEF • Greater certainty for depts to plan and budget for services in line with policy priorities • Affordable spending in the medium term • Strengthened political decision-making and accountability • Greater transparency of budget and service delivery information for the public • Improved management of public finances

4. Key players in process • Cabinet • Parliament • Ministers’ Committee on the Budget • Budget Council • Budget Forum • FOSAD • Supporting technical committees

5. Political scrutiny of departmental allocations (MinComBud) Fiscal framework Division of Revenue Cabinet approval Budget documentation Bidding process (MTEC) Budget Day MTBPS Main steps in budget process Policy priorities

6. MTEF process and reforms • Early discussion by the Ministers’ Committee on the Budget & Cabinet on policy priorities (May- July) • Preparation and submission of departmental MTEF budgets (May to Aug) • Review of departmental budget submissions (Aug) • Division of revenue & medium term priorities (July-Aug) • National & provincial MTEC allocation process (Sept-Nov) • Medium Term Budget Policy Statement (Nov) • Preparation of budget documentation (Nov-Feb) • Tabling of Budget in parliament (3rd week of Feb)

7. Policy discussions at Cabinet Fiscal framework Borrowings Expenditure Debt Servicing Tax Revenue Contingency reserve Available Expenditure

8. Policy discussions at Budget Council, Cabinet Policy discussions at Cabinet Division of Revenue Available Expenditure National Share Provincial Share Local Share

9. Budget documentation • Intergovernmental Fiscal Review (Sept) • Medium Term Budget Policy Statement (Oct) • Budget Review and Budget Speech (Feb) • Estimates of National Expenditure (Feb) • Provincial Budget Statements (Feb – March)

10. Key Budget format reforms • New national and provincial budget formats developed in line with s215 of Constitution & s27 of PFMA • New formats aim to: • Reduce duplication in budget documentation • Move to Government Financial Statistics (GFS) in the new economic classification • Strengthen link between planning and prioritisation, budgeting and service delivery

11. Key Budget format reforms... • Extension of medium term information • 7-yr trend information enables comparative analysis • Service delivery information - specifying outputs and output measures and indicators • Emphasises ‘value for money’ • Move towards quantity, quality, timelines and cost measures and indicators in subsequent Budgets • Tracking and making progress in service delivery is key message

12. Budgeting for service delivery • Helps departments plan, budget and manage programmes better • Improves accountability and control • Informs policy- and decision making • Provides information to the public about what goods and services government ‘buys’

13. Policy priorities reforms • Strengthening link between Govt policy priorities and public expenditure is key message of MTEF budgeting • Spending plans translate policies into service deliverables - a key tool for public goals • Budget reform aims to strengthen political oversight of policy and budget prioritisation • Facilitates policy priorities for sustainable development

14. Budgeting and policy choices • Budget prioritisation – policy choices and trade-offs against resource constraints, contributing to Government’s strategic goals, incl: • Reducing poverty and vulnerability • Increasing employment • Increasing investment • Lowering the costs of economic activity • Improving safety and security of citizens

15. Strengthens MTEF Budgeting.. • Strategic set of budget priorities strengthens credibility of MTEF budgeting: • Guides resource allocation decisions in budget process • Strengthens political oversight of budget process • Reinforces link between policies, spending & service delivery • Advances public goals of social and economic development

16. Building on 2001 & 2002 Budgets • In 3-year rolling MTEF: • Priorities decided on in 2001 & 2002 Budgets form basis for review of priorities for 2003 • Existing priorities evident in forward estimates of 2002 MTEF (i.e. year 2 & year 3 estimates) • Review of priorities is about guiding resource allocation at the margin within the new MTEF • Additional available resources through economic growth, increased revenue collection and economic growth

17. Existing Budget priorities • Budget priorities reflected in 2001 & 2002 Budgets include: • Investment in new infrastructure and rehabilitation & maintenance of existing infrastructure • Deepening the skills capacity of the economy • Reducing poverty and vulnerability among our citizens • Encouraging partnerships with communities to improve access to basic services • Strengthening capacity to combat crime

18. Infrastructure allocations

19. Priorities reflected in DoR • Budget priorities & choices reflected in Division of Revenue to 3 spheres: • Strengthening capacity to fight crime increases the national share • Extending coverage and raising the value of social security grants adds to the provincial share • Improving access to basic services (water, sanitation, electricity, refuse removal) raises the local government share

20. 2002 Division of Revenue

21. Process of prioritisation…. • Review of priorities for 2003 to evaluate: • How policy options and priorities contribute to Government’s strategic social and economic goals? • What factors should be taken into account in assessing trade-offs against resource constraints? • How do various kinds of economic and social policy concerns complement each other or compete for resources? • What should the sequencing of policy implementation be for sustainable economic and social development?

22. Looking ahead to 2003 …. • Looking ahead to the 2003 MTEF: • The correct budget priority choices may be to deepen and strengthen existing priorities rather than introducing new priorities • Questions often arise on how to implement – these choices are just as NB as they determine how successful policy choices are in practice

23. Policy & implementation challenges • Increase capacity to spend on infrastructure • Lever private sector finance and expertise • Enhance environment for step up in private sector investment • Further tax reform • Strengthen employment creation incentives • Reinforce labour-based infrastructure and service delivery • Address regulatory impediments to increased formal sector job creation • Enhance support services to SMMEs and informal sector

24. Policy & implementation challenges • Reduce poverty and vulnerability • Improve access to services for the poor • Extend coverage and improve quality of basic & social service delivery • Reinforce crime prevention capabilities • Implement sector policing • Improve prison management • Rationalise courts • Harness information & communication technology improvements • Options to complement telecommunications growth & competition

25. Budget Reform and Policy Implementation General Course on Good Governance Centre for Human Rights 8 July 2002