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An overview of the budget process in South Africa, the role of the Standing Committee on Appropriations, and the legal framework for fiscal oversight.
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Overview and Mandate of The Standing Committee on Appropriations
overview of the budget process • The budget is a process through which choices have to be made about competing priorities • Allocative efficiency, fiscal stability and service delivery are key in budgeting • Budgeting is a political exercise that starts with political choices about priorities and ends with political choices about which programmes and projects get funded • The three interrelated spheres of government should cooperate in delivering concurrent functions • The vertical division of revenue shows resources allocated to the three spheres • South Africa uses a three-year rolling budget system, informed by key government priorities, strategic plans of departments and the fiscal stance • The Constitution provides Parliament with powers to amend the budget – realised through the Money Bills Amendment Procedure and Related Matters Act, 2009
overview of the budget process • Government’s outcomes approach provides a framework for results-driven performance • South Africa’s budget process is undergoing reform, shaped in part by the outcomes approach and by the Money Bills Amendment Procedure and Related Matters Act, 2009 • For budgeting purposes, votes and their entities have been organised by function across the three spheres, allowing for a more effective comparison of allocations with service delivery trends • For the budget to meet it’s objectives, it must be as comprehensive in covering the public sector as possible. This includes: • Public entities and state owned enterprises • Departments in the three spheres • Donor receipts (both cash and in-kind)
money bills amendment act • The Money Bills Amendment Procedure and Related Matters Act, 2009 puts in place the procedure to amend money bills, as per Sec 77(3) of the Constitution. It defines the processes and procedures that will be undertaken to pass the Budget • The process starts in the year prior to the tabling of the Budget, when each parliamentary committee tables a Budget Review and Recommendation Report (BRRR) • These reports evaluate the performance of each government department and must be referred to the Minister of Finance and the relevant Minister by Parliament • The recommendations in these reports act as an ‘early warning system’ regarding the issues that Parliament is concerned about • When the Finance Minister tables the Budget he must table a report indicating how the Division of Revenue and the Budget gives effect to the recommendations made in the reports • If the Minister’s explanation does not address Parliament’s concerns, they can amend the Budget in order to give effect to their proposals
mandate of SCOA • The Standing Committee on Appropriations (the Committee) was established in terms of the Money Bills Amendment Procedure and Related Matters Act, No 09 of 2009 (the Money Bills Act). In terms of section 4(3) of the Money Bills Act, each House must establish a Committee on Appropriations whose powers and functions include considering and reporting on the following matters: • Spending issues; • Amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriation Bill and the Adjusted Appropriation Bill; • Recommendations of the Financial and Fiscal Commission (FFC), including those referred to in the Intergovernmental Fiscal Relations Act, 1997 (Act No. 97 of 1997); • Reports on actual expenditure published by the National Treasury (section 32 reports); and • Any other related matters.
LEGAL FRAMEWORK – parliamentary Oversight Overview • Oversight is a Constitutional mandated function of the legislative organs of state, to scrutinize and oversee Executive action and any organ of state. • Section 92 provides that (2) Members of the Cabinet are accountable collectively and individually to Parliament for the exercise of their powers and the performance of their functions. (3) Members of Cabinet must … act in accordance with the Constitution; and provide Parliament with full and regular reports concerning matters under their control. • Section 55 (2) provides as follows: The National Assembly must provide for mechanisms - (a) to ensure that all executive organs of state in the national sphere of government are accountable to it; and (b) to maintain oversight of- (i) the exercise of national executive authority, including the implementation of legislation; and (ii) any organ of state.’
LEGAL FRAMEWORK – fiscal oversight Overview • South Africa has a legal fiscal oversight framework in place that enables parliamentary oversight over the Executive which comprises of the Constitution, Public Finance Management Act (PFMA) and the Money Bills Amendment Procedure and Related Matters Act came into effect in April 2009. (Money Bills Act) • Constitution Section 215 provides that • National, provincial and municipal budgets and budgetary processes must promote transparency, accountability and the effective financial management of the economy, debt and the public sector. • The PFMA- The main objective of this Act is to ensure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities of all public institutions. • PFMA Section 38(1)(b) states that accounting officers of departments and constitutional institutions are responsible for the transparent, effective, efficient, and economical use of resources of the department or constitutional institution • Section 32 states that within 30 days after the end of each month, National Treasury must publish in the Government Gazette a statement of actual revenue and expenditure....Section 40(4) states that the government institutions must submit explanations of variances and steps taken to ensure that these remain within the budget.
Division of Revenue Act (DoRA) • Section 9 of the Money Bills Act • After adoption of the Fiscal Framework, DoRA is referred to Committees on Appropriations. • The Bill provides for the equitable division of revenue raised nationally among the national, provincial and local spheres of government ........and the responsibilities of all three spheres pursuant to such division and allocations; and to provide for matters connected therewith. • Parliament (NA & NCOP) should consider & report within 35 days after adoption of Fiscal Framework • Any amendment must be consistent with the adopted fiscal framework and Section 214 of the Constitution • The Committees on Appropriations must consult with the FFC and allow the Minister 3 days to respond to any proposed amendments prior to submission to the relevant house
Appropriation Act • Section 10 of the Money Bills Act • After the adoption of Fiscal Framework, the Appropriation Bill must be referred to the SC on Appropriations • Should be passed by Parliament within four months after the start of the new financial year. This means by the end of July it should be passed by Parliament. • Committees should facilitate public participation. • Ministers should be given 10 days to respond to proposed amendments • Amendments may only be considered after the DoRA Bill is passed
Important issues for consideration • Section 10 (10) provides that when amending the Appropriation Bill, the report from the Committee on Appropriations: • Indicate reasons for such an amendment; • Demonstrate how the proposed amendments take into account the broad strategic priorities and allocations of the relevant budget; • Demonstrate the implications for each amendment on affected vote and main divisions within the vote; • Demonstrate the impact of any proposed amendment on the balance between transfer payments, capital payments and recurrent spending; • Set out how the report relates to the prevailing departmental strategic plans, reports of the Auditor General, committee reports of the house and section 32 reports. • If a Committee amends, the report proposing the amendments must include the responses of the Minister or Cabinet member affected. • The role and expertise of Parliamentary Budget Office critical
Medium Term Budget Policy Statement • Section 6 of the Money Bills Act • The MTBPS contains, broadly, the revised and proposed fiscal framework and outlines the spending priorities of government for the medium term • Matters dealing with the fiscal framework, macro economic and fiscal policy estimates are referred to the Committees on Finance • Matters dealing with revised actual spending projections and adjusted grant allocations, proposed spending priorities and proposed division of revenue to be referred to the Committees on Appropriations • The Committee is required to consider and report on the following issues: • the spending priorities of national government for the next three years; • the proposed division of revenue between the spheres of government and between arms of government within a sphere for the next three years; and • the proposed substantial adjustments to conditional grants to provinces and local government, if any.
Important issues for consideration • Recommendations from the Committees on Finance may include proposals to amend the fiscal framework • Recommendations from the Committees on Appropriations may include proposals to amend the division of revenue • Section 7(4) provides that the Minister of Finance must report to both Houses at the time of tabling the budget how the budget responds to the recommendations of all four Committees • i.e. When the Finance Minister tables the Budget he must table a report indicating how the Division of Revenue and the Budget gives effect to the Committee recommendations • If the Minister’s explanation does not address Parliament’s concerns, Parliament can amend the Budget in order to give effect to its proposals
Important stakeholders • Legislatures (Portfolio Committees, Finance and Appropriations Committees, SCOPA) • Cabinet (National and Provincial Departments, National Treasury) • Auditor-General • Public Entities • Constitutional entities • Financial and Fiscal Commission (FFC) • South African Local Government Association • Civil Society • Parliamentary Budget Office
Parliamentary Budget Office • Established in terms of the Money Bills Act. • Section 15 (2) provides that the core function of PBO is to support the Finance and Appropriations Committees through: • Annually review and analysis of relevant budget documents. • Provide advice and analysis on proposed amendments to the fiscal framework, DORB, money bills, policy proposals with budgetary implications, etc. • Monitor and synthesise matters and relevant reports with budgetary implications adopted in the House with particular emphasis on reports by other committees. • Keep abreast of policy debates and developments on expenditure and revenue. • Monitor and report on potential unfunded mandates
