The Budget Explained

Feb. 20, 2018 (9 months, 3 weeks ago)

Every February the Minister of Finance presents his budget speech in Parliament for the upcoming fiscal year.

This is not the final budget but a proposal that has to be scrutinised and approved by Parliament.

What is in the budget and why should I care?

The budget presents an overall synopsis of the state of the country’s economy, amendments to tax, distribution of revenue across spheres of government and distribution og expenditure across national departments. This is where the legislation accompanying the budget speech play a role, namely, the Appropriations Bill and Division of Revenue Bill. The budget serves as a practical way through which government’s plans and policies are tangibly translated into goods and services.

Since there is a limit to the resources, the need for proper budgeting arises to allocate scarce resources to various governmental activities. Every item of expenditure has to be well thought out and worked out for a specific period. The budget is strongly aligned with constitutional imperatives: two-thirds of spending goes to realising social rights enshrined in the Constitution. It provides the Government with the money it needs to deliver its policies and run vital services in areas such as Health, Education and Defence. The budget is arguably the most important government document. It impacts s the economy at large and the everyday lives of South Africans.

The Budget cycle

Although most of us hear about the year’s Budget when it comes to Parliament, it has taken 14 months of work to prepare. In other words, by the time a Budget is introduced, the Budget for the following year has been in preparation already. The process is this lengthy because a number of time consuming processes must be completed first. Each Budget is part of an ongoing three-year plan called the Medium-Term Expenditure Framework (MTEF). Planned expenditure for the year immediately ahead (year 1 of the MTEF cycle) is fixed while the two years after that (years 2 and 3 of the cycle) are revised in the next budget cycle. Find more information here.

What happens after the speech?

Exercising budgetary power is one of Parliament's basic tasks, along with enacting legislation. Parliament exercises this power by approving the Budget.

After the speech, the debate will move from the chamber to the Committee corridor where - spread out over a couple of months – Committees will hold hearings with the Minister, Parliamentary Budget Office (PBO), Treasury, relevant departments, statutory bodies, economists and civil society before rushing out with a report (Parliament is currently reviewing the time frames and sequencing associated with the different financial instruments and bills, and the parliamentary procedures related to them). The Parliamentary Committees under the spotlight during this process are the Standing Committee on Finance and the Standing Committee on Appropriations along with their counterpart Committees in the NCOP. At the same time, the various money and tax bills which give effect to the changes and appropriations in the budget will be processed. This process hardly ever results in some change to the Budget. Attempts by the opposition to bring in amendments of their own are always repelled.

Parliament's scrutiny of the budget includes in-year reporting and end-year reporting as well. With respect to mid-term reporting, Parliament’s Budgetary Review and Recommendation Reports (BRRRs) are invaluable. These reports are compiled annually (during the midterm budget process) and are based on the work the Committees have done in relation to assessing government performance and audit outcomes and, most importantly, make recommendations and suggestions around the use of financial resources of government departments and entities for the next financial year. Specifically, in preparation for compilation of the BRRRs, Committees examine the medium term ENEs of departments along with strategic plans and audit outcomes.

The Minister of Finance also receives the BRRRs from Parliament and considers how these impact on the budget and MTEF in preparation for the Medium Term Budget Policy Statement.

The BRRR is tangible evidence of Parliament assessing the performance of every government department in terms of service delivery against what the department was allocated and appropriated during the budget process i.e. the Report determines if there was value for money. This is a key channel through which Parliament fulfils its all-important oversight function and holds government accountable for the way in which taxpayers money is spent. Making recommendations for future budgetary processes through the BRRR is also a critical way in which Parliament influences the process. Although the lengthy BRRR process is of paramount importance on the parliamentary calendar, oversight by Committees over departments in this way is meant to be ongoing throughout the year. It is suggested that rigorous in-year oversight by Parliament could lessen poor performance by departments at year-end.

The PBO

pbo



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