Budgeting in uncertain times

The 2009 budget was presented amid heightened public discourse over economic policy and service delivery. The central thesis of the debate has centred on the extent to which the ANC after Polokwane will vehemently push for a more leftist economic policy characterised by increased social spending and how effectively government has used funds to alleviate poverty, reduce income inequality, create more jobs and delivery of basic services.

Indeed, a great deal of progress has already been made, including a sustained economic growth rate, increased uptake of social grants, broadening the social wage, job creation and delivery of basic services such as water and sanitation. However, there is still growing public discontent about the pace of change. Recent surveys show a growing disillusionment with the country’s institutions and leaders.

The impact of the current global financial crisis will also worsen the situation. The contagion has already reached our shores. In 2009/10, the economy is set to grow at a paltry 1.4%, for the first time in a decade we have a budget deficit of 3.8% and revenue collection is set to decrease. In light of these downward adjustments, the 2009 budget commits itself to prioritisation in social spending. The consolidated expenditure on social protection increases from R72.3 billion in 2005/6 to an estimated R118.1 billion in 2009/10.

Many governments face the key strategic challenges of optimal allocation of funds for service delivery and the efficient use of these resources. In South Africa, the government has over the years committed itself to pro-poor and efficient allocation of resources, but the key challenge has been inefficient resource allocation, particularly at the provincial and local government levels. The Minister also alluded to this in the budget speech when he remarked “budgeting is not only about expanding expenditure on constructive and necessary activities, it is also about rooting out waste, promoting cost-efficiency and phasing out ineffective programmes”.

In order to address these perennial implementation problems it is important to revisit the oversight role of the legislature. Currently there is an entrenched system where departments submit their quarterly expenditure reports to parliamentary committees. The system has not been very effective because the reporting system is more focused on the output rather than the impact of the expenditure.

However, a significant process currently underway will in future enhance legislative oversight. The Money Amendment and Related Matters Bill 2008 which is currently awaiting the President’s signature will enhance the budgetary oversight role of the legislature. This important piece of legislation will give parliament the power to either adopt or amend the fiscal framework and the passing of the Division of Revenue and Appropriation Bills.   

In these uncertain times, it is imperative that the economic actors in both the public and private sectors work towards growing the economy through effective service delivery, and attracting foreign investment. This must be motivated by the noble objective of “a better life for all”, through good and inclusive governance that ensures sustainable development and poverty alleviation.

Ahmed Mohamed
Researcher: Budget Unit
Political Information and Monitoring Services
IDASA