Public Sector Governance and Accountability Series: Budgeting and ...

508 Alta Fölscher
treasury advisers. In the council, consensus is reached on fiscal and financial
matters affecting the provincial government, and recommendations are
made to the cabinet. The Budget Forum comprises the Budget Council plus
local government representatives and discusses local government matters.
Discussions take place (from June to September each year) between the
three spheres of government on the overall budget framework and the division
of revenue between the spheres of government, primarily through the
Budget Forums. These political-technical forums are supported by committees
of officials preparing and discussing technical background work for
use in the budget process. They include national and provincial treasury and
sector department officials.
Use of formulas to maximize transparency and predictability
Only after the share of each sphere has been established is the horizontal
division of revenue between the provinces determined, using transparent formulas
that take into account national priorities, relative demand for services
between provinces, and particular provincial circumstances. The practice is
to phase in any drastic shifts in allocations on account of changes in formula
structure or key determinant data so as not to upset the stability of provincial
budgets. Similarly, the redistribution of resources from previously advantaged
to disadvantaged provinces, which resulted from the formula structure
and weighting, was phased in over the first few years of the formula.
The formula was recently reviewed to take account of the shifting of
responsibility for social security payments. These used to be a provincial
expenditure and were included in the block grant. However, provinces experienced
difficulty budgeting for these payments as they grew on account of
extended coverage. Often, other social expenditure was squeezed out. In
addition, the weaker provinces had difficulty administering the grants. From
2006, social security payments are funded through the national budget and
are administered by a national social security agency.
In South Africa, therefore, the sequencing of annual decision making on
the allocation of available revenue to competing policies is inextricably
bound up with the intergovernmental system. The institutions created
within the system are key structures in the annual budget process. Aligning
the intergovernmental and budgeting system through the budget process
strikes a balance between the need to reduce the fiscal risk associated with
decentralized systems and to coordinate national policy objectives, on the
one hand, and the constitutional requirements of provincial autonomy, on
the other.