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

Country Case Study: South Africa 511
policies. The annual revision of these policies determines the extent of additional
money that gets allocated for new priorities. The second objective of
the MTEF is to strengthen the link between policy priorities and public
expenditure, by ensuring early policy prioritization, rigorous evaluation of
competing policies and programs, and matching of current and mediumterm
plans with available resources. Through this process, and over time, a
higher proportion of public funds is spent on core programs that have the
highest returns in terms of poverty alleviation, job creation, or whatever the
government has put at the top of its agenda. In this way, the focus of public
expenditure has gradually shifted with the changing needs of government
and its main stakeholders. In recent years, for example, having a mediumterm
planning and budgeting perspective has assisted in facilitating a balance
between spending on poverty alleviation, spending on economic services
programs, and spending on physical infrastructure (see box 15.1).
Understanding how the MTEF operates to realize these objectives has
two important dimensions. The first is that the MTEF system revolves around
integrated sets of rolling national and provincial three-year forecasts, targets,
and plans—from macroeconomic forecasts and fiscal targets, through revenue
forecasts, to the forward projection of what public goods and services
will be delivered by spending departments at what cost. These plans are the
end product of the annual process by which the expenditure needs are
matched to available resources. The second dimension is that the MTEF
system is as much about the structures, institutions, and rules of the budget
process as it is about the sets of three-year plans that result.
Differing from many other countries that have introduced multiyear
budget frameworks,the South African system makes no differentiation between
an MTEF and the annual budget process. Thus, the budget proposals that are
voted by Parliament are prepared and considered in the MTEF process,
coherently with the forward estimates, and are not revised separately from
the forward estimates in a subsequent process. All budget estimates, down to
subprogram level, are compiled for the full three-year period. This process
strengthens the link between policy and planning. Instead of having two separated
phases affecting budget allocations (with the first being of a more
strategic policy nature and the second dealing with annual budgeting), the
process in South Africa facilitates making strategic policy decisions in the
context of budgeting decisions and vice versa. The sequencing, instead, is
from larger aggregations of funding (and policy) to vote, program, and subprogram
level, but keeping a medium-term perspective throughout.
The MTEF process is also the only avenue that spending ministries have
for funding. Unless spending is unforeseen and unavoidable or caused by an