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

Country Case Study: South Africa 533
because ceilings are determined in a top-down manner within the framework,
establishing credible forward funding projections would have been
very difficult at any level if they were not connected to the fiscal framework
and other projections. Anchoring reforms by linking them with other
processes has also contributed to their implementation and was necessary for
their effectiveness. For example, linking the MTEF to financial management
through the PFMA (which makes it a legal requirement) and other reforms,
such as those at the Office of the Auditor General, helped consolidate the
MTEF as the only system for budget planning. Arguably, if the MTEF had
been implemented in isolation, without links to improved fiscal and financial
management, its benefits would have been fewer.
The implementation of the MTEF and PFMA was strengthened greatly
by the amalgamation of the former Department of Finance (responsible
for macroeconomic, fiscal, and budget policy planning) and the Department
of State Expenditure (responsible for departmental budgeting and
implementation) into the National Treasury. Institutionally, this change
has brought expenditure planning and monitoring together and has located
the full budget process, from macroeconomic forecasting and fiscal planning
through to managing expenditure in-year and compiling reports on the state
of the budget, under one executive authority and one accounting officer.
Better integration in the budget process between budgeting and implementation
has resulted. For example, one desk is now responsible for monitoring
a spending department or sector, assessing budget plans, and monitoring
in-year performance.
Any reform process is likely to meet with resistance from vested interests
and to experience setbacks. Therefore, building support for the reform
process is important at all levels of government by making sure that benefits
show up. In the case of South Africa, the benefit of working within a multiyear
budgeting framework was demonstrated early, when the fiscal framework
for the 1999 budget had to contend with fewer resources than expected.
Instead of having to institute budget cuts, as would have been required under
a one-year framework to meet deficit targets, the government used the
medium-term framework to keep spending stable in the short term, absorbing
the shortfall by drawing down the contingency reserve and shifting the effect
to the outer years. So whereas an annual budget cycle would have forced
immediate expenditure cuts, the medium-term framework allowed the shock
to public finances to be smoothed over the economic cycle. This outcome
demonstrated the usefulness of medium-term planning, helped overcome
resistance at the political and institutional levels, and contributed to making
the MTEF a functional strategic budgeting tool.