1. Budget 2002 & 2002 Appropriation Bill
A brief overview...
National Treasury

2. MTEF process
Early discussion by the Ministers’ Committee on the Budget & Cabinet on policy priorities (May- July)
Preparation and submission of departmental MTEF budgets (May to Aug)
Review of departmental budget submissions (Aug)
Division of revenue & medium term priorities (July-Aug)
National & provincial MTEC allocation process (Sept-Nov)
Medium Term Budget Policy Statement (early Nov)
Preparation of budget documentation (Nov-Feb)
Tabling of Budget in parliament (3rd week of Feb)
National Treasury

3. Key players in process Cabinet Parliament
Ministers’ Committee on the Budget
Budget Council
Budget Forum
FOSAD
Supporting technical committees
National Treasury

4. Main steps in budget process
Policy priorities
Political scrutiny of departmental allocations (MinComBud)
Fiscal framework
Division of Revenue
Cabinet approval
Main steps in budget process
Policy prioritisation stage May / June
Feed into macroeconomic and fiscal framework
Division of Revenue between national, provincial and local government (aug)
Bidding process at MTEC in September
MTBPS October
Political scrutiny of departmental allocations by MinComBud in late October
Cabinet approval in November
Budget documentation
Budget Day -3rd week in February
Budget documentation
Bidding process (MTEC)
Budget Day
National Treasury

5. Available Expenditure
Fiscal framework
Policy discussions at Cabinet
Expenditure
Debt Servicing
Borrowings
Tax Revenue
Contingency reserve
Available Expenditure
Fiscal framework
Debt servicing costs and contingency reserve topsliced. The additional available expenditure is then allocated in line with Government policy priorities
National Treasury

6. Available Expenditure
Division of Revenue
Policy discussions at Budget Council, Cabinet
National Share
Available Expenditure
Policy discussions at Cabinet
Provincial Share
Division of Revenue between national, provincial and local government is line with policy priorities Budget saw Defence procurement - national share increased Budget prioritised infrastructure and social delivery - incremental increases greater for provincial and local government shares
Local Share
National Treasury

7. Overview of 2002 Budget Economic and fiscal outlook:
Growth recovery over years ahead
Healthy balance of payments and fiscal trends
Rand depreciation to boost trade
Robust revenue performance allows tax relief
Strong spending growth over next 3 years
continued focus on infrastructure
broadening of social security net
reinforcing fight against crime
partnering municipalities in extending services
Moderate rise in deficit
debt service ratio continues to fall
National Treasury

8. Spending priorities over the MTEF
Increased political oversight over budget process
Priorities over the next three years:
Infrastructure
With emphasis on urban renewal and rural development
Addressing poverty and vulnerability
Child support grant extended to an additional 1,2 million children
Spending on HIV/AIDS exceeds R1 billion/year over the MT
Partnerships with municipalities:
Improved access to affordable basic services
Fight against crime
more police
National Treasury

9. Main new allocations
Local government gets additional R1,6 bn in 2002/03 and R2,4 bn in 2003/04
Provinces get R5,3 bn and R7,0 bn above baseline
Social grant increases cost about R2,2 billion more next year
Police to get R5,2 bn more over three years to hire additional police
Defence gets R3,9 bn over 3 years for currency depreciation
Enhanced HIV/Aids programme: Additional R4,1 bn over 3 years
National Treasury

10. Additional allocations
R13,4 billion in 2002/03 and R17,9 billion in 2003/04
Positive real growth in all three spheres:
National R6,6 and R8,5 billion
Provincial R5,3 and R7 billion
Local R1,6 and R2,4billion
National share includes restructuring SA Post Office, UIF, currency depreciation and fight against crime
Provincial priorities - social security grants, education, capital investment and maintenance
Infrastructure and capacity building at local government level
National Treasury

11. Spending by function
National Treasury

12. Spending trends
Non interest spending goes up 4,1% a year in real terms
Balanced growth in all sectors over MTEF, particularly in social services, protection services and general government
Interest on debt (as % of consolidated expenditure) declining from 17,5% to 15,7% in 2002/03
Personnel share of consolidated spending is expected to stabilise on 42,2%
Capital spending expected to grow at an average of 18,1% over the MTEF
National Treasury

13. Division of Revenue
Strong growth in transfers to provinces (7,9% a year) and local government (18,3% a year) over the MTEF
Priority pro-poor programmes:
Early childhood education programme
Bolster health system against the impact of HIV/Aids
Higher social grants and increased take-up of child support grant
Social and economic infrastructure
Extension of basic municipal services
National Treasury

14. Division of Revenue
National Treasury

15. Addressing Local Government Challenges
Establishment of new municipalities
Restructuring service delivery
Delivery of free basic services
Expanding infrastructure
Co-ordination of capacity building
Financial management reforms based on Municipal Finance Management Bill
National Treasury

16. Nat transfers to Local Government
Rising rapidly by 18,3% from R6,5 bn in 2001/02 to R10,8 bn in 2004/05
Increases by R1,1 bn. R1,8 bn and R2,3 bn over MTEF
Forms over 10% of LG finances
Smaller municipalities receive larger share
Include transfers to category C municipalities
Municipal infrastructure development, especially in poor nodes identified in ISRDS and URP
National Treasury

17. Local government transfers
National Treasury

18. 2002 Appropriation Bill & ENE
Estimates of Expenditure accompanies Appropriation Bill tabled in Parliament on Budget Day
Through the Appropriation Bill, the Executive seeks Parliament’s approval of its spending plans for the forthcoming year
The ENE focuses on national spending plans, objectives, 3-year spending estimates, programme developments, outputs & service delivery indicators
National Treasury

19. Main changes since 2001 Budget
Presidency receives additional funds to support foreign travel & NEPAD
Increased allocations to Parliament for improved administration & infrastructure
Foreign Affairs - funds to cater for effects of rapid depreciation of rand and provide for expansion in SA’s foreign representation
Home Affairs - funds to support critical systems development and to enhance service delivery capacity. IEC funding also increased for preparation of 2004 elections
GCIS’s budget rises to accommodate increased capacity and expansion of multi-purpose community centres
National Treasury

20. Main changes since 2001 Budget
Treasury’s allocation increases to support implementation of SARS’s business re-engineering programme
Further allocations to DPSA contribute to Government’s computer network and sustaining projects aimed at improving Gov service delivery
DACST receives additional funds for Freedom Park, supporting cultural industries and in support of Biotechnology industry strategy
National education spending rises in support of higher education sector restructuring & NSFAS
National Treasury

21. Main changes since 2001 Budget
Health receives funds to expand its HIV/Aids programmes
Housing allocation increases to facilitate reduction of housing backlog & for increase in value of housing subsidy
Correctional Services allocation rises to finance construction of additional prison space & to accommodate costs of increased nos of prisoners
Additional amounts on Defence vote provide for shortfall on strat package due to depreciation of rand
Justice receives more money for service delivery re-engineering & employ additional staff - prosecutors
National Treasury

22. Main changes since 2001 Budget
ICD capacity is increased to accommodate extension of mandate
Safety and Security spending rises to recruit & train more police officers, upgrade IT, modernise vehicles
Agriculture allocations increase to fund flood relief to farmers
Communications spending rises to support restructuring of Post Office
Further allocations to DEAT help finance World Summit, support maintenance of national park infrastructure & harbour walls, support tourism
National Treasury

23. Main changes since 2001 Budget
Additional funds to Labour for restructuring of the UIF
Allocation to Land Affairs rises to support land redistribution
Minerals and Energy spending increases to fund rollout of national electrification programme
Additional amounts to Transport raise funding for rehabilitating national roads and rail networks, refurbishing the SARCC rolling stock and for improve law enforcement to ensure safety and security on roads
Water Affairs and Forestry receives additional funds for investment in rural water and sanitation infrastructure, increasing access to clean water, and improving access to sanitation facilities
National Treasury

24. Conclusion 2002 Budget supports poverty alleviation and growth
Strong real growth in spending
Especially on social grants, infrastructure, local govt. and fighting crime
Large tax cuts for all
R15 billion PIT relief
Solid base for future economic growth laid
Increased competitiveness and rising productivity
National Treasury