1. 4th Economic and Social Rights Report - SAHRC
National Treasury presentation to the Joint Budget Committee
11 November 2003

2. Overview
The SAHRC is empowered by the constitution to monitor and assess observance of economic & social rights
National Treasury recognises important role of SAHRC
Need to clarify how SAHRC role fits in given oversight role of Parliament and legislatures
How do we hold government and its departments to account for their performance

3. What is stated in chapter 13
Examines role of treasuries – policy, programmatic & legislative – Constitution
Challenge treasuries on their role in meeting economic and social rights of SAns
Comments on nominal and real values in budget allocations – 1999/00 to 2001/02
Role of treasury in budget allocative process – does it ensure realisation of economic and social rights

4. Methodology
However, data collection methodology is severely limited - should use existing budget documents
Existing survey methodology lacks validation
While some findings are useful, needs to recognise importance of collective responsibility in Government
What is the appropriate role of Treasuries in promoting economic & social rights?

5. Our response focuses on..
Intergovernmental system and budget decentralisation
Role of Treasury
Reforms that improve resource allocations
MTEF
Budget Process
Measurable objectives and service delivery targets

6. Intergovernmental System and Budget Decentralisation
Constitution establishes 3 spheres
Section 214 divides nationally-raised revenue between 3 spheres
Takes account of functions and fiscal capacity of each sphere
National govt or departments cannot determine budget of province or municipality
Spheres not tiers, with govts not administrations
Cannot hold one sphere resp for another
Water provision a municipal function, cannot expect a provincial treasury to know what funds are spent on water

7. Role of Treasuries Constitution PFMA
Chapter 13 and section 216 in particular
PFMA
Manage the budget preparation process
Manage implementation of annual national budget
Facilitate implementation of the DoRA
Coordinate intergovernmental fiscal and financial relations
Budget allocations determined by Cabinet, provincial EXCO or mayoral/executive committee
Budget reforms to widen participation
MINCOMBUD, Cabinet, Budget Council, B Forum

8. Performance in Government
HR report grappling with difficult concept
Does not take account of key performance documents in national/provincial govt
ENE, IGFR
Strategic plans and performance measures
Survey methodology is problematic
Figures provided are inaccurate
Figures cannot be compared btw govts like IGFR
Assess a government as a whole
Cannot assess every dept to perform every other function
Treasuries are a type of “back-office” operation

9. Outputs and Inputs HR report focuses on inputs rather than outputs
Need to focus on outputs
Inputs like how money says nothing about performance
Key is to assess how resources used
Example of school education
Budget of R45 bn, but 80% used for personnel
Key is to contain personnel expenditure, increase capital and npnc (learner support materials etc)
Role of parliament and legislatures in holding executive to account, approving budget etc

10. Medium Term Expenditure Framework
Budget reforms in SA
Accounting standards
Procurement reform
Plannning, budgeting, reporting link
Measurable objectives
Strategic plans tabled in Parliament
Estimates of National Expenditure
Public Finance Management Act
Intergovernmental system required all three spheres (national, provincial and local) to develop and adopt their own budgets – decentralised budgeting – led to transfers to provinces and municipalities
MTEF – 3 year rolling plan for national and provincial gvernment
NES complemented the previous White Book (that contained the budget numbers) by providing both the numbers and service delivery objectives
The PFMA eliminates micro-control, giving managers greater flexibility but holding them accountable. Also provides a framework for modernising the financial management of national and provincial departments
The ENE replaced the NES as the national budget. Eliminated duplication. Policy developments, legislation and service delivery objectives are presented alongside departmental spending plans.
National and provincial departments table their strategic plans in the relevant legislature 7 days before the relevant Minister or MEC presents their budget vote.
Measurable objectives for each departmental programme introduced in the 2003 ENE
National Expenditure Survey
Medium Term Expenditure Framework
Intergovernmental System

11. Medium term policy review Departmental and agency planning & budgeting
MTEF budget process
Medium term policy review
Macroeconomic framework, fiscal policy & DoR
Preparation of MTSF
Cabinet lekgotla
Cabinet lekgotla
MTBPS
Jan April July Oct
Departmental and agency planning & budgeting
Preparing budget submissions
ABBREVIATIONS
MTBPS: Medium Term Budget Policy Statement
Pre-budget statement outlining fiscal and budget policy for the next Budget
Tabled four months before Budget
Increased transparency
Opportunity for Parliament and the Public to engage in proposed spending priorities
MTEC – review & recommendations to Cabinet
Preparation of Budget Documents
May Aug Nov Feb

12. Medium Term Expenditure Framework
Based on four principles
Fiscal policy and the budget framework
Policy priorities and public expenditure
Political oversight of the budget process
Budgeting for service delivery
Budget is driven by priorities like poverty-alleviation, social services and grants, economic priorities, crime-prevention etc

13. (1) Factors affecting fiscal policy
Level of taxation
Rise in tax burden may impede economic growth
Slowdown in tax burden may require higher borrowing or less spending
Level of borrowing
Borrowing for investment may boost longer-term growth
Interest costs may crowd out other expenditure in the long term
Too much Govt. borrowing pushes up interest rates
Balance between capital and recurrent spending

14. How three-year budgeting works
2003 MTEF
Increase to baseline, determined by:
Revised macroeconomic framework
Draw down on contingincy reserve
Policy priorities / alignment with dept. business plans
Vertical division of revenue
Inflation adjustment in 3rd year.
2003/04
2004 MTEF }
2004/05
baseline
2004/05
2005/06
baseline
2005/06
2006/07

15. (2) Policy priorities and public expenditure
MTEF budget process strengthens link between policy priorities and expenditure
Departmental strategic planning aligned with medium-term policy priorities
Budget submissions based on strategic plan and policy priorities
Budgets evaluated on basis of Government’s priorities – articulated by Political Executive
Child support grant extended to indigent children under 14 yrs – phased in over the 2003 MTEF period. Priority is to reduce poverty and vulnerability

16. (3) Political oversight of budget process
Executive responsible for policy and prioritisation – ensured by MTEF budget process
Manage the tension between competing policy priorities and budget realities
Improve legislative oversight through JBC, SCOPA
Trade-off between extending child support grant to children < 14 years or increase spending on school books, or can both be accommodated within approved fiscal framework

17. (4) Budgeting for service delivery
MTEF deepens medium to long-term certainty
Budget certainty supports policy for the phasing-in of CSG
Allows for medium-term reprioritisation
Legislative reforms provide manager with greater flexibility – accountability for use of resources
Budget documents contain service delivery commitments:
IGFR, ENE, Appropriation Bill, DoRA, Budget Review
Measurable objectives and output targets included in national and provincial budgets

18. Future challenges
Better formulation of service delivery objectives, outputs and targets
Better use of existing documents
Legislatures
SAHRC
Public
Improving monitoring and evaluation systems
Strengthening the accountability cycle
Aligning strategic plans, budgets and annual reports
Performance agreements of line-managers