The budget process

23 February 2022

Today, the Finance Minister, Mr Enoch Godongwana will deliver the Budget Speech to the National Assembly (NA) at the Good Hope Chamber.

Through the Budget Speech, the Minister will update the nation on the state of the economy, public finances and progress on government’s objectives in terms of service delivery. The budget will also give details on how the Treasury intends to fund commitments made in the State of the Nation Address (SONA) for the financial year.

The Minister will also update Parliament about the progress on the Medium-Term Budget Policy Statement (MTBPS) he delivered last year in October.

The national budget process is a continuous cycle that runs from April to March every year. This process is crucial to good governance because it ensures that government spending remains aligned to South Africa’s policy goals and objectives.

The Minister of Finance takes the baton from the President to share how the government’s plan of action, as articulated in the SONA, will be financed. He further unpacks how the funds will be allocated to the different spheres of government, departments and state entities.

During SONA, the President outlines the government’s priorities and objectives, and the Minister of Finance allocates funding for these programs. Thereafter, Parliament (through its committees) interrogates the allocation of funds to meet the priorities identified in the SONA and approve the National Budget, which the Minister of Finance tables, before it can be implemented.

Oversight

Parliament’s responsibility in relation to scrutiny of the budget and oversight of government spending is an ongoing, rolling process. The Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009) empowers Parliament to make amendments to the fiscal framework, appropriations and division of revenue.

The fiscal framework sets out overall estimates of revenue collection, expenditure, borrowing, interest and debt servicing. It provides a roadmap for the government’s specific proposals about the Division of Revenue Bill – which allocates funds to the national, provincial and local spheres of government. It also provides motivation for the Appropriation Bill, which allocates funds to different government departments and entities of the state – including Parliament. The different entities present motivations to Parliament about why Parliament should approve the money, which the National Treasury has allocated to them.

Once Parliament has passed the Budget and Division of Revenue Bill for a particular financial year, Parliament’s deliberations centre around the allocations to the different departments at separate sittings (known as budget votes) focusing on specific departments and their entities. Parliamentary committees make decisions about the proposed allocations and present reports on them to the National Assembly for approval.

Once the National Assembly has approved the Division of Revenue Bill, it considers the Appropriation Bill and votes on each departmental allocation. Once the National Assembly has adopted the Appropriation Bill, it is transferred to the National Council of Provinces for concurrence.

Monitoring and Evaluation

What is also of great importance is that ongoing monitoring and tracking by the executive and Parliament allows for interventions in the event of wrongful expenditure and failures in service delivery.

The process holds government departments accountable for their expenditure and gives Parliament and the citizens it represents an opportunity to make their own demands and interventions.

The importance of oversight in the budget process cannot be overemphasized, there are a number of processes that take place to ensure oversight over public-sector expenditure and performance.

South Africa has the Auditor General (AG), who audits financial and non-financial expenditure of the government and its entities. The AG does not only monitor government spending, but examine financial statements and transactions to ensure that taxpayers’ money is spent without irregularities, and then report these findings to oversight bodies. The findings of these audits are reported to Parliament for further oversight.

Revenue collection

The State raises funds from a variety of sources, including taxation, non-tax revenue (such as leasing mines and sales of capital assets), financial transactions and loans. The largest source of state revenue is taxes, compulsory payments made to the South African Revenue Services (SARS) by individuals, businesses and any other tax-liable bodies.

Personal Income Tax (on individual’s income – 39,1), Value Added Tax (on goods and services sold – 26,5%) and Corporate Income Tax (on business profits – 16,4%) constitute the largest shares of tax revenues. Funds raised by the government are deposited into the National Revenue Fund (NRF), and are withdrawn for expenditure through the Appropriation Bill, following the Budget process outlined above.

Issued by Moloto Mothapo, Parliament, 23 February 2022