Putting the Government’s Budget Proposal in Context

By by Albert van Zyl, International Budget Partnership South Africa— Feb 23, 2017

Civil society can play an important accountability role throughout the budget process, from formulation to enactment then implementation and audit. Early in the process, civil society organizations can inform the public about the government’s proposals for raising and spending public money and can offer a critical voice that places the proposals in the social and economic context of the country and challenges questionable assumptions. On 22 February 2017 the South African Minister of Finance Pravin Gordhan delivered the annual budget speech upon tabling the Executive’s Budget Proposal in parliament. As an example of how CSOs can engage in this stage of the process, IBP South Africa responded with the following assessment of the proposal.

The background to this year’s budget proposal is that 35 percent of the South African population is unemployed, and the low growth rate and ineffectual education system are not busy fixing this problem. The president’s proposal (once again) delivered in his State of the Nation address two weeks ago was to call for radical economic transformation. President Zuma’s critics smirked that this is code for getting access to the levers of the economy to benefit a small elite, like when he tried to install a puppet finance minister 15 months ago. As Finance Minister Gordhan said in his budget speech on 22 February — the budget remains the primary instrument for transformation.

South African Minister of Finance Pravin Gordhan “balancing the budget” after his 2017 Budget Speech. Credit: Flickr / GovernmentZA

Sluggish growth in recent years has forced government to raise taxes and cut nonessential expenditure. Yesterday’s budget speech offered more of the same. On the revenue side, the strengthening exchange rate for the South African Rand means that the government can increase the fuel levy without increasing the overall price at the pumps, in addition to this the proposal included a 4 percentage point increase in the marginal income tax rate of the highest earners, as well as increases in the soft targets of “sin” taxes, and a new sugar tax. Apart from small increases in the allocations for tertiary education and subnational government, expenditure remains stable or has been cut in some categories of administrative expenditure.

The unresolved elephant in the public finance room is that of efficiency and value for money in government service delivery. Above-inflation increases in allocations for almost a decade have left social service spending at higher levels than in most comparable countries. These increases did not, however, translate into the increases in quality and quantity of services that would have made the South African population more resilient during the kind of financial crises that we are currently enduring. Minister Gordhan alluded to this problem in his speech when we he mentioned that 50 percent of grade five leaners still cannot read in any language — despite South African spending a greater proportion of its GDP on education than many other middle-income countries.

For this reason IBP-SA in its partnerships with organizations like the Social Justice Coalition and Planact will continue to focus on the issue of improved efficiency and value for money in social service delivery: ensuring that contracts are properly executed, social spending is slanted to the poorest, and the poor are given the opportunities and information that they need to monitor budgets. While politically less sexy, we continue to think that the solution to the South African public finance and political conundrum is to use the considerable resources already in the fiscus to provide services to the poor and disempowered. In South Africa this is where, at least over the short to medium term, the Open Budgets, Transform Lives equation will be resolved.

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