The government is determined to push ahead with an ambitious programme of Budget reform. But change will not take place overnight, write Madeleine Wackernagel and Lynda Loxton
THE country’s financing process is undergoing nothing short of a revolution, Director General of Finance Maria Ramos said this week.
Briefing the parliamentary finance committee, Ramos agreed that the programme of Budget reform was ambitious but it “was a very necessary transformation that needs to take place. It is not something that will happen in one day.
“We should not lose sight of the point that what we are talking about is almost a revolution in the government in the way we budget and manage financial resources.”
But so far, there has been little evidence of radical change. A White Paper was scheduled for public comment in October, but has now been postponed until later this year. As one observer close to the process said: “Ramos did not say anything new. But at least she reiterated the government’s commitment to doing something.”
Director General of State Expenditure Hannes Smit was quick to defend the government’s record: “The process took eight years to implement fully in Australia and New Zealand. People are expecting too much in too short a time. A lot of things have happened in the last three years.
“I am not just talking about restructuring. I am talking about priority shifts, changes in management styles, the government getting their ducks in a row … somebody should just go and take stock instead of just wanting to move forward all the time and getting frustrated on timing.”
Ken Andrew of the Democratic Party said: “I don’t believe they are just mouthing platitudes; there is a serious intention to improve the budgetary process. Indeed, the work done to date has already helped the government to hold down expenditure, as we saw in last week’s Budget.
“But there is still room for more progress and it is difficult to say if the changes envisaged will work in practice.”
Ramos admitted that brief presentations to the committee did not allow enough time to go into the detail of work that had already been undertaken.
When work first started on the medium-term expenditure framework (MTEF), the data for the initial costing exercises were very scrappy and out of date and a great deal of time had to be spent updating information, she said.
“We are bringing more information into the exercise so that we are in a better position to provide an instrument that is useful. It is also very easy to take short cuts in this process because the devil is always in the detail.
“We now have the go-ahead from Cabinet to proceed with the MTEF and start implementing it, which we will do this fiscal year, particularly at the level of national government.
“Cabinet had also approved the establishment of the Budget Office and staff are now being recruited.”
The new approach called for a “significant change in the culture of budgeting and financial management within government” at all levels. This would not be possible without extensive training of staff, Ramos said.
The aim is to shift from the present system of year-on-year Budgets to three-year rolling Budgets to create a better alignment between policy and resource allocation.
“This will allow us to quantify and to say that while government has all these plans … for them to materialise, we need resources. The MTEF will allow for a closer alignment between policy and resources.”
Questions about capacity and implementation remain, however, particularly in terms of the provinces.
Says Murphy Morobe of the Financial and Fiscal Commission: “What we need is a frank and brutal assessment of capabilities – now. Otherwise, at crunch-time, it will be too late. There is little sense that training is central to the whole process.
“It cannot be seen as an incidental, otherwise, just when we think it’s all under control, it won’t happen.”
Committee members also voiced their concerns about whether many departments had the ability and skills to plan new projects, to which Smit replied that training was an important part of the new direction.
A pilot project on three-year Budgets would be launched in the Department of Land Affairs, which would provide practical experience for other departments.
“It is going to take capacity building, new thinking, not only from the officials but definitely more from the politicians because the politicians will now also be measured for delivery,” he said.
Ramos said that no matter how good financial controls were, the government would not be able to meet its objectives if it did not have a clear idea of the choices it had to make to achieve certain results.
Thus, the MTEF would allow for greater stability and certainty in planning and over time would reduce the need for rollovers and front-loading.
“It will allow us to identify policy and programme trade-offs such as, for example, how to balance spending on primary healthcare and hospital rehabilitation.
“Importantly, it allows for reprioritisation and rationalisation. It allows you to make choices,” she said.
On the revenue side, the Department of Finance was also working on a medium-term revenue framework, which would identify revenue sources and how they tied in with the overall direction of taxation policy, borrowing strategies and spending limits.
Ramos said this approach was important because if the government adopted a popular, expansionary route and “simply set out to fulfil the expenditure wish-lists without consideration for the kinds of resources we have available, we would be faced with an environment where expenditures far exceed the resources we have available as a government … Thus, we need to prioritise.”