Howard Barrell
President Thabo Mbeki and Minister of Finance Trevor Manuel have thrust aside last-minute resistance from Cabinet colleagues and decided to launch on time what is likely to prove a silent revolution in the control of the state’s finances and its delivery of services.
Manuel told Parliament in his budget speech on Wednesday that the government would abide by its original timetable and start introducing the far-reaching Public Finance Management Act from April 1.
The law, passed last year, lays down a strict regime on how taxpayers’ money should be handled. It aims to eliminate corruption in government institutions, and ensure that taxpayers get maximum value for their money.
Implementation of the Act forms a vital part of the backdrop to Manuel’s upbeat budget.
Political sources confirmed this week that some Cabinet members and senior officials – whom they declined to identify – had called for a delay in the implementation of the tough new law. But Manuel, with strong backing from Mbeki, determined early this month that implementation should go ahead. Both men stressed the law was an important instrument in their efforts to impose discipline on the public service and speed up social delivery.
The law establishes a clear chain of financial accountability in all government bodies. Each institution will have an accounting officer, who must publish monthly and annual reports on the state of its budget. The Act also designates who may borrow on behalf of any national entity. Moreover, it sets out to prevent buck- passing. It requires that, if a minister makes a directive to the director general of the department which has financial implications, this must be done in writing.
The Act also seeks to establish a basis for measuring performance. When the annual budget of, say, a national government department is introduced in Parliament, its accounting officer must publish “measurable objectives” against which its performance can be assessed; and its annual report must document the extent to which these objectives have been met.
The law empowers the national treasury – basically the minister of finance and his senior officials – to set out accounting standards and cash management procedures. The national treasury may also require banks to give it information on the bank accounts of national and provincial institutions. And the Act establishes a basis for disciplinary proceedings against those not complying with its terms.
Ministers and officials who objected to the law’s implementation from April 1 argued either that they lacked the necessary capacity to meet its requirements or that it imposed unreasonable limits on the discretion they could exercise over how state funds are spent.
Manuel said on Wednesday that the new law would be phased in gradually.
The new law has been widely welcomed by economists and opposition parties. One commentator, Standard Bank’s chief economist, Iraj Abedian, said: “It is the most basic change, the most transformative step taken in South Africa insofar as fiscal management is concerned. The conventional view is that the reallocation in recent years of funds from defence to other areas, such as health and education, was the most significant change. But this new law will ensure value for money.”
Abedian said it would make proper management of state finances less dependent on having a tough disciplinarian like Manuel as finance minister as it would put in place an altogether new, disciplined “fiscal architecture”.