NAME: SIMANGA

SURNAME: DLAMINI

STUDENT NUMBER: 3880716

SCHOOL OF GOVERNMENT (SOG)

MODULE: ECONOMICS & PUBLIC FINANCE (PUA 616)

LECTURE: PROFESSOR E. ARNOLDS

DUE DATE: 14.09.2018

“Accountability is the glue that ties commitment to the result” (Bob Proctor 2014).
Table of Contents

Introduction into Public Finance Management Act (PFMA)...................................................................4

Define Public financial Management (PFMA)..........................................................................................4
Background to the Act.............................................................................................................................. 4
Why the need for PFMA?.......................................................................................................................... 5
PFMA Legal framework............................................................................................................................. 5
The PFMA cycle and the key actors involved......................................................................................... 5
Defining responsibilities........................................................................................................................... 6
Accountability............................................................................................................................................ 6
Transparency............................................................................................................................................. 6
The link between the Constitution And PFMA........................................................................................7
Aims and objective of the legal framework............................................................................................. 7
Critical Discussion: PFMA in the south African context........................................................................8
Factors influencing PFMA non-compliance............................................................................................ 9
The National Development Plan (NDP) – Background.........................................................................10
NDP promise of Basic Services for all our citizens by 2030................................................................10
Link between the NDP and the Constitution.........................................................................................11
Mechanisms to hold leaders to account................................................................................................ 11
Introduction to State Capture................................................................................................................. 12
Define state capture................................................................................................................................ 12
Effects of State capture in South African.............................................................................................. 12
Recommendations to combat this phenomenon..................................................................................13
Theoretical framework: state capture.................................................................................................... 14
Recent Allegations of State Capture...................................................................................................... 15
Introduction to Performance Budget systems......................................................................................17
Define Performance Budget System...................................................................................................... 17
Background of Performance Budgeting................................................................................................ 17
Main objective of performance budgeting............................................................................................. 18
The applicability of performance budgeting to the public sector in South Africa.............................18
The nature, scope and intents of performance budgeting in its generic form...................................19
Advantages of Performance Budgeting................................................................................................ 20
The applicability of performance budgeting to the public sector in South Africa.............................20
Conclusion............................................................................................................................................... 21
Bibliography............................................................................................................................................. 23
ASSIGNMENT INSTRUCTION

Budgeting
The Public Financial Management Act provides the legal framework that entrenches the
necessity for transparency and accountability at all levels of government in South Africa.
The National Development Plan’s Vision 2030 requires that ‘Citizens have the right to
expect government to deliver certain basic services, and to hold leaders accountable for
their actions’.
In the light of the debates around “State Capture”, discuss the potential of performance
budgeting systems as tools for improving government performance and accountability.
You are specifically asked to include the following elements in your discussion:
1. The nature, scope and intents of performance budgeting in its generic form
2. The applicability of performance budgeting to the public sector in South Africa
3. The potential of performance budgeting for improving government performance
and accountability

Please remember the following when writing your assignment: -

• The Harvard Reference System is used;

• Pagination is used only when there is a direct quote;
• A passing reference only need the author’s name and year;
• Do not number paragraphs;
• Layout must be well presented and structured;
• Paragraph’s must be fully developed and written in good academic English;
• Please proof-read essays before submission;
• Broken grammar and typographical errors are NOT accepted.
Introduction into Public Finance Management Act (PFMA)

The 1994 transition to a democratic state brought many challenges for managing the
public finances in South Africa. Not only did the new constitutional dispensation lay
down a changed structure and distribution of power in the state, with implications for the
way in which public funds were allocated and used, but the new government had a
critical political commitment to improve the coverage and quality of public service
delivery to the majority of the population, in order to redress the racially based
distortions of the past.

It is without a doubt that our Government’s role has expanded exponentially over the
years. Not only is it responsible for security, international relations and common goods
but it has also since been responsible for the fiscal of the country, regulation of the
economical market and the improvement of the standard of living of its citizens. As
finance follows function, this increase in responsibilities of a government has led to an
increase in finances that the government’s is responsible for. To ensure good
governance and good management of public finances a level of transparency,
accountability and sound management must be upheld.

Define Public financial Management (PFMA)

Public Financial Management (PPFMA) refers to the set of laws, rules, systems and
processes used by sovereign nations (and sub-national governments), to mobilize
revenue, allocate public funds, undertake public spending, account for funds and audit
results. A large number of actors engage in this PFM cycle to ensure it operates
effectively and transparently, while preserving accountability.

Background to the Act

Government has prioritized the transformation of the public sector to enable it to meet
the needs of the people and the objectives of the Reconstruction and Development
Programme (RDP). Given the enormous demand for services and the limited resources
available to satisfy that demand, all available resources must be used as effectively and
efficiently as possible. Government is determined to modernize the management of the
public sector, to make it more people friendly and sensitive to the communities it serves.
Why the need for PFMA?

The Public Finance Management Act 1999 (PFMA) was found to regulate financial
management in the national and provincial government. It ensures that all revenue,
expenditure, assets and liabilities of those governments are managed efficiently and
effectively to provide for the responsibilities of persons entrusted with financial
management in those governments and to provide for matters connected therewith. The
objective of this Act is to secure transparency, accountability and sound management of
revenue, assets and liabilities of the institutions to which this act applies.
(PFMA of South Africa, 1999:2)

PFMA Legal framework

The national treasury rules and guideline consist of the provisions on the PFMA, the
treasury regulations and instructions issued to the national treasury in terms of PFMA
for and in respect of provincial institutions of a province.

General Recognized Accounting Practices (GRAP) are standards issued by the

Accounting standards Board (ASB) in terms of the PFMA to prescribe the reporting and
accounting principles for specified reporting entities such as municipal and public
entities. The modified cash standards (MCS) is GRAP for departments and any other
entity that claims compliance with the modified cash basis of accounting. The MCS as
prescribed by the National Treasury, Office of the Accountant General and sets out the
principles for the recognition, recording, measure, presentation and disclosure of
information required in terms of formats prescribed by the National Treasury (Andrew
Lawson 2015)

The PFMA cycle and the key actors involved

Defining responsibilities

The Act clarifies the division of responsibilities between the head of department namely
the accounting officer and the political head called the executive authority, either a
Minister or an MEC. The executive authority is responsible for policy choices and
outcomes, while the accounting officer implements the policy and achieves the
outcomes by taking responsibility for delivering the outputs defined in the departmental
budget.

In this way, the Act empowers accounting officers by unambiguously conferring on them
a clear set of responsibilities. The accounting officer prepares the departmental budget
specified in terms of measurable objectives for the Minister or MEC to approve and
present to the legislature for voting. The accounting officer is then responsible for
implementing and managing the budget. Transparency and accountability need each
other and can be mutually reinforcing. Together they enable citizens to have a say
about issues that matter to them and a chance to influence decision-making and hold
those making decisions to account.

Accountability

Accountability can be viewed from different points of view: The Public Administration
Dictionary (Fox & Meyer, 1995: 1) defines accountability as: The responsibility of
government and its agents towards the public to realize previously set objectives and to
account for them in public. The commitment required from a public official to accept
responsibility for his actions or inaction. The obligation that a subordinate has to keep
his or her superior informed of the execution of responsibility.

Transparency

Transparency and openness are principles of governance that require officials to

act openly. They show that government officials have nothing to hide and that all
decisions and transactions can stand up to public scrutiny. Sekoto and Van
Straaten (1999:11) argue that openness and transparency promote a customer focused
approach.

The link between the Constitution And PFMA

A modernisation of the financial management processes of the public sector has

since been introduced. The Constitution of South Africa, 1996 (Act 108 of 1996)
introduced a radical change from the previous political dispensation. These changes are
directed towards departments improving the quality of life of all citizens through their
departmental policies. The Constitution states that all spheres of government must
promote transparency, accountability and effective financial management (RSA
Constitution 1996, Section 215:1). Chapter 13 stipulates that all money the national
government receives must be paid into the National Revenue Fund. Furthermore, that
money can be drawn from the National Revenue Fund only in terms of a law of
Parliament.
South Africa, being a unitary state, is comprised of three interdependent but distinctive
spheres of government - national, provincial and local government. The budgets of
income and expenditure of all governments in the national, provincial and local spheres
must comply with specific requirements; national legislation will prescribe their form.
Fölscher and Cole (2004: 114) states that the Constitution sets out the principles and
requires subsequent acts of Parliament to determine how these principles are to be
applied and their requirements met. In keeping with this spirit, the supportive legislation
enacted in the first years after the 1994 transition also does not primarily legislate
specifics, but puts in place sets of institutional arrangements to facilitate the best
possible substantive outcome to be found in any given year or circumstance.

Aims and objective of the legal framework

The PFMA essentially locates budgeting and financial management within

a performance management framework. Abedian (2004) summarises the main
aims of this legislative reform as follows:
 To establish an appropriate link between strategic objectives and
expenditure plans;
 to ensure fiscal discipline within the constraints of what can be afforded;
 to promote the efficient use of resources, by decentralising and delegating
decisions to where they are best made;
 to improve incentives and empower managers to make effective decisions
while at the same time holding public sector executives accountable for their
managerial decisions;
 to introduce transparency and promotion of accountability, and
 to introduce accessibility of information and budget estimates.

Critical Discussion: PFMA in the south African context

South Africa is unique in that it inherited “a state which was illegitimate and structured to
serve the interests of a white minority. To attain all these and other objectives, it
became the seedbed of corruption and criminal activity both within the country and
abroad” (Chipkin, 2012). The South African government in attempts to get rid of the
legacy of apartheid neglected or abolished traditional public administration model
practices but failed to replace them with anything really new or more effective. Growth,
employment and redistribution strategy (GEAR) was implemented. This market driven,
state assistant approach required capacity and scarce skills, something that was not
available in the public sector. To compensate for this, private-sector consultants were
used to fast-track contracting-out arrangements which led to little skills transfer (Wenzel,
2007).

To make matters worse, public institutions find themselves lacking relevant capacity to
perform their duties. There has been a recent exposure of individuals occupying top
positions in institution without the relevant technical skills or qualification. Former
chairperson of SABC Ellen Tshabalala was found to have lied on her CV about her
qualification. Furthermore, acting chairperson of South African Airways has also been
found to not have any qualification. As Wentzel states that many of these government
agencies “tend to be as bureaucratic and rule driven as the government departments
that spawned them. They also enforce complex application and reporting procedures,
making a mockery of the claim that they would implement more efficient management
practices. For example, the supposedly independent National Skills Authority has
neither the capacity to manage the highly technical skills development implementation
process, nor has it the authority to enforce lower agencies’ compliance” (Wenzel, 2007).

While this framework exists, in practice there is no transparency, accountability and

sound management in the public sector. According to the Auditor general, only 30 out of
319 municipalities and municipal entities receive cleaned audits, irregular expenditure
amongst municipalities and municipal entities amounted to R11.6 billion, and the
financial health of the municipalities and their entities has deteriorated. Furthermore
only 119 of the 469 departments and public entities audited received clean audits,
irregular expenditure amongst departments and public entities amounted to R62.7
billion, and the financial health of departments and public entities have deteriorated
significantly. This paints a picture an environment that is inefficient, ineffective, that
does not comply with legislature and, most worrying, that is gripped with corruption
(Wenzel, 2007).

It is clear that the objective set out in PFMA and the MFMA have not been met, but why
is this, the case? The financial framework in South Africa is based on new public
management paradigm. The problem with this is that, there are several preconditions
for the success of the adoption of the NPM model. As Wentzel perfectly points out that,
“The World Bank, after decades of advising the literal destruction of public sector
capacity, acknowledged the importance of building institutional and organizational
capacity and now warns against excessive managerialism in countries with weak control
or capacity (Wenzel, 2007).

Factors influencing PFMA non-compliance

Having outlined the background of the PFMA, it is essential to identify factors

influencing lack of compliance with the PFMA. Firstly, it should be noted that
policymakers are focused on the desired outcomes of change, but neglect the
contextual factors that influence implementation.

A study by Van Wyk (2004: 414) identified, amongst others, the following factors:

 Lack of experienced, knowledgeable, skilled and qualified staff

 Outdated accounting and information systems
 Inadequate knowledge of the Public Financial Management Act, 1 of 1999
 The transformation from financial control/ administration to financial management
 Inadequate control systems and a lack of knowledge of accrual accounting and
Generally Recognized Accounting Practices (GRAP).

The National Development Plan (NDP) – Background

Since the birth of democracy in 1994, the post-apartheid state has struggled to
substantially address the deep socio-economic legacies of the apartheid era. While
progress has been made in addressing the apartheid legacy, poverty, inequality, and
unemployment remain stubbornly high. In light of the extreme socio-economic
cleavages experienced by the majority Black population, the ANC-led government saw
an interventionist or a developmental state as the vehicle through which to transform the
economy, create jobs, and provide long denied needs, including land and housing
(Karriem, A. & Hoskins, M. 2016)

One of the main drivers of the NDP is a commitment to full employment. In economic
terms, this means maximising the use and allocative efficiency of scarce resources
within the economy. The aim is to reduce unemployment to 6% by creating more than 5
million jobs by attacking issues such as education. Further to this is, government aims
to have better integration between the various policy documents such as IPAP and the
New Growth Path (Andrew Lawson, 2015).

NDP promise of Basic Services for all our citizens by 2030

The NDP aims to achieve the following objectives by 2030:

 Eradicate absolute poverty – from 39% of people living below the poverty line of
R419 (2009 prices) to zero
 Reduce unemployment rate to 6% – by creating 11 million more jobs by 2030.
 Significantly reduce inequality from 0.69 to 0.60 gini coefficient through a range of
policy interventions
Link between the NDP and the Constitution

The NDP aims to reduce and eliminate poverty, eradicate inequality. The constitution
manifests a right- based approach and envisage a prosperous, non-racial, non-sexist
democracy that belongs to all its people. The youth have a right to better education,
economic opportunities, focused efforts are required to eliminate gender inequality.
Economic infrastructure is a prerequisite for providing basic service such as electricity,
water, sanitation, telecommunications and public transport and it needs to be robust
enough to meet industrial and commercial household needs.

Mechanisms to hold leaders to account

 Parliament – Has the right and powers to summon leaders to appear before
parliament and to hold them accountable.
 Joint standing committee – has the responsibility to conduct oversight over all
government and government linked institutions
 Portfolio Committee – has the right to hold any leader accountable.
 Monitoring & evaluation committee – has the authority and power to conduct
oversight over government departments and all government entities.
Introduction to State Capture

In recent times the concept of state capture has become very popular in the political and
economic arena of South Africa. It was particularly the close affiliation between the then
President of South Africa, President Jacob Zuma and the Gupta family that stirred up
great concern about the South African state facing a possible state capture. Many
analysts, however, argue that the notion of state capture has long been part of the
dealings of the ruling party, the African National Congress (ANC), but has been
concealed by the fact that the South African state has not been regarded as a failed or
failing state. This is primarily because the ANC government is still able to exercise full
administrative control, maintain some degree of peace and is able to consistently
provide public goods to its citizenry (Jonas 2016: 16).

Define state capture

According to Sutch (2015: 2), state capture can be defined as the actions of individuals
or groups both in the public and private sectors, influencing the formation of laws,
regulations, decrees and other government policies to their own personal advantage.

Effects of State capture in South African

it has also become evident that South Africa, under the administration of the current
government, is both internally and externally falling apart. Exports are falling, commodity
prices are falling, and the rand has slumped. The economy shrank by 1.2 percent in the
first quarter of 2016 alone: it is now only the continent’s third largest. Unemployment is
at 27.2 per cent – an eight-year high – and business confidence is at its lowest for more
than two decades (Hartley 2016: 1). Additionally, the assassination of political affiliates
within the ANC during the municipal elections has shown that political power has
become an important element in South African politics (Sutch 2015: 9). Below namely
are some other effects of state capture just to name a few.

 Investor confidence: A drop in investor confidence in these sectors will impact

directly on jobs. Money and value are leaving the country.
 Increased cost of living: Mathekga said corruption increases the costs of goods
and services as well as undermines democracy.
 Democracy undermined: When people have unduly captured policymakers, it
tends to break the contract voters had with those officials., Mathekga said.

Recommendations to combat this phenomenon

It has become clear that Jacob Zuma has extended power by employing loyalists to
control all state institutions in order to put his own interests ahead of that of the nation’s.
The rationale is that when the network (loyalists) keeps Zuma in power, he will protect
and reward them in office. A need therefore arises to put strategies in place to reverse,
if not, fix the problem of state capture in the South African state Pithouse (2016),

The decentralisation of power: The centralisation of power and the capture thereof by
the president of the ANC and the country, this way, power will not just be vested in the
ANC, but in a number of parties, to deliver services, enhance economic growth and
provide employment to the people. Accountability and transparency are therefore more
likely in a denaturalised democracy than a centralised one. It can also be argued that
the one-party system is not sustainable in the long term, especially given the fact that
the country has emerged from such a brutal past which makes such a party almost
impossible as noted by Pithouse (2016),

Combatting state capture from the inside out: It is no doubt that Jacob Zuma and his
Premier League are the rotten apples within the ANC. It has become evident that Jacob
Zuma has successfully institutionalised corruption within the core structures of the state.
Moreover, his voracious appetite for power and control has crippled both the economic
and political levers of the state (Hunter et al. 2016).

Creating structures outside the state to reverse state capture: The World Bank and
the International Monetary Fund (IMF) have played a pivotal role in assisting countries
in constructing structures and institutions outside the state to combat corruption. The
purpose of such structures is to enjoy administrative autonomy to prosecute offenders,
investigate crime, review judicial processes, and charge judges and courts of justice for
penal law infractions (IMF 2015). However, these frontiers must be approached with
great caution and with careful monitoring of implications on the ground.

In South Africa, for example, Corruption Watch has been established in 2012 as an
independent non-governmental organisation, with the purpose of combatting corruption
with the assistance of the public (Corruption Watch 2015).

Theoretical framework: state capture

According to Sutch (2015: 2), state capture can be defined as the actions of individuals
or groups both in the public and private sectors, influencing the formation of laws,
regulations, decrees and other government policies to their own personal advantage. It
is important to note that when discussing state capture, the state and the economy
cannot be conceived as two separate entities. Economic and political power is therefore
fused. State Capture comes in many forms. Firstly, at one end of the spectrum, it can
occur in terms of an individual or family that exert control over both the state and the
economy. Other forms include the development of oligarchies with a quasifeudal
structure of dependents or a complex range of networks with more equal and reciprocal
relations. This is especially the case where laws and institutions become the product of
corrupt transactions so that what counts as legality is itself a function of corruption
(Sutch 2015: 5). It is apparent to note that state capture undermines the efficiency of the
state, especially where there is a direct relationship between state capture and
corruption.

This primarily happens when a state is paying more than it is supposed to for
outsourced goods and services. State capture also undermines the efficiency of the
state. This happens through poor quality services and public goods being delivered by
patronage networks but less than capable service providers, through fiscal resources
being redirected away from public goods provision for the poor or from value-adding
economic endowments towards servicing some or other patronage network; and by
weakening state capacity through appointing pliable but less than capable people in key
positions, especially in finance procurement and political bearers (Whelan 2016). Jonas
(2016) asserts that the most important element state capture takes away from a state, is
its legitimacy. This happens through governance systems and rules being flouted with,
leading to a lack of transparency and accountability within the structures of the state.

Recent Allegations of State Capture

Mcebisi Jonas, Vytjie Mentor and Themba Maseko have revealed the inner workings of
the Gupta machine at the state capture inquiry. We look at some of the more startling
revelations.

Jacob Zuma gave the orders

In his testimony, former government spokesperson Themba Maseko disclosed that

former president Jacob Zuma had personally called him and told him to give the Guptas
what they wanted. He said: "My brother, there are these Gupta guys who need to meet
you and who need your help. Please help them."

The Guptas 'dealt with' ministers who did not listen to them

Maseko was told by Ajay Gupta that if ministers did not co-operate with a scam to get
government advertising money to their media products, "he would deal with them
directly". Maseko said: "I asked him to elaborate and he told me that he will personally
summon and deal with any minister who doesn't co-operate in this regard."

The Guptas took charge soon after Zuma became president

In her testimony, Vytjie Mentor told how in early 2010, the Guptas were already "running
things". They wanted to appoint her minister of public enterprises so she could stop the
SAA route to Mumbai. The Guptas wanted the route for another airline.

"[Ajay Gupta] said he could put in a good word with the president. He said ‘we normally
do’."

The Guptas bragged that they controlled the investigative and prosecutorial parts
of the criminal justice system
“He said: ‘You must understand that we are in control of everything — the National
Prosecuting Authority, the Hawks, the National Intelligence Agency, and the old man will
do anything we tell him to do’.”

The Guptas bragged that they earned R6bn from the government

Jonas testified that Ajay Gupta had bragged about how much money they made from
the state. “He said that at the moment we — and I understood him to mean the Gupta
family — earn about R6bn from the fiscus through various entities, including Eskom,
Transnet and government departments. He said they wanted to increase this amount to
R8bn and that they thought I could be helpful in this regard.

“Mr Gupta said they had determined that the Treasury was a stumbling block for their
growth and that they wanted to and, again I quote, ‘to clean up Treasury’.
Introduction to Performance Budget systems

Globally public sector performance management is undergoing radical changes, as

internal and external forces converge to make governments more accountable.
Governments are increasingly under pressure to demonstrate results to electorates who
are no longer just interested in inputs and outputs, but also want to see the actual
outcomes and positive impacts of public expenditure (Kusek and Rist, 2004).

South Africa recently adopted the National Development Plan (NDP), which emphasises
state capability as a precondition for development and an outcomes-oriented approach
to service delivery and Monitoring and Evaluation (M&E). The fundamental aim of the
outcomes approach is to ensure that government derives value for money from public
expenditure, and public services bring the desired developmental impact. (The
Presidency, 2010).

Define Performance Budget System

Robinson and Brumby (2005) define performance budgeting as procedures or

mechanisms intended to strengthen links between the funds provided to public sector
entities and their outcomes and/or outputs, through the use of formal performance
information, in resource allocation decision-making.

Background of Performance Budgeting

Performance budgeting was first recommended by the Hoover Commission in the US in

1949 (OECD Policy Brief, 2004). The Hoover Commission's "performance budget" was
intended to shift the focus away from inputs of government to its functions, activities,
costs and accomplishments. Thus rather than emphasizing items of expenditure such
as salaries, rent and supplies, performance budgets were to describe the expected
outputs resulting from a specific function or activity, e.g. Weapons or training ( MacGill,
2001: 377). This shift from inputs to outputs was based on the fact that, in the 1940's,
OECD countries were struggling to allocate resources in an optimal manner. The
budget allocation of these countries was only on inputs without taking into consideration
the outputs and outcomes of such inputs. Budgeting was done separately from policy.
(OECD, 2004, 4).

Main objective for Performance Budgeting

The core objectives of performance budgeting are enhanced allocative and productive
efficiency in public sector expenditure. In respect of allocative efficiency, performance
budgeting reformers believe that expenditure allocation in the public sector tends to be
insufficiently responsive to changing social needs and priorities (Robinson & Brumby,
2005: 13). Performance budgeting is seen as the solution to the inefficiencies in
resource allocation in the public sector.

The importance of performance budgeting in the south African public sector

service.
Monitoring and measuring service delivery and performance are critical to the overall
management of departments, ensuring that objectives are met through the delivery of
outputs. What gets measured, gets done! Integrating service delivery and performance
information into planning and budgeting processes contributes to better budgeting and
enhanced service delivery. The quality of decision making within departments is
improved as managers move away from focusing on inputs and the amount of
resources allocated and utilised towards the outputs the monies will ‘buy’ and the
impact thereof on communities (Shirley Robinson, 2002).

Monitoring and measuring service delivery and performance may be viewed as a

process of assessing progress towards achieving predetermined goals. The process
may be used as a tool for self-assessment, goal-setting, monitoring of progress and to
facilitate communication of objectives and service delivery targets and progress to
external customers (Shirley Robinson, 2002).

Until recently South Africa did not have an overarching government-wide M&E
(GWM&E) policy framework. Prior to 2010, M&E was carried out unsystematically,
mainly by National Treasury, The Presidency and a handful of sector departments and
premier’s offices using different systems. The initial thrust of National Treasury M&E
was financial, growing to encompass non-financial data following the enactment of the
Public Finance Management Act (PFMA) and the Municipal Finance Management Act
(MFMA). Under the PFMA/MFMA, national, provincial and local governments are
required to table their annual budgets concurrently with strategic plans and Annual
Performance Plans (APPs) for scrutiny and approval. The intention is to make a more
explicit linkage between outputs and resource allocation in budget programmes, through
institutionalised and streamlined reporting requirements, and more importantly to
improve accountability. Both the PFMA and MFMA place accountability for financial
performance with the administrative heads of government departments or municipalities
(Layman (2003).

The nature, scope and intents of performance budgeting in its generic form

Performance budgeting seeks to improve the efficiency and effectiveness of public

expenditure by linking the funding of public sector organizations to the result they
deliver, making systematic use of performance information. (Marc Robinson and
Duncan Last, 2009).

Basic performance-based budgeting can also improve aggregate fiscal discipline.

Improving expenditure prioritization means an improved capacity to make “fiscal space”
for new spending initiatives without commensurately increasing aggregate expenditure.
It also facilitates fiscal consolidation when this is necessary by helping government
target spending cuts at its least effective or least socially important programs. And
insofar as performance-based budgeting (and managing-for-results generally) succeeds
in improving the efficiency of government services, it enables government to do “more
with less” and helps contain the long-term upward pressure on aggregate public
expenditure (Marc Robinson and Duncan Last, 2009).

Performance-based budgeting fits naturally with a medium-term budget framework,

although the latter should not be thought of as a prerequisite for the former. Like
performance-based budgeting, a medium-term budget framework aims to improve
expenditure prioritization (although performance-based budgeting is much more
focused on managing the efficiency and effectiveness of public expenditure). The best
way to improve expenditure policy formulation is both to make maximum use of
performance information and to consider the medium-term cost implications of
expenditure choices (Marc Robinson and Duncan Last, 2009).

Advantages of Performance Budgeting

Roberts (2003) listed the following as the advantages of performance budgeting:

 It enables the correlation of the physical and financial aspects of every programme
and activity.
 It helps in effecting improvement in the procedure of budget formulation and review-
ing the actual progress of programmes at all levels of government.
 It helps improving decision-making and management of programmes and objectives,
a sort of indirect help to the administrative authorities.

How Performance Budgeting can improve governments performance

 Evaluation: is important even in a basic model because indicators alone are

often insufficient to judge program performance. However, it is important to avoid
the allocation of excessive resources to a “monitoring and evaluation” industry
employing complex evaluation methodologies.
 Fiscal dumping: this refers to when money is not spent for its intended
purpose, but on other item or services that ultimately yield no (or less) value for
money.
 Inter and intra governmental coordination: this refers when there is lack of
coordination of effort to departments that have distinct and regional offices.
 Internal audit function: internal audits are centralized; the office of the Audit
General relies on the work of internal audit.
 Financial misconduct: departments must enhance the effectiveness of the
internal control processes and systems to minimize fraud and corruption.
 improve expenditure prioritization this refers to the capacity to allocate limited
resources to where they will do the most good.
  Encourage efficient and effective spending: by making managers them aware
that their performance will influence their level of funding and by reducing or
streamlining the controls that impede good performance.

Conclusion

South Africa is such a breath-taking hotel looking from the outside in, it sorts of feels
wrong to say that I’m disappointed; but I am. In 24 years since Nelson Mandela was
released from prison while many things have changed, so many things have stayed the
same. One elite is being replace by another elite, privileges and segregation still exists,
the gap between the haves and the have nots is vast. It may be 24 years since the end
of apartheid but I believe the struggle for South Africa has only just begun.

PFMA concluding remarks: looking at the current government policies and systems it
is with no doubts that these are great policies but however; these policies have not had
the desired impact; with that in mind we also need to understand that policies alone
can’t work they need people to make them work. I also think there’s just not enough
political will to sometimes get these systems off the ground and that’s if we really want
to curb the issue of corruption in the public service sectors then we need to start seeing
people taking bold decisions which is in the governing party.
According to President Jacob Zuma (23 April 2010) “What we need is a different type of
a public servant; a public servant who respects the citizens he or she serves. A public
servant who values the public resources she has been entrusted to manage. We need a
public servant who comes to work on time and performs his or her duties diligently”.

Concluding remarks on Performance Budgeting (PB): The budgetary process has

delivered a top-down framework but consultation with local governments through
bottom-up exposure will become even more essential in future. Proper legislation exists
to make proper execution possible although not always visible at all spheres of
government. Performance contracts including visible incentives based on delivery and
proper training of all public officials especially at municipal level has now become
urgent. The groundwork has been laid in terms of public finance management but the
foundation could be shaken if the trickle-down effect of higher economic growth rates is
not felt where it matters, i.e. at municipal level closest to the people.

Concluding remarks on State Capture: In closing, the promise expressed by

President Nelson Mandela during his inauguration address in 1994 continues to be what
all South Africans aspire to achieve. It is a promise that all South Africans expect
Government to understand and fully support across every sector. It is, however, a
promise that has been betrayed by the Zuma-centred power elite. It is, nevertheless, a
promise that can still be achieved if a new economic consensus emerges to realise
authentic and truly inclusive radical economic transformation. It is time, therefore, that
political conditions are created that enable and catalyse the realisation of our founding
promise. (Public Affairs Research Institute) 2017
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Legislation

 Constitution of the Republic of South Africa, 1996

 Local Government: Municipal Finance Management Act 56 of 2003
 Local Government: Municipal Systems Act 32 of 2000
 Prevention and Combating of Corrupt Activities Act 12 of 2004
 Public Finance Management Act 1 of 1999
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