FINANCE: Before the Budget Speech: National Budget and How It Works
Recent Gauteng Business News
We cannot talk about the Budget Speech without understanding the underlying process of how the budget is considered, tabled, and approved. The national budget – government earnings and expenditure – is a public issue, so the public have the right to know how the Finance Ministry plans to table the nation’s budget. The annual Budget Speech is an opportunity the Finance Ministry creates to inform the government and the public of the national budget – how much money the Finance Minister aims to raise (and how), and what his spending plan for the year ahead looks like.
The Objective of Government Departments
The 1996 National Constitution of South Africa states that citizens have the right to education, housing, healthcare, and social welfare, so it’s up to the various government departments to ensure that these rights are met on a local, provincial, and national level – which is why the government’s annual budget (and the budget speech) is such an important public concern. The national budget funds the delivery of public services with resources managed by government departments and private service providers within various systems of delivery and accountability. These include systems of allocation, expenditure management, performance monitoring, integrity, and oversight – which are all monitored in terms of their information output. The various departments are held to account on how their budgets were allocated for the year.
The Role of Parliament in the National Budget
One of Parliament’s most important functions revolves around the national budget because without it, it would be impossible for the government to undertake its economic and development endeavours. The income the government requires and the methods by which this income needs to be balanced with the country’s expenditure is a complicated process because of the limited resources available – so parliament’s role is to oversee the government’s spending and to increase its accountability to South African citizens. Parliament’s financial objective is to ensure that the budgetary decisions undertaken by the government are fiscally sound and meet the needs of the public within the limits of the available resources.
The Budget Process
Planning and authorisation
The budget first needs to be planned and requires a range of input from the Departmental Annual Strategic Plan, the Medium-term Strategic Framework (MTSF), the Medium-Term Budget Policy Statement (MTBPS), as well as the State of the Nation Address (SONA). The Minister of Finance compiles the budget, which is first sent to the National Assembly’s Portfolio Committees on Finance and Appropriations before being distributed to the finance committees in each province. The process – driven by the National Treasury – then lands in parliament, where organised interest groups and civil society, the media and the public debate the parameters of the proposed budget. This period of planning and legislative debate not only allows for a close scrutiny of the budget, but promotes transparency in the budgeting process.
The Budget Speech is delivered to parliament and the nation, detailing the National Treasury’s spending plans and strategy for raising revenues. Parliament is given the opportunity to vote on the budget and to approve or reject it.
The approved budget is then enacted by parliament and the period of service delivery takes place during the relevant financial year. Parliamentary Committees undertake in-year and year-end monitoring as part of the budget oversight process.
The last step in the process is the audit undertaken by independent auditing institutions as well as the South African Auditor General who meticulously scrutinises year-end reports from all departments to determine whether they have delivered sound financial management and performance. The Auditor General then offers his or her report on the departments’ financial management against the year’s national budget.
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