Fiscal sustainability and the South African financial management challenge at national government level

Pakkies, Letsepa (2016-12)

Thesis (MPA)--Stellenbosch University, 2016.

Thesis

ENGLISH SUMMARY : The South African government is confronted with hard choices on how to harness financial management reforms while reducing costs associated with financial misconduct. The purpose of this thesis is to assess the credibility of national government budgets. The objective of this study involved providing an analysis of the three budgetary outcomes: levels of fiscal discipline, strategic prioritisation, and operational efficiency. The study found that while the budget acts as a key policy statement of the government, public expenditure management (PEM) acts as an instrument of government policy. It is used by the South African government to collect taxes and fund its projects, and emphasises the efficient and effective use of resources. The study further suggests that there are three mutually exclusive, complementary and interdependent basic budget outcomes of public expenditure management, namely financial discipline, allocative efficiency, and operational efficiency. In addition to these budget outcomes, accountability and transparency are secondary outcomes that are critical for public expenditure management. The research further attempted to highlight that the South African government is borrowing money to pay for current spending, a practice the researcher deems an unsustainable spending regime. The rigorous planning process of the Medium-Term Expenditure Framework (MTEF) is meant to ensure that allocations are made to government’s priority areas such as education and health. Budget allocations are reflective of government’s strategic priorities and the current broad policy framework, known as the National Development Plan (NDP). The shifting of funds in-year, known as virements, is counterproductive in view of the fact that funds are shifted from priority areas. Excessive spending in March coupled with under-spending by national government departments signifies weak financial controls and bad spending practices. The study concluded that financial misconduct is rampant in government and the situation is exacerbated by the absence of consistent and appropriate sanctioning of officials. The study also concluded that there is a requirement for institutions similar to the National Treasury, institutions that will ensure fiscal sustainability and prudential fiscal management.

AFRIKAANSE OPSOMMING : Die Suid-Afrikaanse regering staar moeilike besluite in die gesig oor hoe om finansiële hervormings te implementeer en terselfdertyd koste wat gepaardgaan met finansiële wanbestuur te verminder. Die doel van hierdie mini-tesis is om die geloofwaardigheid van nasionale regeringsbegrotings te bepaal. Die studie het drie begrotingsuitkomste ondersoek: vlakke van fiskale dissipline, strategiese prioritisering, en produktiwiteits-doeltreffendheid. Die studie het bevind dat hoewel die begroting dien as ‘n sleutel-beleidsverklaring van die regering, openbare bestedingbestuur as die instrument van regeringsbeleid dien. Dit word deur die Suid-Afrikaanse regering gebruik om belasting in te vorder asook om projekte te finansier, en beklemtoon die doeltreffende en doelmatige gebruik van hulpbronne. Die studie dui verder op drie wedersyds eksklusiewe, komplementêre en interafhanklike basiese begrotingsuitkomste van openbare finansiële bestedingsbestuur, naamlik finansiële dissipline, toewysing-doeltreffendheid en operasionele doeltreffendheid. Benewens hierdie begrotingsuitkomste is die volgende sekondêre uitkomste onontbeerlik vir openbare finansiële bestedingsbestuur: aanspreeklikheid en deursigtigheid. Die navorsing het voorts gepoog om aan te toon dat die Suid-Afrikaanse regering tans geld leen om vir lopende uitgawes te betaal, ‘n praktyk wat volgens die navorser ‘n onvolhoubare bestedingspraktyk is. Die streng beplanningsproses van die mediumtermyn bestedingsraamwerk – of Medium-Term Expenditure Framework (MTEF) – is daarop gemik om te verseker dat toekennings aan die regering se prioriteitsgebiede soos opvoeding en gesondheid gemaak word. Begrotingstoekennings weerspieël die regering se strategiese prioriteite asook die huidige oorkoepelende beleidsraamwerk, wat bekendstaan as die Nasionale Ontwikkelingsprogram – of National Development Plan (NDP). Die oordrag van fondse in-jaar, bekend as viremente, is teenproduktief, omdat fondse vanuit prioriteitsareas oorgedra word. Oormatige besteding in Maart, tesame met onderbesteding deur regeringsdepartemente, dui op swak finansiële beheer en swak bestedingspraktyke. Die gevolgtrekking van die studie is dat finansiële wanpraktyk hoogty vier in die regering en dat die situasie vererger word deur die afwesigheid van konsekwente en toepaslike strafmaatreëls vir amptenare. ‘n Verdere slotsom van die studie is dat daar ‘n vereiste bestaan vir instellings soortgelyk aan die Nasionale Tesourie wat fiskale volhoubaarheid en omsigtige fiskale bestuur sal verseker.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/100243
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