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The Discourse of Budgetary Matters

Phillip Rakgwale

CISA, CIA, CFE, RGA, M.Inst.D Chairperson of the SAIGA council

Empirical evidence points to the existence of a dynamic equilibrium relationship between domestic and foreign debt, the budget deficit, inflation rate, and economic growth, both in the long and short term.

Based on statistical research, the results indicate that real GDP growth in South Africa is negatively correlated with external debt, and this relationship is consistent over the long and short time. Numerous consequences for policy have resulted from the research findings.

South Africa has to enhance its debt management practices and make the country's public debt more manageable. Additionally, government can privatise failed state-owned businesses by employing debt-to-equity swaps as a strategy. This would enhance their competitiveness and efficiency.

This policy measure has the potential to attract an influx of foreign direct investment and increase job opportunities, both of which would contribute to the enhancement of South Africa's economic growth.

The budget speech and resources

The budget speeches reflect a heightened level of involvement with the NDP, notably in the early years following its implementation. The 2012 budget address, like the State of the Nation Address (SONA), primarily emphasised the identification of commonalities between the National Greening Program (NGP) and the National

Development Plan (NDP).

In the 2013 budget address, there was a focus on the areas of resemblance between the National Growth Path (NGP) and the National Development Plan (NDP).

However, it was evident at that time that a clear hierarchy had been established, with the NGP being described as providing support to the NDP. According to Naidoo and Maré (2015: 421–422), there is a notable transition in focus from the NGP to the NDP. The shift in focus does not inherently imply a modification in the substance of economic policy but rather implies a shift in the message sent by the budget speech on the comparative significance of various conceptualisations of economic policy.

The continuity of this signal was shown in 2013, as shown by the budget speech which emphasised the alignment of the National Development Plan with the 2013 Budget. Furthermore, it was said that the strategic goals of the government and the mediumterm expenditure plans would be coordinated to effectively achieve our objectives. Therefore, the speech supported the plan for implementing the National Development Plan (NDP).

The budget speech of 2014 emphasised the significance of the NDP and the initiation of the alignment process. The initial stage of executing the NDP involved the formulation of a five-year plan and a medium-term budget framework. The speech highlighted the NDP's focus on the importance of mobilising society in support of the agenda.

In 2015, the budget speech reiterated the ongoing efforts to execute the NDP and emphasised the significant role of the budget in that regard. The assertion that a strong budgetary framework is crucial for the NDP’s effective implementation was made to support the case for public expenditure control. The 2016 budget address explained that the NDP had an impact on the budget and provided a thorough synopsis of the key elements taken from the NDP.

Nevertheless, in the 2017 budget address, a cautionary note was sounded for the first time, emphasising that the level of growth achieved “significantly deviates from our National Development Plan objectives.”

Furthermore, it stressed the importance of having a clear vision and the sector-specific objectives and programmes outlined in the NDP. The latest budget speeches have emphasised alternative initiatives, including the Economic Growth Strategy for 2020 and the Economic Reconstruction and Recovery Plan in 2021.

Estimation of national spending

The estimation of national spending is a crucial aspect of economic analysis and policy formulation. It involves the calculation and projection of the total amount of money that a nation is expected to spend during a certain period. The comprehensive Estimates of National Expenditure show a comparable level and manner of involvement, as they furnish specific information on budgetary allotments for certain sectors.

The foreword and introduction, which precede the specific departmental information, offer a contextual framework for understanding the alignment of the budget with the National Development Plan (NDP). The foreword to the 2013 Estimates of National Expenditure aimed to utilise the NDP to reinforce the Treasury’s emphasis on optimising the utilisation of current resources.

The foreword emphasised that any future improvements in results must stem from improvements in the way that current funds and other resources are used.

The 2013 Estimates of National Expenditure for Basic Education underscored the alignment between the NDP and the department’s existing education plans. It emphasised that the department’s action plan and vision for schooling in 2025, as well as the proposals for basic education in the NDP, are mutually supportive. Furthermore, both plans prioritize the continuous improvement of education quality (National Treasury, 2013: 315).

The Estimates of National Expenditure for Basic Education in both 2013 and 2014 featured a section dedicated to programmes that made a telling contribution to the NDP. These activities were comprehensively detailed, covering a wide spectrum of initiatives. A number of these initiatives were specifically aligned with the Treasury's prioritized objective of enhancing quality, including efforts to raise the pass rate of examinations and reform the evaluation methodology for assessing school performance.

This part also includes other actions that have discernible financial ramifications, such as the provision of increased scholarships for aspiring educators and the resolution of existing deficiencies in school infrastructure, by the expenditure plans that are in line with the objectives of the NDP.

Starting in 2015, the Estimates of National Expenditure for Basic Education underwent reforms wherein a distinct section dedicated to activities associated with the NDP was no longer included. Instead, each year, particular actions that were aligned with the NDP were included within the broader narrative of the education sector.

While the New Democratic Party (NDP) and the New Green Party (NGP) used to be in a dominant position, current events indicate that the NDP may have given up its position because of the rise of creative economic policies.

However, it is worth noting that these policies might be viewed as furthering the broad objectives stated by the NDP.

The emphasis in budget speeches has shifted from highlighting the importance of the NDP to restating the process of implementation and then to other economic policies, all the while retaining the assertion that the NDP plays a central role.

Proper utilisation of resources

In recent years, there has been a shift in budgetary processes towards a greater emphasis on the proper utilisation of resources, rather than just how they are allocated. This shift is reflected in the increased significance placed on the narrative explanations that accompany budgetary decisions. This change in focus can be attributed to the evolving nature of public financial management, which has moved from a focus on inputs to a focus on outputs (Schick, 1983: 6).

The contemporary trend in national development planning aligns with this transition, as planning efforts now prioritise alignment with budgetary narratives rather than only focusing on resource allocation. The concept of signalling draws our attention to the way budgets respond to, make allowances for, or modify signals originating from the national plan.

Additionally, it sheds light on the signals that budgets themselves transmit on the significance of national development plans.

According to Chimhowu et al. (2019: 83), the authors propose that the aspect of funding is often the least developed in most plans. This is especially true when the plan is formulated by entities other than the Ministry of Finance. However, it is important to acknowledge that this does not necessarily diminish the significance of these plans in terms of their signalling function.

According to research by the World Bank (2017: 27), the issue of planning in Malaysia was examined, specifically focusing on the discrepancy between the planned objectives and their actual execution. The report identified this gap as being caused by a lack of coordination between the planning process and the budgeting process.

Budget officials often encounter significant challenges when attempting to balance competing priorities and mandates. They are tasked with evaluating spending programmes against a wide range of measures, including national development plans, poverty-reduction strategies, vision documents, and political party manifestos. These various sources of guidance frequently have conflicting requirements, and there is often a lack of clarity regarding how they should be prioritized (CABRI, 2006: 2).

The issue of harmonising plans and budgets has also been seen in specific sectors. Tsofa et al. (2016) observed that the Kenyan health sector has difficulties in achieving alignment between planning and budgeting due to the presence of an entrenched division between these two processes within the institutional framework.

However, when considering the signalling function of a national plan, the concern may not lie in the lack of cost estimation for the plan, but rather in the extent to which the budget aligns with the signals conveyed by the plan.

A plan lacking a cost analysis maintains the power of the finance ministry in determining budgetary allocations without opposition. However, outlining priorities, also allows ministries to contest these

allocations. According to Kelly and Wanna (two thousand), the implementation of budgetary reform has the potential to disrupt the distribution of power between those responsible for overseeing budgets and those responsible for spending them.

Consequently, disruption can influence the actual strategies that budget actors can employ, impacting budget outcomes.

Moreover, the revival of national development planning is expected to influence budget processes, even in cases where these plans lack cost estimates.

According to Hadley et al. (2019: 32), the role of budget officers in managing departmental spending is significantly influenced by the specific circumstances and systems of each country. This contextual factor is likely to shape the way budget officers interact with a national development plan and the subsequent impact on the budgetary process.

Chimhowu et al. (2019) argue that the primary barrier to implementation lies in the insufficient availability of financial resources. This perspective aligns more closely with past planning approaches that prioritised the identification and funding of specific projects. If the current emphasis of national planning is in the delineation of a vision and objectives, as well as in the mobilisation of the state and society towards these goals, then the significance of finance systems may not be paramount.

The primary factor to consider is the strategic significance of the strategy. A limited number of individuals would engage in a comprehensive reading of such a text. Even if they were to do so, each reader would distinctly interpret the text. The plan attains influence by its resonance and subsequent adaptation in many other written materials.

The aforementioned papers serve as intermediaries in facilitating the connection between the plan and its execution through a process known as alignment.

However, it is important to note that this alignment might manifest in several ways, deviating from the commonly assumed top-down approach.

Understanding the relationship between planning and budgeting in the context of the resurgence of national development planning is made easier by looking at signalling processes.

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