The School of Public Management and Administration (SPMA), University of Pretoria express thanks to the Chairperson and the Select Committee on Finance for inviting the SPMA to make contributions on the MTEF process. I would like to state that the MTEF process is an innovative one, which will revolutionise the way governments, and its various departments do business. We accept the three-year cycle as a process, which allows for incremental and flexible approaches to the achievement of sound financial budgeting. But at the same time, we also would like some other options to be considered in conjunction with the MTEF proposal. This is by no means asking for the dissolution of the MTEF process, but as a means of strengthening the process. We ask the Select Committee on Finance to consider the following:

• Departmental Estimates in line with the core business of government
• Examining Provincial Revenue generating ability
• Three Year MTEF Cycles and Two Year Budgeting Framework Cycles
• Sharing the National Revenue Resources
• Futuristic Budgeting

The SPMA is sure that there are several proposals here before the Select Committee on Finance on the MTEF. Our role here is not to advocate for radical changes but to examine existing structures and to consider probable alternative overviews. The SPMA’s position is to consider a sequential biennial approach with checks for the introduction of mid term budget review cycles. This could be built into the existing Three-year cycle of the MTEF. While others may argue that the biennial system presents the views that it allows for oversight, it is worth consideration. It would be expedient therefore to consider all options in conjunction with the MTEF proposal. We believe that the work put into the MTEF’s document is crucial, we support the forward thinking as outlined in the document, but at the same time, we propose that other incremental steps be considered in order to meet the overall core business of government.

This type of budget approach involves budget with far interventions in mid Term. It is a projected type of Budgeting and some may argue that it allows for growth, planning and development. International indicators which sometimes do not meet the local needs of developing nations, suggest that future or forward estimates are linked with policy dimensions and government’s agenda to move or deliver on key priority areas. They allow for the rolling over into the next fiscal year, thereby providing a financial cushion. With futuristic budgeting, it allows for annual revision both on the policy side and on the actual final allocation based on government’s key priority initiatives. It provides for flexible approach. This does not mean that the MTEF cycle should be discarded but should be seen as to be able to accommodate other adjunct proposals. These proposals allow for trade-offs between government departments per sector in line with key government priorities. The futuristic process allows for policy shifts in accordance with overall core business of government.

The SPMA accept the MTEF proposals in principle, but there are critical issues with respect to discretionary spending through Treasury allocation and approval that must be addressed. One way to address this is to scrutinise the spending and budgetary cycles of the department executing and managing government programs. Here, the main contention is to source financial resources in one program in order to shift to another program with the greater need. We note that the South African constitution allocates a greater source of the revenue to the national government and it’s operating departments and agencies. Taxes of all types, with greater share are allocated to the national government. This puts heavy levels of dependency on provincial governments. This in turn could hamper interprovincial relations. We note that the ability of provinces to generate income is very low. As such, this heavy reliance on the centre to carry the entire burden should be re-examined. We also call for the amendment of this aspect of the Constitution in relation to section 228 which provides some latitude for provinces to be able to raise their own resources. The SPMA supports the FFC’s position that if provinces are given this flexibility to raise their own tax base, greater levels of accountability could be attained between inter-governmental fiscal relations.

• Publication of the Medium Term Expenditure Framework and Policy to the respective committees of parliament for review prior to detailed estimate process.
• Detailed projections of the policy process for revenue allocation to departments must be made to fall in line with Key Priorities of Government on deliverables.
• The SPMA supports the FFC revenue sharing formula but suggest that latitude be granted to provinces in raising revenue.
• That a single window data base sharing approach be introduced across various spheres of government.
• Clear information to provinces on their powers to administer, raise and report on tax sharing processes.
• Provincial powers to raise resources must be consistent with their ability to pay or afford the interest costs.
• Departments could anticipate future plans through strategic planning and thereby be able to inform the estimate process of their needs and operational plans.

We thank you