MTBF: South African Experience

MTBF: South African Experience
Ekram Ahmed
Project Director
DMTBF Project
Study tour to South Africa
 Background
 SA follows a mixture of developing and developed
economic policies and processes
 SA is a leading country in financial management reform
 A pioneer in introducing MTBF
 A team of GoB officials visited SA in 2005 to gain
experience in SA MTBF
 Visit to SA in 2011 to see the progress/change made
during last 6 years after the earlier visit
Principles of PFM reforms in SA
 Comprehensiveness and integration
 Political oversight and a focus on policy priorities
 Using information strategically
 Changing behaviour by changing incentives
 Ensuring budget stability and predictability while
facilitating change at the margin
Spheres of government
 Establishes three distinct but interrelated spheres of
government, each with an elected executive
 Assigns powers and functions to each of the three spheres
 Forces spheres to cooperate in the delivery of concurrent
 Assigns revenue sources by sphere
• 1 national budget, 9 provincial budgets and almost 300
municipal budgets
• Executives decide on where to allocate resources
Functions of the spheres
National Government:
Delivers policing, foreign affairs, defence,
higher education
Makes policy
Sets priorities through legislation, norms and
standards of political statements
Deliver school education, health, social
Generally fund national priorities
Deliver water, sanitation, refuse removal
Have more autonomy on what their resources
are spent on
National share
Provincial Share
Local Share
Aspects of Budget Reforms
Budget must meet three functions
 Spending, Taxation and Borrowing must support
economic objectives
 Resources must be allocated to where political
priorities are
 Budget and Budget information must be tools to
improve quality and effectiveness of spending
Budget submissions review process
MTEF starts in June-July with baseline analysis
Information sessions over the MTFC and Capital Planning guidelines
including key dates are held throughout July of earlier.
By end of July, projects from Public Entities and department with detail
supporting documents are submitted to each line Ministry of consolidation.
Budget submission from line Ministry are then submitted to National
Treasury for evaluation.
Recommendations from the PPP unit and PF are submitted to the
Medium Term Expenditure Committee (MTEC) for consideration.
Minister’s Committee on the Budget (MinComBud) considers MTEC
recommendations for submission to Cabinet
Cabinet considers MinComBud recommendations for endorsement
February Minister of Finance tables budget in Parliament
Role-players in the budget process
Role-players in the Executive
 Medium Term Expenditure Committee (MTEC)
 Minister’s Committee on the Budget (MinComBud)
 Cabinet
 Extended Cabinet
• Departments
• Required by the Constitution and Intergovernmental Fiscal Relation Act:
 - Financial and Fiscal Commission (FFC)
 - Provincial governments - the Budget Council
 - Organised local government - the Budget Forum
 - Various intergovernmental forums exist at both the executive and official level to
give effect to the constitutional imperative for cooperative governance
• Relevant entities and donors
• Legislatures
 - Portfolio Committees, Finance Committees, Appropriations Committees
 - National Assembly
 - National Council of Provinces
• Provincial Legislatures
Aspects of budget reform
 Stabilising intergovernmental system
 Legislated frameworks, not specifics
 Integrating intergovernmental system and annual
budget process
 Predictable and transparent allocative process
 Intergovernmental forums to improve allocations
 Use of formulae to maximise transparency and
Aspects of budget reform
 Adopting a multi-year budget framework and a top-
down budget process
 Fiscal policy drives expenditure envelopes
 Central role of budget framework
 Credible macro-assumptions and revenue targets
 MTEF process, the annual budget process
 Disciplined top-down process
 Counting forward projections
 Use of contingency reserve
Aspects of budget reform
 Focus on the margin and outer years
 Political oversight of the budget process
 Aligning strategic policy development and budgeting at
sector level
 Using budget documents strategically
 A considered budget process
Aspects of budget reform
 A new framework for public financial management
and reporting
 Responsibility of individuals and ensuring checks and
 Financial responsibility of executive authority
 Legal underpinning for the role of Treasuries in the
budget process
 Systematic in-year monitoring, management and
Aspects of budget reform
 Shortening budget cycle
 Providing for, but limiting, in-year flexibility
 Setting clear sanctions
 Internal control framework and regulating support for
accounting officers
 Providing for effective cash management
 Mindful implementation
Aspects of budget reform
 Improving the classification system
 New economic reporting format
 Improved quality of functional classification
 Improved programming classification
 Mindful implementation
 Improving budget management for service delivery
 Measurable objectives and output performance
Way Forward for PFM reform
 More stable public finance environment
 Improved political involvement and oversight
 Improved policy environment and improved
 Greater transparency
 Strengthening the planning, budgeting and reporting
 Improving capacity throughout the system
 Improving parallel systems
 Reforming the financing of specific services
 Increasing the planning and budgeting horizon
 Integrating donor financing into the budget
 Improving intergovernmental coordination further
 Improving municipal financing and budgeting
• Accounting Reform
• Procurement Reform
Publication of Quarterly
Performance Information
& allocative
Measurable objectives
SP tabled
AR tabled
Publication of Section 32 & CG
information, MTSF
Estimates of National Expenditure &
Provincial Budget Statements 1 & 2
Public Finance Management Act
National Expenditure Survey & IGFR & MinComBud
Medium Term Expenditure Framework
Medium Term Budget Policy Statement
Intergovernmental System
Stage 1: Workgroups make recommendations on the proposed budget
baselines and non-recurrent expenditure for the Medium Term
Expenditure Framework (MTEF) by function (disaggregated by votes
within a function) and by economic classification
• Align current budgets to the outcomes identified for each department
• Examine the following areas to identify funding that can be
- Non core service delivery expenditure items
- Underperforming or non-performing programs! projects! entities
- Surpluses housed at entities
- Revenue raising! cost recovery efforts
• Stage 2: Workgroups make recommendations on the MTEF additional
expenditure proposals by departments in their submissions to the
National Treasury
• Ensure that the recommendations proposed to the MTEC fall within
the available spending envelope for the particular sector that is within the
net change indicated for the sector
• To ensure that:
- multi year budgeting, with 3 year framework
- enhance consultation and cooperation with stakeholders
- budget process, starting from allocation of division of revenue
- political oversight is enhanced and focus is on key policy priorities
- top-down budgeting discipline
- budget stability and predictability
- reprioritization over time
- value for the money spent
- planning, budgeting, reporting and policy are aligned to get better
service delivery within budget
- information is used strategically to improve public policy, funding
choices and enable accountability
• Prior to the introduction of the MTEF and the program
budgeting approach:
- There was little political oversight over budgeting
- No transparency about the budget process
- Poor information systems, inadequate to inform the
budget process
- Hidden spending
- Lack of accountability by public sector managers
- Lack of macroeconomic and fiscal sustainability
- Spending not aligned across departments
- Resources not appropriately allocated to priorities
• Provide the overall Fiscal Framework based on the macroeconomic
• Propose the Division of Revenue between the 3 spheres based on
the above and decisions made at a political level on priorities.
• Provide the technical guidelines for budget submissions.
• Conduct the evaluation of those budget submissions.
• Ensures that submissions reflect key government priorities.
• Maintains on going communication with other central government
• Make recommendation to Budget Council and Minister’s Committee
on the Budget (who in turn make recommendations to Cabinet and
Extended Cabinet).
Policy review
Departmental planning
And budgeting
Review, evaluate
and decide on new
major policy
Propose fiscal and budget
framework and division
of resources
Executive/s consider
frameworks and division
of resources
Table Medium Term
Budget Policy Statement
Departments prepare budget,
including detailed spending
plans for new proposals
Intergovernmental and
technical forums
Sector and focused budget
Division of Revenue
Act passed
Appropriation Bill
and Revenue Bills
Policy review
Departmental planning
And budgeting
Cabinet approves
new MTEF
Departments revise
medium term plans and
finalise budget inputs
Portfolio committees
submit BRRR
reports, adopt fiscal
framework, pass
Money Bills
National Budget
tabled (includes
response to BRRR
Provincial budgets
are tabled (14 days
after National budget
is tabled)
Strategic Plans
Adoption of fiscal
Should be 5-year plan aligned to broader government strategic-ideally aligned to
the electoral cycle.
Should ideally not be changed over the 5-year period unless there are significant
policy changes relating to the mandate or the service delivery.
Amendments: (1) a new plan can be tabled in the next tabling period or (2) an
annexure to the Annual Performance Plan.
Strategic Plans do not replace the need for long-term planning or other more
specific plans should be used to priorities and plan the progressive
implementation of its other plan.
Focus on strategically important issues.
Part A: strategic overview, vision, mission, values and the strategic goals over a
5-year period.
Part B: strategic objectives, resource implications and the risks.
Part C: links to other plans e.g. long-term infrastructure plan, conditional grants,
review of public entities, ppp’s.
The developmental results of achieving
Specific outcomes
What we aim to change?
The medium-term results for specific
Beneficiaries that are the consequence
Of achieving specific outputs
Manage towards
Achieving these
What we wish to achieve?
The final products, or goods and
services produced for delivery
Plan, budget
implement and
What we produce of deliver?
The processes of actions that use a range of
inputs to produce the desired outputs and
ultimately outcome
What we do?
The resources that contribute to
the production and delivery of
What we use to do the work?
• Aim to link the plans, budgets and the performance of an institution.
• Presents program performance indicators and targets-to achieve goals
& objectives over MTBF.
• Part A: recent developments in the operational environment & link
budget - for achieving strategic goals and objectives.
• Part B: strategic objectives, performance indicators & targets for
• Part C: budget for infrastructure projects, changes to conditional
grants, public entities and ppp’s.
• Quarterly performance reports will be expected based on the quarterly
targets set in the APPs.
• APPs will inform Annual Reports.
1. Improve quality of basic education.
2. A long and healthy life for all South Africans.
3. All people in South Africa are and feel safe.
4. Decent employment through inclusive economic growth.
5. A skilled and capable workforce to support an inclusive growth path.
6. An efficient, competitive and responsive economic infrastructure network.
7. Vibrant, equitable, sustainable rural communities with food security for all.
8. Sustainability human settlements and improved quality of household life.
9. A responsive, accountable, effective and efficient Local Government system.
10. Environmental assets and natural resources that are well protected and
continually enhanced.
11. Create a better South Africa and contribute to a better and safer Africa and
12. An efficient, effective and development oriented public service and an
empowered, fair and inclusive citizenship.
By Parliament, provincial legislature or municipal council
Policy development
Identify desired impacts
Assess and adjust
End-year reporting
Monitor and take
corrective action
Implementation and
in-year reporting
Specify performance
planning and
Set targets and
allocate resources
Medium Term Strategic Framework
National Plans and
Planning Frameworks
Sectoral Strategies
and other plans
President’s State of the
Nation’ address
Programme of
Provincial Growth and
Development Strategy
Strategic Plan
Premier’s State of the
Province’ address
Annual Performance Plan
Information from district Office
Local Government IDPs
Measures and Budget
Report and Asses
Develop Performance
Revise targets and
Estimate performance
Strategic Plan
Annual Performance Plan
Part A: Whole department/ Public entity
Situational Analysis
Primarily SMART Impact
and Outcome Statements
with 5-Year Targete
Contextual Environment
Institutional Capacity
For each Programme
(and selected sub-Programme)
Part B: Strategic Objectives
Programme purpose
Updated Situational
Revisions to legislative and
other mandates
Overview of Budget and MTEF
Part B: Programs / sub-programs
Primarily SMART Output
Statements with 5-Year
Risk management
Part C: Links to other plans
For each Programme
And other mandates
(and selected sub-Programme)
Part A: Whole department/public entity
Programme purpose
SMART Annual and
MTEF Targets for
Strategic Objectives
Performance Targets
Programme Performance
Indicators with SMART
Annual and Targets
Part C: Links to other plans
Links to the long term infrastructure plan
Links to the long term infrastructure plan
Conditional grants
Conditional grants
Public enitites and PPPs
Public enitites and PPPs
Annexures: Other relevant information
Quarterly targets for
indicators (if possible)
Annexures: Revisions to Strategic Plan (if any)
National Treasury issue Treasury Guidelines for the preparation of the
MTEF budget process in May/June of each year.
• The guidelines amongst other things stipulates the submission dates and
also start and end dates of the budget process.
• Flexibility has been provided in the budget period in order to
accommodate Parliament's unique budget process which include
consultation with the Minister of Finance and National Treasury, this is not
the case with national and provincial departments.
• The following process is followed with respect to Parliament's
submission to the National Treasury:
Parliament meet with Public Finance in a program meeting in
May/June where Parliament submit its request for baseline adjustment;
Public Finance assess and evaluates the request for additional
funding and make recommendations to the Minister of Finance;
Minister of Finance meet with the Speaker of Parliament and
Chairperson of the NCOP to consider recommendations in
Minister of Finance approves the recommendations for additional
funding and informs Public Finance;
Public Finance submit the recommendations to MTEC Committee
and MinComBud;
Parliament submit the database including the additional request for
Allocation letters are issued in November in preparation for the
Estimate of National Expenditure (ENE);
ENE database an chapter first drafts are submitted in December and
second drafts submitted in January;
ENE process finalized beginning of February and Minister of Finance
tables his/her budget speech in February including the tabling of the
Appropriation Bill and Division of Revenue Bill.
In 2009 Parliament passed the Financial Management of Parliament Act,
(Act No.10 of 2009).
• The Act aims to:
- Promote and maintain a high standard of professional ethics in the
financial management of Parliament;
- Promote the efficient, economic, and effective use of resources allocated
to Parliament;
-Ensure the transparent, accountable and sound management of the
revenue, expenditure, assets and liabilities of Parliament.
• Chapter 3 : Planning and Budgeting deals with the following:
- Submission and preparation of Strategic Plan;
- Submission and preparation of Annual Performance Plan;
-Submission and preparation of the Annual Budget;
- Consultation with the Finance Minister and National Treasury with regard
to the Budget.
• Budget analysts from the National Treasury work closely with institutions
throughout the Budget process depicted above to assist them in finalizing
their budget submissions
• The Budget Office in the National Treasury are the coordinators of the
budget process and issue budget guidelines and templates for expenditure
estimate submissions at different stages in the budget cycle
• Public Finance and Intergovernmental Relations Divisions in National
Treasury contains Budget analysts who liaise with departments, assist them
in the preparation of expenditure estimates in accordance with guidelines
issued and monitor budgets and policies
• Each department has a Finance/Budget Division with their own staff
• These departmental staff members communicate with relevant Treasury
units during the budget process
PFMA implementation plans included performance management
PFMA gave departments responsibility to spend within approved
budgets and against policy/performance commitments
PFMA requires measurable objectives by program
VFM is arguably the hardest thing to achieve through the budget
NT has no direct say in how a department spends its money or how
services are delivered, and cannot impose sanctions for poor spending
Our philosophy has been that if we force departments to report on
performance alongside spending, then parliament, the public, the
media can play a role in improving the quality of spending
- It's all about accountability, which is not a financial management issue
but a political issue
Many budget reforms deal with reporting on performance in some way
- Parliament not always equipped to deal with these reports
The value for money agenda is an area where we have made progress,
this is the area where the Treasury spends most of its resources and is
the area of major focus in budget reform agenda
Using various indicators in conjunction with financial
information, it is then only possible to assess
optimality of resource allocation
Different levels of indicators are useful for different
For our concerns the following indicators will be of
use: crime rates, cases to court, number of police
officers, number of officers having completed
specific training courses
Optimal resource mix may differ from one
geographical area to another
• Considers financial and non-financial information which
best describes the policy objectives and plans of spending
program and an assessment of whether the objectives
and targets have been achieved thus far.
• Data sources:
- use the previous year's Estimates of National
Expenditure (ENE)
- the Strategic Plan
- the Annual Report of the department
Framework provides for:
- Structures, systems and processes required for
performance information
- Roles and responsibilities for performance information:
Departments, Presidency, National & Provincial
treasuries, Stats SA and Public Service and
Administration, among others
- Promoting accountability and transparency by providing
Parliament, with timely, accessible and accurate
performance information
- Standardizing terminology on performance information
The Framework for Managing Performance Information provides
guidance on Programme Performance Information which is part of
the Government-wide Monitoring and Evaluation System (GWM&E)
Census and
Survey Information
Programme Performance
• Department of Performance Monitoring' under the President's
Office is responsible for monitoring national outcome indicators (12
such outcome indicators have been set by the present government).
• Line departments (ministries) are responsible for monitoring output
indicators set for agencies working under them and have to report to
the Treasury in prescribed format periodically.
• Treasury centrally oversees the actual achievements against
targets and reports to the Parliament on regular basis.
• Auditor General's Office verifies authenticity and correctness of
information sent to the Treasury by line ministries/agencies on
achievement of performance of the output indicators.
In-year reporting on non-financial results
• The purpose is to report on overall progress made with the implementation of
the department’s performance plan both on a quarterly and an annual basis.
QPR allows Accounting Officers to track progress against what has been
planned and what is actually achieved to service delivery outputs.
The Treasury Regulations have been amended to reflect the requirements of
the Framework.
Departments must submit a copy of their quarterly performance reports to
National Treasury & DPME within 30-60 days after end of each quarter.
Owing to weakness in many departments management systems, institutions
may in the interim revise their reported numbers for a given quarter in the
following quarterly performance report.
Formal requirement for end-year reporting
• Ultimate accountability document in government.
• Aligned with other planning document.
• Provides information to legislatures so they can exercise proper oversight –
linked to what was originally planned in annual performance plans.
• Records, reports and evaluates the past year’s performance
- Part A: Legislative Oversight Role
- Part B: Performance (Non-financial Data)
- Part C: Financial Statements – Auditors Report
- Part D: Human Resource Data
• Publish information so that civil society can engage with government
• National Treasury provides ‘Guidelines for Annual Reporting’
Analyzing alignment and consistency between what is reported in the SP,
APP, QPR, Budget documents and Annual Reports.
• Information reported for a 7-year period (i.e. 3-year history, current year
and MTBF).
• In-year progress report during the AENE process.
• Annual Report to reflect on what is reported in the plans and budget
• Parliamentary portfolio committees analyze the Annual Reports and
with specific departments.
• The Auditor General has started with Auditing of Performance Information
- department then have to improve their processes.
Supply Chain
Extended Asset
IFMS Hub - Glassfish
Master Data
Chart of
• Financial Management Reform (PFMA)
• User requirement specifications
• Institutional re-organization (Change management
of SITA as PSI).
• Architectural design
(Buy COTS)
(Not part of IFMS)
(Buy COTS)
• National Treasury, South Africa used a homegrown macroeconomic
model composed of a group of supplementary models.
• Parliament extensively participates in the budget formulation process
through a committee system.
• Citizen participation in the budget has been institutionalized in South
Africa through an organization called ‘Nedlac’.
• Initiate the process of replacing its old fashioned line budgeting
with program budgeting to establish a more visible linkage between
government’s policy.
• Introduced a technical evaluation system for budget bids so that projects
can be efficiently identified and funded accordingly.
 Political commitment to budgeting and financial
management reform is a must
 Need a simple framework and transparent norms
 Need comprehensive implementation
 Making sure that PFM reform matters
 Convince stakeholders about its seriousness
 Strong central agency responsibility for reforms
 Building capacity on demand and support its
 Early demonstration of success