AS WE approach Wednesday afternoon's Budget, it seems morecertain that Malusi Gigaba will still be finance minister to present it to theNational Assembly.
Although the personality and political thinking of anindividual adds a certain flavour and focus, the National Budget pretty much has a fixed structure with a three-year medium-term outlook. South Africa regularlyreceives international accolades for the transparency of its structured budgetprocess and is regarded as a world leader in this regard.
These days a Cabinet committee of ministers, appointed by the president, also considers, advises and makes recommendations on budget allocations. One can expect the new government leadership to have also influenced the content of the budget. According to some news reports,Treasury sources let slip that sweeping and "difficult" choices had to be made.
The budget review explains the policy considerationsunderlying the numbers in the budget. The document describes three frameworks:
The fiscal frameworksets out government's income and expenditure, or tax revenue and spending projections. It takes into account the economic outlook and forecasts the budgetbalance for the next three years. If spending exceeds revenue, government has abudget deficit or shortfall, which must be financed by borrowing.
When government borrows money it issues a bond, whichentitles the holder to interest payments, referred to in the budgetdocumentation as debt-service costs.
Another framework is the division of revenue which shows how taxes and other resourcesraised will be shared between thenational government (and departments), and provincial and local government.
The third is the medium-termexpenditure framework. It provides details of government's three-yearspending plans.
How the money is allocated
In terms of the Constitution, all money received by thenational government must be paid into the National Revenue Fund. This includestaxes collected and money borrowed to bridge a budget deficit.
The budget review presents state finances in two ways - themain budget and the consolidated budget.
The main budget shows all expenditure financed from theNational Revenue Fund. It covers all transfers to national departments and provincial and local government (last two levels receive an equitable share andconditional grants).
The consolidated budget provides a broader view of thepublic finances. It includes the main budget and spending financed by sourcesthat are not part of the National Revenue Fund, such as taxes raised byprovinces for their own use.
The consolidated budget also includes the spending of socialsecurity funds, such as the Unemployment Fund, which are largely funded throughstatutory contribution levies. It also includes more than 180 public entities,such as the Passenger Rail Agency of South Africa, but excludes state-owned companies likeEskom, Transnet and South African Airways.
These are defined as companies in which the state is themajor or sole shareholder. Their revenue comes from the sale of goods andservices on the market.
About one-third of local government revenue is transferredfrom the National Revenue Fund. The remaining two-thirds comes from propertyrates and utility bills, and this is also excluded from the consolidated budget.
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