The Minister of Finance, Mr Tito Mboweni, will deliver the 2020 Budget Speech today in the National Assembly. In the speech, the Minister will spell out what amount of the national Budget will be appropriated for which key priority area, and provide reasons for such allocations.
Unlike the State of the Nation Address which is delivered before a Joint Sitting of Parliament, the Budget Speech is delivered in the National Assembly as it is delivered with some of the section 77 Bills that can only be introduced in the National Assembly.
Budget preparation is a lengthy process that runs from April to March every financial year. The process involves a timeline that is divided into the following five stages, namely: planning, formulation, legislative, implementation and auditing.
At the planning stage, the national and provincial departments consider their medium-term strategic objectives and spending priorities. At formulation stage, the National Treasury issues guidelines to government departments. In return, the departments submit their draft budgets and then a negotiation process and final decision by the executive takes place.
The legislative stage includes the tabling of the budget, consideration by parliamentary committees, and lastly, Parliament accepts amendments and/or rejects the Budget.
In the implementation stage, the departments start spending their budgets while the National Treasury monitors their spending. Mid-year adjustments are also made. The Medium Term Budget Policy Statement (MTBPS) which highlights key government priorities, the size of the spending envelope for the next Medium Term Expenditure Framework, proposed revenue and major provincial and local government allocations are tabled in Parliament.
The final stage occurs when the Auditor-General examines financial statements and performance, and then audit reports are published and revised by Parliament.
Raising funds/money for the Budget
Government income mainly comes from taxes. There are two categories of taxation. They are, direct and indirect taxes:
Direct Taxes: They are so called because it is normally assumed that the real burden of payment falls directly on the person or company that is immediately responsible for paying them. Personal income tax: income tax is paid by everybody who earns a regular salary. Richer people pay higher income tax than others.
Company tax (also known as corporate tax): all registered companies have to pay a percentage of their profits as company tax.
Indirect Taxes: They are so called because it is assumed that the real burden of paying them will not fall immediately on the company responsible for paying them, but it will be passed on to the customer.
Value added tax: everybody in South Africa currently pays 15% on any item that they buy unless that item is exempted from VAT (like bread, fresh vegetables and paraffin). The VAT was hiked by the National Treasury in 2018 from 14% to the current 15%.
Customs and Excise: when you import things from other countries you have to pay a set amount in import duties or tax. These are government taxes also meant for producers and manufacturers of certain goods like cars. The reason for this is to protect jobs in South Africa.
Sin taxes: taxes on alcohol, tobacco and gambling. Fuel levy: tax paid on petrol. Administrative fees: business licences, diamond export rights, fishing licences and motor vehicle licences are examples of such.
User charges: prices charged for the delivery of certain public goods and services like toll roads, public swimming pools, and so on.
All the taxes mentioned above are paid to the South African Revenue Service (SARS) and handed over to the National Treasury to distribute to the national, provincial and local government departments.
How the public benefits from the Budget
The budget is allocated according to the priorities or programmes outlined in the State of the Nation Address (SONA) by the President, who is the Head of the state. Two weeks after SONA, the Minister of Finance tables the Budget Speech in Parliament.
This speech is used to inform Parliament, the executive and the public on how much money (in the form of taxes) has been collected and how the money is going to be distributed.
The Budget provides a clear understanding of how public funds are used. It is also important that citizens understand the allocations in the Budget, since they are directly or indirectly affected (for example. direct and indirect taxes). A Budget cut, for example, may impact negatively on certain groups, such as the elderly, children and the poor.
The Budget and law-making
The Budget forms part of the law-making process whereby the draft national Budget gets tabled in Parliament as the Appropriation Bill. The Appropriation Bill is a draft law that appropriates money from the National Revenue Fund for the state, which includes government departments, state entities and Parliament.
After the Appropriation Bill has been debated and adopted by the two Houses of Parliament, it is submitted to the President to be signed into law. When the President signs it into law, it becomes the Appropriation Act.
Is there any public representation and/or involvement in the Budget Vote?
Public representation during the Budget occurs directly through the elected political parties representing the voting population of South Africa. For instance, during the Budget debate, Members of Parliament will either criticise or praise the Budget and also vote on behalf of the public to adopt it. Members of the public may attend the debates in the galleries of both Houses of Parliament.
Members of the public can also keep themselves informed through various media platforms available, such as radio, TV, newspapers, Parliament’s website, and so on.
The relationship between the Budget and oversight
Public funds are raised by means of contributions made by citizens through taxation. The state is held responsible and accountable for how it raises public funds and how it spends taxpayers’ money.
Parliament therefore exercises its oversight role (a function granted by the Constitution to Parliament to monitor and oversee government actions) over the state funds through the parliamentary committees.
These committees hold the state accountable for what it spends money on, its performance and assess whether it is achieving results or meeting the objectives for which public funds are spent.
There are a range of processes and mechanisms in place to ensure oversight over public expenditure and performance. For example, South Africa has an Auditor-General who audits government departments’ financial and non-financial performance.
The findings of the audits are reported to Parliament, and the Standing Committee on Public Accounts of Parliament makes sure that issues raised by the Auditor-General are dealt with accordingly.
Role of the two Houses of Parliament in the Budget process
Both Houses of Parliament play a role in the Budget. For instance, after all the Budget Votes have been debated, Members of Parliament representing each House vote on the whole Budget.
If the Budget is approved, the Ministers and Parliament can go ahead and spend the money as budgeted. During Parliament’s Budget Vote, the Speaker of the National Assembly opens and closes the debate of Parliament’s Budget Vote. In the National Council of Provinces, the Chairperson normally chairs a policy debate focusing on Parliament’s Budget Vote.
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