THE DISCOURSE OF BUDGETARY MATTERS

In Summary: Main budget deficit has increased by R54.7 billion compared to the 2023 main budget estimates AND also mid-term budget shortfall is R56.8 billion when compared to the main February budget. The budget speech was the extension of the Social Relief of Distress (SRD) grant for another year. The extension will cost the government an additional R34 billion.

Other highlights/features:

• SA’s main budget deficit forecast for 2023 has worsened, to 4.9% of GDP, compared to the 4% estimated in the February budget.
• South Africa will need to borrow an average of R553 billion per year over the medium term.
• The gross debt will rise from R4.8 trillion in the current financial year to R6 trillion in 2025/26.
• Over the next three years, debt-servicing costs as a share of revenue will increase from 20.7% in 2023/24 to 22.1% in 2026/27.
• Spending has been revised down by R21 billion for the current financial year. Further reductions of R64 billion in 2024/25 and R69 billion in 2025/26 are proposed.
• No bailout was announced for Transnet.
• No further major bailouts were announced for other state-owned enterprises (SOEs) such as Eskom, Denel, or SAA.
• Additional funding of R24 billion for the 2023/2024 public sector wage increase.

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THE BUDGETARY DISCOURSE

Empirical evidence suggests the existence of a dynamic equilibrium link, both in the short and long run, among foreign debt, domestic debt, budget deficit, inflation rate, and economic growth. The findings derived from empirical analysis suggest that there is a negative relationship between external debt and real GDP growth in South Africa, which holds true for both the short-term and long-term periods.

To enhance the manageability of public debt, it is imperative for South Africa to enhance its debt management practices. Moreover, the nation can employ debt-to-equity swaps as a strategy to privatize failing state-owned enterprises. This would enhance their competitiveness and efficiency. This policy measure has the potential to attract a greater influx of foreign direct investment and generate increased job opportunities, so contributing to the enhancement of South Africa's economic growth.

The budget speeches exhibit a heightened level of involvement with the NDP, notably during the initial years following its implementation. The 2012 budget address, like the State of the Nation Address (SONA), primarily emphasized 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 conceptualizations of economic policy.

The continuity of this signal was evident in 2013, as shown by the budget speech which emphasized the alignment of the National Development Plan with the 2013 Budget. Furthermore, it was said that the strategic goals of the government and the medium-term expenditure plans would be coordinated to effectively achieve our objectives. Hence, the speech served to reinforce the strategy for enacting the National Development Plan (NDP).

The National Development Plan (NDP) was also mentioned in connection with certain matters like as economic growth, infrastructural development, and the cost of living. The budget speech of 2014 emphasized the significance of the National Development Plan (NDP) and the initiation of the alignment process. It was said that the initial stage of executing the NDP involved the formulation of a five-year plan and a medium-term budget framework.

The budget speech of 2015 reiterated the ongoing efforts to execute the National Development Plan (NDP) and emphasized the significant role of the budget in facilitating this endeavor. The assertion that a robust budget framework is a crucial prerequisite for the successful execution of the National Development Plan was made to bolster the argument for the regulation of public spending. The budget speech of 2016 included a comprehensive summary of the essential aspects derived from the National Development Plan (NDP) and elucidated that the budget was influenced by the NDP.

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Nevertheless, in the 2017 budget address, a cautionary note was sounded for the first time, emphasizing that the level of growth achieved "significantly deviates from our National Development Plan objectives." Furthermore, it emphasized the significance of the lucidity of vision and the specific sectoral goals and programs delineated in the National Development Plan. The latest budget speeches have predominantly emphasized alternative initiatives, including the Economic Growth Strategy in 2020 and the Economic Reconstruction and Recovery Plan in 2021.

Budget speeches have transitioned from highlighting the overarching significance of the NDP to reiterating the implementation process, and subsequently shifting focus towards other economic policies, all while maintaining the assertion of the NDP's overarching role.

The emphasis on signaling also prompts us to consider the congruence between planning and budgeting. In recent years, there has been a shift in budgetary processes towards a greater emphasis on the efficient utilization of resources, rather than solely the allocation of resources. 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 prioritize alignment with budgetary narratives rather than only focusing on resource allocation. The concept of signaling directs our attention towards the manner in which budgets react to, accommodate, or adjust to signals emanating 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 the majority of 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 it signalling function.

The execution of the plans has been examined, specifically focusing on the discrepancy between the planned objectives and their actual execution. The research 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 programs 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 .

The issue of harmonizing plans and budgets has also been seen in specific sectors. The analysis observed that the Key sectors 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 signaling 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 purportedly maintains the power of the finance ministry in determining budgetary allocations without opposition. However, by outlining priorities, it 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, this disruption can have an influence on 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.

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 prioritized 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 mobilization of the state and society towards these goals, then the significance of finance systems may not be paramount.