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As calls grow for budget reform in South Africa, National Treasury’s pre-budget consultations create an opportunity to improve financial transparency and enhance public participation in fiscal policies.

There are two points on the national financial calendar that have increasingly gained prominence in the public domain: one is the tabling of the Budget, which is held in Parliament in February; and the other is the Medium-Term Budget Policy Statement, which is held in October.

Each of these constitutes an important opportunity not only for Cabinet to signal fiscal priorities, but also for members of Parliament to exercise oversight over budget decisions and execution. However, the opportunity for members of the public to meaningfully participate in such processes has traditionally been neglected. 

Improved public participation has been shown to enable governments to respond more effectively to people’s needs. In addition, civic participation in the budgetary process can improve efficacy in the allocation and use of public resources.

Over several years, the results of the International Budget Partnership’s Open Budget Survey have lauded South Africa as a global leader in fiscal transparency. At the same time, however, the survey has highlighted South Africa as one of several countries that does not provide adequate opportunities for those affected by fiscal decisions to inform relevant discussions. This includes making available opportunities for public comment before, during and after public funds have been allocated and spent.

Civil society’s constrained space

Parliamentary budget hearings constitute the primary formal space for civic actors to engage committees on tabled or enacted budgets. However, this space is constrained — first, by the limited scope for informing the Budget before it is “too late” and decisions are finalised; and, second, by the intermediary role of parliamentary committees.

Since 2019, National Treasury has worked with an advisory group comprising civil society representatives, other government representatives, the Global Initiative for Fiscal Transparency and the International Budget Partnership to identify a mechanism by which the public can participate in fiscal policy processes. This multistakeholder partnership is part of a five-country initiative called the Fiscal Openness Accelerator (FOA) project. 

This year is National Treasury’s second year of pilot pre-budget consultations. South Africa is well placed to leverage its advanced public finance environment, progressive policy and high-ranking budget transparency scores in the Open Budget Survey to enable more participatory, democratic budget processes. 

To inform systemic, sustained reform, Treasury must continually consider ways of partnering with civil society beyond the conclusion of the FOA pilot in September 2022. Although the outcomes are positive so far, as with most pilots, there is room for improvement. 

Participation exists on a continuum and the pre-budget consultations in the current format can do with some enhancements. If effectively enacted, this may be a significant opportunity to effect budget reform and foster more accountable decision-making where public resources are concerned.

Public proposals

The deadline for public submissions in response to a call from the National Treasury for inputs on the medium-term budget was on Friday, 19 August 2022. 

This second call invited the public to submit written proposals containing key recommendations under the following guiding themes: unemployment, social security funding, energy choices and fiscal subsidies, safety and security, health and food security. These written inputs will be analysed, and the recommendations shared with the Medium-Term Expenditure Committee. 

The opportunity for the public to contribute to these deliberations in advance of the Medium-Term Budget Policy Statement is significant given that Medium-Term Expenditure Committee hearings interrogate the links between departmental budgets and government’s policy priorities.

It further involves key government role players, such as the National Treasury’s director-general and deputy director-general, senior Treasury officials and directors-general from other departments including the Presidency. 

The Medium-Term Budget Policy Statement itself provides an opportunity to review the country’s fiscal policy positions and is an important participatory space. Following deliberations of the National Treasury and the FOA Advisory Group, the 2022 pre-budget consultations were designed to align with the medium-term allocation process, which is driven by the Medium-Term Expenditure Committee.

How has the pilot changed in its second year?

Provincial treasury offices were called on to promote the call and to receive handwritten responses from members of the public who do not have access to technology or the internet. 

Although the first year of the pilot afforded participants the opportunity to engage in a live dialogue between participants and senior National Treasury officials, this second iteration of the pilot limited feedback to written submissions. 

Although this option may allow officials more time to prepare more considered responses and produce a more comprehensive (written) public record, this change constrains the opportunity for robust engagement because there are no direct exchanges between participants and officials. 

But there is scope for submissions received from participants and official feedback in the form of response to contribute to later iterations of the pilot that are more interactive, as well as for further innovation.

The pre-budget consultations are a welcome and necessary step towards budget reforms envisaged in section 215 of the Constitution; section 195 of the Constitution, which obliges the government to encourage public participation in policymaking; in the UN’s Sustainable Development Goal 16; and in the objectives of the National Development Plan to ensure the participation of all South Africans in the process of achieving their own development. Public feedback from the first pilot informed key aspects of the second pilot. 

More direct links needed

The proverbial ball is now in the hands of National Treasury about how and whether this participation mechanism will be further developed to become an integral part of engaging civil society around the Budget.

This will hopefully include heeding some past suggestions from civic actors. For instance, pre-budget consultations should be progressively deepened and institutionalised within fiscal policy and budget processes.

The potential for forming more direct links between public inputs and critical decision-making structures such as the Ministers’ Committee on the Budget Technical Committee, for one, is significant, because these deliberations inform key executive structures, such as the Ministers’ Committee on the Budget, and ultimately have an impact on national policy and planning priorities. 

Providing citizens a lever to access resource allocation in decision-making is an astute governance choice and mechanism for balancing the power differential between state and citizenry. Moreover, it is a critical tool in democratic participation for keeping and holding the government accountable.

As we approach the Medium-Term Budget Policy Statement in October, it is worth reflecting on how the second iteration of the pre-budget consultations can promote participation in fiscal policy in South Africa. 

Increasing opportunities for public participation in the Budget is not only necessary, it has the interest and support of a cross-section of government and non-governmental actors. This level of public consultation can serve as an opportunity for budgeting and policymaking processes to centre on the country’s most vulnerable citizens and to ensure allocation of resources in a participatory and human rights-based manner. 

This moment is an important opportunity for improving engagement and building trust between the government and its citizens. DM/MC

The authors are members of the advisory group of the National Treasury’s FOA. 

Zukiswa Kota is programme head: South Africa at the Public Service Accountability Monitor. Matshidiso Lencoasa is a treasury researcher at Section27. Gary Pienaar is a senior research manager in the Human Sciences Research Council’s Developmental, Capable and Ethical State research division. Celeste Fortuin is a member of the FOA administrative support team. Kailash Bhana is the FOA lead consultant to National Treasury. 

At an estimated R27 billion per year, the cost of corruption equates to about 10% of the country’s total budget for health in 2022. With procurement understood to be a government’s single greatest corruption risk – health contracts are especially vulnerable. This is why reform related to safeguarding public procurement and resources is now beyond urgent, argues Zukiswa Kota.

Much has been said about this ‘moment’ in South Africa’s socio-political environment. And while much of it has rightly centred on efforts to recover from Covid-19 and ‘state capture’, more must be said – and done – to achieve the longer-term changes required for such recovery.

Open government reform is key to tackling corruption and capture.

The clandestine nature of corruption makes it nearly impossible to accurately quantify the losses to the state. However, at an estimated R27 billion per year, the cost of corruption equates to about 10% of the country’s total budget for health in 2022, and with procurement understood to be a government’s single greatest corruption risk, health contracts are especially vulnerable.

In South Africa’s case, this constitutes a direct threat to closing the yawning chasm in universal healthcare and equity. With an estimated 87.7% of children and 84.7% of the total population having no private medical aid cover and depending on an ailing public health system, the risk is serious.

The potential for clean procurement to contribute to the realisation of universal healthcare is severely undermined in a multitude of ways (including in less obvious ways such as in the abuse of preferential procurement policy). While issues like shortages of medicines can result from a wide array of factors such as delayed tenders, late payment to suppliers, and poor contract management by health departments, it creates breaches in people’s access to vital care. These recurring drug stock-outs in public health facilities underscore the need to ensure an open, transparent procurement system.

The same can be said for Covid-19 vaccine contracts.

Various organisations have advocated for the South African government to introduce open contracting to counter malfeasance and the derailing of public procurement processes. The Health Justice Initiative, for instance, has approached the courts to compel government departments to publish Covid-19 vaccine contracts.

Beyond urgent

Clearly, reform related to safeguarding public procurement and resources is now beyond urgent. Since 2018, there have been some important interventions including key appointments to State-owned enterprises (SOE) boards and the National Prosecuting Authority (NPA). Interventions to strengthen criminal justice institutions and bolster prosecution authorities must also be met with steps to prosecute those implicated in corrupt activities.

Currently receiving public attention are the recommendations emanating from the Judicial Commission of Inquiry into State Capture, Corruption, and Fraud in the Public Sector that make explicit reference to public procurement. Another is the release for public comment (in 2020) of the Draft Public Procurement Bill by the National Treasury.

A third is the tabling of the National Health Insurance (NHI) Bill. Many of the public submissions on the NHI Bill decried the dire impacts and risks of procurement corruption in the health sector. Finally, open government and clean governance commitments made by the Presidency via the African Peer Review Mechanism (APRM) and Open Government Partnership (OGP) are worth some attention.

A social and environmental justice imperative

Effective public procurement is squarely a social and environmental justice imperative which, in South Africa also carries constitutional obligations to tackle the consequences of apartheid-era discriminatory policies.

It is not unreasonable, then, to expect the Minister of Finance and the President in their Budget Speech and State of the Nation Address (SONA) respectively to boldly articulate how the South African government intends to address massively compromised, opaque procurement governance environments.

But this was not quite the case.

There were some encouraging signals in the SONA and Budget 2022 for plans to bolster state capacity and anti-corruption interventions. This includes the allocation of R 426 million to the Investigating Directorate in the NPA and the Financial Intelligence Centre to support the investigation and prosecution of criminal cases emanating from the State Capture Commission.

Of concern, though, is that some of these funds (R262.1 million) will be euphemistically ‘reprioritised’ from existing budgets.

However, given deep-seated corruption involving complex webs of private and state players the Presidency and National Treasury’s seeming lack of urgency to implement critical reform is worrying. A range of civic actors forming the Procurement Reform Working Group have raised concern, for instance, about the government’s lax approach to procurement reform and anti-corruption interventions.

Among the proposals made in the NHI Bill is for procurement of health sector goods and services to be more centralised. The Draft Procurement Bill also aims to “create a single regulatory framework for public procurement and eliminate fragmentation in laws which deal with procurement in the public sector”.

Centralising procurement can have significant benefits, including substantial cost savings. In a 2016 supply chain management review, the National Treasury outlined a range of benefits including the elimination of unnecessary duplication, the reduction of leakages, better utilisation of scarce procurement skills, and the reduction of administrative burdens on officials. A particular emphasis was placed on the need to ensure that officials ‘refocus’ their efforts on actual contract management. This is particularly important.

The Special Investigating Unit (SIU) report relating to misappropriated millions in the Digital Vibes contract highlighted weaknesses in the National Department of Health’s project and contract management. The State Capture report highlights the abuse of provisions of the Public Finance Management Act allowing entities to deviate from regular procurement practice.

The report cites that instead of proper planning and effective contract management (and contrary to sections 217, 28, and 51 of the Constitution and Public Finance Management Act respectively), deviations appear to be the norm rather than the exception.

So, the benefits of centralisation are only likely to be reaped under specific conditions that will require extensive strengthening and capacitation not only of the health sector but of the public service more broadly. This objective is not a clearly budgeted-for priority. In the short to medium term, there is value in implementing more e-government and open data platforms to support health procurement.

In the context of the NHI, aligning tender data with the Office of the Chief Procurement Officer’s e-tender portals and central supplier databases to ensure access and centralisation of data using uniform open data standards can be an important safeguard using existing platforms.

Both the NHI and Procurement Bills should respond to South Africa’s OGP and African Peer Review Mechanism commitments to transparency. Both the OGP and APRM involve international and regional agreements signed by government to foster multistakeholder collaboration and accountability to improve governance and deepen democracy.

This is particularly important for the publication of fiscal and procurement data. In the 2020/21 and 2021/22 financial years, R10.1 billion was allocated for the rollout of Covid-19 vaccinations. In the current financial year, the health department has been allocated R4 billion to purchase and administer vaccines with provisional funds set aside. Worryingly, however, is that there has been no public disclosure of the details of the related contracts despite the vulnerability of this sector.

On 14 March, the President shared reflections on the achievements of the Special Tribunal of the SIU which he established. The SIU Tribunal has reportedly recovered an estimated R8.6 billion from unlawful contracts and — in recent weeks — set aside more than R100 million in irregular and unlawful contracts in Covid-related procurement. Ramaphosa’s emphasis on the need not only to see prosecutions but to recover funds is significant.

The President has set a date in June 2022 to announce his Cabinet’s response to the State Capture Commission findings. Here’s to a detailed, fully-resourced plan that recognises the dire urgency of this ‘moment’ in South Africa’s history.

*Zukiswa is head of monitoring and advocacy at the Public Service Accountability Monitor at Rhodes University.

*This article was published by Spotlight – health journalism in the public interest.