Addressing inefficiencies through improved budgeting

Tshepo Moloi and Prof Johann Kirsten of the Bureau for Economic Research at Stellenbosch University suggest that a zero-based budgeting approach could offer an opportunity to reassess the role of the state in rural development. The agriculture department should also consider adopting a loan, rather than a grant system, when providing production support to new farmers.

- Tshepo Moloi and Prof Johann Kirsten

To consolidate government’s unsustainable debt trajectory, the Minister of Finance, Tito Mboweni, announced during the Supplementary Budget Speech in June that National Treasury would explore the implementation of a zero-based budgeting approach. However, not many details were provided on how exactly this would be achieved, especially given the time and capacity constraints associated with implementing it within a budget cycle. With this budget approach, government departments would have to start from a zero-base and justify their expenditure anew every financial year. Therefore, the budget for the current year was not simply an extension of the previous year.

The full implementation of zero-based budgeting involves a technical process of assessing individual departmental programmes against their mandates, purpose, cost to provide services, and outcomes achieved to determine the efficiency and effectiveness of the programme and its activities. Beyond the technical aspects of the process, National Treasury would also have to facilitate a change management process, given that the approach is likely to be met with resistance, particularly from departmental and agency heads. It is for these reasons that several countries have not fully implemented the principles of zero-based budgeting, but have rather adopted and incorporated aspects of the approach into their existing resource allocation frameworks.

This is also how we think National Treasury will implement the reform to complement its existing expenditure reviews, as well as the programme-based budgeting procedure.