CO-OPERATION: Officials in Soth Africa learn budget techniques in preparation for new system

Restructuring the budget for change

A seminar on Restructuring the budget held in Rustenburg, South Africa, last November brought together 24 administrators and financial officers from the nine provinces as well as from the National Education Department. It was the second meeting of its kind organized by a consortium of South African institutions, with support from the French government and in co-operation with IIEP. The aim of these seminars is to allow participants to share their experiences and improve their technical know-how in a period of transition towards new budget procedures, such as: zero base budgeting, determining budget priorities at the provincial level, and allocating national resources in an effort to reduce inequalities.

Distributing the resources
During this second workshop, various presentations were made in order to help participants evaluate the current state of government finances, the education budget and to discuss the latest proposals concerning the allocation of budget resources.

The current financial situation of the South African Government is the result of a long period of low economic activity, with growth rates of around 1 per cent and a population increase of around 2.5 per cent each year. The State debt in 1995 represented 60 per cent of the GNP, and its repayment takes up 18.8 per cent of the budget expenditures.

Education represents around 21 per cent of the national budget, but the provinces and schools receive grants which are distributed very unevenly. These inequalities are a consequence of apartheid with separate education systems, each with its own specifications. Schools for white children had much better teaching standards, teachers were more qualified and better paid, whereas schools for mixed-race, Indian and particularly black children functioned on much lower grants. Uniting the different systems and administrations has brought with it a demand for equal treament for all schools and provinces. The Finance and Fiscal Commission has put forward its proposals for the distribution of budget resources between the provinces and how it should evolve over the next five years. These proposals try to balance the resources

allocated to national services (justice, security, external affairs, debt servicing, etc.) and provincial services (education, health, etc.), as well as between the provinces. The provincial allocation would include three grants: one basic grant calculated on the basis of the province's population, with an extra 25 per cent for rural populations; another grant for education and health according to national specifications; and a third grant to even out differences in fiscal capacity of each province.

The education grant would be calculated on the basis of projections for the 5-17 year-old population, with a ratio of 38 pupils per teacher (and an average of 40 in primary and 35 in secondary), bearing in mind the number of teachers needed, an average salary and a percentage of 41 per cent for other costs. Correcting disparities in investments is not taken into account since these types of expenditures are covered by the Reconstruction and Development Fund (RDF) to which projects must be submitted.

Budget powers will be shared between the national government (which defines priorities), the Ministry of Finance (which fixes the global allocation), and the provinces (which distributes the funds received to the different services).

The new system will be effective as from the 1996/97 fiscal year and it is hoped that an equal distribution of resources between the provinces will be achieved in five years.


Budget methods
The French and IIEP specialists made presentations on the zero base budget method, the distribution of funds between the provinces, and on administrative regulations and how they affect the implementation of the budget.

The zero base budget method has to be applied in the provinces. This method makes it easier to comprehend how the system functions, since costs are calculated by programme and activity; in this way, the cost of each activity can easily be evaluated. It also demands a close and more effective link with

planning. However, defining priorities between the different programmes is extremely difficult when it entails grading the different levels and types of education.

The idea of presenting the budget in programmes corresponding to levels of education and to functions (teaching, canteen services, vocational guidance, family assistance, ...) should help to devote funds to priority areas. It was emphasized that the preparation of the budget should also be participative and not solely limited to the work of a small specialized team.


The problems of change
During the workshop, groups were formed to discuss: the financial needs of the provinces for the current year and the ways of meeting foreseeable expenditures; needs in information systems; the Reconstruction and Development Fund; and strategies for preparing the 1996/97 budget.

The organization of schools is fixed in January, the start of the academic year, according to the specified pupil/teacher ratios. Once the budget has been decided (the fiscal year goes from April to March), it cannot be modified. In seven out of the nine provinces, this, together with difficulties in managing the transition, has caused over-spending on the budget. Once the year has started, adjustments can no longer be made and the group discussions centred around the administrative means for obtaining the necessary budgetary extensions.

Despite the fact that needs for statistical information vary from one province to another, the groups felt that it was necessary to build up a unified information system, which would be identical in each of the provinces. The National Department of Education would naturally play a significant role. The information system project presented at the national level comes a bit late for the provinces urgently in need of solid data for management purposes.

The financing procedures of the Reconstruction and Development Fund have not been fully mastered by those responsible at the provincial level who do not apply much for financing from the Fund. The Fund constitutes an important source made up of budget reductions in various sectors and destined to correct inequalities which currently exist. The groups discussed the mechanisms and administrative circuits used to unblock funds and the need to stipulate resources coming from the fund when preparing budget documents.

For the preparation of the 1996/97 budget, it would appear that not all the provinces are able to fully apply the zero base budget method. It was suggested that, for this year, programmes be structured by function and that the method only be applied for those parts of the budget concerned with priority functions. Subsequently, as pluriannual plans are drawn up, it would be possible to anticipate needs and see how they compare with resource projections, thus facilitating annual budget preparation.

All participants in the workshop were very satisfied with both the content, which was directly related to their professional needs, and the organization. They emphasized that it was crucial, in the future, to continue organizing similar occasions for exchange and mutual reflexion.



Serge Peano