Treasury and DPE to pilot zero-based budgeting

Re-costed budgets to be produced in 2022/23.
Guaranteed budget increments have in some cases been shown to create perverse incentives to enter into high-cost contracts. Image: Moneyweb

National Treasury and the Public Enterprises Department (DPE) will be the first two government departments to pilot zero-based budgeting this year in an effort to improve efficiency.

Finance Minister Tito Mboweni made the announcement on Wednesday during the presentation of the 2021 budget speech.

Zero-based budgeting is a budgeting process whereby funding is allocated based on programme efficiency and necessity rather than budget history.

Read:

Since June last year, Treasury has been reviewing government spending to improve efficiency.

More than 30 spending reviews across all functions have been conducted to understand service-delivery outcomes and how these might change under different scenarios. These reviews will be used to inform the development of zero-based budgeting.

South Africa does not get good value for money in public spending. Waste and inefficiency reduce developmental impact, and become a glaring problem in the context of limited state resources.

SOE merger/closure opportunities identified

The spending reviews have highlighted significant restructuring opportunities – including merging or closing entities to reduce duplication of functions – and noted massive inefficiencies in some infrastructure programmes.

The reviews have revealed the limits of incremental budgeting, especially where technology has the potential to transform service delivery.

They also showed cases where guaranteed budget increments create perverse incentives to enter into contracts that have high unit costs for the delivery of certain services.

The reviews will help improve the efficiency of spending as part of adopting zero-based budgeting principles.

During 2021/22, National Treasury and the DPE will be the first departments to pilot a new budgeting methodology, with the intention of producing significantly re-costed budgets from 2022/23.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.

AUTHOR PROFILE

COMMENTS   1

You must be signed in to comment.

SIGN IN SIGN UP

Budgeting is such a colonial concept. Zero-based budgeting sounds like a WMC- or EWC-inspired version.

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

TAX CALCULATOR  

How much do you earn per year?
How old are you?

Income:
Total tax:
Rebates:
Income after tax:

Income:
Total tax:
Rebates:
Income after tax:
Moneyweb is a financial, investment news provider and not a tax- or financial advice authority. Please contact Sars or a registered tax practitioner for any tax-related queries.
 
 

ECONOMIC DATA  

  CPIThe Consumer Price Index (CPI) measures monthly changes in prices for a range of consumer products Sep 2021 5.00%
  CPI ex OERThe Consumer Price Index excluding Owners’ Equivalent Rent (CPI ex OER) measures monthly changes in prices for a range of consumer products excluding Owners’ equivalent rent that measures changes in the cost of owner-occupied housing Sep 2021 5.50%
  RepoThe rate at which the Reserve Bank lends money to the country’s commercial banks and set by the Reserve Bank’s Monetary Policy Committee. Oct 2021 3.50%
  Prime lendingThe Prime Lending Rate is the rate of interest that commercial banks will charge their clients when issuing a loan (home loan or vehicle finance) Oct 2021 7.00%
USD/ZAR
GBP/ZAR
EUR/ZAR
AUD/ZAR
Yuan/ZAR
INSIDER SUBSCRIPTIONS APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING PORTFOLIO TOOL CPD HUB

Follow us: