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.
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.