Issued by: Ministry of Finance
23 July 1996
In 1994, R2,5bn was taken as a top slice off the budget and used to help reprioritise expenditure between departments and functions. This escalated by a further R2,5bn per annum, totalling R7,5bn in the current budget allocations. Although this managing of the Exchequer's contribution to the RDP Fund has been successful, it also engendered a parallel budgeting process with the consequence that spending agencies avoided reprioritising expenditure within the main body of their budget. What we witnessed in the first two years of the new government was concentrated reprioritisation and micro-management of a tiny proportion of the budget. However, during this process valuable lessons were learnt.
When the President announced the closure of the RDP office on 28 March 1996, he stated that the budget as a whole should in future be directed at the goals of the RDP. We therefore now need to apply the lessons learnt in prioritising a small portion of the budget to the reprioritisation of the whole budget of R173bn. This has meant the transfer of certain responsibilities to line departments and provincial administrations as part of integrating the RDP allocation into the budget.
In future, departments and provinces will be responsible for managing funds allocated to them for RDP in the same manner as in the case of other voted funds. The current RDP funding allocations have already been integrated into departmental line budgets, and this will be the practice for the 1997/98 budget. Therefore, the need for a separate RDP allocation has fallen away, and the Exchequer will no longer make a contribution to the RDP Fund as from the 1997/98 financial year.
An appendix of the recently published Growth, Employment and Redistribution Strategy indicated that the RDP Fund would be abolished. This in fact is not true - the RDP Fund will no longer house Exchequer funds, but will continue to house all grant finance. The financial planning unit in the Department of Finance, which is responsible for international development finance, is responsible for liaison with foreign governments and donors, forming a one-stop facility for grant financing. These funds will be integrated into the Expenditure Budget.
Administration of RDP projects
The RDP is the framework within which government operates. The RDP office has been dissolved - it has not been transferred to the Deputy Minister of Finance's office. The staff of the RDP office have been assigned to spending agencies to support the accounting officer and his/her team in planning, drafting and approving business plans, implementing and monitoring projects. These officers are called members of the programme management service (PMS), and they will report to the accounting officer. For this financial year, spending agencies will submit their approved business plans to the Department of State Expenditure. There will be a PMS manager based in the Office of the Deputy Minister of Finance, who will co-ordinate these submissions. The Department of State Expenditure will then evaluate the business plans to ensure that the requirements of Treasury, such as reprioritisation, provision for recurring expenditure and an exit strategy, are adequately provided for. If satisfied, approval will be given to proceed. The cutoff date for business plans in respect of earmarked allocations to be approved in this manner is 17 December 1996. After that, unused earmarked RDP allocations and RDP rollovers will be returned to the Exchequer. Future funds will be obtained via the normal budget process.
Provision has been made for the funding of carry-through costs for RDP projects in the 1997/98 financial year.
Cross cutting RDP programmes, such as the national spatial planning system, criminal justice system and integrated community services infrastructure will be co-ordinated by the major stakeholders.
In order to obtain a clear picture of where the RDP Fund stands at present, an audit by the Department of State Expenditure has been instituted and is almost complete.
All spending agencies are currently being informed of the new procedures regarding RDP allocations.
Government's commitment to the RDP
Government's recently released macro-economic strategic frame- work sets out its commitment to the RDP:
"A strategy for rebuilding and restructuring the economy is set out in this document in keeping with the goals set in the Recon- struction and Development Programme." And to quote from Mr Trevor Manuel's speech to Parliament on the 14th June:
"The Reconstruction and Development Programme is the commitment of this government to the people to rectify the distortions of the past and to ensure the continued and sustained provision of educa- tion and training, food and health services, housing and the crea- tion of jobs, all designed to provide a better life for all South Africans. This can only be achieved through sustained higher growth of our economy. The programme which we announce here today puts in place an integrated set of macro-economic policies which enable government to deliver on its commitments we have made in the RDP. By shifting gears we can realise the potential of this economy."
The government has put in place an economic strategy and manage- ment structure that will ensure a significant shift away from focus- ing a small portion of the budget on development, as represented by the RDP allocation, towards ensuring that total budgeted expenditure is aimed at achieving the goals set out in the RDP.
CONTACT: Jennifer Wilson 012 323 8911