Public financial management reforms for value-for-money in selected South African provincial governments

Abstract

Far-reaching public financial management (PFM) reforms have been implemented in South Africa in accordance with the Public Financial Management Act, 1999 (Act 1 of 1999) (PFMA). This study assesses the extent to which the PFMA and related reforms have achieved their initial objectives of enhancing value-for-money (the efficiency, effectiveness and equity of public expenditure) in provincial governments between 2000 and 2013. It also generates policy recommendations to enhance the effectiveness of future PFM reform in South African provincial governments. Based on questionnaires administered to a sample of public financial management specialists from the National Treasury, seven of the nine provincial treasuries, and independent experts, a qualitative analysis provides a detailed understanding of factors triggering PFM reform in South Africa since the country s transition to a democratic order in 1994, reform objectives and critical success and risk factors in reform implementation. To benchmark the PFM performance of the provincial Education and Health departments, a Public Financial Management Progress Index (PFMP index) is constructed for each of the nine provincial Education and Health departments for the period from 2007/2008 to 2013/2014, based on annual performance plans, budgets and audited financial statements. Analysis of the PFMP index indicates that, while there has been considerable progress in PFM reform, wide variation in the quality and effectiveness of PFM practice across the nine provincial Education and Health departments persists. Stability of the top administrative leadership, availability of PFM skills, varying degrees of accountability and departmental capability to establish PFM systems that conform to new accounting standards drive these variances in reform outcomes. Based on current shortcomings in PFMA enforcement, fiscal accountability and PFM capacity, the study concludes by making recommendations on how the PFMA and its regulations can be reviewed in order to strengthen the link between planning and budgeting, enhance supply chain management, promote effective capital infrastructure spending, combat fraud and corruption, improve the quality of monitoring and reporting and clarify PFM roles and responsibilities. It advocates a sustained long term PFM capacity building programme in the provincial sphere, supported by complementary public service reforms (such as recruitment, performance and consequence management).