The role of the provincial treasury in driving budget reform in South Africa’s decentralised fiscal system

Abstract

After the transition to a fully democratic order in 1994, the adoption of the new Constitution of the Republic of South Africa in 1996 prompted the creation and development of a decentralised administrative structure consisting of three distinct, but interrelated and interdependent spheres of government (national, provincial and local government). It also lead to the institution of a long-term budget reform initiative aimed at realising the constitutional ideals of efficiency, effectiveness, equity and development orientation. Significant budgets and expenditure responsibilities were devolved to the provincial governments, which deliver crucial public services such as providing basic education, supplying health services and building and maintaining roads. Provincial treasuries play a crucial role in driving the budget reform process in the subnational spheres, but most budget reform research to date has focused virtually exclusively on the role of the National Treasury. To fill this research void, this article explores the role of provincial treasuries as a critical institutional modality for implementing public financial management reforms in a decentralised fiscal setting. The article reviews the legislative framework for budget reform and the mandate of provincial treasuries as derived from the Public Finance Management Act, 1 of 1999. It assesses the recent performance of provincial treasuries in driving budget reform in the provincial sphere, using national intervention in the Limpopo Provincial Treasury in 2012 as a case study. The article concludes that the large variation in provincial treasury performance and capacity poses a serious risk to the realisation of public financial management reform benefits in South Africa.