Finance minister Tito Mboweni. Picture: RUVAN BOSHOFF
Finance minister Tito Mboweni. Picture: RUVAN BOSHOFF

Finance minister Tito Mboweni says he is strongly recommending to president Cyril Ramaphosa and the cabinet that the government adopt a form of budgeting that does not operate on the basis of the previous year’s budget as a baseline.

Called zero-based budgeting, this is a method of budgeting in which all expenses must be justified for each new period. It starts from a zero base and every function within an organisation is analysed for its needs and costs.

Adoption of this form of budgeting would represent a significant change from the existing system of using the previous year’s budget as the baseline for the next, and would allow for a fundamental rethink of budgetary allocations to departments in terms of strategic priorities.

Mboweni said, in concluding the first reading debate in the National Assembly on the Appropriation Bill, that a change in approach is necessary in light of the changed circumstances and with SA not being as rich as it previously thought.

Mboweni urged that parliament and its committees think seriously about adopting zero-based budgeting, which would involve focusing attention on strategic issues and on growth-enhancing activities, and no longer take for granted that the baseline of the previous year would continue for the future.

“We must start from scratch, prioritise infrastructure and growth-enhancing [activities] and try to reduce all expenditure that is not required, which we thought we could afford but which we cannot afford,” the minister said.

The Appropriation Bill is based on the February budget and will be overtaken by the Special Appropriation Bill and the supplementary budget, which Mboweni will table in parliament on June 24. This will take account of the changed circumstances brought about by the Covid-19 pandemic, which has resulted in an economic recession and a sharp decline in tax collection.

Sars has forecast tax revenue for the year of R285bn less than the budget estimate.

The Special Appropriation Bill will reflect the R130bn repriorisation of budgets by departments to fund government’s R500bn Covid-19 relief package.

Mboweni said it is now necessary to focus attention on what is feasible and be “brave, forthright and determined” about implementing structural reforms in the economy. He noted that most sectors of the economy are in dire straits.

ensorl@businesslive.co.za

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