South Africa’s Participatory Budgeting and Audit System: Transparency and Accountability

South Africa’s transition from apartheid to a constitutional democracy in 1994 did not just change who governed, it fundamentally reshaped how public money is collected, spent, and scrutinised. The country’s budgeting and audit systems today are built on two powerful democratic pillars: transparency in how the state plans its spending, and accountability for how that money is ultimately used. Together, the Medium-Term Expenditure Framework (MTEF) and the Auditor-General of South Africa (AGSA) form a governance architecture that many developing nations now study as a reference point for participatory and rigorous public financial management.

The constitutional foundation of South Africa’s budget system 🔗

South Africa’s budgeting framework is anchored in the 1996 Constitution, which explicitly requires Parliament to play a meaningful role in money matters rather than simply rubber-stamping executive decisions. Section 77 of the Constitution calls for national legislation to provide a procedure to amend money bills before Parliament, a provision that took more than a decade to fully operationalise.

That operationalisation came through the Money Bills Amendment Procedure and Related Matters Act of 2009. This legislation reinforces the authority of parliament in budgeting while establishing the balance of power between the legislature and executive in budget decision-making. In other words, unlike many parliamentary democracies where the executive’s budget is rarely challenged, South African MPs have formal powers to amend the executive’s budget proposals.

This legal architecture is complemented by the Public Finance Management Act (PFMA) of 1999, which governs how national and provincial departments manage funds, and the Municipal Finance Management Act (MFMA), which does the same at local government level. Together, these statutes create a chain of financial responsibility that stretches from the National Treasury down to every municipal ward.

Understanding the Medium-Term Expenditure Framework 🔗

At the heart of South Africa’s budget planning sits the Medium-Term Expenditure Framework (MTEF). Introduced in the late 1990s, it moved the country away from single-year budgeting toward a forward-looking, multi-year approach. The MTEF initiates a process of rolling three-year budgets, meaning that every annual budget is actually the first year of a three-year spending plan that gets revised and extended each cycle.

The rationale is straightforward. Policy outcomes, whether in health, education, or infrastructure, rarely materialise within a single fiscal year. A rolling three-year framework allows departments to plan investments with confidence, knowing roughly what resources they will have over the medium term. Enabling departments to enter into forward commitments without committing the entire amount in the first year of a proposed project should reduce the need to carry unspent balances from one year to the next.

How the MTEF is prepared each year 🔗

The National Treasury issues technical guidelines that departments must follow when preparing their submissions. These guidelines are issued in terms of Section 27(3) of the Public Finance Management Act, which provides that the National Treasury must prescribe the format in which an annual budget must be prepared. The process requires departments to justify existing baselines, identify savings, and align their requests with national priorities.

A critical feature of recent MTEF cycles has been the introduction of spending reviews. Spending reviews were introduced to strengthen the detailed analyses and when implemented effectively, they support the reallocation of resources to higher-priority interventions and strengthen overall fiscal discipline. This means departments must continuously demonstrate that existing programmes deliver value, rather than assume that last year’s budget automatically carries forward.

The MTEF’s objectives in practice 🔗

The framework pursues several overlapping goals. Improved macroeconomic balance, including fiscal discipline, is attained through good estimates of the available resource envelope, which are then used to make budgets that fit squarely within the envelope. At the same time, the MTEF aims to prioritise expenditures based on socio-economic programmes, improve budget predictability, and increase political accountability for how public money is spent.

The results have been mixed but broadly positive. Research suggests that MTEFs in African contexts, including South Africa, have had measurable impact on resource allocation to priority sectors, though there is some indication that MTEFs, if designed properly, may be successful in building some pressure for greater political accountability.

The participatory dimension: budgeting as a democratic exercise 🔗

What distinguishes South Africa’s budget system from many others is the formal space it creates for public participation. This is not merely cosmetic. It is legally mandated.

Public hearings and the legislative stage 🔗

After the Minister of Finance delivers the Budget Speech in February, the process shifts to Parliament. The Portfolio and Select Appropriations committees then consider and hold hearings on the fiscal framework, the Division of Revenue Bill and Appropriations Bill. These hearings are open to the public, and civil society groups, trade unions, community organisations, and ordinary citizens can make oral or written submissions.

The Standing Committee on Appropriations has increasingly taken these hearings out of Cape Town and into communities across the country. At a recent set of hearings in Westville, KwaZulu-Natal, participants were told that every person who comes to a public hearing becomes a public representative for that day. Submissions at such hearings have ranged from pleas about inadequate scholar transport funding to critiques of how technical budget language excludes grassroots participants.

The Medium Term Budget Policy Statement 🔗

Participation is not limited to February and March. In October each year, the Minister of Finance tables the Medium Term Budget Policy Statement (MTBPS), sometimes called the mini-budget. The MTBPS sets out government’s three-year financial plans, communicates the economic context and provides for the estimated revenue and expenditure for the coming three years. Crucially, this document gives Parliament and the public an opportunity to shape the full budget before it is finalised the following February.

The Parliamentary Budget Office 🔗

To equip MPs with the technical capacity to engage meaningfully with complex fiscal documents, the Money Bills Act established the Parliamentary Budget Office (PBO). Its mandate is to provide independent, objective and professional advice and analysis to Parliament on matters related to the budget and other money Bills. The PBO analyses budget proposals, reviews amendments, and helps committees make sense of Treasury documents, ensuring that Parliament’s oversight is substantive rather than symbolic.

The Auditor-General of South Africa 🔗

Planning and spending public money is only half the story. The other half is verification, and this is where the Auditor-General of South Africa (AGSA) enters.

Constitutional status and independence 🔗

The AGSA is one of the Chapter 9 institutions, a group of bodies created by the Constitution specifically to strengthen democracy. The Constitution recognises the importance and guarantees the independence of the Auditor-General of South Africa, stating that the AGSA must be impartial and must exercise its powers and perform its functions without fear, favour or prejudice.

Two features reinforce this independence. First, the tenure of the Auditor-General is for a fixed, non-renewable term of between five and 10 years, preventing political leaders from using reappointment as leverage. Second, the office is financially self-sustaining because it funds itself by charging fees for its services, a feature that reduces dependence on the executive.

The AGSA reports not to the President or the Cabinet, but to Parliament. AGSA is accountable to the National Assembly, to which it reports annually on its activities and the performance of its functions by tabling the main accountability instruments, namely its strategic plan and budget and its annual report. This reporting line ensures that the executive cannot be both spender and auditor of last resort.

Scope of the audit mandate 🔗

The AGSA’s reach is extensive. The Auditor-General South Africa conducts regularity audits of national and provincial government departments, identified public entities, municipalities and municipal entities. On top of this, AGSA conducts discretionary audits such as performance audits, special audits, and investigations into matters of public concern.

When auditors examine a department or municipality, they look at three core questions. The first is whether financial statements give a fair presentation of the department’s finances and that there are no material misstatements, which could mislead the user of the statements. The second is whether the auditee provided reliable information on its performance against predetermined objectives. The third is whether it complied with laws and regulations such as the PFMA and MFMA.

Audit outcomes and the “clean audit” standard 🔗

A clean audit is the gold standard in the AGSA’s vocabulary. It means the financial statements are free from material misstatements, the performance report is reliable, and there is no material non-compliance with legislation. But clean audits remain relatively uncommon in South Africa’s public sector, particularly at municipal level, where audit outcomes have often revealed weaknesses in financial management.

Expanded powers and material irregularities 🔗

For decades, the AGSA could identify problems but had no direct power to enforce consequences. That changed with amendments to the Public Audit Act. The Public Audit Act was amended to expand the AGSA’s mandate beyond auditing and reporting in an effort to strengthen accountability mechanisms, with expanded powers centred around the concept of material irregularity. Where accounting officers fail to act on identified irregularities, the Auditor-General can now issue remedial action, refer matters for investigation, and even recover losses.

How budgeting and auditing connect 🔗

The real power of South Africa’s system lies in how its front-end planning and back-end scrutiny reinforce each other. After departments spend the funds Parliament appropriates, the auditing stage involves investigations by independent audit institutions, such as the Auditor General of South Africa, into the various organs of state’s compliance with spending and procurement regulation.

These audit outcomes then feed back into the next budget cycle through Budgetary Review and Recommendation Reports (BRRRs). The BRRRs provide assessments of the service delivery performance of each government department, given available resources, the effectiveness and efficiency of the departments’ use and further allocation of resources. The Minister of Finance must take the BRRRs into account when developing the national budget for the next financial year.

This closes the accountability loop. A department that wasted resources or failed to deliver cannot simply expect the same budget next year. Its performance, as measured by the Auditor-General and assessed by parliamentary committees, becomes a formal input into future allocations.

Persistent challenges and reform directions 🔗

For all its strengths, the system faces real challenges. Audit outcomes at many municipalities continue to disappoint, and concerns about wasteful expenditure, procurement irregularities, and weak internal controls surface regularly. Civil society groups have also raised concerns about whether public hearings truly shape outcomes or whether they function as consultative theatre.

The National Treasury has acknowledged these tensions. The National Treasury has recognised the need for a comprehensive review of the budget process with the objective to identify and implement reforms that will enhance the efficiency, transparency, and effectiveness of the budget process. The reforms target sharper prioritisation, stronger baseline analysis, and clearer links between spending and service delivery outcomes.

The scale of fiscal pressure cannot be ignored either. Debt-service costs now consume one of every five rands of government revenue and absorb a larger share of the budget than basic education, social protection, or health. Such pressure makes rigorous budgeting and auditing more important than ever, because every rand misspent is a rand that could have served a citizen.

Lessons from the South African experience 🔗

Several features of South Africa’s system stand out as worth studying. The legal formalisation of parliamentary amendment powers over money bills is rare globally. The constitutional independence and self-funding of the Auditor-General provides institutional robustness. The multi-year MTEF aligns spending with longer-term policy goals. And the commitment to taking budget hearings into communities reflects a serious, if imperfect, attempt to democratise what is usually a technocratic process.

None of this guarantees good outcomes. Institutions are only as effective as the people who run them and the citizens who hold them to account. But the framework itself, built on transparency, participation, and independent verification, offers a template for how a developing democracy can pursue both fiscal discipline and public accountability without sacrificing one for the other.

What do you think? Should a legislature have formal powers to amend the executive’s budget, as South Africa’s does, or does that risk undermining fiscal discipline? And how far should “clean audits” be treated as the ultimate measure of good governance, given that a department can pass an audit while still failing its service delivery mandate?

References

1. https://academic.oup.com/pa/article/76/2/465/6414888
2. https://www.treasury.gov.za/documents/national%20budget/1998/review/chapter_05.pdf
3. https://www.gov.za/news/media-statements/national-treasury-medium-term-expenditure-framework-technical-guidelines-2025
4. https://www.treasury.gov.za/publications/guidelines/2026%20MTEF%20Guidelines.pdf
5. https://gsdrc.org/document-library/medium-term-expenditure-frameworks-from-concept-to-practice-preliminary-lessons-from-africa/
6. https://www.lexology.com/library/detail.aspx?g=219a89fa-22a7-49e8-a160-01ad3da827c7
7. https://www.parliament.gov.za/news/dont-just-tick-box-listen-us-say-westville-residents-appropriation-bills-public-hearings
8. https://parliament.gov.za/press-releases/parliament-and-budget-process
9. https://www.parliament.gov.za/parliamentary-budget-office
10. https://www.agsa.co.za/AboutUs/Legislation.aspx
11. https://en.wikipedia.org/wiki/Auditor-General_(South_Africa)
12. https://nationalgovernment.co.za/units/view/50/auditor-general-south-africa-agsa
13. https://pfma-2021-2022.agsareports.co.za/role-of-the-agsa/
14. https://www.treasury.gov.za/publications/guidelines/2025%20MTEF%20Technical%20Guidelines.pdf