Preparing for the 2015 National Budget

National Budget South AfricaThe annual reading of the National Budget always represents an exciting time to those concerned with the financial side of life as South Africa’s head of finance lays down the government’s goals and new policies designed to take the country forward.

There is, contrary to popular belief, a lot of thought and effort that goes into each annual budget with an immense amount of prior planning necessary.  To truly understand the direction in which the 2015 National Budget will head, one must analyse the preparation process.

The Basics

The National Budget is scheduled to be read by the current head of finance, Minister Nhlanhla Nene, on the 25th February.  This budget is reported annually and serves the primary purpose of predicting and recording the South African government’s expected revenue and income for the upcoming financial year.  This document is integral, not just for the essential government financial planning, but also for the increased transparency afforded to South African citizens with regard to where their tax money is being spent.

The government’s National Budget works much like any budget would, with revenue needed to balance out the predicted expenditure.  Most of the government’s revenue is garnered through taxes placed on the country’s citizens, while most of its expenditure is on goods and programs that will improve the lives of the country’s people.  In short: a true give and take system.  It is possible for the government to spend more money than it generates which is called running a budget deficit.  Budget deficits are generally accepted on the world economic stage but, if the deficit is allowed to get too big, it can lead to a decrease in foreign investor confidence in the country.

How It’s Prepared

Each annual National Budget takes 14 months to prepare, meaning that next year’s 2016 budget is already being worked on!  The planning process runs according to an easy to follow ongoing three-year plan called the ‘Medium Term Expenditure Framework’.  For each three-year plan to work, South Africa’s Department of Finance must create an accurate 3-year projection of how much revenue the South African government can expect to bring in.  The division of this expected revenue is a bit more complicated as each national and provincial department must then compile a report of what they hope to achieve and how much money they will need to achieve it.  Off the basis of these reports, further negotiations between departments take place and the money is then divided.

What Happens Next?

Following the National Budget speech, the Minister of Finance must table three separate bills:

  1. Division of Revenue Bill – Specifies how much money is to be divided amongst the different spheres of government.
  2. Appropriation Bill – Specifies how much money will be set aside for the national government to use and how it will be spent.
  3. Income Tax Laws Amendment Bill – Amends the previous tax laws in order to make sure the government receives the necessary sum of money for the national budget to function adequately.

The three separate bills are then debated in the national assembly and a vote is ultimately taken to see if they pass or not.  It is worth noting that currently, according to South African law, each bill must be accepted in its entirety or rejected outright, with voting for one particular amendment not an option.

You are now fully equipped to understand and enjoy the National Budget process with greater understanding!

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