The Complexity of Budget Reform and Performance Management in the South African PublicSector Financial Environment

Abstract

A budget is a key element that indicates whether an institution will be able to achieve its aim. The budget management process is inseparable from performance management and the focus should not only be on expenditure control, but also on the achievement of objectives. The objective of budget reform should therefore be to enable management to measure and enhance a department’s performance. Performance management in the environment of public financial management in South Africa is no longer a foreign concept. Performance management systems have evolved to secure a higher degree of service delivery in respect of effectiveness, efficiency, economy, and appropriateness. Since 1997 the South African public service has been moving towards the utilisation of performance management as a requirement for the executive authority of a department to determine a system of performance management and development for employees. Senior managers are also required to enter into performance agreements with the executive authority of their department. The importance of performance management for senior managers in terms of financial management is illustrated by the fact that a performance agreement has to be signed with the executive authority within the first month of the new financial year. This indicates that performance is directly linked to financial management (budget control) and the measurement of performance. In view of the importance and the significant role of performance management, the budget and the budget process should be further reformed and refined into a mechanism to make the measurement of performance more effective so as to achieve service excellence.