Economics, public finance, domestic revenue mobilisation & budget support

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Evaluation of Budget Support to South Africa: High-level Executive Summary

 An independent evaluation of EU Budget Support (BS) operations in South Africa (SA) was recently completed on behalf of the Government and the EU with a view to assess the extent to which BS contributed to achieve sustainable results in the relevant sectors over the period 2000-2011.

The evaluation which followed the OECD-DAC 3 step approach covered 16 Sector Budget Support (SBS) operations, for an amount of € 984 million, of which 32% in Employment and Private Sector Development, 25% in Water and Sanitation, 7% in Governance (Legislative and Justice), 17% in Health, 12% in Education and 7% in Urban Renewal.


Overall assessment

Summary assessment. EU BS to SA in the period 2000-2011 represents a positive experience that should be continued and further integrated into the SA-EU Strategic Partnership. BS has been adapted to the context, ensuring both Government ownership and strategic relevance of EU support.

Adaptation to the context. SA is a middle income country with a well-diversified economy and moderate growth, but the very high levels of poverty and unemployment, the low level of human development, as well as strong income inequalities represent major challenges and threats. GoSA guidelines specify that ODA, which constitutes just 1.3% of the government’s budget and 0.3% of GNP, should be used to support new and more effective ways of implementing government policies and priorities for poverty reduction and add value by furthering innovation, by piloting and testing new approaches and catalytic initiatives to unlock domestic resources for sustained, long term implementation.

The Trade and Development Co-operation Agreement (TDCA) drafted in 1999 and the Strategic Partnership (SP) established in 2006 provide the legal framework for relations between the parties and for development co-operation that has been further spelled out in two joint Country Strategy Papers (CSPs). Since the beginning of the considered period, development cooperation between SA and EU has been part of a larger partnership framework and, in the second part of the period, its value added in terms of peer-to-peer exchange of knowhow and joint international initiative has been strongly emphasised.

Shifting to BS in the early 2000s’ has been a coherent decision, probably the only option compatible with keeping ODA focused on the key strategic challenges addressed by the GoSA while responding to its request for stronger ownership and alignment. With SBS funds, predictability of aid has markedly improved compared to other forms of aid. However, and despite the rather low proportion of SBS in the overall GoSA public expenditures, delays in payment of some tranches have had negative consequences on the implementation of specific SBS-supported programmes.

BS operations in SA present a particular specificity: It is an EU untargeted transfer of funds paid into the Reconstruction and Development Programme Fund that is an account of the National Treasury, and then channelled to the executing government departments and agencies to finance development programmes and projects. As such, it is ‘on Treasury’ but not ‘on Parliament’, i.e. it is shown in the annex of the budget, audited by the Auditor General but it is not voted by Parliament.

Finally, the good quality of PFM at national level acted as an enabling factor for SBS, rather than an SBS objective; at the same time, SBS contributed to reinforce PFM systems, namely at sector level.

SBS has supported policy experimentation and innovation in different ways. In most cases, SBS operations have created a financial opportunity for the key policy actors (GoSA departments, decentralised and/or specialised public institutions) to develop their own policy processes, through risk taking and innovative initiatives, including – in some cases – the significant involvement of Civil Society Organisations (CSOs) in the delivery of key services and as essential actors in reaching socially excluded groups. In various sectors (e.g. Justice, Legislative, Water, Health and Science & Technology), the SA-EU dialogue, building on previous joint experience and exchanges of know-how, has helped shape and/or integrate innovative aspects within policy design and approaches. In fewer and more recent cases (Health and, partly, S&T and Legislative, but not Employment and Education), the dialogue has gone beyond the single policies and programmes supported and has paved the way to a wider exchange of policy experience. At times, such an exchange has been facilitated by a Capacity Building / Capacity Development (CB/CD) component aimed at promoting the exchange of high-level know-how and profiting from - and feeding into - the existing rich framework provided through the TDCA and the SP.

Government policies supported by SBS have produced significant development results. The approach launched and tested through the GoSA programme Masibambane in the Water Sector has been a determining factor of the success in increasing access to clean water and sanitation facilities in the poorest areas over the period evaluated. TheGoSA programme Access to Justice and Constitutional Rights has produced important results through the mobilisation of local networks of intermediation in the most marginalised areas, which have started to respond to the democratic needs of the poor. Strengthened Legislative Assemblies relying on stronger people participation, access of the poor to advanced technologies, improved access to primary health facilities are all consolidated outcomes of the policies and programmes supported through SBS. The evaluation has also highlighted weaknesses which the supported policies and programmes have only been able to marginally address, such as: the failure in infrastructure operation and maintenance and CSOs mobilisation in the Water Sector; the insufficient employment growth and strengthening of the SMMEs participation to economic activity; the inadequate skills development resulting in low level of employability of the labour force; etc. In some of these areas where weaker results have been recorded (employment and SMMEs development), the more limited contribution of SBS should not be so surprising considering that the related policy weaknesses are deeply entrenched in key bottlenecks of the post-apartheid transition.

Main Recommendations

Development co-operation: priorities and modalities

  • Development co-operation should continue to be recognised as a key element of the EU-SA partnership and remain focussed on national developmental needs; at the same time, approaches should be developed and relevant experience and possible lessons identified for replication at regional and international level (Recommendation 1).
  • Budget support should be maintained as the key financing modality, to guarantee government ownership and strong links with the stakeholders involved in policy making and implementation. At the same time, enhanced dialogue and CB/CD components should be strengthened also through complementary actions to better reflect the value added of the SA-EU co-operation (R2).
  • Future BS operations should continue to support creative and innovative public institutions with an established tradition of co-operation with the EU, one of the key success factors to date, and should possibly involve new development partners (R3).
  • The specific typology of SBS in SA should be considered as an option for cooperation with other MICs, in specific cases (R4).

Value Added of the EU-SA development co-operation

  • ‘Programme-level’ policy dialogue should be combined with a broader ‘strategic dialogue’ according to the Strategic Partnership, based on peer-to-peer exchange of knowledge on key development issues (R5).
  • Continue mobilising expertise for institutional strengthening and CB/CD, but expand CB/CD initiatives to support advanced policy exchange and knowledge sharing, according to the Strategic Partnership (R6).
  • Create new tools in the framework of the Strategic Partnership and the existing dialogue architecture to foster enhanced forms of knowledge sharing (R6).
  • Extend lessons from development co-operation at national level to regional and international level (R8).

Sectoral issues

  • Keep the sectoral and thematic focus for BS operations, according to the SA demand, but open up dialogue and expand knowledge sharing to address relevant strategic themes (R9).

Other key issues for development co-operation

  • Further expand the involvement of civil society actors (R10).
  • Integrate BS with complementary CB/CD support to local authorities to ensure their full participation in development actions (R11).
  • Increase access to - and involvement of - the whole range of EU institutional actors (R12).
  • Enhance predictability of the flow of budget support funds (R13).

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Stijn Bertrand
14 January 2014

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