TECHNICAL ASSISTANCE REPORT SOUTH AFRICA Fiscal Transparency Evaluation FEBRUARY 2024 Prepared By Carolina Rentería, Trish Chiinze, Sagé de Clerck, Foyzunnesa Khatun, Natalie Manuilova, Vincent Tang Authoring Departments Fiscal Affairs Department The contents of this report constitute technical advice provided by the staff of the International Monetary Fund (IMF) to the authorities of South Africa (the "TA recipient") in response to their request for technical assistance. This report (in whole or in part) or summaries thereof may be disclosed by the IMF to IMF Executive Directors and members of their staff, as well as to other agencies or instrumentalities of the TA recipient, and upon their request, to World Bank staff and other technical assistance providers and donors with legitimate interest, unless the TA recipient specifically objects to such disclosure (see Operational Guidelines for the Dissemination of Technical Assistance Information—http://www.IMF.org/external/np/pp/eng/2013/061013.pdf). Disclosure of this report (in whole or in part) or summaries thereof to parties outside the IMF other than agencies or instrumentalities of the TA recipient, World Bank staff, other technical assistance providers and donors with legitimate interest shall require the explicit consent of the TA recipient and the IMF’s Fiscal Affairs Department. IMF | Technical Report 3 Contents Abbreviations and Acronyms _________________________________________________________ 4 Preface ____________________________________________________________________________ 5 Executive Summary _________________________________________________________________ 6 I. FISCAL REPORTING ______________________________________________________________ 11 1.2. Frequency and Timeliness of Fiscal Reporting _________________________________________ 21 1.3. Quality of Fiscal Reports __________________________________________________________ 23 1.4. Integrity of Fiscal Reports _________________________________________________________ 26 1.5. Recommendations _______________________________________________________________ 29 II. FISCAL FORECASTING AND BUDGETING ___________________________________________ 32 2.1. Comprehensiveness _____________________________________________________________ 33 2.2. Orderliness _____________________________________________________________________ 40 2.3. Policy Orientation ________________________________________________________________ 42 2.4. Credibility ______________________________________________________________________ 47 2.5. Recommendations _______________________________________________________________ 50 III. FISCAL RISKS __________________________________________________________________ 53 3.1. Risk Disclosure and Analysis _______________________________________________________ 54 3.2. Risk Management _______________________________________________________________ 59 3.3. Fiscal Coordination ______________________________________________________________ 72 3.4. Recommendations _______________________________________________________________ 76 IV. Appendices ____________________________________________________________________ 79 Appendix I. Main Fiscal reports pubished in South Africa ____________________________________ 79 Appendix II. Public Sector Institutional Coverage in South Africa ______________________________ 80 Appendix III. South Africa’s national classifications of functions _______________________________ 81 Appendix IV. South Africa: Legal Framework for the Compilation of Audited Financial Statements ____ 82 Appendix V. South Africa: Nature of material irregularities identified in 2021/22 ___________________ 83 Appendix VI. Forecast reconciliations in the BR 2023 _______________________________________ 84 Appendix VII. 2023 Eskom Debt Relief Initiative____________________________________________ 85 IMF | Technical Report 4 Abbreviations and Acronyms AGSA Auditor General of South Africa MFMA Municipal Financial Management Act BR Budget Review MCS Modified Cash Standard COFOG Classification of Functions of Government MPRR Mineral and Petroleum Resources Royalties Act of 2008. CSO Civil Society Organizations MTBPS Medium-Term Budget Policy Statement DDG Deputy Director General MTEF Medium-Term Expenditure Framework DG Director General MTSF Medium Term Strategic Framework DORA Division of Revenue Act NDMC National Disaster Management Centre DPE Department of Public Enterprises NT National Treasury DPME Department of Planning, Monitoring and Evaluation OCPO Office of the Chief Procurement Officer DMRE Department of Mineral Resources and Energy OCDS Open Contracting Data Standards EME Emerging Market Economies PBO Parliamentary Budget Office ENE Estimates of National Expenditure PIC Public Investment Corporation FAD Fiscal Affairs Department of the IMF PPPs Public-Private Partnerships FFC Financial and Fiscal Commission PSBS Public Sector Balance Sheet FRC Fiscal Ri