South Africa: Technical Assistance Report-Fiscal Transparency Evaluation

SOUTH AFRICA Fiscal Transparency Evaluation FEBRUARY2024 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 MonetaryFund (IMF) to the authorities of South Africa (the "TA recipient") in response to their request for technicalassistance. This report (in whole or in part) or summaries thereof may be disclosed by the IMF to IMFExecutive Directors and members of their staff, as well as to other agencies or instrumentalities of the TArecipient, and upon their request, to World Bank staff and other technical assistance providers and donorswith legitimate interest, unless the TA recipient specifically objects to such disclosure (see OperationalGuidelines 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) orsummaries 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 theexplicit consent of the TA recipient and the IMF’s Fiscal Affairs Department. Contents Abbreviations and Acronyms _________________________________________________________4 Executive Summary _________________________________________________________________6 I. FISCAL REPORTING ______________________________________________________________11 1.3. Quality of Fiscal Reports __________________________________________________________23 1.5. Recommendations _______________________________________________________________29 II. FISCAL FORECASTING AND BUDGETING ___________________________________________32 2.1. Comprehensiveness _____________________________________________________________332.2. Orderliness _____________________________________________________________________402.3. Policy Orientation ________________________________________________________________422.4. Credibility ______________________________________________________________________472.5. Recommendations _______________________________________________________________50 III. FISCAL RISKS __________________________________________________________________53 3.1. Risk Disclosure and Analysis _______________________________________________________543.2. Risk Management _______________________________________________________________593.3. Fiscal Coordination ______________________________________________________________723.4. Recommendations _______________________________________________________________76 Appendix I. Main Fiscal reports pubished in South Africa ____________________________________79Appendix II. Public Sector Institutional Coverage in South Africa ______________________________80Appendix III. South Africa’s national classifications of functions _______________________________81Appendix IV. South Africa: Legal Framework for the Compilation of Audited Financial Statements ____82Appendix V. South Africa: Nature of material irregularities identified in 2021/22 ___________________83Appendix VI. Forecast reconciliations in the BR 2023 _______________________________________84Appendix VII. 2023 Eskom Debt Relief Initiative____________________________________________85 Abbreviations and Acronyms Preface At the request of the National Treasury of South Africa, a team from the IMF’s Fiscal Affairs Department(FAD) undertook a Fiscal Transparency Evaluation (FTE) during July 11 to 25, 2023. The mission teamwas led by Ms. Carolina Renteria and comprised Ms. Sagé de Clerck,Ms.Natalie Manuilova, Mr. VincentTang (all FAD), Ms. Trish Chiinze (IMF−AFS), and Ms. Foyzunnesa Khatun (STA). The mission teammet Mr. Momoniat Ismail, Director General National Treasury, and National Treasury officials to discussthe key findings of the evaluation and proposed actions. During the mission, the team had extensive meetings with senior staff of National Treasury; Mr. EdgarSishi – Deputy Director General (DDG) Budget Office, Mr. Duncan Pieterse−DDG, Assets and LiabilitiesManagement, Ms. Mampho Modise−DDG Public Finance, Ms. Malijeng Ngqaleni – DDG Inter-Governmental Relations, Ms. Boipuso Modise – DDG Economic Policy, Mr. Warren Harris−Director TaxRevenue Forecasting and Ms. Lindy Bodewig – Chief Director Technical Support Services, Office of theAccountant General. Meetings were also held with representatives of Department of Forestry, Fisheries and Environment−Ms. Veronica Steyn, Chief Director Budget and Financial Management; Department of CooperativeGovernance−Ms. Funani Matlatsi, Chief Financial Officer; Department of Mineral Resources and Energy−Mr. Willem Meintjies, Integrated Geoscience Development. Chief Director Information & CommunicationTechnology, Budget Facility for Infrastructure−Ms. Dorcas Kayo; Director Infrastru