Public Finance Management Act, 1999 (Act No. 1 of 1999)

Key success factors

The PFMA is central to improving financial management in the public sector. Financial management reform is being introduced in phases, and larger projects broken down into more manageable subprojects.

The main requirements for successful implementation of the Act are:

The implementation of the PFMA depends on strong, entrepreneurial managers. The reform of the financial management system requires empowered managers to take the initiative in revamping operations, reallocating resources and pointing their departments in new directions. Without strong management, departments may be in a similar position after the reform process, but may have incurred high transaction costs and pose a greater risk to Government.

National and provincial treasuries

In line with Section 214 of the Constitution, the Act creates a ‘national Treasury’ (by combining the existing Departments of Finance and State Expenditure). It also establishes nine provincial treasuries.

The Act modernises the role of the treasuries, and shifts their focus from the policing of detailed expenditure control procedures to a more constructive, guidance role in financial matters. Treasuries will play a crucial role in the implementation of the PFMA and in the establishment and maintenance of efficient and effective financial management systems and principles throughout the public sector.

Role of treasuries

The Act places a specific duty on the ten treasuries to enforce the PFMA, and this has to be seen in the context of cooperative governance. The national Treasury is responsible for promoting and implementing Government’s macroeconomic policy through its oversight of both national and provincial departments (the latter through provincial treasuries). To fulfil this oversight role, current information and monitoring systems are to be improved. The relevant treasury will monitor the implementation of the PFMA within departments, and assist with building capacity to ensure the efficient and effective management of revenue, expenditure, assets and liabilities. The relevant treasury will report progress to Cabinet/Exco, and the national Treasury will monitor the extent to which provincial treasuries fulfil their responsibilities.

Special Quality-enhancing Projects

Just as the role of departments changes under the PFMA, so does the role of the treasuries. While the treasuries will provide support to all departments, they cannot be closely involved with implementation in all departments. The treasuries will, however, promote models of best practice and share lessons from the experiences gained from the first phase of the Special Quality-enhancing Projects, which will operate in a number of departments. These pilot projects will focus on finance staff, internal controls and the functioning of newly appointed CFOs, and will run for at least 12 months.

Capacity building

The PFMA represents a fundamental change in Government’s approach to the handling of public finances, as it shifts the emphasis away from a highly centralised system of expenditure control by the treasuries. It holds the heads of departments accountable for the use of resources to deliver services to communities. It will also change the accounting base from cash to accruals. These substantial changes will require finance staff to undergo significant training.

Currently, departments are spending large amounts on training their officials, but they often do not receive value for money. Training frequently fails to meet the real priorities and is rarely coordinated, as:

The national Treasury is taking urgent steps, in collaboration with the South African Management Development Institute and the Institute for Public Finance and Auditing, to address training issues in a coherent manner, ensuring that individual needs are defined and courses accredited according to Government’s priorities.