South Africa’s budget most transparent in world

obi-textA graphical depiction of the countries,
ranked and colour-coded according to
the transparancy of their budget process.
Click on the image to view a bigger version.
(Image: International Budget Partnership)

Ray Maota and Mary Alexander

South Africa’s budgeting system has been rated the most transparent in the world following the recently announced results of the International Budget Partnership’s (IBP) Open Budget Survey 2010.

This is an impressive achievement for the country considering it beat all developed nations surveyed. In 2008 South Africa was ranked second, with the UK coming first.

The study evaluates whether central governments give the public access to budget information and opportunities to participate in the budget process, and examines the ability of legislatures and auditors to hold their governments accountable. The survey involved 94 countries and takes place every two years.

According to the survey, the world’s most transparent countries are South Africa (with a score of 92 out of 100), New Zealand (90), UK (87), France (87), Norway (83), Sweden (83) and the US (82). The survey classified these seven countries as “providing extensive information”.

“Open budget systems are essential to creating free and just societies in which the public is empowered with the knowledge of how the government is managing their resources,” the IBP said.

“The IBP formulated the Open Budget Survey to promote greater openness in national government budgeting systems; to document the current budgeting practices of governments; to establish standards for transparent, participatory, and accountable budget systems; and to identify countries in varying contexts and with different characteristics that are meeting or are on their way to meeting these standards.”

The 2010 survey had an additional nine countries in the rankings – Chile, Iraq, Italy, Mali, Mozambique, Portugal, Slovakia, Spain and Timor-Leste (also known as East Timor) – compared to the 85 that were assessed in 2008.

To simply measure the overall commitment of the countries to transparency and to allow for comparisons, the IBP created the Open Budget Index (OBI).

The average OBI score for countries surveyed in 2010 is 42 out of 100. About one-third of the countries (33) provide some budget information, scoring between 41 and 60 – although this data is far less than what is required to obtain a clear understanding of the budget and enable a check on the executive. Even when budget documents are made public, essential information is often absent for these countries.

Nations performing poorly on the OBI tend to share certain characteristics such as low levels of income, low levels of democracy and aid dependence.

But progress has been particularly notable among several countries that previously performed very poorly on the OBI, including Egypt, Mongolia and Uganda.

Egypt has recently emerged from a spate of deadly conflict, which led to the ousting of their president Hosni Mubarak after 30 years of rule. Similar unrest has since broken out elsewhere in North Africa and the Middle East.

Good stewards of public funds

A budget is a government’s plan for how it is going to use the public’s resources to meet the public’s needs. Transparency means all of a country’s people can access information on how much is allocated to different types of spending, what revenues are collected, and how international donor assistance and other public resources are used.

Transparency is an important first step to holding governments accountable for how they use the people’s money.

“Open budgets are empowering,” said Warren Krafchik, IBP’s director. “They allow people to be the judge of whether or not their government officials are good stewards of public funds.

“Our goal is to promote increased public access to government budget information. We’ve seen how this can lead to concrete improvements in people’s lives,” added Krafchik.

Key documents

The index score is largely based on whether a country makes eight key documents available to the public. These are the pre-budget statement, executive’s budget proposal, citizens’ budget, enacted budget, in-year reports, mid-year reviews, year-end reports, and audit reports.

The survey found that two of every three countries do not issue a pre-budget statement or release a mid-year review, while five in six countries do not publish a citizens’ budget.

“Citizens’ budgets are important instruments to more broadly disseminate budget information and generate greater understanding and engagement in the budget process,” the IBP says. A citizens’ budget presents the government budget in a non-technical, easily understandable way.

Of the 94 countries surveyed in 2010, 84% did not disseminate such a document, even though doing so required no further data or analysis. Egypt, Brazil and Mexico were among those which did publish citizens’ budgets.

The survey also noted that several countries, including South Africa, publish the citizens’ budget online.

South Africa also has the online “Tips for Pravin” system, in which ordinary citizens can send budget suggestions to Finance Minister Pravin Gordhan.

Where the public’s access to the internet is limited, the citizens’ budget is another way to inform the public about fiscal spending and policy, and can be published in newspapers and magazines or broadcast on radio and TV.

“For most people, an oral presentation is the most accessible,” said Krafchik.

Worst offenders

“Restricting access to information hinders the ability of the public, journalists, commentators, academicians, and civil society organizations to hold officials accountable and creates opportunities for governments to hide unpopular, wasteful, and corrupt spending,” the IBP says.

Lack of information also hinders the ability of other government bodies, such as legislatures and national audit offices, to do their jobs effectively.

More than this, legislators in many countries receive budget information too late to allow them to adequately review it or to hold the public hearings necessary to foster debate and careful scrutiny.

In the 94 countries covered in the 2010 survey, the average score for “strength of the legislature” is 44 out of 100.

The worst offenders that make available little or no information are: Algeria, Angola, Azerbaijan, Bangladesh, Bosnia, Cambodia, Cameroon, Chad, Chile, China, Democratic Republic of Congo, Dominican Republic, Ecuador, Equatorial Guinea, Fiji, Iraq, Lebanon, Malaysia, Malawi, Morocco, Namibia, Nepal, Nicaragua, Papua New Guinea, Pakistan, Romania, Saudi Arabia, São Tomé e Príncipe, Senegal, Sudan, Timor-Leste, Tanzania, Turkey, Vietnam and Yemen.

Unpopular, wasteful and corrupt

Lack of transparency allows governments to hide unpopular, wasteful, and corrupt spending, the IBP says, citing these examples from 2008:

  • Oil-rich Equatorial Guinea bought a US$35-million holiday home for its president in Malibu, California, according to a US Senate investigative committee. This was $10-million more than the government’s budget showed the country planned to spend on health care for its impoverished population in 1995.
  • Saudi Arabia, which holds an estimated $400-billion in assets from oil profits, makes so little information available that it is not clear what spending is accounted for in public documents and what spending is not reported in public documents. Saudi Arabia publishes almost no budget documents at all, providing only a very scant summary of the budget and some highly aggregated information on the overseas holdings managed by its central bank.
  • Nicaragua’s government refuses to account for funds from oil-rich Venezuela that apparently have been used for undocumented loans to government-linked companies and to reward them with no-bid contracts for projects being built on public land.
  • In Nigeria, two top officials resigned when it was discovered that they had pocketed unspent funds from the 2007 budget as their end-of-the-year Christmas bonus.

Information leads to change

According to the IBP, when citizens have access to information and opportunities to participate in the budget process, they are able to improve the decisions made about what to spend public money on and how the money is actually spent. That means that the allocation of scarce public resources is more equitable and effective.

For example:

  • In Mexico, the NGO Fundar found the budget did not allocate funds to combat the loss of lives during childbirth and successfully advocated for funds for emergency obstetrical care, especially in rural areas.
  • In India, Mazdoor Kisan Shakarti Sangathan, an organisation of small farmers and workers, pieced together budget information to uncover corruption, such as the names of dead people and fictitious names on payrolls and payments for work never done.
  • At the urging of the Uganda Debt Network, which monitors local spending, Ugandan officials identified substandard work in school construction and evidence of corruption by local officials and denied payment to the construction firm.
  • In the Philippines, Government Watch has used budget information since 2000 to monitor the delivery of school textbooks, the construction of new schools and other infrastructure, and of the distribution of disaster relief funds. With the cooperation of other groups, these efforts have dramatically cut the cost of textbooks to the government, improved the quality of the books, and substantially lowered the percentage of “no-show” contractors who previously failed to deliver contracted books.
  • Public Service Accountability Monitor, in South Africa’s Eastern Cape province, has used budget reports and other information it obtained as a starting point to monitor the misuse and irregularities in funds budgeted for essential services, such as education, healthcare, and clean water. This helped to highlight the poor quality of service delivery there.

Improvements over four years

The first Open Budget Survey was completed in 2006, when 59 countries were studied. The 2008 survey studied 85 countries, while in 2010, 94 countries were chosen. This provided a more balanced geographic sample of nations around the world.

“When the 40 countries for which there is comparable data for 2006, 2008 and 2010 are examined, the average OBI score goes from 47 in the 2006 survey to 56 in the 2010 survey, an increase of nearly 20% in a relatively short period,” said the IBP.

Some of the improvements in these countries were largely based on taking one basic and inexpensive step of publishing budget documents on their governments’ websites.

“The findings suggest that access to information can easily be improved at minimal cost and in relatively little time,” said Krafchik.

Countries that showed such improvement included Angola, Argentina, Egypt, Ghana, India, Liberia, Mongolia, Rwanda, Yemen and Vietnam.