N5 – Module 3
Monetary Control means: • the manipulation of the money supply; • the control of interest rates – (the reserve bank may increase the lending rate, thereby increasing the rate by which companies and individuals borrow money; this has a direct affect on inflation and growth);
• the control of exchange rates (rates of exchange with foreign currencies); • the indirect control of the inflation rate; • credit control (increasing/lowering rate of interest).
Fiscal Control means: • changes in the spending of central government and its taxation policies; • control is therefore exercised through taxation and not through the banking system (money supply).
The Annual Budget (more in Module 6) The presentation of the annual budget towards the end of February, in Parliament, is considered one of the most important events on the political calendar. In his budget speech, the Minister of Finance announces the government budget proposals. The financial activities of the country and the supply of services to the citizens of the country through various departments is intimately affected. He will also announce the most important income and expenditure proposals – exactly how the government intends receiving funds to supply services, and also how it intends spending the money. See the Minister of Finance, Mr Pravin Gordhan, interviewed in Module 3 on
www.Publicfinance4sa.info
The person responsible for the execution of the budget at various levels is as follows:
Central level Minister of Finance supported by officials/expert advisors and usually a Deputy Minister
Local level Chairman of Finance Committee who chairs the leading executive body
The Stabilisation Account The Minister of Finance is in charge of the administration of public debt – see tasks and duties on previous page. A stabilisation account is created with the central bank in which surpluses are deposited. He alone has the authority to transfer to or to withdraw money from this account. He does this in collaboration with the central bank – the Governor of the Reserve Bank acts as the main advisor to the government on monetary matters.
Chairperson of the Finance Committee This office is the local government version of the ministry of finance. Although they do not enjoy any statutory authority except the authority as prescribed in the regulations of all local authorities by provincial and central legislature, the office nevertheless carries with it important duties and functions. The person elected should always be a distinguished member of the council – often the leader of the local council itself.
The chairperson, with their committee members, acts as a link between the council and all the other committees responsible for various services and tasks. The chairperson of the finance committee is called upon to account for the proposals, recommendations and financial activities of the committee. They are expected to adopt and encourage good communication channels between the finance committee itself and all the other committees, and should be in a position to exert influence on the chairperson and to persuade them to adopt the recommendations of the finance committee. A poor or weak chairperson often means that services will not be rendered efficiently, as all decisions made by the chairperson of the finance committee directly affects the daily activities of
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