Role of the Central Government in the Financing of Public Institutions
Case Study: Inflation Currently, the Reserve Bank has a policy of inflation targeting. That means that the bank wishes to keep the inflation rate (the rise in prices from year to year) within the 3-6% range. It does so by controlling the interest rates. The reserve banks sets the repurchase (or repo) rate. This is the rate at which it lends money to commercial banks like Standard Bank or ABSA. The banks then use this rate to determine the prime rate – the rate that they lend out money to favoured customers. If inflation is running too high, the reserve bank will increase the interest rate, to encourage people to save money and stop them from borrowing, leading to a decrease in inflation. In this way the Reserve Bank controls the economy by manipulating the supply of money and interest rates.
Tender Boards An act of Parliament will regulate the acquisition (procurement) of any goods or services through an impartial tender board. This board shall be fair and is required to give reasons for their decisions to interested parties if requested. No person, particularly those employees of the state, shall be allowed to interfere with the decisions and procedures of this board.
A Tender Board is a committee or institution involved in the government procurement procedure (the process of acquiring services and goods (buying or ordering them) – such as houses, schools, equipment, for example. It formulates requirements for the intended purchase of goods or services, compiles these formulations in tender documents, and hands these documents out to interested suppliers, usually for a fee. After the closing date for bids, the tender board evaluates the proposals and decides on the awarding of the tender itself (who gets to satisfy the demand by supplying the services or goods). Members of the board should be impartial, and have no financial interest in the companies that win tenders, otherwise this could result in corruption.
On the following pages you will find the entire Chapter 13 dealing with finance quoted directly from The Constitution:
EXTRACT FROM THE CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA as adopted by the Constitutional Assembly on 8 May 1996.
General financial matters
National Revenue Fund 1. There is a National Revenue Fund into which all money specified by an Act of Parliament and received by the national government must be paid.
2. Money may be withdrawn from the National Revenue Fund only (a) in terms of an appropriation by an Act of Parliament; or (b) as a direct charge against the National Revenue Fund, when it is provided for in the Constitution or an Act of Parliament.
3. A province’s equitable share of revenue raised nationally is a direct charge against the National Revenue Fund.
Equitable Shares and Allocations of Revenue 1. An Act of Parliament must provide for – (a) the equitable division of revenue raised nationally among the national, provincial and local spheres of government;
(b) the determination of each province’s equitable share of the provincial share of the revenue; and
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