Rethinking public resource allocation: Basic service provision and economic performance in South Africa

IMPACTThis article speaks to senior and middle-level public finance practitioners: budget analysts and program managers in national and provincial treasuries; officials who design intergovernmental grants and equitable share formulae; municipal chief financial officers and integrated development planning managers; and public sector auditors and performance evaluators. Using South African data, it shows that the number of households relying on municipal basic and free basic services is more closely associated with economic performance than poverty, unemployment or infrastructure investment: years in which more households depended on this support were years of weaker economic performance. The practical message is that how budgets are prioritized matters as much as how much is spent. Practitioners can use the findings to argue for treating basic services as economic rather than purely social expenditure, for protecting these programs during fiscal consolidation, for sequencing infrastructure and service grants ahead of transfers that are likely to be less effective where services are absent, and for adding economic outcome indicators to service delivery and audit reporting.