TABLE OF CONTENTS
Page
- INTRODUCTION AND OVERVIEW
- THE DEVELOPMENT AND IMPLEMENTATION OF PUBLIC BUDGETING
- The different budgeting systems 14
- Zero-based budgeting system 16
- Estimates of national expenditure 19
- The different budgeting systems 14
- The budget cycle 21
- Amendments to budgets as a result of policy changes 22
- Variables impacting on public budgeting 24
- Conclusion 25
3. THE DEVELOPMENT AND IMPLEMENTATION OF STRATEGIC PLANNING
- Introduction 26
- What is strategy? 27
- Criteria for effective strategy 27
- Definition of strategic planning and strategic management 28
- Strategic planning versus strategic management 28
- Strategic management models 29
- Levels of strategy formulation 30
- A description of the strategic management process 31
- The relationship between strategic management and 32
management of change
- Stages of the strategic planning process 34
- Benefits and risks of strategic management 35
- The relationship between strategic planning, human 35
resources, planning and tactical planning
- The impact of politics on strategic planning 37
- The role of a board in strategic planning 38
- Conclusion 39
4. STRATEGIC PLANNING, BUDGETING AND MONITORING IN THE MQA
- Introduction 41
- The organisation of the MQA 41
- The statutory mandate of the board 44
- License to practice 45
- Strategic plan 46
- Format of the strategic planning process 46
- Outcomes of the strategic planning session 48
- Strategic objectives of the board for the period 2005–2010 48
- Overall assessment 54
- Income of the MQA 55
- Definitions of mandatory and discretionary grants 56
- Five year cash flow statement 57
- Budgets 60
- Assessment of administrative expenditure for the 2005/2006 61
and 2006/2007 financial year
- Assessment of administrative expenditure for the 2007/2008 62
and 2008/2009 financial year
- Discretionary projects and grants for the period 2005/2006–2009/2010 62
- Monitoring and evaluation in the MQA 64
- Conclusion 65
5. STAKEHOLDER VIEWS ON THE BUDGETING AND STRATEGIC PLANNING PROCESS IN THE MQA
- Introduction 67
- Observation of meetings 67
- Assessment of meetings observed 70
- Interviews with stakeholder conveners 70
- Strengths and weaknesses 73
- Conclusion 74
6. CONCLUSION AND RECOMMENDATIONS
- Introduction 75
- Objectives of this study 76
- Concluding remarks 77
- Recommendations 79
- Areas of possible future research 80
- Conclusion 80
7. LIST OF SOURCES 82
Appendix A: Summary of views by the board after the strategic planning session, 2007 Appendix B: Significant changes in the various sectors of the mining industry Appendix C: List of projects and grants for the 2007/2008 financial year
Appendix D: Questionnaire
LIST OF FIGURES AND TABLES
| FIGURE 2 – 1 | A typical budget of voted funds in respect of the National Department of Housing for the 2003/04 financial year | Page 20 |
| FIGURE 2 – 2 | Template for key performance indicators as per the 2008 ENE | Page 20 |
| FIGURE 2 – 3 | The budget cycle | Page 22 |
| FIGURE 3 – 1 | Levels of strategy formulation | Page 30 |
| FIGURE 3 – 2 | The strategic management process | Page 31 |
| FIGURE 3 – 3 | The management of change process | Page 33 |
| FIGURE 3 – 4 | The relationship between the business (strategic) planning process and human resources planning process | Page 36 |
| FIGURE 4 – 1 | The strategic organisational structure of the MQA | Page 42 |
| TABLE 4 – 1 | Transformation of the sector though skills development | Page 50 |
| TABLE 4 – 2 | Development of a health and safety environment for the mining and minerals sector | Page 51 |
| TABLE 4 – 3 | Development of the current workforce | Page 52 |
| TABLE 4 – 4 | Development of new entrants to the labour market | Page 52 |
| TABLE 4 – 5 | The stimulation of new enterprise development | Page 53 |
| TABLE 4 – 6 | Facilitation of the transition from being employed to unemployed | Page 53 |
| TABLE 4 – 7 | The delivery of quality training and development | Page 54 |
| TABLE 4 – 8 | Overall assessment of strategic objectives | Page 55 |
| TABLE 4 – 9 | Five year cash flow statement including projections | Page 58 |
| TABLE 4 – 10 | Statement of financial performance | Page 59 |
| TABLE 4 – 11 | Administrative budgets of MQA business units | Page 60 |
| TABLE 4 – 12 | Budget, expenditure and variances of discretionary projects and grants | Page 63 |
LIST OF ABBREVIATIONS
| ABET | Adult Basic Education and Training |
| ANC | African National Congress |
| AO | Accounting officer |
| AA | Accounting authority |
| ASGI-SA | Accelerated Shared Growth Initiative of South Africa |
| BEE | Black economic empowerment |
| CBO | Community based organisation |
| CEO | Chief executive officer |
| DME | Department of Minerals and Energy |
| DoL | Department of Labour |
| ENE | Estimates of national expenditure |
| ETDP | Education, training and development practitioners |
| ETQA | Education, training and quality assurance |
| EXCO | Executive committee |
| FET | Further Education and Training |
| GDP | Graduate Development Programme |
| GEAR | Growth Employment and Redistribution |
| HDSA | Historically disadvantaged South African |
| HRP | Human resources planning |
| IDWG | Inter-departmental working group |
| ISO | International Standards Organisation |
| ISOE | Institute of Sectoral and Occupational Excellence |
| JIPSA | Joint Initiative on Priority Skills Acquisition |
| MHSA | Mine Health and Safety Act 29 of 1996 |
| MMS | Mining and minerals sector |
| MOU | Memorandum of understanding |
| MPRDA | Minerals and Petroleum Resources Development Act 28 of 2002 |
| MTEF | Medium term expenditure framework |
| MQA | Mining Qualifications Authority |
| NBI | National Business Initiative |
| NGO | Non-governmental organisation |
| NLRD | National Learner Record Database |
| NQF | National Qualifications Framework |
| NSDS | National Skills Development Strategy |
| NSF | National Skills Fund |
| NUM | National Union of Mineworkers |
| PDA | Personal digital assistant |
| PFMA | Public Finance Management Act 1 of 1999 |
| PPBS | Planning Programme Budgeting System |
| PRC | Presidential Review Commission |
| RDP | Reconstruction and Development Programme |
| RPL | Recognition of prior learning |
| SARS | South African Revenue Services |
| SAQA | South African Qualifications Authority |
| SCOPA | Select Committee on Public Accounts |
| SDA | Skills Development Act 97 of 1998 |
| SDLA | Skills Development Levies Act 9 of 1999 |
| SEDA | Small Enterprise Development Agency |
| SETA | Sector and Education and Training Authority |
| SLA | Service level agreement |
| SMME | Small, medium and micro enterprises |
| SSP | Sector Skills Plan |
| TRG | Technical reference groups |
| UNISA | University of South Africa |
| WSP/ATR | Workplace Skills Plan/Annual Training Report |
| ZBB | Zero-based budgeting |
ABSTRACT
Following extensive research into mine health and safety fatalities by the Leon Commission in 1996, the Mining Qualifications Authority (MQA) was established as an organ of state. The study focuses on the relationship between strategic planning and budgeting and how well these concepts are implemented within the MQA.
The study found that there is definite alignment between the budgeting and strategic planning processes of the MQA. The strategic planning process in the MQA is well- formulated through an annual strategic planning session.
The strategy identified is that Board and Committee members with no financial management experience should attend the training course specifically developed by the University of South Africa (Unisa), namely “Roles of a board in the management of public entities” and the MQA should play a more central role in health and safety through the development of health and safety programmes aimed at reducing fatalities.
KEY TERMS
Strategic Planning, Budgeting, Strategic Management, Operational Plan, Alignment, Board, Executive Authority, Financial Management, Stakeholders, Mining and Minerals Sector.
SPECIAL WORD OF THANKS
A special word of thanks and my sincere gratitude goes to the following people who have played an invaluable role in the processes leading up to the submission of this dissertation.
- Prof JS Wessels for his guidance and support in the finalisation of the research proposal leading to the research dissertation.
- My supervisor, Prof Koos Pauw for his support and valuable input to the research dissertation.
- My co-supervisor, Mr A Van Schalkwyk for his support and valuable input to the research dissertation.
- Dr Florus Prinsloo, a colleague, for his valuable contributions.
- Ms Melanie Malan, the Librarian for the Department of Public Administration and Management at the University of South Africa.
- The management and stakeholders of the Mining Qualifications Authority.
CHAPTER 1 INTRODUCTION AND OVERVIEW
INTRODUCTION
This chapter provides a background and introduction to the dissertation. It also indicates the stimulus for the research and research objectives. The scope of the research, including timeframes, is articulated. Furthermore, this chapter provides an overview of the research methodology, data collection procedures and key concepts of the dissertation.
In conclusion, an outline of the six chapters is covered.
BACKGROUND
The Mining Qualifications Authority (MQA) is an organ of state established in terms of the Mine Health and Safety Act 29 of 1996 after extensive research into mine health and safety fatalities by the Commission of Inquiry (Leon Commission) in 1996.
The MQA was later also registered as a Sector Education and Training Authority (SETA) for the Mining and Minerals Sector (MMS) in terms of the Skills Development Act (SDA) 97 of 1998.
The MQA is tasked with the responsibility to:
- develop a sector skills plan
- implement, register and promote learnerships
- approve workplace skills plans and annual training reports
- liaise with the National Skills Authority on skills development needs for the sector
- collect levies in terms of section 7 (1) of the Skills Development Levies Act (SDLA) 9 of 1999 (South Africa 1999 b, section 10 a–g).
The primary function of the MQA is to provide an institutional framework to implement national, sector and workplace strategies to improve the skills of the South African mining workforce (South Africa 2006 b).
The legacy of the mining industry prior to 1994 was that the industry was a male dominated environment with an estimated 50% of illiterate people. In occupational categories such as general workers, blasting assistants and labourers, approximately 60% cannot read or write and do not have any formal schooling. Further skills shortages in the mining industry include electrical and mechanical engineers, geologists, surveyors and technical support staff (Van Zyl 2006:10–27).
The accounting officer (AO) of an institution must prepare a strategic plan for the Medium Term Expenditure Framework (MTEF) which is for a period of three years. The strategic plan must indicate output deliverables and measurable objectives including spending plans over the MTEF period (South Africa 1999 c, section 5).
The Presidential Review Commission (PRC) placed increased emphasis on the alignment of strategic planning initiatives to budget allocation by government departments and organs of state (South Africa 1998:49 a).
The PRC also indicated that the lack of performance by organs of state is predominantly as a result of poor strategic planning processes including the following:
- There is no synergy and integration of strategic planning, prioritisation, financial planning and resource allocation processes.
- There is a lack of financial and budget management capacity.
- Adequate information is not generated to facilitate political decision-making.
- The focus is on control and adherence to regulations rather than accountability and achieving of results.
- There is a lack of budgetary guidance by treasuries.
- Staffing and resources are divorced from strategic planning (South Africa 1998:49 a).
STIMULUS FOR THE RESEARCH
Public entities are established with specific goals and objectives. In the case of the MQA, the goals are to ensure skills development in the MMS and to implement processes to eliminate the number of fatalities in mines. The increase in mine fatalities during 2008 in Gold Fields and Harmony gold mines and political pressure to find solutions, placed more pressure on the MQA to develop programmes to reduce mine fatalities, including the provision of funding (Hazelhurst 2008:4).
Seen against the increased demand to fund programmes such as bursaries, the limited funds make the concept of strategic planning and accurate budgeting paramount to success. The concept of strategic planning has over the past years gained momentum with renewed emphasis on the alignment of strategic objectives to budgeting (Boyle 2008:1).
In a public entity, the strategic planning process should inform the budget provisions for a particular financial year. This process should identify the key objectives of an institution inclusive of the required financial and human resources to meet the set objectives (South Africa 1999 c).
The budget of an institution is a useful tool to monitor the implementation of a correctly costed operational plan. In the South African context strategic planning is a compulsory part of strategic budgeting which is to ensure that funds are utilised for those objectives identified as part of the strategic planning process (Boyle 2008:1).
In the 2008/2009 financial year government’s consolidated spending programme is estimated at R613,3 billion based on the strategic plans and objectives to be achieved by departments. This results in a deficit of R2 billion to be funded from fixed or portfolio investment. In an assessment of the key drivers in terms of expenditure, education and training remains the single biggest item at R121 billion (Boyle 2008:1).
A credible budget starts with strategic planning by departments and the establishment of processes to link strategic plans to the budget. Departments must review their strategic plans, priorities and skills needs. Budget requests for capital programmes must include
detailed costing and spending plans over the budget period. The outputs and outcomes should be identified and how these fit into the strategic plan and programme objectives (Hazelhurst 2008:1).
Against this background the author is of the opinion that the findings of the PRC in section 1.2 and any improvements on these findings since 1998 by organs of state need to be tested against the process of compiling a budget and the alignment thereof to the strategic plan as described by Hazelhurst above. The research will determine whether the MQA meets these requirements (as seen by Hazelhurst) in the budgeting and strategic planning process.
This study is directly linked to the researcher’s field of specialisation. The results of this study can be used to enhance the process of strategic planning and budgeting in the MQA. The researcher has chosen this topic because of his involvement in strategic planning and budgeting for the last thirteen years.
Whilst in the Department of Housing, he was responsible for strategic planning, budgeting and corporate governance matters of organs of state falling under the Department of Housing. Currently with the Mining Qualifications Authority, the researcher is responsible for the administration of the appointment of the Board, including its roles and responsibilities, of which strategic planning is of the utmost importance.
The researcher has chosen this particular entity because of his involvement with the entity whilst within the Department of Minerals and Energy for the last three years. In the process, he has also established relationships with the stakeholders and management of the MQA that will be useful in the execution of this assignment.
