Modern, Growing, Successful Province

Budget Speech 2016/17

Address by Mr Mac-Collen Jack (MPL) MEC for Finance, Economic Development and Tourism to the Provincial Legislature on the occasion of tabling Budget Vote 8 for Provincial Treasury, 24 May 2016

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Honourable Speaker- Mr. Kenny Mmoeiemang
Honourable deputy Speaker – Ms Juanita Beukes
Honourable Premier — Mme Sylvia Lucas
Colleagues in the Executive Council
Honourable Members of the Provincial Legislature
Executive Mayors, Councillors
Traditional Leaders
Leaders in the Religious and Business Community
Senior Management and Government Officials
Comrades and Friends
Ladies and Gentlemen

Honourable Speaker, this year marks the 20th anniversary of the signing of the Constitution of the Republic in Sharpeville on 10 December 1996 by President Nelson Mandela, which has its foundation in the Freedom Charter, to proclaim that South Africa belongs to all who live in it. A lot has been done to promote inclusion and a non-racial society.

However, in recent months, we were shocked and shaken when racism constantly reared its ugly head on social and electronic media, causing excruciating pain and anger amongst our people. There is a great need for the country to confront this demon of racism head on. We are proud of our democracy and what we have achieved in a short space of time. Our democracy is functional, solid and stable, we remain resolute and we will not allow a few incorrigible lumperts to destruct us from our cause.

Honourable Speaker, I wish to remind us of a few important anniversaries this year. This month we celebrated mothers’ day and the celebration is more memorable as it has been 60 years since the women’s march to the Union Buildings to demand an end to the pass laws. In the midst of the 20 000 strong group of women who had marched to the Union Buildings in Pretoria, was Kimberley born Frances Goitsemang Baard, an African National Congress stalwart and once National Treasurer of the ANC Women’s League, who dedicated her entire life to the struggle for the total emancipation of our people against colonial disposition and apartheid subjugation. “Wa thinta Abafazi wa thinta Imbokodo”.

As we approach Youth Month, let us also note that this year marks 40 years since the landmark June 16 student uprising in Soweto. We salute the class of 1976 for their bravery in standing up against the brutal apartheid regime. In her State of the Province Address this year, Premier Sylvia Lucas said, I quote: "The youth will be a focal point in our implementation of the 9 point plan which will be mainstreamed into all our programmes and initiatives. Provincial government has recently completed a profile of Young People in the Province and the Northern Cape Youth Development Strategy is underway which is aimed at responding comprehensively and meaningfully to the challenges facing young people." “Bavumeleni abantawana beze kum ningabaleli ngokuba ubukumkani bamazulu bobabo.” The future of the country and the province is in the hands of the Youth.

Honourable Speaker, the economic circumstances we face at present are the most complex and the context within which we are to discharge our responsibilities to deliver goods and services is changing constantly. Changed circumstances in this regard calls for a review of how we do our business. In this regard our responsibility as policymakers is to provide an honest, sober assessment of our environment.

Honourable Speaker, Provincial Treasury will continue to make sure that the budget process address the quality of life of our citizens and, indeed, ensure that the limited resource allocations we propose are directed towards the achievement of government priorities. Our focus for the 2016/17 financial year will again be directed towards the following among others: An improvement in the audit outcomes; ensuring transparent and fair supply chain management practices; monitor spending by departments through effective in-year monitoring of expenditure and sound cash management; maintaining the present healthy provincial cash position; and strengthening the assistance to municipalities and public entities to ensure prudence in financial management.

Honourable Speaker, the Legislature is the key oversight body of the public purse and as head of the Provincial Treasury in terms of the PFMA; I am accountable to the Legislature for the stewardship on the public funds. It is, therefore, the Legislature’s job to hold departments and their Executive Council accountable for the billions of rands allocated to them and to keep a watchful eye on the implementation of plans and budgets. It is further their responsibility to enforce the pillars of improved effectiveness of the public funds. These pillars entail consistent improvements to the financial management framework, rigorous analysis and targeted spending allocations in line with the priorities of government. Amongst these, fighting poverty and investing for growth remain high on the agenda.

Honourable Speaker, given the shrinking resources, the time has come where we should not tell story of what we could have done if we had enough money. Our story in these difficult circumstances must be to tell the citizens what we did with the limited resources at our disposal. It is incumbent upon us to tell the citizens what have we done, what have we achieved and what the outcomes or impacts of the spending has been on the ordinary citizens.

Honourable Speaker, Provincial Treasury is a key stakeholder and catalyst in ensuring the realization of service delivery outcomes both at Provincial and at local government level. Intensification of the support provided to municipalities will feature prominently in our 2016/17 priorities. Last year we implemented Municipal Support Programme. In this regard we assisted eleven (11) municipalities that attained disclaimers in the 2014/15 financial year. An intensive hands-on support was specifically provided to Dikgatlong and Renosterberg municipalities in strengthening their capacity to produce reliable Generally Recognised Accounting Practices (GRAP) Compliant Asset Registers and Annual Financial Statements. These initiatives should improve financial management and audit outcomes of the said municipalities. To intensify hands on support, this Support Programme will be rolled out to all struggling municipalities in the province.

Honourable Speaker, improving the financial situation at municipalities requires a holistic approach from all parties. As a collective, we have to find innovative measures to support our municipalities. Municipalities continue to face challenges in meeting their financial obligations, and this is evidenced by the non-payment of Eskom, Water Boards and other creditors.

Our assessment revealed that most municipal councils continue to approve budgets that are not funded and this in the long run leads to these financial problems. This is further aggravated by the non-implementation of credit control by municipalities. Failure to implement credit control results to massive outstanding debts by households and businesses including government departments.

To ensure that municipalities’ budgets are adequately funded so as to sufficiently fund service delivery, we will continue to critically assess municipalities’ budgets, emphasis being on how they utilise their Equitable Share to adequately fund free basic services. This review process will also be synergized with the support provided to municipalities in improving revenue collection.

Honourable Speaker, the total own revenue generated in the province as reported by municipalities as at 31 March 2016 amounts to R2.2 billion, which is an under collection by 9 percent. To assist municipalities to produce credible budgets, Provincial Treasury has developed a tariff setting tool which will allow all municipalities to set tariffs in a cost reflective manner that is transparent, fair and implementable, and thus improving collection rate.

Honourable Speaker, in partnership with National Treasury, Provincial Treasury is undertaking to launch a revenue enhancement project. This project will be analysing the integrity of municipal data with the specific aim of identifying the gaps in the billing systems, thereafter develop strategies in addressing the gaps identified and provide hands on support to address those challenges. The project is intended to be rolled out to all 32 municipalities.

I must also mention that progress on reducing government debt to municipality is slow, due to the incorrect classification of items in their

billing systems and the unavailability of supporting documents to support municipal claims. Some strides have, however, been made in strengthening the inter-governmental relations between all spheres of government in addressing these disputes. This extensive interaction between these spheres of government will also assist Provincial Treasury in taking appropriate steps in enforcing departments to settle their debts to municipalities.

Honourable Speaker, credible reporting allows us as decision makers to make informed decisions that improve the lives of our people. To improve reporting in this regard we are implementing Municipal Standard Chart of Accounts (mSCOA). To ensure that the implementation is successful, we have heightened awareness within the province through the establishment of the Provincial Integrated Consultative Forum. During the past year municipalities were guided on how to compile project implementation plan and perform a self-assessment that will enable the municipality to evaluate its current status.

The challenge, Honourable Speaker, in this regard is the lack of commitment from municipalities as most of them have not started with the implementation. This raises a great concern and I would like to caution municipalities that failure to implement the mSCOA and further meet the set milestones will result in dire consequences. I therefore encourage all municipalities that have not started with the implementation process to move with speed.

Honourable Speaker in enhancing financial governance, Provincial Treasury has consulted and engaged with all district municipalities to determine how to strengthen their shared internal audit services and Audit Committees. From these engagements it has come clear that that there is a need to strengthen this arm of governance. In this regard we have decided to pilot this programme in one district, namely Pixley Ka Seme. The successful implementation of the pilot project will result in the rolling out of the programme to all the districts. Furthermore we intend to intensify the advocacy for the creation of risk management structures within the districts and to ensure compliance to the national risk management framework through hands on support.

Honourable Speaker, it gives me great pleasure to report that since inception of the Municipal Finance Management Internship Programme (MFMIP), three hundred and twenty four (324) interns have been trained in the province, which yielded in one hundred and fifty four (154) interns being retained by municipalities, forty five (45) being absorbed by departments, private sector and municipalities in other provinces. The programme will continue for the next two years and already a total of one hundred and twenty one (121) interns have been registered.

Honourable Speaker, Infrastructure development is one of the key stimuli for economic development and job creation. The Provincial Infrastructure team will continue to give new impetus to the planning and implementation of major capital projects through the rollout of Infrastructure Development Implementation Programme (IDIP) phase four and the Northern Cape Infrastructure Delivery Management Framework (NCIDMS). This will raise the level of investment spending and thus contributing to the Socio Economic development and growth in the province.

Honourable Speaker, all spheres of government has been tasked to reduce spending on non-essentials and implement the prescribed cost containment measures. These measures should not be viewed as punitive measures but as required mechanisms to ensure that our economy is adequately cushioned from the current economic downturn. During the Provincial Budget Speech, I announced key cost containment measures that will be implemented by the province. I further announced that we will be intensifying our oversight role over the provincial budget.

In fulfilling this, we will analyse the utilization of public resources and advice on how resources can be allocated and redirected in order to mobilise and fund the investment we need to drive an all-inclusive socio-economic growth. I would like to inform Honourable Members that as part of tightening the belt we have revised the cost containment measures and these will be monitored on a monthly basis by Provincial Treasury.

To manage personnel cost we stated that guidelines and procedures for filling critical vacant funded posts in departments would be determined by the Office of the Premier and Provincial Treasury. Honourable Speaker, I am happy to inform this august house that the said guidelines and procedures had been determined and communicated to all departments and public entities and henceforth, all provincial departments and public entities are required to follow these guidelines and procedures for the filling of vacant funded posts going forward.

Honourable Speaker taking our lead from the Constitution of Republic of South Africa, Chapter 217 subsection (1) which states that when an organ of state in the national, provincial or local sphere of government contracts for goods or services it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost–effective. In achieving this objective the Province has rolled out the Supply Chain Modernisation reform initiatives, which includes the National Central Suppliers Database (NCSD). All provincial departments will be required to fully implement and utilise the NCSD by 1st June 2016 and municipalities will follow with effect from 1st July 2016.

To date 1,930 suppliers have registered on the Database. Let me take this opportunity to encourage all suppliers to register on the NCSD, this is a seamless and quick process that will give suppliers access to potential government procurement. Provincial Treasury fully commits to support all departments’ regional offices and municipalities with the implementation and utilisation of NCSD.

Honourable Members, in order to leverage on economies of scales, National Treasury is in the process of finalizing centrally negotiated contracts for travel and accommodation and cellular communication services. Interim measures have been issued through circulars and instruction notes and we wish to encourage all departments to comply with these circulars. Once the process is finalised, no department will be allowed to enter into contract in relations to these services.

Honourable Speaker, payment of suppliers within 30 days is one of the pillars that ensure the sustainability of SMMEs. The provincial average of non-compliance has regressed from 9% to 10% in the past financial year. This statistic needs to be reduced as a matter of urgency. We need to take cognizance of the fact that SMMEs are key in driving economic growth and late payments not only forces SMMEs to close down but is counterproductive and inhibits economic growth. Provincial Treasury will continue to assist those departments that are still struggling to pay suppliers on time with the development of a business case that will outline service delivery requirements and a holistic strategy to address the shortcomings.

Honourable Speaker our shared internal audit model has proved to be very successful and the most cost effective model in improving financial governance. Based on the positive outcomes since full implementation of this model, we have decided to expand the internal audit services to the Northern Cape listed public entities as from 1st April 2016. This will ensure that these entities’ internal controls are improved and comply with the PFMA.

Honourable Speaker all these initiatives, amongst others, will be driven by the skilled and competent officials of the department within the allocated financial resources. We have made a firm commitment to be true activists in the promotion of sound financial management that supports sustainable economic growth. All our approaches will be client oriented and executed in a professional and effective manner.

Honourable Speaker, it gives me pleasure to table the Budget for Vote 8 Provincial Treasury for 2016/17. The total budget for Vote 8 is R222 million in the 2016/17 financial year. This represents a decrease of R2.3 million or one (1) per cent compared to the 2014/15 adjusted appropriation of R224 million.

Provincial Treasury’s allocated budget for 2016/17 financial year is as follows:

Programme1: Administration received an allocation of R82.1 million. The key outcomes of this allocation include the delivery of strategic support in relation to corporate services and the provision of effective financial management in pursuit of a clean audit outcome.

Furthermore, the department has recently implemented an Information Technology Services Management system (ITSM) which allows departmental and provincial users’ to resolve system related faults and thus improve turn-around time.

Programme 2: Sustainable Resource Management received an allocation of R44.2 million. The budget includes an allocation for regional offices that give hands on support municipalities in the above mentioned initiatives. This programme plays a pivotal role in monitoring and exercising control over provincial and municipal budgets, the enhancement of revenue management, ensure credible and socio-economic variable that support resources allocation.

Programme 3: Asset and Liabilities received an allocation of R42 million. With the allocation, this programme will among others focus on compliance with the supply chain and asset management prescripts. The programme is also playing a major role in maintaining system security of the highest standards on the transversal systems. The infrastructure management unit within this programme will conduct a review of the effectiveness of existing infrastructure at Local Government to determine how the system can be improved.

Programme 4: Financial Governance received an allocation of R23 million to promote accountability and good governance through substantive reflection of financial activities as well as compliance with financial norms and standards. Strengthening and development of stringent accounting and financial management control practices within provincial and local government will also be a priority for this year.

Programme 5: Internal Audit and Audit Committees is allocated R30.4 million. With this allocation, the unit will continue to ensure that Internal Audit and Audit Committees function effectively and are value adding partners to the province.

Honourable Speaker, we are acutely aware of the extent of need – for employment, for broader participation in economic activity, for relief from the trap of persistent poverty, for housing, better education, and reliable health services. These challenges have disciplined our policies and budget plans over the last twenty years, and they remain firmly in mind in the growth and development strategy for the decade ahead.

Finally, permit me to express appreciation to the Acting Head of Department and the team he leads, and the ministerial staff for their dedication and effort. Their combined effort has brought measurable improvements in the quality of life of so many ordinary citizens.

I hereby table the 2016/17 budget of the Provincial Treasury for the consideration of this house.

I thank you.

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