Modern, Growing, Successful Province

Budget Speech 2011

Address by Mr. J. Block MEC for Finance, Economic Development and Tourism to the Provincial Legislature on the occasion of tabling the Northern Cape appropriation bill on 02 March 2011

Honourable Speaker Honourable Premier, Ms Hazel Jenkins
Members of the Executive Council
Honourable Members of the Provincial Legislature
Mayors and Councillors present
Distinguished guests Comrades and Friends
Ladies and Gentlemen

On the 7th – 8th March the Province will be hosting the celebrations of the International Women’s Day. The International Women’s Day is celebrated in many countries around the world. It is a day when women are recognized for their achievements without regard to divisions, whether national, ethnic, linguistic, cultural, economic or political. It is an occasion for looking back on past struggles and accomplishments, and more importantly, for looking ahead to the untapped potential and opportunities that await future generations of women.
In 1975, during International Women's Year, the United Nations began celebrating International Women’s Day on 8 March. Two years later, in December 1977, the General Assembly adopted a resolution proclaiming a United Nations Day for Women's Rights and International Peace to be observed on any day of the year by Member States, in accordance with their historical and national traditions. In adopting this resolution, the General Assembly recognized the role of women in peace efforts and development and urged an end to discrimination and an increase of support for women’s full and equal participation.
International Women’s Day first emerged from the activities of labour movements at the turn of the twentieth century in North America and across Europe.

The first National Woman's Day was observed in the United States of America on 28 February 1909. The Socialist Party of America designated this day in honour of the garment workers’ strike in New York, where women protested against working conditions.
The Socialist International, meeting in Copenhagen 1910, established a Women's Day, international in character, to honour the movement for women's rights and to build support for achieving universal suffrage for women. The development was greeted with unanimous approval by the conference of over 100 women from 17 countries, which included the first three women elected to the Finnish Parliament.
As a result of the Copenhagen initiative, International Women's Day was marked for the first time (19 March) in Austria, Denmark, Germany and Switzerland, where more than one million women and men attended rallies. In addition to the right to vote and to hold public office, they demanded women’s rights to work, to vocational training and to an end to discrimination on the job.
Between1913 - 1914 the International Women's Day also became a mechanism for protesting World War I. As part of the peace movement, Russian women observed their first International Women’s Day on the last Sunday in February. Elsewhere in Europe, on or around 8 March of the following year, women held rallies either to protest the war or to express solidarity with other activists.
Honourable Speaker, it was not by mistake that when the democratic government led by the African National Congress was voted into power, one of the first days to be observed was the recognition of our women in line with our own women struggle against the pass law.
Since those early years, International Women's Day has assumed a new global dimension for women in developed and developing countries alike. The growing international women's movement, which has been strengthened by four global United Nations women's conferences, has helped make the commemoration a rallying point to build support for women's rights and participation in the political and economic arenas. Increasingly, International Women's Day is a time to reflect on progress made, to call for change and to celebrate acts of courage and determination by ordinary women who have played an extraordinary role in the history of their countries and communities.

The United Nations and Gender Equality
The Charter of the United Nations, signed in 1945, was the first international agreement to affirm the principle of equality between women and men. Since then, the UN has helped create a historic legacy of internationally-agreed strategies, standards, programmes and goals to advance the status of women worldwide.
Over the years, the UN and its technical agencies have promoted the participation of women as equal partners with men in achieving sustainable development, peace, security, and full respect for human rights. The empowerment of women continues to be a central feature of the UN’s efforts to address social, economic and political challenges across the globe. To show that we care about issues affecting women President Jacob Zuma created a ministry of women, children and the people with disabilities. Last year the global theme for the International Women’s Day was “Equal rights, equal opportunities: Progress for all”. This year’s global theme is “Equal access to education, training and science and technology: Pathway to decent work for women”.
Honourable Speaker, equally important, is the fact that during this month on the 21st March our country will be commemorating the Sharpeville massacre that took place on 21st March 1960 where at least 180 black Africans were injured and 69 killed when the brutal South African police opened fire on approximately 300 demonstrators, who were protesting against the pass laws in Sharpeville. The Sharpeville massacre, signalled the start of armed struggle in our country, and prompted worldwide condemnation of South Africa's apartheid policies.
In this month of March, we will be celebrating the international victories and challenges of women. It is appropriate that we reflect on the advances we made to create a human rights culture in our country. It is thus befitting that we dedicate this budget and its resultant results to the memory of our fallen heroes and heroines.
We remember Brain Hermanus, Mervin Erlank, Peter Cedrass, James Letswalo, Mayenzeke Ntlathi, Lawrence Liholo, Cobus Hoorn, Dorothy Peters, Jim Summerrs, Dr. Modise Matlaopane, Mme Mieta Seperepere, and the many who sacrificed their lives so that we can beer the fruits of Freedom.
They fought and sacrificed so that we may use the instrument of government as a tool to improve the quality of life for our people. We are just but placeholders to manage our resources, environment and finances so that future generations may bear the fruits of our toil. We are mindful of this task and responsibility and we keep the memory of our departed heroes and heroines as our guiding star in our quest to uphold the dignity of our people.

Global Economic Outlook
The global recovery is off to a stronger start than anticipated earlier but is proceeding at different speeds in the various regions. Following the deepest global downturn in recent history, economic growth solidified and broadened to advanced economies in the second half of 2009. In 2010, world output is expected to rise by 4 percent. This represents an upward revision of ¾ percentage point from the October 2009 World Economic Outlook. In most advanced economies, the recovery is expected to remain sluggish by past standards, whereas in many emerging and developing economies, activity is expected to be relatively vigorous, largely driven by buoyant internal demand. Policies are needed to foster a rebalancing of global demand, remaining supportive where recoveries are not yet well sustained.
In advanced economies, activity has moderated less than expected, but growth remains subdued, unemployment is still high, and renewed stresses in the euro area periphery are contributing to downside risks. In many emerging economies, activity remains buoyant, inflation pressures are emerging, and there are now some signs of overheating, driven in part by strong capital inflows. Most developing countries, particularly in sub-Saharan Africa, are also growing strongly. Global output is projected to expand by 4½ percent in 2011 an upward revision of about ¼ percentage point relative to the October 2010 World Economic Outlook. This reflects stronger-thanexpected activity in the second half of 2010 as well as new policy initiatives in the United States that will boost activity this year. But downside risks to the recovery remain elevated. The most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally. These need to be complemented with policies that keep overheating pressures in check and facilitate external rebalancing in key emerging economies.
Most countries in sub-Saharan Africa have recovered quickly from the global financial crisis, with the region projected to grow 5½ percent in 2011. But the pace of the recovery has varied within the region. Output growth in most oil exporters and low-income countries is now close to pre-crisis highs. The recovery in South Africa and its neighbours, however, has been more subdued, reflecting the more severe impact of the collapse in world trade and elevated unemployment levels that are proving difficult to reduce.
Prior to the recent global crisis, sub-Saharan Africa enjoyed a period of strong growth. Growth in the region was particularly impressive at more than 6 percent during 2004–08, second only to developing Asia. This reflected the improved political environment, favourable external conditions, and sound macroeconomic management. These strong initial conditions helped most countries in the region weather the worst effects of the food and fuel price hikes of 2007–08 and the subsequent global financial crisis. Many countries supported output by injecting fiscal stimulus and lowering interest rates. As a result, the region continued to grow at nearly 5 percent in 2009, although output fell in the region’s middle-income countries—a grouping dominated by South Africa. In most of the oil-exporting countries growth slowed, with the notable exception of Nigeria.
Most countries in the region have now returned to pre-crisis growth rates. In 2011, these countries are projected to grow by 6½ percent. Domestic demand is being supported by automatic stabilizers, expansion in public investment and social support programs, and continued monetary accommodation. Growing trade ties with Asia are also playing a role in the region’s recovery, primarily through commodity markets. Output growth has rebounded in South Africa, but high unemployment and subdued confidence are expected to continue to dampen the pace of recovery, restricting growth to about 3½ percent in 2011.
Risks remain weighted to the downside, however. The pace of recovery in Europe, the dominant trade partner for most non-oil-exporting countries in sub-Saharan Africa, is modest and uncertain. More immediately, the sharp pickup in fuel and food prices stands to make a significant impact on many non-oil-exporting countries. Rising food prices are likely to affect the urban poor in particular, given the high share of food in their consumption baskets. In response, governments will need to consider targeted social safety nets, with attendant fiscal costs. Managing these pressures, particularly against the backdrop of elevated fiscal deficits and narrowing output gaps, will be an important challenge for the region in 2011—a year with a busy political calendar, including perhaps 17 national elections. Our own local government elections are certainly to be announced in the near future.
With recovery at hand in most countries in the region, the emphasis of macroeconomic policies needs to shift: The New Growth Path outlines our approach to accelerate growth and employment, focusing on several key drivers including:

  • Continuing and broadening public investment in infrastructure,
  • Targeting more labour-absorbing activities in the agricultural and mining value chains, manufacturing, construction and services, ? Promoting innovation through “green economy” initiatives and supporting ruraldevelopment and regional integration. Sustained and more robust rise in economic activity over the medium term, however, will require a recovery in consumer demand and private investment, job creation, and careful management of debt and inflation pressures.

The recession had a far reaching impact on South Africa and in particular our province with raising joblessness and falling incomes affecting millions of people. The economic activity has started to revive but it will take time for stronger confidence to boost consumption, employment and investment. Real GDP growth is projected to rise to 2.3 per cent in 2010 and 3.2 percent in 2011. The improved outlook is supported by expansionary fiscal and monetary policies, public investment, high commodity prices and the upturn in global demand.
Recovering jobs lost in 2009 and reducing high levels of structural unemployment will require much more greater focus by government, business and labour. To achieve this, macro-and microeconomic policies will have to work is tandem to remove constraints to growth and employment, and enhance competitiveness.

Fiscal Response to the Recession and Recovery
Economic growth is the prerequisite for reducing poverty and improving livelihoods. By offsetting the effects of the business cycle, countercyclical fiscal policy contributes to growth and job creation. When the economy is doing well, the budget balance improves to build fiscal space, limit increases in the cost of financing and counteract inflationary pressures. When the economy is underperforming, government allows the budget balance to deteriorate, using the fiscal space built up beforehand to fund expenditure and stimulate economic activity. Owing to sound management of the fiscus during the preceding six years of strong economic growth (2002-2007), government entered the 2008-2009 recession with healthy public finances and a comparatively low level of debt.
This allowed for a flexible response to deteriorating economic conditions. Spending increased to reinforce the social security net during a period of exceptional hardship for many South Africans, and provided an economic stimulus through the infrastructure programme. To ensure that public expenditure is not crowded out by an ever-rising interest burden, government debt needs to be managed sustainably. Long-term fiscal planning, predictable actions and credible policies create confidence in the future of the economy. South Africa’s ability to continue building roads, schools and hospitals will depend on how quickly the economy grows, the long-term level of spending, and the choices made about financing social programmes.
The projected budget deficit in 2010/11 is R142.4 billion, or 5.3 per cent of GDP. As economic growth strengthens, and tax revenue recovers, government will reduce the budget deficit gradually to 3.8 per cent of GDP by 2013/14.
Over the next three years, as economic growth strengthens, government will consolidate the fiscal position by moderating the rate of expenditure growth. Priority spending will continue to be financed as government stabilises its borrowing. Fiscal policy will maintain this trajectory as long as economic growth continues to strengthen, rebuilding fiscal space to respond to future crises.
Tax revenue, which accounts for most revenue available to government, has become more sensitive to changes in the economic cycle since the tax base was restructured in the early 1990s. As a result, tax revenue tends to accelerate when the economy is doing well, and to slow sharply when the economy is underperforming. If revenue does not cover expenditure, borrowing is a short-term solution, but higher government expenditure as a share of GDP ultimately requires a growing tax base or higher tax rates. At the height of the recession in 2009/10, revenue underperformed expectations by R60.6 billion. Over the medium term, tax revenue is expected to recover as the economy grows and the tax base broadens.

Municipal Finance
Honourable Speaker, last year we reported that the viability and sustainability of municipalities depends heavily on revenue from rates and taxes and for services rendered. We said that one of the challenges in this regard is the fact that some provincial and national government departments have not regularly paid for these services resulting in considerable amounts of money being owed to municipalities. In this regard, we said that the Provincial Treasury has been tasked to work with provincial departments to ensure that a solution is found and that municipalities are paid what is due to them. We indicated that this would go a long way in alleviating the financial difficulties of our local municipalities and improve the provision of services.
Our analysis of debts owed to municipalities indicated that Frances Baard District is the one owed the largest amount at the end of September 2010 by government departments. Government departments owed the municipalities R142, 022 million according to the consolidated report of the district, of which R65, 154 million was older than 90 days, R35, 501 million was between 60 and 90 days old and R40, 178 million was not older than 30 days.
Our approach, given the size of the debt in the district, was that initial attempt should be made to resolve the Sol Plaatje Local Municipality debts which when resolved would address the biggest portion debts owed to municipalities. We engage the local municipality but we were met with the most difficult challenges. The municipality not being able to provide supporting documentation that we can use to convince provincial departments to pay the outstanding accounts. The other challenge that we faced was that the municipality did not bill the contractors who build the new correctional services facility and the contractor of the incomplete mental hospital which both constitute the biggest amounts owed to the municipality.
The municipality does not differentiate between the section 21 schools that are liable to pay for their services and the non section 21 schools that must be paid by the Department of Education. We are currently arranging to have contract services of an accountant that will be deployed at the municipality for a period not exceeding two months to first resolve the long outstanding debts and help the municipality develop a simple system to tract outstanding government accounts.
Last year we reported that government will focus on ensuring that municipal finance management is improved and that to this end we have developed strategies and interventions to address these challenges and ensure that municipalities deliver on their mandate. Amongst others, was an initiative between the Provincial Treasury and the Department of Corporative Governance, Human Settlement and Traditional Affairs to build capacity for sound financial management at district level. This initiative will be full implemented in the 2011/12 financial year. We also indicated that in collaboration with District Municipalities and the Development Bank of South Africa approximately 150 people will be trained on various financial management aspects of municipalities with funding from the Local Government SETA. The National Skills Fund which was to fund the cost of this strategy resolved to scale down all the activities related to National Skills Development Strategy II including suspending or totally closing down some funding windows in preference to National Skills Development Strategy III which will only be implemented from April 2011 hence the project could not start as envisage during the 2010/11 financial year. We are currently investigating other funding streams that will ensure that we appropriately respond to the challenges in municipalities.

Financial Management
Honourable Members, despite the challenges of financial governance that remains in the province, the difficulty of attracting and retaining skilled financial management personnel, low level of financial management capability maturity which is echoed by non compliance with many financial management prescripts hence the need for interventions by Provincial Treasury to capacitate financial personnel and drive the process of ensuring that the necessary structures are set up at municipalities and departments.
For the 2010 audit cycle, the Province had a slight improvement as the number of unqualified audit opinions increased to 9 departments from 8 of the previous financial year out of 13, two qualified audit opinion and two disclaimers of audit opinion. The Department of Education was the most improved department as it had moved from a disclaimer of audit opinion to a qualified audit opinion after three consecutive years of disclaimers. Departments of Health and Roads and Public Works were the two departments that received disclaimer opinions.
The biggest challenge on audit outcomes is in the municipalities where for the same period the province received six unqualified audit opinions, four qualifications and nineteen disclaimers of opinion.
More efforts are still to be directed towards municipalities and two major departments, Health and Education to ensure better results in the coming years.
The auditor general in his general report cited the following as the major contributors to negative results:

  • Failure by the Chief Financial Officers to ensure adherence to basic accounting disciplines.
  • Lack of proper document management systems.]
  • Ineffective utilization and management of consultants.
  • Lack of monitoring of implementation of action plans to address prior year findings.
  • Twenty municipalities did not display a high level of GRAP readiness.
  • Lack of technical support from Provincial Treasury and Department of Co-operative Governance, Human Settlements and Traditional Affairs due to capacity constraints.

From the above contributors to negative reports it is clear that more still needs to be done at Local Government level.
Timeous payments to SMME’s are crucial to keep them afloat as we indicated in the previous speech. Our analysis of late payments reported by the Auditor General in the 2010 annual financial statements indicated a number of instances where suppliers were not paid within 30 days as required by law. We have intervened on a number of sporadic cases where there were suppliers concerns and have amicably resolved the disputes. However, there were also valid cases where departments lawfully withheld payments for valid reasons

Provincial Financial Position

Honourable Speaker, in business there is almost nothing more important than cash. Cash is the essential ingredient that enables a business to survive and prosper. It is also the main indicator of business’s health. It is the measure of a business’ ability to pay its bills on time. This, in turn, depends on the timing and amounts of cash flowing into and out of the business each week and month. While a business can survive for a short time without sales or profits, without cash it will die. For this reason the inflow and outflow of cash need to be carefully monitored and managed. These principles apply to any government institution including national, provincial and local government.
At the tabling of the 2010 provincial main appropriation bill I indicated that this administration inherited cumulative unauthorised expenditure for the period 2004/05 to 2008/09 amounting to R672, 586 million as at the end of 2008/09 financial year and that at the end of the same financial year, the bank overdraft amounted to R357, 736 million. Honourable Speaker, I also indicated that unless we significantly adjust our course, we would be faced with an increasing debt over the coming years. A heavy debt load limits the government’s efforts or ability to deal effectively with social issues such as poverty, unemployment, education, health and other government priorities.
I am proud today to announce that, through the stringent cash flow measures by the Provincial Treasury, but not at the expense of service delivery, we were able to reduce the bank overdraft by a staggering R221, 874 million from R357, 736 million to R135, 862 million at the end of March 2010. Although we started the current financial year with a bank overdraft of R 135,862 million, we have managed our cash flow so well that we did not have an overdraft from April last year to February this year. Honourable Speaker, it is not the government priority to participate in investing activities but rather to fund expenditures of spending departments to enable them to provide the services that are so much needed in our society. Most of our favourable bank balance was as the result of the R135, million of the hospital revitalisation grant that we had to eventually surrender to National Treasury.
However, favourable bank balances over the year to date has enable us to invest the surplus funds that we did not require immediately and to this end the department of Provincial Treasury has been able over the period April 2010 to February 2011 to generate interest on investments of R 18, 8 million which will be used to fund other provincial priorities in the coming months. It is anticipated that we are likely to end the financial year with R20, million of interest received. Honourable Speaker, to this end I would like to salute Mr. Julian Marais and his team for the work well done. In the same period we have not paid any interest for short term bridging finance.
Honourable Speaker, I am also pleased to announce that the debt redemption strategy that we have agreed to and implemented is bearing fruits. The R672, 586 million cumulative unauthorized expenditure that I referred to earlier increased marginally by R13, 644 million which was as a result of the Department of Education overspending their budget for the year ended March 2010 which represented a massive decrease from the year before, this was the carry thought effects of their overspending for the 2009/10 financial year. R287 millions has been set aside to reduce the unauthorized expenditure from the current levels to R402, 743 million, to this end we have already requested the Provincial Standing Committee on Public Accounts to arrange that departments appear before the honourable committee to facilitate the process of authorizing these expenditures. Honourable Speaker, these actions that we have taken clearly demonstrate that we have significantly adjusted our course in order to avoid being faced with an increasing debt over the coming financial years.

Infrastructure Development
Honourable Speaker our point of departure remains that the relationship between socioeconomic growth and development and infrastructure delivery has been strongly emphasized in the past through provincial governments commitment to infrastructure delivery which is demonstrated by the fact that since 2007/08 financial year a total of R 3,345 billion has been spent on infrastructure development.
Clearly, government is committed to generating economic growth and development by means of the infrastructure budget allocated for the next three years, which amounts to R 4,317 billion over the 2011 MTEF. Included in the total infrastructure budget is the Infrastructure Grant to Provinces (IGP) Conditional Grant of R2, 296 billion over the 2011/12 MTEF. Infrastructure delivery is therefore crucial in supporting the Government’s objective of extending access of social services to the poor and especially to rural communities.
Government’s programme of action 2009 identified 10 priority areas for the period 2009 to 2014. One of these priority areas is to introduce a massive programme to build economic and social infrastructure.
However there are challenges, risks and opportunities for government in delivering such a quantum of infrastructure in an efficient and effective manner.
Infrastructure delivery occupies a key place in South Africa’s transformation democracy, socio-economic development and service delivery. In 2000/01 it became evident that further decline in the delivery of provincial infrastructure needed to be reversed and thus delivery be scaled up significantly. The response to meet the required infrastructure needs was in the form of increased funding flows from conditional grants (such as the Infrastructure Grant to Provinces), and an enhanced equitable share to provide room for the stepping up of infrastructure for Health, Education and Roads.
However, a study which the National Treasury commissioned in 2002 found that increased funding on its own will not enhance infrastructure delivery. The study identified the need to develop and institutionalise new systems to plan and manage infrastructure delivery and to develop departmental capacity and capability to sustain these systems. Infrastructure Delivery Improvement Programme was introduced to improve infrastructure delivery through improved systems effectiveness and capacity development. We have benefited in this process through technical assistants who were deployed to the province at no cost. We are now in the third phase of the programme. Phase three of the Infrastructure Delivery Improvement Programme builds on the lessons and support that were learned during the previous two phases. Phase III assists provinces to sustain and consolidate the progress that was made before and to achieve even more fundamental improvements in the planning for and provisioning of infrastructure. Honourable Speaker, we have the funds to finance infrastructure development and maintenance but what we lack is the capacity to implement programmes that will ensure that the money voted for infrastructure development delivery is spent.
Although this programme has been implemented in the province, a number of challenges still remain, in particular, lack of integration of infrastructure plans into departmental strategic and operational processes and procedures, lack of implementing at least a two year planning phase in accordance with the alignment model, lack of capacity in both the implementing department and client departments. Lack of forward planning and poor alignment of planning and budgeting cycle, inadequate assessment of infrastructure plans and budgets by departments. Budgets for large multi year projects are committed to one financial year. Lack of programme management skills in departments.
This was evident in the slow or under spending in infrastructure funds by the three infrastructure departments; Education; Roads and Public Works and Health which resulted in a total amount of R 275, 364 million being stop by National Treasury as a result of slow spending on the infrastructure budget. The stopping of the infrastructure funding will have disastrous consequences for our cash flow that has been so well managed for the last eleven months of the financial year. Honourable Speaker, it is for this reason that considerable efforts are continuously being dedicated to the improvement of the infrastructure delivery process.
We have impressed upon this house in the past the importance of maintenance. Infrastructure maintenance must be regarded as a strategic tool to promote improved service delivery, to unlock funding to extend infrastructure to historically disadvantaged communities, and to support the province’s economy. It is the primary means of ensuring that the life cycle expenditure on infrastructure remains in the province. Maintenance of existing assets should therefore not be seen as being of secondary importance to the apparently more attractive prospect of new infrastructure.
However, the good news is that on the other leg of infrastructure delivery, in particular housing delivery, we are performing much better than many provinces, to the extent that the province has received an additional R174, 0 million in the current financial year which was stopped from less performing provinces and re-directed towards the Northern Cape Province. In this regard we want to salute the MEC Mooiemang, the Acting Head of Department Mr. Swartland and his team by ensuring while the province is faced with infrastructure delivery challenges on the other hand they are able to work so hard that we receive additional funding to deliver on our commitment to create a better life for our people.

Fiscal Framework
Robert Heilbroner, in his book “The Making of Economic Society”, describes economics as the study of how man assures his material sufficiency, of how societies arrange for their material provisioning. According to Heilbroner, economic problems arise because the wants of most societies exceed the gifts of nature, giving rise to the general condition of scarcity. Scarcity, in turn, whether it arises because of the nature’s stinginess or man’s appetites, imposes two severe tasks on society. Firstly, the society must mobilize its energies for production, producing not only enough goods, but the right goods. Secondly, the society must resolve the problem of distribution by arranging a satisfactory solution to the problem of who gets what.
Accordingly, Honourable Speaker, we found ourselves as a province faced with the problem of scarcity of additional funds and how the limited resources must be divided amongst the different priorities of government. The needs are always unlimited but the resources are limited. Government has had to make difficult choices in order to ensure that despite the shortfall in revenue and the unfavourable economic outlook public services are provided with no hindrance and that large scale public investment in infrastructure development is continued.
The province received an additional R800, 622 million over the MTEF which is R187, 171 million less than we received in the previous MTEF. R447, 646 million is intended to cover the carry-through costs of the most violent 2010 public-sector wage agreement, including a 7.5 per cent cost-of-living adjustment and an R800 monthly housing allowance; R145, 080 million will finance phase 2 of the occupation specific dispensation for educators; R197, 424 million will cover occupation specific dispensation for doctors and therapist and the recapitalization of the nursing colleges, and lastly a general baseline increase of R10, 472 million.
Honourable Speaker, budgeting is not only about expanding expenditure on constructive and necessary activities, it is also about rooting out waste, promoting cost-efficiency and phasing out ineffective programmes. Departments needs to identify savings in the face of scarcity of additional funds, and shift these savings to the areas of most need and programmes that will increase our ability to create jobs that are so much needed by our young generation. In the period ahead, it will be necessary to take stronger action in pursuit of efficiency and better targeted expenditure.
There is insufficient control of certain goods and services expenditure items such as advertising, public relations activities and consultancy services. Departments must build their own capacity and stop depending on the services of consultants. Stricter oversight of the activities and executive remuneration in public entities is also required. We believe, Honourable Speaker, that the Legislature and our Committees of the Legislature should play a more active role in challenging accounting officers to plan their efficiency saving initiatives up front, and report regularly on progress. A greater sense of responsibility needs to permeate the ethos of government all the way through the accountability chain and consequences for non performance.
Honourable Speaker, the next few years are going to be tough. If we are to afford continued expansion of social services, then, in addition to the need for greater efficiency, we have to conduct a thorough assessment of all of provincial government’s programmes to see how we can improve value for money and to identify areas where we can eliminate or reduce wastage. We need to spend more on social services to improve the lives of our people, but we also need to spend better. In addition, we should confront the truth that there are programmes of provincial government that do not work, and on which we should spend less. Honourable Speaker, the budget we are tabling today seeks to fund government priorities identified for the period 2009-2014. These priorities include amongst others the following.

  • Support job creation, by moving resources towards labour intensive-sectors and expanded public works programme
  • Enhance the quality of education and skills development, by focusing on improving foundation-phase literacy and numeracy, and on increasing the number of learners passing grade 12 mathematics and science
  • Improve the provision of quality healthcare, with particular emphasis on reducing infant, child and maternal mortality rates, and broadening access to antiretroviral and tuberculosis treatment
  • Carry out comprehensive rural development linked to land and agrarian reform ? Intensify the fight against crime and corruption.

Last year during the tabling of the adjustment appropriation bill, we reported that R38, 398 million of the FIFA World Cup 2010 Legacy Projects has been spent of the various legacy projects. The plans for the implementation of the remaining projects to the value of R58, 910 million have been finalised and the balance of that funding is to be spent in the current financial year and rolling into the next financial year as follows:

  • Upgrading of AR Abass Stadium I R14,910 million
  • Upgrading and Renovation of Sports Facilities at 50 Schools R30,000 million
  • Improving Sports Facilities in Pixley ka Seme District - De Aar R 7,000 million
  • Improving Sports Facilities in JTG District-Kuruman R 7,000 million

Our baseline budget has decreased by R248, 080 million over The MTEF. Last year after the tabling of the medium term budget policy statement, Cabinet resolved to cut .3% across all national and provincial departments baseline budgets with the result that our baseline decreased by R71, 5 million over the MTEF. In addition, the adjustment to the baseline decreased by R176, 580 million over the MTEF due to new data used in the equitable share formula that has become available and changes in the health and education components of the equitable share formula that has been made to respond more appropriately to allocating funds to the priorities in health and education.
The total revised allocation for the province amounts to R10, 400 billion in 2010/11, R11, 071 billion in 2011/12 and R11, 731 billion in the 2012/13 financial years and amounts to R33, 202 billion over the MTEF. R363, 556 million over the MTEF has been set aside to finance unauthorized expenditure.
Of the R10, 400 billion in 2011/12 mentioned above 23, 8 percent represent conditional grants. In this regard, the total revised conditional grants increases from R2, 177 billion in 2010/11 to R2, 473 billion in the 2011/12 financial year. This represents an increase of R296, 061 million or 14 percent.
The infrastructure grant to provinces has been stopped and in its place two new infrastructure grants have been introduced for the education and the roads sectors and are called Education Infrastructure Grant and Provincial Roads Maintenance Grant respectively. Education Infrastructure Grant is now almost equal to the Provincial Roads Maintenance Grant. In the first year of the MTEF the Department of Education will receive R289, 158 million while the Department of Roads and Public Works will receive R308, 760 million. The increase in the Education Infrastructure Grant is intended to eradicate unsafe and mud schools in the entire country within the next three to five years. With effect from 1st April 2011, the Department of Agriculture, Land Reform and Rural Development will no longer receive the infrastructure grant. The split of the infrastructure grant has resulted into the Department of Roads and Public Works forfeiting almost R127, 516 million in first year of the MTEF and R456, 630 million over the MTEF period. .
The province contributes approximately two per cent of provincial own revenue in addition to the equitable share and conditional grants. In the previous financial year the province budgeted R183, 203 million and the latest indications are that the budgeted amount will be exceeded and we have adjusted accordingly our future revenue forecast. We will continue to strengthen and tighten internal controls, procedures and processes to ensure that all revenue due to the provincial government is indeed collected.

Allocations,
Honourable Speaker, at this point I wish to turn my attention to the main appropriation estimates. Let me take this opportunity to elaborate on departmental allocations for the 2011/12 MTEF period by providing the main highlights in each vote. Our budget priorities continue to be characterized and informed by a pro-poor spending pattern to broaden access to basic services such as Education, Health and Housing for the poor.
We continue to strive for provincial budgets that are not only credible but conform to the broad developmental agenda of government. It remains our task to ensure that the budget responds to the material conditions of the people and that the necessary balance is found in terms of how much of the country’s resources go towards expanding the economic opportunities of all citizens? It reminds me of a Chinese proverb: I grumbled because I had no shoes until I met a man who had no feet.

Social Sector

Honourable Speaker, the poverty levels in our country and the morally repugnant and social destructive forms of social inequality based on factors such as class, gender and ethnicity necessitates that unashamedly and unapologetically government prioritize social services. Accordingly, in the current budget cycle we seek to expand and improve quality of health and education services through various national and provincial policy interventions.
In this respect, the Department of Education’s major priorities in the 2011/12 is to improve access and quality of education. Areas such as Early Childhood Development, Adult Basic Education, Further Education and Training are expected to contribute to the social capital development, benefiting all the citizens of the Northern Cape. Furthermore, the provision of basic infrastructure to schools such as clean water, decent sanitation, and electricity as well as speedy delivery of classrooms continues to be a key policy thrusts.
Development and maintenance of high quality and an efficient education system that contributes to expansion of the skills base is not only critical for fighting poverty but also for growth and development of the economy. Our commitment in this respect finds expression in the proposed allocation that includes conditional grants amounting to R4, 062 billion for the 2011/12 financial year. The indicative figures for the two outer years of 2012/13 and 2013/14 are R4, 295 billion and R4, 535 billion respectively.
An additional amount of R203, 719 million over the MTEF has been allocated to cover the improvements in the conditions of service of employees. R145, 126 million over the MTEF has been added to finance occupation specific dispensation for educators which is now in the second phase. Over the MTEF a significant amount of R941, 475 million has been added to improve education social infrastructure and the eradication of mud and unsafe schools in the form of a conditional grant for school infrastructure. National School Nutrition Programme Grant of R337, 611 million over the MTEF is intended to ensure that no child attends school with an empty stomach. Further Education and Training Colleges Grant of R231, 089 million over the MTEF is intended to ensure that those matriculants and others who wants to further their carrier in the technical field can do so and should be able to find the colleges adequately prepared for them.
Department of Health is allocated a total budget amounting to R2, 947 billion including conditional grants in the 2011/12 financial year. Over the MTEF, the department’s budget amounts to R9, 484 billion. Additional funding of R363, 125 million over the MTEF is intended to finance sector priorities that have been agreed upon at sector level including health technology, occupation specific dispensation for doctors and other health professionals, expansion of maternal and child health, personnel and goods stabilisation, HIV/AIDS antiretroval threshold increase, employment of registers and other critical personnel, etc. while R106, 552 million over the MTEF has been added to cover improvements in the conditions of service of employees.
In addition, R9, 541 million over the MTEF has been added to appoint revenue management personnel to increase the revenue collection base in the department. Conditional grants included in the allocation referred to above amounts to R3, 365 billion over the MTEF.

Honourable Speaker, proposed allocations to the Department of Social Development seeks to give impetus to the enhancement of social welfare to the citizens of this province to ensure the greatest impact on poverty alleviation. The total budget for this department amounts to R505, 1 million for the 2011/12 financial year. By 2013/14 financial year the budget would have grown to R558, 352 million.
The priorities for the Department of Social Services include extending Early Childhood Development; expanding secure care services to children in conflict with the law and strengthening access to home and community-based care.
The Department of Sports, Arts and Culture 2011/12 MTEF priorities relates to sport development, promotion and preservation of heritage and libraries transformation.
In this respect the department of Sports, Arts and Culture is allocated an amount of R213, 035 million for the 2011/12, R223, 837 million for 2012/13 and R235, 831 million for the 2013/14 financial years. This allocation includes R304 million in conditional grants in respect of the Community Library Services and Mass Sport Recreation Participation Programme grants over the MTEF.

Economic Sector

Honourable Speaker, the general consensus of what should constitute a budget of a developmental state is that such a budget constitute a balance between two elements. These relates to how much the state spends fighting poverty and deprivation? and how much of the country’s resources go towards expanding the economic opportunities of all citizens? Today we still need to come to grips with this concept because for as much as we need to fight poverty there is an equally important need to grow and develop the provincial economy. Insignificant increases in the budget of the economic cluster, seeks to incrementally arrive at the balance referred above.
The Provincial Growth and Development Strategy identified development of the tourism industry as a priority because of its potential to diversify and grow the provincial economy as well as create employment opportunities. The Economic cluster remains focused on championing the implementation of initiatives to grow, transform and diversify the provincial economy as well as integrated infrastructure investment to support economic growth and development. Land and Agrarian Reform Initiatives, implementation of the Northern Cape Diamond Strategy; economic and social infrastructure development and delivery of houses are some of the key issues on the programme of the Economic cluster. In the 2011/12 MTEF the policy priorities include initiatives to accelerate economic growth and development, as well as integrated infrastructure development and maintenance.
In terms of departmental allocations, the Department of Economic Development and Tourism is allocated an amount of R192, 778 million for the 2011/12 financial year. This amount will grow to R213, 146 million by the 2013/14 financial year. Included in these allocations is an amount R90, million over the MTEF that has been allocated over the MTEF year to stimulate economic growth in the Province in association with other stakeholders.
The target to provide adequate infrastructure for economic growth and development as set out in the revised PGDS is primarily driven by the Department of Roads and Public Works. Integrated infrastructure investment, and Expanded Public Works Programme, are the key priorities for the department in the 2011/12 MTEF.
In this respect the Department is allocated an amount of R756, 061 million for the 2011/12 financial year and will grow to R882, 290 million in the last year of the MTEF. Included in these allocations are conditional grants for devolution of property rates to provinces, extended public works incentive programme and provincial roads maintenance grants amounting to R1, 202 billion over the MTEF. The EPWP grant is aimed to increase labour intensive employment through programmes that maximize job creation and skills development. A once off amount of R4, 810 million has been provided.
initiatives to accelerate economic growth and development, as well as integrated infrastructure development and maintenance.
In terms of departmental allocations, the Department of Economic Development and Tourism is allocated an amount of R192, 778 million for the 2011/12 financial year. This
amount will grow to R213, 146 million by the 2013/14 financial year. Included in these allocations is an amount R90, million over the MTEF that has been allocated over the
MTEF year to stimulate economic growth in the Province in association with other stakeholders.
The target to provide adequate infrastructure for economic growth and development as set out in the revised PGDS is primarily driven by the Department of Roads and Public Works. Integrated infrastructure investment, and Expanded Public Works Programme, are the key priorities for the department in the 2011/12 MTEF.
In this respect the Department is allocated an amount of R756, 061 million for the 2011/12 financial year and will grow to R882, 290 million in the last year of the MTEF. Included in these allocations are conditional grants for devolution of property rates to provinces, extended public works incentive programme and provincial roads maintenance grants amounting to R1, 202 billion over the MTEF. The EPWP grant is
aimed to increase labour intensive employment through programmes that maximize job creation and skills development. A once off amount of R4, 810 million has been
provided.

Honorable Speaker, the department of Agriculture and Land Reform is charged with the responsibility to lead in the development of the agricultural sector and contribute towards the improvement of livelihoods in the province, by ensuring reasonable access and involvement in the agricultural value chain, improving global competitiveness, promoting sustainable use of natural resources and ensuring food security. The policy priorities in the 2011/12 MTEF include land and agrarian reform initiatives, commercialization of goats and food security
The department’s allocation including conditional grants amounts to R357, 084 million for the financial year 2011/12, R385, 968 million in the 2012/13 financial year and
R412, 488 million in the last year of the MTEF . An amount of R465, 070 million over the MTEF is allocated in the form of conditional grants that include Comprehensive Agricultural Support Programme; Land Care Programme; and Illima/Letsema Projects.

In Cooperative Governance, Human Settlements and Traditional Affairs, the focus remains to promote and facilitate sustainable, integrated human settlements and infrastructure development for effective service delivery. Key priorities for the department are provision of houses and sanitation as well as implementation of the Operation Clean Audits 2014 together with other stakeholders. In the 2011/12 financial year the Department is allocated an amount of R560, 480 million including conditional grants. This includes an amount of R322, 639 million in respect of Integrated Housing and Human Settlement Development Grant.
The Department of Environment and Nature Conservation is allocated an amount of R299, 167 million over the next three years. Included in the allocation to the department is an amount of R5, 374 million over the MTEF period for improvement in conditions of service and R4, 134 million for the revitalization of the provincial nature reserves.

Governance Cluster
Honourable Speaker, The Governance and Administration Cluster’s mandate is to harmonize the work of departments with related mandates and functions and coordinate the implementation of the provincial government programme of action. It strives to improve the quality of life of the people by improving the capacity and organization of the provincial administration. The cluster priorities are derived from government commitment to transform the system of governance to address the challenge of declining trust by entrenching the culture of accountability, honesty and transparency among public servants.
The Governance and Administration cluster endeavours to promote greater cooperation between all departments and municipalities by coordinating and implementing integrated and coherent provincial and local economic development strategies. Building capacity of the state, social cohesion and moral regeneration initiatives are some of the key areas of focus in this cluster.
The main priority for the Governance and Administration Cluster is to contribute to building a developmental state focusing particularly on improving the capacity and efficacy of the state, delivery and quality of services, entrenching a culture and practice of a transparent and compassionate public service and building partnerships with society and strengthening democratic institutions.
In terms of allocations, the Office of the Premier is allocated a total R445, 908 million over the 2011/12 MTEF period to ensure proper coordinate of government’s programmes. The Provincial Treasury is allocated an amount of R452, 848 million over the MTEF period to ensure prudent financial management.
The Provincial Legislature is allocated an amount of R394, 661 million over the next three years to exercise oversight over the Executive. The Department of Transport and Safety and Liaison is allocated an amount of R553, 361 million over the MTEF period to exercise civilian oversight over the South African Police Services and transport management within the Province. Included in the total allocation are Conditional Grants amounting to R128, 942 million over the MTEF in respect of the Public Transport Operations Grant.

Conclusion
Honourable Speaker, the allocations that we have tabled here today represents the government’s response to the desires of the poor majority to better their lives. They echo our determination to make sure that service delivery and standard of living is improved, the economy grows and jobs are created. Our focus in the current phase is to minimize the impact of the economic recession on the country’s productive capacity as well as jobs and poverty reduction measures, to identify opportunities for new areas of growth and economic participation, and progressively to set the country on a new growth path and development.

The current economic conditions suggest that government is challenged to do more with less. The need for prudent management and execution of spending plans becomes even more imperative to ensure that the set objectives are achieved in the most efficient, effective and economic manner. Undoubtedly, all of us do understand that moving forward we must be more efficient and prudent in the way we manage our resources and execute our spending plans.
Lastly, Honourable Speaker we are also tabling today the consolidated provincial socioeconomic review which includes the province and the districts. The legacies bestowed in our communities make a study on socioeconomic conditions at both the provincial and local government level more compelling. The 2011 Provincial and District Municipality Socio-economic Review provides an analysis on economic outlook, demographic profile, labour market status and development indicators. Considering the developmental backlogs in some district municipalities and the socio-economic conditions thereof, there is a need for development interventions in order to bring parity across all five districts.
programmes. The Provincial Treasury is allocated an amount of R452, 848 million over the MTEF period to ensure prudent financial management.
The Provincial Legislature is allocated an amount of R394, 661 million over the next three years to exercise oversight over the Executive. The Department of Transport and Safety and Liaison is allocated an amount of R553, 361 million over the MTEF period to
exercise civilian oversight over the South African Police Services and transport management within the Province. Included in the total allocation are Conditional Grants amounting to R128, 942 million over the MTEF in respect of the Public Transport Operations Grant.

The above can be achieved through good governance, the existence of public-private partnerships and continued involvement and communication with the local communities.
I wish to conclude by extending my sincerest gratitude to the Honourable Premier Ms. Hazel Jenkins for her support and cooperation as well as the entire Executive Council for the understanding and ensuring that their respective departments work with us to arrive at the status quo.
I must also thank the Heads of Department and Chief Financial Officers for ensuring that the Provincial Treasury receives the necessary information and documentation thereby assisting to table a credible budget.
Special thanks and recognition is extended to Mr. Vuyisile Gumbo, the Chief Director responsible for coordinating the budget process, Mr. Bakang Moea and his team of budget analysts that worked hard to prepare the estimates of provincial expenditure, Ms. Portia Seameco and Mr. Bright Mahlangeni and their team which prepared the provincial and districts socio-economic review, Mr. Sello Mokoko, the Head Official of Provincial Treasury for his outstanding leadership of this important department and the officials in Provincial Treasury who laboured diligently and meticulously to ensure that the budget is tabled correctly and lastly the Ministry Staff that has supported me so well since I took office.
Honourable Speaker and Honourable Members I commend to you:

  • The Northern Cape Appropriation Bill 2011
  • The Estimates of Provincial Expenditure for the 2011/12 MTEF
  • The Northern Cape Socio-Economic Review 2011: Provincial and Districts

I thank you!

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Office of the Premier 
Private Bag X5016 
Kimberley 
8301

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