19 march 2013

Honourable Speaker
Honourable Acting Premier, Ms Griezelda Cjiekella
Members of the Executive Council
Honourable Members of the Provincial Legislature
Honourable Mayors and Councillors Present
Distinguished Guests
Comrades and Friends
Ladies and Gentlemen

Introduction
Honourable Speaker, today I would like to start the budget speech by quoting from the Greek philosopher who said, and I quote, “A society grows great when old men plant trees whose shade they know they shall never sit in.” Those who have ears to hear have heard me.

Economic Outlook
Honourable Speaker, the International Monetary Fund (IMF) projected acceleration in global economic growth in both 2013 and 2014 as factors constraining growth gradually dissipated. The IMF expects economic growth in the Sub-Saharan Africa region to pick up to 5.8 percent in 2013 before moderating marginally to 5.7 in 2014. Oil exporting countries such as Angola, Cameroon, Chad, Equatorial Guinea and Ghana are projected to benefit from rising oil production and oil prices, while new mining countries such as Niger and Sierra Leone would also be positive for the African economic growth. The region also seemed likely to benefit from recurrent strong capital investment in China.

Economic activity in advanced economies declined marginally in the final quarter of 2012 as a result of contractions registered in the United Kingdom (UK), the euro area and Japan. Real output in the United States moderated significantly to 0.1 percent in the fourth quarter of 2012 after expanding by 3.1 percent in the preceding quarter. Positive contributions from personal consumption, fixed investment and imports were offset by a marked contraction in government military expenditure, with further negative contributions from inventory disinvestment and exports.

In South Africa the real economic growth picked up moderately in the final quarter of 2012 to an annualised rate of 2.1 percent roughly doubling the pace recorded in the third quarter when severe unrest in the mining sector had taken its toll. In the mining sector real value added contacted further in the fourth quarter of 2012 as a number of gold and platinum mines continued to be adversely affected by strike activity. By contrast agricultural sector output rose further as livestock production held up fairly well over the period.

The manufacturing sector recorded a firm increase in real output in the final quarter, supported by the expansion in activity in emerging market economies and improved competitiveness arising from the depreciation of the external value of the rand. However, construction activity slowed in the fourth quarter of 2012, due to unplanned shutdowns of operations at some mining and manufacturing establishments alongside a further round of power buy–back arrangements.

The services sector real value added expanded at somewhat firmer pace in the final quarter of 2012, led by acceleration in the banking and financial market activity. The transport and communication sector also registered stronger growth over the period as freight transport activity increased. By contrast, fourth quarter real activity was disappointing, resulting in a slowdown in real output growth in the trade sector, while real output growth of the general government sector also decelerated marginally.

The lacklustre economic growth in 2012 was accompanied by subdued job creation. While the number of workers in the public sector continued to rise, this was not always the case in the private sector, with a significant number of jobs, for instance, lost in the mining sector in the third quarter of 2012. Labour productivity continued rising at a pedestrian pace, while wage settlements averaged 7.6 percent in 2012. Domestic expenditure components weakened in the fourth quarter of 2012, culminating in a slight contraction in real domestic expenditure. Growth in household real final consumption expenditure slowed somewhat over the period, constrained by slower growth in disposable income and rising inflation. On the other hand, real final consumption expenditure by general government contracted slightly in the fourth quarter of 2012 as the high level of spending on armaments in the third quarter was not repeated in the final quarter.

Real fixed capital formation rose at a notably slower pace in the fourth quarter of 2012. The rate of increase in real fixed capital spending by both general government and public corporations slowed significantly over the period. The volume of imports receded moderately in the final quarter of 2012, weighed down largely by lower imports of vehicles and transport equipment.

The value of merchandise imports, however, increased over the same period, predominantly owing to a significant depreciation of the external value of the rand. This also underpinned an increase in the rand value of exports. Despite a moderate deterioration in the terms of trade, these developments resulted in a slight narrowing of the deficit on current account form the third to the fourth quarter. Simultaneously, the deficit on the services, income and current transfer account contracted marginally, causing the deficit on the current account of the balance of payments to decrease to 6.5 percent of the gross domestic product.

Financial inflows were again sufficient to finance the deficit on current account in the final quarter of 2012. The larger inflows were recorded in the form of an increase in short term loans extended to the domestic banking sector, supplemented by an increase in non-resident deposits with South African banks. Net portfolio investment made a small positive contribution, whereas new direct investment registered an outflow of capital during the quarter concerned.

The nominal effective exchange rate of the rand on balance depreciated in the final quarter of 2012 as domestic constraints and labour unrest continued to weigh on international investor sentiment. With inflation already gradually accelerating in the second half of 2012 driven by higher prices of food and petrol, the weakening of the exchange rate of the rand imparted a further upward bias to a wide range of prices and costs. The twelve month rate of consumer price inflation nevertheless remained below the upper limit of the inflation target range and continued to do so in January 2013 when a rebased and reweighted consumer price index was adopted.

Money market interest rates remained stable with the repo rate unchanged at 5.0 percent since July 2012. Orderly conditions and adequate liquidity continued to prevail in the money market. In the bond market lower bonds yields and rising net issuance supported turnover, while in the share market local share prices reached new record highs.

The South African economy has continued to grow, but at a slower rate than projected.

 

• Gross Domestic Product growth reached 2.5 percent in 2012 and is expected to grow at 2.7 percent in 2013, rising to 3.8 percent in 2015. The Northern Cape’s economic growth is expected to follow that of national, a slowdown in 2013 and an upsurge in 2015.
• In terms of factor income, the growth over four quarters in total nominal factor income accelerated from 7.2 percent in the third quarter of 2012 to 7.6 percent in the fourth quarter.
• Gross saving as a percentage of gross domestic product advanced slightly from 12.7 percent in the third quarter of 2012 to 12,8 percent in the fourth quarter.
• The level of employment in the formal non-agricultural sector of the economy remained broadly unchanged in the third quarter of 2012.
• South Africa’s total outstanding external debt increased substantially from US$121.6 billion at the end of June 2012 to US$131.6 billion at the end of September 2012.
• Global foreign direct investment flows fell by 18% to an estimated US$1.3 trillion, down from a revised US$1.6 trillion in 2011, as significant investor uncertainty continues to hamper the foreign direct investment recovery. Foreign direct investment flows to developing economies remained relatively resilient in 2012, reaching US$680 billion, the second highest level ever recorded.

Provincial, District and Local Municipalities Socio Economic Review

The fifth edition of the Provincial, District and Local Municipalities Socio Economic Review is published at the time when government is in the process of implementing the National Development Plan. The National Development Plan which is a new vision for 2030 provides a perfect vehicle for a united action precisely because it has the support of South Africans across the political and cultural spectrum.

The building blocks of the National Development Plan are: creating jobs and improving livelihoods, expanding infrastructure, changing to a low carbon economy, transforming urban and rural spaces, improving education and training, providing quality health care, building a capable state, fighting corruption and enhancing accountability and transforming society as well as uniting the nation. According to the National Development Plan, a developmental state builds the capabilities of people to improve their own lives, while intervening to protect the rights of the most vulnerable citizens. Consequently, provincial departments have to align their strategic plans with this new plan to ensure that they contribute positively in achieving the objectives of this new vision.

The 2013 Provincial, District and Local Municipalities Socio Economic Review presents a study with specific focus on demographics, economic performance, the labour market status and human development. The analysis and findings of this publication will aid the provincial government to achieve allocative efficiency. The socio demographic and economic disparities that exist amongst municipalities needs to be taken into account in the allocation of limited resources. This implies that individual municipalities require different fiscal policy responses in order to achieve their developmental objectives given their unique social and economic conditions.

Despite an overall improvement in the provision of services in the province, districts and local municipalities, our own legacy of inadequate infrastructure, widespread poverty and inequality, structural unemployment and slow pace of transformation thwart the realisation of our developmental goals. Therefore, the provincial government together with all relevant stakeholders should meet these challenges with boldness. “Sedikwa ke ntswapedi gase thata”

Infrastructure

Honourable Speaker, our point of departure with regard to infrastructure remains that: investing in infrastructure, operations and maintenance offers outstanding opportunities for economic stimulation. South Africa’s investment in infrastructure gained momentum in the years leading up to the 2010 Soccer World Cup, and is set to expand as the foundation of national growth and development strategy. The country’s electricity, water, transport and telecommunications networks are being extended, education and health infrastructure capacity is being expanded, and human settlements are being built and upgraded to strengthen the fabric of our society.

In the State of the Nations address, the President informed the Nation that by the end of March this year, starting from 2009, government will have spent about R860 billion on infrastructure. Various projects are being implemented around the country. The President also announced that the first phase of the expansion to increase iron ore port capacity at Saldanha to 60 million tons per annum from Shishen mine in the Northern Cape was officially completed in September last year.

In addition, government signed contracts to the value of R47 billion in the renewable energy programme. This involves 28 projects in wind, solar and small hydro technologies, to be developed in the Eastern Cape, Western Cape, the Free State and most notably the Northern Cape. The construction of the new university in the Northern Cape is expected to begin in September of this year. We truly value and welcome the investment for our province.

Cabinet has also approved the gazetting of a new Infrastructure Development Bill aimed at fast-tracking and enhancing the coordination of South Africa’s planned strategic infrastructure projects (SIPS) through the Presidential Infrastructure Coordinating Commission (PICC).

The relationship between socio-economic growth and development and infrastructure delivery has been strongly emphasized in the past through our provincial government’s commitment to infrastructure delivery which is demonstrated by the fact that since 2009/10 financial year, a total amount of R3, 507 billion has been spent on infrastructure in the Northern Cape.

The Northern Cape government’s commitment to generating economic growth and development by means of the infrastructure has been further enhanced with a budget allocated for the next three years, which amounts to R5, 753 billion; over the 2013 MTEF. Included in the total infrastructure budget is the Infrastructure Conditional Grant to Provinces which amounts to R4, 554 billion over the 2013 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.

Honourable Speaker, our province has been experiencing a critical lack of infrastructure management capacity in key areas. The Infrastructure Delivery Improvement Programme (IDIP) has been a valuable source of learning for government and understanding by departments of the principles embodied in Portfolio, Programme and Operations and Maintenance Management.

Through the assistance that was provided by the Technical Assistants appointed by National Treasury at the Department of Education, Health and Roads and Public Works, we were able to capacitate the department of Education and Health Infrastructure units with the allocation of R10 million for capacity building from the Infrastructure Conditional Grant in the Division of Revenue Act, to enable them to better coordinate, integrate and focus on implementation of infrastructure management within our province.

The National Treasury has undertaken, through the Infrastructure Delivery Improvement Programme, to focus on further capacitation of the roads directorate within Roads and Public Works in the coming financial year. Provincial Treasury was also able to increase the capacity of its infrastructure directorate to be a catalyst for efficient; effective value for money and best practice methodologies for the management of the provincial infrastructure portfolio.

The provincial infrastructure team has also developed a Code of Practice for Infrastructure Delivery Management System which provides a documented body of knowledge and standard operating procedures that represent generally recognized best practices focused on the delivery and life cycle management of public sector infrastructure. This system will form the backbone for infrastructure delivery and it will be managed through the web based system namely PROMAN to ensure institutionalization of the Infrastructure Delivery Management System process to ensure the effective management of infrastructure in our province and the realization of government’s goal to social upliftment and economic empowerment through infrastructure.

Expanded Public Works Programme

Honourable Speaker, last year we reported that we were performing dismally in accessing the Expanded Public Works Programme incentive scheme rewards, however, over the last twelve months we have been improving steadily in implementing and reporting on Expanded Public Works Program (EPWP). For the first time since the inception of EPWP, both provincial departments and municipalities met their targets in 2011/12 financial year. The municipalities exceeded their targets and all 32 municipalities reported on EPWP work created. This indicates that this program continues to act as a safety net for the most vulnerable sections of our population who continue to bear the harsh realities of unemployment. This program as much as it is being criticized for not creating full time employment by certain sections of the society, the reality is that it is making a huge difference to those people that have nothing else, and appreciates even a day’s work.

This improved reporting also resulted in an increase in the number of municipalities qualifying for EPWP incentives. Although all 32 municipalities reported on their EPWP projects, 26 Municipalities qualified for incentives. This is an improvement from 22 in the past year and only 8 the year before. Collectively, these 26 Municipalities received R32 million in the infrastructure, environment and culture incentives in 2012/13 financial year with Sol Plaatjie Municipality receiving the biggest cut of the R32 million which is R7,6 million. The intention is to have all 32 municipalities participating and creating work opportunities through EPWP and taking advantage of the incentive grant scheme offered by National Department of Public Works.

The number of reporting departments also increased from five in 2011/12 to 8 in 2012/13 across all sectors. R9, 9 million was allocated as incentives to these departments in the infrastructure, environment and culture sectors in 2012/13. These incentives are helpful in creating additional work opportunities for the unemployed and unskilled members of our society.

In the 2013/14 financial year, five provincial departments participating in the Social Sector EPWP will receive R19, 8 million of incentives and seven participating in the infrastructure, environment and culture sectors will receive an allocation of R14 million to upscale EPWP and create even more work opportunities. It is hoped that this will encourage those departments and municipalities that still do not report on EPWP to do so and access more of these much needed incentives.

Audit Committees and Internal Audit Unit

Honourable Speaker, the province has made significant progress in addressing governance matters, specifically to the audit committees and internal audit unit, and various controls have been implemented to strengthen the control environment. The audit committees have been in operation from 2011 and provide effective quarterly oversight in line with the PFMA requirements.

The shared internal audit function is servicing all 12 departments, currently with the assistance of service providers. Additional funding of R11 million has been made available to enhance the internal audit function and to ultimately service all twelve departments with internal capacity. This will see the staff complement increasing to thirty seven in the 2013 MTEF and further increase over the MTEF to a total complement of fifty nine staff members. In addition, chief audit executive was appointed last year, while two senior managers were also appointed to bring to five the number of senior managers in internal audit as part of improving internal audit function in the province.

The internal audit unit aims to deliver audit assurance in terms of international standards for the professional practice of internal auditing. The unit also facilitates an internal audit training scheme to develop audit clerks into professionally qualified internal auditors.

Payments of suppliers of goods and services within 30 days

Honourable Speaker, once again, The President of the Republic, during the State of Nation address emphasized the importance of paying creditors within 30 days. Our government is determined in increasing the uptake of the SMMEs as their dynamism and ability to innovate will assist us in creating the much needed jobs in our economy. They are the driving force of employment opportunities.

During the budget speech the Minister for Finance reiterated the sentiments of The President that departments should introduce punitive measures against all those who contravene Treasury Regulation 8.2.3. Honourable Speaker, we need to emphasize this point to all Members of Executive Councils in their respective portfolios to institute sanctions against all officials who disregard the prescripts of the PFMA. In other words, there must be consequences for the disregard of the law. Accounting Officers must put in place systems that would fast track the processing of the invoices from the date of receipt to the date of authorisation.

Provincial Treasury has embarked on an initiative to create awareness amongst departmental officials through workshops, hands-on-training and other forms of intervention to ensure that creditors are paid within 30 days from the date of receipt of an invoice. The impact of this intervention has been seen in the decline of late payment as a percentage of total expenditure from 16% in February 2012 to 7% in January 2013.

Departments are making significant strides in ensuring payment of creditors within 30 days; however, the challenge still remains with Departments of Health and Education both recording higher levels of non-compliance. I have instructed Provincial Treasury to formulate financial misconduct charges against officials who are disregarding the payment of creditors within the prescribed period. There must be consequences for the deliberate contravention of the law.

We also call upon service providers to inform departments on time with regard to changes in banking details. Departments have been paying service providers and only to discover latter that the bank account is dormant. We also urge service providers to submit their tax clearance certificate as they know that it’s only valid for a year and therefore departments are not allowed to trade with any service provider whose tax clearance certificate has expired.

Provincial Financial Position

Honourable Speaker, the Acting Premier, during her state of the province address spoke to the issue of proper cash flow management and indicated that the province has and maintains a positive cash flow to finance its daily operations without experiencing any difficulties. Cash flow is an important element in the management of the provincial budget and therefore has to be attended to at all times for if left unattended it could result in a situation where the province would be unable to meet its obligations.

Without a positive cash flow we would find ourselves at a point where we would be unable to discharge our commitments towards employees by failing to honour salary obligations. We would find ourselves at a point where we would be unable to pay businesses for goods and services that they have supplied to the provincial government. We would be at a point where we would be unable to meet our obligations towards the non-governmental organizations that perform important work on behalf of government in the social sector. We would be at a point where most clinics and hospitals would have to turn patients away because we would not be able to pay for medicines and the necessary drugs required for dispensing to the sick and infirm. We would find ourselves at a point where we would be unable to provide the ARV’s that are required on the daily basis for those living with HIV/AIDS. As at last week Friday, we had a positive consolidated cash flow balance of R245, 753 million.

The most important aspect of cash flow management is avoiding extended cash shortages, caused by having too great a gap between cash inflows and outflows. Some of our municipalities find themselves faced with cash shortages due to the lack of ensuring collection of outstanding debts due to them by businesses, communities and governments departments. We have extended an invitation to municipalities in the past and we would like to repeat that those municipalities that have long outstanding debts by provincial departments, we have the capacity to assist and support municipalities in this regard.

Risk management and service delivery

Honourable Speaker, the art of thinking ahead of what can go wrong in service delivery and how to prevent the service delivery short-comings and ensure that the plans are executed as envisaged is called risk management in business language. The ultimate objective of risk management is to identify risks that are inherent in service delivery operations and to find ways and means of minimising the impact of the short-comings and to have a plan to deal with the unforeseen circumstances.

Honourable Speaker, if risk management was properly applied during the construction of the mental hospital, we would not be sitting with the problem that we are faced with today because we would have identified at the early construction stage the inherent risks and found a better way to deal with their impact at the time they surfaced. As provincial government, we have embraced the implementation of risk management in all departments including the municipalities and public entities.

Accounting officers have demonstrated commitments towards establishment of risk management functions in provincial departments. Honourable Speaker, out of twelve departments, five have dedicated risk management practitioners, the other five have assigned risk management responsibilities to internal inspectorate divisions or other officials while processes are under way to address structural arrangements in the remaining two departments which do not have risk management personnel and depend fully on the assistance of the provincial risk management support personnel located in Provincial Treasury.

Risk management committees have been established in eight departments and the remaining four are using senior management meetings to address risk management matters in the interim. Workshops and provincial risk management forum are used as platforms to share knowledge and improve skills of the risk management practitioners and committees. We have made it compulsory that all senior management in all departments including risk management practitioners enrolled in the e-learning programme which is a National Treasury web based training initiative to provide skills in areas of risk management.

Honourable Speaker, our greatest challenge is with regard to the implementation of risk management processes and procedures in municipalities where there is lack of capacity to implement risk management practices. To address these challenges we will continue as Provincial Treasury to provide support and assistance and we are further advocating for shared risk management services to be established in District Municipalities.

Honourable Speaker, the accounting reforms that have taken place over the number of years have seen the provincial and local government having to implement the accounting standards that are equivalent to the international reporting standards. These were characterised by slow implementation and the requirements not being met due to capacity constraints in the field of financial management. This has been evidenced by the decline in the number of unqualified audit opinions from the Office of the Auditor General.

To improve the quality of annual financial statements submitted to the Auditor General, guidance and assistance was provided during the preparation of quarterly interim financial statements by departments. Chief Financial Officers’ forum for departments was facilitated to improve knowledge management and training on the new standards was arranged for public entities. However our greatest challenge remains the cooperation and commitment by stakeholders with regard to the availability and submission of prescribed information and the synchronization of efforts by all stakeholders who plays a monitoring and oversight role. To enable us to achieve these it is of great importance that managers perform their duties as prescribed in legislation.

Operation clean audit and municipalities

Honourable Speaker, the Operation Clean Audit technical committee was appointed and tasked to conduct an assessment to uncover root causes of challenges facing municipalities during February 2011. Observations and findings informed recommendations that were subsequently tabled at the Executive Council for endorsement, implementation and enforcement.

Provincial Treasury, Office of the Premier, COGHSTA and SALGA were key strategic support stakeholders to municipalities during this assessment process. They developed and implemented support intervention strategies aimed at resolving problems identified. The Operation Clean Audit technical committee was again this year mandated to conduct a review of progress made with the implementation of Executive Council resolutions.

A desk top assessment was conducted taking into consideration reports submitted by municipalities, information gathered during municipal visits, audit reports and other reports compiled since the Operation Clean Audits Technical Committee assessments were conducted in 2011.

The initial assessment provided information that assisted the committee to develop intervention strategies to support identified municipalities. A wide range of support activities was provided for capacity and institutional development, asset management, supply chain management, internal audit and audit committees, risk management, budgets, reports, revenue management, annual financial statements preparation, and many others. Indications from these reports show that there is little or no progress made by these municipalities.

Honourable Speaker, for the municipalities to improve their financial management status, all municipalities must perform the following bare necessities:

Activities that have to be done on daily basis must be done e.g. balancing of movements in cash; processing of day’s transactions and proper filing of supporting documents; etc. Monthly financial disciplines must be adhered to, such as key reconciliations (bank, debtors, and creditors). Municipalities must create realistic service delivery strategies and align them to the municipal budget. Municipal Councils must hold the mayor or executive mayor accountable for the performance of the municipality as part of their oversight. In turn, the mayor or executive mayor must hold the municipal manager as accounting officer accountable for the performance of the municipality. Supply chain management processes must be adhered to. Municipalities must implement harsh debt collection strategies. Funded vacant posts must be filled with suitable and competent candidates.

None compliance with these bare minimum requirements has resulted into most municipalities receiving disclaimer and qualified audit opinions year after year.

Honourable Speaker, if these bare minimum necessities are not put in place, this should form the basis for disciplinary charges for those who have been charged with the responsibility to put them in place. There must be consequences for disregard of the law; there must be consequences for failing to lead ethically. There is overwhelming evidence that consequences regime can change behaviour.

Honourable Speaker, with the aim of assisting municipalities to achieve clean audit opinions by 2014 and to improve and sustain the quality of financial statements, Provincial Treasury embarked on process as early as January 2012 to identify municipalities for assistance to improve on submission of AFS and the audit outcomes.

Four municipalities accepted our assistance as others have appointed or were in process of appointing consultants and indicated that they would require financial assistance which we declined to provide. The four municipalities identified were Kamiesberg, Mier, Renosterberg, and !Kheis. Our assistance to these municipalities was targeted at preparing Generally Recognized Accounting Practice compliant annual financial statements including the immovable asset registers, improved audit outcome and to assist the municipalities during the audit process.

I am happy to announce that our assistance has helped Kamiesberg, Mier and Renosterberg municipalities to submit credible annual financial statements of a high quality compared with the previous submissions and hope that the audit outcome will not be far off our expectations. With regard to !Kheis Municipality, we withdrew the services of the consultants due to misrepresentation of facts by municipality.

Supply chain management, fraud and corruption

Honourable Speaker, one of the challenges that face all departments is that all are prone to fraud and corruption especially in their procurement cycles and payroll. Fraud and corruption in the procurement manifest itself in illicit rebates, kickbacks, dubious supply relationships, etc. etc. while in payroll it relates to mainly fictitious employees (ghosts) and the manipulation of travelling expenses by inflating the rates charged and kilometres travelled.

Whilst the risks can never be fully eliminated, departments need to implement or have controls in place to reduce the likelihood of this occurring. Instances of fraud and corruption in the procurement cycle are not easy to detect, prove or prosecute. Evidence to this effect can be found in the number of fraud cases that have been brought before the courts and the government losing the cases as it could not prove beyond reasonable double that the accused actually committed the deed. Whilst the risk of fraud cannot be eliminated entirely, it can be greatly reduced by putting in place measures to deter it from happening.

Measures that can be implemented to improve supply chain management and deter fraud and corruption include but no limited to the following:

Ensuring quality, experience, expertise, training and the hiring of the right people. Continuous assessment of internal controls. Actively monitoring internal controls. Developing a fraud response plan to react to fraud and corruption and knowing who the suppliers are.

Honourable Speaker, in order to understand how fraud and corruption is taking place in departments and to develop an appropriate response to the challenges in supply chain management environment, we used the risk management approach I referred to earlier and found that the two biggest risks areas that allow fraud corruption to continue are:

• Unfettered access to and incorrect use of Basic Accounting System, Logistical Information System and Personnel Salary System.
• A lack of sufficient prescripts on the processes that must be followed – this allows for a lack of predictability and transparency in the processes that must be followed during procurement and therefore a lack of prescripts makes it difficult, and in some cases impossible, to audit the processes followed in supply chain management.
• High vacancy rates.
• High staff turnover in supply chain management posts.
• Supply chain management organisational structures in chief financial officers’ offices are not aligned to supply chain management functionality i.e. demand management, acquisition management, logistical management, disposal management and performance management.
• Training and education of staff not sufficiently aligned to public sector needs.
• Departmental supply chain management performance management systems insufficient and in most cases non-existent.
• Embedded organisational performance management systems not implemented.
• No or little alignment between departmental supply chain management performance systems and individual performance agreements.
• Little or no job standardisation – job descriptions for similar supply chain management positions differ substantially even within departments.
• Internal controls are generally week and do not address key risk areas.
• Skills, competencies and capabilities of supply chain management practitioners not adequately developed.
• Supply chain management practitioners are not sufficiently trained in critical areas (e.g. strategic sourcing, infrastructure procurement, compliance related aspects).

Honourable Speaker, some of the risks that I have outlined above can be resolved over the short to medium term. The institutionalisation of supply chain management structures in chief financial officers’ offices will receive the highest priority in the 2013/14 financial year. To this effect, we have set aside within the provincial revenue fund an amount of R46 million over the 2013 MTEF to address deficiencies in the supply chain management structures. In addition we will conduct an assessment of supply chain management reporting including how risk management is practiced within supply chain management directorates. We will be implementing a central supplier management system that includes mechanisms to cross check supply chain management with personnel salary system data to identify employees doing business with government while on the payroll of government.

• National Treasury is currently conducting a comprehensive gap analysis of the Logistical Information System to ensure it has functionalities that can address all supply chain management needs including log in and user rights issues, demand planning, and controls and relevant performance information. Provincial Treasury will increase capacity of the unit that monitors the execution of the procurement plans as well as increasing the general capacity of provincial supply chain management team to be able to meet the requirements of the of the added responsibilities. Provincial Treasury will rigorously monitor departments and compelled them to publish within ten working days after the closure of any advertised competitive bid on their respective websites, the names of and preferences claimed by all bidders that submitted bids in relation to that particular advertisement to enforce transparency, including the publishing of the total bid prices, as submitted by the respective bidders. Investigation will also be conducted to determine whether the preferred bidders have the capability and ability to execute the contract. This measure is intended to ensure that projects are executed by capable service providers especially in the built environment to avoid another case similar to the mental hospital. One of the measures that we will put in place will be to ensure that contracts or agreements are legally sound to avoid potential litigation and to minimize possible fraud and corruption. Such contracts or agreements will be actively managed in order to ensure that both parties to the contract or agreement meet their respective obligations. All these measures Honourable Speaker, are intended to vigorously improve supply chain management environment and reduce the high level of irregular expenditure as reported by the Auditor General in the past.

Honourable Speaker, in addition to the supply chain management improvement measures outlined above, the province has resolved to introduce biometric systems. This decision was informed by the recent fraud cases which show an increase in collusion by departmental employees and the increase relates to the capturing, approving and authorization of fraudulent transactions on both the Basic Accounting System (BAS), Personnel Salary System (PERSAL) as well as the Logistic Information System (LOGIS). Departments affected by fraud and corruption instituted criminal cases against affected employees but lost cases in court due to the inability to prove beyond reasonable doubt which is requirement in a criminal case. The solution to the problem lies in the implementation of biometrics access control.

Honourable Speaker, allow me to give this august house a brief outline of biometrics and how they work. Biometric-identification technologies collect and analyse unique human traits. A sample is collected from a user, processed into a digital template and stored for later comparisons. Biometrics can be used to verify the identity of an individual or to determine if a record of the person exists in a larger database. In the not-so-distant future, we may access our homes and cars, perform retail transactions, or renew driver’s licenses using our physical traits.

Passwords which are currently being used in the Provincial Government are potentially the weakest link in our information security systems. Biometric authentication technologies promise a more secure alternative. The main benefit of using a biometric authentication factor instead of a physical token is that biometrics can't easily be lost, stolen, hacked, duplicated, or shared.

They are also resistant to social engineering attacks – and since users are required to be present to use a biometric factor, it can also prevent unethical employees from repudiating responsibility for their actions by claiming an imposter had logged on using their authentication credentials when they were not present which has been one of the defence mechanisms used by those brought to justice. Biometric systems can be much more convenient than tokens and other systems, and are useful to augment existing security methods like passwords.

To use a biometric system, it is first necessary for each user to sign up by providing one or more samples of the biometric in question such as a fingerprint which is used to make a "template" of that biometric. When a user attempts to authenticate, the biometric they provide is then compared with their stored template. The system then assesses whether the sample is similar enough to the template to be judged to be a match. The implementation of biometric access control will enhance the integrity of provincial government information technology system from improper access both internally and externally and thereby reduce if not eliminate fraud and corruption perpetrated using government systems.

During the year ending 31 March 2012, the Provincial Department of Education used biometrics system to perform head count in the department. At the close of the project, educators who did not turn up to register after the project was extended beyond the initial agreed-to closing date, were three hundred and fifty four who represented potential ghosts, two hundred and eighty nine did not present themselves during the head count verification process, thirty four had resigned, thirteen their contracts ended, seven were deceased, six were transferred while five were on pension and in all these cases they were not terminated on the system.

If a similar access control system is introduced to curb unfettered access and incorrect use of the Basic Accounting System, Logistical Information System and Personnel Salary System, the potential saving will over the short to medium term return the investment made in improving the security of our systems. We have set aside an estimated R25 million for implementing biometrics system across provincial departments and R10 million to roll out biometrics head count to all vulnerable provincial departments in an effort to eliminate ghost employees in our payroll system and use the savings generated to improve service delivery.

Provincial fiscal framework

The 2013 MTEF Budget is the first to be tabled within the framework of the National Development Plan (NDP). The National Development Plan sets out an integrated strategy for accelerating growth, eliminating poverty and reducing inequality, recognizing that South Africa’s urbanizing, youthful population is strength on which to build. While development is a long-term process, South Africa and our province in particular can achieve more in the short term if government, business, labour and civil society reach consensus on national priorities.

The province received from the national transfers an amount of R39. 055 billion over the 2013 Medium Term Expenditure Framework (MTEF) of which R12.295 billion in 2013/14, R12.874 billion in 2014/15 and R13.885 billion in the 2015/16 financial years. These transfers comprise the equitable share and conditional grants allocations. The equitable share constitutes R28.906 billion or 74 per cent of the total national transfers while conditional grants represent R10.148 billion or 26 per cent.

The provincial own revenue is growing albeit at a marginal rate, own revenue constitute only 2 per cent of the provincial receipts. The main sources of revenue is mainly motor vehicle licenses which contributes 56 per cent followed by health patient fees at 34 per cent, casino taxes contribute 7 per cent and other 3 per cent. The province projects to collect R245.507 million in 2013/14, R261.468 million in 2014/15 and R278.531 million in the outer year of the MTEF.

The result of the 2011 Census data indicated that the population in the province has increased. The change in the population resulted in the equitable share baseline increase by R411 million over the 2013 MTEF. This additional funding will assist the province to address some of the pressures that could not be considered in the previous budgets a result of the cut in the baseline budget of the province.

Honourable Speaker, this house will recall that last year during the budget speech, I reported that the 2012 MTEF budget was tabled against a backdrop of huge reductions in the equitable share as a result of adjustments due to new data updates and health components changes in the equitable share formula. The 2012 MTEF reduction amounting to R274. 765 million happened at a time when all the discretionary provincial reserves were exhausted mainly as a result of cuts in the previous years’ equitable share baseline.

SPENDING PRIORITIES: ALLOCATIONS

Social Sector Services

Honourable Speaker, our spending priorities are informed by the overriding objectives of accelerating growth, modernizing our public services, infrastructure and reducing poverty and inequality. Over the next three years we are budgeting to spend almost R38.5 billion of which R12.2 billion will be spend in the 2013/14 financial year. As before and further in moving to restore fiscal balance, we will continue to invest in our foremost priorities of education and health.

On Learning

As we are all aware people of this province want the best possible future for their children – and that in the long run, that future depends most of all on our education system from the early years on wards. To ensure this, the Government has invested strongly in education by transforming early learning and strengthening our school system. If we truly want to create a society where human life has equal worth and where every child has an opportunity to succeed, we must improve the quality of our education. This cannot happen by its own but by concerted action to make things change.

In the year ahead, we remain committed to this priority. We will continue to invest in our Early Childhood Development Programme and to enhance learning outcomes in our schools. To fulfill our commitment in this regard, the proposed allocation to the Department of Education amounts to R4.448 billion in the 2013/14 financial year. This amount includes conditional grants. This amount rise to R5.112 billion in the 2015/16 financial year.

Mr Speaker, the education sector has a target of achieving the universal rollout of Grade R by 2014. The Early Childhood Development Programme is expected to grow over the current MTEF, and this growth will need additional Grade R learner and teacher support materials. There will also be a need for additional teachers to be appointed to enable this universal enrolment. In the regard an amount of R21.541 million is allocated in the 2015/16 for the appointment of Grade R teachers.

An additional amount of R27. 235 million in 2015/16 financial year has been provided to enable poorer schools to increase their numbers of teachers across all grades. This will reduce the teacher: leaner ratio in the classrooms.

Honourable Speaker, teachers are the frontline of our education system. We place our children in their hands every day and in most cases, our teachers do sterling work under extremely difficult conditions. We pay tribute to them and we ask no more than that they continue to serve with dedication and integrity.

Towards Health and Wellness

Honourable Speaker, as we invest in education, we are investing in our future. We are mindful that we must also respond to the needs of today to improve the health and well being of the people of the Northern Cape.

High quality health care services are increasingly important to our people – and the Government has responded to that priority throughout our term of office. We have invested strongly amongst others in the primary health care.

As members are aware, primary health care implementation is one of the key priorities of the Department of Health. More importantly it is the first point of contact between people and health care providers.

In addition to the key priorities, we are still committed to strengthening our ongoing efforts to broadening access to antiretroviral (ARV’s) and tuberculosis (TB) to more people through local clinics.

To give effect to these key priorities a total amount of R3.342 billion in the 2013/14 financial year is proposed for the Department of Health. Included in this total is an amount of R1, 096 billion in respect of conditional grants. Over the three years, the budget of the department of Health amounts to R10, 608 billion.

An amount of R9.097 million over the MTEF is dedicated towards the rollout of an improved diagnostic test for tuberculosis to reduce the risk of more people getting infected.

Inclusive and a Caring Society

Honourable Speaker, it is increasingly a well-known fact that our social conditions influence our health, learning and economic outcomes. As you are well aware, we all benefit when most vulnerable people in our society have a better life, more access to opportunities and greater inclusion.

To improve the livelihood of the poorest members of our community, we will continue as Government to make a concerted effort by extending quality social assistance to these communities. To achieve this, the Department of Social Development is allocated an amount of R603.823 million in the 2013/14 financial year. This amount increases to R672.631 million in the outer year of the MTEF.

As Government we work with a number of community based non-government partners (NGO’s) to deliver over a broad range of programmes and services to vulnerable communities. Some of these NGO’s are experiencing financial challenges, with some closing down, retrenching or scaling down services. This has a negative impact on the delivery of social welfare services. To assist these NGO’s to become sustainable, an amount of R16.131 million over the MTEF has been earmarked in this regard.

Honourable Speaker, the Department of Social Development like all other provincial departments of social development, has been under pressure to absorb an increasing number of social work graduates funded through the social work scholarship programme. In order to address this funding pressure, an amount of R25. 225 million is provided over the MTEF.

Social Cohesion

The Department of Sport, Arts and Culture priorities relates to sport development, promotion and preservation of heritage and libraries transformation. This department is allocated an amount of R235.837 million in the 2013/14 financial year. Over the three years resources allocated to the Department of Sport, Arts and Culture will rise from R235. 837 million in the 2013/14 financial year to R329.262 million in 2015/16. This translates to R851.397 million over the 2013 MTEF.

Economic Sector

Honourable Speaker, if we are to maintain our core priorities such as education, health and social welfare programmes, it is essential that we grow a strong and prosperous economy, and to this end, spending on the economic sector will amount to R2.817 billion or 23 per cent of the total provincial budget in the 2013/14 financial year.

The Department of Roads and Public Works has been allocated an amount of R1.146 billion in the 2013/14 financial year. The growth in spending for this department is mainly attributed to the Provincial Maintenance Grant which has been allocated an amount of R659.484 million in 2013/14 financial year. The Provincial Maintenance Grant is projected to spend R2 billion over the 2013 MTEF. Over the three years, the budget for this department amounts to R3.6 billion. I would also like to take this opportunity to indicate that the Devolution of Property Rate Grant is no longer a conditional grant and has been phased into the equitable share. An amount of R147.565 million over the MTEF has been earmarked for this purpose.

EPWP remains an important vehicle in our quest to provide jobs to our people, and although only R3 million has been allocated to this department in the 2013 financial year, there is huge potential to access more funding provided that targets are met and reports are submitted timeously to the National Department of Public Works.

The mandate of the Department of Economic Development is to create an enabling environment for economic growth and development in the Northern Cape. To give effect to this mandate an amount of R223.028 million has been provided for in the 2013/14 financial year and spending grows to R239.336 million in the outer year of the MTEF.

Honourable Speaker, I indicated during the 2012 adjustment budget speech that the National Consumer Protection Act came into operation on the 1st of April 2011 and in order to ensure the effectiveness of this court in the province, an amount of R17.345 million over the MTEF is made available for this important priority to enable the court to discharge its mandate. This department also received an allocation amounting to R0.550 million for EPWP as job creation is also central in the mandate of this department.

Honourable Speaker, our health, our well-being and our economy depend on the quality of our environment. In this regard, the Department of Environment and Nature Conservation is allocated an amount of R104.683 million in the 2013/14 financial year. Over the next three years resources allocated to the department will rise from R104. 683 million in the 2013/14 financial year to R115.240 million in 2015/16 financial year. This translates to R330.865 million over the 2013 MTEF.

The Department of Agriculture, Land Reform and Rural Development mandate is to champion land and agrarian transformation, promote and facilitate increased production and provide expertise for improved livelihoods, sustainable rural development and food security for all. To give effect to this mandate, this department has been allocated an amount of R690.023 million in the 2013/14 financial year. Over the next three years resources allocated to this department will rise from R690. 023 million in the 2013/14 financial year to R736.620 million in 2015/16 financial year. This translates to R2.132 billion over the 2013 MTEF.

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.

The Department of Co-operative Governance, Human Settlements and Traditional Affairs has been allocated an amount of R652.413 million in the 2013/14 financial year. Over the next three years resources allocated to this department will rise to R1.611 billion over the MTEF.

Honourable Speaker, safe and affordable housing contributes to the wellbeing and quality of life to the people of the Northern Cape. To give effect to this need, an amount of R395.724 million in the 2013/14 financial year has been provided in the form of Human Settlement Development Grant.

Governance and Administration Sector

Honourable Speaker, we are all aware of our responsibility to ensure that we have a capable state and workforce that is able to give effect to the administrative duties and respond proactively towards meeting the needs of the poor.

The main priority of this sector is to ensure good governance and drive the programme of action of this provincial government and perform oversight over the provincial and local government.

Honourable Speaker, this government recognizes the seriousness of the crime situation in our province and will continue to provide leadership in the fight against crime. The Department of Transport, Safety and Liaison is allocated an amount of R299. 255 million in the 2013/14 financial year. Over the three years resources going to the department will rise from R299. 255 million in the 2013/14 financial year to R324.899 million in 2015/16. This translates to R936.620 million over the 2013 MTEF.

Provincial Treasury has been allocated an amount of R195. 660 million for the 2013/14 financial year. This amount will decrease over the MTEF as a result of once off allocations in the 2013/14 baseline. Included in the allocation is an additional amount of R22 million in the 2013/14 financial year for the Biometrix implementation on behalf of the province, of this amount R10 million is earmarked as a top up for the actual implementation of the system, R2 million is the for the maintenance and further R10 million is provided for the Headcount Rollout in all departments.

Honourable Speaker, the importance of an effective Internal Audit for provincial departments cannot be over emphasized. The Internal Audit Unit within Provincial Treasury is allocated an amount R32.870 million over three years to build the necessary capacity to service all provincial departments.

Office of the Premier is allocated an amount of R167. 828 million in the 2013/14 financial financial year growing to R180. 4623 million in the 2015/16 financial year. Other priorities funded in the Office of the Premier relate to the establishment of the Provincial Aids Council which has been allocated R11.038 million over the MTEF, a further amount of R11.564 million over the MTEF is shifted from the Department of Education to Office of the Premier for the Provincial Wide Human Resource Strategy.

Honourable Speaker, the aim of the Provincial Legislature is to serve the people of the Northern Cape by building a developmental institution for effective law making, public participation, accountability and oversight over the Executive and municipalities. To give effect to this mandate, Provincial Legislature is allocated an amount of R138. 785 million in the 2013/14 financial year. Over the three years resources allocated to the Provincial Legislature will rise from R138. 785 million in the 2013/14 financial year to R148.954 million in 2015/16. This translates to R431.160 million over the 2013 MTEF

Conclusion

Honourable Speaker, we have noted that the economy is not growing at the rate that we expect it to grow; it is not creating the number of jobs we require for job opportunities that are so badly required by the majority of unemployed youth.

The socio-economic review and the national development plan present us with the tools that we can harness to improve and better the lives of our people. The infrastructure provides sustainable momentum and foundation on which the economy can grow. Even though the EPWP produces temporary work opportunities, is welcomed by many who do not have permanent jobs.

We are making progress with regard to both the internal audit and audit committees, we are improving on paying suppliers within the prescribed period, we have embraced risk management in on service delivery landscape, we are pushing hard for improvements in municipal audit outcomes and we are on the verge of implementing biometrics that will improve the integrity of our systems and root out ghost employees thereby reducing our payroll and shifting savings towards service delivery improvement.

Honourable SpeakerI wish to conclude by extending my sincerest gratitude to the Honourable Premier Ms. Hazel Jenkins in her absence and wish her well during this period of recovery 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 would also like to extent my gratitude to the Acting Premier.

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 us 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, Mr Elvis Ramafamba and his team which prepared the provincial, districts and local municipalities 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 2013.
• The Estimates of Provincial Revenue and Expenditure for the 2013 MTEF
• Provincial, District and Local Municipalities Socio-Economic Review 2013.

Honourable Speaker, I would like to conclude by quoting the quotation that I started with. “A society grows great when old men plant trees whose shade they know they shall never sit in.”

I thank you.