ADDRESS BY MR. J BLOCK (MPL) MEC FOR FINANCE, ECONOMIC DEVELOPMENT AND TOURISM TO THE PROVINCIAL LEGISLATURE ON THE
OCCASION OF TABLING BUDGET VOTE 8 FOR PROVINCIAL TREASURY

24 May 2013

Honourable Speaker Honourable Premier—Mrs Silvia Lucas
Members of the Executive Council
Honourable Members of the Provincial Legislature
Executive Mayors, Mayors and Speakers of our Municipalities
Heads of Departments, Municipal Managers and Senior Managers
Chairpersons and CEOs of the Provincial Public Entities
Officials of the Provincial Departments
Distinguished Guests
People of the Northern Cape
Members of the Media
Comrades and Friends
Ladies and Gentlemen

Introduction

Let me first and foremost salute all of you gathered here today for prioritizing to attend Provincial Treasury budget vote speech; your presence plays a very critical and outstanding role in ensuring that together we continue to improve the lives of the people of the Northern Cape for the better.  When people overwhelmingly voted the ANC back into power in 2009, they were giving us unqualified mandate to speed up the pace of transformation and service delivery.  We should understand that we carry the hopes of our people, and we dare not fail them. Our democratic mandate puts more responsibility to work harder to change the lives of our people for the better.

Five months into the year, we wake up with the reality that the ruling party held its successful conference in Mangaung to shape, improve and cement its future to better the lives of South Africans. We wake up with a sudden reality of the emergence of political parties that are not only competing for political space, but doing so by attempting to find faults with what this Government has been able to do since 1994.

Honourable Speaker, this adds more responsibility and urgency on our part to speed up the pace of service delivery; we need to assure our people that we are succeeding to build an efficient public service that is sensitive to the needs of the majority of the people we serve.  Poverty, unemployment and inequality remain the most serious challenges facing our people.  Our programme of action going forward, based on the National Development Plan, should reflect our endeavors to tackle these and other socio economic issues adequately.

Honourable Speaker, through the stewardship of this Government we are ready and prepared to work together with opposition parties and external stakeholders to enhance service delivery in our Province.  fifty eight years ago, in 1955, the people of South Africa, assembled at the greatest Congress of the People in Kliptown, declared amongst others: “We, the People of South Africa, declare for all our country and the world to know: that South Africa belongs to all who live in it, black and white, and that no government can justly claim authority unless it is based on the will of all the people.”

Our greatest expression of gratitude go to the masses of our people for confidence they bestowed on the African National Congress to continue leading South Africa as the only agent for change and transformation for a better life for all.

Honourable Speaker, in everything we do, we will continue to strengthen our interface with these masses and critical social players as we seek to find solutions to challenges of our times.   In doing so, we will not shy away from pointing out difficulties as we seek to map out strategic interventions.  This becomes more so in the light of the likely impact the current melt down will have on our capacity to realize our core electoral mandate.

We need to support the ideas and mitigating plans that Government is initiating to assist in reducing high rate of unemployment in our Province, especially to our youth.  With salaries being a major source of income for the majority of our people in Province, unemployment directly increases both the number of people that are destitute as well as the extent to which they are-combined with many other socio economic indicators, these point toward the ravaging impact of the global financial meltdown on individuals and households in the Province.

These are moments and times of hard choices that need courage and vision for long lasting solutions.  We draw our inspiration on the steadfast and visionary leadership of our President and the Premier for acknowledging turbulent times within which we operate in the current epoch with the attendant emphasis on the spending on key priority areas as articulated in the Medium Term Strategic Framework (MTSF).

Asserting the Role and Importance of Provincial Treasury

 

Honourable Speaker, there will always be two sides to a story! To some, the current financial crisis presents challenges! To others it presents opportunities! We, as a Department and collectively as Government, are presented with both challenges and opportunities; there is no middle road.

Part of the challenge to us is to fully grasp and understand forces at play that determine the total sum of the current economic realities.  This will enable us to correctly identify which part of our systems, processes and approaches must be reformed, discarded or improved.

The Minister in the Presidency responsible for Planning, Mr. Trevor Manuel put it more appropriately when he said. “Change is not to weaken functions or line departments, but to ensure that government operates differently, and to reorientate government towards delivering better services in a more integrated way.  The intention is to ensure that planning in government is interlinked with budgeting processes.”

The Northern Cape Provincial Treasury will continue to be the principal custodian of strategic capacity for meaningful resource planning, allocation and utilization across all departments.  Without playing ‘big brother role’ together with our colleagues from other departments we will continue to be at the centre of synergizing our spending priorities.  We will continue to champion the vision “to be the heartbeat of sound financial management that supports economic growth and development”. We will aggressively pursue the promotion of responsive and sustainable service delivery that is in line with Government priorities in an economical, efficient and effective manner through prudent resource management, prompt and quality services, policy and statutory compliance.

Overview of Achievements

Honourable Speaker, the Department will continue to render support to other departments and municipalities in highly specialized fields; it is in this context that we announce that we need political interventions and support from all those who occupy political position in order to address challenges facing the municipalities and the departments. These efforts and mitigations strategies need to be prioritized so that we can achieve our goals for clean audits.

Honourable Speaker, we are aware of the challenges that confront us and we will build on the achievements that we have already realized which include the following:

• We have established a vetting unit and that regularly liaise with intelligence services on matters related to security clearances of officials and preemployment screening of shortlisted candidates which is intended to ensure the credibility of our recruitment processes. Culprits and recruitment fraudsters have already being identified through the vetting and screening process.
• We have outsourced the physical activity program to produce healthy and productive employees in order to achieve our objectives.
• We have contracted a child care facility that assists children in absence of their parents due to official responsibilities and currently we have forty six children registered. Honourable Speak, the outsourcing of the child care facility is not the core function of the department but plays a critical role ensuring that officials both men and women while away from Kimberley they children are cared for by professional people.
• We managed to beat the target vacancy rate by filling all fifty eight funded vacant posts including those posts that became vacant due to promotions. We have set a new record of recruitment by advertising posts at the beginning of a month, arrange and hold interviews in the same month and issue appointment letters in the same month. The recruitment standard for the department is now one month and we challenge other departments to improve on that standard.
• We have managed to award departmental bursaries sixty seven officials who registered and completed degrees, national diplomas and certificates with institutions of higher learning. Honourable Speaker, education is the key to success and this is one of the department’s pillars to capacitate the employees to enhance service delivery. We would like to congratulate all those employees of the department who accepted and use this opportunity given to the by the department.
• Job creation is one the main challenges facing our country and this affect our economy. We managed to appoint fourteen interns that we are training in different fields in the department ranging from human resources management, internal audit, budgets, economic analysis, financial management and others departmental areas of specialization. Some of them their internship comes to an end at the end of the June while others will complete their training period in six months. I would like to assure the interns that they will be favourable considered based on their performance and conduct to fill critical posts in both Provincial Treasury and other line function departments.
• We have filled all senior managers’ posts in in the department and this will enhance department’s compliance with all legislative requirements, including supply chain management.
• Honourable Speaker, one of the biggest challenges that face provincial government and government in general is the payment of service providers within thirty days after the receipt of the invoice. We reported in the main budget speech that improvement is gradual but there are still challenges in other areas of provincial departments. I am happy to report that in April alone, the department paid all its suppliers within 30 days. This clearly shows that it is possible to pay suppliers within 30 days after the receipt of the invoice and that it does not require rocket science. I challenge my all departments to do the same or face consequences.
• In January, the Department held its strategic planning session which strived to realign the strategic objectives with respective budgets. This activity has paved the way for effective and efficient coordinated management approach in the department. The initiative ensures accurate and reliable performance information going forward and thus contributing to the objective of obtaining a clean audit. Honourable Speaker, I must say that I am confident that in this current financial year the department will receive a clean audit.
• We published a Provincial, District and Local Municipalities socio economic review and this review presents analysis with specific focus on demography, economic performance, labour market status and human development. As I stated in Provincial Budget Speech these findings will aid the Provincial and Local Government to achieve effective resources allocation.
• We continue to assess revenue generation and collection capacity of all provincial departments and assist to enhance their revenue collection.
• Three priority areas has been identified for the financial year—capacity building, support, accountability and to drive financial management initiatives that supports the aim of reaching level three of financial management maturity.
• The department established a risk management function separate from the oversight directorate to ensure that departmental risk management matters are given the necessary attention.
• The banking and cash flow management directorate managed the cash resources efficiently and generated interest revenue amounting to R27.3 million.
• The audit of the Revenue Fund for the year ended 31 March 2012 has been completed and the Auditor-General issued an unqualified report.
• The implementation of LOGIS in Health institutions has commenced in April 2013. Two facilities namely the Siyanda Regional Office and Gordonia Hospital have gone live and are in operation on the system.

Focus Areas

Honourable Speaker, the department is growing in response to the demand for its services and the service delivery challenges that we are faced with, office space has become and remains one of our biggest challenge hence we are opting to renovate and relocate to Ridirile Primary School or any other alternative that can offer the department an alternative accommodation at the least cost.

We will further enhance the implementation of In Year Monitoring (IYM) reports as these are important early warning systems that inform departments and users of possible over or under spending by departments through the financial year.

We will further ensure that the impact of the budget baseline cuts do not negatively affect core service delivery programmes of departments. The departments were trained and guided in how these cuts should be dealt with, that is cutting back on noncore items such as telephones, catering and travelling etc. where possible, and to shift the composition of expenditure towards investment programmes such as job creation programmes and infrastructure.

Honorable Speaker, in an effort to keep the EXCO informed about the state of expenditure in the province, quarterly expenditure reports are presented at EXCO including any risks of over or under spending. It is through these reports that remedial measures and where necessary interventions are proposed and implemented to mitigate any risks that may lead fiscal or cash flow problems in the province.

Another area of growing importance is the monitoring of non-financial targets through the Quarterly Performance Report (QPR) which provide useful platform for government to evaluate the services for which it has allocated funds.

Municipal Finance Directorate gives effect to the duties and functions assigned to Provincial Treasury in the Municipal Finance Management Act (MFMA).  The directorate will continue to focus on improving the technical support it provides to the thirty one delegated municipalities in preparing their multi-year budgets thereby enhancing their ability to meet their obligations to provide basic services to the communities.

The government’s thrust to improve the quality of the lives of our people is better felt at local government level. The government continues to fund a number of programmes at that level to improve access of services to the community, especially the poorer of the poorest. The local government equitable share formula has been revised, to benefit most of the municipalities in the province.

One of the challenges that municipalities in the province must address, is their planning capacity. Most of the municipalities are unable to spend the conditional grants they receive from central government, resulting in them having to surrender the unspent amounts to the national revenue fund. What is of great concern is that these unspent grants are not cash backed. This implies that the municipalities concerned are not able refund the unspent grants due to the fact that the funds have been used for operational costs such as payment of salaries and wages.

Honourable Speaker, many institutions in the province have been and continue to struggle to comply with the requirements of the PFMA and MFMA due to the lack of capacity (skills and resources) in financial management. This has led to either the late/non submission of annual financial statements, poor reporting and negative audit outcomes.

The negative audit outcomes are mostly due to poor record keeping (unavailability of documentation for audit purposes), inadequate understanding of the financial systems, poor internal controls and poor understanding by preparers of the requirements of Generally Recognised Accounting Practice and above all lack of consequences for non- compliance.

Furthermore the Auditor General reported that due care was not taken when financial statements were prepared and these statements were also not properly reviewed by management before they were submitted for auditing resulting in various adjustments.  This poses a challenge as the responsibility for the production of accurate financial statements are the mandated functions of an accounting officer.
For the year under review our focus remained on the improvement of reporting related to accounting matters by way of monitoring, supporting and guiding departments, public entities and municipalities. Institutions were assisted and the necessary guidance provided during the preparation of the annual and quarterly interim financial statements. Furthermore, good financial practices were encouraged through letters, instruction notes, communiqué on new developments and recommendations contained in the monthly reports on the compliance certificates received during the financial year.

As part of strengthening intergovernmental relation with local government in our quest to promote credible reporting, consultants were appointed under the auspices of operation clean audit to assist four municipalities that were not in a position to adhere to accounting matters to compile Generally Recognized Accounting Practice compliant asset registers and annual financial statements. The quality of information availed for reporting purposes remained a challenge due to daily reporting disciplines that have not been adhered to by municipalities.

Therefore in the coming financial year, our focus will be predominantly on strengthening our interventions to ensure improvement of financial accounting and reporting by way of intensified monitoring and support to departments and municipalities. We will continue with sharing of accounting best practices in order to improve the credibility of information.

Compliance remains to be a challenge in both the provincial and local government sphere hence continuous guidance on application of the financial acts and support is provided by the Norms and Standard Directorate.

We have set ourselves a target to promote a culture of embedding risk management in day-to-day activities of line management to ensure that risks identified are addressed. More emphasis will be to intensify support and continuous monitoring of the implementation of risk management best practices and advocate for establishment of risk management structures in the departments that are still not having such and provide continuous assistance to them.

The Department of Trade and Industry embarked on a programme to designate certain industries, sectors and sub-sectors for local production opportunities with minimum threshold levels for local content.  The above links with government new growth path (NGP) and Industrial Policy Action Plan (IPAP) that has identified the need to leverage public procurement. Many of the sectors targeted for designation are aimed at leveraging public expenditure for industrial development.  As part of the implementation process, we are rolling out local content as part of procurement policy and have already conducted workshops for departments and municipalities as well as suppliers in Upington and Kimberley in conjunction with Department of Trade and Industry.

We will continue to support and monitor the PERSAL system and to give guidance on matters relating to human resources and payroll.  A quarterly report that provides management information relating to human resources and salary administration will be issued to departments on a monthly basis as has been the case in the past.  Quarterly reviews on user activities will be performed at departments to ensure that access to functions is not violated and within the prescriptions of the user account management policy.

We have re-arranged and regrouped the information technology support function of the department that previously resided under Corporate Services with Supporting & InterLinked Financial System responsible for BAS, PERSAL and LOGIS.  Matters relating to ICT governance and network security policies and procedures highlighted by the office of the AG will be attended to in the coming year. Support on the transversal systems will continue to ensure continuity of operations on systems.

The LOGIS enhancement implementation project will enable facilities to record all supply chain management and asset management transactions electronically. The enhancement implementation of the system will provide for an improved inventory, procurement and asset management system that complies with the legislative framework of government.  The implementation is a very resource driven process due to the fact that all implementations are taking place outside of Kimberley which entails a huge amount of time in terms of support and travelling.  To many users it is their first exposure to electronic systems and even computers as a tool of trade. It is in this regard that the system is also seen as an educational process.

The Basic Accounting System division is currently performing the system controller function on behalf of departments and are instrumental in maintaining user access control on the systems in a secure manner.

Biometric Access Control and Head count

In an attempt to further improve security on government’s financial and human resources systems, a Biometric Access Control System is going to be implemented in the provincial administration in the current financial year.  The tender processes have been concluded and the final award of the tender to the successful bidder will be made today.  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.

The department has 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.

Capacity Support

Honourable Speaker, the role of treasury, both public and private, continues to evolve.  The department is increasingly being requested to use its unique skills and expertise to play a more strategic role for our government.  The current emphasis on a more holistic approach to managing performance of departments and municipalities by the Provincial Treasury implies a need to improve the capacity of the department through skilled, competent and capable financial management workforce.

Therefore to address such skills, a survey was performed in the offices of the chief financial officers to identify the skills gaps, of which the findings indicated that there is a severe skills shortage that needs urgent attention.  The results of the survey correlates with the poor audit results that are being reported taking into account the fast changing financial management environment with regards to accounting reforms.

To address the challenge, we have solicited the assistance of South African Institute of Chartered Accountants (SAICA) in partnership with the Association of Accounting Technicians (AAT) through a National Treasury initiative to provide competency based training. The competency based training offered by AAT would enable officials in financial management to make a positive contribution within their respective departments finance units. The training is practical and results in a SAQA accredited qualification, targeted at all staff levels, from clerical/administrative to professional accounting.It consists of both accounting theory and practical components that will allow officials to develop and apply skills in their work environments.

Honourable Speaker, I am proud to announce that the training of 25 provincial departmental officials for NQF level 4 will commence towards the end of this month and for the 77 that will be trained for NQF level 3 will commence next month.  One of the major milestones set for the current year is to pay special attention to monitor and oversee Internal Audits and Audit Committees in all delegated municipalities.

We will continue to provide support and assistance and we will further advocate for shared risk management services to be established in district municipalities.  We will advocate for the better coordination of efforts by all stakeholders who plays a monitoring and oversight role.

Infrastructure Management

Honourable Speaker, we have impressed upon this house in the past and during the 2013/14 budget speech the importance of Investing in infrastructure operations and maintenance as it offers outstanding opportunities for economic stimulation for the Province.

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 a total amount of R 5.075 billion has been spent on infrastructure by the province.

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 R 5.928 billion; over the MTEF. The department has gone through a rigorous process of capacitating the infrastructure and public private partnership directorate to enable the province to leverage the full potential that the PPP process and the infrastructure delivery improvement programme methodologies assist the province in managing infrastructure at provincial and local government more effectively. 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.

Therefore, alternative PPP processes will assist the province in unlocking and mobilizing funding through PPP arrangements. Saving on project costs, improved quality and systems performance from the use of innovative materials and management techniques, substitution of private resources and personnel for constrained public resources and access to new sources of private capital are amongst some of the benefits that the province may derive in implementing successful PPP projects.

The Infrastructure Delivery Improvement Programme (IDIP) has been a valuable source of learning for government in the understanding by departments of the principles embodied in the Infrastructure Delivery Management System (IDMS) Toolkit focusing on Portfolio; Programme and Operations and Maintenance Management.

The provincial infrastructure team has also developed a documented body of knowledge, Code of Good Practice and Standard Operating Procedures that represent generally recognized best practices focused on the delivery and life cycle management of public sector infrastructure. Subsequent to the latter the infrastructure team is in the process of finalizing the Northern Cape Infrastructure Delivery Management System (NC IDMS) in conjunction with National Treasury and the National Sector departments which will provide the backbone for Infrastructure Management for the province and it will be managed and implemented through the web based system tool namely PROMAN to ensure institutionalisation of the NC IDMS process.

While all areas of infrastructure management and the alternative methodologies at our disposal described above must be addressed, taking a long term view and focusing on key areas is of utmost importance. The most important element is the acceptance that infrastructure planning and delivery improvement is a long term programme and requires key management commitment to the life cycle costing approach. It should be recognized that this approach will only be facilitated through the development of an Infrastructure Delivery Management System frameworks, that will enable the province to meet its policy priorities in terms of the implementation and management of our Infrastructure portfolio to ensure the effective management of infrastructure in our province and the realization of governments goal to social up-liftment and economic empowerment through infrastructure.

Internal Audit and Audit Committees

Provincial Treasury accommodates administratively the provincial shared internal audit unit and audit committees. The provincial shared internal audit unit provides independent assurance and consulting services to all twelve provincial departments. The unit services four departments with own staff and contracted two service providers to service the other eight departments. During 2012-13, a general manager, two additional senior managers and four senior internal auditors were appointed. The internal audit unit is in a growth phase to appoint more staff in order to service more departments with own staff and ultimately phase-out the use of service providers.

The internal audit unit is structured into four clusters of three departments each, namely:

• Cluster 1: Education, Provincial Treasury, Economic Development & Tourism
• Cluster 2: Health, Office of the Premier, Social Development
• Cluster 3  Agriculture, Land Reform & Rural Development, Cooperative Governance, Human Settlements & Traditional Affairs, Sport, Arts & Culture
• Cluster 4: Roads and Public Works, Environment, Transport and Safety & Liaison The internal audit unit aims to deliver audit assurance in terms of International

Standards for the Professional Practice of Internal Auditing. The unit will undergo the five-yearly compulsory external quality assurance review during 2013-14, and R160 000 has been budgeted for this purpose. The unit also facilitates an internal audit training scheme to develop audit clerks into professionally qualified internal auditors. All auditors are registered with the South African Institute of Internal Auditors.

Three audit committees are in place and provide effective oversight through quarterly audit committee meetings and audit committee members attending ad-hoc departmental meetings. The audit committees are funded through Programme 1 and are aligned to the internal audit unit clusters, with cluster 3 and 4 falling under 1 audit committee. The audit committees operates in terms of an approved Audit Committee Charter and discharges all the requirements as outlined in the PFMA, Treasury Regulations and Charter.

Honourable Speaker, in making sure that fiscal prudence is achieved and that service delivery is accelerated, we will also have to step up our monitoring and oversight role through assistance of political intervention. Whilst we will continue to support other arms of government charged with mandate, we will have to engage from time to time with departments to allow us to intervene promptly where and when necessary and to make timely decisions.

Programme Allocations

Honourable Speaker,  it’s my pleasure to table Provincial Treasury’s 2013/14 budget. The Department has been allocated a budget amounting to R195.6 million for the year under review. Over the next three years, the budget allocated to the department will decrease from R195.6 million to R175.1 million in 2014/15 and R182 million in 2015/16 financial year. The total allocation over the MTEF amounts to R552.8 million.

The above figures reflect a decrease of 10 per cent in 2014/15 and increase of 4 per cent in 2015/16. These allocations already include the reduction on the departmental baseline amounting to R10.2 million over the MTEF due the reprioritization of government spending towards investment programmes such as job creation and infrastructure development.

Furthermore, the significant decrease from the 2013/14 to 2014/15 is as a result of the once off funding allocated for the implementation of biometric system aided projects.

The 2013/14 budget has been allocated as follows per economic classification:

• Compensation of employees is allocated R117.9 million which constitutes 60 per cent of our total allocation. The high personnel percentage is due to the fact  that Provincial Treasury is personnel driven thus the percentage is appropriate. This also includes additional funding allocated to building capacity within the internal audit programme. The internal audit unit programme’s staff complement will increase from twenty six officials to thirty seven officials in the current financial year.
• The good and services for the entire department is allocated R74.9 million;
• Transfers and subsidies received an allocation of R301 thousand; and
• A payment for capital assets is allocated R2.3 million.

Furthermore, the allocations per programme are as follows:

Programme1: Administration received an allocation of R67.8 million, of which compensation of employees is allocated R38.8 million; goods and services R27.9 million, transfers and subsidies R301 thousand and payments for capital assets R692 000.

Programme 2: Sustainable Resource Management received an allocation of R35.4 million, of which compensation of employees received an allocation of R26.2 million; goods and services R8.9 million and payments  for capital assets  R315 000.

Programme 3: Asset and Liabilities received an allocation of R51 987 million, of which compensation of employees is allocated R24.2 million; goods and services R27 million and payments for capital assets R630 thousand.

Programme 4: Financial Governance received an allocation of R19.4 million, of which compensation of employees is allocated R14.9 million; goods and services R4 million and payments for capital assets R282 thousand; and

Programme 5: Internal Audit is allocated R20.9 million, of which compensation of employees is allocated R13.6 million; goods and services R6.8 million and capital payments R407 thousand.

Conclusion

In conclusion, Honourable Speaker we will attempt at all cost to make this year, a foundation phase for a robust term as we grapple with new approaches, methods and systems for an efficient and effective Provincial Treasury.  As we do that, we will not treat this budget as a mere product of technocrats whose essence is only compliance.

We will bear in mind that a budget is also a political process by means of which decision making on key political commitments are converted into real achievable objectives. This vote, is an instrument through which the NCPT aims to support the achievement of the commitment that the ANC has made to the electorate during the 2009 elections.  That, we will do through consistent interaction with stakeholders who are central to the day to day work of the department.  Indeed speaker, together we can do more with various stakeholders.

I want to thank the Head of the Department, Mr. Sello Mokoko for his stewardship in the department and the entire top management leadership of NCPT for hard work and competency in their execution of the mandate of this department—Ntate Mokoko without you I don’t think we would have been this far and please continue to with your sterling work. I would also like to thank the Chief Financial Officer and her team in putting together the budget that we are tabling today.

My family, my wife…. and my kids…for their continued understanding and support.

Honourable speaker, I hereby table the 2013/14 Budget Vote 8 for Provincial Treasury.
I thank you.

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