Billy Nel, MEC for Finance
20 February 2006
Introduction
Mahatma Gandhi had this to say in 1923 about public money:
âIn every civilised community, the outlay of public funds collected through
contributions from the community in a variety of forms, calls forth the
liveliest interest from the taxpayers and demands the greatest carefulness from
the authorities entrusted with the outlay. In theory, the layout of these
monies must be, like the sowing of the seed by the farmer, in the hope and with
the intention that it would be retained a hundredfold to the sowerâ.
Madam Speaker,
Gandhiâs statement is an elegant reflection of the objectives of public
resource management. The statement calls for governments to be effective,
responsive, and accountable. While these objectives are of a continuing nature
in public resource management, they reflect the changing fiscal realities.
Together, they offer a formidable agenda that underpins effective budget
planning and execution. Once again, the occasion has come for the government to
account to the citizens of Eastern Cape of how the resources entrusted with it
have been managed and will be managed in the future.
Last year, I stood on this podium to table the âIkwezi Lomsoâ Budget of
2005/06, which sought to promote stewardship over the finances of this province
and to achieve better results through continuous improvement of the budgetary
and monitoring systems. The result of this often painful process is that we can
now proudly claim ownership and control over the financial governance in the
Eastern Cape, and in so doing, look forward to a future in which a stable and
ever-growing economic environment will contribute towards the creation of
wealth and prosperity in the province.
Madam Speaker,
The 2006/07 Budget has been designed to place the province on a virtuous
cycle of sustainable growth. This requires the leadership of the province to
ensure that we eradicate under-spending, especially of conditional grants,
rather than keeping our banks happy. The leadership of the Eastern Cape
Government subscribes to the sentiments expressed by President Mbeki in his
State of Nation Address on 3 February, regarding the optimism and positive mood
prevailing in the country. South Africans are optimistic and in positive mood
because they can see and feel that systematically we are winning the war to
replace a life of despair with a future full of hope and fulfilment.
The substantive content and modalities of state intervention to push back
the frontiers of poverty are grounded in the Accelerated and Shared Growth
Initiative of South Africa (ASGISA). ASGISA has become the kingpin of job
creation and poverty reduction. This Initiative and the Provincial Growth and
Development Plan (PGDP) are inextricably linked. ASGISA is a strategic catalyst
for the successful implementation of the PGPD. We have embraced ASGISA and will
implement key programs and projects.
The potential impact of ASGISA, Coega and the East London Industrial
Development Zone (IDZ) on the demand for social infrastructural services such
as electricity and water, provision of efficient and competitive logistical
infrastructure, and expansion of modern telecommunication infrastructure in the
province is immense. Together, ASGISA, Coega and the East London IDZ will
define and shape the trajectory of sustainable economic growth and development
of this province.
I would like to echo the words of the President as contained in his State of
Nation Address: âThe years of freedom have been very good for business. I
believe that this should have convinced the investor community by now that, in
its own interest and as part of the national effort, it has to invest in the
expansion of that freedom, especially by actively and consciously contributing
towards the achievement of the goal of halving poverty and unemployment by
2014.â
Madam Speaker,
Before I get to the 2006/07 Budget, I would like to provide a brief review
of the 2005/06 financial performance. The 2005/06 financial year commenced with
total revenue of R35,6 billion. During the year, the revenue was reduced by
some R11 billion, reflecting the social assistance grants, which were stripped
off and moved to the South African Social Security Agency (SASSA). Further
adjustments during the year brought the provincial total revenue to R25,2
billion against a projected total expenditure of R23,9 billion, leaving a
surplus of some R1,3 billion.
The total provincial revenue of R25,2 billion for financial year 2005/06 is
made up as follows:
* Equitable Share: R22,2 billion
* Conditional Grants: R2,6 billion
* Own Revenue: R429,0 million
The projected total expenditure of R23,9 billion is also made up of the
following:
* Compensation of Employees: R15,3 billion
* Non-personnel Non-Capital Expenditure : R7,0 billion
* Capital Expenditure: R1,6 billion.
As is traditionally the case, the largest part of the total provincial
expenditure is made up of compensation of employees. Compensation of employees
has grown from R13,3 billion in 2003/04 financial year to the current R15,3
billion, representing an increase of some 15% over the period.
The 2006/07 Budget
Policies and Priorities
Madam Speaker,
I will now turn to the main business of the day, that is, the 2006/07
Budget, beginning with the policies and priorities.
Economic Outlook
Regarding the economic outlook for the province one cannot but remain
up-beat of the fact that the Eastern Cape is bursting with opportunities. I
only need to remind Honourable Members of the House of the massive investment
of about R3 billion in the Coega Development Zone to date. We are also waiting
eagerly for the outcome of the robust negotiations between the Coega IDC and
the Canadian Aluminium Giant Alcan for an investment of some R15 billion. Under
the banner of ASGISA, the national Government has given the green light for two
of the Eastern Capeâs icon projects, namely the Timber Industries Cluster at
Ugie-Maclear and the Umzimvubu Catchments Project. These two projects will have
a major impact on accelerated and shared growth, providing some 3 000 direct
employment and 10 000 downstream employment opportunities. Other projects in
the pipe-line such as the Wild Coast Meander, the Moltena/Indwe Coal Mining
Initiative and the Gariep Irrigation Scheme to provide water to the Cacadu
District will give an additional boost to job creation opportunities in the
province.
Sectoral Priorities
Madam Speaker,
I would like to reflect at this juncture on the sector priorities for the
2006/07 financial year. In the education sector, the priorities are to reduce
the backlog in school equipment, expand Grade R, teacher development and HRM
systems, extend the new curriculum to Grades 10-12, continue to implement the
norms and standards for school funding, support special schools, and expand
information management systems.
In the health sector, the priorities are to enhance human resource
management, recruit health professionals, expand the emergency medical
services, implement the new Ambulance Services Model, expand Primary Health
Care, and improve services in the rural areas.
In the social sector the focus will be on expanding the existing welfare
services, implement the Childrenâs Bill, Older Persons Bill and the Child
Justice Bill in phases, and implement the Expanded Public Works Program (EPWP).
The EPWP in this sector involves mainly the expansion of existing community
health workers, home/community-based care and early childhood (ECD) development
programs. The program also covers the provision of training of practitioners,
stipends and materials, and food and basic health care. Over the medium term
2006/06 to 2008/09, a total of R671,3 million will be available for the EPWP in
the province.
Infrastructure Planning and Investment
The significance of infrastructure in the provinceâs economic transformation
and growth has been recognised in the PGDP. Infrastructure is central to
economic growth, global competitiveness, and poverty alleviation. The
transformation of the provincial economy to create jobs, generate income, and
thus reduce poverty is the single most important challenge confronting the
government of this province. Underpinning this challenge, however, is the need
to provide appropriate and adequate social and economic infrastructure. Poorly
maintained and unreliable infrastructure and service delivery systems hamper
both private and public sector activity. Although continued delay or neglect of
investment in infrastructure projects may provide immediate savings for other
expenditures, a heavy price could be paid in the longer term in the form of
lower economic growth, high unemployment and an increase in poverty.
Over the medium term, the infrastructure budget will increase significantly
from R2,9 billion in 2006/07 financial year to R4,3 billion in 2008/09, with
the bulk of the money going into the provision of roads, school infrastructure
and hospital facilities. Departments are therefore urged to ensure that
realistic and comprehensive Infrastructure Plans are developed to cover the
medium term. Already, the National Treasury is developing guidelines and
formats for infrastructure planning for all provinces. Several interactions
have taken place between our own Treasury and the National Treasure on this
matter. Beginning in March 2006, the Provincial Treasury will commence the
coordination of the development of the Infrastructure Plans for the province.
In terms of the 2006 Division of Revenue Act, provincial departments are
required to submit their Infrastructure Plans to the provincial Treasury by not
later than 31 August 2006.
Public-Private Partnership
Madam Speaker,
The challenges posed by the need for infrastructure development, rehabilitation
and maintenance are of such a magnitude that government alone cannot meet them.
At the same time, it is believed that the province is among those in the
country with the lowest capital stock per worker, reflecting both the size of
the provinceâs population, inability to attract significant investment
resources from outside, and loss of private domestic wealth to other provinces.
The governmentâs approach to addressing this problem is to broaden the
participation of the private sector in infrastructure development. The strategy
is to attract private financial support through direct equity investment and
assistance in developing entrepreneurial and managerial capacity in areas such
as project planning and financial management, outsourcing of non-core
businesses, leasing, Build-Operate and Transfer (BOT), etc.
Madam Speaker,
Kindly permit me to be very specific in this regard. The government has had a
long standing relationship with the First National Bank. I think the time has
come for both parties to benefit from this relationship. From the government
side, the time has come for the Bank to be seen to be supporting the social and
economic development agenda of the province. Three areas where the Bankâs
support could be of immense help to the government and people of this province
are bond financing for government employees (junior staff and middle-level
managers) who do not qualify for government housing subsidy, the provision of
office accommodation in Bhisho for leasing, and micro-financing of
cooperatives, small, medium and micro enterprises (SMMEs), and local emerging
black contractors to develop local entrepreneurship and create wealth. Madam
Speaker, there is the FNB Stadium in Johannesburg. How does it sound to have
FNB House in Bhisho? The government will engage the FNB in discussions around
this matter in the coming financial year.
Under-spending
Madam Speaker, Honourable Members,
The pursuit of budgetary outcome closer to the intent and achievement of
success in fiscal stabilisation requires addressing the problems that afflict
the budget implementation phase. These include poor or no planning, cut and
paste business plans, long delays in finalising the procurement process,
insistence on several procedural formalities that are mostly unrelated either
to the task at hand or to the changing requirements, etc. During the current
financial year, these developments have caused considerable under-spending of
infrastructure and some conditional grants. A shortage of money is one thing,
but an inability to spend the already inadequate allocation is unacceptable.
Regardless of the causes, it is necessary that the problem of under-expenditure
is addressed.
During the 2006/07 fiscal year, Treasury will undertake a comprehensive
study into the causes of under-spending of infrastructure and other conditional
grants, and develop appropriate responses to deal with the problems. I must
also add that, until the pace and efficiency of expenditures are improved, the
system of roll-overs of unspent budgeted funds will undergo a serious review.
Treasury will critically scrutinise the pattern of expenditure during the year
and progress of expenditure closure to the end of the financial year, and
selectively approve roll-overs. I wish to emphasise that unspent recurrent
funds will have limited chances of being rolled-over. Treasury will also
seriously consider reviewing the two Adjustments Budgets usually tabled during
the financial year. Adjustments Estimates Budgets will not be prepared for the
purposes of creating an opportunity for departments to clean their books before
the end of the financial year. This will constitute an abuse of Section 31 of
the Public Finance Management Act. Departments are therefore encouraged to plan
their expenditures and cash flows very carefully.
Financial Management Enhancement
Budget planning and preparation are the mechanisms for achieving control of
expenditure to ensure affordability; effective means for achieving resource
allocation that reflects expenditure priorities; efficient delivery of public
services; and, effective means of minimising the financial costs of budgetary
management.
Madam Speaker, Honourable Members of the House,
This ideal is rarely matched by the practices in the province. Quite apart from
weaknesses in the institutional arrangements, decisions on affordability,
priority setting, and efficiency in spending have all become artificial because
of the following factors:
* Subsequent cash allocations or adjustments (made twice a year) render them
redundant:
* Amounts allocated to programmes or given by line items are deliberately loose
or unclear; and
* In some instances, the priorities are set outside the formal budget
framework.
Although the allocation of resources across spending departments is a political
decision, those planning and preparing the budgets will need to advise on what
is realistically achievable. For this, economic analysis should play an
important role.
A cursory look at the internal organisation of departments of the provincial
administration, however, shows that many are extremely weak in economic
analysis, policy formulation, planning, forecasting, monitoring and evaluation,
and effective service delivery. Even the introduction of the new management
philosophy that places emphasis on strategic planning, performance and
accountability, application of market principles, and investment in relevant
information systems have not made these departments any more corporate in
outlook than they have been. The capacity and skills required to embrace the
new changes are very low in many departments, although in general the
commitment for change is as high as the demand for change. The challenge
though, is how departments would go about attracting and retaining staff with
the requisite experience and skills, reinforce their commitment to work, and
forge their co-operation to become the dominant feature of service
delivery.
To address the problem I have just outlined, the provincial Treasury will
design and implement a comprehensive âFinancial Management Improvement
Programmeâ in the whole provincial administration during the 2006/07 financial
year. An important element of this programme will be the building of capacity
in financial management and planning in departments.
Search for Economies in Expenditure
The Financial Recovery Program introduced two years ago has tended to create
a budget management culture that focuses on securing higher allocations and
spending them during the year. While there is always a need for more resources,
this has to be tempered by the recognition that resources are limited and have
alternative uses. The budgetary process will begin to emphasise the search for
economies in expenditure, particularly in the context that the existing
legislation often limits the range of flexibility in the annual budget. This
search for economies will focus on the evaluation of the existing legislation,
programs, and projects so that there can be improved delivery of services
within given resources. As part of the Financial Management Improvement
Programme, Treasury will engage in a serious consultative interface with
departments, with the view to identifying areas where economies can be found
and develop joint strategies to harness them.
Cash Planning and Management
The ability to adjust spending, both in the timing as well as the amount, is
of strategic importance in any budget system. Careful cash planning and
efficient in-year management of the budget delivery are very critical in this
context. As an integral element of financial management, cash planning and
management should be able to keep budgeted expenditure in cash terms and
prevent unanticipated overdrawn accounts that might disrupt the fiscal
stability objectives. To this end, the Treasury has begun to institute a more
organised form of cash management, a technique that will allow, through
systematic and regular forecasting of revenues and expenditures, a firm link
between cash flows and the budget implementation plans. Departments are
expected to do likewise.
Madam Speaker,
A good cash plan cannot compensate for an unrealistic budget. Indeed, the cash
plan must not become a substitute for the budget itself. The budget planning
and preparation procedures is a prioritisation process within specific revenue
constraints, and this prioritisation process should be fully in place before
expenditure is broken down into weekly or monthly cash limits. Yet the reverse
is often the experience in this province. Decisions about expenditure
priorities are not adequately discussed or settled at budget preparation time
by departments. I wish to remind departments of the following five
prerequisites of good cash management:
* A realistic budget;
* Clear procedures for the release of appropriations;
* Strict observance of the budget execution rules;
* Experienced and skilled staff to prepare and monitor the cash plans;
and
* Clear borrowing rules.
If departments fail to respect the cash management prerequisites I have just
outlined, the provincial Treasury will have no option but to exercise its power
over real prioritisation and expenditure cuts through cash allocations. To
assist departments in this regard, the provincial Treasury is in discussion
with the provincial banker (the First National Bank), with the view to getting
the bank to provide cash management training to officials performing this
important function. Details of the cash planning and management training will
be unveiled during the year.
Authorisation of Unauthorised Expenditures
Several unauthorised expenditures were incurred by many departments of the
provincial administration during the pre- and post-1998/99 financial years.
Honourable Members will recall that on numerous occasions, the Portfolio
Committee on Finance and Provincial Expenditure has prevailed on Treasury to
table a Finance Bill to deal with these unauthorised expenditures. The
pre-1998/99 unauthorised expenditures, amounting to some R363 million was part
of the write-off of some R1,06 billion owned by the former Transkei/Ciskei and
Cape Provincial Administrations. The Finance Bill for these unauthorised
expenditures is ready and will be tabled in the House for discussion and
approval. I wish to inform members that the process will have no financial
implications for the province as the expenditure has been written off in the
provincial accounts. The National Government passed a Bill authorising the
write-off and so, our Finance Bill will be asking for your concurrence for the
write-off.
The post 1998/99 unauthorised expenditures amounting to some R3,1 billion
will require departments who have not already met with the Standing Committee
on Public Accounts to do so and explain their cases so that the Committee can
pass resolutions on them. Thereafter, Treasury will formulate a Finance Bill to
give effect to the resolutions. Treasury is arranging a time table with SCOPA
for departments to appear before it and defend their unauthorised
expenditures.
Municipal Debts
The provincial administration owes a number of municipalities in respect of
services rendered to departments. Up to June 2004, and after reconciliation of
accounts, it was discovered that four departments of the provincial
administration, including the Departments of Social Development, Roads and
Transport, Local Government and Housing, and Health owe the Nelson Mandela
Metropolitan Municipality a total of R41,6 million. The Nelson Mandela
Metropolitan Municipality, for its part, is holding back some R92,6 million of
provincial money in respect of licences and vehicle registration fees. The
Government has taken the decision to pay the Nelson Mandela Metropolitan
Municipality debt. Accordingly, provision was made for the payment of the debt
in the second Adjustments Budget I introduced in the House a week ago. I
implore all departments and their spending agencies to ensure that they pay for
the services rendered to them by the municipalities timeously to avoid interest
charges and a build up of debts. The Nelson Mandela Metropolitan Municipality
has been requested to release all monies belonging to the province before the
financial year ends on 31 March 2006.
Municipal Oversight
The current state of financial management at municipal level is in flux,
necessitating the introduction of the Municipal Finance Management Act in 2003.
The Act, however, recognises that the National Government alone cannot
implement and monitor the financial and budgetary reforms of all the
municipalities in the country. The approach therefore is that:
* The National Treasury will monitor the Metros and the 20 largest category B
municipalities, which together represents over 75% of the total local
government expenditure in the country;
* Provincial Treasuries will monitor District Councils and the remaining
category B municipalities;
* District Councils will monitor the smaller primary municipalities within
their jurisdiction and report on their progress to Provincial Treasuries;
* In his speech last week the Minister of Finance, Mr. Trevor Manuel disclosed
that the Development Bank of South Africa is currently assembling a task force
of engineers and project managers to be named âSiyenza Manjeâ to contribute to
operational and strategic capacity in distressed municipalities as to
accelerate the roll-out of basic services. An improved maintenance, standards
and management system will be implemented. Under the umbrella of Project
Consolidate we will give focussed attention to municipal finance management and
procurement administration.
As the first phase of the implementation of the Municipal Finance
Management Act, the National Treasury has selected 12-point priorities to
implement. Provincial Treasuries are required to monitor and report on the
progress of the implementation to the National Treasury. This is a monumental
responsibility bestowed upon Provincial Treasuries. Our Treasury will need to
boost its financial management and planning capacity in this area in order for
it to be able to perform not only the oversight role but also to support the
major improvements necessary for the municipalities to implement the financial
management and budgetary reforms. The 2006/07 financial year will therefore
witness a major capacity building exercise in the Provincial Treasury.
Demarcation of Provincial Boundaries
The newly demarcated boundaries will take effect from 1 March 2006 or at the
commencement of sections 2 and 4 of the Constitution 12th Amendment Act of
2006. The result of the boundaries demarcation process is that Uzimkhulu is
incorporated in KwaZulu-Natal and Matatiele in the Eastern Cape. The process
has some budgetary implications for the province, as the equitable share and
conditional grants have to be aligned with the new boundaries. This will mean
shifting of funds, transfer of ongoing programs and projects, and transfer of
assets, liabilities and staff between the two provinces. Treasury and the
Department of Housing, Local Government and Traditional Affairs are playing
active roles in this process to ensure a smooth transfer and in keeping the
affected departments up to speed with their new responsibilities.
Government Employee Medical Scheme
Government agreed on specific incentives to allow for low-income public
servants (approximately 40% of its workforce) to have access to medical
coverage at affordable cost. The implementation of the Government Employee
Medical Scheme (GEMS) therefore commenced on 1 January 2006. To support
provinces to implement GEMS, funds were added to the provincial equitable
shares. These allocations top up what provinces should budget for the
employerâs contribution for medical aid coverage for all employees. In the
interim, provinces have been requested to ensure that their budgets adequately
provide for all personnel related cost, including provision for medical aid
coverage for all employees, whether they will be on GEMS or any other medical
aid scheme. The funding for all the personnel related costs remains a
provincial responsibility while the funds added to the equitable share is just
to augment the provincial funding. The GEMS funding has not been allocated to
departments because the guidelines spelling out how the Scheme is to be
implemented has not been finalised.
The fiscal framework
Madam Speaker,
The total provincial revenue for fiscal year 2006/07 will amount to R27,9
billion, representing an increase of 10,7% over the 2005/06 revenue figure.
This R27,9 billion is made up of the following:
Equitable Share: R24,6 billion
Conditional Grants: R2,8 billion
Own Revenue: R475,0 million
Compared to the figures for the 2005/06 financial year, the increases are as
follows:
Equitable Share: 11,0%
Conditional Grant: 9,9%
Own Revenue: 10,7%
We propose a total budget of R26,8 billion, representing an increase of
12,3% over the 2005/06 projected total expenditure. This figure is composed of
the following:
Compensation of Employees: R16,3 billion
Non-Personnel Non-Capital Expenditure : R8,5 billion
Capital Expenditure: R2,0 billion.
Compared to the projected expenditure figures for 2005/05, the increases in
the 2006/07 figures are as follows:
Compensation of Employees: 6,6%
Non-Personnel Non-Capital Expenditure: 20,8%
Capital Expenditure: 29,2%
Departmental allocations
Madam Speaker,
I now wish to turn to the specific allocations to departments of the provincial
administration. As I mentioned earlier, total appropriation proposed for the
financial year 2006/07 amounts to R26,8 billion, indicating an increase of R3,1
billion over the 2005/06 adjusted budget and a surplus of R1,1 billion.
Vote 1: Office of the Premier.
The Office of the Premier is currently undergoing major structural changes.
To facilitate and support the process, the departmentâs budget is increased by
R37,9 million in 2006/07 financial year. The bulk of this allocation will fund
the Provincial Coordinating and Monitoring Unit, whilst the filling of critical
posts, branding of the province, and coordination of the implementation of the
PGDP have also been catered for in the allocation.
Vote 2: Provincial Legislature
Madam Speaker, you will be pleased to note that the allocation to the
Provincial Legislature has been increased by R29,7 million, bringing the total
allocation in financial year 2006/07 to R129 million. This allocation has been
made to accommodate the new Standing Rules that will increase House sittings,
public participation and Committee reports. These changes will pose new
challenges to the Legislature, especially regarding the provisioning of
enabling facilities, equipment, housing and office support. Treasury is also
cognisant of the fact that the Legislature wishes to revamp the House. During
the year Treasury will engage in discussions with the officials of the
Legislature on this matter.
Vote 3: Health
For the financial year 2006/07, the Department of Health will receive an
allocation of R6,9 billion, representing an increase of 13,2% over the previous
yearâs allocation. The conditional grant portion of the departmentâs allocation
amounts to R905,1 million. The conditional grant is to fund the Comprehensive
HIV/Aids Programme, forensic pathology services, health professional training
and development, hospital revitalisation and national tertiary services.
In addition to the key sectoral priorities I have already outlined, the
increased allocation will fund the implementation of the revised service
platform, particularly the realignment of tertiary services,
de-institutionalisation of chronic patients, and the promotion of home-based
care. The allocation will also support the roll-out of the anti-retroviral
programme.
Vote 4: Social Development
The allocation to the Department of Social Welfare for financial year
2006/07 is R762,8 million. This figure represents an increase of 41,4% over the
2005/06 allocation. As all social assistance grants will be administered
through the South African Social Security Service, the department can now focus
its efforts entirely on social welfare services and development. This move
necessitates a change in the approach of service delivery towards strengthening
self-reliance among individuals and households. In addition to the priorities
for the social sector that I have mentioned earlier, the increase in the
departmentâs allocation will assist the implementation of the following
programmes:
* Transformation of services from the traditional approach to social
development;
* An integrated poverty alleviation programme; and
* Special Development Programmes, such as HIV/AIDS, Old Age Support, Victim
Empowerment Programmes, Disability Management, and the prevention of substance
abuse.
Vote 5: Public Works
The allocation to the Department of Public Works is reduced by R13,3 million
to R514,3 million in financial year 2006/07. This is attributed solely to the
shifting of the roads maintenance function to the Department of Roads and
Transport, leaving the department to coordinate the Expanded Public Works
Programme (EPWP). The EPWP offers the Department of Public Works the
opportunity to engage actively in projects that aim at creating job
opportunities and skills development, thereby contributing to the eradication
of poverty in the province.
Vote 6: Education
The allocation to the Department of Education increases by R1,8 billion in
the financial year 2006/07. This increases the total allocation to the
Department to R13,1 billion in 2006/07. Included in the total allocation is an
amount of R319,99 million conditional grant for FET recapitalisation, HIV and
AIDS, and the National School Nutrition Programme.
The huge increase in the baseline allocation will enable the department to
continue to enhance its service delivery capacity by filling critical vacancies
in schools and offices, reduce infrastructure backlogs, and provide more and
better school facilities. Part of the additional funds allocated to the
department will be used to develop a medium term strategy for the delivery of
learner and educator support materials; broadening the Matriculation
Intervention Programme; and prepare the department to take over the management
of the School Nutrition Programme from the Department of Health.
Vote 7: Housing, Local Government and Traditional Affairs
For the financial year 2006/07, the Department of Housing, Local Government,
and Traditional Affairs will receive R1,2 billion. This amount represents an
increase of 24% over the previous yearâs allocation. Included in the
departmentâs allocation is an amount of R104 million for the traditional
institutional arrangements and resource administration, and conditional grant
of R761,99 million for the Integrated Housing and Human Settlement
Development.
In an attempt to effectively address the issue of housing in the province,
the department has introduced the âBreaking New Groundâ policy. This new policy
signifies a shift from the traditional RDP housing delivery approach to the
creation of integrated and sustainable human settlements. An important element
of the new approach is the provision of social and economic amenities, such as
water, electricity, sanitation and roads.
Vote 8: Agriculture
For the financial year 2006/7, the department will receive an allocation of
R869,7 million, indicating an increase of 5,8% over the previous yearâs
allocation. Included in the departmentâs allocation is a conditional grant of
R63,7 million for the Comprehensive Agricultural Support Development and the
Land Care Programme.
The implementation of the Green Revolution Programme is the key driver of
the departmentâs allocation. The department is focussing attention on
transforming subsistence farming into commercial farming to strengthen the
latterâs contribution and participation in the mainstream agricultural economy.
Among the key projects to be implemented by the department to support the
agrarian transformation during the year are the following:
* Food Security/Massive Food Production (Siyazondla Siyakhula);
* Uvimba Transformation: Uvimba and Vulithuba;
* Land care projects;
* Land Redistribution for Agricultural Development;
* Comprehensive Agricultural Support Programme; and
* Micro Agricultural Finance Scheme (Mafisa).
Vote 9: Economic Affairs, Environment and Tourism
The allocation to the Department of Economic Affairs, Environment and
Tourism is reduced by R103 million in financial year 2006/07 as a result of the
funding of the Coega IDZ being taken over by the National Government under
ASGISA. The allocation to the department therefore remains at R519,1
million.
The department, in collaboration with its public entities and the private
sector will, however, continue to market the province aggressively as a
destination of choice for tourists and investors to support the growth of the
provincial economy.
Vote 10: Roads and Transport
The Department of Roads and Transport receives an allocation of R1,98
billion in the 2006/07 financial year, representing an increase of some 12.2%
over the previous yearâs allocation.
The additional allocation to the department is to support the revival of
public transport in the province. During the year, the department will continue
with the extension of the East London/Berlin to King Williamâs Town rail
commuter service project; the proposed Port Elizabeth/Motherwell/Coega IDZ
railway commuter service project, and the continuation of the Kei Rail
project.
Vote 12: Provincial Treasury
Allocation to the provincial Treasury is increased by R16 million to R196,8
million in financial year 2006/07. A large chunk of this allocation, which
represents an increase of 9,1% over the previous yearâs allocation, will fund
the following projects that will be implemented by the department during the
year:
* Provincial Financial Management Improvement Programme;
* Provincial Infrastructure Plan;
* Provincial Suppliers Electronic Database;
* Skills development in cash planning and management;
* Provincial Own-Revenue Studies;
* Municipal finance oversight;
* Filling of critical posts; and
* Public Financial Services Agency (PFSA) Programme
* Part of the increased allocation will also fund the enhancement of telephone
management system and the implementation of office automation services systems
for all departments.
Vote 14: Sports, Recreation, Arts and Culture
The allocation to the Department of Sports, Recreation, Arts and Culture is
increased from R267,3 million in the previous year to R322 million in 2006/07.
This represents an increase of 20,5% in financial year 2006/07. Included in the
departmentâs allocation is a conditional grant of R17,1 million for the Mass
Sport and Recreation Participation Programme.
The increase in the allocation to the department is attributed to the
following:
* The expansion of the Siyadlala Mass participation Programme in all local
municipalities;
* Expansion of provincial library services. Subsidies to provincial libraries
will be increased to ensure that the services are sustained and contribute to
eradication of illiteracy. All District Municipalities will also be provided
with âLibraries on Wheelsâ units to increase access to library services in the
rural areas;
* Implementation of phase 1 of the construction of the Mthatha Stadium for the
2010 FIFA World Cup; and
* Support to the Provincial Geographical Names committee.
Vote 15: Safety and Liaison
The Department of Safety and Liaison receives the largest increase in
allocation during the 2006/07 financial year. The allocation to the Department
increases from R13,4 million in 2005/06 to R24, 4 million, indicating and
increase of some 82%. The additional allocation will enable the department to
fill critical posts to enhance its service delivery capacity.
Conclusion
Madam Speaker, Premier, Honourable Members of the House,
In conclusion, I believe that the budget and policy statement I have delivered
today marks the commencement of the second phase of the expenditure
restructuring process. The first phase, covering the two financial years of
2004/05 and 2005/06 placed emphasis on stabilising the finances of the
province. During this period, measures were introduced to consolidate
expenditures by reducing wasteful and fruitless spending, seeking economies in
expenditure, making spending departments and their agencies to recognise the
constraints on revenue, and generally enhancing fiscal discipline.
In the second phase, emphasis is placed on redirecting spending towards
sectors that have the potential to accelerate economic growth, create
employment, and reduce poverty. Reducing poverty in this context should not be
misinterpreted to mean giving handouts to the poor, but rather opening the door
widely for the poor, vulnerable and neglected to enable them to increasingly
participate in the mainstream economic activity. In doing so, we are guided by
the saying that âif you feed a person, you will feed him for ever, but if you
teach a person how to feed himself he will not only feed himself but will also
teach others how to feed themselvesâ.
Madam Speaker,
I will like to take this opportunity to thank the Premier and Members of the
Executive Council for their unflinching support to the budget planning and
preparation and the financial management of the province. I will like to assure
the House that with the appointment of a permanent Head Official, the Treasury
is going to position itself in a manner that will enable it to become the
fulcrum around which the wheels of the government rotate.
Enormous words of appreciation go to the management and staff of the
Treasury for their commitment and sense of duty. This budget is the culmination
of months of hard work and weeks of long hours spent in the office. Be assured
that your efforts have not gone by unnoticed.
Honourable Speaker, I hereby table:
* The Appropriation Bill for Financial Year 2006/07
* Budget Statements 1 and 2, and
* A copy of the Budget Speech and Policy Statement.
Enkosi Kakhulu! Ek dank u! I thank you.
Issued by: Provincial Treasury, Eastern Cape Provincial Government
20 February 2006
Source: Eastern Cape Provincial Government (http://www.ecprov.gov.za)
