When I tabled the Main Budget on 8 March 2011, the global economic outlook seemed very promising. The financial markets had stabilised somewhat, cushioned by substantial fiscal stimulus, particularly by the US Federal government. This was necessary to halt the devastating effects of the 2009/10 recession. However, the continued impasse on the resolution of the debt crisis in the Eurozone (South Africa’s main trading partner), affecting largely Greece and Spain, and now also Italy has dampened the level of optimism with respect to global economic growth for the years ahead.
Unfortunately, South Africa’s economic growth typifies the global economic growth. It is no wonder therefore that, in tabling his Medium-Term Budget Policy Statement (MTBPS) on 25 October 2011, the Minister of Finance, Mr Pravin Gordhan, revised the economic growth forecast downwards from 3.4 to 3.1 for the current year. These revisions were necessary as the main economic sectors in the South African economy slowed down significantly in the first half of the year, with agriculture shrinking by 7.8%, mining by 4.2% and manufacturing by 7%. The consequence of this slowdown is an increase in unemployment rising to 25.7% in the second quarter of 2011. The only sector of the economy that has shown resilience is general government, which recorded 5.7% growth in the second quarter – an indication of the counter-cyclical fiscal stance that the country has adopted.
As a result of the subdued economic activity in the current year, National Treasury has indicated that tax revenue has remained below budget. In fact, the year-end forecast indicates a R13 billion revenue budget shortfall which needs to be financed somehow. In reality, what this means is that the national fiscus is severely constrained and is likely to remain so until economic growth improves significantly. This requires government to seriously give effect to the notion of baseline reprioritisation. The days of substantial increases in additional allocations seem to be over for the foreseeable future. We need to be very efficient in spending our existing budgets to ensure we get value for money. We need to prioritise and only spend on items and programmes that give effect to government’s stated priorities.
Similar to the national scenario, KwaZulu-Natal’s economic trajectory appears subdued. The gross domestic product for the Province of KZN increased by 3.50% on an annualised basis during the second quarter of 2011. On a quarter- on-quarter basis, however, the gross domestic output for the Province increased only by 0.64% during the second quarter of 2011, which is significantly less than the 1.67% and 1.04% recorded in the first quarter of 2011 and the fourth quarter of 2010, respectively. While the economy of the Province is in a slightly better position compared to a year ago, it is losing steam nonetheless, mostly because of the global economic uncertainties caused by the European debt crisis mentioned earlier.
The production sectors of the provincial economy have performed fairly reasonably over the last year, mainly as a consequence of the initial promising global economic recovery. However, given the current renewed global economic slump, the outlook for the provincial production sectors is less optimistic. Similarly, the tertiary sectors are also struggling, with households seemingly unable and/or unwilling to access credit. The downward pressure on house prices further constrains households’ ability to borrow, and weakens the confidence to spend.
It is within this economic context that this Adjustments Budget is tabled.
Proposed Adjustments
Let me now turn to the contents of the Adjustments Budget I am tabling today. I
will indicate to the House how these adjustments are financed.
Section 31 of the PFMA requires that the MEC for Finance tables the provincial Adjustments Budget annually. Adjustments are made to the Main Appropriation in terms of Section 31 of the PFMA and may ONLY provide for:
- Appropriate funds that have become available to the Province as per
Section 31(2) (a) of the PFMA. - Cater for unforeseeable and unavoidable expenditure as per Section
31(2)(b) of the PFMA. - Expenditure in terms of Section 31 (2) (c) read with Section 25 of PFMA, i.e. in emergency situations.
- Appropriate funds for expenditure already announced by the MEC for Finance during the tabling of the main budget as per Section 31(2) (d) of the PFMA.
Cater for the shifting of funds between and within votes in terms of
Section 31(2)(e). - Provide for the utilisation of savings under the main division within a vote for the defrayment of excess expenditure under another main division within the same vote, commonly referred to as virements and as governed by Section 31(2)(f).
- Accommodate Treasury-approved roll-over requests for those departments who could not spend the entire amount voted by the Legislature in that particular year, as per Section 31(2) (g) of the PFMA.
Having said this, the basis of any additional allocation to departments generally arises after extensive consultation and discussion with various role-players. This takes the form of informal consultation between Treasury and the departments, but also through formal bilateral meetings with the departments, where Provincial Treasury engages face-to-face with the departments. These formal meetings occur at least three times a year, and are a good platform for departments to highlight any spending pressures; how and why they arise; and what can be done to fund these from internal reprioritisation. If internal reprioritisation is not a feasible option, such requests are taken forward by Treasury for consideration for additional funding, depending on the availability of funds in the fiscus.
Treasury always reviews and considers these funding requests in the context of the 12 national outcomes and the Provincial Growth and Development Strategy (PGDS), among others. In particular we take our lead from domestic priority areas, i.e.
- the promotion of education and of health for all our population;
- the creation of jobs and poverty alleviation;
- rural development;
- and the combating of crime.
As members will see in this Adjustments Budget, a concerted effort has been made to make allocations to these priority areas. At a provincial level, we also use the PGDS that has been adopted by Cabinet. For example, the allocations made to the development of various regional airports (which I will elaborate on later) give effect to a Regional Airport Development Strategy which forms part of the PGDS.
These additional funding proposals are then taken through to the Ministers’ Committee on the Budget (MinComBud) and to Cabinet for approval.
Financing of the Adjustments Budget
This House will recall that the Province has been in overdraft due to provincial over-expenditure in 2007/08, 2008/09 and 2009/10. In response to this and in an attempt to curb this over-expenditure trend the Province implemented the Provincial Recovery Plan, along with the associated list of cost-cutting measures. Besides this, the province started to budget for a surplus from 2009/10 to start repaying the provincial overdraft and protect itself against any unforeseen fiscal shocks.
There is no doubt that these measures assisted the province tremendously: to such an extent that the Province was able to end the 2010/11 financial year with under-expenditure of some R3.451 billion. While this is good news in terms of repaying the provincial overdraft, there are aspects of this under- expenditure which did not arise due to savings from cost-cutting, but rather as a result of under-spending on service delivery programmes, in particular on infrastructure provision. This is totally unacceptable and Treasury has put in place a so-called “Infrastructure Crack Team” to assist departments with infrastructure delivery. Care must be taken to ensure that we never compromise on service delivery.
This Adjustments Budget deals with aspects related to underspending, such as the conditional grant budgets that were under-spent. Some were approved to be rolled-over to 2011/12, whereas some had to be returned to the National Revenue Fund. This must be avoided at all cost in future.
Impacting on the availability of surplus funds in this Adjustments Budget, is the fact that the province is once again projecting to over-spend, largely due to pressures in the personnel budget of the Department of Education arising in part from the carry-through costs of the various Occupation Specific Dispensations (OSD) and the higher than budgeted wage agreements of the past few years. The department has also not yet processed the “no work, no pay” deductions relating to the 2010 public service strike action. At this stage it seems unlikely that these deductions will be effected and the department has therefore reflected a reversal of the journal passed at the end of 2010/11 in this regard which amounted to approximately R579 million. The reversal of this journal has drastically increased the department's 2011/12 level of expenditure against Compensation of employees. If this amount had been deducted, the department's projected year-end over-expenditure would obviously have decreased by R579 million.
Similarly, the Department of Health is showing some pressure, also due to cost pressures arising from the implementation of various categories of OSDs which was delayed and only implemented in 2011/12, while the department had received funding for it in 2010/11 but could not spend it because it had problems with the Persal code. The above budget 2011 wage agreement has also impacted on the department’s end-of-year projected over-expenditure. However, the department will be compensated in full for the 2011 wage agreement.
Net Financial Position - 2011/12
R-thousand: 2011/12
1. Bank balance as at midnight 31 March 2011: R2,668,590
2. Less: Accruals relating to 2010/11 (incl. NHLS liability): R1,714,609
3. Bank balance if accruals had been paid in 2010/11: R953,981
4. Less: Underspending of 2010/11 & bgt surplus of 2010/11: R4,554,563
5. Bank overdraft at end of 2010/11 if province had not under-spent 2010/11 & bgt for a surplus: R(3,600,582)
6. Add: Year-end under-expenditure (as per Audited IYM): R3,451,135
7. Add: Budgeted surplus for 2010/11: R865,038
8. Add: Over-collection of own revenue (as per audited IYM): R238,345
9. Funding available from 2010/11 after repaying the bank overdraft: R953,936
10. Less: Unspent conditional grants: R162,725
- Agric - Land Care grant: R476
- Education - NSNP: R102,069
- Health - Comprehensive HIV/ AIDS grant: R17,885
- Public Works - Devolution of Property Rates grant: R42,295
11. Less: Conditional grant funds to be returned to National Treasury: R213,462
12. Less: Implementation of first charge (Health and Education): R869,466
13. 2010/11 funding overdrawn after repaying overdraft, returning unspent cond. grant and provided for Education & Health's 1st charge: R(291,717)
14. Less: Provincial Commitments: R67,350
- Economic Dev & Tourism (UCI/BMX): R3,150
- Prov. Treasury (Ulundi airport): R20,000
- Prov. Legislature (Over-collection of own revenue in 10/11 ito S22 of PFMA): R3,509
- CoGTA (Elections of Traditional Councils): R10,000
- CoGTA (Infrastructure at voting stations): R3,000
- DEDT - SMME investment fund: R2,691
- Royal Household (seed funding for Royal Trust): R5,000
- Office of the Premier (LIV - Orphanage): R20,000
Table 1 provides an analysis of the province’s net financial position, taking into account the under-expenditure from 2010/11, the bank overdraft that needs to be repaid, conditional grant funds that have to be returned to the National Revenue Fund, among others. It also indicates the roll-overs that have been approved and the provincial commitments that have been funded.
This table is, in essence, a snap-shot of the adjustments that are included in the Adjustments Budget that is being tabled today. What this table does not take into account, is the additional funding allocated to KwaZulu-Natal in the National Adjustments Budget. These national adjustments will be discussed in more detail below.
The table begins with the bank balance as at midnight of 31 March 2011. This balance stood at R2.699 million, which sounds quite healthy. A few factors needed to be considered, though. A number of outstanding payments had not been made before the end of the year which would have had an impact on the provincial bank account. These accruals amounted to R1.715 billion and included an amount of R800 million relating to the National Health Laboratory Services. Line 4 of the table then goes into theoretical calculations of what the bank balance would have been if the province had not under-spent its 2010/11 budget allocation; had not over-collected own revenue; and had not budgeted for a surplus. Once these are taken into account, Line 5 indicates what the provincial overdraft would then have been at the end of 2010/11. The overdraft would have theoretically been R3.601 billion. This amount therefore becomes a “first charge” against the 2010/11 under-spending, own revenue over-collection and the budgeted surplus. Lines 6 to 8 make these adjustments to arrive at Line 9 which indicates the funds left in the bank after settling the bank overdraft i.e. R953.936 million remained available.
Included in this balance, though, are unspent conditional grant funds from
2010/11. These have to be excluded from this analysis as these have to be returned to National Treasury if not spent or committed at year-end. National Treasury approved the provincial roll-over of R162.725 million, as seen in Line 10 of the table. This amount provides for the following conditional grant roll-over approvals:
- Land Care grant: R476 000
- National School Nutrition Programme: R102.069 million
- Comprehensive HIV and AIDS grant: R17.885 million
- Devolution of Property Rates grant: R42.295 million.
Line 11 removes all uncommitted conditional grant funding from the bank balance, as any unspent conditional grant funds have to be returned to the National Revenue Fund.
Line 12 makes provision for the two outstanding first charges relating to Education and Health which have been outstanding since 2009/10. Since both these departments under-spent their 2010/11 budget allocations, these funds are now available to honour the first charges. As such, these amounts are removed from the funds available as follows:
- Health: R758 million
- Education: R111.466 million
Line 13 indicates that, once these first charges are accounted for, the funds available in the bank then become overdrawn by R291.717 million.
This Adjustments Budget also deals with a few provincial commitments. Additional funding is added to various departments for the following:
UCI Events
The Department of Economic Development and Tourism receives R3.150 million to host the UCI events in the Province. By offering at least three of the eight International Cycling Union (UCI) disciplines (road, mountain biking and BMX) Pietermaritzburg has now been positioned as the “bike city” of Africa.
Not only will this initiative contribute to job creation and poverty alleviation but it will also promote health by encouraging our young people to engage in healthy activities. It will attract large numbers of visitors to the City (increased spending) and gives us the opportunity to brand Pietermaritzburg as the “City of Choice for World Class Events.” The national and international media exposure is another spin-off. The estimated total direct, indirect and induced spend over six years is R617 156 123 (R102 859 354 per annum). This will give us 26.93% return on investment.
Development of Ulundi airport
We have allocated R30 million for the development of the Ulundi Airport. This project will be dealt with similarly to the development of the Pietermaritzburg airport where funds are only transferred to the municipality on the successful completion of various milestones. Of this R30 million, R10 million comes from the full interest on the overdraft provision no longer being needed in the current year, as the province has been cash positive since May 2010. This R10 million is therefore reprioritised within Vote 6: Provincial Treasury in the current year and has no effect on the net financial position detailed in Table 1. The balance of R20 million will be allocated to Provincial Treasury (as seen in the table) when the 2012/13 MTEF budget is prepared, with these funds being sourced from the provincial under-spending that occurred in 2010/11.
The upgrading of the airport is an important catalyst for unlocking business and tourism development and providing vital emergency and health services for this area. A guarantee of 650 (return) passengers a month will be sufficient for an airline to invest in providing daily (return) services between Pietermaritzburg and Ulundi. In addition to business demand there are many tourist attractions in and around Ulundi (the Hluhluwe-Mfolozi Park, Battlefields Route; eMakhosini Cultural Heritage Park; the King’s five palaces and related cultural events, e.g. the annual Reed Dance, etc.). Tourists arriving by air can be ferried by small entrepreneurs. This will be a major injection into the local economy and can create a number of jobs in the area.
Surplus own revenue
The Provincial Legislature receives R3.509 million, being the own revenue over-collection relating to 2010/11. In terms of Section 22 of the PFMA, any revenue collected may be retained by the Legislature.
Infrastructure at voting stations
R3 million is allocated to the Department of Cooperative Governance and Traditional Affairs. This funding was provided to the department as many voting stations were found to have inadequate infrastructure in place during the local government elections. The allocation assisted to provide support to the Independent Electoral Commission (IEC) in acquiring items such as chemical toilets, gas lights, etc., thereby contributing to the smooth functioning of the elections.
Elections of Traditional Councils
R10 million is being allocated to the Department of Cooperative Governance and Traditional Affairs. These funds will be used by the department in administering the Traditional Council elections in February 2012.
SMME risk sharing fund
R2.691 million is added to the Department of Economic Development and Tourism in terms of the SMME risk sharing fund entered into with Standard Bank. An investment is kept as part of the Revenue Fund in terms of an agreement with Standard Bank, from which funds are drawn in the event of a SMME defaulting on a loan.
The Royal Trust
The Royal Trust receives R5 million as seed funding for the establishment of the Royal Trust, as agreed to by Cabinet. These funds will be used for various set-up costs of the Royal Trust.
Lungisisa Indlela Village (LIV) Orphanage
The Office of the Premier receives R20 million for the rehabilitation of the infrastructure at an orphanage at Verulam (LIV) Orphanage, with R12 million being allocated in this Adjustments Budget and the balance of R8 million when the 2012/13 MTEF budget is prepared. Government, Business and the Church all work together to provide education to vulnerable children without parents in a family environment where they receive love, spiritual guidance, care and nurturing.
In addition, the Province has approved the following roll-overs:
Cooperative Governance and Traditional Affairs (CoGTA)
CoGTA receives R2 million to monitor the implementation of the R214 million disaster funding which was allocated to the Department of Transport in 2010/11.
While Transport implements the funding, the provincial CoGTA is responsible to provide reports to the National CoGTA on whether the funds have been adequately spent.
Office of the Premier
The Office of the Premier receives R8 million as a roll-over from 2010/11 for the commemoration of the arrival of Indian indentured labourers. The Office of the Premier was allocated R10 million for this purpose in the 2010/11 Adjustments Estimate. While R2 million was spent by the end of the 2010/11 financial year, R8 million remained unspent and is rolled over for the same purpose.
Provincial Legislature
The Provincial Legislature receives R22.531 million in unspent funds from 2010/11 for various infrastructure improvements. These infrastructure improvements include the repair and upgrading of the Legislature buildings, e.g. the Office of the Deputy Speaker, the foyer area, the Members’ parking, as well as the purchasing of generators in view of the frequent power outages experienced in the city centre. A portion also goes towards the implementation of the Enterprise Resource Planning System, a system that will enable the Legislature to operate on an accrual and not on a cash basis of accounting. This is expected to strengthen its oversight role and independence with regard to other government departments.
Provincial Treasury
Provincial Treasury receives R34.565 million as a roll-over being the unspent portion of the R40 million allocated to Treasury in the 2010/11 Adjustments Estimate for the development of the Pietermaritzburg airport over a three year period. Of this amount, R18.538 million is allocated in 2011/12 with the balance of R16.027 million being allocated in 2012/13.
We are already picking the fruit of this investment as passenger numbers arriving per flight have increased from 20.66 in 2006 to 35.63 in 2011. Flight diversions have reduced from 65 in 2006 to 5 in 2011. The majority of businesses indicated that they have experienced increases in their airport related revenues. There has been a significant demand for cargo facilities at the airport, for example cut flowers, chickens and eggs, fruit and vegetables, and post. To this end SA Airlink is in the process of converting two jet streams into cargo aircraft. A cargo hub will be established at the airport and an application for SADC accreditation will be submitted to meet the growing demand for the handling and movement of cargo at the airport.
It is conservatively estimated that the financial position of the airport at the municipality will change from a deficit of R6 million to a surplus of about R3 million, i.e., a R9 million turnaround within three years with significant escalations thereafter.
Economic Development and Tourism
The department had requested that R84.231 million of their 2010/11 under- spending be allocated back to them for transfer to the Dube TradePort. These funds will be used to fund various strategic projects which the entity is undertaking with a view to stimulating the economy and creating jobs.
Line 18 of the table reminds us that the Province once again budgeted for a surplus of R948.008 million, while Line 19 tells us that the Province was projecting to be over-spent by R1.172 billion as at the end of July 2011 (the July figures were used as they exclude the impact of the above budget 2011 wage agreement as National Treasury will be providing funding to cover the shortfall).
Line 20 brings back the bulk of the accruals referred to in Line 2 as most departments are able to fund their 2010/11 accruals from within their 2011/12 baselines. Excluded from this assumption, though, are the accruals related to the National Health Laboratory Services as well as Education’s accruals due to the department already showing severe spending pressures in its Compensation of employees’ budget. Once the accruals are removed, the Province has a positive net financial position of R63.413 million. This funding is not available for distribution, though, as there are a number of unfunded mandates lurking in the shadows of our fiscal framework. These unfunded mandates can, and in some instances are, beginning to have an impact on the Province’s spending levels. These include, but are not limited to, the remuneration of traditional leaders and ward committees, rural development and the backlog in the maintenance of the provincial road network. CoGTA estimates that the remuneration of ward committees would be approximately R96 million per annum.
I would like to highlight a few positives of these adjustments. The first one is that, if supported in this House, the adjustments proposed finally eliminate the overdraft. This is very significant. This House will remember that we had proposed to deal with the overdraft over a three-year period.
- With these adjustments, we are effectively eliminating the overdraft in about a year and a half.
- Secondly, these adjustments allow the Departments of Education and Health to deal with their “first charges”, as per SCOPA resolution, all at once.
- Thirdly, despite financing these huge liabilities, the province still remains with a small surplus of R63.4 million (bearing in mind of course the unfunded mandates) that will cushion the Province in the event of any fiscal shocks that may arise before the current financial year ends.
Additional allocations from National Treasury
Madam Speaker, the 2011/12 Adjustments Budget includes additional funding allocated by National Treasury to the Province of KwaZulu-Natal.
The following additional amounts have been allocated:
- R656.639 million for the higher than anticipated 2011 wage agreement. The 2011 wage agreement resulted in a 6.8% increment for all public servants, compared to the budgeted wage increment of 5.5%. The 1.3% difference was calculated to be R446.156 million. National Treasury has provided in excess of the requirement and the additional amount is being allocated to Education (R188 million) to assist with the pressures that exist in their budget as a result of the carry-through costs of the various OSDs, as well as the carry-through costs of previous above budget wage agreements.
- R10.744 million is added to the FET Colleges grant for the effects of the above budget 2011 wage agreement.
- R3.570 million is added to the Community Library Services Grant under the Department of Arts and Culture, being the national roll-over of unspent funds from 2010/11.
- Various amounts are added to the Province for disasters that occurred in January and February 2011, mainly related to storms. As such, R17.820 million is added to the Education Infrastructure Grant for schools damaged by floods. R31.140 million is allocated to the Department of Human Settlements as a Housing Disaster Relief Grant for repairs to houses damaged by floods and R29.736 million is given to the province in the form of a Transport Disaster Relief grant for the repair to roads and bridges damaged by the floods, and this is allocated to the Department of Transport.
Technical adjustments/Internal reprioritisation
Other than these adjustments, the Adjustments Budget also contains a reallocation of the EPWP Incentive Grant for Provinces. Portions of the EPWP Incentive Grant for Provinces are moved from the Department of Transport (R12.421 million) to Agriculture, Environmental Affairs and Rural Development (R8.316 million), Economic Development and Tourism (R536 000), Education (R536 000), Health (R536 000), Human Settlements (R536 000) and Public Works (R1.961 million), in accordance with Schedule 8 of the 2011 Division of Revenue Act.
Further, R45 million is moved from Provincial Treasury’s interest on overdraft provision (which will not be fully utilised in 2011/12 as the province has been cash positive since May 2010) to Education to assist the department in paying Section 21 schools’ municipal service charges.
R37 million is being moved from Vote 5: Education to Vote 12: Transport to provide for parts of the learner transport function to be moved from one department to the other. The Department of Education will continue to be responsible for the planning of the learner transport, including the verification of learners requiring transport, distances they need to be transported, etc. The Department of Transport on the other hand will be responsible for planning the routes and acquiring service providers.
As mentioned earlier, Provincial Treasury has reprioritised R10 million in the current year from the interest on the overdraft provision to provide funding for the development of the Ulundi Airport. This money remains against Treasury’s vote and will be administered similarly to the Pietermaritzburg airport, only upon progress on the ground. The balance of the R20 million required for the Ulundi airport will be allocated in the 2012/13 budget.
Similarly, Provincial Treasury has reprioritised funds from the interest on the overdraft provision, as well as savings from cost-cutting, to provide funding of R10.5 million toward the development of the Richards Bay Airport. Due to development in aircraft the Richards Bay Airport has to be upgraded before the end of March 2012, as the new aeroplanes will not be capable of turning on the existing runway. Furthermore, many of the multi-national companies have businesses in other African countries and need a viable airport. I will expand on these in more detail below.
Other initiatives
Infrastructure Development to stimulate the economy
As government, we continue to look out for investment opportunities that will support and stimulate the provincial economy. In this regard, as indicated earlier, we are providing funding to revive our regional airports, i.e. Pietermaritzburg and Ulundi. As mentioned above, funding will also be made available for the Richards Bay Airport. This is linked to the Regional Airport Development Strategy developed by the Province. The development of KwaZulu-Natal’s airports is also contained in the PGDS and is seen as a catalyst for economic growth. Airports are economic engines that can create jobs, directly and indirectly. In addition to passenger traffic and cargo volumes, land development on or near airport sites, mainly for industrial uses but also for tourism and recreation, generates additional economic activity.
Support for infrastructure delivery
It is old news that this province has been struggling with infrastructure delivery over the past five years. To assist in solving this problem, we launched an infrastructure “crack” team with the necessary technical skills and experience to facilitate province-wide infrastructure delivery. I am pleased to announce that this team has commenced working and is assisting various departments and municipalities with their infrastructure delivery challenges.
Operation Sikhokha Ngesikhathi
One of the ground-breaking initiatives launched this year was “Operation Pay on Time” which was launched in August of this year. The aim of this programme is to facilitate prompt payment to service providers, i.e. within 30 days as per Section 38(1)(f) of the Public Finance Management Act (PFMA) No 1 of 1999 and Treasury Regulation 8.2.3. Some departments delay payments to service providers without valid reason to the detriment of small entrepreneurs. Some have gone out of business due to cash-flow shortages, directly as a result of late payments. The programme is located at Treasury in the Accountant General’s office. Therefore, any service provider who has a legitimate claim can contact the Provincial Treasury for immediate resolution to the payment problem in the event that Departments fail to meet their commitments.
Supply Chain Management (SCM)
The province continues to pay close attention to supply chain management, given:
1) Its strategic nature in government business;
2) Its susceptibility to fraud and corruption; and
3) Its potential to yield significant savings.
There are various initiatives linked to SCM that we are currently rolling out in a phased approach. We have already started rolling out contract management in some departments as a pilot project. The aim is to strengthen our capacity to properly manage contracts that the province enters into with various service providers to ensure that we yield maximum value from these. We had hoped to have started with price-benchmarking by now to ensure that we do not pay inflated prices when we procure goods and services. The delay is as a result of the introduction of an SCM module as part of the Integrated Financial Management System (IFMS) by National Treasury. Provinces were asked not to develop or procure any new system, including a price-benchmarking system. We therefore hope that this module will be available soon to provinces, so that we can implement it as a matter of urgency and we are engaging National Treasury in that regard.
Forensic investigations
We continue to strengthen our forensic investigation capabilities as a means of reducing fraud and corruption in the province. Treasury has increased the staff complement of corporate investigators so that, there is enough internal capacity to respond without having to rely excessively on external assistance. This capability is further strengthened by the strong relationship we have established with the law enforcement agencies. We regularly interact with these agencies, as cases of suspected fraud are referred to them for further investigation and prosecution. We keep in close contact with them to ensure that cases proceed expeditiously.
Financial Literacy
As part of the partnership initiative through the KwaZulu-Natal Financial Literacy Association, a financial literacy programme for public servants was launched in May this year with the Office of the Premier. We embarked on this because we realised that a very large number of public servants are in serious financial difficulty, and we believe that it is imperative for government to look after the wellbeing of its employees. Furthermore, it is also in the interest of government to ensure that we have a financially literate workforce as some officials when managing public money transfer their poor personal financial habits to the workplace. Indebted employees are vulnerable to accepting bribes and commit unethical or corrupt practices to remedy their financial situation. In addition indebtedness often results in absenteeism, abscondment and the escalation of theft and fraud.
One of our initiatives is the KNOW YOUR MONEY newspaper for government employees - launched on 4 November 2011. The bi-monthly newspaper is self- financed and a true partnership between government and the private sector. The Employee Wellness practitioners from all 16 departments will ensure the distribution of 190 000 copies to each and every person in government and together with the communication units will also encourage officials to read the content and provide us with feedback.
Cost-cutting measures
The fiscal austerity measures we tabled about two years ago, as part of the provincial financial recovery plan, remain in place. This plan will ensure that the province remains financially viable in the years ahead. It is only prudent to keep this plan in place given the uncertainties of the global and domestic economic growth prospects. However, these measures have never implied that departments should not spend the money that they have to ensure service delivery – spending on service delivery projects and programmes is a non- negotiable.
In conclusion, I would like to convey my sincere appreciation to the Premier, my Cabinet colleagues as well as the members of the Ministers’ Committee on the Budget (MinComBud) for their assistance in finalising this Adjustments Estimate Bill. The support received from the Finance Portfolio Committee is also acknowledged with appreciation. Lastly, I would like to thank all the Treasury officials, including the Ministry staff, for ensuring that the budget documentation we are tabling today is accurate and of high quality.
It is my honour to formally table the 2011/12 Adjustments Appropriation Bill for consideration in this House. I look forward to the debate on this Bill.
Thank you.
