Madam Speaker, Section 28 (1) of the Public Finance Management Act (1999) requires the MEC for Finance in a province to annually table, in the Provincial Legislature, a multi-year budget projection of:
a) The estimated revenue expected to be raised during each financial year of the multi-year period; and
b) The estimated expenditure expected to be incurred, per vote, during each year of the multi-year period, differentiating between capital and current expenditure.
I therefore rise to table the 2011/12 Medium Term
Madam Speaker, Section 28 (1) of the Public Finance Management Act (1999) requires the MEC for Finance in a province to annually table, in the Provincial Legislature, a multi-year budget projection of:
a) The estimated revenue expected to be raised during each financial year of the multi-year period; and
b) The estimated expenditure expected to be incurred, per vote, during each year of the multi-year period, differentiating between capital and current expenditure.
I therefore rise to table the 2011/12 Medium Term Expenditure Framework (MTEF) for the Province of KwaZulu-Natal.
A. Introduction
The skeleton of the state
Economist and political scientist Joseph Schumpeter referred to a government’s budget as “the skeleton of the state,” and he believes that the “evolution of the nation is evolved in its budget.”
George Bush – not always known for his intellectual capacity – apparently said, “It’s clearly a budget. It’s got a lot of numbers in it.”
Indeed, our budget has a lot of numbers in it! But the test of whether it is a good budget – the ‘skeleton’ of the province – should be whether the numbers reflect the KwaZulu-Natal government priorities and commitment to:
- Creating decent work and economic growth
- Ensuring rural development/agrarian reform and food security
- Fighting crime
- Education
- Health
- Nation building and good governance.
These priorities, which have been integrated into 12 National Outcomes, are translated into programmes. And as a pro-poor budget it has the potential to empower the marginalised to realise their economic, civil, political, social and cultural rights.
Not only am I tabling the Provincial Budget today. I am also here to give all women a huge global hug. Every year, on 8 March, organisations and governments celebrate International Women’s Day. However, today is extra special as 2011 marks the 100th celebration of International Women’s Day.
The theme for this centenary is Equal access to education, training and science and technology: Pathway to decent work for women. Female-headed households have been hit hardest by unemployment. In particular, long-term unemployment rates are growing rapidly for women who have limited education. And many of these women have no safety net to fall back on.Our budget should therefore be subjected to a further test, namely: is it a pathway to decent work for women through equal access to education, training and science and technology?
B. Shaping budget decisions
Given the importance of fiscal policy in shaping the economic growth trajectory, it is always useful to reflect on the current economic circumstances under which this budget was crafted in order to provide both the context and the rationale for the budget policy decisions taken.
Economic scenario
The national economic recession that started during the first quarter of 2009 officially ended during the third quarter of the same year. While the recession was short-lived, its effect on the economic performance was very dramatic and severe. Although South Africa’s financial markets were largely insulated from the crash that engulfed the US and most of Europe, the real economy suffered tremendously as credit lines shrunk and liquidity in the market evaporated. Our Gross Domestic Product shrunk by 1.68% on average in 2009. Final consumption recorded negative growth of 3.1% – significantly down from the 8.3% positive growth in 2006. The economy lost more than 1 million jobs since September 2008, commencing as the early signs of the global recession of 2009 started making their way through the economy.
Even though the general consensus seems to imply that the worst of the recession in now over, the pace of the recovery is painfully sluggish. Viewpoint – a Standard Bank publication – still foresees a protracted and ‘anaemic’ economic recovery in advanced economies. In the US, the economic performance has failed to generate employment opportunities leading to subdued domestic demand. This slow pace of recovery in advanced economies negatively affects the export performance of emerging markets – including South Africa.
As a result of the structural relationship between South Africa’s and KwaZulu-Natal’s economies, the Province has also been negatively affected by the recession. In 2009, the provincial economy shrunk by 2.24% with devastating effects on employment. What was even more profound was the dramatic increase of discouraged work-seekers rising from 183 000 in the first quarter of 2008 to a staggering 495 000 in the third quarter of 2009.
The economic outlook, however, seems somewhat more promising for 2011. According to the latest forecasts, the national economy is expected to expand by 3.4%in 2011, 3.7%in 2012 and 4% in 2013. The Provincial Treasury projects an estimated economic growth of between 3% and 3.5% for KwaZulu-Natal. However, for the South African economy to create jobs, it needs to grow at more than 7% per annum for a prolonged period.
And while we are excited about our inclusion as the “S” in the BRICS1 formation, we cannot afford to ignore the competition that our fast-growing partners offer. In an attempt to stimulate growth and create employment opportunities, South Africa is embarking on reforming its prudential framework, which covers offshore investments by individuals and companies. In an attempt to make South Africa attractive as an investment destination, and to encourage investments on the African continent, the Minister announced that non-South African companies would be allowed to deploy (and raise) capital offshore without exchange control approval. Over and above this, exchange controls on domestic companies were amended to remove barriers to their international expansion from a domestic base.
The new growth path
A new growth path for South Africa has been adopted by Cabinet. It focuses on changing the structure of the economy from a resource extraction economy to a more production-led economy that can create employment opportunities. Sectors that will be targeted, given their potential to create jobs, are the:
- Infrastructure/construction industry
- Agriculture value chain
- Mining value chain
- Green economy
- Manufacturing sectors
- Tourism and high-level services.
I am confident that, if fully implemented, this growth path will have a profound positive effect on the performance of the South African economy, including that of KwaZulu-Natal.
For many decades, the giant that is KwaZulu-Natal has been slumbering. However, beneath the rolling green hills, the golden beaches and mighty mountains, KwaZulu-Natal is slowly but surely beginning to flex its economic muscle. We overtook the Western Cape to become the second largest regional economy in South Africa – now second only to Gauteng (refer to pie chart below). Working together as a team we can ensure that KwaZulu-Natal realises its full potential.
2011 – The year of job creation
The International Women’s Day theme fits in well with South Africa’s declaration of 2011 as the year of job creation. But what has been on everybody’s lips is: Where will tomorrow’s jobs come from?
According to data projections3 in the US, 64% of 15.3 million projected jobs will be created by small business over the next decade. And women-owned businesses, (which only account for 16% of the total jobs), will be responsible for creating one-third of the new anticipated jobs by 2018.
In South Africa, where women, and especially black women, are advanced by government through preferential procurement policies, women and small business are most likely to be our province’s and country’s future job creating engines.
Effective job creation is crucial in dealing with our huge unemployment rate and the large inequalities that exist between the rich and the poor. Thus Finance Minister Pravin Gordhan emphasises in his budget speech that our particular development circumstances “require newideas and bold efforts from all: government, business, labour, communities and every family.”
It also requires the team work that Premier Zweli Mkhize spelled out in his State of the Province Address, and for all government departments to put appropriate programmes in place and to establish the right environment for the creation of many decent and sustainable jobs.
C. Some funded government job creation initiatives in KwaZulu-Natal
C.1 Human resource training and development
Bursaries
The provincial government spent approximately R260 million from 2005 to 2010 on external bursaries through its various departments, in an effort to increase the skills and employability of particularly the newly matriculated and unemployed youth. In 2011/12, we anticipate spending approximately R72 million on external bursaries. We furthermore spent approximately R68 million on internal bursaries from 2005 to 2010 to improve the skills of our own employees, and anticipate spending a further R19 million in 2011/12 internally.
Learnerships and Internships
In terms of a Department of Public Service and Administration (DPSA) directive, all government departments are required to take in unemployed youth and graduates to give them practical work experience. Interns and learners should constitute 5% of the total staff establishment of a department.
FET Colleges
The FET colleges continue to offer both the National Certificate (Vocational) and National Education (NATED) programmes in the FET colleges sector, which have enabled the colleges to:
- increase the pool of local skills
- generate a cohort of employable persons
- contribute to self-employment.
Public Service Academy
The academy will receive R50 million from the National Skills Fund over the next three years for learnerships, apprenticeships and skills programmes in construction, manufacturing and engineering, benefitting public servants and the unemployed.
C.2 Creating jobs
- The Department of Economic Development and Tourism will create work opportunities by:
- supporting and developing sustainable small, micro, medium and social enterprises that contribute to food security, wealth and job creation;
- effectively promoting and packaging KZN as the choice destination; and
- implementing the economic development strategies of the Province.
- The Department of Health will increase the number of community care givers and facilitate the development of community health workers into clinical assistants over the 2011/12 MTEF.
- Small KwaZulu-Natal companies and rural women will be given an increasing share of market opportunities through departments’ procurement spend.
- The Department of Transport will continue to expand community-based labourintensive road construction and maintenance programmes. Where possible, preference will be given to local suppliers of goods and services and work will be undertaken by local Vukuzakhe contractors.
- The Department of Cooperative Governance and Traditional Affairs will create a number of jobs through the Corridor Development programme using Expanded Public Works Programme (EPWP) principles.
- The Department of PublicWorks will enhance the quality of the EPWP by focusing on the following interventions:Improving the efficiency of approvals for training of EPWP local labourers on technical, life and business skills through partnering with the Department of Labour and National Department of Public Works, and also establishing new funding partnerships with the KZN Small Enterprise Development Agency (SEDA) and SETAs.
- Promoting early submission of potential projects to ensure their inclusion in the EPWP.
- Utilising the EPWP Incentive grant to enhance the Izandla Ziyagezana Programme, a job creation initiative giving contracts to indigent local communities to clear vacant government sites
- The Department of Human Settlements’ enhanced people’s housing process programme provides for community/beneficiary involvement in the construction of houses. It is expected to yield 1 000 units over the three years of the new MTEF.
- The Department of Agriculture, Environmental Affairs and Rural Development plans to recruit unemployed agriculture graduates on a contract basis, offering them bursaries and appropriate experience to become extension officers in KwaZulu-Natal’s food security programme.
- Another area of job creation of the Department of Agriculture, Environmental Affairs and Rural Development is the invasive alien species eradication programme. Approximately R100 million per annum has been budgeted for this programme over the 2011/12 MTEF. It will provide employment to 5 000 people per annum over the next three years and 130 000ha of land will be cleared annually.
- The Department of Social Development trained 366 young people as part of the Masupatsela Youth Pioneer programme. These graduates will work in the Youth Ambassador programme from 2011/12 in the Office of the Premier.
- The Department of Community Safety and Liaison continues to employ 2 100 volunteers to drive social crime prevention through visible policing.
D. Overview per vote for the 2011/12 MTEF
The Province of KwaZulu-Natal receives the lion’s share of the equitable share allocation from the national fiscus, and has a total budget of R78.248 billion for the 2011/12 financial year, increasing to R88.631 billion in the outer year, 2013/14. (Please refer to Section 1 of Table 4).
I will now deal specifically with the main service delivery objectives of and funding for each of the 16 provincial departments.
Summary of provincial payments and estimates by vote
D.1 Education
The largest portion of the budget goes to Education. The Education budget is set to rise from R29.570 billion in 2010/11 to R32.618 billion in 2011/12 and R36.492 billion in 2013/14. Thisshows an average annual growth of 7.3% (nominal) and 1.3% in real terms. This is to promote quality basic education and a skilled and capable workforce. The budget allocated to Education pays for a variety of items, such as:
No Fee school policy
The number of No Fee schools increased from 3 513 in 2009/10 to 4 747 in 2010/11, rendering close to 80% of the schools in KwaZulu-Natal No Fee schools. The number of learners benefiting from the policy increased from 1 279 769 in 2009/10 to 1 740 965 in 2010/11 and is expected to increase to 1 750 721 in 2011/12, 1 760 882 in 2012/13 and 1 870 000 in 2013/14.
National School Nutrition Programme (NSNP)
The NSNP was expanded to cover all primary schools in Quintiles 1, 2 and 3 and secondary schools in Quintiles 1 and 2. In 2011/12, this programme will be extended to cover Quintile 3 secondary schools thus increasing coverage to 2 087 001 learners. The number of learners benefiting from this scheme is set to increase from 1 984 704 in 2010/11 to 2 107 871 by 2013/14.
Infrastructure provision
The department continues to make recognisable strides in addressing backlogs in the provision of classrooms, toilets, computer rooms, laboratories and media centres.
D.2 Health
The budget allocated to the Department of Health increases from R22.120 billion in 2010/11 to R24.485 billion in 2011/12 and R28.189 billion in 2013/14. This is the second highest share of the provincial budget. This reflects an annual average growth of 8.4% (nominal) and 2.4% in real terms.
Health service delivery has also improved over the years:
- The number of patients (both adults and children) on the ART programme has increased to 380 000 in 2010/11 from 143 000 in 2007 and this is set to increase further to more than 650 000 by 2013/14.
- Immunisation coverage of infants under one year old is set to increase from 80% in 2007/08 to 90% over the 2011/12 MTEF.
- To deal with the shortage of nursing staff, the Department has been training both basic nursing students and professional nurses. 1 500 basic nursing students graduated in the current financial year compared to 1 170 in 2007/08. Likewise, 901 professional nurses graduated in 2010/11 compared to 725 in 2007/08. These nurses are now ready to assume duties at various health facilities across the province.
This budget will continue to be utilised for improving the provision of health care in the province, and the overall aim of government of ensuring a long and healthy life for all. This includes the comprehensive management of HIV and AIDS, maternal, neo-natal and women’s health and the comprehensive management of TB.
D.3 Transport
The budget allocated to the Department of Transport increases from R5.953 billion in 2010/11 to R6.574 billion in 2011/12 and R7.679 billion in 2013/14 which shows an average annual growth of 2.9% in real terms (8.9% nominal).
The department’s strategic policy direction is to support rural development, poverty alleviation and job creation as the Department builds roads and bridges, provides safe integrated public transport systems, and manages traffic and the safety of all road users. This is in support of the outcome that states “an efficient, competitive and responsive infrastructure network.” In line with this, in 2010/11, a total of 350 km of gravel roads have been constructed to provide much needed access for rural communities. 150 000m² of black top patching has been done.
The department will also continue with the road upgrade and construction programme that supports the corridors of the primary and secondary nodes, as well as key projects that will be a stimulus in linking the rural communities to the hubs of activity. As part of its employment creation drive, the department has employed a total of 57 000 workers as part of its Expanded Public Works Programme (EPWP) and has created more than 5.2 million person-days of work per annum, over the new MTEF.
D.4 Cooperative Governance and Traditional Affairs
The Department of Cooperative Governance and Traditional Affairs (CoGTA) sees an increase in its budget allocation from R1.062 billion in 2010/11 to R1.138 billion in 2011/12 and R1.253 billion in 2013/14. This is an increase of 5.7%in nominal terms. This is in support of government’s outcome to have a “responsive, accountable, effective and efficient localgovernment.” This allocation will be used for various initiatives, including the Small Town Rehabilitation programme. This programme has contributed to a number of infrastructure related projects in several municipalities, such as:
- Richmond – CBD rehabilitation including the construction of a shelter for informal traders as well as the small business incubation facility
- Msinga – the upgrading of the Tugela Ferry storm water system and the construction of a pedestrian walkway and
- Ladysmith – town centre beautification, trading stalls in Queen and Forbes streets, installation of surveillance cameras, construction of sidewalks in the CBD, and the upgrading of Wimpy Park With 2011 being the election year for municipalities and traditional institutions, the main focus in 2011/12 will be on training and development of the newly elected Municipal Councils and Traditional Councils.
D.5 Human Settlements
The budget of the Department of Human Settlements decreases from R3.193 billion in 2010/11 to R3.053 billion in 2011/12 and rises to R3.364 billion in 2013/14, which is an average annual increase of 1.8% in nominal terms.
The strategic policy direction of the department is in line with government’s outcome to provide sustainable human settlements and improved quality of household life. The budget provides for integration and sustainability in respect of accelerated delivery of housing opportunities and more efficient land utilisation.
To achieve this, the department will accelerate housing delivery in rural areas throughout the province and continue with the slums clearance programme aimed at eradicating all slums in the province by 2014.
The department will continue to provide affordable rental housing for people within the province.
The main project in respect of this is the Community Residential Units programme, designed to attain a non-racial, integrated and socially coherent society for all income groups. The department plans to construct/complete 4 000 units in 2011/12.
D.6 Agriculture, Environmental Affairs and Rural Development
The budget allocated to the Department increases from R2.228 billion in 2010/11 to R2.460 billion in 2011/12 and R2.765 billion in 2013/14 which is an annual average real increase of 1.5% (7.5% nominal).
This allocation is mainly for:
- Unlocking crop production on under-utilised land;
- Livestock development;
- One Home, One Garden.
The department will focus on rural development, agrarian reform, social and economic infrastructure development and sustainable natural resource management. This is in support of government outcomes of “vibrant, equitable and sustainable rural communities contributing to foodsecurity for all” as well as “protected and enhanced environmental assets and natural resources.”
D.7 Social Development
The budget of the Department of Social Development increases from R1.668 billion in 2010/11 to R1.953 billion in 2011/12 and R2.140 billion in 2013/14, which is an annual average increase of 2.7% in real terms (8.7% nominal).
During the 2011/12 MTEF, the major focus of the department will be poverty alleviation, with the focus on good governance and institutional development, the reduction of poverty among children, youth, adult and older persons as well as social cohesion. This largely links in with the outcome of “a long and healthy life for all.”
The department will continue to focus on various initiatives, such as:
- Developing technical skills of youth and women in all eleven district municipalities
- Early childhood development as outlined in the new Children’s Act
- Providing support to families and communities and fostering social cohesion
- Creating an environment that promotes and protects the rights of older persons and people with disabilities and
- Reducing social crime and substance abuse.
D.8 Economic Development and Tourism
The department’s budget allocation, which is in support of government’s outcome of “decent employment through inclusive economic growth”, was R1.725 billion in 2010/11. This decreases to R1.487 billion in 2011/12 and R1.651 billion in 2013/14, mainly due to the completion of theairport portion of the Dube TradePort (DTP). The DTP will continue with constructing a 16 hectare greenhouse agri-zone that will produce over 3 000 tons of airfreight once fully operational. The trade-zone property developments will also continue, focusing on light manufacturing activities. The targets for 2011/12 are the export of 15 300 tons of produce through the cargo terminal, the creation of 500 permanent jobs and the generation of R100 million private sector investment. This department also funds the Agri-business Development Agency (ADA), an entity established to support beneficiaries of land reform.
D.9 Public Works
The Department of Public Works’ budget increases from R1.333 billion in 2010/11 to R1.220 billion in 2011/12 and R1.375 billion in 2013/14, which is an average annual nominal increase of 1.0%. This fairly low growth is because 2010/11 includes a once-off allocation to clear outstanding property rates dating back to 2008/09. The department contributes to the outcome of government of “an efficient, competitive and responsive infrastructure network.”
D.10 Provincial Treasury
The budget allocation of Provincial Treasury decreases from R692.500 million in 2010/11 to R536.486 million in 2011/12 and R590.764 million in 2013/14. This reduction is largely due to a lower provision being made for the payment of interest on the provincial overdraft, as the province has been cash positive since May 2010. As such,the interest on the overdraft provision is capped at R100 million (previously at R235 million) and this results in an average annual real negative growth of 10.4% (negative 5.2% in nominal terms).
The allocation will assist in obtaining the objective of good governance and also provides for:
- the continued monitoring of budget implementation and budget performance of provincial departments and entities
- regular hands-on engagement and support to provincial departments and public entities
- the Municipal Support Programme which continues to support and assist municipalities in improving their level of financial management and reporting
- assisting departments and municipalities and their respective entities to achieve and sustain clean audit outcomes
- identification and review of key financial controls and
- fraud risk reviews and assessments, together with access to investigative IT tools, and the development of a risk register that incorporates all risk categories.
D.11 Office of the Premier
The office of the premier’s budget allocation increases from R451.361 million in 2010/11 to R471.105 million in 2011/12 and R524.827 million in 2013/14, which is an increase in nominal terms of 5.2%.
This allocation provides inter alia for:
- The Youth Ambassador programme which commenced in 2010/11. The youth will continue to conduct provincial household surveys to profile the needs of the communities. These surveys will assist in determining the level of poverty, access to education, adequacy of housing, access to social services, among other things. The youth ambassadors will also assist in the implementation of other government programmes, such as awareness campaigns on HIV and AIDS, healthy lifestyle promotion, the “One home, One garden” and “Back to school” campaigns.
- The establishment of the Provincial Planning Commission which will make recommendations of a long-term strategic development nature, ensuring coherence in policy development and planning across the provincial government. It will also strengthen performance monitoring and evaluation to assess delivery on the desired outcomes.
D.12 Arts and Culture
The Department of Arts and Culture’s budget allocation increases substantially in the outer year from R364.922 million in 2010/11 to R364.856 million in 2011/12 and R610.760 million in 2013/14. This is a substantial increase of 12.2% in real terms (18.7% in nominal terms). This increase is influenced by the fact that the department receives substantial additional funding over the MTEF to take over public libraries and museums, thus beginning to address this unfunded mandate. Schedule 5A of the Constitution clearly places these functions as a provincial competency.
The hosting of various cultural events aimed at promoting social cohesion will continue. A number of community dialogues will be held in various parts of the Province to promote nationbuilding. Moral regeneration will be addressed through the presentation of programmes aimed at improving family values and addressing social ills such as HIV and AIDS, alcohol and drug abuse, teenage pregnancy, women abuse and crime. The Department will continue with the building of art centres over the MTEF.
D.13 Sport and Recreation
The Department’s budget increases from R311.065 million in 2010/11 to R358.333 million in 2011/12 and R396.801 million in 2013/14, which is an average annual increase of 2.5%in real terms (8.5% in nominal terms).
- A large portion of the department’s allocation relates to the Mass Sport and Recreation Participation Programme conditional grant which funds the mass participation in sport among learners from previously disadvantaged urban and rural schools. It focuses on high crime areas, farm and rural areas and government priority nodes.
- The department provides for developmental programmes to identify new talents and to increase the pool of qualified coaches, technical officials and administrators. Approximately 5 500 players representing all 11 SAFA regions in the Province will benefit from a football enrichment programme that will also target 60 clubs.
- The department also provides sport and recreation infrastructure.
D.14 Provincial Legislature
The budget of the Provincial Legislature increases from R345.161 million in 2010/11 to R374.702 million in 2011/12 and R421.247 million in 2013/14, which is an average annual real increase of 1.0% (6.9% in nominal terms).
This allocation is inclusive of:
- the remuneration of the Members of this House; and
- public participation events aimed at improving the interaction between the Legislature and the citizens of the Province.
D.15 Community Safety and Liaison
The department’s budget increases from R140.744 million in 2010/11 to R150.139 million in 2011/12 and R165.637 million in 2013/14, which is an average annual nominal increase of 5.6%. The Department’s activities are aligned to government’s outcome of “all people in South Africa are safe and feel safe.”
This allocation provides for:
- the Volunteer Social Crime Prevention Programme which aims to enhance social crime prevention through visible policing and
- creating an integrated, multi-pronged approach to crime, combining aspects of crime prevention and the improvement of socio-economic conditions.
D.16 Royal Household
The Royal Household’s budget allocation increases from R47.149 million in 2010/11 to R55.028 million in 2011/12 and R64.065 million in 2013/14, which is an average annual real increase of 4.7% (10.8% in nominal terms). The Royal Trust is tasked with the following for the benefit of the Monarch and the Royal Household:
- Providing for the Royal Household, including the cost of education, running costs of the Royal residences, and related household expenses;
- Developing systems, processes and controls to administer the operations of the Royal Household;
- Ensuring the sustainable, financial independence of the Royal Household; and
- Marketing the Royal Trust, and its related activities.
These are some of the services this government has been able to deliver to our communities. Of course we are aware that more still needs to be done to improve the quality of life of our citizens.
E. The fiscal framework
I now turn to the 2011/12 Fiscal Framework for the province. It is with great pleasure that I indicate to this House that the financial position of the province has improved substantially compared to the 2009/10 financial year.
Projections from departments indicate that expenditure will be within budget in the current financial year, which means that the province will not over-spend – thanks to the fiscal austerity measures introduced in 2009. The cash position in the Revenue Fund has also been positive since
May 2010 and is likely to remain positive for the rest of the financial year given the prevailing spending trends. This success is due to the teamwork of the provincial government, and the KwaZulu-Natal model is now being adopted by the whole country.
E.1. Cost-cutting measures
This House will recall that I stated in my budget speech last year that most of the cost-cutting measures are simply elements of good governance and therefore they remain in place for the foreseeable future. However, it should be noted that the prohibition on the payment of performance bonuses from 2010/11 falls away from 2011/12, and that departments may therefore again reward staff for exceptional performance.
Furthermore, the president directed in his State of the Nation Address that all vacant funded government posts must be filled. This will follow the review of the staff establishments of all provincial departments and entities – as per our Cabinet resolution.
It is because of departments’ adherence to the cost-cutting measures that the Province was able to release some funding from the budget surplus to fund various provincial priorities over the 2011/12 MTEF. These include a substantial provision to Transport for the provincial road maintenance backlog, funding to Agriculture, Environmental Affairs and Rural Development for the expanded extension officer programme, among others. Further savings realised from implementing the cost-cutting measures will also be reallocated to service delivery projects in departments.
E.2 Reductions in equitable share
The 2011/12 Fiscal Framework is characterised by a significant amount of budget reprioritisation to cater for the reductions in the equitable share allocation for KwaZulu-Natal.
As can be seen in Table 2 below, the province’s equitable share reduces by R316.395 million in 2011/12, R471.126 million in 2012/13 and R302.265 million in 2013/14, due to various technical adjustments.
| Table2: Changes in KZN’s equitable share | 2011/12 | 2012/13 | 2013/14 |
| Reductioninequitableshare duetodatachanges | 115333 | 242282 | 43958 |
| Reductioninequitableshare duetochangeinformula | 17384 | 34986 | 52869 |
| Reduction duetoESformulaupdatesandchanges | 132717 | 277268 | 96827 |
| Reductioninequitableshare dueto0.3%cut(NationalCabinet) | 183678 | 193858 | 205438 |
| TotalreductioninKZNequitableshare | 316395 | 471126 | 302265 |
- The first reduction was a result of the changes in data that informs the equitable share coupled with the reconfiguration of the health component of the equitable share. Combined, these changes have resulted in the province losing R132.7 million in 2011/12, R277.2 million in 2012/13, and R96.6 million in 2013/14.
- The second reduction came from a National Cabinet decision to reduce budgets of all national and provincial departments by 0.3% in order to finance the health sector. For KwaZulu-Natal, this means a further reduction of R183.7 million in 2011/12, R193.9 million in 2012/13 and R205.4 million in 2013/14. These reductions are financed as follows to ensure that the province is able to fund several expenditure priorities:
- The first source of funding is the surplus which the province has been budgeting for.
- The second source is the allocation earmarked for the overdraft interest payment.
- The third source (although very small) is the proportional reduction of departmental baselines.
As indicated in Table 3 below, the province had budgeted for a surplus of R1.8 billion in 2011/12 rising to R2.3 billion in 2013/14. This surplus is now capped at R948 million over the three MTEF years – which releases R857.4 million, R1.3 billion and R1.4 billion for each of the three years, respectively.
The budget for the interest on the overdraft held against Vote 6 has been capped at R100 million, down from R235 million in the previous MTEF for each of the three years, and this releases a further R135 million annually.
A total of R992.4 million, R1.4 billion and R1.5 billion is therefore released from this reprioritisation and allocated back to various provincial priorities, as well as to finance the reduction of the Province’s equitable share referred to above.
| Table3: Reprioritisatio | 2011/12 | 2012/13 | 2013/14 |
| Budgetedsurplusasper2011EPE | 1805426 | 2219765 | 2341852 |
| Budgetedsurplusas per2011/12MTEF | 948008 | 948042 | 948388 |
| Subtotal | 857418 | 1271723 | 1393464 |
| Intereston ocerdraftcappedatR100m | 135000 | 135000 | 135000 |
| Totalreprioritisedtofundprovincialpriorities | 992418 | 1406723 | 1528464 |
Despite the part utilisation of the surplus to fund the reductions, the province still remains with a healthy surplus of R948 million over the next three years (refer to Table 4 – line 12). This surplus should be sufficient to provide a cushion in cases of unforeseen fiscal shocks over the MTEF.
F. Summary of Provincial Fiscal Framework and additional allocations
The 2011/12 MTEF makes available R2.4 billion, R3.4 billion and R4.04 billion per year in additional funding from the equitable share (after taking the reduction into account), conditional grants and provincial reprioritisation.
While the province saw a reduction in its equitable share, it also received additional funding ring-fenced for:
- The carry-through costs of the 2010 wage agreement (R1.167 billion in 2011/12, R1.213 billion in 2012/13 and R1.263 billion in 2013/14).
- The Occupation Specific Dispensation (OSD) for educators (R348.819 million in 2011/12, R393.661 million in 2012/13 and R438.778 million in 2013/14).
- Various health priorities, including the OSD for doctors and therapists, maternal and child health, ARV 350 threshold, among others (R373.987 million in 2010/11, R823.868 million in 2012/13 and R948.191 million in 2013/14).
MTEF, with this funding being sourced from provincial reprioritisation and additional funding from National Treasury.
F.1 Votes
Education receives a significant portion of the additional allocations – R1.06 billion in 2011/12 rising to R1.3 billion in the outer year of the MTEF. This is to cater for the 2010 public sector wage agreement costs, expenditure associated with the expansion of examination services, and the OSD for educators.
The Department of Health also receives substantial amounts of R797.9 million in 2011/12 rising to R1.6 billion in 2013/14 to cater for the carry-through costs of the 2010 wage agreement, the maternal and child health initiative and the OSD for doctors and therapists, among others.
Transport receives R307.9 million in 2011/12, R505.5 million in 2012/13 and R672.9 million in the outer year of the MTEF. The bulk of this additional allocation goes to the maintenance of the provincial road network.
The Office of the Premier receives additional funding for the establishment of the Provincial Planning Commission, the carry-through costs of the 2010 wage agreement, extending the Youth Ambassador programme, the Provincial Nerve Centre, Amafa Heritage projects and for bursaries for disadvantaged students.
Social Development also receives additional funding for the carry-through costs of the 2010 wage agreement, and to finance service delivery infrastructure such as:
- Places of Safety
- Old Age Homes
- Children’s Homes
- Protective Workshops
- Reform Schools
- Secure Care Centres
- Substance Rehabilitation Centres.
The Department of Cooperative Governance and Traditional Affairs’ increased allocation makes provision for the carry-through costs of the 2010 wage agreement. The increased budget allocation of Human Settlements provides for the carry-through costs of the 2010 wage agreement.
The Department of Agriculture, Environmental Affairs and Rural Development receives additional funding over the 2011/12 MTEF for the employment of additional extension officers to enable the Department to respond adequately to the food security priority of government, the carry-through costs of the 2010 wage agreement, an allocation to the SA Association for Marine Biological Research, and additional funding for Ezemvelo KZN Wildlife personnel costs.
The Department of Public Works’ increased budget will mainly be used for the carry-through costs of the 2010 wage agreement, the implementation of the Government Immovable Assets Management Act (GIAMA), and the fixed assets register.
The Department of Arts and Culture’s substantial increased budget allocation will be used over the MTEF for the provincialisation of public libraries and museums, as mentioned earlier, and the carry-through costs of the 2010 wage agreement. The increased allocation to Sport and Recreation will be utilised for the carry-through costs of the 2010 wage agreement.
The additional funding for the Provincial Legislature will be spent over the 2011/12 MTEF to phase in the Financial Management of the KZN Legislature Act when it has been passed, as well as salary increases for Members, as well as for the carry-through costs of the 2010 wage agreement.
The Department of Community Safety and Liaison’s budget increase will be used to fund the carry-through costs of the 2010 wage agreement. The Royal Household will receive increased funding over the 2011/12 MTEF for the upgrading and refurbishing of the Royal palaces, as well as the carry-through costs of the 2010 wage agreement.
Provincial Treasury receives additional funding for performance auditing and the carry-through costs of the 2010 wage agreement. Economic Development and Tourism receives additional funding for the carry-through costs of the 2010 wage agreement, the implementation of the Consumer Act, the KwaZulu-Natal Sharks Board and the Tourism Indaba.
For more details on additional funding allocated across all provincial departments in the 2011/12 MTEF and the national Cabinet decision to effect cuts across all departments.
F.2 Conditional grants
Three important changes have also taken place with respect to conditional grants in the coming
MTEF:
- Firstly, both the Forensic Pathology Services grant and the Hospital Revitalisation grant are being phased into the equitable share from 2012/13 and 2013/14, respectively.
- Secondly, a new grant is being introduced namely: Dinaledi Schools for Education.
- Thirdly, the Infrastructure grant to Provinces has been redefined as the Education
Infrastructure grant, the Health Infrastructure grant and the Provincial Roads Maintenance grant, and the allocation formula reconfigured as follows – 45% for Transport; 42% for Education and 13% for Health. As a result of this reconfiguration, Transport now receives a substantial additional allocation at the expense of Health and, to a smaller extent, Education.
Summary of additional allocations,2011/12MTEF
The following grants receive inflationary adjustments only:
- Ilima/Letsema grant
- HIV and AIDS (Life Skills) grant
- National School Nutrition Programme grant
- Technical Secondary Schools Recapitalisation grant
- Health Professionals Training and Development grant
- Public Transport Operations grant
- Community Library Services grant
Several other grants receive real additional allocations and these include:
- FET College Sector grant (Education)
- Devolution of Property Rates Fund grant (Public Works)
- Comprehensive Agricultural Support Programme grant (Agriculture)
- EPWP Incentive grant (Transport)
- Comprehensive HIV and AIDS grant to cater for the earlier introduction of HIV positive people to ARV therapy (Health)
- National Tertiary Services grant (Health)
As a result of slow spending and National Cabinet’s decision to cut national departments by 0.3%, a few conditional grants have had their allocations reduced.
These include:
- The Human Settlements Development grant has been reduced by R379.6 million, R439.8 million and R277.4 million over the MTEF period.
- The Mass Sport and Recreation Participation Programme grant has been reduced by R7.9 million, R8.4 million and R3.3 million over the MTEF period.
Updated Conditional Grant Allocations–2011/12MTEF
F.3 Infrastructure budgets
There is strong growth in infrastructure budgets over the next three years. In 2011/12, a total of R11.754 billion is allocated to infrastructure up from R11.170 billion rising to R13.3 billion in the outer year of the MTEF. The largest portion of the infrastructure budget goes to transport for road construction and maintenance, followed by human settlements for housing delivery.
Education and Health also receive a sizeable portion of infrastructure allocations. Economic Development and Tourism receives an infrastructure allocation to continue with the development of the Dube TradePort and the Richards Bay IDZ.
I am very pleased with the growth in infrastructure budgets. The real increase in capital spending supports government’s efforts to reduce backlogs in social and economic infrastructure, while at the same time addressing unemployment through the labour intensive EPWP.
Summary of infrastructure payments and estimates by vote
It is therefore essential that the total infrastructure budget is spent efficiently, effectively and economically, i.e. we must get value for money. Furthermore, this investment in infrastructure makes the Province more attractive as an investment destination. Infrastructure development is usually labour intensive and creates many employment opportunities. It is therefore not a coincidence that the new growth path strategy is underpinned by a strong focus on infrastructure investments as a vehicle for sustained employment creation.G. Other initiatives
G.1 The green economy
As indicated in the Premier’s State of the Province address, KwaZulu-Natal will focus on opportunities presented by the Green Economy. It ensures the sustainable utilisation and the conservation of resources. The Green Economy refers to two inter-linked developmental outcomes for the economy of South Africa:
- Firstly, it is growing the economic activity (which leads to investment and jobs) in the green industry sector. In this regard, the departments will pursue and explore the concept of green jobs.
- Secondly, it is a shift in the economy as a whole towards cleaner industries and sectors with a low environmental impact compared to its socio-economic impact.
G.2 Bursary scheme
Madam Speaker, Cabinet has also been considering other initiatives aimed at addressing the problem of a significant skills shortage in the Province. To this end, the province will be introducing a bursary scheme in the coming MTEF to be centrally managed by the Office of the Premier. This scheme will be available to matriculants who have excelled in their matric examinations but cannot afford fees at institutions of higher learning. Seed funding for this purpose has been allocated to the Office of the Premier, but may be adjusted in the 2011/12 Adjustments Estimate budget should the demand exceed the current seed allocation. The Office of the Premier will give more details on how this scheme will operate during the tabling of Vote 1’s budget.
G.3 KwaZulu-Natal Financial Literacy Association
The Provincial Treasury, in partnership with the business community, non-profit and nongovernment organisations, academic institutions, regulating bodies and sister departments, has established the KwaZulu-Natal Financial Literacy Association to coordinate and implement financial literacy training to help improve the level of understanding of our communities on how to manage personal finances. I will say more on this initiative when I table Vote 6’s budget.
H. Responsible spending
H.1 Infrastructure Crack Team
We have also noted with some disappointment, challenges related to slow spending of infrastructure conditional grants, in particular, in the province. Under-spending of conditional grants is problematic because any unspent portion of a conditional grant has to be returned to national government. The result is less service delivery. To address this problem, Cabinet has endorsed the creation of a “crack team” that will assist the Province in unblocking all blocked infrastructure projects. This team of built environment experts will also assist with project planning and monitoring, working jointly with the Infrastructure Delivery Improvement Programme (IDIP) team already deployed in the Province. I will give more details on the terms of reference of this team when I table Vote 6’s budget speech.
H.2 Assistance by the Provincial Treasury
The Provincial Treasury has put several measures in place to assist public institutions in:
- Spending on budget
- Obtaining clean audits
- Cutting unnecessary costs
- Getting value for money: Doing More With Less
- Dealing with corruption and deliberate wrong-doing.
By running a clean government we create an environment conducive to economic growth and prosperity.
I will elaborate on these measures in the Vote 6’s budget speech.
As I indicated earlier, the projections are that the province will end the current financial year with no over-expenditure, an experience we have not had for the previous two financial years. I therefore would like to thank the Premier and my colleagues inthe Executive, as well as the Accounting Officers and Chief Financial Officers in all provincialdepartments for their commitment to the recovery plan. Lastly, we thank each and every officialin government for contributing to the financial recovery of the Province – without team work, itcould not have happened.
Conclusion
Several role players have contributed in various ways in the preparation of the 2011/12 budget. I take this opportunity to express my gratitude to the Premier, Dr. ZL Mkhize and the entire
Cabinet for the leadership and support demonstrated during the preparations of the 2011/12 MTEF budget. We are also indebted to Minister Pravin Gordhan for his wisdom and guidance on fiscal matters. The rest of Team Finance has also provided sound technical advice during this process.
The members of the Ministers’ Committee on the Budget (MinComBud) have worked tirelessly alongside me in crafting the budget which I am tabling today. We engaged in lively debate on many complicated issues along the way, and this has added value to the budget process.
To the Chairperson of the Finance Portfolio Committee, Ms Belinda Scott and the rest of the Committee, we always have robust engagements with you, and we look forward to more fruitful discussions going forward.
I thank the Head of the Department, as well as all officials for ensuring that the budget documentation we are presenting today is of good quality – your dedication and commitment is always appreciated.
Lastly, Madam Speaker, I acknowledge members of various communities we have engaged with as part of our pre-budget road-shows for their inputs into some of the proposals we are tabling today. On 10February we even engaged students at the University of KwaZulu-Natal on how the budget is prepared. I was pleasantly surprised by the level of insight these students have with regard to government programmes and look forward to further engagement with them.
It is now my honour to table the 2011 Appropriation Bill for the province of KwaZulu-Natal for consideration in this House, together with the Estimates of Provincial Revenue and Expenditure.
I invite Members of the Legislature to familiarise themselves with the budget documentation to ensure a robust debate on this Appropriation Bill in due course. Your contributions are most valuable and essential to a Provincial Budget which we can all support.
Thank you.
Source: KwaZulu-Natal Treasury
