Madam Speaker, it is with a great sense of gratitude to once more stand before this revered House, the Gauteng Provincial Legislature, to table the 2011 Medium Term Budget Policy Statement and the 2011/12 Adjustment Budget.
We are mindful of the enormous task that lies ahead of us. Days of gloom are still lingering in the air, and the economic woes that have been with us for the past few years are still affecting our ability to accelerate the pace of service delivery.
Madam Speaker, the 2011 Medium Term Budget Statement (MTBPS) takes its cue from the recently published National Development Plan Vision 2030. This document is a landmark in long-term planning as it articulates the future of our country and detail the things that we must do to achieve our objective. Therefore our budget allocations should seek to work towards the attainment of the vision 2030.
This vision Madam Speaker requires of us to create a society that “moves away from a passive citizenry receiving services from the state to one that systematically includes the socially and economically excluded, where people are active champions of their own development, and where government works effectively to develop people’s capabilities to lead the lives they desire”.
The creation of an engaged citizenry, speaks of our ability to provide the requisites for our people to take charge of their wellbeing and take care of their loved ones.
Madam Speaker, the ongoing financial crisis that is crippling the financial resources of European countries is an important lesson on what happens when the citizenry is taken into confidence by decision makers. That is why it is important to develop a citizenry that is able to hold the political administration in check; ensuring that transparency in the utilisation of public resources serve as a fundamental thinking paradigm of the society.
Minister Pravin Gordhan recently alluded to the fact that the recent Euro-crisis has contributed negatively to the performance of our economy . The Finance Minister, on the occasion of tabling the Medium Term Budget Policy Statement, said the South African Revenue Service has under-collected its revenues by as much as 13 billion rand.
This has subsequently put enormous pressure on the fiscus and has impacted negatively on the ability of government to meet its developmental objectives. All of the above was as a result of a failure to create a society “where people are the active champions of their development, and where government works effectively to develop people capabilities to lead the lives they desire”.
Madam Speaker, bearing in mind the dialectical relationship between those elected to positions of power and the ordinary people, it becomes almost impossible that the ordinary people will be active proponents of their development if those that are given the sacred duty to lead them take irresponsible decisions that are to the detriment of the people’s wellbeing.
So we would like to urge decision makers both in the public sector and the private sector to take responsible decisions that will place the wellbeing of the people first and not their sectoral interests.
The 2011 Gauteng Medium Term Budget Policy Statement (MTBPS) outlines the priorities, outcomes and outputs of the Gauteng Provincial Government and the ways in which funding has been allocated to achieve these outcomes while aligning with national objectives. The MTBPS takes into account the available fiscal resources and demonstrates how the provincial budget is utilised to continuously improve service delivery for Gauteng’s citizens.
The 2011 MTBPS advices the following for consideration on the 2012 Medium Term Expenditure Framework:
- There has been progress in the delivery of services, and GPG’s departments remain committed to implementing activities in line with the 8 priority outcomes while ensuring that resources are used efficiently and effectively;
- The Gauteng economy although recovering from the 2009 recession, growth has been slow and unemployment rate has increased from 26.9% in the first quarter of 2011 to 28.2% in the second quarter of 2011;
- Therefore continuous investment in infrastructure is essential for job creation while national and provincial programmes aimed at addressing unemployment in youth should be adequately funded;
- The slow economic growth has impacted national tax revenue collections in that provincial Medium Term Expenditure Framework allocations shows a modest growth resulting in insignificant additional contribution to the existing tight fiscal framework;
- Internal control and compliance with legislative framework should be stepped up to ensure that Gauteng Provincial Government achieves a clean audit opinion by 2014;
- Accruals should be addressed as a matter of urgency as they threaten the available resources and 2012 Medium Term Expenditure Framework allocation; and
- Gauteng Provincial Government departments should continue reprioritising resources while ensuring that core services are not adversely impacted.
Madam Speaker, this is a framework in which funding for agreed priorities should occur, it should be noted that this is the last leg of the MTEF of the current term of office, this implies that no new funding will come into the provincial purse so no new priorities can be accommodated. This calls on all of us to accelerate implementation of agreed priorities.
Economic Outlook
Madam Speaker, the Global Economy does not look good, there is a threat of a double deep recession emerging from the Euro-zone. Many European countries are currently faced with financial difficulties, and unfavourable movements in exchange rates could make it very difficult for them to repay their sovereign debts.
The Euro-zone debt crisis is likely to have a negative impact on emerging markets such as South Africa. Finance Minister Pravin Gordharn has indicated that the biggest risk faced by the country from this crisis is a slump in global economic performance affecting South Africa through contagion. The Gauteng Province accounts for approximately 68% of total national exports; it would thus be heavily affected by any trade shocks.
National Economy
Madam Speaker the Minister of Finance during the tabling of the MTBPS, indicated that “for 2011 as a whole we now expect growth of 3.1 per cent, which is somewhat below the projections made during the presentation of the budget in February. For the period ahead, growth is expected to be 3.4 per cent next year rising just over 4 per cent in 2014 and 2015”. All major economies have revised their economic growth projections down.
Madam Speaker the projections by the Minister are way below our competitors in the developing market category and our major trading partners going forward the BRICS economies. Angola’s growth is expected to rise rapidly, from 3.7 per cent end of 2011 to 10 per cent 2012 before moderating to 6.7 per cent and ending the period under review at 6 per cent.
Gauteng Economic Performance
Madam Speaker, Gauteng remains the economic power house of South Africa and the continent, contributing about 35.1 per cent of the country’s GDP. The GDP-R is estimated to have increased to R644 billion in 2010 from R474 billion in 2002.The tertiary sector’s contribution to the Gauteng economy is estimated at 71.4% for 2010 and forecasted to reach 72.5% by 2015.
The secondary sector’s share is estimated at 25.3% for 2010 and forecast to decrease to 24.8% by 2015. The primary sector contributes the lowest, estimated at 3.2% for 2010 and is forecast to decrease to 2.7% by 2015.
The 2010 estimates show that, at 24.9%, the finance & business services sub-sector was the main contributor to the provincial economy. This is forecast to reach 25.2% in 2011 and 26.2% by 2015. The government, social and personal services sub-sector is estimated to have contributed 23.3% in 2010 and is forecast to increase to 23.8% by 2015.
Madam Speaker unemployment remains the outmost challenge confronting South African society and therefore one of the primary focus areas of government. The President has declared this year a year of Job Creation, as such all government departments and entities are seized with the task of creating employment.
In the first quarter the unemployment rate in Gauteng was 26.9 %, while that of the country was 26%, 0.9 percent points below that of Gauteng. In the second quarter the unemployment rate rose to a staggering 28.2%, an increase of 1.3 percentage points compared with the first quarter. This can be attributed to the slower economic growth and uncertainty in the markets during that quarter.
Fiscal Framework
Madam Speaker the Finance Minster indicated that “the fiscal challenge over the next three years is complex. We must support job creation, maintain the value of the social wage and finance economic transformation outlined in the New Growth Path”.
This requires all of us Madam Speaker to take difficult decisions, and more importantly abide by those decisions. Fiscal constrains force government to choose carefully between competing objectives, between competing needs. Difficult decisions are required to ensure that scarce resources are directed towards economic development and more effective service delivery while, ensuring that debt levels are sustainable.
Madam Speaker the 2011 Adjustment Budget represents the mid-point of the 2009-2014 term of governance, while the 2012 Medium Term Expenditure Framework (MTEF) will take the current provincial government to the end of its term. The current provincial government will use this adjustment budget process and the 2012 MTEF to consolidate its programmes that support the Programme of Action towards 2014.
The 2011 Provincial Appropriation Act presented all estimates of provincial revenues and the provincial expenditure for the 2011/12 financial year, both current and capital; per vote and per main division of a vote. Therefore, the Provincial Adjusted Appropriation revises the 2010 Provincial Appropriation Act as approved by this house.
Madam Speaker the 2011/12 Adjustment Budget is informed by the following principles:
- The identification and shifting of funds from underperforming programmes and spending items to address budgetary pressures that might be resulting;
- Maintaining the credibility of the budget by ensuring that departments are only allowed to do shifts and make virements that take into account the service delivery targets.
Madam Speaker these principles were informed by the fact that Provinces will not be receiving any discretionary additional funding during the adjustment period. This suggests that reprioritisation remains a priority for all departments including the legislature.
Madam Speaker during the Months of October and November 2011, we held the Premier Budget Committee (PBC) and Finance Lekgotla. In these two gatherings the Provincial Government resolved that the Gauteng Department of Finance should identify possible under-spending which should be surrendered to the Provincial Revenue Fund for reallocation to Health to address accruals since the department is experiencing significant pressures in paying historical debts.
The Provincial Government is of the view that this strategy will lead to full payment of accruals before this term of office comes to an end.
Madam Speaker during the course of this financial year we have experienced some difficulties with regard to under-spending in infrastructure development (Capital Spending), the Department of Finance together with the Department of Infrastructure Development have developed a joint program to accelerate infrastructure spending.
The program includes identifying quick wins within infrastructure allocation to ensure that this pattern is reduced; more emphasis is to be directed towards the maintenance of our health facilities.
Madam Speaker, The revenue adjustments are mainly in the form of the equitable share allocation, conditional grants and provincial own revenue which amounts to R539.14 million, R87.74 million and R87.9 million respectively. Furthermore, an amount of R526.57 million is made available from the Provincial Revenue Fund to finance provincial rollovers from the previous financial year.
Madam Speaker the 2011/12 Adjustment Budget will be allocated as follows:
- The Department of Local Government and Housing will receive an additional amount of R20 million to assist with the incorporation of Tshwane Metropolitan Municipality and the reincorporation of Metsweding District. The allocated funds will cater for the amalgamation of the Metsweding Persal System into Tshwane, ensure that the IT system of both municipalities are linked up, the assets register is linked up with Tshwane register and operationally to ensure that the Metsweding region continues to function properly.
- The Office of the Premier received an additional funding from GPG amounting to R5.92 million in lieu of goods and services to cover the costs incurred for two state funerals that were declared in the province.
- The total amount of direct charges allocated to the Legislature did not cover the full cost of payments for the office bearers; as a result, the Legislature utilised their own funding to cover the shortfall amounting to R2.72 million. This amount is therefore allocated to the Legislature to augment payment of direct charges relating to the remuneration of the members of the provincial legislature.
- Health receives an additional total funding of R272.21 million comprised of R2.21 million for capacity building forinfrastructure delivery, and R270 million to deal with budgetary pressures. An amount of R100 million is suspended from this amount for maintenance to the Provincial Revenue Fund and will be reallocated to the department when there is progress on spending by the implementing agent. The net allocation to Health amounts to R172.21million.
- Education receives an amount of R3.09 million for capacity building of personnel in infrastructure. The capacity building includes training in project management as well as the respective technical skills required by the personnel with respect to infrastructure planning.
- Gautrain Management Agency (GMA) has been allocated a loan amount to the tune of R261.21 million. A total of R145.19 million is suspended to the Provincial Revenue Fund for the loan repayment. A balance of R116.02 million is being transferred to the GMA.
- The Department of Agriculture and Rural Development charges a service fee for some of the functions which it provides to stakeholders. An amount of R19.54 million was deposited into the Cost Recovery Trading Account of the department and transferred into the Provincial Revenue Fund. The department has obtained approval for the use of this amount to settle once off payment of Occupation Specific Dispensation (OSD) as well as the payment of departmental debts accrued.
- Department of Sport, Art, Culture and Recreation receives an allocation of R6 million to host the 2011 SA Open Golf Tournament.
- The Department of Infrastructure Development receives an amount of R2.5 million as an incentive for Expanded Public Works Programme (EPWP). To this end Madam Speaker I would like to urge the Department of Infrastructure Development to fast track EPWP projects so as to benefit from the EPWP incentive grant.
Madam Speaker, in terms of Treasury Regulations and Public Finance Management Act, funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year, subject to approval by the relevant Treasury. A total amount of R522.5 million has been approved to be rolled over to the 2011/12 financial year to fund the 2010/11 commitments.
Madam Speaker, further and above the adjustments as detailed above, an amount of R913.5 million is being added in the departments to cater for other adjustments. Other adjustments are comprised of function shifts; unallocated amounts announced in the main budget; adjustments due to significant unforeseeable economic and financial events; emergencies; self-financing expenditure; and declared savings.
We are today adding to the baseline of Gauteng Provincial Departments an amount of R1.2 billion.
Madam Speaker, the 2011/2012 Budget Adjustment that we are tabling today takes place weeks after the National Planning Commission published the National Development Plan Vision 2030, a bold policy statement that encourages all spheres of government to work towards the creation of a society that “moves away from a passive citizenry receiving services from the state to one that systematically includes the socially and economically excluded, where people are active champions of their own development, and where government works effectively to develop people’s capabilities to lead the lives they desire”.
I am confident that the Budget Adjustments we are announcing today will one way or the other contribute towards the achievement of vision 2030.
In Gauteng the Premier will in the near future outline Gauteng Vision 2055, the process is at the advance stage and should be concluded soon. The Gauteng Vision 2055 will not contradict the National Vision but will operate within the broader ambit of the National Plan.
Madam Speaker and Honourable Premier the South African Reserve Bank has begun the reform of the financial regulation and risk management set out in the paper A Safer Financial System to Serve South Africa Better.
Some of the reforms made are that, all inward-listed shares on the Johannesburg Stock Exchange (JSE) will henceforth be classified as domestic assets and be included on the JSE indices, as agreed with the regulatory authorities, steps will also be taken to simplify procedures and reduce the cost of cross-border money remittances, particularly to neighbouring countries and the rest of Africa.
Madam Speaker these reforms will improve South Africa’s position as a financial gateway into Africa and facilitate cross-border transactions; and this bodes well Honourable Premier in making Gauteng and Johannesburg in particular the financial Hub of the continent.
In this light we are pleased to announced that ABSA/ Barclay Group is in the process of relocating its Head Office from the Middle East to Johannesburg, and steps are underway to accommodate $5,1 billion worth of shares of the Oppenheimer family in DeBeers boughtby Anglo gold, the financial sector is at work to create the infrastructure necessary to accommodate such capital.
Madam Speaker, towards the end of the month South Africa will be hosting the 17th Conference of Parties (COP17) in Durban, to deal with complex issues around climate change, as Gauteng we will be sending our delegations led by the Honourable Premier to present our position on climate change matters. We are in no doubt about the success of this mega Conference; we have done it before and will do it again.
Madam Speaker, allow me to express my gratitude to Premier Mokonyane for her guidance and leadership. I am grateful for the support of Members of the Executive Council, and Portfolio Committee and the staff in the department.
Honourable Speaker, I hereby submit the Medium Term Budget Policy Statement 2011, and I table the Adjustment Appropriation Bill for consideration by the Legislature.
I thank you.
