Budgets and Expenditure Review by Trevor Manuel Minister of Finance
17 October 2006
Chairperson
Honourable Members
Ladies and gentlemen
Our sincere thanks are due to the Chairperson, Honourable MJ Mahlangu and
the National Council of Provinces (NCOP) for the enthusiasm with which they
always receive us when we come to share with this house the work we do at the
National Treasury as part of our contribution to strengthening your oversight
role. We do this not because the law requires us to do it, but because we feel
that it gives meaning to our democracy.
Chairperson and Honourable Members, last year we published a Review which
did not include information on local government. At the time we promised to
publish a separate document on local government this year. Today we are
delivering on that promise. While the separation is artificial in some ways,
there are some good reasons behind it.
Firstly, the provincial and national government financial year starts on 1
April and ends on 31 March, while the financial year of local government starts
on 1 July and ends on 30 June. This makes for "untidy" reporting when financial
information for all three spheres is combined in one publication.
Secondly, with consolidated budgets well in excess of R100 billion the local
government sphere has now reached a stage where it warrants a dedicated
publication.
Chairperson and Honourable Members, for us the two Reviews we table before
this House today represent an important link in the accountability cycle. Every
year this house processes a Division of Revenue Bill which appropriates just
under 60% of nationally raised revenues to provinces and municipalities. The
bulk of the money is intended for pro-poor public services such as public
school education, primary healthcare, welfare services, water and
sanitation.
Once the financial year has ended, the NCOP has a right to know what has
happened to the money. It has a right to know what the money has bought. And it
has a right to know whether what the money bought has contributed towards
improving the lives of our people.
Honourable Members, I must hasten to say that the two Reviews, while
comprehensive, cannot and are not intended to provide all the answers to all
our questions about performance. However, they serve as a very valuable
starting point. To get a complete picture Members need to complement them with
other documents and publications that our system of reporting and monitoring
has institutionalised over the years, such as the Estimates of National
Expenditure, the Division of Revenue Act, Strategic and Performance Plans of
Departments, in-year Monitoring Reports, Annual Financial Statements,
Integrated Development Plans, Service Delivery and Budget Implementation Plans
and Annual Reports, to name a few.
Some of the issues that emerged from the workshop
Chairperson, when we were given an opportunity to make opening remarks at
the workshop yesterday not only did we highlight some of the trends in the
Reviews we table before this house today, but we also indicated how the two
documents could be utilised to begin what we referred to as a "political
audit." Rather than repeating what we said yesterday, allow me to reflect on
what emerged from the deliberations of the workshop.
Readiness to ask tough questions
The workshop confirmed yet again that the NCOP is ready, eager and capable
of exercising its oversight role. The questions it asks are increasingly
becoming sharper and tougher. Yes, as always it can always do better and should
aspire to do even better.
There is a desire for more performance information
Chairperson, in the interest of ensuring that what we produce serves this
house, in the past we have invited the NCOP to guide us by indicating whether
the information we provide in these Reviews and other budget documents is
adequate and how it could best be tailored to suit your needs. I am happy to
indicate that the sense we got this time is that there is a need for more
information and deeper analysis.
In this regard, the National Treasury will seriously consider undertaking
deeper and more extensive expenditure reviews. However, time and resources
might not allow us to undertake in-depth reviews for all sectors in any given
year. We shall have to prioritise sectors on the basis of some criteria, but we
welcome the challenge and hope to rise to it.
Spending agencies need to show what the money buys
Honourable Members, yesterday a consensus also emerged that as a country we
face a unique challenge. On the back of a robustly growing economy and
efficient South African Revenue Service (SARS) we often find ourselves having
more money than we are able to use. I say this with the full knowledge that
there may be many people who will find it hard to believe. However, Honourable
Members if one examines the spending patterns for the first quarter of this
year as contained in the section 32 report published in July, it is not very
hard to come to this conclusion.
The report, which has been discussed extensively by the Select Committee on
Finance showed that after three months or 25% of the financial year, spending
on some of these grants was around 14%. Given past trends it is not hard to
predict that if nothing changes during the course of the year we might witness
some under spending on some of these grants, yet again.
The Reviews we table before this house today confirm that over the seven
years covered in the analysis, spending grew very strongly. They also show that
there are more South Africans who have access to public services delivered by
both provinces and municipalities, but I would submit to this house that we do
not know enough about the quality and sustainability of these services.
Provinces and Municipalities account for very large spending
Chairperson, the Reviews we table before this house today show that
provinces and municipalities accounted for R161 billion and R119 billion of
public expenditure in 2005/06. The question we should be asking ourselves is
whether we know enough about the change that amount of spending had on the
lives of South Africans. We should ask this question not because we want to
cause trouble for anyone or ourselves, we ask it because this is our
responsibility as elected representatives. If we fail to ask it we shall have
failed those who elected us. This is what the "political audit" I referred to
yesterday is about.
When Honourable Tutu Ralane and the Select Committee on Finance he chairs
invite national and provincial departments to come and explain the progress
they are making with implementing the range of programmes funded through
conditional grants, they are doing their job. This house and Parliament must
support them.
Yes, when they ask difficult questions they may come across some resistance,
but this is what the work of this house is about. You need no permission from
anyone to do it. The Constitution assigns you that job.
Chairperson, I want to take this opportunity to encourage this house to make
more use of the section 32 reports and the Division of Revenue Act in
exercising its oversight. The reports indicate how much money national
departments have transferred to municipalities and how much of it has been
spent at the end of each quarter. This is very useful information. From it
Members can tell which programmes are not spending the funds they appropriated
to them. From the reports it is also possible to detect when national
departments continue to transfer funds to provinces and municipalities
regardless of whether spending takes place. This allows this house to intervene
and call for remedial action long before the end of the financial year.
Chairperson and Honourable Members, I now formally table the Provincial and
Local Government Expenditure Review and the Local Government and Expenditure
Review.
Thank you.
Issued by: National Treasury
17 October 2006
