Development, on tabling of the KwaZulu-Natal Budget in the Provincial
Legislature
1 March 2007
Mr Speaker
Honourable Premier and colleagues in the Executive
Deputy Speaker
Honourable Members
Members of the diplomatic corps
Distinguished guests and business leaders, ladies and gentlemen
Introduction
When the Premier delivered the State of the Province address on 14 February,
fifteen days ago, under the theme 'Building the economy through partnership,'
he presented an honest picture of KwaZulu-Natal (KZN). He portrayed KZN as a
province emerging from a dark and divided past, facing daunting challenges but
determined to lift itself up and shake off all scepticism, surge forward as an
unstoppable force towards a positive future.
I am one of those who feel honoured to serve the people of our province at
this crucial time in the history of our new democracy. We are determined to
create political stability, lasting peace, tackle unemployment and banish
poverty and relegate our sad history of apartheid exclusion and political
conflict to the distant memories of only those of us who lived through those
turbulent times. We are determined to create a safe, secure and prosperous
province. For the sake of those who laid down their lives for our country to be
free and for the sake of our children and their future, KwaZulu-Natal must
succeed. We are determined to make KwaZulu-Natal the leading economy in South
Africa.
As I deliver this Provincial Budget for deliberation by this House, I do so
with a sense of pride and optimism.
I am reminded of the tribute by Francis Carey Slater to the South African
poet Roy Campbell which says much about where we aim to take this province.
"Soar again, young eagle, soar again �
Leave carrion to vultures! � soar above
The blazing precipes of the sun,
The huddled glaciers of the arctic moon;
Soar, soar and scatter with ascending wing
The swirling hailstones of the fierce, white stars."
Last year the President in the State of the Nation Address referred to the
fact that the "masses of our people had entered into their Age of Hope." In
tabling our budget, we spoke about the dreams and aspirations of poor and
unemployed people across the province that we encountered during our people's
budget consultations. This year we are convinced that our people are determined
to soar up to the lofty heights of those dreams and turn them into reality.
Building a Developmental Province
Building onto that message this year the Premier spoke in this House of a
developmental state. One of the attributes of a developmental state,
particularly given our conditions, should be its strategic capacity: popular
legitimacy deriving from its democratic nature and approach of people-centred
and people driven change. In this regard, it should be able to mobilise society
to take part in its implementation.
The economic change we all seek to achieve must be located within a very
clear understanding of the nature and context of our developmental state and
province. It is becoming abundantly clear that a democracy can only survive if
it is founded on a thriving economy. The structure of that economy should:
"reflect the natural endowments of the country and the creativity that a
skilled population can offer. It should be an economy in which cutting edge
technology, labour absorbing industrial development, a thriving small business
and co-operative sector, utilisation of information and communication
technologies and efficient forms of production and management all combine to
ensure national prosperity."
A thriving economy in a national democratic society requires efficient
markets that address the racial and gender exclusions of the apartheid past as
well as address the peri-urban squalor and grinding rural poverty.
We are driven by this vision and commitment to work harder to convert the
province's undoubted economic development potential into reality. According to
the latest statistics, 29 percent of the economically active population in the
province is unemployed. This is a significant improvement from the 35,4 percent
in 1996. The Human Development Index in the province is 0,57 representing an
improvement from 0,52 in year 1996. This means KZN is in the medium range of
human development. According to the latest figures from Global Insight, the
poverty rate for KZN stands at 51,9 percent - the vast majority of which are
Black Africans. Infant and child mortality rates stand at 68 and 124 per 1 000
live births, respectively. This is so, despite the significant progress being
made in the provision of water and electricity and delivery of basic services
to our communities.
An important part of being a developmental province implies a dynamic
government willing to negotiate its development priorities with the people it
serves. This entails listening to the needs and aspirations of our communities
and letting our policies and strategies be informed by the views of the people.
This is the genesis of our programme of action and the fundamental thesis upon
which it is built.
It is in this spirit that as government we recommit to the international,
national and provincial agenda to combat poverty in all its forms, as
articulated in the Millennium Development Goals (MDGs), national service
delivery targets, the Accelerated and Shared Growth Initiative for South Africa
(AsgiSA) and our own Provincial Growth and Development Strategy (PGDS). In line
with these goals, South Africa has developed its own set of national service
delivery targets such as:
* by 2008 all households will have access to clean water
* by 2010 all households will have decent sanitation facilities
* by 2012 every household will have access to electricity
* by 2014 30 percent of white owned agricultural land will be distributed for
sustainable agricultural development.
Mr Speaker, the main objectives of the Accelerated and Shared Growth
Initiative (AsgiSA) are to place the South African (SA) economy on a
permanently higher growth path of more than 4,5 percent in the period to 2009.
We have set ourselves a target of at least 8 percent growth from 2010 to 2014,
and to halve unemployment by 2014.
The Provincial Spatial Economic Development Strategy
KwaZulu-Natal has developed and adopted a comprehensive Provincial Spatial
Economic Development Strategy (PSEDS) during the course of the past year as a
logical step since the adoption of the Provincial Growth and Development
Strategy. The principles and imperatives of the National Spatial Development
Perspective (NSDP) form the basis of any provincial development strategy to
which it must be aligned. The implication of this is that provincial
development strategies must take cognisance of and clearly reflect national
strategic developmental and spatial imperatives and priorities, whilst at the
same time providing a framework for the development of municipal spatial
development strategies. The PSEDS seeks to address a key weakness identified in
the current Provincial Growth and Development Strategy (PGDS), namely that it
lacks a spatial context.
The PSEDS is premised on the recognition that all government development
programmes necessarily have to take place within a spatial context and
therefore directs its fixed infrastructure investments to areas of greatest
economic development potential as well as areas of greatest need based on
poverty densities. The PSEDS reviewed the competitive and comparative
advantages of the province's economy to identify the sectors which have the
greatest potential to drive growth and impact on poverty and unemployment. This
exercise confirmed that the following broad sectors really make up the economy
of the province:
* agriculture and agri-industry (including land utilisation mapping and
giving particular attention to Land Reform)
* industry, including heavy and light industry and manufacturing
* tourism, including domestic and foreign tourism
* services sector, including financial, social, transport, retail and
government.
The PSEDS has been tabled to all municipalities in the province during the
Local Economic Development (LED) conference held last year and a series of
municipal development and growth summits. It has been used as a guide to inform
the municipal Integrated Development Plan (IDP) and LED planning and
implementation frameworks. To complement this approach, Treasury has encouraged
all departments to embark on a programme of spatial budgeting analysis to
ensure that there is equity across different municipal districts to avoid urban
bias in our expenditure pattern.
Also, our focus on economic sectors includes those labour intensive sectors
which are struggling, such as the clothing and textiles sector and mining. In
March we will be holding a provincial summit on the clothing and textiles
sector, one of the main objectives being to identify strategies to ensure the
domestic industry is sustainable and competitive after the two year window
period provided for in the recent trade agreement with China. We are putting
into place strategies to revive both these sectors, and we will provide more
details during the forthcoming debate on Vote 4, Economic Development.
Our investment partners in the Provincial Economic Development Strategy
Investment by parastatals
To get a true picture of the scale of infrastructure investment in the
province one must include the expenditure of the national government and
parastatals despite the fact that their budgets do not lie in the coffers of
the provincial government. Transnet and the National Ports Authority are
investigating a proposed investment of R15 billion in upgrading the capacity of
Durban Harbour over the next five years.
Private Sector Investments
Foreign Direct Investment (FDI)
Foreign direct investment into KZN is increasing exponentially. Between 2000
and 2005 over R27 billion was invested in the province by foreign companies.
This investment was in a variety of sectors, with the largest amounts being
invested in the automotive sector, steel and metals (mainly aluminium),
forestry and paper, property development and oil and gas sectors. FDI
transactions which stand out during the 2004-05 period include a R3,4 billion
investment by Toyota Motor Corporation of Japan; a R1,4 billion investment by
the United Kingdom (UK)-based Anglo American Plc in Mondi; a R900 million
investment in the Merebank papermill by Anglo American Corporation; the R800
million investment by a Portuguese company in Natal Portland Cement; and a R630
million investment by Shell/BP in the Sapref refinery. Our province will
intensify our efforts to attract investors as well as encouraging companies to
set up their headquarters in KwaZulu-Natal.
Foreign Trade Missions
We are in the process of aligning trade and investment activities to avoid
municipalities going abroad to compete against each other instead of
collectively working for a unified province. A new Board of the Trade and
Investment KZN has been constituted to bring all municipalities to co-operate
under a common investment promotion agency.
Trade and Investment KwaZulu-Natal has been actively driving the promotion
of investment opportunities as well as assessing new markets to be explored for
the possibility of soliciting investors to partner local companies in the
establishment of operations within the province. In pursuit of these investors,
we have led delegations comprising government and local industry showcasing key
investments opportunities within the province. Key to this has been matching
local companies with potential partners within the selected regions. These
trade missions have yielded some results. The following are some of the
projects that resulted from such visits:
* Indian Apallo Tyres bought into Dunlop
* Indian Tata Steel is building a manufacturing plant in Richard�s Bay
* Indian UniPhos Group entered into a joint venture with a KZN Black Economic
Empowerment (BEE) company to set up a plastic manufacturing plant in
Durban
* Belguim's Rovoplast has bought property in Eshowe with the intention of
setting up a PVC manufacturing plant
* a Chinese company, Shanghai Haboa Chair, entered into a joint venture
agreement with a BEE company to manufacture FIFA accredited stadium seats in
Pietermaritzburg.
The Three Development Strategies
The 2007/08 budget framework is informed by three broad developmental
strategies; namely:
* stimulating sustainable and shared economic growth through
partnerships
* employment creation and empowerment initiatives
* improving service delivery.
Strategy One: Stimulating sustainable and shared economic growth through
partnerships
Chalmers Johnson who first coined the phrase 'a developmental state' said
that "a state's first priority will define its essence." Our essence therefore
is in building an economy in which all our people will share and thereby
contribute to the eradication of poverty. We intend to get our province to be
the leading economy in South Africa with the largest contribution to the
nation's Gross Domestic Product (GDP). For this to happen there are a few
necessary pre-conditions:
* government investment in the economy
* mobilisation of private sector investment to transform the provincial economy
and make it participatory and inclusive
* build relevant skills that will support a technologically advanced
economy
* a labour absorptive business sector which directs its efforts to halving
unemployment.
We acknowledge that the government cannot achieve any of the above
objectives alone. There are three clear partners in the development of this
province. First is the provincial government itself. Second is the citizenry of
the province in all of its formations and the private business sector completes
this golden triangle. An important tool in the hands of our government is the
provincial budget that must give meaning to our objectives and guide the
development of this economy.
All efforts to grow the economy of the province have to be aimed at
broadening participation in the economy by those communities that were
previously excluded. Black Economic Empowerment is one significant
consideration that must be taken into account by local and foreign investors.
We want to ensure that meaningful Black Economic Empowerment takes the
centre-stage of KZN business activity.
Government investment in the local economy
Mr Speaker an early analysis of economic sector cluster programmes for the
2007/08 Medium Term Expenditure Framework (MTEF) reveals that government will
be spending R7,637 billion in housing, road construction and maintenance,
agriculture, land reform and restitution, tourism and corridor development
projects in the prioritised corridors and nodes across the province. These
projects are expected to create approximately 183 000 temporary jobs.
Infrastructure investment
Infrastructure expenditure by the provincial government has more than
doubled between 2003/04 to 2007/08, from a baseline of R2,9 billion to R6,4
billion and it alone will grow to R9,8 billion in 2009/10 (Figure 1). Given its
potential to stimulate economic growth across a broad front, infrastructure
delivery will remain one of the key focus areas of this government. We have
also taken a firm view that we will not tolerate infrastructure underspending.
I am satisfied that several meetings that have been held with the relevant
departments to put an end to this problem will provide a lasting solution. We
will continue to intervene and reallocate funds from departments which show
underspending to those that can deliver, as was done in the last budget
adjustment.
In respect of transport infrastructure, the provincial budget we table today
provides for a total of R3,18 billion to be spent by the Department of
Transport over the next three years to upgrade major transport corridors in the
province, including: John Ross Highway (allocated an extra R100 million), P700
from Richards Bay to Ulundi and ultimately linking to Vryheid and the north,
etc.
The Dube TradePort and International Airport
We are grateful for the partnership with the Airports Company of South
Africa (ACSA) on Dube TradePort, the biggest single government infrastructure
investment in the province. When ACSA joined the project, specifications were
revised with the attendant increase in the amount required for the project from
R2,5 billion to about R5,3 billion. The preferred bidder has already been
selected, namely the Ilembe Consortium. Negotiations with the Consortium are
underway to reach an agreement by the end of March. The agreement between ACSA
and DTP has been signed which will ensure that the relationship and respective
roles are clearly defined. I would like to congratulate both ACSA and DTP for
the commitment shown through the finalisation of this agreement. I wish to
thank Minister for Transport Hon Jeff Radebe for his role in the conclusion of
this matter. I also wish to thank Premier Ndebele and my cabinet colleagues and
Heads of Departments for their support in delivering this long awaited project
for KwaZulu-Natal.
Despite the appeal lodged in court against the selection of the preferred
bidder, my confidence in the correctness and legality of the procurement
processes has been so high that I did not expect this challenge to derail the
construction of the airport and disturb the timelines beyond the 2010 target
dates.
I am now pleased to announce that the appeal lodged against the selection of
the preferred bidder was rejected with costs in a judgement issued by the
Pietermaritzburg High Court last week. This means that the way is now clear for
the project to move ahead on schedule to meet the 2010 timelines and
beyond.
The catalytic impact of this project will not be confined to the growth node
in the coastal area north of Durban, but will reverberate across the entire
province and position KwaZulu-Natal as a destination of choice for domestic and
international tourists � the inexhaustible gold mine of our province.
In the months leading up to the World Cup in 2010, citizens of this province
will be able to look up into the skies, and see gigantic planes landing and
taking off from the King Shaka International Airport.
The 2010 Soccer World Cup
Mr Speaker, the 2010 Soccer World Cup promises to bring significant economic
benefits to the country and the province, particularly in the tourism sector.
Our province is certain to get a semi final. The 2010 FIFA World Cup is about
business opportunities for our province in many sectors: tourism, sports,
security, hotel, food and beverage industry, transport and many others.
KwaZulu-Natal must get ready!
Good progress is being made in the construction of the 2010 Soccer Stadium
in Durban that will host the semi-final match. Negotiations with the preferred
bidder are at an advanced stage to ensure timely delivery of the stadium. Given
the importance of this iconic stadium, the province has committed itself to
providing financial support towards the construction costs. We are satisfied
that the current cost of building the stadium is unavoidable and therefore we
intend to make a contribution of R300 million over the next MTEF cycle.
The Provincial Growth Fund
We intended that the Growth Fund would be fully operational during the
current financial year. Despite the overwhelming enthusiasm from the private
sector for this partnership, the process of finalising all the contractual
agreements around the fund, involving five separate private sector lenders, has
however taken a lot longer than we anticipated. It became necessary for me to
intervene, the result of which was a decision to reallocate R400 million of
this year's funding for the Growth Fund during the recent Adjustments Estimate.
The assistance of the Development Bank of Southern Africa (DBSA) was secured to
strengthen the Fund since it has also suffered from a lack of capacity in the
Fund Management structure, thus slowing the process of identifying and
packaging projects for consideration by the Fund's investment committee.
Treasury recently convened a meeting with the five financial institutions
who are partners with government in the Fund to get the Fund to begin
disbursing funds on major projects on a regular basis. I am confident that with
these measures in place, we will be in a position to spend the bulk of the R500
million allocation to the Fund in the coming financial year. The oversight on
the Fund will now reside in the Department of Economic Development.
Other government instruments to stimulate sustainable and shared economic
growth Government has put into place a number of other instruments to stimulate
sustainable economic growth, built around the theme of creating a positive
image and promoting KZN as a sporting and cultural Mecca.
The A1 Grand Prix
Last weekend the province was witness to a partnership of another kind. I am
referring to the A1 Grand Prix, which involves a three-way partnership between
the provincial government, eThekwini Metro and the local A1 Holding Company
Dunrose Investments. This event has already made a major impact on the regional
economy, generating approximately R350 million last year alone.
The KZN film industry
KZN has become a natural home for the shooting of feature films and TV
commercials. Approximately 59 feature films and commercials were shot in KZN in
2004. This increased to 77 in 2006. This rise in film and commercial shoots can
be explained by the fact that it costs 30 to 40 percent less to shoot a film in
South Africa than in Europe and the United States. In order to exploit this
competitive advantage even further, Economic Development � through the KZN Film
Commission � is considering a range of incentives to encourage more film houses
to consider KZN as a home of filmmaking. Details of this will be provided
during the Economic Development vote.
The music industry
In regard to the music industry, over the years KZN has produced some of the
greatest musicians and artists, who have excelled both in South Africa and
abroad. However, most of these artists/musicians have only reached their full
potential after having migrated to other provinces and countries. This results
in loss of local talent and to the KZN music industry; loss to the KZN economy
and undermines KZN government policy to promote KZN as a cultural centre and
Mecca for the creative arts.
In this budget we are providing funding to the amount of R10 million per
year, to the Department of Economic Development, working with the Department of
Arts Culture and Tourism, to establish a unique, commercially viable non-profit
making agency that will promote the local music industry and enable our
musicians and later all artists to achieve their dreams, without leaving our
province. This will provide opportunities for musicians to record their music
in the province and ensure that all profits generated will be for the benefit
of the musicians themselves.
Tourism
KwaZulu-Natal is now market leaders for domestic tourism as well as number
two in terms of international tourism. Over the past three years KwaZulu-Natal
has steadily been growing its market share in both markets.
The hotel occupancies for the province for the period to December 2006 have
been 1 percent higher than the national average. Overall, the total
contribution to Gross Domestic Product per Region (GDP-R) was 10 percent. The
tourism sector created 77 000 direct jobs and 154 000 indirect jobs, an
important factor municipalities must note as they conduct their Local Economic
Development Summits (LED).
There has been substantial investment in tourism infrastructure. Extensive
renovations and refurbishments totalling some R89 million were carried over the
past two years. In addition, there has been private sector investment of about
R2,5 billion in new hotel infrastructure. Furthermore, three more hotels are in
the planning stages including a coastal holiday resort.
In capitalising from these past gains, the Economic Cluster working with
Department of Economic Development and the Department of Arts, Culture and
Tourism will work towards finalising a plan for packaging new tourism
investment opportunities in different parts of the province, within the next
six months.
"Soar again, young eagle, soar above
Those jagged turrets and sky-tossing peaks�"
Strategy Two: Employment creation and empowerment initiatives
Our overall goal of fighting poverty is intertwined with the need to create
employment opportunities and to promote black economic empowerment through the
following key interventions:
Supply Chain Management
All provincial departments have established Supply Chain Management Units
and are now better placed to actively promote the provincial government's BEE
and other provincial economic development policies. The analysis of the
spending patterns of the past two financial years indicates that some 71
percent of the 2007/08 budget will be utilised on salaries, payments for
municipal services, Telkom services and transfers to Non-Governmental
Organisations (NGOs) and public entities. This leaves us with 29 percent, or
R12,3 billion that requires some form of procurement procedures.
The analysis further indicates that 37 percent or R4,7 billion of this
amount is in respect of procurement from contracts negotiated and controlled at
national level (medicine and vehicles) and contracts with major national and
international suppliers. Our preferential procurement prescripts and strategies
thus far have not sufficiently influenced transformation at this level. The
Treasury is accordingly formulating a new strategy to deal with these contracts
to ensure local economic development and enforce sufficient commitment to black
economic empowerment from these companies. We will meet with all these
companies during the year to ensure commitment to our economic transformation
and empowerment policies and targets.
The remainder of the procurement budget (63 percent or R7,5 billion),
represents an amount that government can directly influence. We are determined
to leverage this procurement spend more aggressively to benefit BEE and local
economic development. To companies who refuse to transform and support
government's transformation policies and targets, the message is that the
Provincial government will not do business with you.
The analysis does indicate an increasing trend of BEE suppliers to
government. Whilst this is a good sign, it also becomes clear that some of the
suppliers behind these BEE groups have not embraced our policies of meaningful
and sustainable Black Economic Empowerment. We will identify these suppliers
and exclude those who refuse to co-operate with government in this regard.
Agrarian revolution and basic food security programmes
Agrarian Revolution as adopted by the government of this province remains
the most important strategy to revive rural economy, reverse the scourge of
poverty and ensure food security. It allows us to mobilise already existing
resources such as communal land and take advantage of the indigenous farming
skills.
Apart from revitalisation of the Nguni livestock, according to the
Department of Agriculture 8 670 hectares of land was cultivated to maize and
dry beans this year, with government supplying fencing, fertilisers seed and
weed killers supported with tractors in the mechanisation programme. It is
expected that more than 13 000 tons of maize and dry beans will be harvested
for the benefit of people in Nongoma, Magudu, Nquthu, Nkandla, etc.
The implementation of this programme has, however, been beset with serious
challenges which must be acknowledged. Over the past two years the programme
has suffered from various planning and operational deficiencies, resulting in
late plantings in some areas and over-expenditure. The department has received
a disclaimer and other unfavourable comments from the Auditor General and
attracted severe criticism from the Provincial Legislature. Despite this
reality, there is little doubt regarding the benefit of the programme to the
communities that received the assistance. The current investigation, once
completed should allow the necessary steps to be undertaken to correct the
operational deficiencies and restore the programme to a sustainable footing to
achieve government's objectives in the forthcoming MTEF cycle. This is the
commitment of the Premier and my colleague, the MEC for Agriculture and
Environmental Affairs which I share and support.
We will also be focusing sharply on agri-processing export opportunities
linked to the Dube TradePort.
We are further investigating the viability of tea production since about 5
000 jobs were lost when this industry declined. The Ngome Estate shareholders
have expressed their willingness to help us revive this industry. We have been
advised by Japanese experts on the tea industry to concentrate on the high-end,
ready to drink (RTD) green tea products. We are awaiting a final feasibility
study before making a decision.
Ithala
To finance and increase opportunities for economic activity at the local
level, we asked Ithala to be the main funder driving the co-operatives
programme and the small, medium and micro enterprise programme as well as the
promotion of Black Economic Empowerment. The management of Ithala has apprised
us of the challenges associated with development of this sector. These have,
quite expectedly, resulted in the amounts of arrear payments in both of these
loan books at Ithala increasing significantly to reach about R52 million for
the two years.
The Provincial Treasury together with the Ithala Board and Management met in
January to discuss these matters in the light of further recapitalisation of
Ithala that remains necessary to fund our development programmes. A strategy
was agreed to deal with the arrear payments on the one hand and also to ensure
that new businesses that are approved are provided upfront with support that
will prevent them getting into arrears.
In addition, the Board and the MEC have agreed on a restructuring process
that will be driven by the new Board of Ithala. In the restructured Ithala,
focus will be on the finalisation of the deposit taking activities of Ithala
and streamlining of the Development Corporation. This will ensure better
co-ordination and conform to the market norms. We will address this House on
the changes once they are finalised.
We are also encouraged by the commitment of management to recruit further
skills into the organisation so that true development finance institution can
emerge.
In the next allocation to Ithala it will be recommended that a minimum of
R50 million be reserved for youth owned enterprises and a similar target for
women. In this budget, we are allocating a total of R1,3 billion over the three
year MTEF period to Ithala for the purposes of financing and mentoring small
businesses (R665 million) and co-operatives (R635 million).
Support to small business and access to finance
The broader objective of the Small Medium and Micro Enterprise (SMME)
financing facilities that we have established is to assist historically
disadvantaged individuals to start up and expand business. Bridging the gap
between the first and the second economy is not a choice but a must if we are
to meet our policy objectives of black economic empowerment and job creation,
amongst others.
To date, Ithala has approved SMME loans totalling R478 million for 465
enterprises in agricultural, manufacturing, services, construction, energy,
tourism and other sectors. Through the finance provided to SMMEs Ithala
facilitated the creation of 3 552 job opportunities. To address challenges
experienced by this sector, Ithala has appointed the Ukwakha Consortium to help
with receiving and preparing business plans, mentorship, technical support and
professional due diligence services for specific referrals on business loan
applications.
Using the model from the Republic of India, the National Small Industries
Corporation (NSIC) of India has assisted us in the development of a strategy to
provide support the SMMEs on a district basis which will be integrated with the
Small Enterprise Development Agency (SEDA). This strategy will have the effect
of strengthening our small business sector, create more employment and help to
protect our investment in this sector through Ithala loan book.
Co-operatives programme
The Co-operatives Programme has two very specific objectives, namely to
provide food security and create economic activity at a very basic community
level. Ordinary people have testified that they are now able to support their
families through this programme.
Though more co-operatives have received training, currently over 4 000 of
them have worked with Further Education and Training (FET) colleges to draw up
business plans. Over 1 000 have had their funding approved by Ithala and a few
have made own savings and are operational without any funding from Ithala.
According to Ithala records, a total of R169,6 million in loan capital has
already been approved to fund co-operatives, contributing to the creation of
more than 7 130 jobs in the province.
The culture of co-operatives is here to stay and is growing. We need to make
it clear that co-operatives are not entities established and run by government
but are a community movement created for the benefit of the members while
government creates a supportive environment for co-operatives to survive.
We look forward to members of co-operatives reaching several millions in the
not-so-distant future in this province.
At our request, great strides have been made in collaboration with the
University of Zululand in developing and implementing a curriculum which will
make it possible for students to do studies on co-operatives and
entrepreneurship. This university must be commended for appointing Professor
Dele Braimorh and Professor Anthony Setsabi who are specialists in
co-operatives, (Both from Lesotho University). Young people can now study and
make a career for themselves after obtaining a certificate, a diploma, and
degrees on co-operatives. Professors Braimorh and Setsabi will also oversee the
revamping of the co-operatives programme and elimination of weaknesses in this
programme which have contributed to among other things the large disparity
between the numbers enrolled and operational co-operatives.
We will complete the establishment of secondary co-operatives to ensure that
co-operatives do benefit in procurement, bulk buying, marketing, quality
assurance and branding, and have meaningful participation throughout the value
chain. By the end of this year, there will be at least one secondary
co-operative operational in each district throughout the province. We envisage
that secondary co-ops will be incorporated in poultry production, beef
production, vegetable product, beans production and mechanisation programme. A
combination of grant funding and loan capital will be used to drive the
programme.
Government remains committed to offering a market for co-operatives to
trade, we commend the Department of Health for leading the way in procurement
of linen, fresh produce and meat for public health institutions. We urge more
departments to do the same.
Specific job creation programmes � Expanded Public Works Programme
(EPWP)
The Expanded Public Works Programme is one of the main second economy
interventions of government aimed at job creation, empowerment and poverty
alleviation. This budget provides funding for EPWP�related activities in the
departments of Transport, Health, Social Welfare, Local Government, Education,
Agriculture, and Works � targeting particularly women and the youth. EPWP
programmes are wide-ranging in nature, and include the Department of
Transport's Zibambele and Vukuzakhe programmes (expected to create 109 500 job
opportunities by 2009/10); the community health and home-based care programmes
in Health and Social Welfare (16 034 jobs by 2009/10); the Community
Development Workers programme managed by the Department of Local Government
(410 jobs by 2009/10); and the alien weed eradication programme managed by the
Department of Agriculture (4 500 jobs by 2009/10). Collectively provincial
departments will be spending approximately R2,6 billion on EPWP programmes over
the three years of the 2007/08 MTEF. Budgets for these items are integrated in
departmental votes.
Business process outsourcing (BPO)
Business process outsourcing is the contracting out of a specific business
task, such as payroll, human resources, and administration to a third-party
service provider. Usually, BPO is implemented as a cost-saving measure for
tasks that a company requires but does not depend upon to maintain their
position in the marketplace. Already a large number of multinational companies
are looking at offshore outsourcing of several business processes.
In the next financial year, Economic Development will establish three call
centres � in Pietermaritzburg, Richards Bay and Newcastle as part of the
provincial investment in the business process outsourcing arena. The first call
centre under this programme will be operational in June 2007. A training
programme for 1 000 call centre agents will begin in May 2007 and R20,8 million
has been set aside to finance this project.
Empowerment through savings
It is a cause for concern indeed that South African households spend more
than they earn. South Africans only save 0,2 percent of disposable income. It
is of vital importance that we revive and encourage the culture of savings at
all levels. The hike in interest rates has been used as a deterrent to
increased borrowing. We have to be vigorous in educating the public about the
benefits that come with having a sound financial savings plan; hence we have
given you each a money box.
In his Budget Speech, Minister Manuel had this to say: "In a country with a
low level of savings, the planned fiscal surplus is government's contribution
to a national savings effort and we would like our citizens to follow this
example."
Strategy Three:
(A) Improving service delivery
The budget we present has demonstrable growth in allocations to provide
sufficient funding in Departments' baselines to deliver quality services, which
impact directly on poverty levels and quality of life in the province. In
2009/10, Education and Health will be receiving R10,2 billion over and above
what they would have received if their 2003/04 baseline budgets had simply been
adjusted for inflation only (Figure 2). There are however some budgetary
constraints that must be acknowledged.
Education
The 2007/08 MTEF budget framework provides for a significant increase when
compared with the allocation made in the 2006/07 MTEF. An additional amount of
R2,4 billion representing a growth rate of 14,9 percent has been added to the
2007/08 budget. This additional allocation to the Department of Education funds
various initiatives, amongst which is the allocation for no-fee schools. We can
proudly say that Education's budget is a pro-poor budget and Provincial
Treasury is satisfied that all national priorities have been satisfactorily
funded. Included in the allocation is provision for salary increases and
employment of more teachers. The number of no-fee schools in the province has
increased from 1 346 in 2005/06 to 3 342 in 2006/07 and is bound to grow even
further in the coming MTEF period. However, my colleague Hon Mrs Cronje and the
whole provincial government are still concerned that the substantial additional
allocations made to Education are not matched equally by significant
improvements in matriculation pass rates.
Budgetary allocations towards Further Education and Training (FET)
programmes continue to grow. From a baseline of R392 million in 2006/07,
allocations to this programme will grow to R513 million by 2009/10. We consider
this programme a key pillar in the provision of skills necessary to support the
sustainable growth of our economy. The additional allocations include part of
the funding for the Masifundisane literacy campaign to add to what Department
of Labour has provided.
Health services
The 2006/07 Adjustments Budget allocated R75 million, to intensify the fight
against multi-drug resistant tuberculosis (TB), which has surfaced in the
province. Going forward we will be stepping up this allocation.
The Department of Health will receive a budget of R13,4 billion for the
2007/08 financial year, representing an increase of R1,7 billion of new money
or 14,4 percent over the previous MTEF. This budget will strengthen our
campaign against HIV and AIDS through encouraging the programme of voluntary
testing, counselling and increasing the number of people receiving
antiretroviral (ARVs) therapy. The allocations provided enable the Department
of Health to fulfil their plan to increase the number of people receiving
antiretroviral treatment from the current 30 percent of patients who qualify
for ARVs to reach the targeted 70 percent by 2009. Budgetary allocations to
this programme rise from R988 million in 2007/08 to R1,3 billion by 2009/10.
The increase in personnel allocation makes provision for phased implementation
of the Health Professionals Remuneration Review and increase in the number of
posts of the health professionals.
The fact that our Department of Health has reached the immunisation levels
higher than the national average indicates the effectiveness of our Primary
Health Care Services. Consequently the department will be stepping up the
construction of primary healthcare (PHC) clinics, thereby increasing the annual
visits beyond 19,9 million per annum in 2006 (from 10,4 million in 1995). Our
PHC facilities are at the forefront in the fight against common and curable
diseases many of which contribute to high infant mortality rates and general
morbidity of our population as well as the reduction of life expectancy in the
province.
The current delays in spending the capital budgets have been intensely
discussed and working with the Department of Works, a lasting solution has been
found to deal with this challenge. The capital budget has been reduced through
the resolution of the national Department of Health. Treasury is currently
finalising preparations for a Private Public Partnership to address the
increased demand for revitalisation of hospital facilities. This will deliver
the state of the art facilities despite our budgetary constraints.
Social Welfare
Honourable members will recall that at the beginning of 2006/07 an amount of
R13 billion for social security grants function shifted to the national sphere.
This amount which is handled by South African Social Security Agency includes
grants for aged, war veterans, disability, grants in aid, foster child grant,
care dependency and child support grants. In 2002, some 406 440 pensioners were
receiving grants. In January 2007 we had 443 795 old age grant beneficiaries in
our province. With regard to the Child Support Grant beneficiaries, 530 484
children were recorded in the system in 2002. This number has increased nearly
four-folds to 1 903 802 by the end of January 2007.
The budget caters for the improvement in salary of social workers and
employment of auxiliary social workers mainly for Population Development
programmes below which will be strengthened:
* prevention of substance abuse and rehabilitation
* care and services to older persons
* crime prevention and support for crime victims
* child care, care for the disabled and debilitated
* prevention of HIV and AIDS, unwanted teenage pregnancies
* general social relief and strengthening social fibre, etc.
Function shifts to Economic Development
It has been decided to shift accountability for the managing the Provincial
Growth Fund and SMME funds from Provincial Treasury to the Department of
Economic Development. Many members of this house raised this matter in the
budget debate last year. This function shift will take place with effect 1
April, and Honourable Members will notice that the funds for these programmes
appear against Vote 4 in the budget proposals being tabled today. Amounts of
R1,709 billion over the MTEF period representing the Provincial Growth Fund and
R665 million over the MTEF representing the Small Medium and Micro Enterprise
Fund have been transferred to Economic Development. Treasury will however
assist the Department of Economic Development in the strategic management of
these funds until capacity can be built in the latter Department, in the form
of full-time project managers.
(B) Good Governance
Performance Budgeting System (PBS)
The drive to improve service delivery is the essence of the Performance
Budgeting concept (PBS). The implementation of the Performance Budget System
started in July 2005 with the Departments of Health and Transport.
In April 2006, implementation of the system also started in Agriculture,
Office of The Premier, Provincial Legislature, Economic Development and
Treasury. These departments should also go live on 1 April 2007, except for
Agriculture where the project is lagging behind because of lack of
capacity.
There is a need for all departments to update the data lines in order to
enable the system to really perform as a live system failing which there may be
user apathy. Given the fact that the province is spending about R100 million
(last year's budget) on this project, it cannot fail, and Treasury will do its
utmost best to fully implement the system. Of course Treasury will also rely on
the good will of all provincial departments.
Financial Management
Another key determinant in improving the quality of services delivered by
government is the issue of financial management and reporting. If there is poor
financial management and controls in a department, service delivery inevitably
is the first to suffer through a combination of waste and loss of resources and
fraud and corruption. In this regard the Treasury will be looking closely at
the audit results of department in the coming year. The 2005/06 audit results
did not reflect well on the province (1 disclaimer, 9 qualified audits and high
number of matters of emphasis) and Treasury is determined to avoid a similar
outcome in this and the outer years of the MTEF.
We have made a commitment to eliminate disclaimers and to halve
qualifications in the audit findings of 2006/07. This is a very bold
commitment, but we are determined to achieve it if we are serious about
strengthening financial management in the province to improve service
delivery.
Treasury will not hesitate to intervene in departments where there is
continuous contravention of the Public Finance Management Act (PFMA).
Monitoring of municipal financial management performance
I should emphasise that our focus is not only on the standards of financial
management in departments.
The promulgation of the Municipal Finance Management Act (MFMA) was an
important milestone in the area of local government financial management. Its
underlying principles endorse greater financial accountability and
sustainability of municipalities and municipal entities, thereby facilitating
effective service delivery to communities. The implementation of the Act
requires a number of financial reforms at municipal level, the most significant
being the budget process and its link to the Integrated Development Plan (IDP);
in-year and post financial year reporting; audit and internal controls; and
supply chain management.
The role of the KwaZulu-Natal Provincial Treasury is to provide guidance and
assistance on these MFMA implementation and financial management issues to 53
of the 61 municipalities which have been delegated to the province. This is no
small task. The combined provincial municipal budget, including the budgets for
the ten district municipalities and eThekwini Metro for the 2006/07 financial
year, amounts to R24,1 billion. The municipal budgets have grown by 18,8
percent between 2005/2006 and 2006/2007.
Seventy five percent of the delegated municipalities in KwaZulu-Natal have
tabled their budget timelines for the preparation of the 2007/2008 budget. To
date Uthukela, Nquthu and Mpofana were in overdraft and are implementing
mechanisms to reduce this before June 2007. In terms of the submission and
auditing of the 2005/06 municipal financial statements only two municipalities
have not yet submitted, namely, Ulundi and Umkhanyakude.
(C) Fighting crime and corruption
Safety and security: Improving crime prevention measures
The unacceptably high levels of crime in the country have rightfully been
the subject of much public debate in recent weeks.
This prompted the Premier in his State of the Province address to state as
follows:
"Our government is not going to allow the criminal minority in our society
to undermine our efforts to realise our social and economic potential as a
province."
The budget provides an additional allocation of R105 million (R20 million,
R35 million and R50 million) over the three years of the MTEF for use by the
Department of Community Safety and Liaison for the crime prevention volunteer
corps announced by the Premier. We have calculated that this funding should be
sufficient to meet the personnel related costs of recruiting and training of 1
000 volunteers to the new corps in 2007/08 to over 2 000 in 2009/10. Further
investigations into the technology announced will be provided later as more
definite information becomes available. I have no doubt that these volunteers
(modelled along the lines of the London Metro Police project), working hand in
hand with the police and communities, will make an immediate and measurable
impact on the crime situation in the province.
Fraud and corruption
With regard to the issue of fraud and corruption, I want to state
categorically that this government under the leadership of Premier Ndebele and
the Executive of KwaZulu-Natal will not tolerate fraud and corruption in any
form, size and in any area of the public sector. Zero tolerance of fraud and
corruption is now an in-built and ongoing strategy in all government
departments in the province. This government will not tolerate any form of
fraud or corruption on the part of any public servant or elected official, no
matter how senior, irrespective of political affiliation or any form of
association. All suspected cases of fraud and corruption will be investigated
without fear or favour.
I can report that sixteen forensic investigations ranging from fraud,
corruption, theft, mismanagement, maladministration and other irregularities
were conducted during the 2005/06 financial year and more are underway during
this financial year. Some of these cases are before the courts of law and
concerned departments have instituted internal disciplinary hearings.
Government took an unprecedented action to challenge litigations against the
Department of Social Welfare and Population Development thereby saving
government millions in welfare grants claimed by unscrupulous legal firms using
touts. Consequently the Law Society has found two prominent legal firms guilty
of misconduct in addition to the cases reported to the South African Police
Service (SAPS). We have joined forces with external forensic investigation
fraternity in our fight against fraud and corruption, as well as the national
Department of Home Affairs and South African Revenue Services. The Department
of Local Government and Traditional Affairs has conducted investigations in
more than 20 municipalities whenever there is information suggesting that good
governance is being undermined. Under all circumstances government action will
be guided by the results of a professional process of investigation and will
not react with emotions generated by publicity that such matters inevitably
attract. We welcome the decision of the Standing Committee on Public Accounts
(SCOPA) requesting the Auditor-General to investigate the internal operations
in Ithala to ensure that no favouritism is involved in the awarding of loans. A
forensic investigation is currently underway in the Department of Agriculture
and Environmental Affairs as ordered by the Premier following a decision in the
Legislature. A full forensic report will be released soon and will not be
discussed in this presentation.
The 2007/08 Provincial Fiscal Framework
More details are also contained in the Budget Statements we are tabling
today. Nearly all departments have received additional funding over the MTEF. I
invite the Honourable Members to familiarise themselves with the contents of
the Budget Statements.
A summary of the provincial fiscal framework for the 2007/08 MTEF budget is
given in Table 1. The provincial equitable share allocations increase over the
MTEF by R5,7 billion. The increases in the conditional grant allocations are
mainly due to the increase in the allocations of the Infrastructure Conditional
Grant. There has also been a considerable upward revision in the provincial own
receipts, which is mainly attributable to Transport's revenue estimates.
Section 2.1 of Table 1 gives the new funding available for distribution
which amounts to a total of R6,3 billion the 2007/08 MTEF. The
non-discretionary expenditure areas that have a claim on this budget are as
follows:
* Carry-through costs of the 2006/07 Adjustments Estimate. Details of these
allocations are listed in Table 2 below.
* The net financial implications resulting from expenditure responsibility
associated with the incorporation of Umzimkhulu and the parting of Matatiele �
these financial implications are presented in Table 1.
* National spending priorities � in Education, Health, and Social Welfare
personnel, over and above inflation adjustments. The increase in Education's
personnel budget is to provide, mainly, for the scaling up of the remuneration
packages of principals from 1 April 2007 and extending it to other educators
over the MTEF. In Health, the increase in personnel allocation is to provide
for the phased implementation of the Health Professionals Remuneration Review.
The increased allocation is to also cater for the creation of additional posts
for health professionals to boost health professional numbers in the next five
years. The additional funding in Social Welfare is to increase the number of
social auxiliary workers. The breakdown of these allocations for the three
departments is given in Table 2.
After taking into account the three non-discretionary expenditure
responsibilities, the province is left with a deficit of R105 million and R138
million in the first two years of the MTEF. To meet this shortfall, the
baseline budgets of some programmes in the Department of Economic Development
have had to be reduced, namely the Richards Bay Industrial Development Zone
(IDZ), the Growth Fund and the SMME Fund.
Taking into account these internal reallocations from the baseline budget of
the Department of Economic Development, the province is left with R130 million,
R84 million and R691 million to allocate towards provincial bids. All the
additional allocations to departments are shown in Table 2.
Mr Speaker, increases in the Governance and Administration cluster
departments are as follows:
The Office of the Premier receives a total of R27,5 million over the MTEF to
accommodate the carry-through costs of the 2006/07 adjustments with respect to
Izimbizo.
Provincial Legislature: Amounts of R34,6 million in 2007/08, R32,5 million
in 2008/09, and R34,8 million in 2009/10 are allocated. These allocations will
cater for the following: constituency allowances, taking Legislature to the
people, and the publication of Iso Elibanzi.
The Royal Household receives a total of R11,2 million over the MTEF to
accommodate the carry-through costs of the 2006/07 adjustments.
Local Government and Traditional Affairs receives R53,9 million; R31,6
million and R124,8 million to finance Umzimkhulu expenditure, water and
sanitation and to fund the rehabilitation of small towns.
Sport and Recreation receives R19,1 million, R5,5 million and R18,7 million
to accommodate the decentralisation expenditure, support for major sport
events, as well as expenditure in Umzimkhulu.
The Economic Cluster Departments receive the following increases over their
baselines:
* Agriculture receives R33,1 million, R26,9 million and R168,8 million
mainly for the agrarian revolution.
* Transport receives R150,7 million; R128,4 million and R399,2 million for
expenditure in Umzimkhulu, the R102 expansion to improve access to the Dube
TradePort; road maintenance and the construction of access roads.
* Works: A total amount of R16,1 million is allocated for expenditure in
Umzimkhulu.
* Arts and Culture receives a total of R26,1 million over the MTEF to
accommodate carry-through costs, expenditure in Umzimkhulu, and accelerating
transformation in the tourism industry.
* Economic Development is allocated R26,7 million; R30,3 million and R35
million for carry-through costs, the establishment of the music-recording
studio as well as integrated business support.
* As a result of these additional allocations, departmental baseline budgets
have been revised upwards as indicated in Table 3.
Conclusion
"Soar again, young eagle, soar above
The vast expanses of that silent sea,
Whose shallow waters are grey scrub, whose foam
Is shifting sand: here drowns the sun in floods
Of orange and of gold, of purple pomp
That pales to violet ere the stains of day
Are washed out by the waters of the moon."
Mr Speaker, the stains of yesterday will not dampen our spirit. Like the
young eagles we shall lift ourselves up into the skies. As we implement our
development objectives, we shall realise our commitments to the people of this
province and our country, a better life for all. Indeed our people shall share
in the wealth of our nation. Women, children and the youth will all say, we
have at last realised the fruit of our freedom.
We will be turning dreams and visions into reality. As in the inspiring
words of John Updike, "Dreams come true; without that possibility, nature would
not incite us to have them."
I would like to thank all the people across the province who have made a
contribution to the 2007 people's budget through their engagement in our budget
roadshows, street interviews and telephone calls. We have had valuable comments
and contributions from the youth, particularly from those represented on the
Student Representative Councils (SRCs) of universities, academics, the clergy,
the business sector, organised labour and from communities in general: mothers,
fathers and the youth who turned out in their thousands to give us advice.
Drawing a budget is a job of many people whom I would like to acknowledge.
For the strategic guidance I have received from the Honourable Premier of our
province Thank you Manzankosi. It would not have been easy to put together such
a budget framework without his wisdom. The support I have received from
Minister Manuel, my Cabinet Colleagues, the Finance and Economic Development
Portfolio Committee is highly appreciated especially Chairperson Belinda Scott,
and members of the committee who accompanied me in the People�s Budget
Campaign, as well as the previous Chair Mr Cyril Xaba Nonkosi.
I also would like to sincerely thank my officials at Treasury and Economic
Development � particularly Mshengu Sipho Shabalala and Carol Coetzee and my
team in the Ministry, Sgananda and the Team who have assisted in the
preparation of the budget documentation we have today. Finally, to my wife May,
for the support spanning over two decades and my entire family especially
Dedani and the girls who have now grown to become my advisors, thank you for
all the support and understanding.
Mr Speaker, I am honoured to table in this House the Appropriation Bill,
2007 for the Province of KwaZulu-Natal together with the Budget Statements for
consideration.
Borrowing from Slater we should all say:
Soar again, KwaZulu-Natal, soar again!
Thank you.
Issued by: Department of Finance and Economic Development, KwaZulu-Natal
Provincial Government
1 March 2007
