The past three fiscal years have been challenging for the Gauteng Provincial Government (GPG). The sharp decline of the equitable share and the diminished collection rate from our own revenue sources as a result of the global economic downturn led to cash flow challenges.
This situation, coupled with poor financial management capacity in some of our departments at the time led to over-commitments and unauthorised expenditure. This spread our budget too thin; effectively threatening our ability to fully resource our priorities and meet our service delivery obligations to the people of Gauteng.
Driven by a desire to ensure that our operations continue to run as planned and service delivery to our people is accelerated in line with our social contract, we took hard decisions with the aim of addressing the challenges that we faced as government. We implemented a wide-ranging reprioritisation programme. The aim of this program was two-fold: firstly; to align spending to the outcomes envisaged by the new administration and secondly; to cut costs in areas that were not in line with the new priorities. As a result of this process we saved in excess of R2 billion during the 2009/10 financial year.
In the immediate past financial year, 2010/11, we continued with our austerity measures, shifting available funds to finance priority outcomes in particular those that create job opportunities, reduce unemployment and facilitate economic growth. We implemented prudent budgetary reprioritisation, strict cost containment measures, contract management reform processes and stringent payment plans to ensure compliance with the Public Finance Management Act. Our monitoring mechanisms were intensified to ensure that departments spend within their allocated budgets.
We never had any doubt that these austerity measures would improve the financial position of the province, enabling us to allocate resources to projects and programmes that will enhance the quality of life of our people.
Today, I would like to report to the people of Gauteng that as a result of the measures outlined above, we are slowly but surely restoring the fiscal well-being of GPG. The first sign of this improvement in our fiscal position was when we tabled a balanced budget for the 2011/12 financial year and said it was an indication of consolidating fiscal discipline with sound financial management.
We remain mindful of the fact that the road towards normalising our finances is still long; it will require hard work from all GPG officials and commitment to do things according to applicable regulations. That is why the austerity measures that we briefly outlined above are still in place and without any doubt will remain in force for the entire medium term period.
During this financial year we will appeal to all departments to efficiently manage their human capital and maximise production; ensure adherence to approved and funded spending plans; improve efficiencies in the process of procuring goods and services, and strengthen financial controls. Corruption will not be tolerated irrespective of who the officials found guilty of such practices are; this is because it will only serve to take us back as we seek to move forward in our quest to stabilise provincial finances.
Revenue enhancement measures for the medium term period
Let me now turn to revenue enhancement. When we tabled this year’s budget we said we will work with all departments to improve the collection of revenue from various sources that we have in the province. We said this because Gauteng’s Own Revenue Generated (ORG) has been on the spotlight over the last few years with emphasis placed on the GDF to optimise revenue collection and for GPG departments to present credible revenue projections. Therefore we spent the previous financial year putting in place measures to improve collection going forward.
Our assessment is that these measures are already working. In the year to March, GPG generated a total of R2.8 billion an increase of R100 million from the adjusted appropriation of R2.7 billion. This was from motor vehicle licences, gambling and betting taxes and hospital patient fees.
Three departments contributed 97% to GPG’s ORG in the year under review. These were Department of Roads and Transport which collected R1.7 billion or 62%, the Department of Economic Development was second with R535.1 million or 19% and the Department of Health and Social Development came in third with R438.4 million representing 16% of overall collection.
The figures outlined above are in line with our strategy to improve the collection of revenue in the coming years in order to fund provincial outcomes, which include improving the quality of the public education system, provision of responsive health care services and facilitating inclusive economic growth.
Such measures will include the following:
Gauteng charges a 9% tax rate to casinos. This is the lowest casino tax rate in the country. Other provinces charge between 12% and 15%, with Western Cape charging up to 17% which is the highest casino tax rate in the country. To make matters worse Gauteng’s casino tax rate has not been reviewed over the last 13 years. Consequently, the GDF in collaboration with Department of Economic Development has started a process that will lead to the review of casino tax rate in the province.
Since last year, we have been working closely with the Gauteng Department of Health and Social Development (GDH&SD) to ensure that public institutions with outstanding debts are contacted and payment arrangements are made and honoured. As a start, we have reached an agreement with the North West Health department that all verified invoices will be settled in full during this financial year. Other initiatives such as the Electronic Data Interchange have been implemented in most public hospitals in the province and will assist us ensure that all patients who are on medical aid are billed within 15 days after being discharged from these facilities.
Going forward we are looking at also enhancing revenue generated from rental income. In this regard a process has been initiated to align monthly rental fees charged to employees who live in state houses to market rates. The sale of advertising space on government owned property including buildings, car parks and highways is another area that will be prioritised.
Other sources of revenue including commissions paid to municipalities for collection of motor vehicle licenses will also be reviewed. In addition, employee-parking fees that have not been increased since 1995 will come under the spotlight.
It is important to point out that the demand for public services is growing particularly in Gauteng due to an ever-increasing population. Gauteng is the smallest province in the country in terms of land size accounting for less than 2% of the country, and yet it is by far the most populous province in the entire country. This increase has not been matched by our current government revenue growth trends, which have seen negative growth in real terms year on year. As a result, this situation calls for intensive measures of revenue collection to be adopted as every rand counts when it comes to resourcing our outcomes. Once we have collected, we must maximise production; ensure adherence to approved and funded spending plans and improve efficiencies in the process of procuring goods and services.
Improvement in delivery of provincial infrastructure programme
As indicated in the provincial budget, GPG will spend a total of R30 billion over the next three years maintaining existing infrastructure and building new facilities. We will spend this money on key infrastructure that supports service delivery to our people such as roads, schools, health facilities, sewer and water networks, and housing to formalise informal settlements in line with our priorities.
The implementation of this massive infrastructure programme will, without any doubt, create employment opportunities for people in the province, and contribute to reduce unemployment. This will be in addition to accelerating service delivery to many people. Therefore we are committed to ensuring that we implement our infrastructure investment programme without fail.
In the last financial year we had challenges with infrastructure delivery resulting in the lowest capital spending 72% of the total allocated budget. There were many reasons for this, from lack of project management capacity, poor procurement strategies, delays and late payment of service providers, disputes with contractual arrangements and non-compliance with the regulations of the Construction Industry Development Board (CIDB).
Therefore, the Executive Infrastructure Management Committee (EIMC), which is chaired by me, as MEC for Finance, has taken decisive steps that will see the province implementing infrastructure projects efficiently, within set timeframes and budgets.
We will establish a Strategic Integrated Infrastructure Planning Committee. This body will work within the Gauteng Planning Commission to facilitate integrated infrastructure planning and implementation. We have taken a decision that a statutory and mandatory maintenance plan for all our health institutions in the province should be put in place and included in the medium term expenditure framework. This type of maintenance will cover all the life and death equipment in hospitals such as autoclaves, chillers, air conditioners etc and also includes inspection, servicing and repair of statutory items such as fire-fighting equipment and infrastructure, lifts and hoists in accordance with health and safety requirements.
Further we must consider centralising procurement for infrastructure projects within the Departments of Finance and Infrastructure Development. This may be done through the establishment of the Provincial Infrastructure Acquisition Council, which will comprise staff members with the technical knowhow and thorough understanding of the Public Finance Management Act (PFMA) and the Treasury Regulations to adjudicate on all our infrastructure projects. The team must ensure that only the best service providers are appointed to implement projects, at an acceptable price so that GPG could get value for money from infrastructure investment.
GPG departments will henceforth sign mutually beneficial service level agreements with service providers appointed for various projects. They will then report to Executive Council (EXCO) or the provincial cabinet on a quarterly basis on progress made on those projects. This will allow us to manage infrastructure delivery performance in our province.
Improved turnaround in supplier payments
As you all know, the provincial government procures goods and services from various companies to aid the process of running government’s business; which is to deliver services to the people of Gauteng. In recent years, particularly in the 2009/10 financial year and largely due to the global economic downturn that I have spoken about, we experienced severe cash flow challenges. This resulted in us being unable to pay service providers within the stipulated timeframes, which is 30 days of receiving an invoice.
However, since last year, we have worked very hard to improve our cash flow and increase the turnaround times for supplier payments. Indeed we still have challenges in this regard, largely due to accruals from previous years in certain departments. But overall, the time between us receiving invoices from suppliers to the actual time when we make payment has reduced significantly. In fact, there have been many instances where we have been able to make payment within 15 days of receiving invoices, way before the required 30 days period.
Therefore, in the not-too-distant future, we are confident that we will be able to meet our payment obligations to all our suppliers within 30 days.
Last but not least, GPG departments have been tabling before the Legislature their Budget Votes for the 2011/12 financial year. As the Department of Finance, we like to take this opportunity to call upon all our departments to use voted funds according to the prescripts of the Public Finance Management Act and related regulations. It is only through this that we can accelerate service delivery to communities and improve the life of our people.
For our part, we will intensify the monitoring processes, ensure that there is accountability for every decision taken, and move swiftly to counter any instances of fraud and corruption identified.
We are encouraged by last week’s report of the Auditor-General which, amongst other things, said there is an overall improvement in audit outcomes of municipalities in Gauteng. As our local sphere of government starts its financial year, we commit to work closely with the new leadership of our municipalities, to assist Mayors and Municipal Managers run clean administrations. Our comprehensive plans in this regard will be revealed when we table the department’s Budget Vote tomorrow, 12 July 2011.
Indeed the journey is arduous but we are confident and want to reassure the people of Gauteng that the Gauteng Provincial Government remains committed to realising their aspirations as encapsulated in our provincial outcomes. We are ready and poised to do even more to ensure that this accelerated delivery occurs in an environment characterised by prudent use of resources at our disposal, strict adherence to the regulations and processes in place and with zero tolerance to fraud and corruption which only serve to derail delivery against our mandate.
Enquiries:
Khusela Sangoni
Cell: 079 510 5408
E-mail: gdfmedia@gauteng.gov.za
Media statement by Gauteng Finance MEC Mandla Nkomfe on the financial performance of the Provincial Government
Province
