Free State Provincial Legislature, by Mr Phi Makgoe, MEC for Finance
20 March 2006
Speaker,
Madame Premier,
Members of the Executive Council,
Honourable members of the legislature,
Distinguished guests,
Members of the media,
Ladies and gentlemen,
It gives me great pleasure to table the expenditure proposals for the Free
State Provincial Treasury Vote for the 2006/07 - 2008/09 Medium Term
Expenditure Framework (MTEF) period in this House, at a time when all
provincial departments and municipalities are hard at work to lay the necessary
stepping stones, to realise the objectives of the Free State Provincial Growth
and Development Strategy (FSGDS), of:
* stimulating economic development and sustainable job creation
* developing and enhancing the development of infrastructure for economic
growth and social development
* poverty alleviation through human and social development
* ensuring a safe and secure environment for all the people of this province
promoting effective and efficient governance and administration.
Aggregate 2006/07 - 2008/09 MTEF expenditure proposals
âWith money in your pocket, you are wise and you are handsome and you sing
well too.â (Yiddish proverb)
Proposed allocations to my Department over the 2006/07 - 2008/09 MTEF period
which starts on 1 April 2006 are R119,7 million in the first financial year,
R125,6 million in the second year and R134 million in the 2008/09 financial
year, which represents nominal year on year growth of five percent, five
percent and seven percent respectively over the three year period.
Proposed expenditure on programme 1: Administration
Expenditure on this programme caters for all functions and activities aimed
at supporting departmental specific operations through the provision of
creative leadership and strategic management of the Department in accordance
with legislation, regulations and policies to achieve overall departmental
goals efficiently, effectively and economically.
R40,2 million or some 33,6 percent of total departmental expenditure is
allocated to this programme in 2006/07 growing to R42,4 million in 2008/09, to
cater for operations of the office of the MEC, management services, corporate
services (including legal services and security management), financial
management of the Department itself and internal audit services.
Proposed expenditure on programme 2: sustainable resource management
Proposed expenditure on this programme will be R11,6 million in 2006/07,
R12,3 million in 2007/08 and R12,9 million in 2008/09 which represents some 10
percent of the total departmental budget to provide professional advice and
support on provincial economic analysis, fiscal policy, public finance
development and management of the annual budget process.
Expenditure proposals in respect of programme 3: Asset and liability
management
This programme provides provincial policy direction aimed at facilitating
the effective and efficient management of physical and financial assets,
liabilities, Supply Chain Management Frameworks (SCMF), Public Private
Partnerships (PPPs) and the implementation and maintenance of interlinked
financial systems.
R52,7 million representing 44 percent of total departmental expenditure will
be allocated to this programme in the first MTEF year, growing to R56,0 million
and R63,0 million in the second and third year respectively.
Expenditure proposals in respect of programme 4: Financial governance
This programme accounts for 12 percent of departmental expenditure over the
MTEF period with allocations of R15,1 million in 2006/07, R15,6 million in
2007/08 and R16,4 million in 2008/09 to fund functions aimed at promoting
accountability through the substantive reflection of financial transactions of
the province and compliance with financial norms and standards.
Initiatives in support of the Provincial Growth and Development Strategy
(PGDS)
Mr Speaker, it is my believe that the aforementioned expenditure proposals
represent the best of possibilities to give effect to the objectives of this
departmentâs strategic plan, recently tabled in this House.
Both the strategic plan and these expenditure proposals, represent the end
result of an intense exercise to plan the execution of departmental functions
and operations in a manner that meaningfully supports the attainment of the
goals and objectives of the PGDS.
To this end it is my considered view that I should not engage in the detail
of sub programme expenditure proposals for the MTEF period, as such detail is
already captured in the 2006/07 provincial budget statement tabled in this
House on 17 February 2006. Instead, I will focus on areas identified for
heightened focus during the 2006/07 financial year and the rest of the 2006/07
- 2008/09 MTEF period, aimed at further supporting the attainment of the
objectives of the PGDS through the implementation of this departmentâs
strategic and performance plans as such exposition will allow for more robust
debate that will ensue in this House with regard to the 2006/07 Appropriation
Bill.
More informed resource planning
âThe will to succeed is important, but whatâs more important is the will to
prepare.â (Bobby Knight).
Whilst the provincial growth and development strategy creates a mandatory
framework to uniform provincial resource planning and whilst the
2006/07-2008/09 provincial MTEF vote allocations seek to lay the starting
blocks towards the attainment of the objectives of the growth and development
strategy by directing resources towards those areas of operation that are
mission critical to address the challenges the growth and development strategy
seek to address, it would be naive to assume that this is sufficient for the
ultimate realisation of long term targets of the growth and development
strategy.
Consequently, the acceptance of the growth and development strategy as the
means to address provincial challenges brings with it the challenge for the
provincial treasury to further entrench its role as an important provincial
change agent to ensure that resources are utilised in a manner that directly or
indirectly effectively promote economic growth and development and social
equity.
Mr Speaker, the person who cannot see the ultimate becomes a slave to the
immediate and to meet this challenge, my Department has re-configured its
sustainable resource management programme to enable the sub programmes dealing
with economic analysis, fiscal policy and public finance to more aggressively
engage in operations aimed at addressing the gap between provincial socio
economic needs and key service delivery indicators.
In this regard, more work will be done to:
* build analytical capacity within the treasury to engage in a rigorous
analysis of the economic, social, demographic, spatial and environmental
context, to use such information gained to guide more informed engagement and
agreement on the extent, origin, form and spatial location of poverty and
social needs as well as development potential and investment opportunities at
district and local municipality level
* assess the development impact of expenditure programmes at provincial,
district and local municipality level
* estimate the size and composition of the provincial fiscal envelope over a
period longer than the three year MTEF period, to provide a better multi year
resource framework for long term infrastructure investment decisions and
development agendas for clusters and local and district municipalities.
Whilst it will not be an easy exercise for the treasury to effectively
engage in these and related operations remains important that work in this
regard start in earnestly in the 2006/07 financial year, as it would assist to
lay the foundation to:
* ensure that public infrastructure investment is focused in areas where
greatest development potential and greatest need coincide
* promote training and capacity building in areas mission critical for
sustained long term economic growth and development and in the process, promote
the mobility of people through expanded skills, thus providing them with more
choice as to where they want to stay
* better identify regional opportunities, spatial development patterns and
demographic trends that can be harnessed to enhance the long term competitive
and comparative national and international economic advantages of the
province
* further enhance intergovernmental co-ordination and better define specific
areas where the private sector can be involved to support the governmentâs
development agenda.
Mr Speaker, at a fundamental level, focus on the issues that I have outlined
will enable departments, public entities and district and local municipalities
to develop more appropriate qualitative indicators to measure outcomes enabling
a better mutual impact assessment process throughout the province.
More attention to monitoring the progressive implementation of the Municipal
Finance Management Act (MFMA) in municipalities.
âFailure can be divided into those who thought and never did and into those
who did and never thought.â (WA Nance).
Mr Speaker, one of the key issues informing budgetary allocations to
individual departments was the need to create a resource framework in which it
would be easier to more effectively align local economic developmental
strategies to the PGDS and the provincial spatial development framework.
From a fundamental perspective this implies that the provincial treasuryâs
oversight over the implementation of the MFMA in municipalities should go
beyond ensuring adherence to MFMA prescripts in terms of nominal compliance, to
include an active role with regard to capacity building at the local government
sphere to support more integrated resource planning between municipalities and
provincial departments and more collaborative service delivery to end service
users.
In this regard, Iâm happy to report to this House that a memorandum of
understanding (MoU) exists between my Department and our sister provincial
Department of Local Government and Housing that clarifies the respective roles
and responsibilities of these two departments and identifies areas that need
joint collaborative effort in respect of the implementation of the MFMA in
municipalities.
Mr Speaker, the Premier stated so aptly in her State of the province address
on 10 February 2006, that we must report back to our people and continue to
assess progress made in building a developmental system of local government
especially with regard to the implementation of the MFMA and gaining from the
lessons provided by project consolidate.
This house is well aware that the MFMA seeks to promote a government for the
people, with communities and residents playing a pivotal role in service
delivery. This necessitates that communities within municipal boundaries be
part of the budget and Integrated Development Plan (IDP) processes, through
considering and incorporating the concerns of the broader community into the
municipal planning processes to ensure that resources are directed towards the
legitimate service needs of communities.
Mr Speaker, with respect to this particular matter my Department will
monitor adherence to a proper budget process and provide support where needed.
Although the power to implement the MFMA has been assigned to the National
Treasury, an important provincial milestone was reached in terms of its
implementation when the National Treasury delegated oversight over 21 Free
State municipalities to the Free State Provincial Treasury on 1 July 2005
opting to retain only four municipalities for oversight by the National
Treasury. This demonstrates the National Treasuryâs confidence in our ability
and commitment to discharge such oversight functions.
To maximise local government service delivery and ensure continuous support
and improvement, the MFMA does not only afford communities and residents the
opportunity to become more involved in municipal governance but also brings the
challenge of necessitating a much closer co-operative relationship within and
between the different spheres of government. From a broad financial management
perspective it means that municipal finance officials must be fully equipped
and ready to implement the letter and spirit of the MFMA. This calls for a
complete break with past practices characterised by a rules driven environment
steeped in a bean counting culture largely out of step with modern management
practices.
In this regard, the establishment of municipal budget and treasury offices
provides the ideal once off opportunity to break with such past practices by
setting up new structures comprised of highly qualified and competent
professionals, promoting a new culture that provides municipalities with the
necessary creative and visionary strategic financial leadership.
Mr Speaker, at risk of belabouring the point it is important to note that
much of these reforms aim to foster greater emphasis on performance in
executing mandated functions. Thus, for example, a Service Delivery and Budget
Implementation Plan (SDBIP) must be drafted and adopted with a municipal multi
year budget and made public by the mayor or executive mayor no later than 14
days after approval. It is further expected that the SDBIP will contain details
in respect of the execution of the budget and include information on programmes
and projects broken down by ward. Not only will it provide a commencement phase
and completion dates, revenue and expenditure and quarterly service delivery
targets and performance indicators but there should also be regular reporting
on progress in respect of the programme or project which will again assist in
facilitating better non-financial and financial reporting to empower
councillors to perform their oversight responsibilities more effectively and
efficiently. The reality of these and other reforms at local government places
a huge responsibility on local government to gear up through revising policies
practices and procedure that would support the attainment of the objectives and
desired outcomes, such reforms seek to achieve.
Mr Speaker, a good memory implies never forgetting those in need and after
the recent peaceful local government election in this province, I wish to use
this public platform to openly commit my department not only to monitor the
implementation of the MFMA in municipalities in terms of its legal mandate but
to go beyond the call of duty to utilise all directorates within the provincial
treasury, to engage municipalities in capacity building initiatives from the
2006/07 provincial financial year and beyond with regard to matters relating
to, inter alia:
* asset registers
* cash flow and expenditure projections
* supply chain management training for members of bid committees
* the establishment of tender advice centres to assist communities with tender
processes
* budget sustainability exercises and reporting
* strategic planning and the effective alignment of budgets with national,
provincial and local priorities
* project management including planning, budgeting, implementation and contract
management
* investment policy procedures
* effective implementation of audit findings and resolutions of the provincial
public accounts committee (PROPAC) of the provincial legislature
* the functioning of internal audit units and internal audit committees
* the functioning of the Finance Committee of Councils (FCC).
Mr Speaker, it is my view that these and other initiatives will go a long
way to foster closer working relations between the provincial treasury and
municipalities and create a much needed platform to share best practice advice
with local government as equal partners in the realisation of the full
potential of this province. In this regard the provincial treasury must not
only assist to ensure that financial management and capacity of municipalities
are deepened but also ensure that provincial departments contribute in
whichever way possible to ensure that local government initiatives aimed at
ensuring that free basic services are provided, a proper waste management
system is in place, the bucket system is eradicated, the built environment
develops and the delivery of municipal infrastructure contributes to job
creation.
Enhanced treasury focus on Supply Chain Management (SCM) frameworks
âNothing so conclusively proves a manâs ability to lead others as to what he
does from day to day to lead himself.â (Thomas J Watson).
Mr Speaker, an important reform instituted as part of this governmentâs
intent to modernise the management of the public sector through giving managers
the flexibility to manage so as to ensure the achievement of the broader policy
objectives of government, within an improved financial management framework
that satisfies the constitutional requirements of transparency and
accountability, were the introduction of SCM frameworks in government
departments, municipalities and public entities.
Although the particular legislative framework that governs SCM processes,
practices and procedures, is adequately defined by the:
* Constitution of the Republic of South Africa (section 217)
* Preferential Procurement Policy Framework Act (Act No 5 of 2000)
* Public Finance Management Act, Act No 1 of 1999, as amended by Act 29 of 1999
(section 76(4)(c)
* Treasury Regulations (regulation 16(A), issued in terms of the Public Finance
Management Act
* Broad Based Black Economic Empowerment Act (No 53 of 2003)
* State Information Technology Agency (SITA) Act.
A recent review of supply chain management practices in provincial
departments and public entities by the provincial treasury, highlighted
numerous and serious shortcomings in the application of supply chain management
practices in the province.
Mr Speaker, members of this House will agree that it goes without saying
that effective supply chain management practices in the public sector remain
key to the achievement of the much-cherished objective of ongoing effective and
efficient management of provincial resources. Because public resources are at a
premium and the attainment of government priorities cannot be compromised, we
do not have the luxury of allowing present shortcomings to sort itself out.
The provincial SCM unit in my Department will thus afford these matters the
highest priority and take the necessary steps to ensure that the following
critical elements of SCM processes are effectively and efficiently implemented
in provincial departments and public entities in accordance with the prevailing
legislative framework, namely:
* demand management
* acquisition management
* logistics management
* disposal management
* risk management
* supply chain performance monitoring and evaluation.
This matter will remain high on the agenda of the provincial treasury in the
2006/07 financial year and the treasury will ensure that where gaps exist,
these are addressed as a matter of extreme urgency as the supply chain regime
represents this governmentâs most direct of attempts to set a clear operative
framework to ensure amongst other things:
* value for money in public expenditure, including for example, the
generation of savings through arranging
* contracts for the purpose of generating advantages through economies of
scale
* stores efficiency, appropriate and prompt response to user requirements and
cost effective disposal
* management of fully depreciated and obsolete items
* effective supplier performance management in line with pre-determined norms
and standards
* effective management of risks associated with all aspects of supply chain
management processes, procedures and practices, and
* adherence to government policy in respect of matters relating to preferential
procurement, broad based black economic empowerment (BBBEE), trade promotion,
small business development, anti-corruption measures, promoting the proudly
South African campaign, etc.
Mr Speaker, to ensure that matters relating to supply chain management
receive the attention it deserves the provincial treasury will operationalise a
suppliersâ management information system to report progress in utilising public
procurement to develop small, medium and micro enterprises (SMMEs), enhance
broad based black economic empowerment (BBBEE) and mainstream historically
disadvantaged generators into formal economic activities. In addition, I can
announce that the toll free hotline that I announced in the provincial budget
speech of 17 February 2006, to afford the general public an avenue to report
problems experienced by suppliers to government as well as incidences of
suppliers not receiving payment for services rendered within the 30 days
stipulated payment period will be launched very soon.
Mr Speaker, it remains important to appreciate that these and other measures
aimed at fostering good supply chain management practices in the public sector,
should not be viewed as mere instruments to ensure nominal compliance.
Instead it should be viewed as mandated necessities to ensure that
governmentâs considerable spent on goods and services not only satisfy user
needs, but meaningfully add to the promotion of this governmentâs developmental
agenda.
What Iâm saying, Mr Speaker, is that we should move with speed to a
situation where every public sector official becomes well aware that supply
chain management must be used consciously to snowball benefits accruing to this
province from a broad range of other existing government policies and
regulations, strategically aimed at:
* enhancing the internal and external competitiveness of the South African
economy through, for example, outlawing anti-competitive practices between
business, their suppliers and customers (Competition Act, Act 89 of 1998)
* levelling the playing field for small business to compete successfully in
the economy (Small Business Act, Act 102 of 1996)
* ensuring equitable and fair labour practices. Here, for example, labour
law would compel accounting officers to ensure that any supplier or contractor
who abuses South African labour standards, be designated as ânon-preferredâ
* promoting the New Partnership for Africaâs Development (NEPAD) through
supply chain management practices that recognises global interdependence in
respect of the environmental base that sustain the planet, reversal of the
skills loss from the African continent and the promotion of a global financial
architecture that rewards good socio economic management and global
governance
* promoting the âproudly South Africanâ campaign through whichever arising
opportunities.
Mr Speaker, from everything that I have said with regard to the importance
of supply chain management as an integral part of the public sector financial
management system it should be clear that it calls for commitment to ensure
that this framework is fully implemented and that the necessary changes do not
only happen at policy and procedure level, but that all activities related to
government spent are aligned to achieve the objectives of supply chain
management. At an operational level it would for example mean that:
* when the departmental performance plan is finalised the impact of the
functions to be performed in terms of goods, services, equipment and facilities
that will be required must already be determined by supply chain practitioners
and costed in the budget
* the cost of ownership of a particular type of asset or piece of equipment
must already be known before budgets are finalised
* the setting of inventory levels, stores and warehousing practices must be
known before the start of a particular year to inform cash flow projections and
necessary tendering procedures throughout the financial year
* registers of tender defaulters must be in swing and this information must
be made available to other departments and public entities.
Mr Speaker, Thomas Edison once remarked that opportunities are missed by
most people because they are dressed in overalls and look like work. To those
who may say that supply chain management need too many things to be done and
issues to be addressed, I pose the question; âis it too much to ask those in
the employ of this government to use the taxpayersâ money to the benefit of
citizens of this Province?â
Stronger focus on improved infrastructure delivery
âAll glory comes from daring to begin.â (Eugene F Ware).
The recent provincial budget speech indicated that infrastructure spending
is anticipated to grow rapidly with 37 percent, 42 percent and 24 percent over
the respective three years of the 2006/07 - 2008/09 MTEF period.
Mr Speaker, it is impossible for me firstly as a Free State civilian and
secondly as a member of the Executive Council (ExCo) responsible for the
finances of this province to over emphasise the need to use all available
opportunities to enhance the effectiveness, efficiency and efficacy with which
the required provincial infrastructure is delivered.
This calls for collaborative effort on many fronts to ensure that as part of
improved alignment and guiding of the planning activities of various role
players and agencies:
* better synergy is achieved between infrastructure need identification,
planning and implementation between national departments operating in the
province, provincial departments, district and local municipalities, provincial
public entities and state owned enterprises operating in the province
* private sector operators are well informed to ensure that they are geared
up to have sufficient and appropriate provincial capacity to assist in public
infrastructure delivery
* inadequate staff capacity where it exists in service departments requiring
infrastructure as well as public sector infrastructure delivery agents are
addressed timeously in a sustainable manner
* effective and efficient forward planning processes and procedures for
infrastructure delivery are well entrenched and internalised as part of the
internal planning processes of end service delivery departments and public
entities.
Whilst effective infrastructure planning processes do constitute the first
step to link departmental budgets to the long term development objectives of
the PGDS as it improve the allocation of resources to strategic priorities the
provincial infrastructure plan alone is not a panacea to all service delivery
management weaknesses.
Such infrastructure plan needs to be further supplemented by practices and
support to ensure that the provincial infrastructure development improvement
programme (IDIP) is effectively utilised as an enabling vehicle to provide the
following critical support mechanisms, namely:
* strategic support and guidance for participating departments
* support for accessing funds, identifying alternative delivery mechanisms
and accelerating skills acquisition and necessary capacity building in critical
areas
* development and implementation of best practice infrastructure delivery
management systems
* facilitating change and communication management
* clarifying responsibilities and optimising delegation of authorisation
* entrenching appropriate and enforceable governance and cooperation
mechanisms for the department of public works, roads and transport and its
client departments.
Concluding remarks
âUnless people are united by a common aim each oneâs hand will be against
the rest.â Lord John Maynard Keynes (father of modern economics).
Mr Speaker, my Departmentâs 2006/07 - 2008/09 MTEF expenditure proposals
represent more than a response to provide constitutionally mandated services to
other provincial departments, municipalities and public entities.
It constitutes more than an exercise in resource planning as it mirrors our
unwavering commitment to be a leading change agent for improved economic growth
and social equity through prudent financial management. To this end it is our
firm believe that effective financial management and positive social impact are
not mutually exclusive.
Mr Speaker, to build a future needs a foundation. The challenges and
obstacles that need to be overcome to secure our brighter future have been
identified. We have the flight plan to guide us in our quest to create economic
value by offering innovative solutions.
Today, funding choices have been proposed in favour of those areas of
operation that will enable us to dig deep today to discover tomorrowâs gems
because an ounce of performance is worth more than a ton of preachment. We are
eager to race towards the success that will enable us to add value and serve
the greater good.
Let us join hands and just do it!
I thank you!
Issued by: Department of Finance, Free State Provincial Government
20 March 2006
Source: Free State Provincial Government (http://www.fs.gov.za)
