and Economic Affairs, Mr Paul Mashatile, Provincial Legislature
22 June 2007
Comrade Speaker and Deputy Speaker
Honourable Premier
Colleagues in the Executive Council
Honourable members of this House
The Head of Department (HoD) of the Gauteng Treasury, Ms Nomfundo
Tshabalala
Esteemed guests
Ladies and gentlemen
Introduction
It gives me great pleasure to table before this House the 2007/08 budget of
the Gauteng Treasury.
The tabling of this budget coincides with the celebrations of the Africa
Public Service Day, a day in which public servants across the African continent
will be re-committing themselves to the values of good governance and improved
service delivery.
Furthermore, we are tabling this budget during the month of June, a month
dedicated to young people. During this month we will through various
activities, honour the contribution young people have made in securing the
freedom that we today enjoy. During this month we will renew our pledge to
ensure that young people indeed participate in the development of their
country.
Comrade Speaker, Gauteng Treasury remains committed to the vision of being
pioneers in financial management and fiscal discipline within the public sector
in South Africa.
We have demonstrated this commitment by supporting departments and
municipalities in Gauteng in the implementation of financial reforms in line
with the stipulated financial regulations.
In line with the Premier's commitment, that Gauteng Provincial Government
(GPG) will increase the number of departments who receive unqualified audits
and that over time we will strive for clean audits in all departments. The
Gauteng Treasury will continue to support departments and municipalities in the
management of their funds.
Furthermore, we will continue to contribute towards the attainment of GPG's
strategic priorities focusing mainly on building an effective and caring
government by ensuring that spending agencies create value for money at both
provincial and municipal level.
I am delighted to announce that the Gauteng Treasury presented its first
Provincial Economic Review Outlook Report. We expect that this report, which
outlines in a comprehensive way the economic outlook of the province and the
country, will be used as a planning tool by GPG and all its stakeholders. It
will assist in generating an understanding of the progress we are making in
growing the provincial economy.
Comrade Speaker, for the 2007/08 financial year the total budget for the
Gauteng Treasury is R104,2 million. This budget will fund the following key
areas in the department:
* Sustainable resource management
* Budget management.
This fiscal year the budget management unit will focus on exploring more
efficient methods of process management, improving budget information and
support systems and exploring possible funding models.
The unit will also invest in a database management system that will capture
all budget information, including historical data to support research analysis.
The unit will also explore the development of medium to long term financing
models to ensure that long term projects are delivered in a sustainable
manner.
In addition, the unit will focus on the implementation of further budget
reforms that will lead to improved management of the provincial budget
allocation process. This in turn will lead to the attainment of allocative
efficiency.
Public finance
The public finance unit was established in the 2006/07 fiscal year to
monitor the implementation of the budget and to strengthen reporting systems.
This unit is now fully capacitated with diverse skills including infrastructure
specialists. This will enable the unit to provide strategic support to
departments in implementing the budget and improve service delivery.
This fiscal year alongside provision of support, the public finance unit
will work with departments and agencies to develop and strengthen in house
policy units.
Further reforms will involve the introduction of a set of measures to
improve budget preparation, implementation, monitoring and reporting processes
at a departmental level. Such measures would include:
(1) a phase in approach to the utilisation of analytical techniques such as
cost benefit analysis and linear programming in budget preparation
(2) introducing the requirements for programme planning on the basis of
business case for each proposal
(3) implementation and monitoring plans
(4) analysis for impact and social value gains expected; it will further
include supporting departments to improve the quality of non financial and
financial reports for infrastructure spending, in year monitoring and
conditional grants.
The infrastructure section will drive the implementation of the
Infrastructure Delivery Improvement Programme (IDIP). This programme, which was
also adopted by national Cabinet, will ensure that we align the budget and
infrastructure delivery cycles.
The public finance unit will facilitate the roll out of the IDIP alignment
model across all Gauteng infrastructure implementing departments.
Comrade Speaker, we have recommended that the IDIP programme be adopted as
it promises excellent benefits for GPG. Identified benefits of the IDIP model
include:
* better linkage with strategic planning
* better alignment of the budget with the targets set out in the strategic
plan
* project planning and design will be properly done resulting in achievable and
realistic cash flows
* multi year commitments are planned and budgeted for thereby reducing
rollovers
* improved clarity of roles and responsibilities between client departments and
implementing agents.
Fiscal policy and economic analysis
The economic analysis and fiscal policy unit will continue to ensure that
appropriate research is conducted to inform how revenue collection and resource
allocation is optimised.
In order to create credible revenue targets, the unit will continue
interacting with all revenue collecting departments to ensure that the revenue
that is due to the province is collected and optimised.
The unit will continue to ensure that the Medium Term Budget Policy
Statement (MTBPS) remains relevant in informing policy direction and budgets in
the province.
This financial year the unit will introduce the socio-economic review
outlook, which will unpack the socio-economic indicators in the province and
lays a foundation for future resource allocation.
As I indicated earlier the unit has already produced a provincial economic
review and outlook which has been submitted to the House for consideration.
The unit also developed the social accounting matrix, which will be used to
determine the impact of key projects and resource allocation on key economic
indicators. It will also help the province to determine whether targeted
resources are making an impact on unemployment, poverty and service
delivery.
The total allocation to the Sustainable Resource Management Programme is
R29,9 million.
Provincial financial management governance
Financial accounting
The Gauteng Treasury will be working towards obtaining an unqualified audit
opinion on the consolidated annual financial statements for GPG. It should be
noted that the achievement of this objective is dependent upon the individual
departments getting unqualified audits reports.
We have a responsibility to assist departments with financial management
capacity in order to realise this objective. To this end, we have increased our
capacity in order to provide effective assistance to departments.
During this financial year the Gauteng Treasury will implement monthly
management reports on financial accounting issues. These reports will be
submitted to the Legislature on a quarterly basis.
We are introducing these reports as a mechanism to assist departments
towards obtaining unqualified audit reports by 2009.
The Department will also reintroduce the Chief Financial Officers' (CFO)
forum that will meet on a quarterly basis to share information on issues of
policy development and effective implementation of budgeting, supply chain
management, financial accounting, cash management, risk management, asset
management and other financial management related matters.
Comrades Speaker, I want to emphasise to all accounting officers and CFOs
the importance of this forum which will deal with common financial management
challenges faced by the province.
Asset management
Asset management is an area that leads to most matters of emphasis and
qualifications in GPG departments.
For the 2007/08 financial year, asset management will focus on ensuring that
all departments have implemented their asset management strategies. The focus
of asset management therefore will be to ensure that queries relating to asset
management are minimised for 2007/08. This will de done by assisting
departments to ensure that their assets are properly classified, evaluated
accurately and all are recorded in their asset registers.
Reporting requirements on asset management will be introduced in 2007/08 to
the Legislature on a quarterly basis as an endeavour to obtain unqualified
reports.
Risk management
The Enterprise Risk Management (ERM) approach recognises that risk
management needs are to encompass all organisations' risks such as operational,
financial, compliance, regulatory and strategic risks. In essence, risk
management must be embedded within the overall context of any business
strategy.
In 2007/08, Gauteng Treasury will continue to implement ERM in all
departments. Of critical importance will be the development and implementation
of a GPG Risk Management Policy and defining risk management standards. This
will result in each department having a risk register that is prepared
according to the risk management framework.
The success factors that will drive the implementation of ERM will be
obtaining a commitment from all accounting officers as well as integrating risk
management into the strategic planning process for 2007/08. Effective
implementation of risk management is also an intervention aimed at reducing
queries raised by the Auditor-General (AG) relating to internal controls and
other organisational risks.
Cash management and banking services
Gauteng Treasury will once again focus on strengthening the cash flow
forecasting in departments. In order to achieve this objective, Treasury will
implement an integrated treasury and cash management system in the departments.
The system will assist with projecting spending patterns of departments. It
will also provide the best mechanisms and technical backup to invest funds
effectively and efficiently on behalf of the province. Gauteng Treasury will
continue to optimise interest on investments, an activity that contributes
substantial funds into the provincial own revenue.
The total allocation to the Sustainable Resource Management Programme is
R20,9 million.
Financial management reforms
Municipal finance management
As part of our ongoing effort to make local government work better, the
municipal finance management unit will continue to oversee the implementation
and compliance with the Municipal Finance Management Act (MFMA) in the
delegated municipalities across Gauteng.
During September 2006, officials from the National Treasury conducted a
review of all the provincial treasuries' ability to perform the delegated
responsibilities pertaining to Section 6(1) (b) of the MFMA in order to
confirm, amend or provide further delegations to provincial treasuries.
With effect from 1 July 2007 the Minister of Finance intends delegating
additional municipalities to the Gauteng Treasury. These municipalities include
Mogale City and Randfontein with joint responsibilities for Emfuleni Local
Municipality, until such time as the agreement on the restructuring grant is
concluded.
We have recently completed a number of technical and financial assessments
in line with the requirements of the MFMA and the Integrated Development Plan
(IDP) engagement process as part of a joint initiative with our sister
Department of Local Government on the following matters:
* IDPs and its alignment with municipal budgets
* municipal budgets for 2007/08
* service delivery, budget implementation plans in line with their IDPs and
performance agreements.
During the financial year 2007/08 the municipal finance management unit will
implement amongst others, the following programmes:
* Generally Recognised Accounting Practice (GRAP) and Generally Accepted
Municipal Accounting Policies (GAMAP) conversion, this year we are embarking on
an extensive drive to support all delegated municipalities by providing
technical support and assistance in aiding municipalities with their respective
conversion efforts.
* Municipal tax and budget policy development, as a measure of ongoing
institutional support to municipalities we endeavour to embark on a series of
policy development frameworks specifically aimed at municipal budget and
supporting policies in line with the requirements of the MFMA.
The municipal support plan, as an ongoing collaborative and an initiative to
support all municipalities in Gauteng we will continue to support our sister
Department of Local Government. The primary intention of this project is to
provide support to municipalities on issues of financial management, governance
and administration. Going forward for 2007/08 Gauteng Treasury will provide
funding support on the revenue enhancement initiative, essentially aimed at
assisting municipalities with data cleansing towards systemic data integrity,
billing improvement and ultimately optimising on their return on outstanding
debtors. In a collective effort to focus on the broader issues impacting on
municipalities we will launch the Gauteng Financial Summit.
Gauteng Financial Summit
Extensive research was done by both the Gauteng Treasury and the Department
of Local Government in an effort to develop an understanding of the current
financial and institutional arrangements within municipalities and thus a
number of issues emerged.
Due to magnitude of the issues which emerged from these research reports we
opted to take the findings back to municipalities. This culminated in the
launching of a pre-summit on 2 and 3 April 2007, municipal CFOs in depth
highlighted a number of critical areas currently impacting on municipal
finances.
As result of this technical engagement and the prevailing matters we decided
to escalate the issues to a higher level. A Financial Summit will be held in
July 2007, the MECs for Finance and Local Government with the Member of the
Mayoral Committees (MMCs) for finance will make a political pronouncement on
the status of municipal finance in the province and will conclude on strategies
going forward to address prevailing municipal financial and institutional
challenges.
The summit will primarily focus on:
* governance of municipal finances
* finance mobilisation and revenue collection
* capacity management of municipal finances.
Public finance management
The public finance management unit will continue to play a leading role in
developing financial management skills and capacity within departments. This
will be done in order to boost financial management reforms and practices which
will result in the reduction in the number of departments obtaining unqualified
audit opinions.
We will also continue to ensure that departments and public entities comply
with the Public Finance Management Act (PFMA) and treasury regulations.
During the financial year 2007/08 the public finance management unit will be
implementing amongst others, the following programmes:
* Financial management capacity building: this initiative seeks to
co-ordinate efforts towards financial management capacity development and
enhancement. It will also ensure that the CFOs' offices are adequately staffed
and capacitated to execute their functions as outlined in the Public Finance
Management Act (PFMA). This programme was launched in the previous financial
year and will be continued in the 2007/08 financial year, an amount of R6
million has been allocated to this programme for this financial year.
* Supply Chain Management (SCM) policy, monitoring and evaluation: this
newly established unit will ensure implementation of SCM reforms in
municipalities and will monitor compliance in departments and public entities
in terms of the MFMA and PFMA.
* Financial management research: the unit will partner with academic and
professional research institutions to conduct a research of the impact the post
PFMA and MFMA reforms in Gauteng as well as further financial management best
practices with a view of implementing new reforms.
The total allocation R32 million.
Public Private Partnerships (PPP)
The objective of the PPP unit is to facilitate and enhance quality public
service delivery by being a catalyst for efficient, effective and
value-for-money best practice solutions. This objective contributes to the
strategic priorities of the province to facilitate growth, reduce poverty,
create jobs and ensure sound financial management.
Comrade Speaker, implementation of PPPs will ensure that we strengthen
existing achievements and address the following identified gaps:
* private financial support to enhance provincial revenue through private
investment in the infrastructure and service delivery
* to evolve as a dynamic and sustainable centre of excellence for PPPs,
providing technical assistance to public institutions through project
feasibility, procurement and management
* successful identification of PPP project opportunities that yield value for
all stakeholders.
Implementation of successful PPPs places an emphasis on acquisition of
skills in the functional discipline which includes technical, legal and
financial knowledge.
We have to be reminded that PPPs are often complex and require high levels
of expertise. PPP capacity is not an overnight acquisition. We have to build a
track record and measure our progress with honesty.
The Gauteng fund
Ensuring adequate funding for strategic economic infrastructure is central
to the objective of building a competitive city region. Part of the challenges
facing city regions is the in-migration which tends to put pressure on
available resources.
In response to this challenge the tendency has been that of channelling the
bulk of resources towards addressing the socio-economic challenges.
The biasness towards the socio-economic needs means that little attention is
given to investment in strategic infrastructure which is crucial for economic
growth.
In line with the Global City Region (GCR), the Gauteng Treasury working
together with other spheres of government will establish a Gauteng Development
Fund as a vehicle to leverage private funding for strategic infrastructure in
the province.
The fund will ensure that strategic projects within the province regardless
of the locality of their conceptualisation are funded as long as they can
demonstrate commercial viability.
Conclusion
Comrade Speaker, honourable members, as the custodian of the provincial
finances, Gauteng Treasury bears a heavy responsibility both to the executive
and this Legislature. It is for this reason, that we have placed a heavy
emphasis on all aspects of service delivery.
We have a responsibility to ensure that GPG provides optimum service
delivery performance, ensures value for money and fosters good governance.
We recognise that there is still much work ahead but we are proud of the
progress achieved thus far. We will continue putting our collective shoulder to
the wheel in the ongoing effort to achieve GPG's strategic priorities and to
make Gauteng a better place for all.
Comrade Speaker, let me sincerely thank Gauteng Treasury's dedicated staff
lead by the HoD, Nomfundo Tshabalala. I also wish to express my thanks to the
finance committee and the Executive Council.
It is my great honour to formally table the 2007/08 budget for Gauteng
Treasury.
Thank you!
Issued by: Department of Finance and Economic Affairs, Gauteng Provincial
Government
22 June 2007
