Honourable Speaker and Deputy Speaker
Honourable Premier Magashule
Members of the Provincial Executive Council
Members of the Free State Legislature
Executive Mayors and Mayors
Marena le Dikgosi
The Business Community of the Free State
Distinguished guests
People of the Free State
Ladies and gentlemen
Honourable Speaker, the post-recession era that we find ourselves in is not only challenging, but exciting too! It is an era full of opportunities, opportunities for new markets, new products, new service offerings, opportunities for new policies and trajectories, opportunities for self-discovery, opportunities for carving new roles for ourselves, opportunities for a rebirth. Speaker, I am not sure how many people know that several big companies such as the FedEx, Microsoft Corp, CNN, MTV Networks, Wikipedia Foundation, Sports Illustrated Magazine, General Electric and Hewlett-Packard Development Company are products of different recessions. To us in government, this era presents an opportunity to accelerate services to our people, an opportunity to re-position the Free State in national and regional trade. We dare not miss this opportunity! It is entirely up to us!
Let me also join the rest of the country in congratulating the Director-General of the Department of Treasury, Mr Lesetja Kganyago for his appointment as the Deputy Governor of the Reserve Bank. This appointment comes at the time when the country and the rest of the world are discussing the role of monitory policy and how it can be used as a tool for economic development. We are particularly pleased to have someone who has served National Treasury, since 1994, which bodes well for our democracy. The positive response by the markets to his appointment confirms our confidence in him. This clearly demonstrates stability and continuity in the way that our government manages its affairs as Mr Kganyago brings a wealth of knowledge to the post.
Speaker, this vote speech seeks to elaborate on the Provincial Treasury’s role in promoting more effective, accountable and clean governance at both the provincial and local spheres of government.
Review of our performance
Speaker, during our tabling of the 2010/11 budget vote, we made several commitments through our vote speech. It is therefore only relevant to get back to this August House on the progress we have made on those injunctions.
Institutional capacity to deliver better and faster services
We made a promise to employ twenty interns and ten young people to gain experiential learning in the department. To this extent, we fulfilled the promise as made and appointed twenty interns and eleven experiential learners in the department to increase the skills base in the province. As a best practice for youth development, I am proud to announce to this house that we have also retained 55 percent of the interns of 2009/10 in the department and the other 45 percent are on a 12 month contract in the department. We will make all attempts to ensure that these young people who have gathered the necessary experience will be absorbed in both the public and private sector institutions.
We also made a promise that all vacant posts from assistant manager level that were to be filled in the 2010/11 financial year, will go through competency assessment process, a promise we kept to the letter. Nineteen posts were subjected to this process in the past financial year. Speaker, the competency assessment process is not only a scientific approach to matching the competencies of the candidate with the job profile, but enhances the selection process by raising the probability of success of the appointed employee in the post. It also enables us to identify developmental areas in a scientific manner, which leads to targeted training to address proven developmental areas.
Speaker we are proud to announce that our department attained a Clean Audit for the financial year 2009/10, thus setting an example in terms of clean financial governance. This was the first clean audit for the province. I take this opportunity to thank the management and staff of Treasury for all their hard work in this regard.
Support to SMME through adherence to public procurement regulations
Speaker, it is common knowledge that non- or late payment of creditors can lead to increased mortality of businesses, in particular small and emerging enterprises, thus resulting in job losses. Our commitment as a department to pay these creditors on time, within the stipulated 30 days remained as we increased the number of creditors paid within 30 days from 97 percent to 99 percent. We also exceeded the 70 percent target on the fifteen most procured items in favour of SMMEs by 8 percent. As a treasury department we will participate in the review of these targets whose aim will be to increase job creation in the province.
Making strides through asset management
Speaker, asset management remains a critical area of focus for Treasury. During the 2010/11 we managed to develop asset management delegations for public entities; conducted 8 asset management forums and 25 training sessions; rolled out IDIP phase three to the Departments of Health, Education, Public Works and Police, Roads and Transport from September 2010. These achievements were however not without challenges, which amongst others included the following:
- Glaring incapacity of departments leading to failure in implementing asset management KPIs and other decisions related to the matter
- Lack of prudent monitoring and evaluation by departments and entities
- Non adherence to deadlines by departments, therefore yielding adverse effects for the province
- Poor planning that goes into User Asset Management Plans that results in either over/under expenditure in a particular MTEF period.
Provincial fiscal envelope
Speaker, we mentioned in several of our speeches and submissions that the provincial fiscal envelope is increasingly being encroached upon by both population shifts as well conditionality considerations on the part of the equitable share, whilst the province’s share of conditional grants appears to have stagnated. It is important that we do not only fully understand the underlying factors responsible for these trends, but also make efforts to reverse them. As a result we commissioned a study to quantify the impact of service provision to foreign nationals in order to beef up our submissions to the Fiscal and Financial Commission (FFC) on the review of the equitable share. This process is driven by an inter-departmental steering committee, led by Provincial Treasury, and includes the provincial office of Statistics South Africa (StatsSA). This study will be completed by end of April 2011 and the findings will be shared with all interested and affected stakeholders. We hope the study will assist us to plead our case for an increase in our portion of the equitable share.
Speaker, during the past financial year, we also committed to increasing the province’s own-source revenue. Out of our engagements with other Provincial departments on revenue collection we anticipate that we will exceed our revenue target by more than 4 percent, which amounts to an additional revenue about R30 million to the provincial fiscus. Our management of cash and a range of measures that we introduced last year resulted in the department exceeding its revenue target of R95 million for interest collection by more than R5 million for the financial year 2009/10. That this was achieved during a low-interest rate cycle makes this achievement commendable. We have also stepped up our research on mechanisms to raise additional revenue for the province, in addition to starting work on the provincial revenue strategy.
Assistance to departments and municipalities for clean audits
The objective of a clean administration is not only noble, but necessary. We have assisted to resolve irregular expenditure of previous years amounting to R200 million. In the process R57 million was directly recovered from departments’ PMG accounts in terms of claims recoverable. We also assisted a number of departments to resolve certain aspects of their audit opinions as a result of our ongoing engagements with the office of the Auditor-General. Speaker, the Cluster Audit Committees will go a long way in assisting government to achieve the goal of clean audits even beyond 2014.
As part of our support to municipalities to improve their audit opinions, we have on a need base, consistently seconded officials to municipalities to finalise outstanding matters required for the preparation of the annual financial statements as well as with the audit process information required. In conjunction with the Department of Cooperative Governance and Traditional Affairs, we also developed and commenced with implementation of the following transversal projects aimed at supporting municipalities in terms of the Local Government Turn-Around Strategy (LGTAS) in an effort to improve on audit outcomes:
- Municipal Generally Recognised Accounting Practices compliance support project
- Municipal policies and business process project (pilot in testing phase)
- Implementation of Case Ware (a computer software that enhances financial management) for which 17 Municipalities have been completed.
Key activities to be underaken in 2011/12
Speaker, we derive inspiration from the progress that we have made last year and are confident that we can, in fact, do more. Our own preliminary internal analysis has shown that poverty and employment have not responded in any significant way to economic growth in the last seventeen years. To take this work forward this year, we will do the following:
Improving the credibility of our provincial budget
Speaker, public finance scholars suggest that the credibility of the public budget requires a sound process centred around four pillars, namely (1) Identification and consensus on priorities, (2) Linking budget with agreed priorities, (3) predictability of resources, and (4) outputs and impacts. In our country, this process is designed at a national level and provincial treasuries have to customise their processes in line with the national process. So adherence to the national process could in fact be said to be fifth pillar of a credible budget.
Let me take this opportunity to briefly unpack these five pillars then. Speaker, the first and second pillars of priority setting and alignment between budgets and priorities require an extensive consultation process. However, this must take place within set timelines. The third pillar dictates that there should be minimum deviation between the appropriation and expenditure. In the context of the outcomes-based approach to planning, there is a need to demonstrate the extent to which public expenditure translates into desired impacts. In this regard, government does not disburse fund for its own sake, but to change the lives of the ordinary people. Speaker, clearly the tabling of a credible provincial budget goes beyond Treasury and requires the support of all the critical stakeholders. We will work hard to ensure that the budget process remains credible. We will during this year beef up public participation in the budget process by making use of information communication technology (ICT).
Maximizing own revenue collection
As reflected in the provincial budget statement, own revenue collection is a critical element for the province to fund its own programmes, amidst the shrinking provincial fiscal framework. In this regard, a revenue enhancement strategy is currently being developed in the province. The strategy will be unveiled in August 2011. This will go a long way towards assisting the departments improve their revenue collection and thus contribute to the much needed service delivery in our communities. In addition, we will commission a study on the feasibility of implementing a surcharge on the fuel levy in the Free State. Due to the rigorousness of the process that needs to be followed in this regard, completion of this study is estimated to be around September 2012.
Increasing the capacity to monitor the management of assets and infrastructure delivery
Speaker, infrastructure is critical in the broader strategy of government of building the economy and creating jobs. As a department we have a responsibility to facilitate the effective, efficient, economical and transparent management of physical and financial assets and the implementation of the PPP framework. We will further build the necessary capacity of the PPP unit to fast track the successful implementation of PPP projects. This further extends to the implementation of alternative service delivery models. We will strengthen our capacity to monitoring, oversight and support role to the departments on infrastructure delivery. Speaker, we will also expect the departments to commit to the IDIP infrastructure best practices to enhance the monitoring function.
Continued work on operation clean audit
Speaker, our work on operation Clean Audit 2014 is still continuing. If we are to attain the goals of this important campaign of our government, we will have to put certain processes in place. The departmental focus on Operation Clean Audit 2014 this year will be to capacitate and assist Departments and Entities with regard to the following:
- Development, approval and implementation of policies and procedures.
- Compliance with SCM Legislative requirements.
- Credible and complete asset and inventory registers.
- Improve management and reporting on predetermined objectives to enhance reliability, completeness and accuracy.
The focus areas for the municipalities will include the following:
- Infrastructure Asset Management register and compliance with GRAP 17
- Compliance with SCM Legislative requirements
- Unauthorised, irregular and fruitless expenditure
- Roll out of policy and procedures project to all municipalities
Special attention will be given to municipalities from which we have noted several challenges. Whilst recognising the existing intergovernmental forums such as PCF, we will however seek to strengthen our relations by having regular focused sessions with MMCs for Finance. The MMCs for finance play a critical oversight role in the conduct of municipal finances. The strengthening of that oversight role will be a significant aspect of our work with municipalities. Key focus areas of these interactions, will include amongst others:
- Enhancing of the institutional capacity of municipalities and relationships between Provincial Treasury and municipalities in the functional area of financial management.
- Improving communication, planning and coordination in implementing the financial management initiatives required by the MFMA and to prevent the duplication of effort.
Providing support for the achievement of the new growth path
The contextual framework of the New Growth Path reflects that its achievement cannot be done with only a single policy instrument. It needs a package of interventions that addresses a range of challenges in the economy and that balances competing policy concerns while mitigating unintended consequences. Private sector remains critical to achieving the goals of the New Growth Path. In recognition of this, we will reduce 70 percent of payments to creditors from 30 days to 20 days, which we hope will assist to sustain our small medium and micro enterprises (SMMEs) and ensure they play their part in job creation. Furthermore, together with other stakeholders, we will develop several discussion documents, culminating in the development of policy interventions to enhance implementation of the framework in the province. These include the commissioning of a study to revive the role and importance of Agriculture and Rural Development in the Free State which we anticipate to complete by end of October this year. Furthermore, we will be investigating evidence-based mechanisms to improve the relationship between economic growth, job creation and poverty reduction.
Building a strong treasury
Speaker, it has been widely reported that there is a strong link between the capacity and role of treasuries and the functioning of the state in general. Treasuries not only disburse funds, but have to monitor the deployment of the disbursed funds. As a Provincial Treasury, we have to ask difficult questions to ensure that the scarce public funds are optimally utilised. It is in the process of doing so that trade-offs will have to considered, trade-offs that will make certain decisions to be unpopular. Speaker, a Treasury that compromises on this virtue abandons its mandate and consequently the purpose of its existence and relevance. We will continue to capacitate ourselves and strengthen our role as stipulated in the Public Finance Management Act. We urge departments and other stakeholders in the province to support us in improving the management of finances in the province, thereby contributing to faster and better delivery of services to our people.
Conclusion
Speaker, the work of government is never ending. As a department whose main purpose is to provide service to other departments and municipalities, we will continue to improve on all the areas of our work. With our budget of R201 million, we will ensure that our monitoring role is strengthened by increasing capacity where it is lacking. We will further improve on areas where our strengths have been evident.
I take this opportunity to thank the Premier and members of the governance cluster for enhancing our role in financial governance, my colleagues in the Executive Council for their collective wisdom, the Portfolio Committee for Finance for its oversight role, the Director General and Heads of Departments for supporting us in our quest for clean audits.
Speaker, I have already indicated earlier that the professional support and commitment I receive from management and staff of Treasury is appreciated. I thank the people of the Free State for allowing me to serve them, and thank my family and friends for understanding this responsibility and their continuity to spur me on. I also wish to thank members of the media, their role in assisting us to build a better Free State cannot be overlooked. Attached, please find an
Annexure containing the breakdown of our budget.
I thank you!
“Annexure”
Provincial Treasury Budget Vote 2011/12
The Provincial Treasury department is divided into four main programmes namely:
- Administration
- Sustainable Resource Management
- Asset and Liability Management
- Financial Governance
The budget of R201,033 million will be shared accordingly for the 2011/12 financial year:
Programme 1: Administration
This programme consists out of the following functional areas:
- Office of the MEC
- Management Services
- Corporate Services
- Financial Management (Including the Office of the CFO)
- Internal Audit (departmental)
34 percent of the total departmental budget for the 2011/12 financial year is allocated to this programme to the value of R68,757 million.This is a decrease of 4 percent from the 2010/11 financial year.
Programme 2: Sustainable Resource Management
The programme is divided into the following four functional areas:
- Economic Analysis
- Fiscal Policy
- Budget Management
- Public Finance
This programme is allocated 12 percent of the 2011/12 financial year’s budget to the value of R23,717 million which is a decrease of 1 percent from the 2010/11 financial year budget.
Programme 3: Asset and Liability Management
The programme is divided into the following two functional areas:
- Asset Management
- Supporting and Interlinked Financial Systems
This programme is allocated 34 percent of the 2011/12 financial year’s budget to the value of R67,439 million which is an increase of 4 percent from the 2010/11 financial year’s budget.
Programme 4: Financial Governance
The programme is divided into the following three functional areas:
- Accounting Services
- Norms and Standards
- Risk Management and Internal Audit (Provincial)
This programme is allocated 20 percent of the 2011/12 financial year’s budget to the value of R41,120 million which is an increase of 1 percent from the 2010/11 financial year budget.
