Honourable Speaker,
Honourable Premier,
Honourable Members,
Our esteemed Traditional Leaders,
All distinguished guests here today and all citizens of the Eastern Cape:
Good morning
Introduction
Honourable Speaker, it is my privilege to stand before all of you today to table the final Medium Term Budget Policy Statement for this political term which is informed by provincial policy priorities. The tabling of the 2013/14 Adjustment Estimates Budget is a statutory requirement that allows us to adjust our provincial budget to accommodate unforeseen and unavoidable events, and most importantly, reprioritise our expenditure away from consumption to investment spending.
In addition, I will also be tabling the Adjustment Appropriation Bill which will include provincial roll-overs to enable the completion of key service delivery projects around the province.
Honourable Members, Census 2011 confirms a steady progress on service delivery to our people. Since Census 2006, Human Settlements has a new meaning for the citizens of the province. It means better quality housing that has access to clean drinking water, sanitation and electricity. This in turn means many of the children are now born into a completely changed environment in terms of basic infrastructure. Over the last three years, more of our surface roads have been rehabilitated. In addition, 23 bridges have been rehabilitated or constructed. There have been 173km roads that have been re-graveled. Of the foregoing, 50 250km roads have been maintained.
It is important to look at infrastructure as a medium of better access to education. The physical evidence is the reduction of illiteracy by 50% since Census 2006. Access to schools and health facilities has also improved by 40% since Census 2006. Such fundamental facilities complete the day-to-day welfare and needs of a child who has to go to school, hospital or clinic.
We have also made in-roads in the fight against unemployment - the Quarterly Labour Force Survey by Statistics South Africa indicates that 12 000 new jobs were created in the province during the second quarter of 2013.
Whilst we continue to make these significant inroads, there are persistent challenges that we continue to wrestle with:
- The global recession that began in 2008 had an impact on the domestic economy and still today, we find ourselves in the midst of a volatile and unstable global economy. This means that as a country, we have had to adjust our expenditure patterns and reprioritise our budget to focus on essential service delivery whilst investing in infrastructure;
- Unemployment especially amongst the youth, women and people living with disability:
- Improving ease of access to higher education institutions by the disadvantaged youth;
- Improving municipal governance and administration which has a direct impact on service delivery.
Honourable Speaker, the Mid-Term Budget Policy Statement serves the following three functions:
- First, it advises the Legislature on what has changed in the economic outlook since the tabling of the Main Budget in March;
- Second, it shares with the province, public policy developments and reforms that will shape the 2014 Main Budget that will be tabled next year;
- Third, it invites the provincial administration and the public to reflect on our priorities and plans as a province, our performance both financially and in terms of delivering services to our people.
Economic Growth and Development
The World Economy
Honourable Speaker, the last six years have been difficult for the global economy while the volatility that characterised the 2008 financial crisis has subsided, there are still a number of challenges. When we tabled the 2013 Main Budget on the 7th of March this year, we were all optimistic that the global economy would recover. This however has not been fully realised. While global growth shows signs of recovery, most developing countries are still in difficult situations that are mainly related to their imperative for social reforms that will eradicate poverty; increase investments in much needed infrastructure and create jobs.
The South African Economy
The South African economy has grown a bit slower than initially anticipated due to a variety of issues including persistent industrial actions in the key sectors of the economy and general perceptions of instability. This has led to the stagnation of both general consumption and export growth which has been followed by a dent in business confidence. In addition, commodity export prices, which supported revenue growth over the past decade, have decreased. Economic growth has been revised downwards since the main budget to 2.0% in 2013. It is now projected that the economy will only recover next year rising to 2.5 per cent and 3.5 per cent by 2015.
The Provincial economy
Honourable Speaker, the Eastern Cape economy has shown considerable resilience in general. However, the recent industrial action within the automotive manufacturing sector has dampened growth prospects, which is reflected in a moderate economic outlook for the province in 2013/14.
Honourable Members, over the past five years, the average growth rate of the provincial economy has been two per cent which is in line with current national growth rate. Competition pressures in industries exposed to trade and weak domestic demand are translating into softer medium-term employment growth forecasts for the province. Agriculture remains an insufficiently exploited comparative advantage for the province given its vast land and high levels of unskilled labour.
The Medium Term Budget
Honourable Speaker, the government’s overarching objective is to ensure sustainable development, to create employment opportunities for our people, and to fiercely combat poverty.
Over the past two years, we have decisively addressed:
- An unsustainable provincial fiscal position;
- Restrained escalating compensation of employees’ costs; and
- Unauthorised and wasteful expenditure by provincial departments through reducing non-compliance with the legislative provisions;
- Infrastructure under-spending which has drastically improved spending and the eradication of infrastructure backlogs.
Honourable Speaker, we can now build on these achievements which are now a strong foundation for a sustainable future. The projected economic growth is not strong and therefore, we must focus our efforts on the following five main priorities:-
1. Gearing the Province for Food Production and Rural Development
Honourable Members, our province is predominantly rural with low levels of industrialisation, manufacturing and mining; and therefore agriculture and rural development are crucial in unlocking our economic growth prospects as this is where the comparative advantage lies. The province has 140 000 hectares of arable land which is readily available for crop production.
Over the 2014 Medium Term Expenditure Framework (MTEF), integrated sectoral planning will be emphasised to ensure increased agricultural production on the available arable land. R2.3 billion has been set aside over the MTEF period to give support to farmers and development as well veterinary services. The coordination of rural development activities will be strengthened, and as such, the Eastern Cape Rural Development Agency will be further strengthened to drive the rural development strategy of the province.
2. Human Capital Development
Honourable Members, building a learning society is partly about improving the quality and content of what goes on in the classroom, and it is also about investments in human capital development by both public and private employers. Over the next MTEF, R71 billion is allocated to education outcomes. This includes eradicating mud schools and school infrastructure such as sanitation and access roads. The socio-economic development of the country depends on a well-educated, skilled, professional and committed workforce.
Technical skills are essential for a developmental state which is focused on infrastructure delivery and improving administrative efficiency in government. Sound educational foundation results in Human capital development which is an investment that will produce the type of skills that we need to take our province to the next level of sustainable development. We cannot stress the point enough - the private sector is an essential partner in our efforts to equip our workforce with the right skills and expertise. Investment in the Industrial Development Zone’s (IDZ) and the training and development taking place in the IDZ’s contributes to our long term strategy.
Honourable Members, the province is home to four higher education institutions, and more than five further education and training institutions. It then follows that human capital development and our ability to retain it, both public and private sector, should be our strategic advantage. Our current public sector graduate internship programme targeting only government bursary holders will be reviewed such that it is able to also consider non-bursary holders.
This programme should be able to respond to our key strategic challenges and to the key priority sectors, such as the built environment, manufacturing & engineering and agricultural sectors. Our human capital strategy must ensure that our departments’ bursaries are aligned to the above key sectors that are essential to developing our provincial economy. Strong coordination between business, education institutions and the provincial administration will underpin our human capital development strategy.
3. Infrastructure Delivery
Honourable Members, apart from focusing on infrastructure delivery which is a springboard for socio-economic development, we are committed to increasing future infrastructure investments that will unlock our economic potential whilst creating jobs. The increased investment in infrastructure is mainly focused on the social sector – thus building roads that connect communities to social amenities like schools and hospitals.
Honourable Speaker, in addition, these infrastructure investments that we are making also include a maintenance budget to ensure that our stock of infrastructure lasts for generations to come. Our plans include expanding investment into the built environment to improve public transport and meet universal access targets on water, sanitation, electricity and housing. In order to succeed, we must begin to address the ratio of consumable expenditure to capital expenditure, and further mitigate the escalating provincial wage bill.
4. Addressing the unemployment challenge
Honourable Members, the basic prerequisite for job creation is economic growth and development which can only be achieved through higher investments in capital formation and intensified human capital development. The panacea for reducing unemployment in the province depends on better educational outcomes, better-located and maintained infrastructure, joint partnerships between the provincial administration and the private sectors, and enterprise development.
The province will strive to enhance the implementation of the Jobs Stimulus Fund which aims to incentivise the creation of new Jobs located within the province by attracting, sector specific, catalytic investments which stimulate sustainable new jobs across the value chain.
5. Fiscal Management
Honourable Speaker, historically the province has been overspending on Compensation of Employees. However, this trend has been contained during the 2012/13 financial year. As the fiscal envelope narrows across the country, prudence is necessary in managing what is allocated to us as a province. Furthermore, we must implement measures that will improve the utilisation of our limited resources through the implementation of cost-containment measures. Provincial Planning and Treasury will issue a circular to guide departments in the implementation of cost containment measures.
6 The Adjustment Appropriation Bill
Honourable Speaker, R2.1 billion is the total additional allocation for the 2013/14 financial year which is made up of the following:
- R387.9 million from National Treasury for Improvement in Conditions of Service, various sector conditional grants, and rollovers; and
- Provincial rollovers of R38.3 million for various sectors.
Honourable Speaker, the following are the key departmental allocations:
- R521 million is allocated to the Department of Health for Improvement in Conditions of Service, HR accruals, non-negotiables and Rural Health Development in Zithulele Hospital.
- R470 million is allocated to the Department of Education for the rehabilitation of storm-damaged schools, hostels, the rollout of basic infrastructure such as water, sanitation and furniture in disadvantaged schools and ECD centres around the province.
- R210 million is allocated to the Department Local Government and Traditional Affairs for financial support to the KSD municipality and general support provided to struggling municipalities.
- R346.5 million is allocated to the Department of Economic Development, Environmental Affairs and Tourism for the stem cell project, the shale gas exploration project, the Home of the Legends project to be undertaken by the Eastern Cape Parks and Tourism Agency; and for the enhancement of social infrastructure that will be undertaken by ECDC.
- R22 million is allocated to the Department of Rural Development and Agrarian Reform for crop production which contributes towards food security.
Conclusion
Honourable Speaker, a collective effort by the provincial administration to improve governance has created a sound fiscal platform for the province. In the next three years, we will be able to direct additional resources towards the eradication of social infrastructure backlogs and maintain existing infrastructure, thus strengthening service delivery and investing in the development of the Eastern Cape.
