Madam Speaker and Deputy Speaker
Honourable Premier
Colleagues in the Executive Council
Honourable Members of the Provincial Legislature
Comrades and friends
Madam speaker
We have entered a new era of "hope and renewal". An era that propels us to do things in a business unusual fashion, do things differently with speed in an effective and efficient way.
Madam speaker the era of "hope and renewal" was adequately defined by the Honourable Premier in Her Maiden State of the Province Address, as an era and I quote "of new governance, the period of renewal, the period of hope, the period of accelerated change and the period of heightened service delivery". In essence putting a sense of urgency in everything we do.
Madam speaker the provincial government will pursue the era of "hope and renewal" within the identified seven key priorities that will guide the work of the provincial government for the next five years. These are as follows:
* Creating decent Work and building a growing, inclusive economy
* Promoting quality education and skills development
* Better health care for all
* Stimulating rural development and food security
* Intensifying the fight against crime and corruption
* Building cohesive and sustainable communities
* Strengthening the developmental state and good governance.
These priorities, madam speaker, were decided upon by the provincial government, cognisant of the prevailing global economic situations that have inevitably affected us. But like the Honourable President indicated in the State of the Nation Address, I quote "the economic downturn will affect the pace at which our country is able to address the social and economic challenges it faces. But it will not alter the direction of our development"
The global economic crisis
The global financial market is currently undergoing a level of turbulence that was last witnessed during the Great Depression in the 1930s, with the International Monetary Fund (IMF) projecting that global growth will slow from 5.2 percent in 2007 to 3.2 percent in 2008 and a contraction of 1.3 percent in 2009. It is expected that there will be an annual contraction for the advanced economies of 3.8 percent in 2009.
The decline in global demand is driving down commodity prices. The IMF also projects a decline in consumption spending as households adjust their expectations in accordance with reduced economic activity, job cuts and declining profits.
South African economy
The South African economy is now feeling the negative effects of the global recession; these effects are relatively less magnified than those experienced in advanced economies and some emerging economies. Export orientated economies and commodities based economies are mostly affected by the crisis.
As reported last month by Statistics South Africa, South African economy has officially entered into recession, after recording a contraction in economic activity for two consecutive quarters, these contractions amounted to 1.8 percent in the fourth quarter 2008 and 6.4 percent in the first quarter 2009. South African economy slowed to 3.1 percent in 2008.
South African households have been under considerable pressure since early 2007 as a result of escalating inflationary pressure and interest rate hikes. The recessionary economic climate is expected to exacerbate the squeeze on the disposable income of households.
On a positive side, oil prices have plunged substantially from the peak of $143 in July 2008 to about $70 by mid June 2009. This has resulted in lower prices of petrol in between the same period. Other positive trends in economic indicators include the recording of an inflation rate at a single digit of 8.4 percent in April 2009 and is expected that the inflation rate would decline back to below the upper end of the 5.9 percent inflation target by the end of 2012.
The decline in the inflation rate has seen the Monetary Policy Committee (MPC) cutting the repo rate four times since December 2008 by a total 450 basis points brining the repo rate to 7,5 to help boost waning growth as a global downturn hits the economy. The cumulative 4.5 percent reduction in repo rate and subsequently the interest rates cut over the past months represents almost 40 percent reduction in the debt servicing costs (like the Honourable Cachalia MEC for Economic Development alluded on 12 June, a middle class family with a R500 000 bond has R2 000 extra to spend as a result of tax and interest rate cuts)
Gauteng economy
Like the rest of the country, Gauteng will experience contraction, It is projected that Gauteng growth rate will decline to a low of 2.1 percent in 2009 before it recovers in 2010.
The largest sectors in the economy of Gauteng in 2008 were the finance and business services (25.2 percent), manufacturing (20.3 percent) and community, social and other personal services (19.7 percent). The construction sector contributed the largest share toward the national construction sector in 2007 and is reaping benefits from the major infrastructural developments in the province such as the preparations for the 2010 FIFA World Cup and the Gautrain Rapid Rail Link. The growth rate for investment within the construction sector is estimated to have averaged around 14percent for 2008 and is 2009.
Madam speaker, given the current economic challenges, the Gauteng Provincial Government developed a comprehensive response to the Global Financial Crisis that is based on the framework developed by the presidential economic joint working group, together with civil society, organised labour and business.
Gauteng's response is based on the need to pursue industrialisation trajectory that is responsive to:
* Promotion of more labour absorbing industrial sectors, with an emphasis on tradable labour absorbing goods and services and economic linkages that catalyze productive employment creation
* Promotion of a broader based industrialisation path that is characterised by greater levels of participation of historically disadvantaged people marginalised regions in the mainstream of the industrial economy
* Making sure that the R40 billion that is set aside for infrastructural investment is utilised appropriately to the benefit of our people intensification of South Africa's industrialisation process and movement towards a knowledge economy.
This response madam speaker seeks to take us through the recession but in the main prepare us for a post recession period a recovery period. Because we understand that recovery as Joseph Schumpeter declared and I quote “is sound only if it comes of itself. For any revival which is merely due to artificial stimulus leaves part of recession undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening the economy with another worse crisis ahead.”
What Joseph Schumpeter is saying is more relevant to South African economic situation. South African economic challenges are largely structural, then any stimulus package that does not address structural challenges of the economy such as Lack of Skills, inequalities and unemployment is doomed to fail and inevitably worsen South African economic situation, them hamper chances of effective recovery. As a result we need a concerted effort from all role players, business, government, labour and civil society to address structural challenges of our economy.
Estimates of revenue and expenditure
Madam speaker allow me to turn my attention and that of the house to the main aspect of the Medium Term Expenditure Framework (MTEF), budget allocations for 2009/10.
The 2009 MTEF budget appropriation takes into account changes in the structure of provincial departments as announced by the premier on 8 May 2009. The new structure of government departments is generally aimed at ensuring that government effectively implement its policies and therefore achieve visible and tangible socio-economic development within the next five years. Specifically the new structure will ensure that provincial departments effectively deliver services in a more efficient and diligent manner to the people of Gauteng.
The reorganisation of the provincial departments resulted in two new departments that have been established through merging, two departments have been established through a split of a previously existing department and the renaming one department. The Department of Local Government and the Department of Housing have merged to be called the Department of Local Government and Housing whilst the Department of Health and the Department of Social Development have merged to form the Department of Health and Social Development. The Department of Public Transport, Roads and Works have been split to establish the Department of Infrastructure Development and the Department of Roads and Transport. The former
Department of Agriculture, Conservation and Environment is now called the Department of Agriculture and Rural Development.
In order to facilitate the successful implementation of the new structuring of provincial departments, the province has formed comprehensive task teams that are responsible for the change management issues. These task teams will identify, recommend and facilitate the implementation of strategies for the changeover to the new structure of provincial departments.
In view of the above, the merger of provincial departments will be fully implemented in the 2010/11 financial year whilst the 2009/10 financial year is regarded as a transitional phase. This implies that the budgets and structures of the merged departments' remain individually unchanged. However what we are presenting here reflects the changes in the Department of Roads and Transport, and the Department of Infrastructure Development and name change of Department of Agriculture and Rural Development.
Infrastructure development
The infrastructure development department has been established during 2009/10 financial year based on the restructuring of the provincial departments. In its formative stage, it is mandated with the provincial infrastructure delivery in respect of the Public Works and the community based programmes that previously were a responsibility of the former Department of Public Transport, Roads and Works.
The department is allocated a total of R3.8 billion over the MTEF for the maintenance and upgrading and construction of infrastructure in the province. Of this amount a total of R627.8 million is earmarked for the workfare programmes and R772.7 million for the Gauteng Provincial Government Kopanong Precinct project.
Public transport and roads
Allocations made to the roads and transport for the provincial key programmes amount to R10.3 billion over the MTEF. These programmes relate to Gautrain Rapid Link, road infrastructure and the conditional grand for bus subsidies.
Furthermore, the 2009 MTEF budget appropriation also takes into account the reallocation of budget from the Department of Roads and Transport to the Gauteng Shared Service Centre (GSSC) to fund the Call Centre services that the GSSC rendered on behalf of the Department of Roads and Transport in the 2008/09 financial year.
The costs for these services which amount to R97.890 million was not finalised during the preparation of the 2008/09 provincial adjustment process in November 2008 and during preparation of the 2009 MTEF budget process in February 2009.
Planning commission
Madam Speaker, as announced by the Premier, the Gauteng Provincial Government has taken a decision to establish the development and planning commission in the Office of the Premier during the course of the year. That on its own honourable members has financial implications. The Provincial Treasury will look at ways and means to finance the establishment of the planning commission in due course and the House will be briefed accordingly.
Implications of the global economic crisis
Honourable speaker, we are all aware of the difficult financial situation we are facing as the Gauteng Provincial Government due to, the global economic meltdown. This situation, honourable members, has resulted in a decline in the revenue collected by both the national and provincial government. At the provincial level the biggest contributor was Motor Vehicle license fees. This situation calls for hard choices and making trade-offs in planning and budgeting for government programs. Furthermore the situation propels us to go back to basics, getting things right at the beginning, by providing quality Health care and education.
Madam speaker, as indicated in the February budget speech, fiscal discipline is critical, in order to accelerate service delivery. Departments have to realise efficiency gain and focus on using available resources for key provincial priorities announced by the Premier in her State of the Province Address. This will again be done by getting the fundamentals right, reprioritisation of resources from non-core functions to core functions. The main emphasis should be on protecting the pro-poor programs and functions through utilising the existing funds in our departments in a prudent manner. Therefore departments should tune themselves to the mode of doing more with less.
Madam speaker, effective collection of revenue and proper cash management in the current times is Very Important. This is also very important for municipalities where the impact of the current recession is felt severely. Furthermore, municipalities should strengthen their credit control to ensure that all revenue due to the municipalities are collected within a stipulated time.
Alternative forms of financing
Madam speaker, there are a number of other sources of financing that can be looked at as a means to augment the provincial revenue streams, however we should be mindful that this does not translate into a burden to our people and the future generation some of this sources include borrowing, provincial taxation and Public Private Partnership (PPP).
Over the years, sub-national governments have been successful in concluding deals through the PPP arrangements .i.e. Gautrain. The current situation dictates that we look for strengthening of the same relationships to fast tracking service delivery
Many governments are turning to the private sector to design, build, finance and operate infrastructure facilities. The estimated demand for investment in the public service shows that government and even donor resources fall far short of the amount required. For this reason, access to private capital can speed up the delivery of public infrastructure and relieve the existing strain on the fiscus from infrastructural demands. PPPs essentially align private and public sector interests to design and implementation of particular projects by aligning the underlying risks. The private sector adds value to such projects by enhancing the overall design and implementation of such projects by taking into account the costs of longer term maintenance and renewal. This enhances the potential for new innovations and complementary procurement tools.
Word of caution
Madam speaker, we have notice bad financial management practice within departments and a total disregard to the government planning cycle with regard to budget bidding process for projects, with the result that funds get diverted from core to non-core projects. If this practice is not addressed immediately it can easily be enshrined as the culture in the province. The Gauteng Treasury will hence forth institute the following measures:
Activate provisions of the Public Finance Management ACT (PFMA) in case where there are serious financial mismanagement (this include instituting criminal actions against perpetrators)
*Explore the possibility of budget blocking and budget freezing to ensure that departments spend within their allocated budgets
*Analyse budget of each department and provide feedback and recommendations on the realistic nature of the budgets as captured in Basic Accounting System (BAS)
*Ratify all DAC approval before tender letters are awarded.
Madam speaker, we are still committed to work closely with departments that are experiencing strain in their budgets and our communication lines remains opened to all departments with regard to the possible means and ways to ensure that the departments stay within their real or actual" budget.
Let me emphasis to all Accounting Officers and Chief Financial Officers that any disregard of the financial management legislation and policies will not be tolerated. It is therefore required that Accounting Officers strengthen internal control systems in their departments.
Madam speaker, one of the distinct qualities of the developmental state, is its ability to track corruption before it occur, in this regard we will as the Premier alluded, enhance corruption fighting mechanism within Departments and speed up the response period of reported cases of corruption in our corruption hotline and definitely act against those that are involved in fraud and corruption activities, including those within our ranks.
Concluding remarks
Madam speaker
Honourable members
It should be noted that, South African society in general and Gauteng in particular, cannot renew herself whereas its upper echelons are a mere parasite on the rest of society, enjoying a self-endowed mandate to use their political power and administrative power (like those civil servants who were exposed by the Auditor-General, a week ago) for their own individual interest to the detriment of our people, and hampering the development of our country and delaying the process of service delivery to the masses of our people.
The call for renewal demands that we purge ourselves of these parasites and maintain a permanent vigilance against the danger of the entrenchment in our society of this rapacious stratum with its social morality according to which everything in society must be organised materially to benefit the few.
The time has come that we call a halt to the seemingly socially approved deification of the acquisition of material wealth and the abuse of state power to impoverish the people and deny our Province the possibility to achieve sustainable economic development.
Madam speaker, as indicated earlier on, this budget seeks to accommodate changes due to the Restructuring of government, it should be read in conjunction with the MTEF budget we tabled at the beginning of the year, we urge new Members to get a copy of a full Budget from Treasury
I thank you.
Source: Sapa
