MEC Rob Tooley: Limpopo Prov Budget speech 2018/2019

2018 is the centenary of President Mandela and Mama Albertina Sisulu, who both lived their lives as servants of humanity. A contemporary of these two icons, President Agostinho Neto, a leader of the MPLA and a free Angola, a friend and dependable ally of the ANC and the people of South Africa said, ‘The African liberation movements are conscious that they are defending in their countries, the common cause of humanity’ and the essence of this phenomenon is the ‘global struggle by humanity to bring an end to the exploitation of man by man’ and that it is within this framework that we must view our struggle outside the narrow limits of racial or any other prejudices’.

The spirit of service and self-sacrifice embodied in these icons, is behind the call by President Cyril Ramaphosa to echo the call by the late great Hugh Masekela, for all of us to lend a hand in addressing the challenges facing our communities.

This spirit, honourable Premier, is visible in the work, done by men and women, in our public service. The improvements that you pointed out in the SOPA, on the work of this administration that you lead, is testimony to the thuma mina spirit, which is germinating within the public service. We at the Provincial Treasury, experience it in our interaction with departments and municipalities, as we hold bilaterals in our quest to improve the lives of our people.

A detachment of cadres in the public service, led by the DG of the province, and HOD’s, is working very hard to take the province in a new trajectory, and these found expression in the report that the premier gave to the people of Limpopo on the 23 February 2018. I thought, I should say that upfront, honourable members, and thank our public servants for the work that they are doing, of course much, much more still needs to be done, for our province to have efficient and responsive systems of administration, with clean audits. We are confident that we are on the right path.

Honourable members, we present the 2018/19 budget in conditions that are markedly different than when we did the adjustment budget a few months back. The current cyclical upswing in the global economy provides an ideal opportunity for reforms, however this should be executed in a manner that it does not deter growth and trade. Furthermore, multilateral cooperation remains vital for securing the global recovery. Geo-political risks will need to be managed to promote free flow of goods, services and people from one region to another.

The national economy has been growing at relatively low rates for the past few years. The expectation is that the situation will continue until 2020. Though it continued its subdued growth performance during 2017, the economic outlook for the country looks positive due to recent political developments. A situation which has ‘provided us with the an opportunity to achieve faster and more inclusive growth, to create jobs for our people, and a better life for all South Africans’ according to former finance minister Mr Malusi Gigaba.

Risks continue to dog our economic prospects and attention still needs to be given to key policy issues which will appease the credit rating agencies as this will boost foreign investor confidence. If the rating agencies are not convinced another downgrade might be experienced during 2018, with their attendant dire consequences for the country.

The economy of our province has managed to sustain a positive growth of 1.2 percent in 2017, which was a recovery from the 2016 negative growth rate of 1.6 percent and the provincial outlook looks positive moving towards 2020, though it is still below the aspiration of the 3 percent as set out in the LDP.

Our economy is dependent on national economic development and it is likely that the provincial economy will benefit from the national and international spill-offs. It is worth noting that, since 1994 the main contributors to the GDPR in Limpopo is the Tertiary sector and the Primary sector, this situation need to be addressed through stimulation of the secondary sector performance.

The secondary sector is also seen as an important contributor to job creation. For instance by September 2017, over 10 million people visited our country, and the revenue generated exceeded R75.5 billion, the question would be how much of this was spent in the province. The tourism and agricultural sectors need more focus in this regard.

The provincial government as the Premier, pointed out, has a duty to leverage government procurement as a lever for addressing the historical imbalances in our economy. The expected finalisation of the Limpopo Procurement strategy, will be key in stimulating local economic development. It is envisaged that the strategy will focus on the empowerment of designated groups, like black youth, women, people living with disabilities, military veterans, co-operatives and towhship SMMEs.

Honourable members the fight against corruption, is one of our key focus areas as an administration, and one of the main challenges is in the supply chain regime. We would like to echo the concern of the National Treasury, that deviations, should not be used to cover corrupt practices, in this regard we are no more going to allow deviations, unless in justified cases, and these will have to be authorised by the Provincial Treasury.

The Provincial Compliance rate, Madam Speaker, on the payment of Suppliers within 30 Days as per the PFMA provisions is sitting at 87% for the period April 2017 to January 2018. While the required norm for all the departments in the Province is 95%, showing that there are still challenges in this regard.

To mitigate this challenge, the Provincial Treasury will meet Statistics South Africa on the 14 March 2018, to introduce to the province, an electronic monitoring system of payments, the system will be piloted at the Health and Education departments, where there are serious challenges, in terms of compliance with the PFMA requirement for payments within 30 days.

The system will enable suppliers to track progress on their payments online, through a reference number that will be issued to suppliers every time an invoice is submitted. A website will also be attached with the reference number for the service provider to track progress at all material times.

These will apply to all people doing business with government that is departments and public entities. Provincial Treasury is in the process of seeking approval from National Treasury to implement this system.

Madam Speaker, the Provincial Treasury remains committed in monitoring and supporting Municipalities on financial management and governance matters as required by the Municipal Finance Management Act 56 of 2003.

The 2016/17 municipal audit outcomes by Auditor General of South Africa highlighted improvements however we are concerned that none of the municipalities obtained a clean audit. As part of the intervention, Treasury introduced municipal Standard Chart of Accounts (mSCOA) to improve the credibility of municipal financial statements. (mSCOA) became effective on the 1st July 2017. National Treasury has allocated the Provincial Treasury with an advisor to provide technical support to all municipalities in the province during the implementation of the reform.

Supply Chain Management in municipalities remains one of the key challenges, and in mitigation, we have as a department developed Provincial Audit Strategy which is intended to eliminate SCM malpractices. Furthermore National Treasury has allocated the province with an SCM advisor who is permanently based here.

The 2016 Local government elections gave birth to a new municipality known as Collins Chabane Local Municipality (Lim 345). Madam Speaker, as part of support we have allocated the municipality an advisor to support them on financial management matters. Our observation is that the support is yielding positive results because the municipality was counted amongst the best in terms of 2016/17 MIG expenditure and 2016/17 audit opinion.

Honourable Members, Thabazimbi Local Municipality had experienced financial challenges which included, amongst others, non-payment of Eskom account and non- filling of vacancies at senior management level. To date the municipality filled the post of Municipal Manager and CFO and other senior management positions. Through our intervention the municipality is honouring payment arrangement with Eskom and shows stability at administrative level.

In the past months we have observed municipalities that are unable to meet their financial obligations, which amongst other includes non-payment of salaries. The Provincial Treasury swiftly intervened in Modimolle–Mookgopong by allocating officials to assist their budget and treasury department while the process of appointing a CFO is being finalised.

The appointment of the CFO should not only bring about stability on finances but would also provide strategic leadership on financial management to ensure the finances of the municipality are sound and sustainable.

In terms of section 72 of the MFMA the Provincial Treasury is required to assess the mid-year performance for each municipality. In the past month we have engaged all 26 municipalities to assess their mid-year performance and our observation is that most of them have improved on MIG expenditure and were congratulated by the Premier during SONA. However, a few municipalities have failed to reach the expected norms in terms of expenditure as at mid-year.

The Provincial Treasury and the department of Co-operative Governance, Human Settlements and Traditional Affairs will be meeting those municipalities before the end of March 2018 to determine the root causes for underperformance so that mitigation measures can be developed to assist them to improve.

Councils have a responsibility to play oversight over the administration of municipal finances through their portfolio committees, and they can adequately discharge these responsibilities effectively only if they are capacitated. The Provincial Treasury will be establishing the Forum of Chairpersons responsible for Finances to enhance capacity for the committees so these committees can be effective in fulfilling their mandates.

Madam Speaker, The provincial spending is funded by two main sources which are transfer receipts from national (comprised of the Provincial Equitable Share and Conditional Grants) and provincial own receipts (made up of tax receipts, fines and sale of capital assets).

The total receipts available for the 2018/19 financial year amounts to R64.9 billion and an amount of R403.3 million is made available from the provincial reserves to support fiscal stabilisation in dealing with the deterioration of the economic environment and its related impact. Read more [PDF]