Ladies and gentlemen of the media, the budget we are presenting today is really a fiscal expression of the ruling party’s electoral mandate, specifically our commitment to improve the quality of education and health services, create more work opportunities, support rural development and fight against crime and corruption.
Notwithstanding the global recession we are now thankfully leaving behind and in spite of the over-expenditure we reported to you in last November’s adjustments speech, today we are putting before you a budget that, in real terms, is showing an increase in provincial government expenditure, especially in high-priority areas such as school nutrition, HIV and AIDS and Tuberculosis (TB) treatment, public work opportunities and infrastructure provision.
Despite frequent public commentary to the contrary, this budget shows very clearly that the provincial government is in many ways becoming an increasingly vibrant core of our socio-economy, providing much needed economic stability and new opportunities in times of private economy distress.
Often many people miss this “big picture” and become unnecessarily gloomy about our future prospects.
1. The economic context and outlook
Our province was badly hit by the global recession. It’s estimated that 95 000 jobs were lost in this province between the final quarter of 2008 and the final quarter of 2009, accounting for seven percent of all provincial jobs.
Although these job losses have put our work creation efforts back by five years, we are pleased to note that already, our motor industry is showing signs that it has resumed growth.
Mercedes Benz is back to full production and new vehicle sales in South Africa in January 2010 were 15.5 percent higher than in January 2009. The new export order for VW Polos is also very pleasing. Volkswagen South Africa (VWSA’s) exports will be twice their 2009 levels in 2010. Also, Stats SA report that the production of motor vehicles was 14.4 percent higher in the final quarter of 2009 than the previous quarter.
What’s important to note, though, is that while our provincial economy contracted by probably more than two percent in real terms, provincial government spending continued to increase in real terms by about four percent (or R9billion). Certainly the impact of the recession would have been much more severe if provincial government spending had contracted along with the private economy.
But the recession has also taught us a number of lessons:
- Clearly there are no instruments at provincial level to respond speedily and effectively to companies in distress
- It also became apparent that there’s a need for improved co-operation with national government
- The fragility of our manufacturing sector and the cost disadvantages it faces was confirmed
- How the recession brought industry, government and labour together at the provincial level perhaps highlights the need for this joint problem-solving to be continued
- The period also under-lined to us the importance of adopting new approaches for the spending of scarce public resources.
Moving forward, our strategy must be about how we can incorporate these lessons and give content and effect to the notion of the “developmental state”.
2. Fiscal challenges and our responses to them
You all know that we’ve experienced numerous challenges over the past financial year. What’s important for us as government, though, is what we’ve learnt from those challenges and what we are doing to minimise their potential damage.
We reported in last November’s adjustments speech and in a press release dated 4 February 2010 that our two largest Departments, Health and Education, may overspend. The estimated overspending against the adjusted budget for 2009/10 is now expected to be nearly R2.1 billion, or about 4.9 percent of the main allocation for 2009/10.
Health accounts for nearly R1.6 billion of this amount, and education for R640 million. This estimated over-expenditure mainly relates to higher than budgeted employee costs.
The detail of this challenge is contained in my speech. What may be important to highlight here is what we are planning to deal decisively with the problem without compromising key service delivery:
- We hope to be complemented by the oversight of the legislature, while Provincial Treasury has established a technical support unit to support all departments
- We’ll be cutting expenditure on non-core goods and services. Far too much money is spent on non-core items such as travel, accommodation and catering
- We are going to reduce outsourcing wherever possible. Far too frequently we find consultants’ reports, for example, simply recycle and re-package information that is already in the public domain. All too often we find consultants hired to do the work of full-time employees
- We are planning to establish an independent verification unit to check major procurement transactions (past, present and future) and the development of a procurement price index to ensure that we get value for money. Corrupt practices must be uncovered and dealt with, particularly collusion between government officials and suppliers, which must be stamped out
- We need to curb the current situation, where the cost of employees amounts to 60 percent of our expenditure; goods and services 20 percent; transfers and subsidies 12 percent; and capital expenditure eight percent.
We’ll be undertaking a provincial personnel verification exercise because we cannot afford to under spend on the critical procurement of goods and services and infrastructure projects:
- We need to keep on improving spending on conditional grants and infrastructure
- The province needs new revenue sources. We’ll be working with our social partners, as we intensify our search for new funding sources, including donor mobilisation and management
- With departments like Department of Trade Industry (DTI) going to receive additional billions to support investment and production in the automotive components and clothing and textile industries, it will be incumbent on us to ensure that provincial enterprises claim their fair share of these funds
- The tenth and final challenge is to increase expenditure budgets in high-priority delivery areas and where development impact can be achieved.
3. Local government
While the transformation of this sphere has probably been the largest undertaking within our entire transformation process, it has not been without its challenges. Issues of weak governance and accountability, political in-fighting and skills deficits have severely compromised service delivery.
Low and shrinking municipal revenues have not helped the situation.
While we believe national government is best placed to address the challenges of local government, we won’t be folding our arms. As the MEC for Local Government and Traditional Affairs will elaborate later, we are allocating R40 million towards the development and implementation of turn-around strategies for municipalities, while helping them to attract and retain scarce skills. We will also help 25 municipalities to achieve clean audit outcomes in 2010/11.
4. Review of main priorities
My speech outlines the main priorities of each of our key delivery areas, and the respective MEC’s will expand on this overview in their forthcoming policy speeches.
My speech outlines, in detail, what we are going to do to enhance the quality of education and develop our province’s skills base.
The speech details how we are going to improve the health profile of the province through the provision of quality health care. For example we are undertaking to spend an additional R120 million for the recruitment of medical professionals.
Pages of my speech are dedicated to the detail of how we are planning to create work opportunities, improve the quality of life in rural areas, build new homes, eradicate mud schools, while investing in the best infrastructure for our province.
5. Strategic overview of budget 2010/11
You will have seen from your packs that total revenues of the provincial fiscus in 2010/11 are budgeted to be R48,2 billion. This is a 14.2 percent increase over the amount budgeted last financial year. Depending on the rate of price inflation over the coming year, this could represent a nine percent increase in real terms.
You have been supplied with copies of the “estimates of provincial expenditure” and I’m sure you’ve noted that major department’s will receive above average increases in their allocations:
- the education department’s budget increases by 16.6 percent
- the health department’s budget increases by 17.8 percent
- the housing department increases by 23.8 percent.
These above average increases are aligned to the very high priority we attach to improving the delivery of education, health and housing in the province.
The last pages of my speech highlight the rest of the budget items where there have been very significant increases.
Simply put: “We are putting the money where our mouth is!”
For more information contact:
Mawethu Rune
Cell: 082 450 5298
