Honourable Speaker,
Honourable Deputy Speaker,
Honourable Premier,
Honourable Members of the Executive Council,
Honourable Members of the Legislature,
Honourable Mayors and Councillors,
Distinguished guests,
And all citizens of the Eastern Cape province,
Good afternoon.
I have the honour of tabling before our Legislature the Adjustment Estimates Budget for the 2012/13 financial year, the 2012 Provincial Medium Term Budget Policy Statement (MTBPS), and the 2012 Adjustment Appropriation Bill.
The Adjustment Appropriation Bill invites the Legislature to consider changes to spending estimates for this financial year. It is inevitable that there will be changes to the budget during the course of the year as budgeting takes place in a changing global environment.
We live in a very dynamic environment influenced by both global and domestic occurrences. Our forecasts are based on the best assessment of domestic and international conditions, but they are vulnerable to unexpected shocks.
As the province of the Eastern Cape, we have to continue to invest in priority areas that support social development, economic growth and transformation. Reprioritisation of baselines, as a way of finding the scarce resources to sustainably undertake investment, is the primary focus of the forthcoming budget.
A pool of saved resources should be identified with urgency in order to fund critical interventions. Further and more urgent efforts should be made to find savings. Of particular importance is more effective management of the public sector wage bill.
This budget must begin to address the challenge of public perceptions of government as wasteful and inefficient. The National Minister of Finance recently reported in his MTBPS that we must rein in government expenditure - “We need to live within our means” the Minister stressed. The Minister also mentioned that there will be an estimated R5 billion revenue under collection for the 2012/13 financial year and gross domestic product (GDP) estimates are to decrease to 2.5 per cent.
Economic outlook and fiscal forecast
Honourable Speaker whilst reporting on the economic outlook, I would commence by reflecting on the global picture as there is great economic uncertainty.
The international economic outlook has weakened over the past six months. According to the IMF’s July 2012 World Economic Outlook (WEO) update, economic growth forecasts for the major economies have been downgraded since the publication of the April 2012 WEO. The current global environment remains sensitive to economic and financial shocks.
The tabling of the 2012 MTBPS coincides with a time of deep concern about the global economy and its near-term trajectory. It marks a point of heightened uncertainty and concern over a range of critical economic developments, primarily global, but also the current domestic industrial relations environment in South Africa, with the tragic events in the mining industry and the impact of this on the local economy. Also, the impact of the recent floods we experienced in the province is severely hampering the local economy.
Remittances paid to families residing in the province, from mine workers, will be negatively affected due to the extended strikes. This resulted in people in small villages being unable to buy the basics, small shops and spaza shops closing down or barely surviving.
Furthermore, the three sovereign rating downgrades that we have been seeing in the past few months have negatively affected our country’s borrowing prospects on international markets. It would, however, seem that the crisis and the accompanying slow and uncertain economic recovery will be with us for some years still.
Honourable Speaker, in the Minister of Finance’s MTBPS, budget deficit was revised from 4.6 per cent of GDP to 4.8 per cent due to lower tax revenue.
A decreasing narrow fiscal window is available to government over the next three years, given the moderate economic growth prospects arising from the economic challenges both globally and locally.
At the recent Budget Council meeting of 16 November 2012, National Treasury outlined the impact on Provincial Equitable Share stemming from the Census 2011 and various other data sources, on the net Equitable Share allocation to the province. The recently released Census 2011 data has negatively impacted on the province’s portion of the national equitable share allocation.
Our province’s population decreased from 6.8 million to 6.5 million. This decrease in population numbers impacts negatively on education, health, poverty and basic components of the Provincial Equitable Share.
The overall impact on the Provincial Equitable Share allocations is that the province’s weighted average decreases from 14.9 per cent to 14.2 per cent (a reduction of 0.79 per cent) which will be phased in over the MTEF. With no additional allocations, the Provincial Equitable Share allocations decrease by R720.9 million in 2013/14, R1.5 billion in 2014/15 and R2.9 billion in 2015/16.
Despite these many challenges, government agrees that there is an urgent need to speed up the fight against poverty, to address the high levels of inequality as well as to reduce levels of unemployment, all of which contribute to social instability. Government cannot allow these economic challenges to stop its developmental agenda. The message therefore becomes more pressing.
As government, we can no longer afford to borrow any more funds for consumption expenditure. The economy depends on investment in infrastructure and other forms of capital investment to sustain the minimal levels of growth we see presently.
Job creation, a crucial priority of government, is happening far too slowly. We have to reflect on the productivity of the public sector and our inability to implement decisions and policies more effectively.
In these times of economic hardship and uncertainty, funding will be assigned to programs that achieve the most impact for the majority of people, recognising the need to not only build a province for today, but also for the future.
Resources will be allocated to those areas of highest priority, and to programs that make our province more efficient and effective in achieving results.
Through these endeavours, the Department of Provincial Planning and Treasury recognises that the province stands a far greater chance of achieving success if it undertakes to address the challenges that the province faces with a sense of collective responsibility. By working together towards a common goal, the province can create better lives for all.
Government’s focus must be on substantially improving its capacity to implement its policies and achieving set objectives.
Honourable Members, we are facing difficult and challenging times but despite the downturn of the economy, we have not cut back on social welfare spending. We have not cut back spending on Education and Health. We have not cut back on any of the spending on special poverty alleviation and employment programmes, in fact we are focusing more on improving services to the poor.
In the national MTBPS, it was indicated that over the 2013/14 MTEF, government aims to achieve better value for money from investment in provincial infrastructure. A new approach to infrastructure conditional grants is intended to institutionalize proper planning. Provinces will be required to bid for these allocations two years in advance and financial incentives will be built into the grant for provinces that implement best practices in delivering infrastructure.
Honourable members of the Legislature, under expenditure on infrastructure and conditional grants is unacceptable as it simply translates to South Africa borrowing money at a high cost to keep it in provincial departments. What is sad is the fact that our province is one of the poorest provinces characterised with high unemployment and yet we are continually failing to spend on infrastructure.
There is an urgent need for a collective effort to address the infrastructure grant under spending whilst we realise value for money for every Rand spent. Interest is being paid on these unspent borrowed funds, economic growth not realised will be unsustainable to fund. Prudence therefore has to be the order of the day.
The historical view of the Eastern Cape as an under-developed labour reserve and a net exporter of human capital among provinces with high poverty levels is set to change. This new face of the province began to emerge during the policy pronouncement phase of governance as anchored by the speeches of the President and the Premier.
The province of the Eastern Cape has been peripheral to the national economy in terms of growth and development but the massive interventions made and commitments of billions of rands are set to make the province a main-player in economic development, as the current efforts seek to address systemic and structural causes of poverty, unemployment and high levels of inequality.
Over the past year provincial departments have focussed on doing more with less, improving financial management and improving management of personnel. We are starting to see the results of these efforts, however more still needs to be done and we as a province must not take our eyes off the ball.
Reprioritisation initiatives were implemented in order to avail resources to fund critical priorities that emerged during the course of the year. Financial prudence should not affect the delivery of core services that will negatively prejudice the neediest within the province.
Overall, the focus is on the identification of resources that can be better utilised for improved service delivery in the province. Added to the call for financial prudence and discipline to be implemented is the need for departments to reprioritise their expenditure in order to find savings and “excess” money that can be redirected to service delivery.
The Adjustment Appropriation Bill
Total provincial adjustments amount to R1.2 billion. Additional allocations from National Treasury amounted to R633.9 million made up of R619.6 million for education and health ICS; and R11.330 million for Further Education and Training (FET) Colleges; and R3 million for the AFCON medical services grant.
National Treasury also approved R217.7 million as a conditional grant roll over and R44.5 million as an equitable share roll over. The recipients of these roll overs are the departments of Health; Social Development and Special Programmes; Roads and Public Works; Education; Local Government and Traditional Affairs; Rural Development and Agrarian Reform; Transport; Legislature and Sport, Recreation, Arts and Culture.
In line with the EXCO resolution of February 2012, there was a 5 per cent cut on departments’ goods and services budgets. Owing to budget pressures in Health, the department was exempted from the top slicing. The top slicing exercise resulted in R189.3 million being made available to fund priority programmes.
An additional R94.3 million was made available through the surrender of surpluses by public entities. These funds have been devoted and made available for re-allocation.
The total additional provincial allocation of R579.1 million is made for the following:
- R101 million is allocated to Roads and Public Works, R100 million to assist in repairing roads infrastructure damaged by the recent floods; and R1 million for the costs related to the Centralised Project Management Unit that is vital to enhancing capacity for infrastructure spending in the province;
- R176.7 million is allocated to the Department of Transport for scholar transport; AB350; the recapitalisation of Mayibuye Transport; and general admin budget pressures;
- R28.6 million is allocated to the Department of Local Government and Traditional Affairs to assist municipalities that are struggling to pay their audit fee, for costs associated with Traditional Leadership and the Initiation programme, for the SALGA support programmes for municipal support; as well as financial and institutional support to struggling municipalities;
- Education is allocated a further R137.6 million to mitigate against CoE budget pressures arising from the 5 per cent baseline cut, and for Learner Teacher Support Material (LTSM);
- The Department of Social Development and Special Programmes is allocated R7 million for the absorption of Social Workers;
- Health is further allocated R115 million for the full scale rollout of LOGIS across the province; the Multi Agency Working Group intervention projects; to defray HR accruals; and to fund the training of medical students in Cuba;
- R10 million is allocated to the Provincial Legislature for the shortfall in CoE and for ICS adjustments and
- The Department of Sport, Recreation, Arts and Culture is allocated R3.2 million for 2013 AFCON.
Conclusion
In conclusion, Honourable Speaker, I would like to assure the people of the Eastern Cape that when crafting this adjustment budget we made sure that basic services to the people remained a priority; and investment in infrastructure takes place.
Honourable members, going forward, the fiscal framework will further be severely constrained. I urge you, my colleagues in the executive and the legislature to enforce reforms in their respective departments and implement the appropriate oversight on all allocations and service delivery programmes.
Colleagues, thus, we have to do more with less. We must make the Rand work harder for us.
Honourable Speaker, I wish to thank the Premier and my cabinet colleagues for the guidance and wisdom shared. Also, I would like to say a special thank you to the Provincial Planning and Treasury team for putting together the adjustment budget.
I hereby table the Adjustment Estimates Budget for the 2012/13 financial year, the 2012 Provincial Medium Term Budget Policy Statement and the 2012 Adjustment Appropriation Bill.
I thank you!
