Z Mkhize: KwaZulu-Natal Budget 2006/07

16 February 2006

Mr Speaker
Honourable Premier and colleagues in the Executive
Deputy Speaker
Honourable Members
Distinguished guests and business leaders, ladies and gentlemen

INTRODUCTION OF THE PEOPLE’S BUDGET 2006

In opening the National Parliament in 2005, President Mbeki said, “our
country, nation, has never in its entire history enjoyed such a confluence of
encouraging possibilities”.

This year during the State of the Nation Address, he said “Clearly the
masses of our people are as a united convinced that our country has entered
into its Age of Hope.”

This hope has been a common message from our people whom we encountered
during our people’s budget campaign this year. In crafting the budget
proposals, we went to great lengths to listen to the voices of the people
across the province, particularly the poor, disempowered, jobless and homeless.
We noted the universal cry for jobs, decent housing, and access to basic
services such as water, health care, electricity, etc. Three consistent themes
raised by the community emerged during the road-shows:

* Concern regarding the provision of basic services and the budgetary
allocations for these services
* Poverty, unemployment and assistance for sustainable livelihoods
* Experiences of people who have been through our small business support
programmes.

The plight of our people is captured better by Hernando de Soto a former
Governor of the Central Bank of Peru. In his book the Mystery of Capital, he
says:
“Third World and former communist nations do not have a representational
process. As a result, most of them are undercapitalised, in the same way that a
firm is undercapitalised when it issues fewer securities than its income and
assets would justify. The enterprises of the poor are very much like
corporations that cannot issue shares or bonds to obtain new investments and
finance. Without representations, their assets are dead capital. The poor
inhabitants of these nations - the overwhelming majority do have things, but
they lack the process to represent their property and create capital. They have
houses but not titles; crops but not deeds; businesses but not statutes of
incorporation. It is the unavailability of these essential representations that
explains why people who have adapted every other Western invention, from the
paper clip to the nuclear reactor, have not been able to produce sufficient
capital to make their domestic capitalism work. This is the mystery of
capital”

We never pretended that this journey to prosperity was going to be a short
one, to be achieved in just one or two years. But we were proud to announce
that the journey had begun! This year the journey to prosperity for all in the
province continues. There will be no change in direction or our end
destination.

The people’s budget campaign gave us an insight into the thinking of
ordinary South Africans.

Though their expectations are high, their acknowledgment of government’s
determination to deal with the complex challenges of our revolution has
injected new energy and filled their spirits with hope. This made contributions
from the people a rich variety of concerns, criticism, appeals for assistance
balanced with words of praise and encouragement to the government they
elected.

The concept of a true “peoples’ budget” requires that we listen to diverse
views and opinions across the province. It is the above concerns coupled with
the government’s determination to create a better life for all our people that
made the President himself to set the following goals for government at a
national level:
* by 2007, the “bucket toilets” system must be completely eradicated in
established settlements;
* by 2010, all households will have access to clean running water and decent
sanitation; and
* by 2012 every household will have access to electricity.

In the next five years the government will invest nationally more than R400
billion in infrastructure to create jobs and fight poverty. These investments
and interventions will occur under the auspices of the Accelerated and Shared
Growth Initiative of South Africa (ASGISA), the overall goal being to halve
poverty and unemployment by 2014.

This province will not lag behind in achieving these national developmental
goals. Thus in this year’s budget there is an increase in funding for all
votes, including that of basic services and infrastructure provision. This
budget will also indicate the funding for the priorities of the provincial
government as contained in the Premier’s State of the Province Address last
week.

PROGRESS REPORT ON BUDGET AIMS AND ACHIEVEMENTS IN 2005/06

As we reflect on the year gone and focus on the dawn of a new year, I am
reminded of the words of Alfred Lord Tennyson in his drama entitled THE
FORESTERS when he said:
“I am only merry for an hour or two
upon a birthday: if this life of ours
be a good glad thing, why should we make us merry
because a year of it is gone? But Hope
smiles from the threshold of the year to come
Whispering it will be happier; and old faces
Press around us and warm hands close with warm hands,”

In tabling the provincial budget for 2005/06 in March last year, we
announced a comprehensive plan to transform the regional economy. This would be
achieved through three main interventions:
* Growing the economy, and increasing investment - in partnership with the
private sector
* Poverty alleviation and empowerment - through broadening participation in the
economy and narrowing the gap between the first and second economy
* Good governance and achieving value for money in managing provincial
funds

As we enter into a new Medium Term Expenditure Framework (MTEF) budget
cycle, it is appropriate to report on the government’s performance and progress
in respect of these three interventions.

INTERVENTION ONE: Growing the economy and increasing investment

The provincial government has achieved positive results in its efforts to
grow the economy and to achieve sustainably higher growth rates, in partnership
with the private sector. The broad objective of this strategy is to position
KwaZulu-Natal (KZN) as the trade gateway into Africa. Programmes and projects
grouped under this strategy include the following:

Provincial Growth Fund

The Provincial Growth Fund (PGF) is an intervention to enhance growth and
development in KZN, thereby contributing to ASGISA. Among its strategic
objectives are to:
* Target productive infrastructure to crowd-in private sector investment into
KZN;
* Enhance the existing comparative advantages of the province by focusing
on:
* Tourism-based development projects
* Provision of bulk water supply
* Transportation and logistics for well defined economic and industrial
zones
* Sector specific infrastructure projects

The institutional structure of the Growth Fund has been finalised
accommodating the legal requirement of financial institutions. Also a Board to
manage the KZN Growth Fund Managers (Pty) Ltd, has been appointed.

The provincial government has already committed some R500m to the fund, and
Standard Bank R375m. The target is to have R1,5 bn committed investment into
the Fund by June 2006. Preliminary discussions with financial institutions
confirm very strong support for investment in our Growth Fund. The Standard
Bank has indicated a need to revise the governance arrangements, after which
their funding to the Growth Fund will flow. Building from this positive step,
other financial institutions will be approached. We are convinced that the
Growth Fund will be fully operational as from May 2006.

Substantial progress on the proposed Growth Fund projects, which I mentioned
in last year’s Budget Speech has been made. Let me refer to just two of these
projects to give honourable members a sense of what this new loan finance
facility is able to unlock:

* A major ship-building and related marine project called the “Bayhead
Marine Industrial Park”, has been approved and has received R24 million funding
through the Growth Fund. The project’s business plan anticipates that a total
of 350 permanent jobs will be created.

* The first aquaculture project has been approved by the Growth Fund. The
Amatikulu Prawn Farm, with a project value of R36 million, is in implementation
phase, and will create 76 permanent jobs within the first year of operations
and up to 350 jobs by phase three.

Mr Speaker, these examples provide hard evidence that we can convert
economic potential and project ideas into new businesses and jobs. In addition
to these two projects, a number of other projects to the value of R3bn are
currently being considered by the KZN Growth Fund. It is estimated that over
5000 permanent and sustainable jobs, both directly and indirectly, will be
created in the province. These include:

Projects aimed at reviving rural towns and industries
* New dam construction in the Amajuba District (tourism and agriculture
business)
* Infrastructure for textile firm expansion in Mpofana municipality
* Port Shepstone Marina
* A Wine Cellar Project in Estcourt
* Manganese smelter in Newcastle region

Job creation and economic growth projects
* Toyota Automotive Supplier Park in Prospecton
* A joint-venture three wheeler (Scooter) Manufacturing Plant in Msundusi
* Market and Trading complexes in Edendale, Osizweni and Paulpietersburg
* Mtunzini Shrimp Farm
* A Biodiesel Plant in northern parts of the Province
* Msuluzi game park
* An ethanol (fuel from sugar) plant at Nkwalini

We therefore invite private sector enterprises and project promoters to join
us in creating real growth in the Province.

* Trade missions and inward investment initiatives

An important aspect of the province’s economic growth strategy involves a
concerted campaign by the provincial government to attract private sector
investment into the province. There were five trade missions that we were
involved in, in 2005, namely visits to Germany, Italy, Korea, Japan and India.
In addition to the benefits reported in the Premier’s report, positive outcomes
from these missions included:

* Agreement in principle by Piaggio, a leading Italian auto manufacturer, to
establish a manufacturing plant in the province for the production of low-cost
three-wheeler scooters;
* An investment in a Joint Venture Furniture Manufacturing project worth R230
million over two years. This Joint Venture between Thabo’s Antiques and
Fratelli Constantini, an Italian furniture manufacturer will provide employment
to approximately 100 people in the Msundusi area; and
* Further impetus and support for the establishment of an automotive component
supplier park at Prospecton in Durban.

Further announcements on the details of these and other projects resulting
from these trade and investment initiatives can be expected in the next few
months.

INTERVENTION TWO: Poverty alleviation and empowerment

“Narrowing the gap between the first and second economies and broadening
participation in the economy”

I need hardly remind honourable members that the central theme of the
“peoples’ budget” tabled a year ago was the need to narrow the gap between the
first and second economies through targeted poverty alleviation, job creation
and capacity building initiatives. I am very pleased to be able to report
measurable progress in all these major programmes.

* Poverty alleviation fund

The R500m allocated to the Poverty Alleviation Fund in the 2005/06 budget
has been put to good use and funds were allocated on Cabinet’s approval to the
critical areas of water and sanitation provision at schools (R100m); access
roads and pedestrian bridges to schools and clinics (R82m); the integrated
primary school nutrition programme (R55m), water quality enhancement in drought
affected rural areas (R43m), and the co-operative incubator programme (R15m). A
further R110m from the Fund was allocated to the cooperatives programme managed
by Ithala. Funds in this programme have been fully committed, and details on
the service delivery targets attached to these allocations can be found in the
Budget Statements for the respective departments.

* Cooperatives programme

Mr Speaker, we are very excited about the progress recorded in establishing,
financially supporting and capacitating cooperatives around the province. The
President emphasised in his State of the Nation address two weeks ago that
support for the small business sector and the development of cooperatives is a
national priority and a key element of ASGISA. In this province, certainly,
government regards the cooperative movement as the key to freeing the millions
of our citizens trapped in the second economy from the despair and hopelessness
brought about by grinding poverty and lack of economic opportunity.

The response to the cooperatives initiative launched a year ago has been
phenomenal, clearly demonstrating the need for this financial injection into
poor communities by government:

*2024 Business Plans have been received to date by Ithala, of which 784 have
been approved;
* The total value of approved business plans is R110m, of which R39m has
already been paid out;
* To date 3820 cooperatives have completed training at FET Colleges - this
includes 39 women cooperatives formed as a result of the National School
Nutrition programme;
* The FET Colleges provide cooperatives training at 74 sites across the
province and the number of sites continues to grow with the demand;
* The incubator programme started operating in 4 FET Colleges in September
2005.
* Currently there are 90 business entities that are participating in the
program.
* 666 cooperatives are registered in the KZN database, with the majority
registered in the agriculture (27%) and manufacturing (26%) sectors;
* Of the approved business plans to date, 328 involve female only cooperatives,
235 youth, 125 male and 96 mixed cooperatives. This is concrete proof of the
special attention we pay to the promotion of opportunities for women and youth
empowerment.

With regard to future plans, the first year of implementation focused on the
credit aspect of co-operatives. The second phase, which will commence this
year, will focus at ensuring that cooperatives prosper and become self
sustaining, through the provision of training in business management and
technical skills.

* SMME Fund

During the past financial year the Provincial Government provided an amount
of R200m to Ithala to drive the small, medium and micro enterprise (SMME)
programme for the province pending the finalisation of a structured SMME Fund.
Ithala in turn has augmented this allocation with its own funding. Great
interest has been generated in this small business support programme in the
province.

As at the end of December 2005, Ithala had approved 405 SMME business plans
worth R433 million. Of this amount over R179 million has already been
disbursed. The deal flow that is currently under consideration by Ithala is
standing at R1.5bn. It is safe to suggest that between R500m to R1bn of those
deals would be worthy of funding. This pressure on Ithala is a reflection that
in SMME finance for the disadvantaged, Ithala is the institution of choice.

Many people in the izimbizo reported delays in getting approval - this is
simply due to the large volumes of applications.

Both Ithala and the provincial government concede that this demand for
finance cannot be met by Ithala alone. In the coming year therefore, we are
going to be implementing a new programme to support SMMEs - the details of
which I will reveal shortly.

* Empowerment initiatives

In the March budget address a year ago it was emphasised that government
intended to use its procurement spend on goods and services, amounting to
approximately R6bn in 2005/06, to stimulate growth in the SMME sector and to
advance black economic empowerment generally.

A provincial supply chain management (SCM) framework policy has been
compiled to provide provincial departments with guidelines on how to procure
goods and services, including from cooperatives, in such a way that
government’s BEE policy and objectives are met. I expect in the coming year to
be able to report actual expenditure figures per department on procurement from
Black Economic Empowerment (BEE) companies, SMMEs and cooperatives. We must
realise that we are dooming the cooperatives and SMMEs we are establishing to
failure from the outset unless we follow through by facilitating access to
government procurement on a sustainable basis.

As importantly, the payment process to SMMEs by Government Departments
leaves much to be desired. It is often heard that lengthy delays occur in
paying the SMMEs for services rendered and/or supplies provided. Such practices
have to become far more efficient, ensuring that administrative delays do not
place unbearable cashflow burden on the SMMEs.

In this regard, I have tasked the Treasury with establishing a small unit to
focus on fast-tracking of payments to cooperatives and SMMEs, with a toll free
number to assist with queries. This will be set up by April this year.

INTERVENTION THREE: Value for money and good governance initiatives

Mr Speaker, in last year’s address I alluded to the fact that we will not
attain our objectives in these economic growth and poverty alleviation
programmes unless at the same time we focus as a government on improving
efficiencies and achieving better value for the vast sums of money we spend on
these programmes. We remain determined therefore to fulfil our obligations to
the tax-paying citizens of this country by maintaining and indeed improving our
high standards in the field of financial management and good governance. In
this regard I am also pleased to report very satisfactory progress over the
last year:

* The reforms in our asset and supply chain management systems and policies
are proceeding on track and are set to greatly improve efficiencies in the way
we procure and account for goods and services and physical assets.

* These reforms include the implementation of an inventory management tool
linked to the Supply Chain Management concept, and an electronic system to
perform the acquisition stage of SCM, namely the sourcing of Quotations and
Tenders - this project will both improve efficiencies and turn-around times as
well as help to eliminate fraud and corruption.

* In respect of Performance Budgeting System (PBS), the roll-out of the
system in departments is proceeding on schedule, and demonstration data bases
have been installed in Provincial Treasury, Health and Transport.

* In the area of governance and risk management, quarterly summary reports
on the risk profile of departments are now being submitted to Cabinet. This is
a significant development, as henceforth governance and risk management issues
cutting across all departments will be highlighted at an executive level.

Progress was also made in enforcing our policy of zero tolerance for fraud
and corruption. Six high profile investigations into fraud, corruption, theft,
mismanagement, maladministration and other irregularities, amounting to the
loss of tens of millions of rands in various departments, public entities and
municipalities were conducted and completed during the course of the year.

Some of the cases are before the courts of law and misconduct enquiries are
also being handled by respective departments. A further 5 high profile cases of
fraud and corruption involving syndicates are under investigation, and we have
joined forces with the Directorate of Special Operations (Scorpions) and Asset
Forfeiture Unit in order to secure successful prosecutions.

During the year we invested R80 million in the social welfare grants
investigation which has yielded tremendous value to the province. 25,956
fraudulent grants were identified in this investigation and the anticipated
savings are as follows: R9,4m savings per month; R113m savings per annum and
R338m savings over a 3 year period. Furthermore a number of government
officials and members of civil society were identified as suspects: 70 at
Social Welfare; 23 at Home Affairs; 3,979 in other departments; and 15 medical
doctors and agents were implicated. Criminal investigations, which will
eventually lead to prosecution, are being conducted by the Special
Investigation Unit, a division of the National Prosecuting Authority.

Treasury took an unprecedented move to engage lawyers to oppose court
applications against the Department of Social Welfare, and that saved millions
of rands while it uncovered a scam which was draining funds destined for the
poor.

ECONOMIC SNAPSHOT

When President Mbeki said: “Clearly the masses of our people are convinced
that our country has entered into its Age of Hope”, I am certain that we in
KwaZulu-Natal will say SIYAVUMA. But some of you might legitimately ask whether
all these government interventions have had a measurable effect on improving
the economic performance of the province.

I can say with some confidence that the programmes and economic sectors
being prioritised by government, with one or two exceptions, appear to be
yielding positive results in terms of performance and trends over the last two
years.

In terms of overall economic growth, according to Stats SA KwaZulu-Natal
recorded a growth rate of 4,9% in 2004, second only to the Western Cape at 5,3%
and above the national growth rate of 4,5% - this compares to a growth rate for
KZN in 2003 of just 2,8%. In 2005 KZN’s economic growth rate is projected to be
in the region of 5,2%, once again well above the national average, and close to
the ASGI-SA target of 6%.

Sectors in the province which experienced particularly strong growth in 2004
were construction, which grew at a staggering 28,8%, and finance, real estate
and business services, which grew at 7,9%. The manufacturing sector grew at a
healthy rate of 4,5%.

In terms of employment, according to the Stats SA Labour Force Survey, in
2004 993,000 people in the province were unemployed - this declined to 987,000
in 2005, improving the unemployment rate from 33.1% in 2004 to 31.8% in 2005.
This decrease in unemployment was in fact faster than the national average,
which declined from 27.9% to 26.5% over the same period.

Just to what extent these impressive growth and employment figures are due
to government programmes and expenditure is difficult to quantify at this
stage. It is surely no coincidence, however, that growth in the construction
sector is surging, given the provincial government’s increased expenditure on
infrastructure totalling R7,42 bn over the last two years. The improvement in
employment figures over the last year, moreover, is certainly partially
attributable to the cooperatives initiative, which is already estimated to have
attracted close to 35 000 individuals, based on an average of 9 people per
cooperative - many of these have already found employment through their
cooperatives or are likely to do so in the near future.

POLICY PRIORITIES FOR THE 2006/07 MTEF

May I remind you again of the words of Alfred lord Tennyson who said:

“But hope smiles from the threshold of the year to come - Whispering it will
be happier;”

Against this background, what are the government’s expenditure priorities
for the new MTEF budget cycle commencing in six weeks?

I have already indicated that I believe it is important that there should be
long term consistency in the budget policy framework and direction to achieve
maximum impact over time. Although we have indeed made progress in addressing
the central challenges of poverty, unemployment and service backlogs in the
past year, much remains to be done in the short, medium and long term. The
provincial budget will accordingly continue to play a key role as policy
instrument to address the socio-economic challenges confronting us.

It should come as no surprise therefore, that the budget expenditure
proposals for 2006/07 recommended by Cabinet can be categorised into three
broad areas which are consistent with the themes which underpinned last year’s
budget, namely:
* stimulating economic growth through coordinated infrastructure
investment,
* creating jobs and alleviating poverty through targeted interventions in the
second economy, and
* expansion of existing programmes and capacity building initiatives aimed at
improving service delivery.

I will deal with each of these three policy priority areas in turn.

Stimulating economic growth through coordinated infrastructure investment
and strategic programmes in reviewing its policy priorities for the new MTEF
period, the Government of KwaZulu-Natal has made the goal of placing the
province on a sustainably higher growth path a central part of its economic
development strategy - this strategy in turn is aligned to the national
Accelerated and Shared Growth Initiative. The rationale behind this approach is
simple: if economic growth can be stepped up to average 4,5% over the next five
years, and 6% from 2009 to 2014, then:
* income per capita will rise by 50% in the next ten years, and
* the rate of unemployment will be halved.

It is unrealistic however, to expect that the provincial economy will launch
itself onto a higher growth path on its own accord. A structural growth
acceleration of this magnitude will require, inter alia, a coordinated and
efficiently implemented infrastructural investment programme, in which both
government and the private sector will have major roles to play. In this
regard, government has identified several key projects and programmes as
priorities for the forthcoming MTEF. These can be summarised as follows:

* Dube TradePort

The flagship Dube TradePort (DTP) project incorporating a state of the art
Airport in King Shaka International has made solid progress and we are on track
to achieve our deadline for the project to be operational by 2009.

We have secured a legally binding MoU with ACSA and the National Minister of
Transport providing for:

* ACSA to acquire a ten year management contract from the province with the
right to take up a concession within or after the 10 year term;
* The relocation of Durban International Airport when King Shaka International
is operational in 2009; and
* The land at La Mercy to be sold to the province.

As the DTP will no longer be established as a PPP, the R100m allocated to
the project in this year’s budget will be routed via Ithala to facilitate site
preparation work - including site acquisition, perimeter fencing, backbone
infrastructure outlay and the development of the N2 interchange. The tenders
for this initial site preparation and technical work have already closed and
are currently being adjudicated. Site preparation and installation of backbone
infrastructure is expected to commence by the end of the calendar year.

Mr Speaker, Honourable Members, I must stress that if the deadline for the
project to be operational by 2009 is to be met - and failure to meet the
deadline is not an option - then all role-players will have to play their part,
including this Legislature.

A Request for Qualification was issued last week to the Market for a Design,
Construct, Fixed Price Turnkey contract. The purpose of this procurement is to
enable the DTP to select at least two, but no more than three pre-qualified
bidders that are technically, financially and legally qualified and meet the
empowerment criteria, and that have sufficient experience and resources to be
able to execute the project within the specified timeframes. I appeal to all
interested consortiums and companies which have a potential interest in
participating in this mega project to seize the opportunity and respond to the
RFQ by the deadline early in March - if you miss the first Request for
Qualification, you will not be able to come on board at a later stage.

In April 2006 a detailed Request for Proposals will be issued to selected
bidders to prepare more detailed bids. By September 2006 a bidder will be
selected and detailed negotiations will commence, which we hope to conclude by
December 2006. Award of the contract will follow and it is expected that main
construction will commence in March 2007, with facilities to be completed and
operational by October 2009.

The Dube TradePort Section 21 Company will have to be converted into a
statutory public entity under the Public Finance Management Act (PFMA) that is
empowered to establish King Shaka International Airport Special Purpose
Vehicle, which will then enter into contractual agreements with ACSA to manage
and operate the airport and with the selected bidder from the private sector to
design and construct the facility. The Dube TradePort as a statutory public
entity will be mandated to drive the trade zone development, the cyberport, the
agricultural zone and other associated commercial developments. Draft
legislation establishing the DTP has been prepared and will be submitted to
this Legislature in March. I appeal to Honourable Members to ensure that this
Bill is dealt with within the strict timeframes we have set ourselves.

Discussions are also in progress on the financing model for the Trade Port.
The total investment required for the airport, which is part of the Trade Port,
is about R2.5 billion over the next four to five years. Our proposal is to set
aside R20 million, R200 million and R1,5 billion over the 2006/07 MTEF years
for this project - this is over and above the R100m already in this year’s
budget for the Trade Port. The balance of funds required will have to come from
debt financing. The Development Bank has already agreed in principle to provide
debt funding secured against revenue streams of the project up to R500m.

2010 World Cup stadium development

The second major infrastructure-related programme being advanced by the
provincial government relates to financial support for the development of
soccer stadiums in the province in preparation for the 2010 World Cup. We are
proposing to allocate R31m, R89m and R139,5m over the MTEF period as a
contribution to the building of soccer stadium infrastructure in the province.
This funding will be allocated to the Department of Local Government and
Traditional Affairs, which will together with the Department of Sport and
Recreation play a coordinating role in assisting the District Municipalities of
Amajuba, Ugu, uMgungundlovu and uThungulu to build the infrastructure and
facilities required for training and base camps. We are also of the view
however that we need not just to build soccer stadium infrastructure, but also
the sport itself in the province. In the MTEF period, therefore, funding
allocations of R50, R55m and R60m have been set aside for the development of
soccer at all levels in the province in collaboration with South African
Football Association (SAFA) - the Office of the Premier will be responsible for
co-ordinating the soccer development programme across the departments
involved.

Richards Bay Industrial Development Zone

An important part of government’s infrastructure-related strategic
investment programme for the medium term is the Richards Bay Industrial
Development Zone. This IDZ was proclaimed by the Minister of Trade and Industry
in 2002. Since then, however, there has not been any significant progress in
terms of infrastructure outlays required to make the IDZ work. We propose to
set aside R90 million and R100 million in 2007/08 and 2008/09 respectively for
development of the IDZ, allowing time in the first year of the MTEF for the
stakeholders to finalise the business case, funding model and ownership
arrangements.

* Corridor development

Other infrastructure-related strategic projects we propose to fund over the
2006/07 MTEF period are the two road corridors leading to Richards Bay, namely
the Lubombo SDI corridor and the P700 linking to Ulundi and ultimately Vryheid.
This investment will stimulate economic development along these nodes and open
up the areas in question to tourism and related services - this will have a
positive impact on the revival of Ulundi as a regional centre. We propose to
allocate R10m, R20m and R130m to these corridor developments over the MTEF.

* Coordinated infrastructure provision and procurement

The challenge facing government in implementing these and other
infrastructure projects is not only to ensure that delivery and expenditure
takes place within planned timeframes, but that BEE-owned companies and
emerging contractors enjoy maximum benefit from the contracts put out to
tender. Treasury has accordingly developed a standardised infrastructure
procurement policy for emerging contractors aimed at promoting and supporting
affirmable business and equity in the civil and building contractor sector. It
comprises a six-staged advancement programme with contract value limits
determined by experience, training and capacity. It will apply to both civil
engineering works such as airports, runways, bridges, roads etc, as well as
general building works.

Creating jobs and alleviating poverty through targeted interventions in the
second economy Our quest to narrow the gap between the first and second
economies will continue to be a central feature of our economic development
strategy in the next three years - we are of the unshakeable view that only by
uplifting the masses struggling to survive in the second economy will we be
able to achieve sustainably higher growth rates over the longer term, and hence
our end-goal of prosperity for all.

To this end, we aim to build on the second economy initiatives and
programmes we implemented last year. In the forthcoming MTEF, ring-fenced
funding will be allocated to departments which have a key role to play in the
second economy interventions aimed at job creation, poverty relief and black
economic empowerment. These programmes are the following:

Establishment of secondary co-operatives

I have alluded to the successes already attained in establishing primary
cooperatives around the province in the last year. This year we intend to move
the cooperatives programme into the second phase of development by establishing
secondary and tertiary co-operatives. Eleven secondary co-ops will be set-up in
each of the district municipalities and metro, with the main functions of
providing support to primary co-operatives, which are by design production
units. The intention is to ensure that primary co-operatives get support from
secondary and tertiary co-operatives, including the provision and loan of
capital equipment, on a day to day basis and are not dependant on government
support permanently. Support will be given to secondary co-ops to empower them
so as to be capable of running viable commercial enterprises. This means that
secondary co-ops will need to possess skills in financial management, marketing
and general business management. For technical skills secondary co-ops should
be the single point of entry by government departments with the required
expertise and for private sector wishing to do business with this sector.

A tertiary co-operative will provide support to co-operatives through apex
level institutions. It will also advocate and engage organs of state, the
private sector and the stakeholders on behalf of its members. The intention is
that the tertiary cooperative should manage the entire value chain, inter alia
through the bargaining muscle it will acquire over the control of resources and
markets through the sheer scale of its operations, with benefits flowing to
members of the co-operatives.

The growth of co-operatives requires a major shift in our strategy. Co-ops
are a community movement.

For sustainability we need to institutionalise the co-operatives movement. A
special training unit has been created in collaboration with the University of
Zululand to train managers and members of co-ops and to develop careers in the
field. This unit will be headed by Dr MA Setsabi and Dr AD Braimoh, both
specialists in the field. The intention is to provide a bridging programme, a
one year certificate, a two year diploma and a three year degree in
cooperatives and business management practice. The University of KwaZulu-Natal
will also be approached on a similar basis.

Funding in the amount of R50m, R55m and R60,5m has been allocated to the
Department of Economic Development for the establishment of secondary and
tertiary co-operatives in the MTEF period. This does not mean that we will be
neglecting the need for continued support for primary co-operatives. The
initial allocation of R110m to Ithala in the current financial year for
financing business applications from primary cooperatives will be augmented by
allocations of R100m, R187m and R217m over the 2006/07 MTEF - these funds will
be managed by the Department of Economic Development.

Continued support for small business development

In respect of SMME support, during the trade mission to India in December
2005 led by the Premier, contact was established with the National Small
Industries Corporation Ltd (NSIC) in India, which has more than fifty years
experience in promoting the growth of small scale industries and business
enterprises. We are exploring two areas of cooperation with the NSIC: the
import of equipment and plant to produce a variety of products such as barbed
wire, ceramic tiles, agri-food products, building materials, paper products
etc; and the commissioning of a study by a team of NSIC experts to review the
current mechanisms, legislation and policies in the province designed to
support SMMEs in the province. A contract is being concluded with the NSIC team
of consultants, who will be based in the province for 10 weeks, and who will
work with a team from Treasury and Economic Development. The equipment and
professional expertise provided by the NSIC will be used to support the growth
and development of small medium and micro enterprises in the province,
including co-operatives at both the primary and secondary level.

The overwhelming success in the promotion of co-operatives and SMMEs means
that our resources must be directed to support both co-operatives and SMMEs at
district level. The consequence of this is the need to expand the Department of
Economic Development, with more staff employed to provide support centres in
all districts in collaboration with municipal initiatives and to strengthen
Local Economic Development. The focus will be on dissemination of information
and giving guidance to women, youth and the disabled. We have undertaken to
cooperate with and assist the South African Women Entrepreneurs (SAWEN) in
collaboration with the Department of Trade and Industry.

We have welcomed the launch of Small Enterprise Development Agency (SEDA) as
a brand of Department of Trade and Industry to support SMMEs and coops. The
SEDA’s will work in collaboration with Ithala and the Department of Economic
Development to provide support services at district level to mitigate the usual
high mortality rate for first time businesses. The co-ordination will ensure
that there are value adds and no duplication.

Before the end of June the Department of Economic Development will convene a
conference involving representatives of all municipalities to discuss common
and coordinated approach to Local Economic Development.

Co-financing strategy

As I mentioned, this year we will also be instituting a new co-financing
model to support the growth of the small business sector in the province.

Given the huge deal flow which the initial SMME fund managed by Ithala has
already generated, the Head of Treasury was tasked to develop a scheme that
will bring banks and other financial institutions to participate in the funding
of SMMEs in the Province, thereby relieving the pressure on Ithala.

Following the interest shown by the banks and other financial institutions,
the Provincial Treasury is in the process of establishing an innovative
small-business-financing framework, to be called the KZN SMME FUND. The Fund is
designed to enable the KZN Provincial Government, in partnership with
participating financial institutions, to introduce a proactive programme to
help establish small, micro and medium enterprises within the province so as to
generate jobs, enhance economic growth and development, and promote Black
Economic Empowerment.

ABSA has already indicated a willingness to commit R25m to funding small and
micro enterprises needing loan finance of less than R3 million. We are also at
advanced stages of discussions with Standard Bank and First National. Standard
Bank has indicated that subject to agreement on governance arrangements, they
will make available R250m for the financing of SMMEs applying for finance
between R3m and R30m. Discussions with FNB have not been finalised. Together
with a provincial government contribution of R200m which we will make
available, the intention is to leverage total funding of over R1,5 bn for the
SMME Fund by June 2006.

The business partners and financial institutions who participate in the Fund
will by agreement access the existing SMME deal flow generated by Ithala.
Applicants who have applied to Ithala for loans should not be surprised
therefore if their deals end up being financed by another financial institution
- the important thing is that all SMME business loan applications will be
attended to within the coming year.

The fund is designed as a central component of a small enterprise lending
framework, which seeks not to compete with other commercial SMME lenders in the
market, nor “crowd out” emerging loan capital, but to complement the existing
offerings and provide loan options for those entrepreneurs and small businesses
who are presently unable to access affordable loan finance due to a range of
factors.

The full details of the exact nature, purpose and governance framework for
the fund will be set out in the Information Memorandum for the KZN SMME Fund.
This document will form the basis for the participation of any other financial
institution in the fund.

The initial contribution of R200m from government in the first year of the
MTEF will be followed by allocations of R220m and R242m in the outer two years.
Note that the funds will be held against the Vote of the Provincial Treasury
pending disbursement to the SMME Fund.

Business Partners in collaboration with Khula, will work with Ithala to open
access to Ithala applicants to the R150m start up capital for SMME and BEE
funding.

Our message is:

SMALL BUSINESS ARISE!!!

Agrarian revolution

PHEZUKOMKHONO!

Another key second economy intervention is that of the agrarian revolution,
whose main aim is to ensure household food security and to move subsistence
farmers upwards towards the first economy. The objective is to develop the
province’s enormous potential in agriculture into a competitive advantage by
utilising all of its 590 bio-resource regions to produce vegetables, fruit and
meat products for export to Europe, the United States of America (USA), the
Middle East and Asia. Another objective is to reduce the reliance on the
importation of basic foodstuffs and to bring down food prices through a
comprehensive support programme for emerging farmers which will facilitate:

* Access to markets
* A dramatic reduction in farming input costs
* Access to support for land reform beneficiaries, and
* Access to research and technical support for better production processes.

The focus of agrarian revolution projects and interventions will be on
boosting the capacity of secondary agricultural co-operatives at the district
level to address the whole agricultural value chain, including marketing,
transport, processing, packaging and branding, the provision of technical
advice, and support to emerging farmers through the loan of tractors,
implements and equipment. This will be achieved through using economies of
scale and the bargaining muscle which comes with concentrating capital and
resources at a regional level. In this way the agrarian revolution
interventions will complement and build on existing agricultural support
programmes such as the “empowerment for food security”, Comprehensive
Agriculture Support Programme (CASP) and “Siyavuna” programmes, which are aimed
at boosting production at the level of primary co-operatives.

It must be emphasised that the agrarian revolution concept is not only about
agriculture. It embraces the whole spectrum of development of our rural areas,
and requires a high degree of co-ordination and co-operation between various
provincial departments and district municipalities.

The Department of Transport’s “African Renaissance Road Upgrading
Programme”, which provides access to markets and lowers transport and hence
production costs, plays a key role in agrarian revolution projects and
interventions, as does the corridor development concept being co-ordinated by
the Department of Local Government and Traditional Affairs. Other key
role-players include the Departments of Economic Development, Housing, Arts,
Culture and Tourism and the regional offices of the Department of Land Affairs
and Land Claims Commission. The ultimate aim is in fact to use the agrarian
revolution concept to facilitate the development of comprehensive and
co-ordinated district development plans.

Treasury has engaged the Department of Agriculture on an appropriate model
for the planning, co-ordination, and approval of the agrarian revolution
projects. It has been agreed that the Economic Technical Cluster of Cabinet
will be used as the forum to engage other affected departments in the project
planning and approval stages of the programme. A list of prioritised agrarian
revolution projects over the three years of the MTEF, with appropriate targets
in terms of job creation and socio-economic impact, will be prepared and costed
in advance for approval in principle by the Technical Cluster and then
forwarded to Cabinet.

The economic and social benefits which will result from fully exploiting the
province’s natural and comparative advantages in agriculture through the
agrarian revolution concept are such that government has earmarked no less than
R110m, R180m and R216,7m for the programme over the MTEF.

Establishment of accelerated economic development unit within Ithala There
is a growing need for government to intervene in the second economy through our
instrument for economic empowerment, Ithala. While much has been achieved in
the last year in terms of the number of new entrepreneurs entering the market,
there is a need to create better focus within Ithala in order to accelerate
delivery in this all important empowerment initiative. Ithala is therefore in
the process of establishing a new business unit called “Accelerated Economic
Development Unit”, which will facilitate delivery in the following areas:

* Ensuring the viability of the land restitution process, through the
facilitation of viable programmes for such areas
* Investing in revival of township economies
* Promotion of commercial, as well as viable subsistence farming in previously
disadvantaged communities
* Tourism programmes, including black-owned game parks
* Property and infrastructure development
* Facilitation of new investment and increased trade within the province

The unit will create capacity to deliver on the above areas and thus
realising government objectives of reducing poverty and unemployment.

In particular, the unit will work closely with the Department of Economic
Development, the regional offices of the Land Claims Commission and Land
Affairs, and other provincial departments with a view to ensuring the
sustainability of the 20 major land restitution projects around the province. A
Task Team coordinated by the Economic Technical Cluster of Cabinet has already
been established with the mandate to ensure that the commercial enterprises
earmarked for the major land restitution projects such as game farming and
eco-tourism, cane and timber production become viable and sustainable in as
short a time as possible. Without exception, the lack of loan financing for the
initial capitalisation of the projects is the single most important impediment
to viability and sustainability, and this aspect will be a major focus area of
Ithala’s Accelerated Economic Development Unit and the other role-players
mentioned.

An amount of R40m will be allocated to the Department of Economic
Development in the 2006/07 financial year as government’s contribution to the
start up costs of the new unit.

Expansion of existing programmes and capacity building initiatives aimed at
improving service delivery. The third area which government is prioritising in
this budget relates to expanding and improving the quality of existing
programmes and projects. Of note are the following allocations:

* R58 million to develop communal agricultural infrastructure;
* R280 million for the maintenance of the provincial road infrastructure;
* R290 million for Adult Basic Education & Training (ABET);
* R110 million to strengthen the Further Education and Training (FET) colleges;
and
* R279 million to improve maintenance of hospitals.

Note that the amounts per project are the total sum over the three years of
the 2006/07 MTEF period. It should also be noted that Expanded Public Works
Programme (EPWP) and Broad Based Black Economic Empowerment (BBBEE) principles
will apply to all additional funding allocated to infrastructure and
maintenance-related projects.

We are also recommending additional allocations in order to help departments
increase their internal capacity and improve service delivery. Proposed
additional allocations to the Office of the Premier (R72.5 million) will
strengthen the secretarial services to the Executive Council, and other
provincial committees. This allocation will also support the regulatory
activities of the Gambling Board. A request from the Department of Housing for
additional capacity has also been recommended to support various initiatives
such as training of housing beneficiaries.

Mr Speaker, we remain committed for example to continue waging a relentless
campaign to combat the ravaging effects of the HIV and AIDS syndrome on our
society. To this end provincial departments will be collectively spending no
less than R3bn over the forthcoming MTEF on combating HIV and AIDS, including
the further expansion and roll-out of the PMTCT, anti-retroviral and home-based
care programmes - this is the total expenditure across the Departments of
Health, Social Welfare and Education. The respective departments will be
providing further details on these and other poverty alleviation programmes in
their respective budget documentation.

“But Hope smiles at the threshold of the year to come whispering, it will be
happier”
(Tennyson)

The 2006/07 Provincial Budget process Mr Speaker, I have dealt at length
with the major policy priorities and therefore I wish to briefly explain the
division of revenue and MTEF framework which underpins this provincial
budget.

Division of revenue framework and revised provincial allocations over the
MTE

Total resource envelope

In his medium term budget policy statement, the Minister of Finance tabled
the division of revenue between the three government spheres. The expenditure
framework provides for R31 billion in additional equitable share allocation to
the provinces over the MTEF. This represents a substantial step up of the
provincial equitable share, especially in the outer year of the MTEF (R18
billion in additional resources).

KZN’s share of additional funding

Table one in the printed speech (see
http://www.kzntreasury.gov.za/documents/budget_statements/BudgetSpeech2006English.pdf)
presents the amount of additional funding available to the province for further
allocation, taking into account projected provincial own revenue and two
national policy directives; the provision for government employees medical
scheme to cover those civil servants not covered by medical aid, and the
phasing in of the food relief and the HIV and AIDS conditional grants into the
equitable share. For 2006/07, R397 million is available for discretionary
spending, rising to R3.2 billion in 2008/09.

2006/07 provincial budget process and policy priorities

Before I deal with the recommendations of how this additional funding should
be allocated between departments, allow me to briefly explain to Honourable
Members the process which was followed in arriving at the budget proposals
which are tabled for the consideration of the House today.

The 2006/07 MTEF budget process commenced with the issue of the Treasury
Guidelines which explained how departments should prepare the 2006/07 MTEF
budget submissions.

The primary focus of the 2006/07 Treasury Guidelines was on the review and
reprioritisation of departments’ budgets, as well as on an analysis of their
spatial spending and service delivery in each district municipality. The
purpose of this ëspatial’ exercise was to move towards attaining a
comprehensive economic alignment strategy for the province, by trying to
identify provincial departments’ spending and service delivery gaps within a
given spatial area. Ultimately, Treasury would like to compile a profile per
district municipality on services provided by provincial departments (and any
gaps in services), in accordance with their legislative mandates and any
sector-specific norms and standards. However, the quality of information
received from departments in their budget submissions in terms of their spatial
spending and service delivery gaps was relatively incomplete and inadequate. It
was made clear to departments that this will become a standard approach for
future budget submissions. If nothing else, this approach has brought about a
change in the mindset of departments and is a first step towards aligning
service delivery provision between the local and provincial spheres of
government.

Total funding request by departments

For the 2006/07 MTEF, a total of R9,7 billion in additional funding was
requested by various departments. This is against a total of R4,6 billion
available in the provincial resource envelope.

Given the limited resources, substantial reprioritisation and trade-offs had
to be made - this is of course the essence of what the budgeting process is all
about.

REVENUE AND EXPENDITURE PROPOSALS: 2006/07

Mr Speaker, I turn now to the detail of the provincial budget proposals for
the 2006/07 MTEF.

Revenue

For the 2006/07 financial year, the province is budgeting for total revenue
of R37,191 billion.

This represents a decrease of 18,4 per cent as compared to last year’s main
budget. Before Honourable Members become alarmed, however, I should explain
that the decrease is entirely attributable to the removal of the social
security conditional grant funding from the provincial budgets altogether -
this funding has been transferred to the newly established Social Security
Agency at a national level. Taking out the social security grant funding of
some R13,8bn in 2006/07, the provincial budget actually grows by 13.4 per cent
over last year’s main budget, again excluding the social security grant
funding. This is not an inconsiderable increase, and there is little doubt that
the provincial government has adequate financial resources at its disposal in
this budget to deliver on its mandate to the electorate.

The budgeted revenue for 2006/07 is made up as follows: (see
http://www.kzntreasury.gov.za/documents/budget_statements/BudgetSpeech2006English.pdf
for table)

Expenditure proposals and departmental allocations

I turn now to the expenditure proposals. In line with established practice
and sound financial principles, the province is aiming at a balanced budget for
the 2006/07 financial year and outer two years of the MTEF period. The full
amount of revenue available to the province for the 2005/06 financial year,
namely R37,192 billion, is allocated to the various provincial departments.

Mr Speaker, I want to emphasise that before the Cabinet decided on how the
additional funding available for allocation should be apportioned among
departments and programmes, we did a comprehensive costing and bench-marking
exercise to ensure that all the national priorities in the fields of education,
health care (including HIV and AIDS), social welfare services and EPWP
programmes were adequately funded. This exercise revealed that indeed we are
funding these national priorities more than adequately, and all the national
priority programmes have been allocated healthy increases in their baseline
budgets over the 2006/07 MTEF.

Over and above this, most departments will be receiving additional funding
over the MTEF for specific purposes and projects, as indicated in Table three
in the printed speech. Note that all funding in the Poverty Alleviation Fund
has been allocated to specific departments, while specific allocations have
also been made to various departments from the Provincial Growth Fund for
strategic provincial projects such as the Dube Trade Port, Richards Bay IDZ and
infrastructure for the 2010 Soccer World Cup.

In respect of the total budget allocations for the 2006/07 financial
year:

* The Office of the Premier is allocated R 294,7 million, an increase of
35.1 per cent over the 2005/06 budget. This large increase is mainly
attributable to an allocation of R50m for coordinating soccer development in
the province in collaboration with SAFA, as well the additional allocations
already referred to for extra capacity in the executive council secretarial
services, the establishment of a training academy, and regulating the gambling
industry. It should be noted that heritage activities contained in the
Premier’s speech reside in this vote and have been provided for.

* Parliament receives R139,2 million, an increase of 7.6 per cent over the
previous year, including an additional allocation over baseline of R15,7
million for the carry- through costs of the 2005/06 adjustments estimate, new
posts and IT support and systems.

* Agriculture and Environmental Affairs receives R1,299 billion, an increase
of 24.2 per cent. This includes additional funding of R110m as mentioned for
the agrarian revolution programme, R8,7 million for capacity building
programmes, and R10m for agricultural infrastructure in support of emerging
farmers. Also included in the baseline is funding for mechanisation, the Nguni
project, alien weed control etc.

* Economic Development gets R390,1 million in 2006/07, a 177 per cent
increase over last year. Before I am accused of nepotism, let me draw attention
to the fact that R50m of this increased allocation is earmarked for the
establishment of secondary co-ops, R100m for primary co-ops, R30m for the
incubator programme, R40m for the Accelerated Development Unit in Ithala, and
R20m for the Dube Trade Port. Previously these funds were kept in Treasury
before they were transferred to Ithala.

* Education is allocated a budget of R16,209 billion. The 2006/07 budget
represents an increase of 11.7 per cent over last year, demonstrating
government’s ongoing commitment to improving the quality and reach of
education. The budget includes additional funding in the amount of R135 million
for EMIS, the National Curriculum Statement, ABET, FET Colleges and the
introduction of the no fee schools policy.

* The Provincial Treasury receives R1,069 billion, a nominal decrease of 1.8
per cent over last year’s main budget. The main reason for the decrease is that
Treasury will no longer have the centralised Poverty Alleviation Fund held
against its budget, while even the balance of the Provincial Growth Fund (R420m
in 2006/07) and SMME Fund (R200m) will only be housed in Treasury’s budget on a
temporary basis, pending approval of projects and consequent transfer of funds
to the Ithala subsidiary, KZN Growth Fund Managers Pty Ltd. The 2006/07
allocation also includes provision for the Government Employee Medical Scheme,
in an amount of R169m. In Treasury’s own operational budget, additional funding
totalling R79,1m is allocated for the carry-through costs of the budget
communication strategy, Performance Budgeting System and SITA costs which were
not included in the original 2005/06 baseline.

* Health is allocated a budget of R11,737 billion, an increase of 13.1 per
cent. This relatively large percentage increase reflects the high priority
which government, both national and provincial, continues to accord to the
delivery of social services, and includes an additional allocation of R24,6
million for improving maintenance in hospitals.

* The Housing budget records a substantial leap to R1,252 billion, an
increase of no less than 29.1 per cent over last year. This includes additional
funding as mentioned for increasing capacity in the department, in the amount
of R18,9 million, as well as R4m for the carry-through costs of the 2005/06
adjustments estimate.

* The Department of Community Safety & Liaison receives R50,8 million
this year, an increase of 5.5 per cent. As the department received a
substantial additional allocation last year, there are no additional funds
allocated in this year’s budget.

* The Royal Household receives R31,4 million in 2006/07, an increase of 13.8
per cent over last year.

* The Department of Local Government and Traditional Affairs gets R595,6
million, a 29.9 per cent increase. Included in this allocation is additional
funding in the amount of R31m for co-ordinating the provision of soccer stadia
infrastructure in District Municipalities and the Metro, R29m for the Community
Development Workers programme, R24,1 million for Project Consolidate, Disaster
Management Centres and the Rural Connectivity Programme, R10m for corridor
development, and a R15,8m allocation to meet the costs of the incorporation of
Umzimkhulu into KwaZulu-Natal.

* Transport’s budget of R2,416 billion in 2006/07 is an increase of 9.9 per
cent over last year. This includes additional funding in the amount of R70
million for maintenance, new road works and access bridges, and anti-fraud and
corruption measures aimed at streamlining the drivers and learners licence
system. Note that the department receives very substantial increases in this
budget in the outer two years of the MTEF.

* The Department of Social Welfare and Population’s budget decreases from
R13,605 bn last year to R895m - a decrease of no less than 93.4 per cent. As
explained this decrease is attributable to the removal of the social assistance
grant funding from its budget. The department nevertheless receives additional
funding totalling R97,5m as a result of the phasing in of the Food Relief and
HIV and AIDS grants. Although not in our budget the conditional grant for
social assistance grants shows an increase to R13,832 bn in 2006/07 compared to
R12,771 bn in the current year. The number of beneficiaries in year 2000/01 was
621,494 compared to 1,836,975 in year 2004/05.

Table three (See
http://www.kzntreasury.gov.za/documents/budget_statements/BudgetSpeech2006English.pdf
for table)

* The Department of Works receives R451,5 million this year, an increase of
6.0 per cent over the 2005/06 budget.

* The Department of Arts, Culture and Tourism receives a budget of R254,7
million, a 21.6 per cent increase over last year. This includes an additional
allocation of R18,7 million for the carry-through costs of the Adjustments
Estimate allocations last year, and R9,5m and R6,7m for catering for cultural
affairs and office administrative costs respectively.

* The Department of Sport & Recreation is allocated a budget of R106,1
million, a 19.3 per cent increase over last year. Note the additional
allocations made in the two outer years of the MTEF for the establishment of
sporting and recreation facilities.

Table four in the printed speech provides details of the proposed
departmental allocations for the 2006/07 MTEF: (See
http://www.kzntreasury.gov.za/documents/budget_statements/BudgetSpeech2006English.pdf
for table)

CONCLUSION

Mr Speaker, compiling these budget proposals has been both a pleasurable and
demanding task.

Pleasurable, in that there has been tremendously positive input and advice
received from communities and interest groups across the province - we are left
with the firm impression that this is truly a budget for the people by the
people of the province. And demanding, because putting budgets together, which
involves making informed choices and matching limited resources against
competing needs and demands, is never an easy process. I am confident however
that we have succeeded in formulating budget proposals which truly reflect the
provincial policy priorities as approved by the provincial executive, and will
go a long way towards satisfying the aspirations of popular expectations.

The budget proposals will simultaneously lead to sustainable economic growth
and investment, job creation, poverty alleviation, and broader participation in
the economy - all cornerstones of the province’s growth and development
strategy. The social services are once again prioritised in terms of the growth
rates in their MTEF allocations, while service delivery issues and capacity
constraints are also addressed in the budget proposals. In short, I believe
that this budget provides us with all the necessary resources to proceed, on
schedule, along our journey to prosperity for all.

There are many people who contributed to the budget proposals which we table
today. The support provided by the Premier Hon JS Ndebele and my Cabinet
Colleagues is most sincerely appreciated. Once again Minister Trevor Manuel and
the Team Finance have provided invaluable advice and guidance on the technical
issues and national budget framework which underpin this budget. I also wish to
extend my thanks to the Chairperson of the Finance and Economic Affairs
Portfolio Committee, Mr Cyril Xaba and his Committee, who have once again have
played a most constructive role in engaging with Treasury on budgetary and
financial management issues.

I also wish to thank the officials in my departments who have assisted me in
the task of finalising the budget documentation we table today. My thanks go to
Sipho Shabalala and his officials in Treasury, and to Ms Fikiswa Pupuma and her
officials in Economic Development, and to my team in the Ministry, now under
the leadership of Ms Sibongile Shezi. Lastly, to my wife May and family for
their support and understanding.

I will again close with the words of Alfred Lord Tennyson:
“... but Hope smiles from the threshold of the year to come whispering: it will
be happier ...”

Indeed Mr Speaker and Honourable Members, IT WILL BE BETTER.

It is now my honour to formally table the Appropriation Bill, 2006 for the
province of KwaZulu-Natal for the consideration of this House, together with
the Budget Statements.

I thank you.

Issued by: Department of Finance and Economic Development, KwaZulu-Natal
Provincial Government
16 February 2006
Source: KwaZulu-Natal Provincial Government (http://www.kzntreasury.gov.za)