and Economic Development on tabling of the 2009 MTEF Budget in the Provincial
Legislature
25 February 2009
Mr Speaker
Honourable Premier and colleagues in the Executive
Deputy Speaker
Honourable members of the Legislature
Members of the diplomatic corps
Business leaders
Distinguished guests
Ladies and gentlemen
Introduction
Global economic down-turn
I rise once again in front of this House to table what will go down in
history as one of the most difficult budgets to craft. The national, and
subsequently the provincial economy, experienced a number of endogenous and
exogenous shocks during 2008. The effects of these shocks will, to a large
degree spill over into 2009 and 2010, and will impact negatively on the
performance of the national and provincial economies over the short to medium
term. To begin with, the nation experienced significant electricity supply
disruptions and constraints during the first quarter of 2008. Fuel and food
prices rose to record high levels, causing inflation to accelerate rapidly,
reaching a high of 13,7 percent annual rate in August 2008. These higher
prices, together with sustained high interest rates during 2008, reduced the
purchasing power of households and narrowed profit margins of many firms,
causing a drag on consumption and business fixed investment. For the first time
in a decade, the 2008 third quarter gross domestic product (GDP) growth rate
was measured at a mere 0,2 percent, and is likely to be negative in the fourth
quarter.
In August 2008, mounting losses on sub-prime mortgages and mortgage related
securities began straining financial institutions in the United States of
America (USA). The repercussions from these losses have triggered a period of
severe turbulence in world financial markets. This financial crisis has not
stayed confined within the United States (US) financial system, but has spread
to the real economies of the major economic powers, pushing most of these into
a recession. The United Kingdom (UK) economy, our major trading partner will,
for example, register a contraction in 2009. Even China, for long the growth
engine of the world economy, is affected, with exports and imports in January
reflecting a 17 percent and 43 percent decline compared to the previous
January.
Figures released by Minister Trevor Manuel at a post budget conference on
Friday 13 February (Mercury Business Report 16 February 2009)
Impact on South African economy
The South African economy has not been insulated from these events. Although
the direct impacts have been minimal, the indirect impacts have been much more
significant, and will continue to affect the national economy during 2009/10.
Economic reports are already indicating an overall slowdown in employment
growth, and job losses amounting to tens of thousands in several sectors such
as mining and the automotive industry. As Minister Manuel stated in his Budget
Speech two weeks ago, "the storm we spoke of last year has broken, and it is
more severe than anyone anticipated." That statement reminded me of a poem by
Dean Thorpe entitled:
The Storm
Hear the thunder rumble, a sound from miles away
Is it getting nearer, or over for today
A flash of blinding light, electric in the skies
Looking out the window, it really hurts my eyes
After comes the rumble, the clash of cloud on cloud
Feel the floor vibrating, that one was really loud
Still more lightning flashes, it hits the old oak tree
Lightning in the garden, now that's too close for me
The storm that was thought to be far has finally caught up with us. It is
however, my belief that we will weather this storm. It will not be easy, but
with focus, strong will and fiscal discipline, we will come out of this
crisis.
Mr Speaker, in tabling the 2008/09 budget last year, I reaffirmed our
commitment to a strategy we call "step-wise rise to prosperity." This strategy
represents government investments at various stages of an ascending ladder, to
help our people move from poverty to prosperity. The strategy recognises that
the wide gap between the impoverished second economy and the privileged elite
at the apex of our economic structures can only be addressed through a targeted
and incremental process of transformation and empowerment.
In the face of such severe global economic turmoil, our efforts should now
single-mindedly be focused on protecting the poor, providing job opportunities
to create a better life, and on creating the wealth at the bottom of the
pyramid. We will do this by increasing investments in social services,
particularly education, skills development, and health, and in development of
infrastructure. This is the only way that our province can cushion its people
from the paralysing effects of the prevailing economic slowdown.
Strengthening the education system
Mr Speaker, in the Premier's State of the Province Address and response by
MEC Cronje, it was clearly indicated what this government has invested and
achieved in the education sector.
The number of schools with sanitation facilities has increased from 5 379 in
2004/05 to 5 797 in 2008/09. We have made significant strides in the provision
of electricity in our schools. In 2004/05, 3 916 schools had electricity. By
the end of 2008/09, 4 767 schools will have electricity. The number of
outstanding classrooms in the province has declined from 13 559 to 7 451,
reflecting our efforts at reducing the backlogs. What is also encouraging is
the reduction of the teacher pupil ratio from an undesirable 35 to 1 in 2004/05
to a more appropriate 31 to 1 in 2008/09. By 2010/11, the Masifundisane
Campaign will have taught more than 670 000 adults how to read and write.
The declaration from the Freedom Charter that the "doors of education and
culture shall be opened" remains as relevant today as it was 54 years ago when
the Freedom Charter was adopted in Kliptown.
It is our considered view that education must be elevated from being a
departmental issue, or even a government issue, to a societal issue â one that
occupies the attention and energy of all our people.
In order to ensure maximum value of our investment in the education of our
children, I call upon teachers, a crucial element of our education delivery
machinery, to commit to a set of non-negotiables, that is; to be in class, on
time, teaching and not abusing learners or neglecting their duty. Otherwise
additional funds will not suffice to solve all the problems. The department's
management, school principals, parents and learners must honour their
responsibility. Little money can do wonders if the attitude is right.
For its part, the provincial government will continue to improve access of
poor South Africans to quality education. This we will do by increasing the
number of no-fee schools from 40 percent to 60 percent. The budget I am tabling
today will indicate the amounts allocated to the expansion of the no-fee
schools policy in the coming years.
The total budget for education has increased from R13 billion in 2004/05 to
R21,3 billion in the current financial year, and is poised to increase further
in the coming Medium Term Expenditure Framework (MTEF). By 2011/12, education's
budget will reach R30,4 billion, making it by far the largest budget in the
entire country. Likewise, education's capital infrastructure budget has
increased from R308 million in 2004/05, to well over R1 billion in the current
financial year, rising to R2,4 billion in 2011/12.
Skills development and youth empowerment
Our government places great importance on investment in human capital as a
key input and a requirement in pursuit of economic growth. Our commitment to
human capital formation is evident in the amount of resources we have dedicated
to funding Further Education and Training (FET) colleges â this is in line with
the national priority of placing Further Education and Training Colleges at the
centre of a drive to develop the skills needed by our economy. The nine FET
colleges we are financing, provide affordable access to education and training
to meet the needs of the labour market and empower our youth. The throughput
rate in all our FET colleges has improved from 68 percent in 2004/05 to nearly
90 percent in 2008/09.
The KwaZulu-Natal Treasury entered into a Youth Skills Development Training
partnership with Ifihlile Training Academy in June 2007. The purpose of this
pilot partnership is to ensure a complete alignment between training and
available employment opportunities. The first intake has focused on technical
skills in air-conditioning, refrigeration and construction, with a contribution
of R39 million at the inception of this partnership. The successful
implementation of this venture was due to the collaboration between the
Departments of Education (DoE), Public Works, Economic Development, Labour,
Manufacturing, Engineering and Related Services Sector Education and Training
Authority (MERSETA) and the youth commission, resulting to date in the
recruitment of 271 learners since June 2007. 17 000 applications were received,
indicating the high demand for youth skills development.
Out of this initial batch of 271 learners, 58 learners in construction are
already doing their practical training with respective private companies, 54
learners have secured employment, and three have opened their own companies.
This partnership, that guarantees employment for learners after completing all
the modules, has to be expanded. Government has committed massive resources for
infrastructure development in the next three years. Growth in the construction
industry reached 12 percent in the past few years. To take advantage of these
opportunities, in the coming months, we will be expanding this training
programme to include short courses in construction, panel beating, spray
painting, landscaping and security, in partnership with the eThekwini and
Umgungundlovu Further Education and Training (FET) colleges. Through this
programme, an additional 10 000 learners will be trained and attached to jobs
in the next three years.
Moses Kotane Institute to further our education and skills development
objectives, a few weeks ago the Honourable Premier launched the Moses Kotane
Institute, targeted at facilitating youth access to science and mathematics
streams of training. The institute will focus on research, innovation, science
and technology. In addition, the institute will focus on training scientists to
support the agrarian revolution. All of these are crucial tools to be used to
arm our youth with the skills that industry will need. Hopefully, this will
bring to an end the phenomenon of unemployed graduates. It is sad to see
unemployment among young people who have taken the trouble to attend school and
universities to learn, simply because of a skills mismatch. This we will aim to
obliterate.
Information Communication Technology (ICT) Training
The provincial departments of Economic Development and Education are also
strengthening these efforts and spearheading another skills development
programme in Information Communication Technology (ICT) and Business Process
Outsourcing (BPO) in collaboration with the National Institute for Information
Technology (NIIT) from India and the Confederation of Indian Industry (CII). An
additional 10 000 students from this province are set to undergo intensive
training over the next five years. The focus is on software engineering,
networking, website development, database development and integration of
website development, computer programming and databases. In due course,
economic development will indicate the number of jobs that will be created
through the establishment of Business Process Outsourcing (BPO) centres
attached to government departments.
Health
In health, it will be noted that the budget allocation specifically for HIV
and AIDS in KwaZulu-Natal has been rising in the past four years, and continues
to do so in the 2009 MTEF, and will reach nearly R2 billion in 2011/12.
Mr Speaker, allow me to share with this House significant progress in the
fight against HIV and AIDS:
* In 2004/05, the Department of Health (DoH) had 11 449 patients in their
anti-retroviral treatment (ART) programme,
* In 2006/07 this number had increased to 73 641,
* By 2007/08 the number of patients in the programme was 146 537, and
* For the current financial year, the department intends to enrol a total of
205 120 patients.
Latest statistics suggest a declining trend in the neonatal mortality rates
in KwaZulu-Natal. From 11 out of every 1 000 live births in the first 28 days
in the year 2004/05, this number has now been reduced to on average nine. The
correctness of the district health system and primary health care is
demonstrated by the increased rate of primary health care utilisation in the
province, from 2004/05 to 2008/09 per person, representing a rise from 18
million to 22 million in the total amount of visits to our institutions in the
respective years. We have improved our tuberculosis cure rate from 35 percent
in 2005/06 to 85 percent in 2007/08. For the past four years, the province has
not recorded any deaths from cholera. Our district health and central hospital
services have increased their OPD headcount from 1,7 million in 2005/06 to 2,7
million in the current financial year.
Additional resources have been allocated to this department to ensure that
the mortality rates are reversed, in line with our targets for the Millennium
Development Goals (MDGs). It has to be accepted that, were it not for the
financial constraints, the challenges posed by increased burden of disease in
this department deserve a much higher allocation than our fiscus can currently
afford.
Supporting small businesses and employment creation
A key element of the stepwise rise to prosperity strategy is, of course, the
interventions in the informal second economy aimed at supporting co-operatives
and small businesses, with the objectives of broadening participation in the
economy, creating jobs and making individuals and communities less dependent on
the welfare institutions of the state.
Our commitment to the co-operatives programme is demonstrated by the fact
that, as I speak, we are into the second day of a major international
conference on co-operatives in Durban, the first of its kind in the country.
The purpose is to share experiences and learn from the best practices found in
Africa and beyond in relation to the promotion, regulation and management of
co-operatives. The fact is that, despite sustained government support since
2005, many co-operatives have been under-performing, while others have failed.
For this reason, we have embarked on a comprehensive programme, in partnership
with the University of Zululand, which will:
* rehabilitate under-performing or failed co-operatives
* promote and support financial services co-operatives, also known as savings
and credit co-operatives
* establish a co-operative training centre and co-operative bank and
* strengthen and expand the scope of co-operatives in key sectors of the
economy.
Since 2005, 1 177 primary co-operatives have received funding from Ithala,
amounting to R175 231 248. During this period, 6 033 jobs have been
created.
The first few years of the co-operatives campaign has yielded good lessons.
For us in KwaZulu-Natal, this strategy is fundamental in bridging the gap
between the first and second economies and building the rural economy. The main
challenges that we have identified in ensuring the sustainability of the
co-operatives have been the inadequacy of training, and a lack of consistent
and reliable markets for their services and commodities. Intensive training is
underway, utilising a team of specialists from Kenya, brought into the
University of Zululand, to bolster the training and ensure that the
co-operatives strategy is based on a sound footing.
Valuable experiences and lessons have enriched the training of staff,
including all regional co-ordinators who have just returned from a month-long
training session in Kenya. A group of members from secondary and tertiary
co-operatives will be dispatched to Kenya for similar short-course training.
Scholarships will be announced soon to recruit hundreds of young people to be
trained as trainers and managers of co-operatives in Africa and further
afield.
Going forward, the intention is to create and strengthen tertiary and
secondary co-operatives in key sectors such as clothing and textiles, arts and
crafts, agriculture and construction. Government procurement processes have
been aligned to ensure access to sustainable markets in these sectors.
Secondary and tertiary co-operatives will be assisted through a combination
of grant, bridging and loan financing to acquire inputs such as seed,
fertilizer, construction material, bulk fabrics, and sewing and manufacturing
equipment at very competitive prices to support their members at a primary and
secondary level. To rehabilitate and strengthen Small, Medium and Micro
Enterprises (SMMEs) and co-operatives and improve repayment of loans, we shall
embark on massive training that will ensure that communities benefit from value
of the money and not cash. This will negate the negative incentive for people
who look for cash hand outs, as we have seen in the past.
The relevant departments will provide more detail, but we need to ensure
that, during these challenging times, our budgetary allocation focuses on
fighting poverty, creating jobs, and providing services to underprivileged
communities. Through these strategies, our budget will be spent at the level of
the community.
More details of the model being developed to support co-operatives in these
priority sectors will be provided in the departmental speech for Vote 4:
Economic development. We will also be indicating the total investments made in
skills development and training for co-operatives, as well as the number of
jobs that this investment will generate going forward.
Ithala
Ithala is one of the vehicles used by the province to finance small business
development. As members will know, there has been a leadership change in
Ithala. This was done to resolve the differences in understanding the
implementation of the mandate of Ithala. We also needed to deploy an individual
who understands development finance. The insinuation that this strategic
decision is an attempt at "covering up corruption" is as unfortunate as it is
incorrect; especially that those who make these statements have not had the
benefit of the reports. I also believe that the constant attacks on Ithala as
an institution are unwarranted. I undertake to fully brief the Finance
Portfolio Committee on the redeployments, including all investigations,
forensic and otherwise that have been undertaken at Ithala. I will do this
because I believe that it is the right thing to do. I will also be indicating
the progress made by Ithala on their banking licence application, the expansion
of its branch network and the increases in its client base. Let me assure this
House that all recent decisions were taken for the good of the institution.
Expanded Public Works Programme (EPWP) Incentive grant
In an effort to reduce the impact of job losses as a result of the economic
downturn, a new Expanded Public Works Programme Incentive conditional grant has
been created. This grant provides an incentive to provinces and local
government to utilise labour intensive methods of service delivery, as
encapsulated in the EPWP guidelines. An amount of R84 million has been
allocated to KwaZulu-Natal to initiate the incentive programme. Because the
programme is on a claim-back basis, I therefore call upon all provincial
departments to take advantage of this grant.
Improving food security and strengthening rural development
The programme to strengthen agricultural co-operatives will be supplemented
by an increased focus on land reform projects, post-settlement support, and the
implementation of the Makhathini Flats Master Plan â all with the objectives
of:
* maximising the agricultural potential of the province
* lowering the cost of food and improving food security
* creating jobs and
* combating poverty.
The provincial government remains convinced that the agricultural sector in
the province has an enormous potential to be expanded.
The Economic Cluster of Cabinet has identified major land reform projects
across the province, and has developed a model whereby integrated
post-settlement support will be provided to beneficiaries. All relevant
provincial departments will be involved. The Land Bank has been approached to
assist with the provision of capital and operational finance for these
projects. The Department of Agriculture and Environmental Affairs has been
allocated R97,5 million in this MTEF budget as a conditional grant
(iLima/Letsema Projects) to implement the Makhathini Master Plan, and to
improve food security and production.
This budget furthermore makes provision for a total of R363,4 million to the
Departments of Economic Development and Local Government and Traditional
Affairs to support the regeneration of small towns, including the building of
trading centres in small towns and villages. Feasibility studies will be
completed this financial year and the full roll out of this programme will
begin in 2009/10.
Responding to natural disasters
Mr Speaker, KwaZulu-Natal has once again been a victim of several natural
disasters in 2008.
Within a period of three months (November to January), widespread storm
damage affected 9 242 households, displaced 1 821 individuals and claimed 28
lives across all provincial districts.
Through the Provincial Disaster Management Centre, KwaZulu-Natal has been
able to provide financial assistance to the affected families utilising its own
funds. National government has also made a significant financial contribution
in an effort to rehabilitate damaged infrastructure.
For 2008/09, National government has allocated a total of R638,5 million
to:
* transport (R616,8 million)
* education (R16,7 million) and
* agriculture (R5 million)
For 2009/10, the Department of Housing (DoH) has been allocated an
additional R150 million to rebuild houses destroyed by storms. These
allocations are over and above the baseline provisions in the budget.
Fighting crime
Members will recall that KwaZulu-Natal introduced a programme to recruit
crime fighting volunteers in 2007/08. Between 2007/08 and 2011/12, a total of
R260 million has been allocated to this programme, and by 2009/10 a total of 2
100 will have undergone the necessary training.
This is an indication that KwaZulu-Natal is serious about fighting crime.
These efforts are over and above the initiatives announced in the budget speech
by Minister Manuel, increasing the numbers and remuneration of police and
upgrading the criminal justice infrastructure.
Economic infrastructure investments
As both President Motlanthe and Minister Trevor Manuel have emphasised in
recent weeks, government's investment in infrastructure, amounting to R787
billion nationally over the next three years, is key to mitigating the tough
economic conditions currently gripping the country.
Roads
In this province, we have made significant investments in economic
infrastructure over the last three years, as an integral part of our growth and
development strategy. Our provincial roads rank among the best in the country.
A total of 1,9 million square metres of surfaced roads have been resealed in
2008/09, compared to 679 thousand square metres in 2004/05. 18 pedestrian
bridges will be completed by the end of the 2008/09 financial year, providing
much needed access to schools and clinics. Some of the roads in the Department
of Transport's (DoT) portfolio are constructed by local residents through the
Zibambele programme, thus creating much needed employment opportunities for our
people. The details were provided by the Premier in his State of the Province
Address.
Dube Trade Port and international airport
The construction of the new airport at La Mercy is at 50 percent completion,
and the first phase will be completed by May 2010 in time for the 2010 World
Cup.
Key milestones achieved to date include:
* the start of the installation of roof sheeting on the passenger terminal
building, with final completion of the roof scheduled for June 2009
* the initiation of the installation of the baggage handling system in the
terminal.
The Cargo Terminal building is nearing completion, and the air bridges,
which have been factory tested in Spain, are making their way by sea to Durban.
These large structures will be visible to the public as they make their way
from the port to the site. Key future milestones include:
* The completion of the building of the passenger terminal, cargo terminal,
runway, aprons and taxiways on 29 January 2010.
* The access road will be completed by 15 March 2010. All other construction
related to the airport will be completed by 30 March 2010, followed by a period
of testing and commissioning prior to opening in early May 2010.
It is my view, that many people in this province have under-estimated the
impact that the Dube Trade Port will have on economic growth and development in
the province. The Trade Zone will provide dedicated space for import to, and
export from KwaZulu-Natal of high value goods, and by providing the
state-of-the-art air freight handling facilities, is expected to attract
industries such as motor components, electronics, clothing and textiles,
perishables and value-added logistics, which depend on specialised and
dedicated cargo handling facilities.
From 1 October 2009, the Emirates Airline will connect KwaZulu-Natal (KZN)
with the rest of the world by launching a daily service between Durban and
Dubai in the Middle East.
2010 FIFA World Cup Legacy projects
The KwaZulu-Natal government has made a number of infrastructure investments
which will ensure that the province successfully hosts the world during the
2010 World Cup, and leaves a lasting legacy for our people beyond the world
cup.
Construction of the world class Moses Mabhida Soccer Stadium, to which the
province has made a significant contribution, is well on schedule and, on 13
January 2009, we witnessed the last piece of the 350 metre arch being fitted.
The provincial government has also, through the Department of Local Government
and Traditional Affairs, invested a total of R137 million towards the
development of other stadia that will be positioned as potential training
venues for some of the teams participating in the world cup.
These include:
* Harry Gwala stadium in Pietermaritzburg,
* Ugu Sports and Leisure Centre in Zotswa, Port Shepstone,
* Umhlathuze Multi-sports Centre in Richards Bay,
* Monte Vista Sports Centre in Newcastle,
* King Goodwill Zwelithini stadium in Umlazi,
* Princess Magogo stadium in KwaMashu, and
* Sugar Ray Xulu stadium in Cleremont.
The provincial Department of Transport, for its part, is spending a total of
R2,269 billion in upgrading road infrastructure and improving access to the
main soccer venues and the King Shaka International Airport, in preparation for
the world cup.
Good governance and financial management
Mr Speaker, the House will also recall that, in tabling the 2008/09 Budget,
I emphasised the importance of good governance and financial management. I
would still like to make a similar call to all accounting officers to refrain
from wasteful expenditure, and exercise prudence in financial management. This
call is even more important now that we are faced with serious fiscal resource
constraints, both as a province and as a country. We need to do more with less.
We need to be able to account properly for the expenditure we incur in our
respective departments.
Audit outcomes
It was such a pleasure to learn of the outcomes of the 2007/08 audits
carried out by the Auditor-General. 13 departments received unqualified audit
reports compared to only five in 2004/05.
Likewise, the number of qualified audit reports declined from nine to three
in the last audit. The province had no disclaimer. This bears testimony to
improvements in financial management. We commend the Accounting and Chief
Financial Officers for the good work.
Over expenditure
I am, however, disturbed by the prevailing trend of budget overruns in the
province. This House will recall that the province over-spent its 2007/08
budget by a net amount of R164,3 million, largely due to the R1,03 billion
over-expenditure in the Department of Health. This trend is continuing this
financial year. According to the latest in-year monitoring (IYM) report, the
province will overspend by R1,9 billion in total, with the Department of Health
projecting to over-spend by R1,4 billion. Part of this over-expenditure is
explained by an increase in the serious disease burden countrywide,
necessitating repetitive visits to health facilities, overshooting of the
target for recipients of the Anti Retroviral Treatment, as well as the
implementation of the Occupation Specific Dispensation (OSD) for nurses. In
fact, seven out of nine provincial health departments are projecting to
over-spend their 2008/09 allocations. This is the reality we have to contend
with and we need to adopt a different approach towards financing health. While
I appreciate these expenditure pressures, I am of the view that we can still do
much more to contain over-expenditure. I would like to send an unambiguous
message to all accounting officers. You cannot spend the budget you do not
have.
As per Cabinet resolution, I also would like to inform the accounting
officers that all provincial departments are requested to reduce their goods
and services expenditure by five percent in the 2009/10 financial year. We will
do this by reducing the use of consultants and promotional advertising, and by
using competitive procurement processes. This should allow the province to
return to a balanced budget within two financial years. Our treasury has
undertaken a groundbreaking research model that provides micro-analysis of
expenditure patterns to track details and location of expenditure. This has
proved helpful in identifying areas of over-expenditure, and has been adopted
by national departments. Most over-expenditure occurs in goods and services and
personnel costs.
Fighting corruption
Mr Speaker, the Premier addressed the matter of corruption as a cause of
concern for which the government has taken major steps to prevent and
uproot.
38 investigations relating to fraud and corruption in the province have been
conducted by our forensic investigations team. Some of these have resulted in
disciplinary hearings, criminal charges and convictions. A full report in this
regard will be given to the Finance Portfolio committee.
We have now been successful in rolling out project Unembeza across all
provincial departments.
As members will recall, the main objective of this project is to identify
fraud and corruption vulnerability in the provincial information technology
(IT) systems and networks. To all of those cyber-fraud syndicates who are hell
bent on defrauding the province, this is the message: We will find you and
arrest you.
The Performance Budgeting System (PBS) is now implemented in all
departments. By the end of the first quarter of 2009/10, the province will be
able to use PBS to monitor performance against the allocated budget.
These initiatives will go a long way to reduce corruption and improve
efficiency.
Municipal support programme
Our work in supporting our municipalities continues. Mr Speaker, this House
will recall that the Provincial Treasury introduced the Municipal Support
Programme in the 2007/08 financial year.
The programme was designed to specifically address the following:
* To identify the cause of financial problems experienced by the
municipalities,
* To implement measures through a financial recovery plan that will place the
municipalities on a sound and sustainable financial position.
Provincial Treasury has successfully implemented the first phase of the
Municipal Support Programme at seven municipalities: uMgungundlovu and Sisonke
District Municipalities, Ubuhlebezwe, Mandeni, Greater Kokstad, Ingwe and
Impendle Local Municipalities. Some of the major achievements of the Municipal
Support Programme to date include:
* updating general ledgers
* performing important reconciliations
* implementing conditional grant registers to ensure that unspent grants are
cash backed and
* established accurate cash flow status and projections.
A partnership with the Development Bank of Southern Africa's (DBSA) Siyenza
Manje project as part of Phase three has now been formalised and we will be
assisting a number of other municipalities.
The 2009 Fiscal Framework â receipts
Mr Speaker, let me now turn to the 2009 fiscal framework. The receipts side
of the framework is made up of three main sources, namely the equitable share,
conditional grants and provincial own-revenue. After factoring in additional
equitable share allocations, conditional grants and increases in provincial
own-revenue, the total baseline for KwaZulu-Natal increases from R58 billion in
2008/09 to R60,5 billion in 2009/10, and it rises to R71,7 billion in
2011/12.
Downward revisions of the equitable share
Crafting this fiscal framework has not been easy. Mr Speaker, let me share
with this House the difficulties we have encountered in putting together the
2009 fiscal framework. The first challenge relates to the equitable share
allocation for KwaZulu-Natal. This House will know that equitable share
allocations are formula-driven. There has been a slight population decline in
our province. After updating the statistics that inform the equitable share,
KwaZulu-Natal actually had a reduction in its share. A total of R1,5 billion
has been reduced from the provincial equitable share over the 2009 MTEF, due to
unfavourable trends in the data that informs the formula.
In January 2009, we were further informed by National Treasury that, due to
lower than anticipated revenue collection at a national level, which is a
direct result of the world-wide economic slowdown, further reductions in the
equitable shares of all provinces needed to be made. As a result,
KwaZulu-Natal's equitable share was further reduced by R432,3 million in
2009/10, R539,1 million in 2010/11, and R645,3 million in the outer year of the
MTEF. This is the first time in many years that we have seen these kinds of
reductions. On a positive note, however, the overall provincial budget is still
increasing, albeit at a lower rate compared to the previous years.
Over the 2009 MTEF, the provincial budget increases by 10 percent annually
in nominal terms, on average.
In order to protect key social programmes targeted at the poor households
and individuals from the negative effects of these reductions, we needed to
reprioritise the provincial budget. The reprioritisation allowed us to release
a total of about R3,7 billion from the Department of Economic Development's
SMMEs, Growth Fund and Co-operatives programmes.
Mr Speaker, this reprioritisation does not mean that we consider these
programmes less important.
The reprioritisation was necessitated by the tight fiscal constraints we
face as a result of the economic downturn. We have, however, retained
sufficient resources in the budget to ensure that we still deliver on our
development mandate with regard to the SMMEs and co-operatives programmes.
Additional allocations
Mr Speaker, let me briefly indicate to the House some of the departments
that have received additional allocations. I will not list them all.
Health
The Department of Health's budget increases from R17,8 billion in 2009/10,
to R22,2 billion in the outer year of the MTEF. Factored into this budget are
additional allocations of R926,2 million, R1,14 billion and R1,71 billion (both
equitable share and conditional grants) over the three years to finance both
national and provincial priorities. Some of the programmes that will benefit
from these additional resources include:
* MDR/XDR Tuberculosis,
* Occupation specific dispensation (OSD) for professional health workers,
* Combating infant and child mortality,
* Medical goods and services,
* Comprehensive HIV and AIDS programme, and
* Hospital Revitalisation programme.
Education
The total budget for the Department of Education rises to R24,8 billion in
2009/10, and will reach R30,4 billion in 2011/12. This includes additional
allocations of R895,9 million, R1,46 billion and R2,45 billion over the three
years of the MTEF to fund some of the following expenditure areas:
* Increasing the number of teachers to reduce the teacher/learner ratio,
* Extension of No Fee policy to Quintile 3 schools,
* Learner-teacher support material,
* Expansion of the school nutrition programme, and
* School infrastructure.
Social development
Social Development's baseline increases to R1,1 billion in 2009/10, rising
to R1,3 billion by 2011/12 to strengthen care and services to older persons,
crime prevention, child care and protection, and services to persons with
disabilities. This increase in baseline includes an additional allocation of
R107 million to finance early childhood development.
Transport
Transport's baseline increases to R4,5 billion in 2009/10, and further to
R5,1 billon in 2011/12.
This increase includes R734,8 million, R87,3 million and R261,3 million to
accommodate expenditure on:
* Road infrastructure,
* Public transport operations, and
* Continued construction of Sani Pass.
Housing
Housing's budget increases to R2,1 billion in 2009/10, rising to R2,8
billion in 2011/12. This increase includes amounts of R439,4 million, R360,8
million and R796,2 million added to the two housing conditional grants,
namely:
* Disaster management, and
* Integrated Housing and Human Settlement Development.
This House will also be pleased to know that the province has allocated
R72,8 million, R69,9 million and R76,4 million to the legislature. Early last
year, the Provincial Treasury and the legislature undertook a zero-base
budgeting exercise to determine whether the baseline for the legislature is
adequate, given the important oversight function the legislature has to
perform.
The results of the exercise showed that the baseline was not adequate. Part
of this additional allocation is therefore made to correct that inadequacy.
The allocations in the rest of the departments are covered in the table as
shown.
The additional allocations to departments over the MTEF period are
summarised in Table 2 in the printed speech.
The Legislature Private Public Partnership (PPP) project
Mr Speaker, it is important for this House to know the progress made with
regard to the construction of the new legislature complex. As most to us will
know, the building of the legislature will be procured through a Public Private
Partnership process. After delays in finalisation of the process due to
technical legal issues, the legislature, with the assistance of the transaction
advisors, undertook an in-depth review of the feasibility study previously
submitted to the National Treasury to align it with the legislature policy
adopted in October 2008. The required authorisations have now been obtained for
both the feasibility study and the request for proposals.
The request for the expression of interest was advertised on 7 December
2008, and nineteen groups/persons expressed interest in submitting proposals
for the project. The first milestone date is the submission of proposals by the
bidders on 27 March 2009, and it is anticipated that financial close could be
reached by the end of August 2009, at which stage a final funding commitment
must be made by the MEC for Finance.
In a PPP procurement, the first payment is only due after the completion of
the complex and the successful relocation of the legislature, which is expected
to be in 2011/12. Details of the estimated cost contained in the feasibility
study cannot be made available until the selection of the preferred bidder(s)
is made. Once the actual numbers are available, provision will be made in the
next MTEF cycle.
Mr Speaker, having made these allocations, the Province of KwaZulu-Natal
proudly tables a balanced budget with positive growth. As I mentioned earlier,
balancing this budget has been achieved largely through internal
reprioritisation of the provincial baseline.
I humbly request members of the Legislature, as they will be voting on these
allocations in the coming days, to familiarise themselves with the details as
contained in Budget Statements 1 and 2.
Mr Speaker, drafting a budget is a team effort. There are several players
who have contributed in various ways to the budget proposals we are tabling
today. Let me start by thanking the Premier, Honourable JS Ndebele and the
entire Cabinet for the leadership demonstrated in drafting the 2009 MTEF. I am
also indebted to Minister Manuel and the rest of team finance for the deep
insights and technical advice provided on national policy priorities which form
the backbone of this budget.
To the Chairperson of the Finance and Economic Development Portfolio
Committee, Ms Belinda Scott and the rest of the committee, I would like to say:
Thank you for the robust engagements with the Provincial Treasury on all fiscal
matters.
The expenditure proposals contained in this budget have been a matter of
intense discussions at the Ministers' Committee on the Budget (MinComBud). I
therefore extend my sincere appreciation for the work done by the MinComBud
MECs Thusi and Mabuyakhulu.
Lastly Mr Speaker, I wish to thank all the officials in both my departments
for ensuring that the budget documentation we are presenting today is of high
quality. To Sipho Shabalala, who has just been redeployed to Ithala, thank you
for your sterling work on the technical aspects of this budget. I would also
like to convey the same sentiment to the Acting Head of Treasury Leslie
Magagula, Mthombeni and the rest of the treasury team, officials in the
Department of Economic Development led by Carol Coetzee and the staff at the
Ministry. To my wife, May and my daughters and son, thank you for putting up
with my hectic schedule. Without your support, my work would have been
impossible.
Mr Speaker it is my honour to formally table the Appropriation Bill, 2009
for the Province of KwaZulu-Natal for consideration in this House, together
with the Budget Statements and other associated budget documentation.
Mr Speaker,
When the storm was raging and its power was felt by the economies in the United
States, Europe and Asia, the South African economy was resilient. We need to
draw strength from that experience and unite and hold each others hands:
government, labour, private sector, big business and small business to help our
country to survive.
Maybe we may be able to say it in the poetic words of G Rynk Thunder
Booms.
I hear the sound.
Lightning flashes.
I see the sight.
The sky turns black within an instant.
A storm begins to form.
The wind blows hard.
I feel its power.
People run.
They try to hide.
They are afraid of the storm.
I do not move.
I stand very still.
I have no fear of the storm.
May South Africa face the storm without fear.
I thank you.
Issued by: Department of Finance and Economic Development, KwaZulu-Natal
Provincial Government
25 February 2009
