ZL Mkhize
2 May 2006
Chairperson,
Honourable Premier and colleagues in the Executive,
Honourable Members.
Provincial Treasury strategic review process
In preparing for the tabling of its 2006/07 MTEF budget, the Provincial
Treasury conducted a thorough review of its multi year strategic and annual
performance plan. The exercise was aimed at ensuring that all components and
business units in the department are aligned to each other and to the overall
mandate of the Provincial Treasury. I am particularly pleased with the new
departmental vision which emerged from this process, namely that the Provincial
Treasury should: âBe the centre of excellence in financial and fiscal
management in the countryâ. I take this vision literally to say that every
member of Treasury aims to be the best at what they do when measured against
their peers in other provinces.
The department also reviewed its mission to read:
We, the Provincial Treasury will empower our people through:
* An equitable distribution of financial resources, and
* Strategic leadership in areas of financial and fiscal management and
corporate governance.
The mission, honourable members, says a lot. In the first instance, âour
peopleâ refers to all the people of the province. The mission commits the
Treasury to ensuring that there is a balance between social and economic
funding in its managing of the allocative framework, and so that all people of
the province are empowered. In the areas of financial and fiscal Management,
Treasury has to provide strategic leadership so that departments are empowered
to perform their functions. In line with the new vision and mission, five
strategic goals were carefully crafted, with supporting strategic objectives.
These are:
* Goal One: To create a spatially based allocative framework for a balance
between basic service delivery & growth of provincial economy
*Goal Two: To develop a framework that will create opportunities for the
participation of PDIâs in the economy
* Goal Three: To ensure optimum financial and fiscal management in the
Province
* Goal Four: To promote good governance in the province
* Goal Five: To maintain a culture of high performance within the
Department
Details on the supporting strategic objectives can be found in the revised
annual performance plan tabled for the information of honourable members. The
Head of Treasury is responsible for delivering on the five strategic goals of
the department, while each senior manager is responsible for delivering on one
or more of the identified strategic objectives, which indeed form the basis of
their Performance Agreements. In this way key responsibility areas are cascaded
down to every level of manager in the department, whose performance will be
monitored and measured on a quarterly basis by means of a Balanced Score
Card.
Overview of programme service delivery objectives for the 2006/07 financial
year
In considering the departmentâs budget proposals, Honourable Members will
naturally want to know what the money they are being asked to vote is going to
deliver. I will accordingly summarise the main service delivery objectives of
each of the Departmentâs programmes for the coming year details can be found
in
The Annual Performance Plan
Programme 1: Administration
This program has been restructured and capacity increased to ensure that the
MEC and Head of Department (HoD) are provided with the necessary administrative
support to enable them to deliver on their core mandates and functions.
Included in this programme are all other support functions, these being,
Human Resource Management, Chief Financial Office, Logistical and Legal
Services and Information Technology.
Programme 2: Resource Management
The key strategic objectives of the programme in the 2006/07 - 2008/09 MTEF
period will be to:
* stimulate economic growth and employment creation through the funding of
strategic investment initiatives, and
* fund the social needs of the Province in line with national norms and
standards.
The strategic objectives of this unit will be achieved through the expansion
of the macro-economic analytical services provided to the provincial government
and the continuation with the implementation of the Performance Budgeting
System.
The Resource Management team will also continue to ensure fiscal stability
in the province by closely monitoring departmental revenue and expenditure. In
order to improve the robustness of the budget process, Treasury will engage the
Finance Portfolio Committee throughout the process for the 2007/08 budget. This
process will include both the provincial budget process and the municipal
budget process. This will empower the Committee to fully exercise its oversight
role. In keeping with the commitment I made during the Provincial Budget
presentation, this coming year will see a greater emphasis on spatial analysis
of departmental expenditure and service delivery. Further, the implementation
of the Performance Budgeting System (PBS) has already been started in the
Departments of Health and Transport. In 2006/07 PBS will be rolled out in the
following departments: Agriculture, Treasury, Provincial Legislature, Premier
and Economic Development.
Programme 3: Financial Management
The Financial Management branch will in the coming year focus on the strategic
objective of providing appropriate financial management systems which improves
value for money and service delivery throughout the province.
To this end, the branch will continue to manage the implementation of Supply
Chain Management (SCM). This implementation started in earnest with the repeal
of the KZN Procurement Act late last year. Departments have now begun managing
SCM on their own with the assistance given by Treasury through various practice
notes and guidelines. SCM provides a major opportunity for the provincial
government to achieve its policy objectives of promoting BEE. In this regard we
have revised the preferential points system where suppliers will only benefit
if they have committed to reform through 40% minimum BEE ownership and
management. With regard to Co-operatives, Departments have been requested to
commit 10% of their procurement spend on Co-ops in the coming year. Treasury
will be calling for monthly progress reports from departments to monitor
whether such targets are in fact being achieved. The implementation of SCM at
municipal level has been phased in according to the capacity level of
municipalities.
During the coming year we will focus on training that will be focussing on
areas raised in the internal and external audit reports. Our biggest area of
concern is the management of suspense accounts and we will focus on this aspect
in the short term.
With regard to Information Systems, several significant developments have
taken place during the past year with the introduction of three new provincial
financial information systems. Provincial Treasury is responsible for
overseeing the implementation of these transversal systems. Last year, a
variety of financial management systems have been rolled out in the province
including Hardcat and Intenda. These systems are at various stages of
implementation. For instance the Intenda system that will undertake the
electronic sourcing of Quotations and Tenders came live in the Department of
Transport on the 1st of January 2006.
Programme 4: Internal Audit
The Internal Audit component will in the current MTEF cycle continue to promote
good governance throughout the province. It will do this by focusing on the
following strategic objectives:
* to promote a credible risk profile for the province
* to audit service delivery performance of spending agencies
* to promote a culture of zero tolerance for fraud and corruption.
To this end, the Unit intends in the coming year to concentrate on
performing meaningful audits particularly in large departments. Our audit theme
this year will be performance auditing with a view to identifying weak areas of
performance that may lead to poor service delivery. It remains a truism that
the ultimate value of Internal Audit lies not in the number of assignments
conducted, but in the acceptance and effective implementation of the
recommendations the unit raises with management, in various client departments.
The intention accordingly is to place more emphasis on following up on
recommendations made with a view to:
* assessing effectiveness of such recommendations where implemented, and
* appraising management of the risks of not implementing recommendations
In order to improve our service offering and to counter the staff turnover
tide, we will in the next four weeks seek a consortium of internal auditors
from black empowered firms to boost our capacity. At the same time we will
continue to employ suitable staff to join our ranks.
Programme 5: Development and Growth Funds
The Provincial Treasury is responsible for managing the two centralised
development and growth funds, details of which were provided in the main
budget. The Growth Fund will be utilised for dedicated project investment
purposes aimed at stimulating economic growth and employment creation by
providing capital for crowding-in further private sector investment. The SMME
fund will focus on supporting emerging entrepreneurs and black owned small and
micro businesses again the intention is to leverage private sector funding to
augment the provincial funds which have been set aside for this purpose. In
this regard, I am pleased to announce that just this week we intend to conclude
negations with the first private sector financial institution to form a
partnership with government within the framework of the SMME fund, namely ABSA
bank. This bank has committed an initial amount of R25m to the fund, and
negotiations with other banks and financial institutions, including the
provincial banker Standard Bank, are well advanced.
The budget for the 2006/07 financial year
Chairperson, I come now to the budget for the Provincial Treasury for the
2006/07 financial year, as indicated in table 1 in the printed speech. (Please
contact the Provincial Treasury for the table.)
Table 1 provides a summary of the Voteâs expenditure and budgeted estimates
by programmes, beginning in 2002/03 and projected over the 2006/07 MTEF period.
In 2006/07, the Provincial Treasuryâs operational budget will be R449,780
million, while the centralised provincial funds held against the Vote amount to
R620 million, giving a total of R1,069 780 billion. The growth in the
operational budget against the main budget for 2006/07 is 30,5 per cent, while
the centralised provincial funds budget declines by 39,0 per cent against the
2005/06 adjusted budget. The reason for the peak in expenditure in the adjusted
budget for 2005/06 is attributable to once-off funding in respect of special
projects for the province which were funded from Treasury as well as the
acquisition of and the payment of running transversal financial systems.
As reflected in the table, the overall decrease in the 2006/07 budget
compared with the 2005/06 main and adjusted budget relates to Programme 5:
Growth and Development Fund. The entire budget for the Poverty Alleviation
Fund, which formed part of the Programme 5 budget in 2005/06, has been
distributed to the relevant departments over the MTEF period.
The operational budget for Vote 6 increases substantially over the MTEF
period, mainly as a result of the provision for the Government Medical Aid
Scheme under Programme 2: Resource Management. The increase in the 2005/06
adjusted budget in Programme 1: Administration is due to the allocation of
additional funds to off-set budget pressures caused by costs of projects such
as the A1 Motor Racing, KORA Awards and Communication costs, most of which were
once-off projects.
As far as Programme 3: Financial Management is concerned, the 2005/06
adjusted budget increased because of the roll-over of funds for the completion
of the Asset Management implementation project. The carry-through costs
relating to SITA accounts for the increase in the MTEF budget, compared to the
2005/06 main budget.
The increase in the 2005/06 adjusted budget for Programme 4: Internal Audit
can be ascribed to the rollover of funds relating to the Social Welfare
Forensic Audit Project, which commenced in 2004/05, but was only completed in
2005/06. This also explains the high expenditure incurred against Programme 4
in 2004/05.
The increases over the MTEF period are in line with inflation trends.
The increase in Programme 5: Growth and Development Fund in the 2005/06
adjusted budget relates to the roll-over of funds from 2004/05. The decrease in
Programme 5 from 2005/06 to 2006/07 is due to the distribution of the entire
budget for the Poverty Alleviation Fund to the relevant provincial
departments.
Conclusion
Chairperson, Honourable Members, as custodian for the finances of this
province, the Provincial Treasury bears a heavy responsibility both to the
Executive and this Legislature. It is for this reason that we have placed a
heavy emphasis on excellence in all aspects of service delivery. We believe
that it is up to us to set the standards for the whole government to follow in
terms of providing value for money, ensuring optimum service delivery
performance, and creating a culture of good governance. It stands to reason
that if we expect other government departments to follow Treasuryâs example in
all these areas, it is imperative that we first ensure that our own house is in
order. In this regard, I want to re-emphasise that all managers within Treasury
have their performance agreements tied up to the departmentâs strategic
objectives which can be found in the Annual performance Plan. Also, Honourable
Members should note that all the departmentâs strategic objectives have
measurable targets attached to them.
I encourage this House and the Finance Portfolio Committee to hold the
department accountable for the standards and performance targets it has set
itself. The Provincial Treasury commits to becoming even more efficient,
economical and effective in its work, at all levels and in all components. It
is determined, in short, to realise its vision to be the centre of excellence
in financial and fiscal management in the country. Chairperson, Honourable
Members, I trust that with this commitment, you will find no difficulty in
supporting the budget for Vote 6: Provincial Treasury, which it is now my great
honour to formally table for your consideration.
I thank you.
Issued by: Department of Provincial Treasury, KwaZulu-Natal Provincial
Government
2 May 2006
