Address by B.F. Scott - MEC for Finance , Provincial Treasury Adjustments Estimate Budget Speech 2018/19
A. Economic outlook and the fiscal implications
Introduction
Madam Speaker, Honourable Members of the Provincial Legislature, colleagues, people of KwaZulu-Natal, ladies and gentlemen, let me begin my speech a little differently this year.
Before I go into the economic background that lays the foundation of the Adjustments Estimate which I am tabling in this House today, as well as the technical aspects of the Adjustments Estimate, I always believe in giving credit where credit is due.
Honourable Members will recall that we were pressed to table a Third Adjustments Appropriation Bill in this House on 29 March 2018 for which we were given very little notice by National Treasury with a gazette formalising the increase in the Education Infrastructure grant (EIG) by R339.996 million being issued to the province on 27 March 2018.
It is because of the maturity and wisdom of this House and the good working relationship we have, that we were able to table this Bill and for KZN to receive R339.996 million. Now that the 2017/18 year is behind us and these funds were well spent, we have seen that the other province that was in line to receive additional EIG funding, did not receive it as they were unable to hold a special Sitting and therefore were hoping to rely on the roll-over process to receive these funds.
The roll-over was not approved for them, though, and they therefore lost the funds. We are grateful to this House and appreciate that you understood the gravity of the situation and therefore accommodated a special Sitting despite the short notice.
Last month, the Honourable Finance Minister, Tito Mboweni delivered his Medium Term Budget Policy Statement (MTBPS). In this speech, he reinforced government’s commitment to the National Development Plan and His Excellency The President’s vision of Thuma Mina.
The MTBPS highlighted the difficult economic and fiscal choices that need to be made over the medium-term and the Adjustments Budget I am tabling today will also talk about the choices we have to make in our province.
Key to improved fiscal space at all levels of government is a faster and more inclusive economic growth and strengthened private and public sector investment. Stabilising the national debt continues to be a priority of this government, as does the need to reduce the structural deficit.
Economic performance
The economic context of tabling this Adjustments Budget continues to be a difficult one with growth prospects initially forecast when the national budget was tabled earlier this year, not materialising. As Minister Mboweni said in his MTBPS speech: “In recent months, deteriorating economic performance, revenue shortfalls and a weaker rand have all contributed to higher debt projections.” The South African economy slipped into a technical recession in 2018, as the Gross Domestic Product decreased by 0.7 per cent in the second quarter, followed by a decrease of 2.6 per cent in the first quarter. This is our current reality.
The public wage agreement was made at a level higher than budgeted for and this also poses a risk to our fiscus. For provinces, this additional bill was not covered by additional funding, thus putting more strain on our already constrained provincial budget.
It is, therefore, key as I said that we focus on ways to improve our economic performance across all sectors to reduce unemployment, poverty and inequality.
His Excellency The President announced various measures to stimulate the economy and these include implementing growth-enhancing economic reforms, reprioritizing public spending to support growth and job creation, enhancing infrastructure investment, addressing pressing matters in education and health, as well as in municipal social infrastructure improvements.
Provinces have an obvious role to play in this regard. This province has established a number of ways to contribute to this drive and these include the establishment of a Youth Development Fund, the continued roll-out of radical economic transformation programmes, the Black Industrialists programme, ensuring full expenditure of departments’ infrastructure budgets (especially by our large infrastructure departments), the focused assistance in the Department of Health, among others.
There is a focused drive to attract investment in KwaZulu-Natal spearheaded by The Honorable MEC Zikalala. The recently published "KZN Investment Opportunities 2018/19” guide bears testimony to this.
We must act with purpose and with vigour in all that we do, and the decisions we take must weigh up what we are putting in, versus what we are getting from our provincial spending. The fiscal space we have will be limited until we resolve all the issues that are holding us back from achieving our full potential.
The following quote from an unknown author reminds us of perspectives and intent, both of which are important:
“Every morning in Africa a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death.
It doesn’t matter whether you are a lion or a gazelle – when the sun comes up, you had better be running.”
B. Proposed adjustments
The Public Finance Management Act (PFMA), and in particular Section 31, determines that provinces must table an Adjustments Budget annually. This must be tabled within 30 days of the national Adjustments Budget being tabled. I, therefore, table the Adjustments Budget in the Legislature today with the national Adjustments Appropriation having been tabled on 24 October 2018.
Adjustments made in terms of Section 31 of the PFMA include the appropriation of funds that have become available to the province, the shifting of funds between and within Votes, the utilisation of savings under the main division within a Vote for the defrayment of excess expenditure under another main division within the same Vote referred to as virements, approved roll-overs for those departments who could not spend the entire amount voted by the Legislature in that particular year, to name a few.
Provincial Treasury holds bilateral meetings with departments and public entities at various points throughout the year to assess in-year spending patterns, as well as to discuss any spending pressures that have arisen since the Main Budget was tabled in March 2018. Due to the tight fiscal position, the province was able to accommodate only a few additional funding requests and these are discussed later. Read more [PDF]
