P Mashatile: Medium Term Budget Policy Statement

21 November 2006

Comrade Speaker
Honourable Premier, Mbhazima Shilowa
Honourable Members of the Executive Council
Honourable Members of the House
Ladies and gentlemen

It is now the second year, since 1994, that we are tabling the Medium Term
Budget Policy Statement to this House. To us this is a significant development
as it indicates that our budgeting process has indeed come of age.

The MTBPS is an important step forward in the budgeting process. It outlines
our strategic priorities and the total revenue that we will use to fund these
priorities over the next three years. It gives practical meaning to our
commitment to open, transparent and co-operative policy making and is therefore
an important milestone in our ongoing effort to deepen the gains of our
democracy.

In addition to the Medium Term Budget Policy Statement, we are also tabling
the Adjustment Appropriation Bill for the 2006/07 financial year. This Bill
will revise allocations made during the 2006/07 Budget Speech in February this
year.

Our progress thus far

As we table these documents, we are mindful of the success and challenges we
face in delivering on the pledge we made to our people in the 2004 elections.
As indicated in our mid-term review; we continue to make significant progress
in meeting the priorities we identified in our Five Year Strategic Plan.

We are on course towards meeting our strategic objective of enabling faster
economic growth and job creation. The provincial economy has strengthened
steadily since 1996. This positive trend in the growth of the provincial
economy is expected to continue into the future.

Business confidence in Gauteng is on the rise. This can be seen by the
increased investment the private sector is making in the provincial economy.
According to the Gauteng Business Barometer, in 2005 business activity in
Gauteng increased by 10,7% compared to the year 2004. Between 2000 and 2005,
net capital investment grew by 17,2 %.

These developments indicate to us that we are on course towards growing the
Gauteng economy at a rate of eight percent by 2014.

We are beginning to make a dent on unemployment. Job creation in our
province averaged around 13% between September 2004 and 2005. Job
advertisements in Gauteng newspapers increased by 38%, over the past few years.
We, however, wish to caution that a lot more needs to be done to create further
employment opportunities.

The launch of a comprehensive provincial Agricultural Development Strategy,
which includes bio-technology and agro processing, will go a long way in
addressing some of the challenges faced by the agricultural sector in our
province. Most importantly, it will contribute to our overall objective of
halving poverty and unemployment.

The implementation of our Broad-Based Black Economic Empowerment (BBBEE)
Strategy and the support for Small, Medium and Micro Enterprises (SMMEs) we are
offering through the Gauteng Enterprise Propeller, has gone a long way in
expanding access to economic opportunities and bridging the divide between the
first and the second economy.

Our comprehensive urban renewal programme to upgrade social and economic
infrastructure in 20 priority townships across Gauteng is one of the key
interventions that will take us closer to the objective of fighting poverty and
building safe, secure and sustainable communities.

In line with our vision to position Gauteng as a Globally Competitive City
Region (GCR), local government is also engaged in a number of infrastructure
projects aimed at fighting poverty and building safe, secure and sustainable
communities. The launch of the Gauteng Safety Strategy will also contribute
towards this objective.

In pursuance of the objective of building healthy, skilled and productive
people, we continue to implement our retention strategy for health
professionals. We also launched the Human Resources Development Strategy and
intensified our learnership and internship programmes.

Furthermore, a comprehensive treatment and care programme, including
antiretroviral treatment is now implemented in 34 health facilities. Since
inception in 2004 this programme has benefited more than 41 000 clients who
were put on antiretroviral treatment.

As part of our quest to deepen democracy and promote constitutional rights,
we continue to pay attention to the emancipation of women, the youth and people
with disabilities.

Through our programme of Izimbizo, we continue to interact with our people
and offer them an opportunity to influence government policies and
programmes.

The deployment of skilled professionals such as engineers and accountants to
municipalities is underway. The provincial Treasury is also working with
municipalities to assist them in strengthening financial management
capacity.

The results of these interventions are starting to bear fruit and place us
firmly on track towards our objective of building an effective and caring
government.

The ongoing programme of rolling out Information and Communications
Technology (ICT) infrastructure across the province will also improve access to
government services and contribute to the creation of an efficient
government.

Honourable Speaker, what I have just described is a true reflection of what
the ruling party in government, based on the African National Congress's
(ANC's) election manifesto, continues to deliver to the people of Gauteng. It
is these facts that are beyond contention, which indicate to us that a better
Gauteng is in the making.

We are on track towards delivering on the promises we made to our people
back in 2004. However a lot more still needs to be done.

To sustain our momentum there is an urgent need to further strengthen
intergovernmental planning, co-ordination and implementation. This is the
essence of the GCR.

Joint planning and implementation will ensure that we maximise the impact of
our collective interventions aimed at delivering on our mandate. We must also
form strategic partnerships with the private sector towards the achievement of
our collective objectives. We must also pay attention to strengthening the
capacity and organisation of the state.

Medium Term Budget Policy Statement

When we presented the 2006/07 Medium Term Expenditure Framework (MTEF)
Budget, we tabled a deficit budget with expenditure exceeding revenue of R783,8
million in the 2006/07 financial year. After the adjusted budget the deficit
has decreased to R610,5 million.

In the 2007/08 financial year, the deficit will be reduced further to R32,2
million and will be financed from reserves in the Provincial Revenue Fund. We
wish to reiterate that our fiscal position remains stable and continues to be
governed by sound principles of fiscal management.

Expenditure for the 2006/07 financial year is adjusted from R34,4 billion to
R35,2 billion, increasing to R36,0 billion and to R38,5 billion in the two
outer years of the MTEF. It is anticipated that from the current financial year
expenditure will increase by R4 billion over the MTEF.

Total expenditure includes more than R17 billion allocated for special
projects over the MTEF. These projects, which include Gautrain and the
implementation of the provincial Growth and Development Strategy, are aimed at
stimulating the growth of the provincial economy in order to ensure that we
reach our target of eight percent growth by 2014.

Capital expenditure over the MTEF will rise to more than R35 billion.
Collectively with local government we have committed ourselves to investing
more than R50 billion over the next five years for infrastructure development
across Gauteng.

We believe this massive investment in infrastructure will further stimulate
economic growth, reduce unemployment, create new nodes of economic activity and
contribute to our overall objective of changing the lives of our people for the
better.

While we pay attention to funding infrastructure investment we will not lose
sight of the equally important need to adequately fund social services. We wish
to reiterate that social services such as health, education, community safety
and social development will remain adequately funded over the MTEF.

This we will do in order to enhance social cohesion and to respond to the
realisation that sustainable and vibrant communities require jobs but also they
require safe neighbourhoods, quality schools and clinics as well as
recreational facilities.

Easing the burden on the fiscus

Comrade Speaker, the solid performance of the economy and the sound
management of public finances have provided us with the capacity and resources
to increase service delivery.

Sound economic policy choices made in the early 1990s are making it possible
for additional allocations to be made available for our key priorities.

However there are challenges that continue to put a strain on the fiscus.
In-migration into Gauteng has resulted in a huge increase in population.
According to the mid-year estimates, there are currently 9,4 million people
living in Gauteng. This puts serious pressure on available resources. Changes
in provincial boundaries that have seen areas such as Winterveldt, Ekangala and
Mabopane being incorporated into Gauteng also present new challenges for the
fiscus.

To address existing and new pressures on the fiscus, there is a need to
constantly look at ways of optimising provincial revenue and easing the burden
on the fiscus. In this regard, a feasibility study which proposes a provincial
tax has been completed and will be presented to the Executive Council for
deliberations shortly.

Other mechanisms of optimising provincial revenue which are currently being
explored include the tolling of existing and future freeways. This will allow
us to raise private sector funding for the maintenance and construction of high
order roads. Funds from the fiscus will then be channelled towards secondary
and primary roads, particularly in our townships.

Blue IQ Holdings is in the process of being restructured to allow it to
raise funding against its balance sheet. Equally, the Gauteng Enterprise
Propeller will be corporatised and restructured to allow it to use seed funding
from the fiscus to gear-in private sector funding to assist SMMEs and BBBEE
companies.

A process to set up a Private Equity Fund jointly with the Metro
municipalities is also underway. The Gauteng Partnership Fund is currently
attracting private sector funding into the social housing market. These
initiatives will be strengthened into the future.

Private sector funding, including the use of Public, Private Partnerships
(PPP) for infrastructure investment will be strengthened into the future. A
process led by Blue IQ for the roll out of ICT infrastructure in partnership
with private sector, is also under investigation.

Comrade Speaker, we are undertaking all these initiatives in order to ease
the burden on the fiscus so that we can channel more funding to our other
priorities. Over the MTEF we will accelerate the implementation of our
programmes.

Our focus will be on ensuring that we achieve maximum impact in addressing
the challenges facing the poor and marginalised in our province.

Over the next three years we will pay attention to the following:

* implementation of the Global City Region Perspective
* implementation of the Growth and Development strategies
* the Integrated 2010 Strategy
* implementation of the 20 priority townships initiative
* integrated infrastructure strategy
* the Gauteng Safety Strategy
* implementation of the Social Development Strategy
* implementation of the Human Resource Development Strategy
* strengthening the capacity and organisation of the state
* integrated Youth and Women development strategies.

We wish to reiterate that these strategies are now in place. The challenge
going forward is to accelerate their implementation. The Gauteng Treasury will
await business plans for these Strategies so that they can be resourced.

Provincial adjustment appropriation bill of 2006

Honourable members, having outlined our priorities over the MTEF, I will now
present the Provincial Adjustment Appropriation Bill of 2006. This Bill will
revise the Appropriation Act of 2006 that was approved by the House in February
this year.

The Appropriation Act of 2006 approved total expenditure amounting to R34,4
billion and estimated revenue of R33,8 billion. The adjusted budget we are
tabling today provides for an upward revision of revenue to R33,9 billion.
Expenditure is also revised upwards from R34,4 billion to R35,2 billion.

The increase in expenditure takes into account additional conditional grants
from national government amounting to R110,7 million, rollovers of R236,6
million, unforeseeable and unavoidable expenditure allocations of R143,5
million and other adjustments of R332,4 million. I will now move to allocations
for individual departments.

Department of Health

The Department of Health receives an additional R255 million raising its
allocation from R10,4 billion to R10,6 billion in the 2006/07 financial year.
The additional resources will be used for hospital revitalisation and forensic
pathology services. An additional amount of R17,5 million has been allocated
for the comprehensive HIV and AIDS programme.

Furthermore, we are allocating an amount of R21 million to this department
for the replacement of old computers in hospitals. An additional amount of R11
million is set aside for the transformation of and the Public, Private
Partnership for the Chris Hani Baragwanath Hospital.

An amount of R2 million is made available to accommodate higher salaries and
related expenditure being paid to provincial staff. An additional R20 million
is set aside for the prevention and treatment of extreme drug resistant (XDR)
Tuberculosis.

We are also allocating an additional amount of R28 million to the department
of Health to cover the shortfalls in the budgets of Dr Charles Hurwitz, Tsepong
and East Rand hospitals which have arisen due to provincialisation.

An amount of R106,8 million will be suspended from the Department of Health
to various departments for the HIV and AIDS project, which will be co-ordinated
by the Department of Health.

Comrade Speaker, we remain committed to the development of healthy and
sustainable communities in our province.

Department of Education

The Budget for the Department of Education increases from R12,2 billion to
R12,4 billion. We have approved an additional amount of R129,4 million to fund
incentives for educators.

The department will suspend R7,2 million to the Gauteng Shared Services
Centre for the employee assistance programme. It is estimated that about 43 000
employees of the department benefit from this service.

We have made these allocations in order to boost efforts aimed at promoting
skills development as a key intervention to drive economic growth and job
creation.

Department of Social Development

The Department of Social Development receives an additional allocation of
R52,8 million raising its budget from R981 million to R1 billion. We have
approved a roll over of R4,7 million for this department to fund commitments
which existed at the end of the financial year for the ongoing integrated
social services programme.

An amount of R21,6 million is suspended from this department's capital
budget to the Department of Public Transport, Roads and Works for the
maintenance, upgrading and rehabilitation of buildings which include upgrading
facilities at Walter Sisulu and Tutela Places of Safety and the planning for
new prototype secure facilities.

Comrade Speaker, our commitment to ensuring social cohesion remains
unquestionable.

Department of Housing

The total Budget for this department increases from R2,0 billion to R2,1
billion. An amount of R81,8 million was approved for ongoing projects in
Alexandra as part of the Alexandra Renewal Project. Additional rollovers of
over R2,6 million were also approved for this department.

Department of Local Government

An additional allocation of R45,8 million has been set aside for the
Department of Local Government increasing its total budget from R160,3 million
to R206,1 million. The bulk of this funding will be used to support
municipalities.

Department of Public Transport, Roads and Works

The total budget for this department increases from R6,22 billion to R6,25
billion. Included in the allocation for this department is an amount of R163
million for improving provincial infrastructure.

Office of the Premier

An amount of R2,5 million has been allocated to the Government Communication
and Information Services programme within the Office of the Premier. These
funds will be used for the publication of the Midterm Review Report which
reflects progress and challenges with regard to the implementation of our five
year strategic priorities. The total Budget for the Office of the Premier is
adjusted to R117,1 million.

The Provincial Legislature

The total budget for the provincial Legislature increases from R129 million
to R146,2 million. Rollovers to the amount of R959 000 were approved for the
purchase of office furniture and equipment as well as the finalisation of the
Legislature's information management system project.

An additional amount of R11,1 million was approved for the Legislature to
fund pressures on overseas travel expenses and visits associated with
activities of the CommonWealth Parliamentary Association.

An additional R4,6 million has been approved to limit funding pressures on
the 2006/07 budget of the Legislature.

The Department of Agriculture, Conservation and Environment

This department receives and additional allocation of R335 000 from national
transfers to augment the Land Care Programme Grant. The total budget for this
department increases from R241,8 million to R243,2 million. An amount of R3
million is suspended from this department to the Department of Public
Transport, Roads and Works for construction works at the Suikerbosrand Nature
Reserve and the maintenance of natural reserves.

A further R850 000 is suspended to the Department of Education for the
Bontle ke Botho prize money.

The Department of Community Safety

The total budget for the Department of Community Safety increases from
R220,1 million to R222,3 million. An amount of R31 million has been allocated
to this Department for Road Safety projects.

The Department of Sports, Arts, Culture and Recreation

The total budget for this department increases from R221,2 million to R263,2
million. A roll over amount of R17 million has been approved for this
department. This includes a capital amount of R14 million approved for
upgrading the Rand Stadium.

An additional amount of R21 million was made available to this department to
host soccer's major international exhibition, Soccerex. The hosting of this
event will contribute towards the growth of the provincial economy and will
enhance Gauteng's position as a Home of Champions and a home of Competitive
Sport.

The Gauteng Shared Services Centre

The total budget for this Department increases from R751,3 million to R776,8
million. Included in the increased allocation for this department is an amount
of R9,7 million allocated for the Vodacom Call Centre training project.

The Gauteng Treasury

The total budget for the Provincial Treasury declines from R70,4 million to
R61,1 million. The decline is as a result of the fact that Treasury has
suspended R5,2 million to various departments for strengthening the capacity of
the Offices of Chief Financial Officers.

Treasury also surrendered an amount of R4 million to the Department of
Health for the appointment of a transaction adviser to speed up the
implementation of the Chris Hani Baragwanath PPP project.

The Department of Economic Development

The total budget for the Department of Economic Development increases from
R572 million to R665 million. The additional allocation will cover among others
a R10,5 million allocation to the Gauteng Gambling Board, which will be
refunded to the North West Province. This follows the completion of the
demarcation process that has seen Morula Sun now becoming part of Gauteng.

Also included in the allocation for this department is an amount of R68
million for the Automotive Supplier Park and R10 million for the Blue Umbrella
project.

Organisational and personnel implications

An amount of R70,5 million has been allocated to various departments to fund
the Government Employees Medical Scheme. Treasury will monitor the use of these
funds to ensure that they are not diverted into other areas.

Comrade Speaker, we have allocated the additional resources at our disposal
in a manner that will ensure that we deliver on the promise we made to our
people in 2004.

Our immediate task is to ensure that these funds are spent and that we
accelerate the implementation of our programmes. We must continue to be
intolerant to both over and under-expenditure.

Furthermore, we must continue to strengthen our capacity to deliver on our
programmes.

I wish to take this opportunity to thank the Premier and my colleagues in
the Executive Council for their political support and insights. A word of
gratitude also goes to Heads of Department and administrative staff from my and
other departments, for their technical support and advice in developing the
Adjustment Bill and the Medium Term Budget Policy Statement.

I now table the following documents for consideration by this House:

* the Provincial Adjustment Appropriation Bill of 2006
* the Explanatory Memorandum to the Bill
* the Medium Term Budget Policy Statement of 2006
* a copy of my speech.

Ke a leboga.

Issued by: Department of Finance and Economic Affairs, Gauteng Provincial
Government
21 November 2006
Source: SAPA