Speech by the Honourable Barbara Creecy Gauteng MEC for Finance on the ocassion of the Tabling of the Medium Term Budget Policy Statement 2016 and the Provincial Adjustment Appropriation 2016/17

SPEECH BY THE HONOURABLE BARBARA CREECY GAUTENG MEC FOR FINANCE ON THE OCCASION OF THE TABLING OF THE MEDIUM TERM BUDGET POLICY STATEMENT 2016 AND THE PROVINCIAL ADJUSTMENT APPROPRIATION 2016/17, LEGISLATURE, 22 NOVEMBER 2016

Madam Speaker;
Honourable Premier;
Colleagues in the Executive Council;
Honourable Chief Whip;
Honourable Members of this House;
Mayors and MMCs present here;
HODs of our departments;
CEOs of our public entities;
Private sector representatives;
Citizens of Gauteng;

INTRODUCTION

It is a great honour and privilege for me to present to this House today the 2016 Medium Term Budget Policy Statement and Adjustment Budget, the third of this Fifth Administration under the leadership of Premier David Makhura.

At the outset let me table the following documents for consideration by this House:

• The Medium Term Budget Policy Statement 2016
• The Adjusted Estimates of Provincial Revenue and Expenditure 2016;
• Adjusted Estimates of Capital Expenditure 2016;
• The Provincial Economic Review and Outlook (PERO);
• A copy of my Speech.

Honourable members, this policy statement gives us an opportunity to reflect on, and discuss, the context within which we are going to fund provincial priorities and accelerate implementation in the remaining two and a half years of this political term.

We are all too aware today, of the complex and difficult times we face at home and internationally. In a poem entitled ‘A New Dream of Politics’, Ben Okri describes the political world as characterised by cynicism. He writes:

They say there is only one way for politics.
That it looks with hard eyes at the hard world
And shapes it with a ruler’s edge,
Measuring what is possible against
Acclaim, support, and votes.
They say there is only one way to dream
For the people, to give them not what they need
But food for their fears.

To those of us who seek leadership in the public domain, he advises us to regain “this tough art of dreaming”. He then poses these poignant questions:
Can we still seek the lost angels
Of our better natures?
Can we still wish and will
For poverty’s death and a newer way…

Honourable Members, for those of us who are part of this ANC-led administration, these ethical questions guide us, as we today re-affirm our commitment to ensure our children grow up in safe and clean neighborhoods, close to economic opportunities with a decent standard of living and a better future.

These questions inform our deeply held view that the public purse must be used strategically, and ethically, to meet the needs of the many who rely on government to educate children, heal the sick and house the homeless.

These questions remind us of our commitment to public spending that will transform our economic landscape and promote inclusive growth, re-industrialisation, innovation and shared prosperity.

The unexpected victories of the Brexit lobby in the UK and of Donald Trump in the US remind us why Government’s commitment to promote inclusive growth and shared prosperity is so important and the dire political consequences that result when economic marginalisation and exclusion are ignored by policy makers.

Also significant in recent times is the overwhelming mandate given to President Daniel Ortega to continue the transformation project of the Sandinista National Liberation Front in Nicaragua. Even the World Bank has had to acknowledge the significant work he has done over the past two terms to grow the economy at 5 percent per annum and reduce poverty by 13 percent. It is indeed always possible to find a newer way to bring about poverty’s death.

And so it is with a renewed sense of urgency that, here in Gauteng, we actively seek out the angels of our better natures, we reject a cynical approach to politics that feeds the electorate food for their fears rather than meeting their real needs. We re-assert today, that these social and economic needs can only be met when we ensure government spending is made to safeguard public and not private interest.

Last month, we hosted the first Open Tender Seminar to take stock of progress made and discuss implementation of this ground-breaking initiative.

We were humbled by the overwhelming support that we received from over 1 300 stakeholders representing all sectors of society from academia, church formations, business and civil sector. There was collective agreement that the Open Tender initiative demonstrates Gauteng’s drive to transform service delivery outcomes by making ethical leadership the basis of accountability.

ECONOMIC REVIEW

Honorable Members, across the world people continue to face economic hardship with subdued growth rates, limited job creation and stagnant or declining living standards:
• Global economic growth patterns have not stabilised from the 2008 financial crisis. The IMF projects that global growth will be 3.1 and 3.4 percent in 2016 and 2017.
• In Africa growth is expected to fall to 1.4 percent this year. Low commodity prices and lack of diversity in many economies deter investors.
• While poor interest rates and monetary expansion in the advanced economies has resulted in capital flows to emerging economies, these have not significantly impacted on investment, trade or the structural reforms needed to achieve more balanced, and equitable global development.

On the 26 October, in delivering his Medium Term Budget Policy Statement, the Honourable Minister of Finance Pravin Gordhan revised our country’s growth expectation to 0.5 percent this year noting that domestic structural constraints continue to limit our growth. However, he said recent hard work by Government and the private sector have created a platform to build on:

“Our central message is that stable and sustainable public finances, alongside economic reforms and a transparent monetary policy, can support a return to the higher growth rates needed to achieve the National Development Plan’s goals. But macroeconomic tools are not enough. If we are to nurture the “green shoots” in the economy then our holistic package of measures must be implemented.”

Honourable Members, our Provincial Government supports the national effort to promote economic transformation and tackle the triple burden of poverty, inequality and unemployment. In June 2016, we held an Economic Indaba with business, organised labour and civil society to finalise the 2030 Gauteng Economic Development Plan.

Subsequently, Premier Makhura has led a number of follow-up meetings to establish sector work streams and implement initiatives to grow Gauteng’s manufacturing and services.

While it is early days, second quarter growth figures for the Gauteng economy indicate new and encouraging “green shoots”.

Our provincial economy grew at 2.9 percent in the second quarter up from 0.1 percent in the first quarter.

Key drivers of the recovery were manufacturing (at 8.1 percent) finance & business services (3.3 percent), agriculture (3.2 percent) and transport (2.8 percent).

Madam Speaker these figures also indicate year on year growth of 2.6 percent in manufacturing and 2.7 percent in finance and business services.

We expect Gauteng’s economy to perform above the National economy, by growing by 0.8 percent this year.

The number of people employed in Gauteng has been increasing since 2010 reaching five million in 2015. The top five sectors for employment in Gauteng were manufacturing; transport; finance and business services; trade and community services.

In 2015 the province created 209 000 jobs; and in the first two quarters of 2016; 47 000 net jobs were created in Gauteng.

Progress is also being made to revitalise and transform township economies across the province. To open markets to emerging entrepreneurs, Provincial Government has committed to spend 30 percent of its goods and services budget procuring goods and services from township suppliers. At the end of the second quarter, this year, we had already exceeded the 18 percent target for 2016/17, spending over R6.8 billion using over 1600 township suppliers.

We reiterate today, the commitment we made during our Economic Indaba in June: Gauteng Province is open for business. From the beginning of this financial year to date, the One Stop Investor Centre in Sandton, has assisted 1567 businesses with regulatory compliance and has engaged with 28 delegations looking for investment opportunities in our province.

Late payment of suppliers is another area where delays threaten the sustainability of emerging enterprises. Mindful of this, Premier Makhura in June instructed all Provincial Departments to pay service providers within 15 days.

We have already made strides in this undertaking, with more than 65 percent of our departments ensuring 95 percent of their payments are made within 15 days.

New innovations that have assisted us to reach these targets include:

• Payment automation for both fixed and variable value leases, contracts and utility payments and
• Enforcing electronic invoice submission contractually for all tenders and RFQ’s above R 250 000 in value.

Gauteng’s green shoots arise from our deep seated understanding of the importance of partnership and team work with business, labour and civil society. The XiTsonga idiom says “Rintiho rin’we a ri nusi hove”; for those of you who are, like me historically linguistically disadvantaged, Honourable Members, the idiom says “one finger alone cannot pick up grain”.

MEASURED FISCAL CONSOLIDATION

Honourable Members while we do important work to promote inclusive growth in our province, the current fiscal outlook remains constrained.

In simple terms low growth means we collect less revenue. Minister Gordhan announced on the 26th October that he expects a revenue shortfall of R23 billion in the current financial year which means government must continue to prioritise capital investment and stabilise national debt. This is a call to action to all who are charged with overseeing public funds.

In response, all provincial governments have agreed on a Joint Action Plan which includes: containment of administrative personnel expenditure, rationalisation and closure of redundant and underperforming programmes and entities, improved revenue collection and cost-containment measures.

Honourable Members at the end of October I tabled the Annual Consolidated Financial Statements for the 2015/16 financial year.

This report provides a consolidated view of Gauteng Provincial Government’s financial position and performance, detailing revenue, expenditure, assets and liabilities. It also reflects on this government’s ability to use its resources to meet current and future service delivery needs and honour the commitments of the Joint Action Plan.

Our war on waste Honourable Members is succeeding. Last year GPG drastically reduced fruitless and wasteful expenditure, including interest paid on overdue accounts and litigation settlements, by 93 percent from R415 million the previous year to R29 million last year. A significant saving of R386 million!

This was largely achieved because last year 10 of the 14 departments paid 90 percent of their invoices within 30 days. In fact, nine departments achieved payment rates of 95 percent and higher.

Honourable Members of this House are aware that this year has seen a significant improvement in the 2015/16 Audit Outcomes by Gauteng Departments and Agencies, all of which obtained unqualified audits, 60 percent of which were clean.

In the Consolidated General Report on the National and Provincial audit outcomes 2015/16, the Auditor General, Mr. Kimi Makwetu had the following to say on our provincial outcomes:

“The improvement in the overall audit outcomes is attributable to the Premier, the Provincial Legislature and MECs leading by example. The Premier with the support of the MECs insisted on a culture of accountability, sound financial management practices, and demonstrated timely and effective consequence management where non-performance was identified.”

Officials from the Auditor General’s Office as well as the Gauteng Audit Committees have cited greater probity in supply chain processes as a major contributory factor and they have also affirmed the significant contribution the Open Tender Process is making to improved audit outcomes in Departments that implemented it in the last financial year.

Irregular expenditure by departments dropped by 26 percent or R1.4 billion, while provincial entities reduced irregular expenditure by 43 percent. While we celebrate this progress, this government believes irregular expenditure remains too high.

We want to make it clear that there is no tolerance for flouting supply chain management rules and regulations and I have already written to my fellow MECs who lead departments that incurred irregular expenditure asking them to investigate these incidences, conduct disciplinary processes against responsible officials and where necessary prepare submissions for this spending to be condoned.

Departmental accruals, where invoices from one financial year are forwarded for payment in the following financial year, also pose a threat both to the overall financial health of the provincial government and undermine the current buying power of departments in the face of rising demand for provincial services. For this reason Provincial Treasury is working closely with affected Departments to implement measures to contain accruals.

We can report today that working together we have managed to stabilise the Provincial wage bill at 54 percent of the Provincial Budget. Key to this has been PERSAL Control for the Department of Health and the implementation of the Identification Verification System which ensures only bona fide employees receive salary payments.

We have also managed to intensify cost containment measures and over the past two budget cycles working with our departments, we have diverted almost half a billion from non-core spending towards our priority programmes. This is further evidence of team Gauteng’s commitment to our common goals! Ri ntiho rin’we a ri nusi hove

PRIORITIES FOR THE MEDIUM TERM

Madam Speaker, in prioritising funding, Gauteng’s goal remains to maintain spending on quality services for our people; increase spending on infrastructure to transform, modernise and industrialise our province; and boosting own revenue and alternate funding.

Honourable Members; I have spoken before in this House, about the ongoing pressure of in-migration into this province. Since we presented the 2015 MTBPS, a further increase of 585 thousand people have migrated into Gauteng. According to the Mid-Year Population Estimates, Gauteng is now a home to 13.2 million people. This places additional pressure on our Provincial Government to prioritise health, education, and infrastructure.

Over the 2017 MTEF we will be spending just over R128.7 billion towards Education in our province. This will finance 2.3 million learners in the public schooling system. One million two hundred thousand learners are at no fee schools; 42 thousands learners in Special Schools and 141 thousand Grade R learners.

As a provincial government we are proud of our track record in improving the matric pass rate and the number of matriculants who qualify to attend universities and TVET colleges.

We understand improved matric outcomes have allowed Gauteng’s youth from township schools to dream of achieving a degree or a diploma. While funding tertiary education is not the primary mandate of provincial government, we could not stand idle.

Over the last two and a half years this provincial government has spent over R600 million on bursaries, to make this dream a reality.

Our spending on Health is cumulatively R127.2 billion over the 2017 MTEF. In the last two and half years, we achieved the following:
• Close to 17 million patients were seen at our health facilities;
• There are currently 745 thousand patients on ARV; and
• 514 thousand healthy babies were born in our facilities.

Infrastructure investment remains central for both the provision of services to citizens, and the promotion of employment and economic growth. In this regard over R44.8 billion is committed over the 2017 MTEF.

The Provincial Treasury has recently re-convened the Infrastructure Spending Committee. Here Departments must agree on projects that must be completed within this financial year and begin procurement processes for the next financial year.

We must all be clear Honourable Members; this government has no place for delays in planning and tender processes. We do not want scope creep or project overruns.

Over the last two and half years, the following infrastructure projects have been completed:
• The new Thele Mogwerane (Natalspruit Hospital)
• 43 new schools;
• 306 Grade R classrooms;
• 578 toilet blocks in public schools have been renovated
• An Old age home has been completed in Mohlakeng
• Nine provincial roads have been upgraded and one major highway rehabilitated.
• 30 000 houses completed and 15 445 stands serviced.

Honourable Members, in an environment of low economic growth and a slowdown in revenue collection nationally, we need to ensure maximum collection of provincial revenue.
From 2014, we have managed to increase our revenues by 10 percent from R4, 9 billion to R5, 4 billion in 2015. In the last two and half years we have collected R13, 6 billion in own revenue. We welcome the recent Constitutional ruling on eNatis as this will allow us to load updated and recent license fees.

In the near future we will once again interact with the Minister of Finance in an effort to ensure that those organs of states that owe us money pay what is due to the province. This will be done within the ambit of the existing intergovernmental fiscal system. Times, as we all know Honourable Members, are hard.

ALTERNTIVE SOURCES OF FUNDING

It has been a good year for the Gauteng Infrastructure Financing Agency (GIFA), we have managed to release six (6) projects to the market. Four (4) projects of these projects will reach financial closure by March 2017.

These four projects will be financed through a PPP delivery model and on full implementation they will bring more than R5 billion in infrastructure investment into the City Region.

The GIFA will continue to work with municipalities to ensure that a new basket of eight projects that are anchored around the energy sector and logistic hubs are released to the market before the end of the current financial year.

Over the 2017 MTEF period; GIFA will have a project pipeline with a potential to raise more than R40 billion to support the Provincial Infrastructure Master Plan.

Honourable Members, potential infrastructure investors have told us they require certainty that contracts will not be arbitrarily or unilaterally cancelled as has happened in the past. They have also expressed concern over costly and protracted litigation that has arisen in respect of some government contracts.

In this regard we welcome the recent out of court settlements of the long running disputes between the Gautrain Management Agency and the Bombela Construction Consortium. We trust that this will open the way for future investment in our public transport network and other infrastructure projects.

ADJUSTMENT BUDGET

Today our Provincial Budget is increased from R103.3 billion as tabled in March by almost R1.9 billion to R105.2 billion.

The adjustments we are introducing today, are comprised of the following:
• Unspent funds from last year amounting to R517 million are proposed for rollover and re-appropriation in the present year;
• Additional resources for unforeseen and unavoidable expenditure amount to R1, 4 billion;
• Additional own revenue which amounts to R336.9 million.

Honourable Members the Provincial Adjustment Budget is primarily to cater for unforeseen and unavoidable expenditure by Departments and entities; and also allow for an adjustment on the revenue side.

The need for this expenditure was brought to the attention of the Provincial Government through the Ntirhisano Outreach Programme.

Over the past year, under the leadership of Honourable Premier Makhura we travelled the width and breadth of the province to listen to the concerns and needs of our people. These engagements were candid, frank and open. Today as we make choices as to where to allocate scarce resources, we are guided first and foremost, by these interactions.

Accordingly; Honourable Members, CoGTA will receive an additional R70 million to use as follows: R20 million to assist in re-settling families displaced by the recent floods in our province; R14 million to assist the Emfuleni Local Municipality prevent sewerage spills into Vaal river system; R20 million to assist the Municipality of Merafong to begin repairs to the water pipeline for Khutsong Extension 4 and 5 and Welverdiend, that were damaged by a sinkhole; and R16 million to assist Rand West Local Municipality for electrification services to RDP houses in Mohlakeng extension 5 and 11. In addition the department receives a roll-over of R27.7 million to fund the Provincial Disaster Management Centre.

The scourge of substance abuse is another matter that has been raised with the provincial Executive Council in every community. Accordingly the Department of Social Development receives an additional allocation of R36.2 million to boost the provincial war against substance abuse and fund increased bed capacity in the Randfontein Life Recovery Treatment Centre; to establish a new treatment centre at the Sedibeng region as well as centres of excellence in Sedibeng and Johannesburg regions. R8.9 million is allocated to fund the appointment of Assistant Community Development Practitioners and nurses in Institutions managed by the department.

To promote social cohesion and ensure young people in particular have constructive ways of spending their free time, Sport, Arts, Culture and Recreation is allocated R16 million is for Community Festive Games, Nelson Mandela Remembrance Walk and the Sports Awards. A further amount of R11.6 million is added to the department for the refurbishment and construction of infrastructure projects and the completion of the Provincial Archive Centre. The department also receives roll-overs of R 17.8m for the completion of community libraries.

Delays in the issuing of title deeds for new and existing houses is another issue that has been repeatedly raised during the Ntirhisano programme. The Department of Human Settlements receives R50 million in new money to accelerate issuing of title deeds by paying outstanding municipal and security services. It further receives a roll-over of R127.5 million for use on Syferfontein phase 2 and an additional payment of rates and taxes for completed housing stock.

The high rate of crime is another issue that has been repeatedly raised by communities. To support the Department of Community Safety in its war on crime, we have added R20.7 million to fund the roll out the Memeza Community Alarm project to the elderly and child headed households, introduce ICT enabled oversight at 40 police stations and support internships for traffic college graduates.

In support of our programme to build an inclusive economy and give ever increasing opportunities to those who have historically faced marginalisation and exclusion we are allocating almost R100 million more to our economic sector departments. This includes R20 million to the Office of the Premier to fund youth employment programmes under Tshepo 500 000.

Economic Development: receives an additional R25.5 million to bolster tourism and the SMME support programmes.

Agriculture and Rural Development receives an additional R53.7 million. R39 million is money from DBSA for the Gauteng Cleaner Production and Remediation Fund to be used for waste re-cycling projects. The balance of R14.7 million will fund various projects including the completion of the hydroponics tunnels in the De Deur area; the establishment of a chicken processing facility in Kaalbasfontein and support for community food gardens and the Bontle ke botho programme.

R35 million is allocated to the Gauteng Infrastructure Financing Agency to further fund the Project Preparation Facility to carrying out feasibility studies for infrastructure projects.

To prepare for the 2017 Academic year, the Department Education receives R260 million: R155 million is allocated to fill critical vacant posts and appoint teachers to cater for increasing learner numbers in the 2017 academic year. R105 million goes towards supporting schools to pay for municipal services resulting from price increases in electricity. In terms of roll overs: the department receives R157 million for the digital classroom programme; R18 million to deal with skills development for GPG; and R4.3 million for the National School Nutrition Programme Grant to cover a shortfall caused by high food inflation.

The Department of Health receives an additional amount of R200 million: R143.7 million is allocated to the department to deal with their personnel pressure. In addition, R56.3 million is allocated towards ICT for revenue enhancement initiatives. Roll overs the Department receives include R33.8 million to complete projects at the Tshwane District, Dr George Mukhari and Charlotte Maxeke hospitals; as well as R15 million to pay stipends to community health care workers working with HIV /AIDS and TB patients.

The Department of Roads and Transport has an upward adjustment R609.7 million. This includes a roll-over of R29.7 million from the Public Transport Operation Grant (PTOG); a re-appropriation of R400 million from the reserves of the Gautrain Management Agency to fund the final settlement of disputes between the GMA and The Bombela Construction Consortium and R 180 million advance from Provincial Treasury that will be deducted from the GMA allocation over the next two years, for the same purpose.

The Department E-Government receives R36 million to fund shortfalls for payment to Sita for the GPG-wide Microsoft licences.

ACKNOWLEDGEMENTS

Allow me Madam Speaker, before I conclude, to thank:
• the Premier for his inspiring leadership and support;
• my colleagues in the Executive Council for their understanding of the financial challenges facing us;
• the Finance Portfolio Committee, and SCOPA under the leadership of the Honourable Sakhiwe Khumalo and Mbongeni Radebe;
• all our senior officials and our stakeholders for their ensuring the fiscal position of this province remains stable and, in particular,
• my thanks go to the officials of Gauteng Treasury and GIFA. As you all know Honourable members this team won two silver and a gold Batho Pele Award for Best Provincial Department and Most Ethical and Professional Department and it is led by 2016’s best Provincial Head of Department, Ms Nomfundo Tshabalala.

CONCLUSION

Honourable Members our path ahead will not be easy. Economic hardship and uncertainty mean that communities across the province need the guidance, support, and services of this ANC-led provincial government more than ever before.

I have shown today that there are green shoots. To see them flourish and bear fruit, we must restore our ancient art of dreaming so we have the strength and the inspiration to overcome. Allow me to end, as I began, with the final verse of Ben Okri’s poem:
We dream of a new politics
That will renew the world
Under their weary suspicious gaze.
There’s always a new way,
A better way that’s not been tried before.

I Thank You. Inkomu

toc dep | giam can nhanh