FREE DAILY EMAIL

Date : 25/02/2004
Source: Free State Provincial Government
Title: Z Dingani: Free State Appropriation Bill 2004/2005


BUDGET SPEECH DELIVERED BY FREE STATE MEC FOR FINANCE, EXPENDITURE AND ECONOMIC AFFAIRS, MR ZA DINGANI, AT THE PROVINCIAL LEGISLATURE 25 February 2004

Honourable Speaker
Madame Premier
Members of the Executive Council
Members of National Parliament
Permanent Delegates to the National Council of Provinces
Members of the Free State Legislature
Marena, Dikgosi, le Mafumahadi
Honourable Mayors and Councillors
Delegates from National Treasury
Distinguished guests
Members of the media
Learners
Ladies and Gentlemen.

It is with great pleasure and pride, but also with some sadness that today I present to you my last Free State Provincial Budget for the 2004/05 financial year, as we approach the end of our term in government.

On the eve of our celebration of the first decade of democracy in South Africa it is perhaps opportune to pause a little to reflect on some of the achievements of this government over this ten-year period.

GREAT EXPECTATIONS (with apologies to Mr Charles Dickens)

Mr Speaker, when our people met in Kliptown in 1955 at the Congress of the People, to adopt the Freedom Charter that mirrored the aspirations and hopes of the oppressed people of this country; it was clear - even then - that the struggle for emancipation from apartheid would not end with the attainment of the National Flag and the National Anthem.

A DECADE OF COMMITMENT TO CHANGE

When our new constitution declared that 'everyone has inherent, dignity and the right to have their dignity respected and protected it was clear to us that it would call for exceptional political will and commitment to exercise the necessary and appropriate choices to realise this ideal.

When we came to power in 1994, we did so with an ambitious agenda for the advancement of socio-economic transformation. In fact, this government was not only supportive of change, it was impatient for change.

At that stage this government, like many new progressive governments the world over before it, found it difficult to say with confidence how much of public service delivery is art and how much is science. The one thing that was very clear to us, however, was that it was not monkey business. We knew that there was no way we could escape making the hard choices to travel the road of steady progress in addressing apartheid's legacy of inequality and poverty.

This realisation did not lead us to despair, but strengthened our earnest commitment and resolve to work hard from the onset to achieve a truly democratic, non-racial, non-sexist, prosperous and stable South Africa which could offer a better life for all.

WHEN INJUSTICE ASKS A QUESTION, TIME CANNOT BE WASTED PONDERING THE ANSWER

This unwavering commitment to do the right thing in order to change the socio-economic landscape of this country and this province for the better, saw this government introducing ground-breaking reforms such as, inter alia, the:

* Reconstruction and Development Programme (RDP) to guide the fundamental transformation of our society in all respects
* Growth Employment and Redistribution (GEAR) strategy to set the parameters within which fundamental transformation of society could be operationalised within the economic strategy of a sharpened focus on budget reforms and a planned multi-year reduction in the then huge inherited budget deficit
* Medium Term Expenditure Framework (MTEF) to enhance analytical capacity to inform more effective and efficient resources-based planning over a multi-year period
* Public Finance Management Act (PFMA) to create an accountability framework that provides government departments and agencies spending flexibility whilst at the same time, shifting emphasis towards strengthening performance orientation, by moving beyond compliance and results.

EMBRACING LEADING EDGE IDEAS

Mr Speaker, our search to build a growing, competitive economy capable of raising employment levels and reducing poverty and persistent historical inequalities, saw us crossing traditional boundaries to share knowledge, to create collaborative and innovative policy solutions, solutions intended to foster this government's citizen - centred approach to service delivery.

Not only did it break new ground, but it offered an invaluable understanding of what ordinary citizens expect as far as public services are concerned.

Allow me to put on record in this House today for posterity to judge, that it is no accident that for the past decade South Africa has largely avoided the dislocation experienced by many developing countries from a continuous series of global financial and economic shocks that characterised this period.

RAISING THE BAR ON EXCELLENCE - A DECADE OF UNPRECEDENTED PROGRESS

History will concede that the onset of democracy in South Africa has been characterised by the implementation of a variety of concrete programmes aimed at expanding service delivery to all and progressively eradicating socio-economic disparities within our society.

In his recent State of the Nation address, our President indicated that the past decade witnessed the longest consecutive period of growth since the Gross Domestic Product (GDP) was first properly recorded in the 1940s.

Mr Speaker, even those political dinosaurs who fail to recognise progress even in the face of continuous visible improvements have over the past ten years, enjoyed the benefits of living in a Free State and a South Africa, with:

* Reductions in inflation of historically unheard of levels
* Enhanced competitiveness and a significantly more diversified economy
* Frequent upgrades as an international investment destination
* Decreasing levels of household debt
* Improved business confidence in the management of the economy
* A discernable improvement in the human development index
* Positive economic growth rates
* Sustained, accelerated private sector infrastructure investment
* Increased international tourism
* Increased government fixed capital formation
* Reductions in individual and corporate tax rates
* Continued improvement in the distribution of income
* Significant reduction in the national budget deficit as a percentage of the Gross Domestic Product (GDP), compared to historical levels.

Furthermore, significant improvements have been made in public management in general and financial management in particular the:

* modernisation of financial management
* enhancement of public accountability
* the effective and efficient management of public revenue expenditure, assets and liabilities, is well managed in this province.

Today, enormous improvements in the financial management of provincial departments are evident, as we now have institutionalised: * The alignment of budget and departmental strategic plans with measurable service delivery objectives of the Free State Provincial Development Plan.

* The practice of actively and continuously managing the budget and monitoring the use of resources for service delivery throughout the year.

* Procedure and practices to avail information to the Provincial Legislature on what has been achieved in the province against original delivery objectives set.

* Implementation of Supply Chain Management reforms.

On the eve of the celebration of South Africa's first decade of democracy, this province is well-positioned to focus on the realisation of important long-term goal of the PFMA, such as the:

* Preparation of consolidated financial statements
* Improved accountability of provincial public entities.

OUR JOURNEY IS NOT FINISHED BUT WE HAVE COME A LONG WAY

Mr Speaker, this overview of our first decade of democratic rule clearly demonstrates that those criticising the performance of this government, are clearly doing so without reference to the facts.

For those who, nevertheless, in the interest of cheap politics continue to raise baseless criticism against the performance of this government, notwithstanding growing consensus amongst researchers, analysts and serious commentators that our policies are increasingly succeeding in addressing the very day-to-day challenges of ordinary citizens. I can only say that although quarrel is the weapon of the weak, I do understand that when a man despairs, his tongue becomes long.

Allow me also to indicate that, notwithstanding excellent progress made with health services delivery in this province, there are those who make it their life-long vocation to level unjustified criticism against our performance.

Mr Speaker, we have not finished our journey, but only small minds can deny that we have come a very long way in a short period of time.

YES, WE HAVE COME A LONG WAY

To steer our course through a second decade of democratic development, we are not waiting for our ship to come in. On the contrary we are using the next MTEF to swim out to meet it, by ensuring that we consolidate the hard-earned gains from public expenditure reform over the past few years, by putting particular emphasis on:

* A renewed focus on employment creation through an Expanded Public Works Programme and a series of interventions to strengthen our skills base and empower communities.

* An enhanced commitment to fighting HIV and AIDS including a progressive rollout of anti-retroviral drugs and supporting measures.

* Further extension of social grants particularly targeting children and other vulnerable groups.

* Improving the quality of school education through targeted focus on learner support materials and other critical supplies.

* We propose a balanced budget for the 2004/05 - 2006/07 MTEF, which position is informed by the need:
* To cater adequately for spending needs emanating from carrying out our provincial mandates.

* For increased funding in particular areas of provincial spending to ensure effective delivery of new services emanating from national and provincial policies and continued improvement in the delivery of existing services.

* To protect the purchasing power of social grants.

* To increase expenditure on non-personnel expenditures to more acceptable threshold levels.

* To consolidate the gains made over the past few years in provincial infrastructure delivery.

The total provincial revenue estimates of:

* R12,543 billion in 2004/05
* R13,684 billion in 2005/06 and
* R14,716 billion in 2006/07

(This therefore means that this government is going to spend R40,9 billion over the next three years on improvement and provision of services)

represent nominal year-on-year growth of:

* 13,5% in 2004/05
* 9,1% in 2005/06 and
* 7,5% in 2006/07

which is well above expected inflation levels.

EXPENDITURE PER POLICY AREA

Mr Speaker, I will now briefly indicate the MTEF expenditure proposals per policy area.

EXPENDITURE ON SOCIAL SERVICES

A key pillar of our development strategy is investment in human capital through the education, skills development and health systems, and the extension of income support through the social grant system.

The bulk of this spending takes place at provincial level where primary responsibility lies for delivering school education, primary health care and hospital services, social grants and welfare services.

Provincial spending on social services has grown substantially in recent years, with much of the growth accounted for in spending on Social Development and, in particular, on social grants expenditure.

SOCIAL DEVELOPMENT PROPOSALS

Mr Speaker, this government has never been apologetic for its people-centred approach to public service delivery and its particular bias towards meeting the real needs of the poor and championing the cause of the destitute and the vulnerable.

In this regard, the extension of the social safety net is probably one of the post-apartheid government's greatest successes. Government's commitment to broaden access to social security and other social development services, as the most effective instrument for poverty alleviation, is evident in our budget proposals for Social Development of:

* R3,163 billion in 2004/05
* R3,635 billion in 2005/06 and
* R4,020 billion in 2006/07
This therefore means that this Government is going to spend R10,818 billion over the next three years on provision of social security and social development, which represent nominal year-on-year growth in expenditure in this area of service delivery of 29,6%, 14,9% and 10,6% respectively over the forthcoming three-year period.

The significance of the social security expenditure proposals over these 3 years of R2,8 billion, R3,2 billion, and R3,6 billion, respectively, is emphasised if contrasted with the 1995/96 voted amount of only R731 million. This allocation serves as testimony of this government's ongoing commitment towards alleviating the plight of the poor, the disabled, the vulnerable and the elderly.

In addition to the extension of the safety net, greater involvement in developmental activities such as income generation, food relief, home-based care and improvement in social grants delivery, will remain key focal areas over the next MTEF period. Building on enhanced social development sector, our response to the impact of HIV/AIDS on communities also remains a key challenge moving forward.

HEALTH PROPOSALS

South Africa has a large and growing health sector with the combined public and private health care system contributing approximately 8% of South Africa's GDP.

It is, furthermore, important to note that all three spheres of government play a role in the delivery of public health services, with:

* The national Department of Health focusing mainly on policy, legislation, national programmes and international liaison.

* Provinces being responsible for most of the delivery of health services, including a significant involvement in out-of-hospital primary health care.

* Local Government playing a role in relation to environmental health and clinic-based primary health care services.

Proposed allocations for expenditure on health will grow by 10,3% to R2,730 billion in 2004/05 and will thereafter grow with a further 8,9% and 7,1% in the two outer MTEF years to R2,972 billion and R3,184 billion respectively.

(This therefore means that Government will be spending R8,8 billion on Health services.)

Expenditure on health has grown steadily over the years to give effect to government's strategy to enhance access to public health services, also at the primary care level. This growth is evident if one compares current budget proposals with the 1995/96 voted budget of health of R1,05 billion.

EDUCATION PROPOSALS

Mr Speaker, our future is in the hands of our children. Education expands abilities and opportunities. It is a freedom in itself that opens doors to other freedoms and, as such will always remain a high priority of this government.

Transformation of education is an area in which considerable success has been achieved over the past decade, including:

* Improved access to education
* Accelerated provisioning of school infrastructure

* Improved learner: educator ratios
* A more equitable distribution of resources within the sector

* Strengthening of parent and community involvement through school governing bodies

Expenditure proposals are as follows over the MTEF period:

* R4,512 billion in the first year (thus a nominal growth of 12,0%)
* R4,848 billion in the second year (7,4 % increase)
* R5,145 billion in the third year (6,1 % increase)
(This therefore means that government will spend R14,505 billion on Education.)

Key challenges on which this sector will focus over the next MTEF period, includes:

* The enhancement of capacity to deliver school infrastructure
* Raising expenditure on non-personnel, non-capital expenditure to more acceptable threshold levels
* Improved equity in expenditure on education
* Improved availability of credible non-financial information
EXPENDITURE PROPOSALS IN RESPECT OF THE OTHER AREAS OF OPERATION

PUBLIC WORKS, ROADS AND TRANSPORT

The development and maintenance of infrastructure will always remain critical towards supporting the ongoing upliftment of our people and to ensure access to services and economic opportunities.

The allocation to this department will increase by 2,8%, 7,3% and 6,5%, R783,18 million and R840,45 million and R895,12 in the three respective MTEF years.

LOCAL GOVERNMENT AND HOUSING

Local Government remains at the cutting edge of political and socio-economic delivery to the people of our province. Ongoing provincial support to local government and traditional leadership continues to be of critical significance.

Mr Speaker, in the recent State of the Nation address by President Mbeki it was extremely encouraging to learn that 1,9 million houses have been built as part of government's subsidised housing programme. We need to retain this focus and ensure that our provincial efforts further add to this outstanding performance.

The expenditure proposals for this department is R571,23 million in 2004/05, R552,79 million in 2005/06 and R585,04 million in 2006/07, which represents nominal growth of 13,8% in the first year, a decrease of 3,2% in the second year and an increase of 5,8% in the last year.

TOURISM, ENVIRONMENT AND ECONOMIC AFFAIRS

The proposed allocation to this department increases with 5,2% in 2004/05 to become R203,75 million.

It is further proposed that this budget should grow with 4,5% in 2005/06 to become R 212,89 million and a further 5,5% to become R224,69 million in 2006/07.

AGRICULTURE

As the food basket of our country, and employer of many of our people, this sector will always need appropriate support.

An allocation of R211,3 million is proposed for this vote in 2004/05, which is 24,2% higher than the voted 2003/04 budget. In the second year it will increase with 6,8 % to R225,57 million and a further 7,6% to become R242,76 million in 2006/07.

PROVINCIAL TREASURY

The Provincial Treasury will receive R117,94 million, R123,05 million, R129,67 million over the next three years, resulting in growth of 12,1%, 4,3% and 5,4% respectively in the size of this allocation over the MTEF period.

OFFICE OF THE PREMIER

This vote grows by 5,4% to R78,39 million in 2004/05, 4,7 % to R82,10 million in 2005/06 and a further 5,7% to R86,8 million in 2006/07.

SPORT, ARTS, CULTURE, SCIENCE AND TECHNOLOGY

The budget of this vote decreases to R94,2 million in 2004/05, compared to R155,3 million in 2003/04 as the Provincial Government will no longer be funding the Phakisa Grand Prix from the 2004/05 financial year.

Hereafter the budget will grow by 15,5% to R108,79 million in 2005/06 and a further 5,0% to R114,19 million in 2006/07.

PROVINCIAL LEGISLATURE

The allocations to the Legislature will be R51,2 million, R54,5 million and R58,57 million over the next three years, which represents 8,1%, 6,4% and 7,5 growth over the period.

PUBLIC SAFETY, SECURITY AND LIAISON

The allocation to this vote grows with 5,9%, 4,5% and 5,4% to R27,12 million in 2004/05, R28,34 million in 2005/06 and R29,88 million 2006/07.

CONCLUDING REMARKS

Mr Speaker, the provincial budgets of the past few years provided for strong growth in expenditure. The 2004/05 to 2006/07 MTEF proposals tabled in this House today aim to secure the benefits of improved service delivery over the past few years, within a sustainable financial framework.

These proposals are not only the end result of an intensively interactive provincial budget process stretching back some ten months, but is also the manifestation of years of hard work of planning and preparation to enable us to achieve our programmes. This was necessary as we believe that failure to prepare is preparing to fail.

This government has always viewed the provincial budget not only as a mere statement of revenue and expenditure estimates defining the limits of what can be achieved within the reality of the constraint imposed by the provincial fiscal envelope. On the contrary, we saw the budget as an instrument that affords the province the opportunity to introduce resources-based planning that appropriately and adequately reflect the ambitions and priorities we all cherish for our province.

This commitment to enhance the usefulness of the budget as an instrument to effect needed socio-economic changes led to the following deliberate objectives forming the backdrop to the drawing of budgets over the past few years, namely:

* The 1999/00 budget promoting the necessity of multi-year resource-based planning to lengthen the planning horizon so as to enhance the effectiveness and appropriateness of public services delivered.

* The 2000/01 budget emphasising the need to build effective transparent partnerships with people, to enable the government to mobilise energies and experiences of million of citizens to ensure that the Free State stays on track and is supported by relevant role-players and stakeholders in delivering much needed public services.

* The 2001/02 budget focusing on the importance of using Batho Pele as an instrument of effective social transformation as enshrined in our Constitution.

* The 2002/03 budget using the improved macro financial situation of the province to focus on the introduction of micro reforms to improve the quality of public spending.

* The 2003/04 budget using the gains emanating from previous budgets to focus more directly on the alleviation of poverty in the province.

Against the background of aforementioned, the 2004/05 budget consolidates the benefits of robust growth in budgets over a number of years, to support the President's call for a people's contract to create work and fight poverty, through a fiscal stance that promotes sustainable growth as well as an environment that is conducive to job-creation, while contributing to steady improvements in public services and development programmes that will, over time, reduce vulnerability and poverty and accelerate the pace of provincial economic advancement in both the medium and long term.

Mr Speaker, in addition to the strategies already mentioned, the far-reaching budget reforms implemented over recent years, also produced tangible results in provincial expenditure management, with prevailing budget trends and this budget's expenditure proposals clearly demonstrating our focus on pro-poor programmes through the consolidation of social services delivery, sustaining increased levels of capital spending and the enhancement of the quality of spending.

Through sound financial management, we have placed our finances on a firm footing, however, provincial delivery capacity needs to be continually bolstered to deal with pressure generated by an ever-growing demand for public services.

The continued challenge that this poses is thus to translate financial management gains into improved service delivery and redress of inequality.

Mr Speaker, allow me to acknowledge the support and contributions of the following people.

Firstly, I wish to thank the Premier for her decisive and visionary leadership and for steering the Free State ship so successfully over the last five years, the Members of the Executive Council for excellent management, meaningful contributions, information and support in the planning and finalisation of this budget.

Secondly, a word of thanks to all Committees of the Executive Council and Provincial Legislature.

Thirdly, I wish to express my sincerest thanks towards the Chief Executive Officer of the Provincial Treasury, Provincial Budgeting Office, officials of the National Treasury as well as to all officials of the Provincial Treasury that contributed their time by finalising this annual budget for tabling thereof today. Thanks also go to all members of my support staff without whom all this work would not have been possible.

I also wish to thank my wife and family for their understanding, patience and support during the past financial year and in finalising this budget.

Lastly, my deepest and sincere appreciation towards all members of the house, people in the gallery and learners and educators that have joined us for the activities of today.

Your attention, patience, efforts and time to attend this budget speech, are highly appreciated.

As Dr Ajar Jammine, well-known economist said in 2003, "South Africa is the best place to be over the next ten years."

Thank you.

Issued by: Provincial Treasury, Free State Provincial Government
25 February 2004

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