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From R827bn infrastructure plan to corruption crackdown, flesh added to NDP vision

27th February 2013

By: Terence Creamer
Creamer Media Editor

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Finance Minister Pravin Gordhan used his 2013 Budget address to lawmakers as a platform to add financial meat to the bare bones of the much-vaunted National Development Plan 2030 (NDP), which aims to forge a “social compact to reduce poverty and inequality, and raise employment and investment”.

Besides stressing the importance on the multibillion infrastructure programme, on which a further R827-billion would be invested in the coming three years, the Minister emphasised the role of the private sector, which had shown investment reticence since the 2009 recession.

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This reticence had increased since the deterioration in the industrial-relations environment in the mining, transport and agricultural sectors and ahead of key wage negotiations in a variety of public and private milieus in the coming months.

Government “recognised” the key role that private companies play in the economy and Gordhan reported that he had engaged with several business leaders on the country’s investment and development challenges in the lead-up to the Budget.

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He elaborated on a range of private-sector-led investment plans in sectors as diverse as hospitality and telecommunications to transport and retail, which he argued signalled “growing confidence in the business outlook, despite difficult conditions”.

“As government, we wish to encourage businesses to keep investing in our economy, and seize the opportunities around us,” he said, noting that various business-supporting initiatives were under way or being developed.

These included the Manufacturing Competitiveness Enhancement Programme, new tax incentives for investors entering the Special Economic Zone Programme, the Jobs Fund, the creation of the Small Enterprise Finance Agency and plans for simplifying tax requirements for small businesses.

“Future growth is also dependent on private-sector investment in the economy,” Gordhan stressed.

INFRASTRUCTURE FINANCING

On public infrastructure investment, the NDP’s position that “South Africa needs to invest in a strong network of economic infrastructure designed to support the country’s medium- and long-term economic and social objectives”, was underscored.

Financing was in place for the R827-billion infrastructure push over the coming three years, Gordhan averred.

The fiscus had allocated nearly R430-billion for schools, hospitals, clinics, dams, water and electricity distribution, the electrification of one-million homes, sanitation schemes, as well as for building more courtrooms and prisons and improving bus, commuter rail and road links. Most of this spending would fall under provinces and municipalities.

The R400-billion balance would be invested by Eskom, Transnet and other State-owned companies, financed through own resources, additional borrowings and supported by the National Treasury guarantees.

However, there was no hint of any additional equity or guarantees to support Eskom, as had been requested by several stakeholders at the recent National Energy Regulator of South Africa hearings into the utility’s request for another series of yearly price increases from 2013 to 2018.

However, there was an additional allocation of nearly R3.3-billion over the three-year period from April 1, 2013, to March 31, 2016, to the Passenger Rail Agency of South Africa, which is pursuing a major commuter rail recapitalisation programme.

In addition, the South African National Roads Agency Limited would receive R1.4-billion over the period, while R897-million had been set aside for the integrated national electrification programme.

Gordhan acknowledged that parts of government were struggling to spend their full infrastructure budgets and that government’s ability to spend was also not improving “fast enough”.

TOO MANY POINTS OF RESISTANCE
The other key NDP issues - ensuring greater government efficiencies through a more professional public service and combating corruption, were also addressed.

Besides announcing plans to cut spending by R10.4-billion over the coming three years in light of increased budget deficits and a weak growth and revenue-collection outlook, Gordhan said the drive to increase value for money remained an ongoing endeavour.

“Let me be frank. This is a difficult task with too many points of resistance,” he lamented.

Procurement transactions were taking place at too many localities and contracts were short term, resulting in poor visibility.

“While our ablest civil servants have had great difficulty in optimising procurement, it has yielded rich pickings for those who seek to exploit it,’ he said, adding that there were also too many people who had a stake in maintaining the current system.

The solutions that had been pursued to date had also not matched the size and complexity of the challenge and would require a special effort “from all of us in government, assisted by people in business and broader society”.

But Gordhan said he was determined to make progress, highlighting, too, that the process for establishing and staffing a chief procurement office (CPO) in the National Treasury had begun and the identity of the chief procurement officer would be released soon.

A project team seconded from state agencies and the private sector had identified four main streams of work, namely immediate remedial actions, improving the current system, standardising the procurement of critical items across all government entities and the long-term modernisation of the entire system.

For instance, the CPO would establish fair value prices for certain goods and services and would pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.

Gordhan revealed that the National Treasury was currently scrutinising 76 business entities with contracts worth R8.4-billion, which it believed had infringed procurement rules, while the South African Revenue Service was auditing more than 300 business entities and scrutinising another 700 entities with contracts estimated at a value of over R10-billion.

“So far 216 cases have been finalised resulting in assessments amounting to over R480-million being raised. The Financial Intelligence Centre has referred over R6.5-billion for investigation linked to corrupt activities.”

Gordhan also backed Public Service and Administration Minister Lindiwe Sisulu’s call for curbs on government officials doing business with government.

“I will complement her initiative by aligning the Public Finance Management Act with the provisions of the Public Service Act.”

Click here to download a copy of the 2013 Budget speech

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