We have detected that the browser you are using is no longer supported. As a result, some content may not display correctly.
We suggest that you upgrade to the latest version of any of the following browsers:
close notification
Date
: 26/02/2004
Source: Eastern Cape Provincial Government
Title: E Godongwana: Eastern Cape Appropriation Bill
2004/2005
EASTERN CAPE GOVERNMENT BUDGET SPEECH 2004, MEC FOR FINANCE,
ECONOMIC AFFAIRS, ENVIRONMENT AND TOURISM, HONOURABLE ENOCH
GODONGWANA
26 February 2004
Honourable Speaker
Honourable Premier of the Eastern Cape
Colleagues in the Executive Council
Honourable Members of the Provincial Legislature
Invited guests
Ladies and Gentlemen.
"Sometimes it difficult to fully understand the fact that we are
barely ten years away from a time in the lives of our people when
our collective future was very uncertain".
President Thabo Mbeki: State of the Nation 2004
The dimensions of what has been achieved in those ten short years
are quite remarkable; no less so in our Province than it has been
in the country as a whole. However, while we marvel at the clear
progress that has been made, we must remain mindful of the scale of
the challenges that still remain to be addressed.
Since the beginning, in 1994/95, nine Provincial budgets have been
introduced in this House. On each of those occasions, we looked
back to what had been achieved with varying degrees of
satisfaction, and sometimes with concern. But on each of those
occasions, we looked ahead with a confidence that we will
succeed!
The first formal budget for the Eastern Cape Government was
presented in 1995/6 and amounted to R12,4 billion. Last year, in
2003/04, the Province's overall budget amounted to R27,9 billion;
and today we will present a budget aggregate of over R31 billion
for 2004/05.
Last year, we said that the tide had turned and that we had taken
the flood tide. I believe that we are still riding that flood tide,
and that it continues to grow stronger as we learn more and more
about how to manage volatile situations and to cope with the
challenges of poverty and unemployment that are still evident in
the Province.
As we move towards the tenth anniversary of freedom and democracy,
it is instructive to consider the progression that has occurred in
the Province's evolution in terms of governance and financial
management.
I would suggest that four distinct phases can be identified.
The first phase extended from 1994 to 1998, and represented a steep
learning curve. We had to deal with the complexities of
amalgamating five systems of administration characterised by
varying degrees of integrity, record keeping and basic principles
of accounting for public funds. Inevitably, this was a period of
uncertainty and crisis management.
The task of organising the Provincial public sector into a unified
and cohesive organisation was immense. Crafting appropriate budgets
for a new spatial entity characterised by extreme disparities in
economic circumstances, employment, health services, educational
systems and social development posed enormous challenges.
It is a tribute to the diligence and commitment of many of those
involved in the early years that we survived those pressures and
tensions. What emerged towards the end of 1998 was a clear trend
towards a focus on planning and improved organisation; particularly
in terms of financial, administrative and operational
systems.
In hindsight, the progress secured in the first four years of this
Provincial administration was remarkable, given the enormity of
apartheid's legacies.
The second phase takes us to 1999-2000, which was a period of
stabilisation and consolidation based on the broad foundations that
were established. This period witnessed the liquidation of the
Provincial overdraft that had accumulated through capacity and
systemic problems surrounding the integration of the previous five
administrations.
This provided a basis of confidence for sustained financial and
administrative improvement, which has been maintained ever
since.
The third phase was in 2001, which was a watershed year in many
respects. This was a period of institutional reform, consolidation
and re-organisation that saw Provincial Departments strengthened in
terms of their operational responsibilities and strategic planning.
The fundamental importance of strategic planning linked to a 3-year
rolling budget cycle, was established and adopted.
Public entities were rationalised, reconstructed and given new
meaning in the context of delivery.
The new local government system, consisting of demarcated
wall-to-wall Municipalities was instituted, together with
comprehensive Integrated Development Plans (IDPs) at the local,
district and metro levels.
For the first time since 1994, government and governance was
organised according to a comprehensive and cohesive system that
linked Provincial Government Departments and Local Government
structures together in the common pursuit of overall social and
economic development.
The fourth phase extends from 2002/03 to the present and was a
period in which real delivery began. I will return to this phase
and its extension into the future.
Government spending trends since 1994
Since our first budget of R12,4 billion in 1995/96 to the budget
presented here today for 2004/05, Provincial Government expenditure
has increased by 10% a year, and the aggregate expenditure over the
1995 to 2004 period amounts to some R194 billion. This represents
an enormous injection of financial resources into the Provincial
economy over a nine-year period.
The principal objective of this spending by government has been to
fashion a facilitating environment that is conducive to sustained
private sector investment in productive economic activity (by
providing infrastructure and services, for example) and to provide
a sound basis for social services, ranging from education, health
and welfare to sport, arts, culture and security.
It is instructive to consider several aspects of that spending as
it has evolved over the period from 1995/96 to the present.
In 1995/96, around 72% of the Provincial budget was allocated to
the social needs sectors (Health, Education and Social
Development), and this proportion has increased to over 80% for the
2004/05 budget. This represents a significant shift in expenditure
(nearly 10% points) towards social needs and is a reflection of the
extent to which the Provincial Government has risen to the task of
addressing the incidence of poverty, deprivation and inequality
over the past decade. It is an imperative that we cannot
avoid.
Expenditure on economic development accounted for 15% of the
1995/96 budget and this proportion has increased marginally to
around 16% of the 2004/05 budget. This involves allocations to
housing, local government, agriculture, economic affairs, roads and
transport, which represent crucial components of the economic
development process in terms of infrastructure development,
investment in job-creating productive activities, small business
development, housing and services. I will later demonstrate the
increased effectiveness of our economic sector spending.
The critical challenge for Provincial Government is to strike a
balance between these imperatives. Social needs must be provided
for; but, at the same time, we must make provision for establishing
an environment that is conducive to economic development,
particularly through investment.
Two fiscal ratios might help to illustrate the progress we have
made over the last few years:
* In 1999/2000 personnel costs accounted for 58% of total planned
spending, while in the Budget I table today, the same ratio is down
to 45,6%
* In 1999/2000 capital expenditure accounted for 1,9% of total
planned expenditure, today we are pushing the same ratio to
10%.
It is also important to understand the importance of this Budget in
our Provincial economic life. The fiscal expansion since 2001 in
South Africa, that Minister Manuel recently spoke about in his
budget speech, has been mainly achieved by increases in real
provincial government spending. Because of the greater importance
of provincial government spending in the economy of this Province,
compared to other Provinces, the impact of the nationally-driven
fiscal expansion, is having a relatively greater effect here.
Honourable Speaker, I believe that the changes and shifts in
Provincial Government expenditure outlined above, provide real
indications of the way in which this Government has responded to
the challenges posed by the legacies of apartheid and has sought to
build a platform for sustained socio-economic development for the
next decade. We have not, by any means, resolved the critical
issues of deprivation and exclusion, but I do believe that we have
made significant progress. I also believe that the Provincial
Growth and Development Plan, together with the associated Municipal
IDPs, provide an important framework within which we will be able
to further address the challenges that lie ahead.
I will now try to present a view of our Province from a fiscal
perspective (both historical from 1994, and planned), so that the
choices implicit in this year's budget allocations are
contextualised and made clear.
Spending Priorities: Continuity and Change
Over the past ten years, our spending priorities have centred
around three strategic imperatives:
* Redressing the historical legacy of unmet basic needs and
poverty;
* Building the Provincial economy and enhancing the global
competitiveness of our industrial sector; and
* Socio-economic transformation aimed at addressing the structural
weaknesses of the Provincial economy and labour markets.
Honourable Speaker, I will speak to each of these imperatives,
indicating where we are on track, what we have achieved over the
past ten years, and where we need to place emphasis for the next
three years.
Redressing the legacy of unmet basic needs
With respect to the first of these imperatives - redressing the
legacy of unmet basic needs - we feel we have made huge strides in
the Eastern Cape. This is reflected in the improved Human
Development Index - the international measure of quality of life,
and a composite index of life expectancy, literacy and incomes -
which was up from 0,49 in 1996 to 0,53 in 2002.
We have progressively extended the social security system to cover
1,3 million beneficiaries. Since 1994 we have put R33,5 billion
directly into the pockets of the Province's poorest and most
vulnerable households.
We have also prioritised the alleviation of hunger poverty, through
initiatives such as the Primary School Feeding Programme that has
been designed to ensure there is no child in any primary school in
the Province who should go to bed hungry.
We have built 127 500 new houses since 1994, and a further 105 000
are nearly completed. We have delivered water to the yards of 114
000 households, and a further 136 400 households now have access to
water from public taps. We have electrified 325 600 homes and 1 130
schools, and extended telecommunications access to 401 000
homes.
We have also built 492 schools, and a further 141 schools should be
completed by the end of next month. 11 100 classrooms have been
built. We have built and/or renovated 97 hospitals, and built 131
new clinics and renovated a further 216, primarily in the former
bantustan areas where service and infrastructure backlogs are most
severe.
We will continue to prioritise meeting the basic needs of our
people. In view of our Provincial Growth and Development Plan, the
strategic interventions we will be making in this three year MTEF
include extending social security benefits; accelerating delivery
of social infrastructure and basic services; improving efficiencies
in the social service departments, and launching two new
initiatives - the Expanded Public Works Programme, and the
Comprehensive HIV and AIDS Programme. Honourable Speaker, I will
turn to the details of these initiatives and their resource
implications shortly.
Building the economy and enhancing the competitiveness of our
industrial sector
With respect to the second of the strategic imperatives that guided
our policies and plans over the past ten years - building our
economy - the facts (which are only reliable for the period 1996 -
2002) speak for themselves.
Firstly, the trend is one of growth - both in the economy and in
per capita income.
* The average real annual economic growth rate in the Province
between 1996 and 2002 was 2,1%, compared to the national growth
rate of 2,8% a year over the same period. Total population growth
was 1,0% a year over the period, resulting in an average growth of
1,9% a year in GDPR per capita in the Province. This was
significantly higher growth than South Africa as a whole.
* This demonstrates that, in terms of overall economic development,
the Eastern Cape has made significant progress over the past six
years, largely because economic growth has outstripped population
growth.
* In line with national and global trends, the fastest growing
sector has been the tertiary sector (which grew by an annual
average of 2,1%), followed by the secondary sector (with 1,6% per
annum growth) and the primary sector (1% pa growth).
* Manufacturing dominates the secondary sector and accounted for
over 80% of secondary output in 2002. The growth rate in the
manufacturing sector between 1996 and 2002 was 1,6% pa.
* The automotive sub-sector accounted for over one quarter of
manufacturing output in 2002 and grew at 3,8% pa between 1996 and
2002.
* Construction accounted for 11% of secondary output and grew at an
annual average rate of 1,4% over the period, this growth being
substantially driven by the provision of new public
infrastructure.
Secondly Mr Speaker, showing how globally competitive our
manufacturing sector has become, and reflecting an investor
confidence that has never been higher, we have witnessed a
spectacular growth in exports.
* Growth in exports peaked at 250% in 2001 making the Eastern Cape
the province with the fastest growing exports. The contribution of
exports to GDPR increased from around 9% in 1996 to 34% in
2002.
* The Province's imports and exports are concentrated in the
manufacturing sector, and 96% of exports and 98% of imports were of
manufactured goods in 2002, while agriculture accounted for 4% of
exports and 2% of imports.
* Exports in the Transport Equipment sub-sector, which includes the
motor industry, increased by over 55% pa between 1996 and 2002,
while textile and metal product exports increased by 28% pa and 27%
pa, respectively.
* In the Transport Equipment sub-sector, imports were 1,6 times the
value of exports in 2002, which reflects the extent to which the
automotive sector has become an integral part of the global supply
chain.
* All of our key exporting sectors (with the exception of clothing
and textiles) have a high import-export ratio, which indicates a
high level of intra-industry trade and close associations with
global supply chains.
This spectacular growth in exports reflects the success of policy
instruments such as the Motor Industrial Development Programme
(MIDP), and underpins a key industrial development strategy in the
Eastern Cape: namely to promote export-oriented manufacturing
through investment in IDZ infrastructure. Together with National
Government we have succeeded in building a more conducive
environment for investment and growth: not just for "greenfield
investments", but also the so-called "brownfield investments" or
expansions of existing industries; and not just export industries,
but also industries with strong inward linkages.
Socio-Economic transformation: building a more cohesive and
integrated provincial economy
Historically, the main role of the Eastern Cape in South Africa's
industrial development under apartheid was a labour reserve for
mining. This locked the Eastern Cape economy, and particularly the
former bantustan economies, in a dependent status with income
inflows from remittances. The decline in mining has meant falling
incomes and rising unemployment.
Our high levels of poverty and unemployment are a direct result of
this legacy. The consequence is a Provincial economy characterised
by a sophisticated manufacturing base located in our two urban
centres, sitting alongside an extremely underdeveloped and
impoverished rural hinterland (what the President refers to as the
"second economy"). By way of example, the per capita income in
Alfred Nzo District Municipality is 12% that of the Nelson Mandela
Metro.
Key initiatives that we have taken to address this uneven
development include the packaging and delivery of strategic
economic infrastructure in the rural economy, aimed at enhancing
linkages between our manufacturing base and the agrarian economy.
Key here has been the rapid delivery of road and agricultural
infrastructure, as well as the Kei Rail Project, of which I will
later speak more.
Our intention, over the next ten years, is to increase the scale of
delivery of economic infrastructure in the agrarian economy as a
catalyst to building productive capability in agriculture and
agro-processing. We will be looking to our district municipalities
to partner with us in identifying and delivering such projects. In
all of these infrastructure programmes we intend using the
principles of the Expanded Public Works Programme in order to
optimise job creation and Black Economic Empowerment.
With respect to BEE, we have intensified our strategy of unbundling
tender contracts to provide economic opportunities to emerging
contractors and black owned businesses. If one analyses the tenders
that went through the Provincial Tender Board only (excluding those
handled directly by Departments), in 1997 only 12% of total tender
awards went to black owned businesses. By 2002, this had increased
to 46%.
In line with our strategy of moving dependent consumer households
into active producer households, we have also launched a number of
agricultural programmes aimed at increasing food production. I will
refer later to the impact of some of these programmes, such as the
Massive Food Production Programme.
Looking Ahead: spending priorities for the 2004 MTEF
Based on the RDP, both the ANC Manifesto and our Provincial Growth
and Development Plan (2004-2014) highlight jobs and poverty
eradication as our two policy priorities for the next 5 years. In
order to address these overarching priorities, we have designed and
packaged PGDP Flagship and Medium Term Programmes in a number of
strategic focus areas, that we are confident will impact
significantly on the lives of the poor and unemployed in our
Province. What remains for me to do is to illustrate the practical
measures and budgetary commitment that we as Government will be
taking in this regard. My input centres around seven strategic
focus areas:
* The fight against poverty
* The delivery of basic services
* Building an integrated provincial economy
* Increasing food security, agricultural output and
employment
* Human resource development
* HIV and AIDS
* Service delivery improvement.
Fighting Poverty
Despite the improvements noted earlier in our Human Development
Index, we are still confronted with high levels of poverty in our
Province. This poverty is most concentrated in the eastern regions
of our Province (Alfred Nzo and OR Tambo), as well as in pockets in
our small rural towns, on farms, and in the informal settlements of
Nelson Mandela Metro and Buffalo City.
The PGDP has set a bold target of reducing by two thirds the number
of households living in poverty by 2014. One of the key measures
that we will be taking to alleviate the burden of poverty faced by
those households who find themselves outside the mainstream
economy, is to ensure a more comprehensive and targeted coverage of
social security benefits for the most poor and vulnerable.
In the past year we made R20 million available for the Rapid
Registration Campaign. This has enabled us to double the number of
social security beneficiaries since 1996 (up from 596 327 in 1996
to 1,3 million in 2003, including more than half a million child
support grant beneficiaries). This amounts to 20% of our total
population.
To this end we have earmarked more than R24 billion for social
security over the next three years. This amounts to half the
non-personnel expenditure of Provincial Government over this
period. Anyone who argues that this is not a pro-poor budget, I
would advise to think again. More than 87% of this budget
(excluding conditional grants) goes to social sector departments
charged with delivering social grants, education and health
services, primarily to the poor. As Minister Manuel said:
"Wagwetywa ndlala!"
But this presents something of a paradox for those of us faced with
the unenviable task of designing and implementing programmes that
impact most significantly on poverty and unemployment.
As the President often reminds us, safety nets alone will not
reduce levels of poverty at the scale and pace we would like to
see. What we require are active measures to move poor households
out of dependency on state grants into productive and sustainable
economic activity. Despite the resource constraints we face, we
will be taking innovative measures to expand the asset and skills
base of the poor to allow them to take advantage of economic
opportunities. In addition we will launch agricultural and
agro-processing initiatives to create jobs and raise rural incomes,
as well as accelerate the delivery of economic infrastructure in
support of manufacturing, agriculture, and tourism. These will be
elaborated below.
Further to this, we will be looking at optimising economic and job
creation opportunities in the social and infrastructure spend - in
the houses we build, in the food we procure for our hospitals, in
the schools, roads, and other public facilities we build and
maintain.
One key initiative in line with this thinking is the Expanded
Public Works Programme. This programme offers an integrated
development package - the delivery of infrastructure, the creation
of jobs, and skills development, and will build on the success of
our Vukuzakhe Programme. The EPWP will be financed from our
Equitable Share, the Provincial Investment Grant and the Municipal
Infrastructure Grant.
Accelerating access to basic services
Building on our current successes, we will over the next five years
further intensify our struggle to eliminate historically inherited
poor social services from our Province. By 2014, all households
must have access to clean water, sanitation, universal primary
education, and accessible health services.
At a cost of some R2,5 billion, we have built some 127 000 housing
units since 1995, with a further 105 000 currently under
construction. Over the next three years, an amount of R1,77 billion
in housing subsidies will be disbursed in the Province. In order to
ensure that we do not experience delivery blockages, we will make
use of our partnership between the Department of Housing and the
Rapid Infrastructure Delivery Agency (RIDA) that we have recently
established. Through our procurement reforms we will also make sure
that the bricks, window frames, and doors that we use on these
houses are produced locally - if possible in the communities where
they are being constructed.
We understand that there has been a significant growth in the
number of households using flush or chemical toilets across all
district municipalities, but there are still far too many
households who report no access to any form of household
sanitation. Similarly there still exist a large number of our rural
households who collect their water from unsafe sources. We have
been working closely with National Government and municipalities to
ensure accelerated delivery of water and sanitation, and are
pleased that DWAF have recognised the urgency to scale up delivery,
allocating R600 million over the next two years. This expenditure
will be routed through our municipalities, which will have to be
capacitated in this regard. We also note with satisfaction the
increased equitable share allocation to municipalities to enable
them to extend coverage of free basic water to the indigent.
As Province, we will also continue to prioritise the eradicating
the degrading "bucket system" from those areas where it is still in
use. Over the next two years we will be spending a further R56
milllion for this purpose, targeting municipalities such as Makana,
Sundays Valley, and Nkonkobe; and towns such as Ngangelizwe, Sada
and Cradock, where the system is still evident.
Building an integrated Provincial Economy
Our strategy to grow the Provincial economy is two-fold -
consolidate and diversify out of the strengths of our globally
competitive industrial sector, particularly the auto-sector, while
at the same time building productive capability in our rural
economy around agriculture, agro-processing and tourism.
Our manufacturing sector, and particularly the export-oriented
industries within the sector, continues to yield growth. We have
focused our attention on taking full advantage of our coastal
location and established manufacturing base built around the auto
sector to leverage domestic and international investment in support
of labour- intensive industries such as metal products, textiles
and plastics, and agro-processing.
To this end we are establishing world-class infrastructure and
logistics capability at Coega and the East London IDZ. By the close
of books next year we will have invested more than R1,2 billion in
the Coega IDZ, and will have netted a R16 billion anchor industry.
The proposed international freight airport at Coega will further
consolidate the IDZs position as a globally competitive investment
location. We will also be investing just under R400 million in the
ELIDZ over the next three years.
I am happy to report, Honourable Speaker, that our joint venture
with VW to develop a supplier park in Uitenhage is progressing
well, with the first tenant expected to take occupation in
September 2004. In addition, the partnership presently being forged
between DaimlerChrysler and the East London IDZ bodes well for
future economic activity in that city.
Key to making these IDZs work for the Province is to ensure
linkages to our impoverished rural economy. Here we have initiated
the Kei Rail Project, at a cost of R663 million over the next three
years, to ensure integration of the former Transkei economy with
the IDZs. The project will also serve to stimulate the
agricultural, agro-forestry and furniture industry in the area,
including the development of a chipping plant at Langeni. In
particular, the upgrading of the Ugie-Langeni Road, will open up
forestry development in the area, having a major impact on
employment creation.
Recognising the importance of transport and logistics
infrastructure in stimulating economic growth, we will also be
scaling up our investment in road infrastructure, and once again I
will provide the investment figure at the end of this speech. Many
of these roads will be constructed in the rural areas of the
Province in order to enhance the economic competitiveness of
emerging industries and businesses in the region.
Over and above delivering enabling infrastructure to stimulate
economic growth, we have also established institutional capability
to leverage investment and promote BEE and SMME development in
identified growth sectors. The transformation of ECDC is complete,
and we will be allocating R283 million to this agency over the next
three years for investment promotion and SMME support. This will
allow us to identify opportunities in the value chain, particularly
in the automotive, textile and clothing, food, and wood products
sub-sectors, with a view to package projects for investment.
In line with our policy goal of building a more integrated and
equitable Provincial economy, a key activity of ECDC over the short
to medium term will be to identify sources of local demand, and
orient our industry towards producing for these markets (for
example food products, housing materials, infrastructure inputs,
clothing, consumer durables etc). State sector markets will be key
here. It is estimated that Provincial Government will procure R17,5
billion of goods and services over the next three years. This
presents a substantial opportunity for Eastern Cape SMMEs to access
sustainable markets. Improved synergies between ECDC and Uvimba
could be beneficial in this and other respects.
Another initiative that warrants mention is the five-year EU-funded
Local Economic Development Programme for the Province, valued at 30
million Euros (approximately R300 million). This programme is
particularly exciting because it will introduce to the Province
some new developmental methodologies that have been applied
successfully elsewhere in the world.
Increasing food security, agricultural output and employment
The agricultural sector is key to stimulating our rural economy. We
import far too much of the food we consume in the Province. Our
PGDP suggests we need to be food self sufficient by 2014. We also
recognise and have long spoken about the under-utilised
agricultural potential of the Province, and particularly regions
such as OR Tambo. We are now taking decisive action to increase
food production.
Last year we launched the Massive Food Production Programme as part
of our Rapid Impact Programme, and we are pleased to hear from the
lead department Agriculture that the programme is netting good
returns. Some 12 500 ha in the former Transkei and Ciskei have been
put under cultivation, which is expected to yield 40 000 tons of
maize. This will nearly double grain production in the Province,
and will raise an income of R130 million.
In addition, as one of the PGDP Flagship Programmes, we are
launching an Agricultural Infrastructure Package. This will
comprise dipping tanks, fencing and small-scale irrigation
infrastructure in support of the economic production of livestock
and the development of sustainable agricultural enterprises.
Human Resource Development
Over the past ten years we have made strides in extending access to
basic education. This has translated into the reduction of the
educator: learner ratio from 40 learners on average per classroom
to 30 learners in 2003. We are beginning to see the returns from
this investment, with a record matric pass rate recorded last
year.
At the same time however, recent studies of the Eastern Cape labour
market reveal low overall levels of educational attainment in the
Province; a labour market still heavily segmented along racial
lines; and reflected in the high number of unemployed graduates we
have in the Province, training outputs that are insufficiently
aligned with the skills requirements of the private and public
sectors.
To address these challenges, in the short-to medium term, we need
to accelerate the supply of critical skills in support of economic
growth and improved service delivery, as well as improve the
capacity of our Further Education and Higher Education Institutions
to respond more coherently to HRD challenges in the Province.
One of our priority HRD spending areas over the next three years
will be transforming and gearing the FET sector to supply
intermediate skills in support of identified growth areas such as
agriculture, agro-processing, construction, and tourism. Our
allocation to the FET sector for 2004/05 to 2006/07 is R643 million
(a 70% increase over the previous three year allocation). This
allocation will serve to upgrade human resource and physical
infrastructure at the colleges, as well as develop the curricula to
more effectively meet our skills requirements and equip our
learners to become active labour market participants.
Given the scourge of illiteracy that continues to retard both
personal and societal development, we have prioritised the Adult
Basic Education and Training Sector, and are allocating R410
million over the next three years. We are confident that we will
meet the PGDP target of improving literacy by 50% by 2014.
Our commitment to both Early Childhood Development and the General
Education sector is reflected in the increased allocation to the
Provincial Education Department. This year the department gets
R10,8 billion - over the three year MTEF it will receive a whopping
R35,2 billion. Within this allocation, we will see increased
spending on school infrastructure, as well as on learner support
material. It is interesting to note in this regard that some
research shows that spending on school materials has a much greater
rate of return than additional spending on personnel.
As announced by the Premier in his State of the Province, in an
effort to address youth unemployment, we are drastically scaling up
the supply of bursaries and learnerships as a PGDP Flagship
Programme. To this end an amount of R90 million will be
administered by the Office of the Premier over the 3 year MTEF for
bursaries and learnerships in agriculture, tourism, nursing,
medicine, engineering, finance, marine biology, and information
technology.
To further build capacity in financial management an amount of R30
million is allocated to the Provincial Treasury over the next three
years.
Recognising the capacity constraints many of our Provincial
Departments face, and the impact this has on service delivery,
there is also an amount of R180 million over the next three years
to develop critical skills for improved service delivery.
HIV and AIDS
HIV and AIDS, as well as TB, is increasingly becoming a priority
spending area for Government. This includes measures to strengthen
our health system to cope with the pandemic. Over the past 10
years, our health care infrastructure has been extended and
upgraded particularly in the poorest areas of the province. The
building of 131 new clinics has significantly increased the number
of health services access points, thereby reducing the
vulnerability of the rural poor.
We have developed an integrated and comprehensive HIV and AIDS Plan
aimed at maintaining the HIV negative status of 5,9 million people
in the Eastern Cape, as well as maintaining the well being of the
estimated 534 000 HIV positive and 53 000 with full-blown
AIDS.
Our HIV and AIDS interventions over the past few years have had an
impact. We now have 220 voluntary counselling and testing sites
across the Province, with the Prevention of Mother to Child
Transmission Programme (PMTCT) being offered in 156 health
facilities.
Our HIV and AIDS Strategy for the period 2004 - 2007 is premised on
the following pillars - social mobilization, awareness and
prevention, comprehensive treatment, care and support for people
living with AIDS and AIDS orphans, poverty alleviation and
nutritional support.
Soon we are launching our Comprehensive Treatment Plan. Health
professionals have been trained, and we are gearing hospital
complexes, community health centres and clinics at six complexes
across the Province to deliver treatment to people living with
AIDS.
Given the envisaged impact of HIV and AIDS, we are prioritising the
strengthening of the health system to cope with the unfolding
pandemic.
Service delivery improvement
As Government we recognise that some of our Departments have not
performed as efficiently as they should. As the executive arm of
Government, we have become less tolerant of inefficiency among our
officials. We have put "turnaround plans" in place for departments
such as Health, Social Development and Education. As agreed, we
trust that Departments will re-prioritise their budgets to finance
these turnaround plans.
In respect of financial management systems we continue to place a
high priority on ensuring that the Provincial Government as a whole
adheres to the highest standards of financial control and
reporting. I am pleased to report that in the last financial year,
the Auditor General issued a first set of Departments with
unqualified audit reports and that is a testimony of the extent of
improvement in financial management.
Honourable Members, the Provincial Government has also achieved
significant successes in dealing with fraud and corruption, which
have generally been of four kinds:
Firstly, and contrary to common perceptions that such practices are
the sole prerogative of civil servants, private sector syndicates
that target provincial assets have been exposed and dealt with. In
many instances, the criminals concerned have been prosecuted and
sent to prison; and their assets have been forfeited to the state.
To date, Treasury has recovered some R10 million. Related to these
cases, more than R7 million worth of assets owned by colluding
government officials have been frozen pending further
investigation.
Secondly, since 1999, some 800 disciplinary cases involving civil
servants have been identified, and 702 of these have been
finalised. Of these cases, more than 280 were fraud and
theft-related, and 30% of these resulted in dismissals.
Thirdly, in terms of social pensions, almost R20 million in
fraudulent claims were identified between March 1999 and January
2004. These cases are in the process of being prosecuted through
the judicial system. To date, R1 million has been recovered and the
remainder is being finalised by the Asset Forfeiture Unit.
Fourthly, irregularities related to duplicate and false claims by
educators in the Education Department were exposed. A sample of
these cases indicated that a total of 950 irregular payments were
made to 443 officials between 1999 and 2003. Disciplinary enquiries
regarding these cases are currently in the process of being dealt
with and will be resolved before the end of the 2004/05 financial
year.
Honourable Speaker, we will not tolerate such activities in our
Government. We shall not rest until the perpetrators of these
crimes are brought to book.
Honourable Speaker, I will now turn to the details of the funding
and allocations of the 2004/05 Budget.
Funding Sources
Our funding structure is dominated by transfers from nationally
raised revenue. Own revenue remains at more or less 3% of total
provincial revenue over MTEF, whilst the equitable share and
conditional grants remain at approximately 88% and 9% respectively
over the MTEF period. Transfers in the form of the equitable share
grow from a revised R26,99 billion in 2004/05 to R30,913 billion in
2006/07 representing an average annual growth rate of 4,8% from
2003/04 to 2006/07. Conditional grants are R3,138 billion in
2004/05 and planned to grow at the same rate over the period.
The main budget provides for total revenue of R31,149 billion in
2004/05, that increases to R36,342 billion in 2006/07. Own revenue
is estimated at R458 million in 2004/05 and grows to R546 million
in the outer year of MTEF. As will be noted, the Province is moving
into a deficit due to a rapidly rising social grants trend line
that is leaving little room to manoeuvre.
In past years the Eastern Cape has had a policy of tabling surplus
budgets, to deal with unforeseen and unavoidable expenditures that
may arise during a year. However, this year we are budgeting for a
deficit of R565 million, which is equal to 1,8% of planned
expenditure.
It is proposed that this deficit could be funded as follows:
* Surrenders from 2002/03 of R96 million.
* Rollovers from 2003/04 estimated at R41 million.
* Improved liquidity management, which could bring in R426
million.
* Bank bridging finance.
Spending Proposals
The budget deliberations between departments and the Provincial
Treasury were enhanced by a greater focus on the pursuit of the
policy goals of PGDP. The second enhancement of the budget process
was that departments had to establish a measurable link between
their activities and the goals of the PGDP. In this way
departmental spending plans are more embedded in the development
challenges of the provincial economy than was previously the
case.
Over this MTEF period starting on the first of April 2004, the
Province proposes to spend an additional amount R8.4 billion over
the next three years. Our budget for 2004/05 is R31,149 billion,
which is R3,2 billion more than tabled in this House a year ago.
This represents a 11,5% increase.
May I present to the House the following proposed
allocations:
Vote: 1
Department: Office of the Premier
Allocations for 2004/05 (R000): 232 615
Mr. Speaker, allow me to make a couple of comments on these
allocations:
* Social Development will receive an additional R1,7 billion, in
the main for increases of R40 and R10 in old age pensions and child
support grants, respectively, and also for new beneficiaries.
* Personnel expenditure accounts for 46% of total expenditure, with
R14 196 billion set aside in 2004/05. There is a marginal increase
of personnel expenditure over the next three years. We will be
continuing to address the skills mismatch within Provincial
Government, and trying to unlock more money for critical
posts.
We have no doubt, Mr Speaker, that if these resources are
efficiently utilised, we will be able to make a lasting impact on
the socio-economic situation in our Province.
Conclusion
Honourable Speaker, I today table the following documents for the
consideration of the House:
1. The Eastern Cape Appropriation Bill, 2004
2. The Explanatory Memorandum to the Bill
3. Budget Statements No 1 and 2
4. A copy of my speech.
Let me conclude by highlighting how this Budget will give financial
flesh to our PGDP:
* Our job creation target for the Expanded Public Works Programme
is 200 000 jobs in the Province over the next five years, with 25
000 jobs a year in the first years. This target is equal to 20% of
the national target. To this end we are allocating R1 billion from
our infrastructure spend over the MTEF period. While we acknowledge
that these jobs will be temporary, the Programme will create
employable skills and provide infrastructure that will leverage
greater private investment.
* Our road building programme is valued at R4 billion over the next
three years.
* With regard to Government procurement from black-owned
businesses, we are targeting to increase BEE procurement from 46%
to 60% over the MTEF period. Over the three year period BEE
procurement will amount to R10,2 billion. Our tool to achieve this
objective is our new supply chain management framework that
includes monitoring mechanisms. This new framework will replace the
Provincial Tender Board and will be operational by 1 June
2004.
* We are proposing an increased allocation to the Department of
Agriculture of 45,8% for non-personnel expenditure in 2004/05. In
the light of the success of the Massive Food Production Programme
mentioned earlier, we are committing R300 million over the next
three years. We are also launching an Agricultural Infrastructure
Package worth R150 million over the next two years. This gives a
total of R450 million to support agriculture development.
* We will be giving R569 million over the next three years for
HIV/AIDS prevention and support programmes by the Departments of
Health, Social Development and Education.
* We will also be scaling up resource allocation to strengthen the
health system. Over the next three years, an amount of R1,8 billion
will be spent on upgrading and maintaining health infrastructure.
We are also allocating R1.95 billion for Primary Health Care, and
will be implementing the rural incentive to attract and retain
health professionals in our rural health facilities.
* Increased spending on school infrastructure will be R960 million
over the three years.
* Expenditure on learner support materials will receive an
allocation of more than R1 billion over the three year MTEF.
I wish to put on record my sincere thanks to:
The Premier for his leadership, trust, advice and guidance;
My colleagues in the Executive for their support and
understanding;
Each of the Heads of Departments for the role they played in the
Budget preparation, and understanding that budgets are all about
choices;
My appreciation to the officials of Treasury for the hard work put
to ensure success of this day;
Finally, my family. Thank you for your support, understanding and
warmth.
Let us make our PGDP work!
I thank you!
Issued by: Eastern Cape Provincial Government 26 February
2004
Map
