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ADDRESS BY MEC JABU MOLEKETI, ON THE TABLING OF HIS DEPARTMENTAL
BUDGET VOTE IN THE GAUTENG LEGISLATURE, 10 June 2003
Honourable Speaker
The Premier
Members of the legislature
Colleagues in the Executive Council
Distinguished guests, ladies and gentlemen
I rise once more to address you on the Budget of Vote 3, the
Department of Finance and Economic Affairs.
The challenges that confront us as we complete our second term of
office in government are clearly manifested, and whether we succeed
in managing these challenges, depend on a number of factors among
which is our own ability to adapt to rapidly changing perceptions
and situations. For this, we need to know our own strength and
weaknesses and the direction we are headed for. Nothing serves to
concentrate our efforts more than the identification of targets and
goals. Once the goals have been identified, it remains only to
chart the route and negotiate your way along.
The Department of Finance and Economic Affairs Vote is an endeavour
to deliver on the objectives and goals set by the Executive
Council, in line with our mandate. An amount of R 1, 654, 261 is to
be appropriated for the 2003/2004 financial year in order to
promote sound public finances, grow the provincial economy and
build a professional administration.
Macro-economic performance
Within the global economic system, South Africa is placed as an
emerging market and is strongly influenced by the considerations
and perceptions applicable to emerging economies. It is also
indelibly a part of Africa, and the progress of the African
continent as a whole has a major bearing on South Africa in a
multitude of ways. The volatility of global financial markets and
the re-alignment of emerging market economies has had a significant
impact on the South African economy, and renders the reform and
restructuring process more difficult. South Africa will continue to
be heavily impacted by economic realignments among emerging market
economies, and these will translate into major effects on the
economy of Gauteng province, given its magnitude, sophistication,
financial sector orientation and international linkages.
Nonetheless, in comparison with other emerging market countries,
South Africa's economic growth has become less volatile. Since the
1950s, the economy has diversified and is no longer dependent on
gold mining. Exports have become more diversified and multi-factor
productivity has been rising since 1992. Private sector investment
is now rising and tight fiscal discipline has allowed government to
start increasing expenditure, while reducing borrowing (with the
budget deficit expected to be between 2 and 2.5% of GDP). These
positive factors have not, however, been sufficient to alleviate
unemployment, despite a significant increase in government spending
on social services in real terms.
Between 1995 and 2002, the Gauteng province's economy grew at an
average of 3.3% - in excess of the national average over the same
period of 2.7% and the province's contribution to South Africa's
GDP grew from 32.6% in 1995 to 33.9% in 2002.
Further, StatsSA data, quoted in Gauteng's 2003/2004 budget,
suggest that the Gauteng province's economy is undergoing
transformation. In 1997, primary industries accounted for 1.8% of
GGP, a figure that has dropped to 1.3%, while secondary industries
have similarly decreased their contribution from 29.2 % to 23.9%.
By contrast, the tertiary sector has increased from 60% in 1995 to
66% in 2002. While between 2000 and 2002 national labour absorption
fell from 43.8% to 40.4%; Gauteng province witnessed an increase
from 44.7% to 45.3%, representing one of only three provinces where
unemployment fell between 2000 and 2002.
Economic growth
Government policy assumes that economic growth, which is required
for development, is best achieved through the private sector taking
advantage of investment and job-creating opportunities.
Government's role therefore in stimulating economic growth is to
ensure the creation of a fair and efficient environment conducive
for business activity. As the 2003/2004 Budget acknowledges,
attention needs to be paid therefore to political and economic
stability (supported by macroeconomic stability and policy
clarity), rates of economic growth, labour market stability,
investment incentives, the tariff regime and the protection of
property rights. These factors need to be underpinned by a clear
regulatory framework, increased competition, accountability and
transparency.
Current emphasis in Provincial Economic Policy
In line with national government initiatives, government priorities
and provincial objectives and competencies, provincial economic
policy has identified the following core themes:
1. A shift in focus from macro to micro economic issues, with
greater stabilisation in fiscal and macroeconomic management. In
this regard, the challenge is to ensure that the economy operates
optimally at the microeconomic level in order for economic
opportunities to be taken up fully and equally across the
province
2. More vigorous industrial policy needs to provide a clear and
strategically informed framework to ensure that the Gauteng
province's growth trajectory is fully transformed and sustained,
supporting regional economic growth and development
3. More vigorous investment promotion is required to support trade
and industry initiatives in the province.
4. Increased infrastructure investment is required to strengthen
the viability of economic activities and to increase access to
these by all citizens.
5. A boost to Small and Medium Enterprise promotion and Black
Economic Empowerment is critical to ensure that the Gauteng
province's trade and industrial activity has the potential to
benefit South Africans who are historically disadvantaged, and
disperses these benefits as equitably as possible.
Expansion of 1997 approach
The 1997 Trade and Industry strategy was focussed towards three
areas of economic activity: industrial performance which looks at
the composition and trends of the economy in general and the
manufacturing sector in particular; trade performance which looks
at Gauteng's exports and market penetration; and Gauteng's ability
to attract foreign direct investment.
The formulation of the Gauteng Trade and Industry Strategy (2003)
has incorporated a review of the progress of the 1997 Trade and
Industrial Strategy, and lessons learnt from it. The policies and
strategies are aimed at building on the province's strengths,
addressing its limitations and constraints, and facing the
challenges of global competition, as well as local issues.
The provincial government intends to pursue a holistic approach to
economic development, which is essential in ensuring stable
economic growth, job creation, poverty alleviation and the economic
empowerment of historically disadvantaged individuals and
enterprises.
Economic growth will be promoted alongside efforts aimed at poverty
alleviation, reduction and ultimately, eradication, contributing to
the restructuring of society. Social, economic, and regional
imbalances will thereby be narrowed. Approaches adopted will
simultaneously seek to move the provincial economy increasingly
towards sustainability in the sense conveyed by the World Summit of
2002.
The new strategy:
The new strategy is aimed at addressing the challenges that result
from increasing globalisation, and to enhance the competitiveness
of the economy and strengthen economic resilience. It attempts to
meet the national government's stated policy objectives
(encapsulated in the RDP and GEAR) and provincial government
objectives to decrease unemployment, increase the general standard
of living, and ensure the continuation of the province as the
economic heartland of South Africa and as an internationally
competitive regional player. The strategy also incorporates the new
economic development imperatives.
The strategy takes into cognisance the Gauteng province comparative
advantages which include: the better than national average skills
base, international status of the City of Johannesburg and the
commensurate base for Multi National Corporations (MNC), foreign
and local corporate headquarters, extensive Research and
Development institutions, sophisticated telecommunications and
transport infrastructure, advanced financial sector, and the
largest local market and purchasing power of any of the nine
provinces.
The strategy seeks to broaden the base of business activity across
a wider spectrum of participants so that benefits of economic
growth are spread widely to the portions of the population that are
most in need.
TREASURY
PROVINCIAL BUDGETING ISSUES
During the last financial year, Treasury had set itself some
targets in order to measure its ability to manage the fiscus. These
targets were that current expenditure would be at 98% of budget;
capital expenditure at 80% of budget and that revenue will be at
100% of budget.
The final unaudited financial statements for the province for
2002/2003 show that the revenue received amounts to R24, 95 billion
compared against an adjusted expenditure budget of R24, 47 billion
leaving the province with a surplus position of R480 million.
The Treasury has optimised cash management and investment income by
raising R260 million in investment income. Our decision not to
outsource the cash management function within Treasury but to build
in house skills and capacity has paid handsome dividends. On the
back of this and the fact that other revenue sources were either
slightly above or at budget, Treasury exceeded its 100%
target.
The province continues to encounter challenges in the provision of
health and welfare services. This has resulted in both the
Department of health and welfare spending more than what has been
appropriated. An increase in patient load of over 7%, and the rapid
escalation in the costs of medical supplies largely contributed to
the overspend in Health. In the case of Welfare, it is the larger
than anticipated take up of the child support grant, a statutory
obligation.
An area of great satisfaction has been the rate of increase in
capital expenditure in the province. The adjusted budget provided
for R3, 6 billion of capital expenditure. Treasury had set itself
of target of 80% spend against budget. The actual spending was in
excess of R3, 2 billion or 90% of budget. That is most heartening.
To think that in 1995/96 the capital expenditure in the province
was under R400 million shows that the much-maligned civil service
can deliver. Spending has increased almost 10 fold over the past 8
years with very little additional capacity.
Even though the province did overspend, Gauteng ended the year with
a net surplus of over R200 million. This bodes well for the future
as it gives us the leeway to manage unforeseen and unavoidable
expenditure without resorting to deficits.
As we progress with budget reforms, the 2003 Budget and the MTEF
emphasise the integration of the strategic planning process into
budget compilation. The Provincial Treasury implemented a Cabinet
decision, which introduced bilateral discussions on departmental
budgets. These discussions were meant to ensure a detailed
evaluation on departments' budget submissions, based on
departmental strategic priorities. These priorities take into
account the Provincial strategic priorities agreed to by the
Executive Council. At the heart of these bilateral engagements with
departments is the need to improve value for money in service
delivery.
PROVINCIAL FINANCIAL MANAGEMENT
The Province embraces the key characteristics of discipline as
advocated by King II report on corporate governance, and embodied
in the Public Finance Management Act.
The consolidation process of annual financial statements for
2002/03 is still an aggregation of all departmental accounts.
Proper consolidated financial statements will be produced for the
2004/2005 financial year once generally recognised accounting
standards have been determined for the public sector by the
Accounting Standards Board (ASB).
For the 2002/03 financial year, Audit Committees have been fully
operational and the Internal Audit unit has begun to assume a more
meaningful role and is able to work in correlation with the Audit
Committees.
According to departmental reports, we have made tremendous progress
with regard to financial management capacity building in the
province. This incorporates the restructuring of the CFOs office to
ensure adequate and efficient support of the CFOs. Departments have
begun work towards ensuring that skilled and well-trained staff
supports the CFOs.
It is important to mention, with pride, that GPG continues to be a
leading Provincial Administration in terms of PFMA implementation
reforms and initiatives. This should, however, encourage us to
strive to continuously improve so as to remain leaders in this
area.
Once again, we need to acknowledge the fact that PFMA seeks to
challenge, rethink and modify practices which have been in place
for quite a long time and it is only fair and sensible that
whatever reforms are introduced, be phased in over a period of time
to allow for thorough engagement and lobbying of the stakeholders
involved. This approach will, to a large extent, address issues of
mindset change and buy-in and the critical component of skills
development and capacity building.
CONSUMER AFFAIRS AND BUSINESS REGULATIONS
The partnership between the Consumer Affairs Office and the Gauteng
Department of Education has produced good results in that a product
has now emerged in the form of a consumer education curriculum. The
grade sevens will benefit greatly from this achievement and plans
are already underway to develop and secure materials for the grade
eights. Both departments will jointly celebrate the launch of this
curriculum in September this year.
The consumer office has now improved its operations by not only
attending to complaints reactively, but also proactively, by
initiating investigations in areas where there is a potential for
the abuse of consumers. This step will curb problems before they
arise. The recent establishment of the research unit in consumer
affairs unit will also improve on the quality of consumer education
programmes. In this way we will also be putting our finger on the
pulse to implement checks and balances on the market trends
affecting consumers.
The Consumer Affairs Court has in this financial year heard forty
four cases of unfair business practices, and has pronounced
judgements in favour of consumers. It is without any doubt that the
consumer affairs office has so far succeeded in winning the trust
of consumers and consumer groups on whose course it is fighting.
However, we still have a large population of service providers who
are involved in unscrupulous and deceptive market practices. I must
state that it remains our challenge to eradicate these
practices.
In terms of reforms in the liquor industry, the house adopted the
provincial liquor bill during the previous financial year. However,
it is yet to be promulgated into law by the Gauteng Premier. This
Gauteng Liquor Act together with the National Liquor Bill are
intended to regulate the liquor industry and improve economic
empowerment. As previously explained, the kind of reforms that the
Gauteng Liquor Act proposes include among others, the involvement
of Local Authorities in the license application process,
self-regulation through Liquor Associations, strengthening of the
enforcement agencies and the regulation of the micro manufacturing,
distribution and sale of liquor.
We are currently identifying office space to broaden the services
of the Liquor Affairs Office to other areas of the province. This
is in line with the new dispensation in terms of the Gauteng Liquor
Act. Before the full implementation of the Liquor Act, a period of
approximately 18 months will be granted as grace, to allow traders
to prepare themselves for full compliance with the requirements of
the Act.
Overview of Blue IQ
Blue IQ is a good model of how government collaborates with the
private sector in order to enhance growth and development, and the
provision of infrastructure earlier and adequately. It is the duty
of government to help make private sector projects viable without
of course sacrificing public interest. I describe this government -
private sector collaboration as a smart partnership. The
partnership is smart because both sides gain. I can say without
fear of contradiction that the partnership with the private sector
is beginning to pay off handsomely.
The first tenant, Lear Corporation has begun production at the
Supplier Park, a development that has taken sixteen months from
concept to being operational. That is a feat that has not been
achieved anywhere else in the world. We will open the gatehouse at
the Supplier Park in July this year and we are confident that the
next two tenants will be announced as well.
The Automotive Industry Development Centre is fully operational and
won the tender in collaboration with the National Metrology Lab to
design and build a custom 4x4 mobile laboratory for Unido. The
skills development plan and the courses offered by the four
tertiary institutions in Tshwane are being considered for
replication in the Eastern Cape.
The Innovation Hub has passed all the regulatory hurdles for
development of the site to begin. Already, two leading companies
with global reach have signed on as anchor tenants. Both will be
establishing their research and development centres at the Hub.
Construction at the Innovation Hub is scheduled to get underway in
the last quarter of this year.
We announced the winning design for the Walter Sisulu Square of
Dedication in Kliptown in June last year after an extensive
competition. We believe that the Square will be a fitting tribute
to a giant among men. The construction of the Walter Sisulu Square
of Dedication has already started. A formal sod turning ceremony is
planned for the 26 June 2003. The due date for completion of the
Square is June 2005 with the opening scheduled for 26 June
2005.
Newtown demonstrated during the World Summit on Sustainable
Development that it is the place to be. It has developed a buzz
like never before and the continuing developments in the area truly
reflect our commitment to regenerate the inner city. The Carr
Street on and off ramps in Newtown will be open to traffic at the
end of June 2003. I do not have to remind you that you will have to
run on 20 July 2003 when we host the Blue IQ Joburg City Challenge
to officially open the Nelson Mandela Bridge. We have managed to
change the skyline of Johannesburg forever.
We have submitted our application for the provisional operator
permit for the Johannesburg International Airport (JIA) Industrial
Development Zone (IDZ) and have already received a response from
DTI. We have a few minor conditions to meet before we can then
begin development of the site. The plan is that development of the
site begins late this year. Work has begun on the construction of
the major R21/K90 interchange that will improve access to the
freight terminal and the IDZ.
In the next few weeks we will have concluded the concession
agreement for the design, build, operate, maintain and transfer of
the Major Interpretation Centre at Mohale's Gate in the Cradle of
Humankind World Heritage Site. This is the first PPP contract of
the province. Another landmark.
The Gautrain tender process will have run its course by September
and the will be in a position to announce the winning bidder before
the end of this financial year. Construction is due to begin in
2004 and phase one of the train operational late 2006/early 2007.
The train surely will propel this province into the future.
The construction of the new N3 off ramp into Wadeville-Alrode marks
the last of the infrastructure to be completed for that project,
the first to be fully implemented by Blue IQ. All that remains is
to entice the private sector to invest now.
April next year marks the end of the first decade of democracy in
South Africa. How fitting then that the Constitution Court will
take occupation of its final home in Braamfontein at the Old Fort
site in the month leading up to that historic April. The
Constitutional Court is one of the key pillars of this democracy
and for Blue IQ the date of completion of the Court has not been
negotiable. The Judges have already approached us with regard to
the launch of the Court in March 2004.
Each of the Blue IQ projects has 3 phases. Phase 1 entails
conceptualisation and detailed planning. Once what needs to be done
is identified, Phase 2 is about implementation and delivery. From
the brief overview given on the projects, clearly Blue IQ has made
rapid progress on this front. Phase 3 is the critical phase:
crowding in private sector investments.
To this end, Blue IQ is hosting the 2nd Blue IQ Means Business Week
in October 2003. The week has three distinct components:
* The Blue IQ Smart Partnerships conference that will have
international and local speakers covering a range of topics that
promotes smart partnerships
* The Blue IQ Smart Industries Expo that will target industry
sectors that compliment those of the trade and industrial
strategy
* The Blue IQ Smart Young Minds Challenge. This competition is open
to learners in schools and challenges them to think creatively and
develop innovative ideas in meeting the needs of communities.
With at least five projects moving into phase three, Blue IQ is
shifting its focus onto attracting investments into those projects.
Private sector investments will be the true success of the
initiative and will over the long term create those much-needed
jobs and overcome poverty.
Gauteng Economic Development Agency (GEDA)
GEDA's mandate is to implement and promote the economic development
policies of Gauteng Provincial Government in the areas of
production, investment and trade. GEDA successfully facilitated
investment to the value of R1.5 Billion into Gauteng as per its
Budget for 2002/3 financial year.
GEDA's core business of investment development and promotion was
expanded to include export development capabilities. The Export
Promotion Programme is aimed at increasing Gauteng's export
capabilities in manufactured products. In the labour intensive
sectors, GEDA aims to find a realistic balance between investment
and jobs and in doing so, maximise job opportunities.
The most notable success of GEDA the in 2002/3 financial year
includes:
* The commissioning of the Medical Waste Disposal Plant in
Johannesburg to the value of R40million
* The reinvestment by Roche Pharmaceuticals, approximately
R100million in the upgrade of their manufacturing facility
* Reinvestment of R105 million by Cadbury Schweppes through Bromor
Foods
* Joint venture between Jasco Telecoms and Israeli interests in the
field of mobile technology and the Tsakane Ext 19 housing Project
to the value of R80million
* The Gauteng Film Office contributed R165million of New Investment
to Gauteng
I am flagging all this milestones in order to illustrate the
zealousness and commitment with which GEDA attracts investments in
the province. We remain committed to ensure that we continue to
promote both foreign direct investment and local investment. The
projected investment generation to Gauteng is R1.5 Billion for
2003/4 financial year.
Gauteng Tourism Authority (GTA)
Statistics indicate that South Africa is the fastest growing
tourist destination in the world, having attracted over 6,4 million
tourists last year. This comes despite the threat of global
terrorism, escalating troubles in the Middle East and bankruptcy
cases being filed across the globe by major European and American
airlines.
Placed within the South African context, Gauteng has emerged as a
leading tourist destination with 54,6% of all international
visitors having visited the province - the highest figure for any
of the provinces. This, we firmly believe, is largely the result of
the unwavering commitment of the private and public sectors as well
as the strong and resilient partnerships that have in recent years
been forged by agencies such as the GTA.
Indeed, Johannesburg is rated as the number one destination in the
country, with both visitor and revenue figures highlighting that
Johannesburg is indeed Africa's premier business, shopping and
pleasure destination. In addition, we are only now recognising the
true importance of cross-border trade and retail shopping to our
regional economy. An encouraging trend has also been the ongoing
growth of the Meetings Incentive Conference and Exhibitions and
Events Market, with Gauteng having successfully hosted both the
United Nations World Summit on Sustainable Development as well as
the 2003 Cricket World Cup.
Placed in this context the activities of the Gauteng Tourism
Authority (GTA) takes on an added significance. The appointment of
Mr Terry Tselane as the new CEO of the Gauteng Tourism Authority
marked a turning point in the performance and visibility of the
Authority. The GTA has indeed been at the forefront of refining the
essence of "brand Gauteng". This work is continuing, in particular
through the partnership that has been created with our six regions
and the industry. Yet, I am confident that Gauteng Waya Waya has
already captured the minds and hearts of not only our visitors but
local citizens as well. With a shift towards an increased focus on
the gathering of market intelligence and research, the GTA has also
greatly enhanced the overall strategic deployment of the provincial
government's marketing resources. The GTA has been instrumental in
a bid to award the hosting of the 2007 International Junior Delphic
Games to the city of Johannesburg by the International Delphic
Council.
Through the Gauteng Tourism Development Fund (managed by the GTA)
more than eighteen community-based projects are currently
benefiting from the fund. The success of these projects is indeed a
milestone in the history of the organisation given past
difficulties experienced by the GTA in committing its allocated
budget to such projects.
With regards to the improvement of industry standards, the GTA is
working closely with the National Grading Council of South Africa
to markedly accelerate the provincial rollout of the new national
grading scheme. Similarly, through the mandatory registration of
all tourist guides with the GTA, this sector is also now looking
forward to greater stability and enhanced consumer confidence in
coming years.
Looking towards the future, the GTA will be consolidating a number
of activities geared towards the African and domestic markets.
Forthcoming events and campaigns such as the Kora Awards and
Shopping Week are geared towards further penetrating the lucrative
markets of not only the sub-region but also the entire continent.
The intention is to position the province as Africa's retail,
entertainment and events hub. Sports tourism has similarly been
identified as a high-growth industry and through the GTAs
involvement in amongst others, the Supersport Show, this niche
market will be further developed.
Gauteng Manufacturing Advisory Centre (Gaumac)
The Gauteng Manufacturing Advisory Centre (GAUMAC) offers high
quality advisory service and information to new and existing SMEs,
with the aim of enhancing their manufacturing competitiveness and
improving their quality. The goal is to improve these businesses
over time to enable them to participate in the mainstream economy
and to eventually become sustainable exporters.
During the previous financial year, GAUMAC exceeded its empowerment
targets in the areas of historically disadvantaged SMEs and female
owned enterprises. Seven thousand five hundred (7500) jobs have
been sustained, and seventy-one new jobs have been facilitated
through GAUMAC. These outstanding results were achieved with
limited resource allocated to the agency.
In an endeavour to widely spread its services, GAUMAC is currently
conducting a feasibility study for the establishment of satellite
offices in Ekurhuleni. The region, popularly known as the
manufacturing hub of Sub-Saharan Africa, has been experiencing
economic decline. Depending on the outcome of the feasibility
study, the far-east region of Ekurhuleni will also benefit from the
support that provincial government offers to manufacturing SMEs
through GAUMAC.
Gauteng Gambling Board (GGB)
The revenues from gambling, collected by the Gauteng Gambling Board
on behalf of the Gauteng Provincial Government, amounted to R314, 4
million for the 2003 financial year. Projected tax revenues from
this source for the 2004 financial year amount to R332, 7
million.
The Gauteng Gambling Board has, with a view to further promote
responsible gambling, promulgated additional rules that will become
effective during the current fiscal year.
The Department of Finance and Economic Affairs has awarded the
tender to conduct the socio-economic impact study of gambling in
Gauteng and this study is expected to be completed during the
current year. The findings of the study will assist in the review
of the gambling licensing and regulatory framework.
The Gambling Board continues to work closely with law enforcement
agencies to eradicate the incidence of illegal gambling in the
Province. During the 2003 year, 268 illegal gaming machines were
confiscated and 30 people were convicted of gambling-related
offences.
In accordance with the memorandum of understanding entered into
between Provincial Government and the horse-racing industry,
Phumelela Gaming and Leisure Limited listed on the JSE Securities
Exchange during June 2002. Black Economic Empowerment Entities hold
22,5% of the issued share capital of the company and have seen a
substantial increase in the value of their shareholding since
listing.
Regarding the sixth casino license, the Gambling Board has advised
the Provincial Government that it is of the view that there are two
remaining alternatives in this regard, namely:
* e-inviting applications for the license; or
* Not issuing the license.
Conclusion
Honourable Speaker and members, the year under review has been
good, yet challenging and exciting. There are so many other
activities that continue to take place within my department and I
believe that I have captured the most significant ones.
The Department has performed well under the current circumstances.
Credit should go to the Head of Department Mrs Thenjiwe Chikane,
her management team and the entire staff complement of the
Department.
I remain, above all indebted to the Premier and my colleagues in
the Executive Council for the unwavering support they have shown to
me and the Department during the year.
Thank you
Issued by Gauteng Provincial Government
10 June 2003
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