Honourable Speaker

Honourable Premier

Fellow Members

Colleagues, comrades and Friends

It is an honour for me to table the 2014/15 Budget Vote of the Gauteng Provincial Treasury today. I would like to begin by paying tribute to my predecessor, Mr Mandla Nkomfe and his administration for the solid Treasury we have inherited in this province. 

During his term of office Honourable Nkomfe, in line with this government’s commitment to an effective, efficient and development orientated public- service, ensured that the Gauteng Provincial Treasury increased provincial revenue collection, reduced overspending and unauthorised expenditure.

Honourable members, this financial year marks the start of a new chapter for provincial government characterised, in the words of Premier Makhura in his State of the Province Address last month, by radical transformation, modernisation and re-industrialisation.

The strategic intent is to build an integrated, socially cohesive, economically inclusive city region, underpinned by a smart and green industrial economy.

The role of the Gauteng Provincial Treasury is to ensure that the programmes that will set us on the course towards realising this vision are funded.

Speaking during the tabling of the Treasury budget vote in the National Assembly, Finance Minister Nhlanhla Nene noted the global economic climate, rising interest rates, declining commodity prices and depreciating currency had combined to shrink government’s fiscal space.

In the current context, this imperative to fund provincial priorities poses all of us with new and interesting challenges:

• How do we review our existing expenditure so that we eliminate programmes that are no longer provincial priorities; that do not offer value for money or waste public resources?
• What revised approaches can we use towards funding capital projects so that we leverage on resources outside of the public purse?
• How do we improve planning and budgeting across provincial government so we can do more by leveraging on a larger resource base?
• How do we motivate provincial departments to improve revenue generation and collection so we have more provincial resources to distribute?

 

These are the questions that Treasury officials have been pondering over the last few weeks and today I want to share with you some of our current thinking in this regard.

Like all good house- keepers facing tough financial times we have to start by addressing a matter of grave public concern and that is how we ensure that the resources we have are well used and not wasted. 

During the recent election campaign, the ANC promised to deal decisively with corruption. This commitment was re-iterated by Premier Makhura in his Thokoza address when he said “We will introduce measures to strengthen the integrity of public institutions and public processes so that fraud and corruption are prevented and detected early in the value chain to prevent losses”.

Honourable Members this Provincial Treasury believes institution building and enhancing transparency in government accounting and procurement processes are the only lasting solutions to the problem of corruption.

Over the last few years, Treasury has played an important role at both provincial and local government level in implementing robust accounting practices,  improving on supply chain management, vetting over 63 000 government employees and contract management and  managing tight cash flows and improving liquidity.

 

These interventions ensured that provincial government achieved a total of eight clean audits and twenty three unqualified audits in the 2012/13 financial year. Our work in assisting local government achieve better financial management won us two awards at the Institute of Municipal Finance Officers Annual Audit and Risk Indaba two months ago.

 

These awards recognise Treasury’s contribution in helping municipalities improve supply chain management, accelerate spending and revenue collection in line with approved budgets as well as supporting operation clean audit and better risk management.

 

Important as these achievements are, we believe we can still do more. Gauteng citizens want to know that we are doing all in our power to ensure that those who are awarded government contracts and tenders have the ability to carry out the work, and that they are awarded through a fair and open process.

 

To enhance the openness and transparency of provincial procurement processes Provincial Treasury and the Department of Transport have agreed to pilot an open process around selected tenders in this financial year.

 

The process will involve supporting bidders to comply with documentary requirements prior to the deadline for the tender;  screening those sitting in the Departmental Acquisition Committee (DAC) for possible conflicts of interest;  publicising who has bid for these tenders;  introducing independent compliance audits of the evaluation process prior to the awarding of tenders and publicising who has won these tenders.

 

The purpose of this pilot exercise is to develop a model for open tendering by GPG departments that we will take to the provincial Executive Council for consideration. 

 

A second area of public concern relates to the question of whether or not those who enter into contracts with government actually deliver what they have been asked to do. It is our intention during this term to significantly improve the capacity of this provincial government to provide oversight of contracts and monitor compliance with both the letter and spirit of the agreement. As part of this process we are already working with the Department of Housing to document all its existing contracts, and audit the status of implementation.

 

To accelerate the war on waste, we have already begun to monitor compliance with cost cutting measures as outlined by National Treasury in Circular 01 of 2013/14 for all provincial departments.

 

We are also currently working with all provincial departments to assist them to review their existing budgets. This will ensure greater synergy between provincial priorities and budgetary allocations with a view to identifying savings. These savings will support the ten-pillar programme and will find expression in the adjustment budget to be tabled in November 2014 and inform the 2015/16 Medium Term Expenditure Framework to be tabled in March 2015.  

 

Honourable members I am happy to report to the house today that through the joint intervention with the Department of Health, last year, the department did not overspend its budget for the first time in years.

 

We are currently working with Health to finalise the second phase of the intervention. Our commitment is to ensure greater input and ownership by the leadership of the health department and a focus on activity based budgeting for clinics and regional hospitals as well as improving the spending on infrastructure, equipment and medical consumables. 

 

I know that Honourable members are interested in the work Treasury does to support the two district and seven local municipalities to achieve better financial outcomes in terms of Section 34(2) of the Municipal Finance Management Act.

 

In this term we want to give attention to the area of revenue generation. I am sure Members would agree this is an important support area if we want municipalities to achieve a stable financial situation.  In this regard we think there are three areas where we can be of assistance:

 

• The first is to support the municipalities to develop better data bases of those who need exemptions form municipal tariffs. The Gauteng Provincial Treasury will assist municipalities with the data cleansing exercise to ensure that the indigent register is reflective of those who cannot pay for services. In this regard we think that a proper partnership with Social Development and Home Affairs will help ensure that the so-called indigent data base has greater integrity amongst residents.

 

• Secondly we will work with our counterparts in the department of Cooperative Governance and Traditional Affairs to help fast track the process of collecting household debt owed to municipalities from those who are not classified as indigent; and

 

• Thirdly we will look at how we can help municipalities to protect their revenue with a view to reduce debt from accumulating.

 

As part of these broad initiatives to support local government, Treasury will take urgent steps to ring fence funds to ensure that Provincial Departments pay their monthly bills for water and electricity usage, and the Department of Infrastructure Development pays municipal rates and taxes on time. Good financial management like everything else has to start at home.

 

In this financial year we have set aside R6 million for hands-on support to municipalities in the area of financial management.

 

Honourable members I have spoken in some detail on how we in Treasury want to support the process of making sure existing resources are used to fund

priorities. I would now like to turn my focus to the whole area of increasing the revenue we have at our disposal.

 

The first area of importance is to improve provincial revenue collection. In 2009/10 financial year, GPG collected R2, 620 billion and this increased to R4, 344 billion in 2013/14 financial year. Over the past five years we improved the contribution of the provincial share to our overall budget by R1, 723 billion and this represents a cumulative increase over five years of 65.73 percentage points. 

 

This was done by institutionalising own revenue management in the province, improving communication with GPG departments and ensuring compliance with the relevant legislative framework.

 

The Gauteng Department of Roads and Transport has been the leading department in terms of revenue collection over the period under review. In 2009/10 financial year the Department collected R1, 540 billion and this grew to R2, 707 billion in 2013/14 financial year, representing an increase of R1, 167 billion or 75, 78%.

 

It was followed by Gauteng Department of Economic Development which collected R546 million in 2009/10 financial year and R759 million in 2013/14, representing an increase of R213 million or 39%.

 

Although Gauteng Department of Health experienced challenges over the period under review, it managed to increase revenue collection by R136 million or 33.66%; collecting R404 million in 2009/10 financial year and R541 million in 2013/14.

 

The Gauteng Provincial Treasury revenue collection grew from R54 million in 2009/10 financial year to R248 million in 2013/14 financial year. This shows an increase of R194 million or 357% over the period under review. The main source of revenue in this department is mainly interest revenue from short term investments.

 

On the basis of this track record, Treasury is confident that we can increase provincial revenue generation over the next five years. To achieve this, the department will explore all avenues within the realm of the PFMA to aggressively optimize revenue generation and collection.

 

A tariff review on Gambling Taxes with a view to optimize revenue collection is being explored in collaboration with Department of Economic Development and Gauteng Gambling Board. We are also exploring ways to incentivise GPG departments to put more effort into collecting revenue.

 

Other sources of revenue being explored include advertising and rental from government properties, an initiative we are working on together with Gauteng Department of Infrastructure Development.

 

Over the past five years the Gauteng Funding Agency has been involved in feasibility studies to explore various funding options for social and economic infrastructure projects. A total of 80 percent of the feasibilities for projects that were referred to the GFA were completed and two projects were funded and implemented. 

 

One is aware that some honourable members have reservations about the usefulness of this institution in assisting Provincial Treasury in accessing alternate funding sources for major projects. I have studied the work of this agency in depth and believe that it has learned valuable lessons that will allow us to do more by leveraging more.

 

In this term we are going to repositioning the GFA to provide a full bouquet of services to the projects that have been selected for alternative funding. Whilst currently the GFA provides service only up to feasibility stage, going forward the GFA will assist departments with their projects up to procurement and contracting stage. 

 

Currently, the Gauteng Funding Agency is supporting the Department of Infrastructure Development with the first phase rollout of the Gauteng Green Agenda. Through this project, private sector funding will be invested to construct and manage Tri-generation plants that will supply power, steam and chilled water to buildings in four provincial hospitals.

 

The feasibility study is complete and the project will go to procurement in this financial year. The second phase entails rooftop solar retro-fitting on GPG-owned building across the Province. This will be implemented after we have finalized the funding structure through a PPP procurement process in the next financial year.

 

In addressing provincial funding needs, attention has to be given to improving planning and spending synergy between provincial and local government as well as with state enterprises who are engaged in significant capital projects in our province.  While the current budget of the Gauteng Provincial government is R84bn the joint budgets of provincial and local governments amount to over R200bn.

 

To improve planning and budgeting and ensure that our rands go further we will ensure synergy in these processes across the spheres in government. The initial stages will be on aligning the planning and budgeting processes at provincial and local government level. For this process to be effective, it will be crucial to review the IDP process working with the local government sphere and ensure that there is integration of all the plans at all spheres of government.

 

In the coming few months both the Gauteng Planning Commission and Treasury will be developing a framework on how best we can achieve synergy of plans and budgets with the local sphere of government. This exercise will be inclusive of all the municipalities in Gauteng. The framework will be underpinned by the intergovernmental framework adopted in South Africa.

 

Honourable members I would like to conclude by thanking the Premier for the exciting vision he has given us for Gauteng over the next five years; my colleagues in the executive Council for their support;  the Honourable Sakhiwe Khumalo and  Honourable Mbongeni Radebe and their portfolio committees for their valuable oversight work;  Team Treasury headed by Ms Nomfundo Tshabalala for building a solid institution and the citizens of Gauteng who have entrusted us with the safekeeping of government’s finances and the funding of their hopes and aspirations.