Budget Speech 2008

Mr Speaker
Premier
Colleagues in the executive council
Honourable members of the provincial legislature
Mayors and speakers from various municipalities
Heads of departments, government officials and leaders of our agencies
Leaders of political parties
Leaders of the business community
Leaders of civil society
Distinguished guests
And the people of the Western Cape

At the beginning of 2004 we signed a contract with our people to give them a better quality of life and to make the Western Cape the best place to live in. We took steps to reduce poverty, create jobs, improve education and health and build infrastructure as important elements on our journey. Budget 2008 moves us a step further along our journey towards improving access to quality education, health and social development services, building, broadening and sharing the economy and making significant inroads into the provision of good infrastructure, housing, skills development and job creation.

The Premier, in his state of the province address highlighted some of the inroads we have made since elected to govern in 2004 in our quest to push back the frontiers of poverty, restore dignity and achieve a better quality of life. Every morning the impala awakes knowing that it must outrun the fastest lion if it wants to stay alive. Every morning a lion awakes knowing that it must outrun the slowest impala or it will starve. It makes no difference if you are a lion or an impala, when the sun comes up in Africa you must awake running. (A United Nations worker in Zambia, November 2002)

Responsible and responsive governance

The budget baseline of the Office of the Premier is augmented to foster its
strategic oversight role and to give effect to the priorities and objectives as outlined in the iKapa Growth and Development Strategy. The department is also spearheading the Social Transformation Programme (STP), which focuses public resources into specific areas identified as vulnerable or at risk. Apart from allocations to strengthen its base, the department receives R10.3 million over the Medium Term Expenditure Framework (MTEF) to support this initiative.

The Office of the Premier plays a key role in strengthening the co-ordinating role for the 2010 FIFA World Cup and R20,2 million over the 2008 MTEF is provided for this purpose. Fifty per cent of the Department's budget is dedicated to providing effective and efficient Information and Communication Technology (ICT) service to the provincial government including repairing, replacing and upgrading outdated Information Technology (IT) infrastructure. Additional moneys of R85.6 million over the MTEF have been set aside for this purpose.

The Department of Local Government and Housing is in the process of fine-tuning its "hands-on support" capacity building programme in municipalities. Over the next few years, the department plans to extend the province's capacity building to cover technical aspects of housing and municipal service planning and delivery. Over the 2008 MTEF an amount of R50 million has been provided additional to the department's budget to achieve this objective.

A number of municipalities are too small to run higher administrative and technical services, essential for the operation of municipalities. Shared services could improve municipal service delivery and governance, a key initiative of my colleague Member of Executive Council (MEC) Dyantyi at Local Government and Housing.

Preparedness for mitigating the impacts of disasters is a feature of a responsible and responsive government. Over the last 3 years the Department has been equipping and staffing the Provincial Emergency Management Centre. The centre has also begun to draw on other government departments and agencies in preparing to manage disasters that affect their particular sectors.

Economic outlook

Speaker, the recently published economic indicators highlight our vulnerability to global market conditions. The rise in inflation, fuel and food prices and interest rate hikes have put tremendous pressure on our choices and the affordability levels of our programmes. The global economy is projected to slow down considerably in 2008 as the international financial market crisis intensifies. Advanced economies such as the United States will be the most adversely affected, while emerging market economies are generally upbeat due to stronger growth in domestic demand.

According to the most recent projections by the Bureau for Economic Research, economic growth for South Africa is expected to slow down to 3,9% in 2008 and recover to 4,8% in 2009. Growth Domestic Product (GDP) growth for the year 2007 is estimated at 5,1%.

The Western Cape economy is estimated to have grown by 5,6% in 2007 and is anticipated to grow at 4,6% for the 2008/09 financial year. The major threats to the Western Cape economic outlook also emanate from the high interest rate environment and the impact of power supply constraints on agricultural and manufacturing activities. While the Western Cape appears to have been relatively less affected than other provinces by the electricity supply crisis at the end of 2007 and early 2008, it has to be emphasised that growth can be somewhat weaker in the event of an intensifying energy crisis.

The manufacturing, commercial and to a lesser extent the construction sectors are particularly exposed to the impact of unplanned power outages and power rationing. My colleague MEC Essop at Economic Development and Environmental Affairs has put a process in place to mitigate the impact of Eskom energy variability.

The Premier in his state of the province address touched on the immediate steps to be taken by the province and our partnering municipalities to deal with the electricity demand side. We have thus set in motion initiatives to try and reduce the demand of electricity by 10% in the province. Overall, the province continues to create new jobs. However, the traditional labour absorptive sectors such as agriculture and manufacturing continue to shed jobs.

During the four-year period between March 2003 and March 2007, the working age
population of the Western Cape grew from three million to 3,270 million individuals. This represents an average annual growth rate of 2,1%, which is almost one percentage point higher than the national average growth rate of 1,2 %. The broad labour force in the Western Cape increased by 248 000 individuals during this four-year period, continuing to put pressure on the economy to create more jobs.

Much of the employment growth in the province is linked to the growth of informal sector activities (which is dominated by retail trade activities). High inflation and interest rate increases are likely to make life difficult for the wholesale, retail trade and industry sectors. Much work is required to make our economic sectors more competitive in the wake of an unforgiving international environment.

Under the auspices of the premier's department, part of our reform will emanate from the Organisation for Economic Cooperation and Development (OECD) analysis, which focuses on the degree of competitiveness of the greater Cape Town Functional Region and on the existence of strategies and policies for regional competitiveness. A full report, supported by proposed strategies will be available towards the second quarter of 2008/09.

Receipts Speaker, I will now deal with the revenue proposals and estimates that will underpin and accompany our spending plans. Total provincial receipts, including financing, of R24.8 billion, will fund our policy objectives and responsibilities in 2008/09. This is about R4,1 billion more than the main budget estimate of a year ago and R3 billion or 13,5 % higher than the 2007/08 revised estimate. Over the (MTEF), total provincial receipts are set to grow annually at a rate well above inflation of 11.2% to reach R30,1 billion in 2010/11.

Receipts from the national government will increase by 14,6% from the 2007/08 revised estimate to R22,4 billion in 2008/09, growing to R28,2 billion by 2010/11. Equitable share transfers increase by R2.3 billion or 14.6% from R15.5 billion in 2007/08 to R17,7 billion in 2008/09 representing an annual average growth of 12,8% over the 2008 MTEF. Although the basic structure of the equitable share formula has not changed for the 2008 MTEF, updating of the demographic and economic data has resulted in positive changes to this province's share.

The provincial share increased from 8.8% in the 2007 MTEF to close to 9% over the 2008 MTEF resulting in nominal increases, before adding any additional amounts to the baseline, of R298.9 million in 2008/09, R335,4 million in 2009/10 and R355,6 million in 2010/11.

Over the 2008 MTEF, the national government has increased the equitable share allocation going to all provinces by R33,2 billion. This translates to R5,9 billion in 2008/09, R9,7 billion in 2009/10 and R17,6 billion in 2010/11. The Western Cape's share amounts to R664,4 million in 2008/09, R1,1 billion in 2009/10 and R2 billion in 2010/11, inclusive of formula adjustments referred to earlier.

The additional equitable share is for nationally agreed to policy priorities, particularly in the social sector and are intended to improve access and quality of mainly social public services; address vulne