Colleagues in the Executive Council;
Honourable Chief Whip;
Honourable Members of this House;
Mayors and MMCs;
HODs of our departments;
CEOs of our public entities;
Private sector representatives
Comrades and Friends
It is an honour and a privilege to present to this House the 2020 Medium Term Budget Policy Statement (MTBPS) of the 6th Administration under the leadership of Premier David Makhura.
This year’s MTBPS comes at a difficult time for our province, our country and the rest of the world.
This is because we continue to battle with the worsening Covid-19 pandemic that has resulted in the death of millions of people, unprecedented number of job losses and the destruction of people’s livelihoods, not just in Gauteng and South Africa, but worldwide.
This pandemic has devastated economies, increased poverty and widened the inequality gap.
As we speak, data from Johns Hopkins University in the US shows that more than 51 million people around the world have been infected with the virus.
And according to the Africa Centres for Disease Prevention and Control, just over 1.9 million of these people are in Africa.
South Africa accounts for more than 700 000 of these cases. But most importantly, our country has the highest number of recoveries from this disease. Sadly, we have lost more than 20 000 people to this virus. Our heartfelt condolences go out to the loved ones of these departed fellow countrymen and women.
In this regard, I call on all the people of Gauteng to support the five days of mourning - from the 25th to the 29th of November – as announced by President Cyril Ramaphosa, to remember all those that we lost due to Covid-19 and gender-based violence, the other societal challenge facing our country. During that mourning period, let us all wear a black armband to show our respect to all those who have departed.
Honourable Members, the National Department of Health says although our infection rate has stabilised over the past two months, the country is still experiencing pockets of cluster outbreaks, and this shows that Covid-19 will remain with us for the near future.
As government, we call on all our people to continue to follow public health protocols required to fight the spread of Covid-19. Let us all continue to wash our hands for at least 20 seconds with soap or use alcohol-based sanitiser, properly wear our masks when in public and maintain social and physical distance to protect ourselves and those around us.
We welcome the progress that is being made in South Africa and internationally to develop a vaccine to fight this virus. Our hope is that when the vaccine is finally found, it will be fairly and equitably distributed around the world to save lives.
Honourable Members, following the devastating effect of the Covid-19 pandemic, a ‘black swan’ event in the history of the world, the province tabled a Special Adjustment Budget on the 23 July 2020 to provide the funding required to address the impact of the pandemic and to align the budget to the envisaged consequences of the lockdown regulations.
Today, we are tabling the Mid-year Adjustment Budget for the 2020 Medium Term Expenditure Framework (MTEF). This is done within a severely constrained fiscus. Our economy is expected to contract by 7.8 per cent this year. There have been severe job losses which increased our unemployment rate, and as a Province we also had to revise our projected revenue targets for the 2019-2024 Medium Term Strategic Framework.
National Government is leading the path to rebuilding our economy through the Economic Reconstruction and Development Plan. The enormity of the work that must be done was clearly explained by President Ramaphosa when he presented the Economic Reconstruction and Development Plan to Parliament last month and I quote:
“Even the darkest of clouds has a silver lining, we need to see this moment as a rupture with the past and an opportunity to drive fundamental and lasting change. It is an opportunity not only to recover the ground that we have lost over the course of the pandemic, but to place the economy on a new path to growth”.
Yesterday, President Ramaphosa led the third South Africa Investment Conference as part of his drive to attract R1.2 trillion in investment to our country in the next five years. This Presidential initiative has inspired great investment momentum with over R650 billion in investment commitments made during the first two conferences.
From these commitments, projects valued at R172 billion are already under implementation, and creating jobs for our people. At this year’s conference, local and international investors made additional investment commitments that further demonstrate that even during these difficult times, our country continues to inspire confidence.
As the Gauteng Provincial Government, we are convinced that the comprehensive interventions of the re-modelled Growing Gauteng Together Vision 2030 are key to re-building and growing our economy.
Therefore, we are committed to continue to align funding to the priorities of the 6th Administration, namely:
Economy, Jobs and Infrastructure;
Education, Skills Revolution and Health;
Integrated Human Settlements and Land Reform;
Safety, Social cohesion and Food Security;
Building a capable, ethical and developmental state;
Sustainable development for future generations; and
Building a better Africa and a better World.
Honourable Members, the recent Exco Lekgotla agreed that in addition to these seven GGT 2030 priorities, we must also track progress on the implementation of the following overarching key areas, namely:
Township Economy Revitalisation by tracking government spend and supporting SMMEs and township entrepreneurs;
The economic emancipation of Women with plans to counter Gender Based Violence through upscaling of the Welfare to Work Programme;
The implementation of Youth empowerment programmes through the Tshepo 1 million programme & Driving a skills revolution using the EPWP programme to attract the youth; and
Clean Governance by institutionalisation of integrity, ethical leadership and accountability in the public service.
Gauteng, as the economic hub of South Africa is key to achieving the objectives of President Ramaphosa’s Economic Reconstruction and Development Plan.
We believe that we are better placed to achieve this goal because GGT is aligned to the national plan and seek to address the triple challenges poverty, inequality and unemployment which have been worsened by Covid-19 through doing the following:
Creating the enabling conditions for infrastructure rollout;
Reindustrialising Gauteng for the 21st century through Multi-tier SEZ & High Growth Sector Programme;
Bringing opportunity to the many and confront inequality at the spatial level through the Township Economic Revitalisation Action Plan, including strategic localisation/ production;
Systematically confront youth economic exclusion through the Tshepo 1Million & Youth workforce programme, with a focus on mass public employment to compliment private sector opportunities;
Restructuring the Gauteng economy for long term growth by:
Modernising network industries
Lowering barriers to entry and addressing distorted patterns of ownership, with a particular focus on women-owned and women empowering enterprises
Prioritising labour intensive growth
Focused and flexible industrial policy; and
Engaging the private sector and social partners to join the effort through structured Social Compacting
Honourable Members, through this Mid-year Adjustment Budget we are providing funding for these GGT 2030 priorities, taking into consideration the economic realities as well as the impact of the pandemic on our fiscus.
The global economy
The year 2020 has been a challenging one for the global economy, as the impact of the COVID-19 pandemic has affected the growth prospects of most economies. The latest estimates from the International Monetary Fund suggest that the global economy will decline by 4.4 percent.
The economic downturn in most economies reflects a significant fall in private consumption in most economies, as a result of social distancing, and this will have ripple effect on the overall aggregate demand, trade, investment, and economic activity.
The fall in aggregate demand has also affected business sentiment and weakened investment, which also affected the labour market as unemployment soared in most economies.
The severe impact of Covid-19 has also resulted in the reversal of progress made towards fighting global poverty worldwide as the economic impact of the pandemic has disproportionately adversely affected the low-income households.
However, the forecast for 2021 indicates a robust recovery with global growth reaching 5.2 percent. This will primarily be driven by a return to normal economic activity, but also robust recovery in international trade.
South Africa’s economy
Our country’s Gross Domestic Product (GDP) is expected to decrease by 7.8 percent this year. It must be remembered that pre-Covid-19, the economy was not in good shape, with poor macroeconomic fundamentals. This has been worsened by the contagion from the global recession that has been caused by the pandemic and due to the domestic lockdown measures that were necessary to slow the local infection rate.
However, National Treasury estimates a slight recovery in 2021, with growth rates expected to continue thereafter. These higher growth rates will only be possible if a more conducive environment is created for long-term investment with support for innovation, including towards a greener economy.
The structural reform measures include opening the energy market, modernising rail and port infrastructure, reducing red tape and the cost of doing business, facilitating regional trade and reducing the skills deficit with immigration and education reforms.
Gauteng economic outlook
Gauteng’s economy is expected to contract by 8.4 percent in 2020. However, with the gradual resumption of most economic activity that began in the month of August, the estimate for 2021 suggests a marginal recovery. In line with South Africa as a whole, Gauteng province is expected to recover to a growth of 2.6 per cent in 2021.
The Covid-19 pandemic has permanently changed the economic landscape in the regional economy and nationwide. The recovery will likely be gradual over at least the next two years.
Central to the recovery, will be a process to restructure the nature of economic activity in a manner that will reduce future economic disruptions of this nature in the future. This process presents opportunities for future growth.
GAUTENG ECONOMIC RECOVERY PLAN
Addressing the Third Global Business Services and Digital Economy Sector Action Lab last month, Premier David Makhura emphasised that the creation of a conducive environment is key to ensure that business activity to increases and jobs are created in the economy.
“On our part as government, we will continue to focus on cutting red tape, investing in skills and enabling infrastructure, unlocking incentives as well as providing safe and secure environment.”
In response to the challenges brought about by the Covid-19 pandemic, GGT 2030 has been remodelled to speed up the reconstruction and recovery of the provincial economy.
The remodelled GGT 2030 brings the possibility of an expansion of the tourism sector, growth in the trade, catering and accommodation services sector, growth in exports for the agricultural sector, a rise in labour productivity and increased competitiveness of strategic sectors.
As Gauteng, we are committed to use the Special Economic Zones (SEZs) to reindustrialise and modernise the Gauteng economy and thus improve infrastructure. SEZ related construction projects commenced in August, and these investments have increased from R2.46 billion to R4.33 billion.
The SEZ project in the Tshwane Automotive Special Economic Zone will boost the automotive industry infrastructure and will produce 200 000 cars a year by 2022. The building phase of this SEZ, is the first stage of a R20 billion investment by the Ford Motor Company in the Tshwane Automotive cluster, matched by R4 billion in public investment.
Other SEZ projects will be initiated in the Vaal, aimed at revitalising the manufacturing sector, logistics, agriculture and agro-processing, in a joint operation with the Gauteng Enterprise Propeller (GEP), the Department of Trade, Industry and Competition (DTIC), the Manufacturing Circle and the National Business Initiative.
These plans aim to focus on urgent issues to retain current investment/jobs in the Vaal and engaging the private sector in the economic masterplan for the area.
SOCIAL AND ECONOMIC INFRASTRUCTURE INVESTMENTS
Honourable Members, infrastructure has been identified as one of the key priorities in rebuilding our economy and creating sustainable job opportunities. Infrastructure projects have been identified in terms of our ten-year Infrastructure Asset Management Plans and three-year Infrastructure Programme Management Plans.
The Province has also developed a project pipeline aligned to the 6th Administration. Implementation of infrastructure projects as planned for in the three-year Infrastructure Programme Management Plans will only be achievable if there are credible and signed off three-year Infrastructure Programme Implementation Plans prepared by Implementing Agents.
In the 2020/21 financial year a total budget of R11.6 billion was allocated for the Gauteng Provincial Government (GPG) infrastructure programme to maintain and improve the condition of the existing stock and to provide additional assets.
This budget was adjusted upwards by R617.4 million in the Special Adjustment Budget to R12.2 billion. Gauteng Provincial Government is focused on using Infrastructure investment to reignite the economy and as a result a budget of R12.3 billion is allocated to the infrastructure programme, which represents an upwards adjustment of R80.8 million.
The main drivers of the upwards adjustment include the approval of the rollover request of R165 million for the Department of Human Settlements and an upward adjustment of R99.6 million for Gauteng Department of Education (GDE) to fund an improved infrastructure performance and resultant additional cash flow requirement for the remaining months of the financial year.
The impact of the Covid-19 lockdown regulations as well as the lack of readiness of projects to proceed from planning and design to construction, makes it very difficult to allocate a higher budget. Gauteng Provincial Treasury is specifically working with departments to progress projects from the planning and design stages to construction.
Overall infrastructure expenditure should ideally indicate a consistent pattern throughout the financial year, thus 50 per cent of annual expenditure should have been achieved by the end of Quarter 2.
However, the normal expected expenditure patterns cannot be applied in the current financial year due to the national lockdown restrictions that negatively affected the performance of infrastructure projects.
It is expected that infrastructure spending will improve gradually since national lockdown restrictions have been eased to Level 1. We are aware that the remaining months of the financial year will be characterised by the builders’ holiday between December and January. Our hope is that the industry will shorten this holiday period to make up for the time lost as a result of Covid-19.
Provincial departments must follow due diligence in ensuring that there is alignment between different planning documents. GPG does not want to see an increase in variations that could have been avoided if proper planning was undertaken and Professional Service Providers (PSPs) applied due diligence in exercising their responsibilities.
No infrastructure project should be allowed to proceed to construction before all the required approvals have been obtained from the relevant statutory authorities such as Municipalities.
Over and above social and economic infrastructure, which is funded through the fiscus, the Gauteng Provincial Government is also looking into working with the private sector in order to deliver priority infrastructure projects at the scale that is essential to grow the economy.
To accelerate infrastructure development and to transform the South African economy, the role of the private sector will be essential in deploying public-private partnership models and purely private funding.
Gauteng is already working with the Infrastructure South Africa Agency in the Presidency and is planning to set up infrastructure investment to revive the provincial economy. This drive will eventually see blacks, women and young people drawn into the thrust of the economy of the province.
The industrialisation and export promotion refer to the development of specialised economic zones in the province. One example, which I mentioned earlier, is the construction of the Tshwane Automotive Special Economic Zone as mentioned earlier on.
The Gauteng Provincial Government continues to improve the ease of doing business in each sector in compliance with applicable lockdown regulations, towards the development of a skilled workforce for each industry and build enabling infrastructure, including SEZs and industrial parks.
INSTITUTIONALISING CLEAN GOVERNANCE
Honourable Members, as Gauteng we believe that it is fitting for us to reflect deeply on the lessons learnt during this time of crisis that we face in the world. The value of the crisis is not the drama, pain and destruction that it has caused in our lives and economy, but valuable lessons learnt both positive and negative.
We saw humanity at its best when many people continuously placed their own lives in danger to save the lives of others. We honour these heroes and heroines of our response to the pandemic.
But we also saw the worst behaviour. We have seen corrupt activities resulting from the abuse and mismanagement of Supply Chain Management (SCM) processes during Covid-19, and this has eroded the trust between the people and government.
Honourable Members, as a province we have been outspoken and consistent in the fight against corruption, wastage, maladministration and unethical conduct. That is why Premier Makhura has continuously briefed the public about the actions that the province is taking against anyone implicated in wrongdoing concerning the procurement of Personal Protective Equipment (PPEs) and other services related to the fight against Covid-19.
To promote transparency and adhere to the Premier’s commitment to clean governance, Gauteng Provincial Treasury has embarked on an exercise of disclosing the Provincial expenditure on PPE every month.
This report includes GPG departments, entities and municipalities. To date the department has disclosed three reports from April – September 2020 and on the 30th of November we are publishing the October 2020 report. We also continue to report the procurement of (PPE) to National Treasury and the people of Gauteng as required by the prescripts.
Furthermore, we continue to conduct compliance checks throughout departments and provide guidance where it is required.
Honourable Members, the Office of the Auditor-General has finalised the audit process for 2019/20 financial year, with exception of a few areas where the AGSA is performing quality control processes.
As we present the MTBPS to this House today, we also bid a final farewell to Auditor-General Kimi Makwetu who sadly passed away last week. I therefore take this opportunity to once again express our deepest condolences to the Office of the Auditor-General, his family, friends and colleagues.
He was a great public servant who was strongly committed to good governance and ethical conduct. One of his greatest legacies is undoubtedly the amendment of the Public Audit Act to give the Auditor-General powers to act against officials for deliberately taking wrong decisions and waste the hard-earned taxes of citizens.
PRINCIPLES OF THE 2020 MTBPS
Honourable Members, these tough economic times that we are experiencing will persist for the near future. The next three years will be characterised by two things – the gradual economic recovery from the unprecedented economic shock experienced during the Covid-19 pandemic; and then the revival of the economy will start to pick up as a result of the measures that are laying the foundation for a new growth path.
This means that we will continue to experience revenue shortfalls across different spheres of government, increasing pressure on already stretched public finances.
Therefore, the allocation of budget in the next three years will be guided by the following principles:
Alignment to the priorities and interventions adopted in the GGT 2030;
Strategic projects that would stimulate economic growth in the Gauteng City Region; and
Allocations will consider the capacity of departments to absorb and effectively utilise resources.
As Gauteng Provincial Government we believe that it is during difficult times that many people depend on government for their healthcare needs, education requirements and social services. It is therefore our duty in these difficult times to balance between containing expenditure and growing the economy.
We will also accelerate the implementation of the revenue enhancement strategy. Eliminating leakages in own revenue generation is very important particularly in these times in order to resource provincial priorities as the Provincial Equitable Share and Conditional Grants from national are steadily on the decline. We must also manage accruals as they are a risk to the provincial budget.
As we continue with the delicate balance of managing public finances, we must also work with all our partners to achieve inclusive economic growth. This must be done through accelerating the implementation of the economic recovery plan, focusing on productive and growth sectors with an immediate aim of job creating much needed jobs for our people
Honourable Members, let me now turn to the Adjustment Budget. In July, I adjusted the budget of this financial year to R146.4 billion. Today, we are further adjusting the 2020/21 budget of the province to R143.7 billion.
The most profound change to the 2020/21 baseline is seen in the reduction by R5 billion to the Provincial Equitable Share, this being the clawing back of funds set aside for the improvements in conditions of service for public servants.
This is the result of the fiscal consolidation measures announced by the Minister of Finance Tito Mboweni in response to the weaker than expected growth, continued deterioration in public finances and challenges to implement structural reforms.
The extraordinary shock to economic output in 2020 has deepened revenue shortfalls, which are expected to persist over the medium term, and which, added to the worsening debt-to-GDP ratio, necessitate urgent action to avoid tipping over the fiscal cliff.
As the Gauteng Provincial Government, we will continue to work closely with National and other relevant stakeholders to ensure service delivery is not affected. For Conditional Grants, there are cuts of R91.4 million in order to contribute towards the funding of the recapitalisation of South African Airways (SAA).
A total amount of R591.4 million will be rolled over from the 2019/20 to the 2020/21 financial years, of which R526 million is Conditional Grant funding, and the balance of R65.4 million from the Provincial Equitable Share. The details of these rollovers are as follows:
Health: The department receives a total rollover of R340.5 million, of which R290.6 million is for unpaid invoices for machinery and equipment at the end of the 2019/20 financial year and R50.9 million for outstanding commitments in Goods and Services;
Education: A total of R52.4 million is rolled over to the 2020/21 financial year to honour invoices that were received after the cut-off date from service providers;
Human Settlements: The department will be receiving a total of R165million in respect of unpaid invoices that could not be certified timely and processed for payment before the cut-off date, as well as delays in the proclamation, formalisation and registration of townships that led to delays in the registration and transfer of title deeds. A further R7 million will be rolled over for the payment of Property Rates and Taxes;
Community Safety: A total of R5.3 million will be rolled over to the 2020/21 financial year to honour invoices to g-Fleet. In addition to the rollover, an amount of R5.3 million is reallocated to the department, being monies received for services rendered to other organs of state; and
Sport, Arts, Culture and Recreation: The department will be receiving R3.1 million, to honour commitments and invoices from the 2019/20 financial year.
Turning now to additional allocations from National, in the 2020/21 Main Adjustment Budget, GPG departments will be receiving a total of Additional funding amounting to R1.3 billion under the auspices of the Presidential Employment Initiative.
The resources are expected to flow through the Provincial Equitable Share and Conditional Grants in the form of the Presidential Employment Intervention that responds to the increase in unemployment emanating from the COVID-19 pandemic.
These funds provide targeted employment opportunities, as well as employment risk support, and will be flowing to the following departments:
Education: R1.1 billion for the hiring of education assistants, and to preserve posts in Quintile 4 and 5 public schools and low-income private schools;
Health: R47.4 million in additional funding to Statutory Human Resources Training and Development Grant to appoint Enrolled and Assistant/Auxiliary Nurses;
Social Development: R77.8 million towards increasing the Early Childhood Development (ECD) grant to provide salary top-ups for additional compliance support duties and for employment risk support; and
Transport: R45.5 million through the Provincial Road Maintenance Grant for job-creation through road maintenance.
Additional funding of R104 million from National will be allocated to Social Development, as reimbursement for the provision of food relief to needy Gauteng residents during the earlier stages of the COVID-19 pandemic, when there were stringent lockdown conditions that prevented many forms of economic activity.
Human Settlements will receive an additional R100 million to deal with validated accruals, this while other processes are still ongoing to ascertain the true quantum of what the department owes, and verification of all these claims.
Other additional funding of R51.1 million will be allocated to Agriculture and Rural Development, in order to provide support to the Emfuleni Local Municipality, particularly relating to addressing the poor waste management services and fast-tracking service delivery.
The Office of the Premier will be receiving an additional R64.4 million, of which R49.6 million will go towards the validated claims for the acute mental health users, and R14.7 million toward the 250 learners appointed to assist the Hotline Unit for a 12-month period during the COVID-19 pandemic.
Gauteng Provincial Government departments will be receiving a total of R23m being funds suspended from the Gauteng Provincial Treasury baseline following the decentralisation of the probity audit process, as part of the of phase 1& 2 implementation, that is an integral part of the Open Tender process that the province embarked on in the Fifth Administration.
This gives effect to the pronouncement made during the tabling of the 2020/21 Budget in March, where I signalled that departments would gradually take over the process that had previously been centralised in the Provincial Treasury. The final phase will be implemented with effect from 1 April 2021.
Health will also be receiving R324 million top-sliced from other Gauteng Provincial Government departments as reimbursement for the personal protective equipment (PPE) procured on their behalf during the early stages of the COVID-19 pandemic, when this function was centralised.
Honourable Members, let me conclude by acknowledging the following:
Thank you Premier Makhura for your inspirational leadership as we continue to implement GGT 2030, a vision that will result in the delivery of the Gauteng of our dreams.
To my colleagues in the Executive Council, thank you for your friendship, support and teamwork, even during robust discussions when tough decisions must be taken for the net benefit of the people of Gauteng
I thank the Finance Portfolio Committee and the Standing Committee on Public Accounts for always providing oversight on our work and giving us great insights that have continuously improved the way we manage public finances in this province.
To HODs of departments and MMCs of Finance, many thanks for your support as we continue to execute our mandate of providing stewardship in all financial matters in Gauteng.
To my team in Provincial Treasury led by HOD Nomfundo Tshabalala, thank you as always for working closely with departments, municipalities and entities to ensure that public finances in the province are managed in accordance with rules and regulations.
Special thanks to my family, particularly my children for the support and inspiration that I receive from them every day as I continue to do my job as a public representative.
Honourable Members, these are difficult times, but we must not despair. As President Ramaphosa reminded us when he addressed the nation last week:
“Let us continue to demonstrate that we are a people of resilience and courage. Let us show that we care for one another in sorrow, sickness and in death. It is our individual actions over the next few weeks and months that will decide the fortunes of our nation.”
As we go through the Covid-19 pandemic, we need to learn that every crisis is never permanent, it has an expiry date. We read in history that there were challenges in the past and many people lost their lives and livelihood.
There is life on the other side of any crisis, and we need to work together and observe all health protocols in order to avoid the second wave of this pandemic that many experts have warned us that it might be more devastating than the first one.
Honourable Speaker, let me present the 2020 MTBPS which outlines the context within which we will fund provincial priorities aimed at realising GGT 2020. I therefore table the following documents for consideration by this House:
The 2020 Medium Term Budget Policy Statement (MTBPS)
The Gauteng Provincial Adjustments Appropriation Bill, 2020
The 2020 Adjustment Estimates of Provincial Revenue and Expenditure (EPRE)
The 2020 Adjustment Estimates of Capital Expenditure (ECE)
The copy of my speech