Issued by: Department of Finance
18 NOVEMBER 1999
Honourable Speaker,
Honourable Premier,
Honourable Members,
Ladies & Gentlemen.
INTRODUCTION
I am pleased to present to this House the adjustment budget proposals for the 1999/2000 financial year.
This is my last budget for this millennium and I am filled with pride and joy. As we prepare to move into the new millennium, we are seeing a new dawn in Gauteng. We have reached an important milestone in Gauteng: we will end the financial year with a surplus. We have projected no overspending in the current financial year. The surplus that we are reporting will be applied to redeem the debt overhang of the previous financial years.
This adjustment budget also marks a significant change in our budget timetable. In the past we have tabled our adjustment budget during February each year. That left very little time for the Legislature to consider the adjustments before the main budget was tabled. There has been occasions when the main budget was tabled before the adjustment budget was adopted. We believe that this new timetable allows for better interrogation of the adjustments and improves transparency and accountability. Departments can be monitored against firm figures and there is certainty in the system.
ECONOMIC OVERVIEW
The South African economy has proved to be resilient and has bounced back quite strongly from the world economic crises of last year. Net inward portfolio investments during the first half of 1999 reached R22 billion, which compares to R20 billion received over 1998 as a whole.
Growth in GDP in 1999 has been weak, represents a substantial improvement over the fourth quarter of 1998. It is anticipated that the economy will continue to recover with strong growth projected over the MTEF period.
Increasing liquidity in the economy caused by a renewal of capital inflows has enabled the Reserve Bank to lower the repo rate. The consequent rapid decline in short-term interest rates has now brought relief to households and improved investment prospects. However, interest rates on longer-term government debts have not declined as quickly as short-term rates. This reflects a risk premium that is associated with an increase in the demand for funds in the local market, uncertainty over future exchange rates and inflation trends.
Although consumer price inflation rose sharply with the increase in nominal interest rates in mid-1998, it has subsequently declined to 1,9 per cent for the year to September 1999. CPI is projected to average 5,5 per cent in 1999. However, core CPI inflation has remained above 7,5 per cent.
The Minister of Finance has announced in releasing the medium term budget policy statement, details of the economic prospects for South Africa over the MTEF period and has reported a lower than planned deficit at 2,7 per cent. Revenue collections are also reported ahead of budget signalling a healthy state of government finances.
MAIN FEATURES OF THE ADJUSTMENT BUDGET
Revenue side - National allocations
The better than projected performance of state finances has allowed for an additional R1,4 billion being made available to provinces in the adjustments to the Division of Revenue Act. Gauteng has been allocated R212 million as its equitable share of the R1,4 billion. This however, has been made available as a conditional grant to be applied to redeeming debt.
As is customary in the adjustment budget, we receive our share of the improvement in conditions of service budget, what is commonly referred to as the ICS amount. This amount is to be utilised to fund the increases in salaries for the civil service that was implemented by government. Gauteng has been allocated R358 million for this purpose.
Other conditional grants have been allocated to Gauteng. These are amounts that were identified in the main Division of Revenue Act but had not been allocated between provinces. A total of R85,8 million has been allocated to Gauteng. The main amounts are R34,2 million for hospital rehabilitation and R23,6 million for financial management in Education.
Revenue side - Own revenue
Own revenue projections show that we are likely to break even against budget. Motor vehicle license fees and patient revenue are on track and will meet budget expectations. Both the departments of Transport and Health are to be commended in ensuring that revenue collection has received attention. We are still committed to our challenge to Health made in my main budget speech. It seems that the incentive will yield results in the next financial year.
Gambling revenue has been performing well above expectation. Admittedly, Treasury has adopted a conservative model for gambling revenue, but collections are most encouraging. Gauteng seems to have a strong base of gamblers. And thus far, with the exception of Carnival City, all other casinos are temporary facilities.
Special mention has to be made of the contribution of the University of Pretoria towards the costs of construction of the new Pretoria Academic Hospital complex. Through the joint efforts of the departments of Health and Public Works, the University has contributed R25 million towards the project.
Expenditure side
Before I take this House through the adjustments, I think it is necessary that I retrace the last few years. The 1995/6 financial year saw us experience overspending in the departments of Health, Education and Welfare. Since 1996/7 there has been no overspending in Welfare. Education has since 1997/8 achieved budget. Today I feel great to announce that the department of health has `come of age'. They have joined this, up until now, elusive club. Health is projected to come in within budget for the 1999/2000 financial year. This is a truly wonderful moment. Hence my assertion, this is a landmark year. This is the result of a tremendous amount of work by the department of Health and its management team, cajoled and goaded on my bulldogs in Treasury. I salute all of you. Please do not call Treasury in April, they will call you, if they can get over the hangover.
Adjustments
The largest allocations cover the distribution of the ICS amounts. The additional conditional grants have also been allocated to the respective departments. These grants have conditions that have to be met in incurring expenditure. It is incumbent upon the respective accounting officers to ensure that they comply with those conditions.
During the year to date, departments have requested the suspensions of amounts on their budgets to mainly Transport and Public Works for the execution of projects or the purchase of vehicles on their behalf. These total R298 million. There has also been the suspension and transfer of funds for the interdepartmental HIV/AIDS programme from Health. the net effect of these suspensions and transfers does not increase the total expenditure level.
There has also been the transfer of certain functions related to the management of hostels and land matters from the department of Housing to Transport and Public Works and Development Planning and Local Government. Again, these transfers do not have any impact on the overall expenditure level.
Finally, it has become necessary to allocate additional resources from the surplus reported in the main budget to the department of Welfare, Health and Finance and Economic Affairs. A total amount of R145 million has been allocated from the surplus. The allocation to the department of Finance and Economic Affairs is to cover the interim work necessary on special projects mandated by the Executive Committee in preparation for the MTEF budget period. These cover the economic growth and job creation plans being developed, the shared services centre project and R2 million as Gauteng's contribution to the millennium celebration.
Welfare
R90 million has been allocated to Welfare. Gauteng was faced with a critical choice. The take up rate of the new child support grant has exceeded the ceiling placed thereon. Rather than turning away applicants once the ceiling was reached, the Executive supported the continued processing of applications as it is targeted to the most vulnerable of our society. Hence the additional allocation.
Health
There has been extensive coverage of the Commission on Hospitals in Gauteng. In recognising the efforts of the management and staff of the department of Health and to show our commitment to acting on the recommendations and ensuring that we turn the situation around, an additional amount of R50 million has been allocated. Of this, R25 million has been utilised from the surplus while the balance has been the contribution from the University of Pretoria. A portion of this allocation will be applied to filling certain critical posts at our hospitals as recommended in the Commissions' report.
Conclusion
I feel truly invigorated. We are ending this century with no overspending. We project that we will close our book with a surplus of almost R280 million. That is some achievement. The hard work of maintaining fiscal discipline in Gauteng will pay rich dividends in the coming years. We have built the foundations to leap into the new millennium. We have plans that will reshape the Gauteng economy in the medium to long term. Our restructuring of support functions will make us the leading government in the world, a reference site for best practice in public sector management. Service delivery is our buzzword and we will deliver.
Gauteng has been a leading light in our infant democracy and we aim to continue to be the benchmark for all.
Acknowledgements
I want to take this opportunity to acknowledge the contribution of all those that have contributed to this wonderful achievement. The department of Health deserves special mention. We salute you for your sterling efforts and dedication under trying and difficult circumstances. I also salute all the other departments to continuing with their commitment to fiscal discipline.
I must of course acknowledge the efforts of all the people who have worked on the budget, which is before you today. My colleagues in the Executive for their co-operation and understanding in making my task easier, the Premier for his tough stance on fiscal matters and all the heads of departments and their financial staff for the long hours in putting all the documentation together. I know that Treasury sometimes makes difficult demands on you.
Finally, my Treasury team, without whom occasions such as this one will not be possible. They have worked under sever pressures but have time and again shown what professionals they are. My sincere thanks to each one of you.
Honourable Speaker, I today table the following documents for the consideration of the House:
I thank you.