Issued by: MEC Finance and Economic Affairs
27 February 2001
Introduction
Honourable Speaker,
Honourable Premier,
Honourable Members,
Distinguished Guests,
Ladies & Gentlemen.
It is with great honour that I present to this House, budget proposals for the 2001/2002 fiscal year.
Heroic past
Gauteng has a proud history, a history that is punctuated by events that have shaped this country, moments that are forever etched in our memories.
The white miners strikes in 1922 dubbed "The Rand Revolt", Mahatma Gandhi and passive resistance, Kliptown and the Freedom Charter, our heroic women and the campaign against the pass laws, the Treason Trials, Soweto and the 1976 uprising, the early nineties and the ground breaking World Trade Centre negotiations. A truly heroic past.
Determined present
Post 1994 and the birth of a new democracy. Our commitment to building a new nation on the foundations of a society that is non-sexist, non racial and non discriminatory that is enshrined in a Bill of Rights. If we all accept, honourable members, that the fate and future of South Africa's children can neither be defined by the colour of their skin nor restricted by their gender, then we should all concede that the fundamental task of government is social equity.
We represent a government that is committed to improving the lives of all South Africans. We have seen our learners increase at our schools from 1,2 million in 1994 to in excess of 1,5 million today. Patients visits at our health facilities are in excess of 5,5 million each year, in 1994 it about 4 million. The number of individuals on our social security system have increased from 300 000 in 1994 to over 411 000 today. Over 153 000 houses have been erected and 229 000 serviced stands delivered through the subsidy programme and 156 000 individuals today have ownership of houses that they have occupied for years but could never own.
Access to water, sanitation, electricity and telephones has grown in leaps and bounds.
Our present is characterised by a passion to improve the lives of our people, indeed a determined present.
Unstoppable future
But our passion does not end there. We are just as passionate to change Gauteng forever. Fast forward to 2015: a matric pass rate in excess of 80% with 75% passing maths and science. Each matriculant in possession of an internationally recognised ICT certification, knowledge workers equipped to participate in the new economy. Chris Hani Baragawanth a modern, model health facility providing world-class care. CBDs that are vibrant, alive and at the very heart of a proud Africa. An economy that has a higher growth trajectory built on key knowledge driven sectors, an economy that produces a multitude of entrepreneurs and highly productive skilled workers.
A dream:
NO, but an unstoppable future!
Gauteng - a heroic past, a determined present, an unstoppable future.
The Gauteng economy
Since 1994, national government's economic strategy has been aimed at establishing an integrated set of economic policies reflecting global best practice while meeting the needs of transformation.
In keeping with this focus, the base of the South African economy has evolved from agriculture and mining to manufacturing, which now accounts for almost 20% of GDP. The contribution made by manufacturing is expected to grow, with emphasis shifting from import replacement to export promotion.
Many South African industries have made the productivity and efficiency improvements necessary to achieve world-class standards and compete in the global market place.
That national government's economic policy has been successful is evidenced by the projected growth figures for the South African economy - 3,5 % for the year 2001. These compare favourably for anticipated growth figures of approximately 2,8 % for many of the world's developed countries in the year ahead. However, South Africa needs higher growth levels to meet the challenges of unemployment, disparities in income distribution and poverty.
Now, as National Minister of Finance, Trevor Manuel pointed out in his budget speech on February 21, it is time for South Africa's economic focus to shift from macro- to micro- economic reform.
And this is where the province of Gauteng is going to play a major role. Contributing 38 % towards the national economy, Gauteng is the engine driving the national economy, but more than that - the rest of the country looks to us to chart a course for economic growth.
We are going to achieve that growth by focusing on microeconomics, in keeping with national strategy and to be very project driven.
Automotive sector
Once highly protected and inwardly focused, South Africa now ranks in the top 20 countries in the world in terms of automotive production, vehicles sales and size of the vehicle park. The industry employs 82 800 people in manufacturing and 170 000 in the motor trade. Overall its contribution to South Africa's GDP is 5,4 % which makes automotive the third largest sector in the SA economy, after mining and agriculture.
Automotive exports have boomed from just R430 million in 1990 to R1,8 billion in 1998.
The Motor Industry Development Programme, first introduced in 1995, is aimed at the development of an international competitive and growing automotive industry - and it has been successful.
The automotive industry has moved from 100 % import protection just 3 years ago to zero today.
In terms of the programme, national objectives are to be achieved by encouraging a phased integration into the global automotive industry; increasing the volume and scale of production by the expansion of exports and gradual rationalisation; encouraging the modernisation and upgrading of the automotive industry in order to promote higher productivity and facilitate the adjustment process.
Challenges within the auto sector
The South African automotive industry is restructuring and adapting to the realities of trade liberalisation and resultant lower levels of protection, globalisation, rapid technological change and rising customer expectations.
The key challenges facing domestic vehicle assemblers are how to cope with the increased competition domestically as tariff barriers come down and new entrants come into the domestic market while ensuring that their operations become progressively more internationally competitive through improvements in manufacturing efficiencies and the attainment of world class manufacturing standards.
Let me illustrate that more clearly. In 1964, there were 52 independent auto manufactures world-wide. It is now down to about 15 and with mergers and take-overs by the year 2005, there are expected to be less than 7.
Trade liberalisation and globalisation of markets against a background of rapid technological change are not the only key international forces.
Rising customer expectations and markets that are becoming increasingly demanding, fast moving in terms of fashion and trends are also increasingly putting pressure on the industry.
What this means is that manufacturers performing fastest and best in terms of global practices are the ones, which will survive - and we need to ensure that they are South African.
A large proportion of South Africa's automotive industry is based in Gauteng. Currently, 50 % of South African auto manufacturers are based in Gauteng, while 70 % of component manufacturers operate from the province.
This places Gauteng in an ideal position to attract further foreign investment as an export-manufacturing site for other world auto manufacturers.
The challenges faced at national level obviously impact on us at regional level. Apart from working through GEDA and the Automotive Industry Development Centre (AIDC) to facilitate our integration into the global automotive market, we also recognise that we need to stimulate component manufacturing and exports and improve transport and communication logistics.
Gauteng has set aside R101 million over three years to support the AIDC and further investments in targeted infrastructure will be made.
In summary, the real challenge facing the South African and Gauteng automotive industry will be to become a competitive production base within the global automotive industry. This is particularly important in view of the consolidation and rationalisation processes that are inherent in globalisation.
Information - Communication - Technology
For this continent to stay in the race, to participate in the global information economy, and to benefit from the power of the Information and communication technology revolution, a strategic response is required - ensuring technologies relevance to unique regional scenarios, reconciling global trends with local needs and supporting the growth of indigenous contributions to high-technology development.
The information highway is fast and exciting. It's revolutionised the way we travel, the way we do business.
Technology has revolutionised our lives, but it has also entrenched the gulf between the haves and the have-nots.
Which is why Premier Shilowa recently announced the gautengonline.com initiative, in terms of which every child should have access to the internet by the year 2006. The budget allocates R500 million over the first three years of the project.
This major new initiative in partnership with the private sector will help us lay the foundation for the creation of an information society in Gauteng and the dual goal of social upliftment and economic growth.
Information and communications technologies are tools that the Gauteng Provincial Government will use to support economic growth and redress inequitable income distribution in the province. Information and communications technologies are also the tools that the Gauteng Provincial Government will use to promote and to deliver a better life based on peace and security, development, reconstruction and social transformation that strengthen our young democracy.
It is important to emphasise that narrowing the digital divide - as is captured in the spirit and action plans of the gautengonline.com initiative - is not a once-off investment or intervention. Rather it is a continuous investment that requires support and commitment from both the public and private sector. The digital divide is a multi-faceted challenge demanding not just a single solution but also a combination of efforts. It is also important to recognise that these investments have secondary or co-dependence effects. For example, the rail link SDI provides the basis upon which people -and therefore knowledge - can be distributed optimally across different social and economic activities across the province.
Bridging the digital divide and positioning Gauteng will not only help upgrade skills, but will accelerate consumption and production in the IT market.
Worldwide the SA IT market makes up 0.6% of the worldwide IT market. The potential for growth is substantial. IT services is currently the fastest growing sector in SA IT market. BMI-T estimates that the growth rate will rationalise to about 17% annually into the new millennium.
What's more, South Africa is the springboard into Africa, many international vendors have subsidiaries here and are beginning to penetrate the rest of sub-Saharan Africa from here.
The time has come for us to build alliances, maximise our impact in science and technology, and optimise our contribution to making South Africa the global winner it can be.
The investment by Gauteng of R258 million over three years, in partnership with the CSIR and the University of Pretoria in the Innovation Hub aims to increase the "smart" sector's contribution to GGP by new IT and electronics businesses by supporting the skills and ideas of new, dynamic entrepreneurs.
Facilities will include sophisticated infrastructure, an entrepreneurial business support centre, educational support, and an "e-Incubator" with sophisticated research capacity.
A number of the business programmes have commenced in the temporary Hub site dubbed the 'HUB2B' located at the CSIR.
Currently 7 start up businesses have already been accommodated.
A 'Virtual Hub', namely a web portal site offering the services physically offered at the HUB2B on the Internet is also out on proposal call. Later this year will see us turn soil at the site.
Construction
The construction industry is a labour intensive industry contributing 5,3% to the South African workforce and 2.9% to GDP.
Building construction contributes roughly two thirds to the sector and civil engineering and other construction one third.
Demand in the construction industry is largely dependent on the state of the private sector economy, government investment policy and perception and expectations in consumer and investment markets. It's also influenced, in the longer term, by the nature and extent of changes in demographic factors such as population growth and urbanisation. As a result, the industry is volatile.
But ... the construction industry is on the way up. Investment turned in the second quarter of 2000 after showing a decrease for 5 consecutive quarters. Latest figures indicate that gross fixed capital formation rose 2,6% (third quarter 2000 on 1999).
Gauteng's prospects are looking good ...
Based on the latest " Nedcor Project Listing " which includes a list of capital investments larger than R20 million, the mining sector constitutes close to 50% of the construction projects in the pipeline, mostly within the Gauteng area. This sector is expected to expand even further during the next 12 - 18 months.
In the last year, housing demand in Gauteng increased by 35% in terms of formal housing developments.
Statistics SA reported that the value of non-residential projects completed in the year 2 000 increased by 2,5% in real terms in South Africa. Gauteng showed the sharpest increase with the value of completions increasing from R918 million in 1999 to over R1,4 billion in 2000, mainly as a result of casino developments being completed.
The Gauteng provincial government has played a major role in the regeneration of the construction industry with over R1,9 billion capital spending in the last year, the bulk of which is construction. The new financial year sees further acceleration in spending.
Manufacturing
The future of manufacturing in Gauteng depends on higher value added production. According to Econometrix, the total manufacturing growth in Gauteng in 1995 real prices was 5.1% between 1998 and 1999, and 4% in 2000.
The contribution of manufacturing to the Gauteng GGP is 18% with Gauteng responsible for 35% of total manufacturing in the country. Sub-sectoral contributions reflect the dominance of the manufacturing sector in a national context. Its share of the GGP has however, declined from about 20% in the last few years.
Wadeville Alrode is the heart of the manufacturing base of Gauteng, indeed, for South Africa. All roads lead to this manufacturing belt, where market leaders in the sector cluster to form Africa's largest workshop. Through the invention of Gauteng, we hope to create a super-manufacturing corridor.
This effort will ensure the continued well-being of the East Rand. In this way, existing industries will be regenerated, new supplier relationships formed and a platform created for the expansion of the tradable goods sector. A substantial investment in partnership with local government with Gauteng providing R72 million over the MTEF period, will improve access to the corridor and create further opportunities for the logistics sector.
It is envisaged that this will be of significant benefit to the other manufacturing regions in the Vaal and West Rand.
The national success of Manufacturing Advice Centres in helping small and medium companies in the manufacturing sector to improve their business, prompted us to establish three MACs in Gauteng -East Rand, West Rand and the Vaal. We will fund the Macs to the tune of R9 million annually with other funding from the department of Trade and Industry and foreign donors.
The Wadeville Alrode Corridor is strategically situated between the Johannesburg International Airport and the City Deep Container Depot and will greatly benefit from the parallel investments in those areas, thus ensuring a competitive advantage for manufacturing industries reliant on efficient logistical management of imports and exports.
Transportation
The Johannesburg International Airport is the busiest passenger and freight hub of Southern Africa, surrounded by a vibrant, fast growing industrial sector. Companies are already benefiting from the investments made to improve the logistics and expedite customs and freight handling services.
ACSA is investing some R1,5 million per day to achieve its Year 2005 development plan.
Alongside these investments, the partnership between ACSA, Denel, the East Rand Metro and the province seeks to improve the transport infrastructure and access to the airport. Contracts have been signed off on the upgrade of Atlas Road, the Elizabeth Road/N12 interchange and the construction of the K90/R21 interchange at a cost of R110 million to Gauteng in the next three years.
At the same time, the City Deep Container Depot is a rapidly growing global logistics hub. The hub plays a critical role. It offers industry rail and road freight services to the Southern African Development Community, other African markets and access to international markets through various ports.
40% of all cargo exported via the port of Durban originates in City Deep.
The upgrade of the road infrastructure will commence during this year with Gauteng providing R60 million to the costs of the upgrade over the MTEF period.
The demarcation and designation of strategically located pockets of land, which are afforded special status to attract new investment in sustainable and competitive industries that will have maximum economic, and social development impacts, locally, provincially and nationally has been recognised. Both the Johannesburg International Airport and the City Deep Container Depot have been identified as potential IDZ sites. The province has begun work on meeting the criteria for the demarcation of this sites as IDZs. The submission to the Minister of Trade and Industry is planned for late this year.
Tourism
It is estimated that foreign arrivals in Gauteng Province last year was valued at R12 billion and domestic arrivals is valued at R30 billion. Gauteng enjoys the largest proportion of the highest quality accommodation in the country and investment tourism plant continues to be buoyant. The opening of new casinos has substantially increased the amount of high quality attractions in the Province. September 2000 saw the opening of the R400 million Sandton Convention Centre and already has hosted a number of high profile events and meetings in the Province such as the National Conference on Racism, The South African Fashion Week, Wine Expo, the Black Economic Empowerment Conference, Food and Hotel Africa 2000.
The city of Johannesburg has managed to secure the biggest conference in the world. The Earth Summit is to be held in Gauteng in 2002, an event that will attract over 50,000 international delegates and over 100 heads of state. It is expected that some R1,5 billion will flow into Gauteng's economy and some 12 500 jobs will be created. A further R150 million is estimated to be spent as delegates visit Johannesburg and other destinations in South Africa.
A special team comprising all three spheres of government are working together to ensure that Johannesburg, Gauteng and indeed South Africa are ready to take on this mammoth task. Investments will have to be made this year in critical areas to ensure success of this high profile conference.
As the team engages with the challenges, the issues will crystallise and the necessary funding requirements identified. The province stands by willingly to contribute its share.
Johannesburg is the gateway to South Africa for foreign travellers and Gauteng is certainly the destination for business travel. Hence our focus on enhancing business, sports and cultural tourism in Gauteng. The coming world heavyweight title fight in Brakpan not only consolidates our position but also will focus world attention on South Africa, particularly Gauteng.
This indeed is a new democratic era. It is mind boggling to think that world premier events could be hosted by an unknown South African town called Brakpan.
The declaration of Cradle of Humankind as a world heritage site has given impetus to the product offering of Gauteng. The area is of outstanding universal value as the palaeo-anthropological have yielded some of the most valuable evidence of the origins of modern humans.
The investment by Gauteng of R150 million over the first three years of the project is geared to attract international and domestic tourists thus boosting the prospects of the local economy. A detailed master plan is currently being completed with identified infrastructure due to begin construction during the year.
Dinokeng is a Tswana word meaning a place were the streams meet; where there is plenty of water. In the North East corner of Gauteng lies a vast expanse of potential natural reserve. By developing this area, we hope to provide a unique experience to the business traveller, the conference attendees, local residents and tourists: all of Africa in one day. They will get to see the "Big 5" within an hours drive from Johannesburg. The master planning team is in place and by later this year work begins to roll out the plan. Our contribution to making this a reality is an initial R140 million over three years.
The new Constitution Court, whose design was the subject of an international design competition, forms the catalyst for the development of the Constitution Hill precinct as a major national and international heritage site. By choosing the Old Fort site as a precinct for the court, the jail ceases to be a symbol of past tyrannies and oppression and becomes a token of hope for all that the constitution aspires to be. By doing so, the tragedies of the past are immortalised and will remain as a warning to future generations not to repeat past mistakes and instead to adhere to the precepts laid down in the Bill of Rights. This is a R710 million project and is structured as a public private partnership to effectively leverage the potential of the precinct. Again, this is a collaborative project on he public sector side with all three levels of government involved with a total public sector contribution of R357 million. Construction will begin during the second quarter of 2001 and will be completed by 2003.
Indeed a heroic past, a determined present, and an unstoppable future.
Inner-city regeneration
The Johannesburg inner city is at the heart of Gauteng. The Newtown Cultural Precinct is of strategic importance to the Johannesburg CBD because of its potential to promote innovation, culture and tourism. In recognition of this, the World Bank has selected the upgrade of the Newtown Cultural Precinct as a pilot inner city regeneration and cultural industry initiative.
Newtown will capture, harness and maximise the value in that which is essentially African - its energy, creativity and industry. It will be distinctly African but with its own Newtown look, sound and feel. Its street life will buzz with activity as the exchange of ideas, trade and products course through the veins of Newtown.
The precinct seeks to attract creative industries, as a magnet for the continued promotion of the area as a cultural and tourism node. The redevelopment of Newtown is happening through a mix of private and public sector investment. Gauteng has committed R238 million over three years to the redevelopment.
The first phase of one of five residential development is already fully let and occupied with the second phase under development. An international design competition for the "world's most spectacular bridge" - to be named in honour of one of the world's most respected men - Nelson Mandela, is now being adjudicated. We hope to make the winning announcement before June 2001. Newtown is a hive of activity. Witness the work underway for yourselves. Indeed we are building on our heroic past, through determined efforts in the present, because we our future is unstoppable.
Alexandra urban renewal
Alexandra is one of the oldest townships in Gauteng with a rich history and a glorious future. It is home to almost 750 000 people and is the most densely populated area in our province.
The past masters of this country long gave up on developing Alex and its surrounds and it has created its own development framework. People live in no particular planning order and every time the Jukskei comes down in flood, hundreds of people lose all of their life's work. It is just not humane.
The rejuvenation of Alex is the result of a detailed study of every aspect of Alex, from age profiles within the sub areas to income distribution, education profiles to economic activities.
It is a plan based on sound planning and realistic implementation goals. Government at all levels have committed R1,3 billion over seven years to harness the glorious future and potential the Alex has. Gauteng has set aside R200 million over the next three years as our contribution to the redevelopment of Alex.
Connecting cities
The area between Johannesburg and Pretoria is experiencing the fastest rate of economic development in South Africa and is set to continue along this path. The Ben Schoeman has been a major catalyst for this development. At present some 160 000 cars use the freeway each day emitting approximately 16 tons of carbon monoxide. Gauteng is experiencing a 7% growth in traffic congestion each year. Yet, effective transportation is essential to sustain economic growth.
The feasibility study that is being finalised, has identified substantial economic and social development emanating from the high speed rail link linking Johannesburg, Pretoria and the Johannesburg International Airport.
Some of the initial numbers are worth repeating from the Premier's opening address to this house. Within the construction phase alone, which will commence 2003, some 42 000 job opportunities will be created. During operations, and we are on track for the first trip in 2006, direct jobs created will be 1220 and a further 39 000 down stream job opportunities will arise. The project is estimated to add between 0,7 and 1% to GGP.
Pie in the sky - never; unstoppable future - YES.
Foreign Direct Investment
Despite the difficulty of measuring FDI in terms of "firm intentions" versus actual investments, Business Map reports an R 1.5 billion FDI inflow to Gauteng for 1999, which increased to R1.69 billion during the year 2000.
Investments to the value of less than R10 million are, however, not included in this figure. The Gauteng Economic Development Agency has been very active in this area and reported facilitated investments into Gauteng during last year close to R 500 million.
We will continue to focus on attracting not just foreign, but also facilitate local industry to increase investment and production in Gauteng.
We have set the wheels in motion. The juggernaut is gaining momentum.
Gauteng is going to be a hive of activity this year. Each of the projects is reaching the stage of bricks and mortar and bulldozers and cranes. New tar will be poured. Our lives changed forever.
Corporate management
The common theme emerging from government reform initiatives is a public service that is responsive to government policy objectives, strives for best practice management, focuses delivery on value for money and is committed to delivering quality services to the public.
In my last year budget speech, I announced the implementation of the Shared Services Centre (SSC). The SSC is an exciting and innovative new development, representing the GPG's vision of having a "world class support service" driven by efficiency and a focus on quality of service delivery.
The SSC will consolidate internal support services (Finance, Human Resources, Procurement and Technology Support Services), which are currently fragmented across 200 GPG sites in the 11 GPG departments, into a single organisational unit. This unit will, in turn, treat the provision of these services as its core business. Globally, shared services are a proven solution for today's leading organisation.
Within the SSC, an Internal Audit Unit has already been established in compliance with the Public Finance Management act (PFMA). Significant progress has already been made in this area.
The unit conducted risk assessment sessions in all departments to identify risks that accounting officers would need to manage in their departments. Internal Audit will be assisting in managing risk and fraud through a Forensic and Computer Auditing Unit.
Ladies and gentlemen, the Gauteng Provincial Government is very serious about good governance and good management. A highly skilled top management team has been appointed to the Internal Audit unit. GPG employees have already been identified to join the Internal Audit Unit and are currently undergoing training. This team is receiving intensive training in leading internal audit practices before migrating to the SSC in April 2001. Within the Internal Audit Unit, there will be Centres of Excellence, which will render specialist audit services in the form of computer auditing, forensic auditing and performance auditing.
In the areas that are within the scope of the SSC, such as procurement, human resources, financial administration and technology support services, there will be key projects that the SSC will be rolling out in this coming financial year:
Strategic Sourcing
Because there is no formal procurement strategy apart from Tender Board regulations, the GPG is not realising its potential to leverage its buying power, term contracts are not optimally utilised, there is no integrated planning between departments, and SMME support is distributed, fragmented and is not developing sustainable organisations.
The Procurement unit intends to develop a sourcing strategy that deals with each commodity grouping used in the GPG, based on its unique market characteristics. That is, screening vendors per commodity grouping to develop a list of preferred vendors for the GPG creating long-term business partnerships. Clear criteria will be developed to guide this process. This will lead to a reduction in cost on certain sub-commodities, better control over suppliers and the quality of service rendered, improved management and technical support to SMEs with the express aim of creating sustainable SME's.
E-procurement pilot
Electronic government is high on the agenda of the GPG. The SSC will pilot an e-procurement system which will provide a solution to some of the major operational problems facing the GPG, while simultaneously providing cost reductions and improving service delivery and focusing on the development of SMMES. The benefits coming from e-procurement will allow the GPG to optimise processes, enhance human capital, harness technology, reduce paperwork and streamline the purchase and administrative procedures. Currently within the GPG, certain departments go through 27 forms in order to acquire goods and services. This has a bearing on order costs, which are estimated at R550 per transaction, comparatively higher than industry benchmarks.
Through collective buying of frequently used transversal goods and services, the SSC will reduce prices. Currently, the GPG spends about R4 billion per annum procuring goods and services. The SSC is targeting, a conservative 2.5 percent savings on procurement, GPG will realise a R100 million savings annually which benefits will accrue in perpetuity. This will allow the GPG to redirect the savings to economic growth opportunities and improving the quality of social service delivery in the province whilst promoting good governance.
In line with the Green paper on e-Commerce, the SSC is committed to SME empowerment and sustainable growth. The SSC will implement a Strategic Sourcing System that will develop strategic partnerships with SME to negotiate reasonable prices and also identify commodity areas that lend themselves to SME development.
This will substantially refocus on the Gauteng's Government strategy on SME training and support, to creating business opportunities through procurement. We will all credit net SME suppliers, create a database of good SME, in selected economic sectors and expose them to other business opportunities with some of our major and big suppliers.
Call centre
The SSC will implement a call centre that will provide a single point of contact with a consistently high standard of services for the 120 000 employees within GPG. This will resolve any support services queries and issues in the shortest possible time thereby improving the overall provision of human resource support services to employees.
HR self-service pilot
An HR self-service pilot will be implemented later this year. It will aim at enabling GPG employees to perform and access certain administrative services for themselves rather than requiring a departmental unit to do it for them.
This will provide greater autonomy for employees and greater savings on administrative costs.
E-Recruitment system
A recruitment and selection support system will enable the GPG to streamline its recruitment processes through centralisation and avoiding duplication of effort across departments. A more efficient recruitment process will result in substantial savings for the province in reducing the costs and time of appointing new employees. At present, the GPG has an approximately 10 percent turnover rate, which has a bearing on the personnel costs.
E-learning system
An e-learning system will be implemented within the GPG. It will provide an integrated approach to employee enrolment and registration for training courses as per requirement of the Skills Development Act.
Centres of excellence
The consolidation of functional expertise from the 11 GPG Departments into the SSC will result in centres of excellence for services across the GPG.
These Centres will deliver high quality services to the Departments. It will encompass highly specialised functional areas such Labour Relations, Organisational Development, Computer Auditing, Information Technology and Training.
Employees finding themselves within these units will act as internal consultants to the GPG Departments. Their primary objective will be knowledge sharing and delivery of uniform, high quality services. Over the years it has been very difficult for the GPG to attract and retain highly skilled staff as support functions were often neglected.
Progress made to date
The implementation of the Shared Services Centre is a long-term journey. The GPG plans for a three-year timeframe for the full implementation of the Shared Services Centre, a time frame that is consistent with other major shared services projects around the world. Once the GPG Shared Services Centre is operational, it will be one of the first public sectors SSC in the world. Our investment over the following two years to realise this objective is R250 million with our full investment repaid in direct savings over a three-year period. Again, handsome returns.
Public Finance Management
The PFMA implementation programme in the province is well under way. The implementation was divided into various streams intended to capture the key essence of the Act.
The establishment of internal audit and the appointment of internal audit committees are almost complete. We will have a fully functional internal audit unit in the shared services centre reporting to an Audit Committee by 1 April 2001. Interviews for the audit committees have been done.
A new chart of accounts that reflects the new reporting requirements and the future needs of generally recognised accounting practice and GFS expenditure classification has been completed. The process of accommodating this in the accounting system required the change from the FMS to the BAS general ledger system. Eight departments have already migrated to BAS with the others due to go live on 1 April 2001. This has been no mean feat.
Susan Woest and her team have done some sterling work to make this possible.
Departments and the province have met the reporting requirements set out in the Act to date. A major exercise is in planning to meet the year-end reporting requirements. I dare say that this Legislature will be considering the annual reports together with audited financial statements for the 2000/01 financial year in October this year. What an achievement that will be in the quest for better accountability.
Finally, six out of eleven departments now have chief financial officers. For the other five departments, an innovative and a totally unique way of developing skills and capacity for the public sector has been used. Dare I say it again, Gauteng leads the way. A tender was awarded to the private sector to employ at their risk 8 potential CFOs. These candidates will undergo a two-year internship programme within the company at the end of which period, three are guaranteed positions in government. During the time that the contract covers, the winning company is required to fulfil the functions of CFOs in the departments. The existing CFOs are also to be provided with mentorship and support similar to that of the interns for the duration of the contract. This programme has already commenced and will ensure a level of consistency in the quality and integrity of financial management in the province.
An unstoppable future.
Revenue side
Total revenue consists of revenue from national, made up of equitable share and conditional grants, and revenue generated by the province.
Gauteng's equitable share, which is determined in accordance with the Division of Revenue Act, will be R15.85billion, which represents an 11% increase on last year's budgeted amount. The equitable share is projected to increase to R16.45billion by financial year 2003/2004.
R3.5 billion has been earmarked as conditional grants to Gauteng.
This represents an increase of 8% on the previous year's budget.
As has been the case in past few years, Health gets a substantial portion of the grants, accounting for 69% of the conditional grants in this financial year. This reflects the nature of the provision of health services and facilities in the past.
Revenue generated by the province is projected at R1.042billion and represents 5% of the total revenue. Provinces generate in total approximately R3 billion in own revenue annually. Gauteng accounts for a third of this own revenue. Own revenue varies between 2 and 4% of revenue in other provinces.
The budgeted amount for collection from motor vehicle licence fees is R621m.
Motor vehicle licence !rce of own, representing 60% of such revenue. Better monitoring systems and access to a comprehensive database for analysis purposes has allowed for improved collections.
However, as is the practice each year, adjustments in the rates levied need review. The average increase to come into effect from 1 July 2001 will be 7,5%. This increase takes into account inflation.
In spite of collections in excess of the budgeted amount during the 2000/2001 financial year, we are still taking a conservative approach in respect of gambling taxes, and are budgeting revenue at R293m, an increase of 9% over the previous year's budget. The industry is growing and revenue streams improving. We take cognisance of the social impacts of gambling and continue to be vigilant to practices within the industry.
The National lottery has not affected the casinos much but has had a negative impact on the horse racing industry. Tax rates for gambling and gaming remain unchanged.
In order to improve the mechanisms that are used to pay for the collection of revenue on behalf of Gauteng, the Direct Charge Bill in introduced. The Bill intends to treat commissions paid on taxes, levies, duties and motor vehicle licence fees collected by authorised agents on behalf of the province to be treated as a direct charge against the Provincial Revenue Fund.
We have maintained the targeted budget for patient fees as agreed with my counterpart in Health at R78m. The incentive scheme in terms of which Health keeps revenue collected in excess of budget remains in place and we are investigating the possibility of rolling this incentive scheme out to some of the other departments.
Budgeted interest revenue has almost doubled from R34m in the last year to R65 million, following Treasury's success in putting effective cash management processes in place. Treasury will continue to look for products in the market that can give the government competitive interest rates, while at the same time managing the risks attached thereto.
Expenditure side
Let me point out Mr Speaker that the preparation of the budget continues to be a challenging exercise, where the increasing needs have to be financed within the available resources. Despite these challenges, we have made considerable effort in trying to address issues of concern for the development of the province in a sustainable manner.
The estimate of expenditure has been classified in accordance with the Government Finance Statistics prescribed by the International Monetary Fund.
Economic Classification of Expenditure
Out of the total GPG budget of R20,146 billion for 2001/02, R17,466 billion is current expenditure and R2,680 billion is capital.
For 2001/02, the budget for compensation of employees is R10,92 billion, which represents 54% of the total expenditure for the province. Personnel costs have been kept relatively constant with a downward trend as a proportion of the total GPG budget. The current baseline allocation reduces the total personnel expenditure by 4% from the previous year's allocation.
This is a clear indication that the province has now moved towards allocating funds to non-personnel expenditure in the social sectors and spending on investment on infrastructure to promote growth.
On transfers and subsidies, the bulk is social security grants.
Gauteng has little or no discretion on the allocation of this item.
To be fiscally responsible it has been provided for first. An amount of R2,536 billion has been allocated for the financial year 2001/02.
Capital expenditure has steadily increased from a base of 6% of total expenditure to now stand at 13%. A remarkable shift in the prioritisation within our budget. We have been diligent in ensuring that capital expenditure has been prioritised and the state of our asset base improved.
The main area of capital spending for the province is directed towards the development of social infrastructure, but at the same time economic infrastructure receives considerable attention.
This is the foundation for sustained economic development of Gauteng and the upliftment of our people. The total budget of R2,68 billion is earmarked for capital expenditure.
Housing is the largest proportion of this allocation accounting for R777 million. This allocation includes R682 million targeted at the capital subsidy programme, providing an additional 4250 units.
Health receives R649 million for new clinics, improvements to existing facilities, and the continued construction of the new Pretoria Academic complex, renovations and rehabilitation and equipment purchases.
R323 million is allocated to Education for the construction of new schools and additions to schools with approximately R180 million earmarked for the upgrade and repairs of existing schools.
Our objective is to ensure that each and every school in Gauteng has running water, electricity, roofs that do not leak, windows that keep out the dust and cold, desks and chairs in every classroom and improved security at all of our schools.
Transport and Public Works is allocated R350 million and the Strategic Economic Infrastructure Investment Programme (SEIIP) is allocated R500 million in the 2001/2002 financial year. These allocations are geared towards largely, the improvement of the economic infrastructure of Gauteng to make it more competitive. The maintenance and extension of our road infrastructure is critical to the well being of our economy. The SEIIP allocation over the MTEF is extended into a fourth year with an additional R500 million, bring the total to R1,7 billion.
Functional Classification
Provinces are largely responsible for the delivery of social services in the form of Health, Education and Social Security.
Consequently, the bulk of the provincial budget is allocated to the social services. This represents 84% of the total expenditure budget.
For the financial year 2001/02 Gauteng government has earmarked 33% of the total expenditure budget for the provision of the health service. The budget of Health, at R6,72 billion represents an increase of 18,1% from the previous year. The wealth of the people of Gauteng lies in their health. The HIV/Aids pandemic has brought the health facilities under severe strain and this has seen a change in disease patterns, which has necessitated the change in strategies to the delivery of the service.
The Department of Health has not lost sight of the importance on the quality of the service and as such they have come up with initiatives to improve quality care. Some of these initiatives involve putting in place a patient complaint system for most hospitals in which a lot of progress has been made in this regard.
Another issue of concern, which has been addressed by the department, is the average waiting times for consultation in hospitals; this has decreased from 99.33 minutes to 23.65 minutes.
Hospitals have also tried to address the issue of mortality rate.
With the implementation of these strategies the Health department has managed to achieve an immunisation rate of 82% and for diseases like TB the cure rate has been increased to 71%.
There is however a number of challenges for the sector such as the requirement of home based care and hospice facilities to reduce the number of patients admitted in hospitals mainly due to HIV/Aids.
Mr. Speaker, the budgets tabled in this house have continued to focus on the importance of a well-educated and appropriately trained citizen of the province. In the current budget, 37% or R7,42 billion of the total expenditure budget is allocated to education. This allocation is 7,3% higher than the previous year.
Gauteng is densely populated and also contains the largest proportion of young people of school-going age. This is a clearly reflected in the increase in the number of learners over the past four-year's by 9%.
For the sake of prudence an amount of R2, 536 billion has been allocated for social security grants. This amount takes into account a 1% increase in the number of beneficiaries and the increase in grant amounts effective 1 July 2001 that were announced by Minister Manuel. These grants provide a vital source of income to a large proportion of our people and are the most effective tool in our fight against poverty.
Acknowledgements
These impressive documents that are tabled today are the end result of a cycle that began in May 2000. A long and, at times arduous cycle. It is incumbent to acknowledge the contributions in putting together this budget.
The Premier under whose leadership we have sailed. Thank you for the firm hand at the till. My colleagues in the Executive whose inputs and contributions have shaped the outcome of the process, thank you.
Each of the Heads of department and their newly appointed Chief Financial Officers, together with the management teams in each department. Budget statement 2 is your effort. Thank you.
Treasury under the leadership of Pradeep Maharaj. Your professionalism and skills in managing this process has earned the respect of all of us. My heartfelt thanks for another excellent job.
Finally, my family. Thank you for putting up with me, supporting me and providing me with comfort and warmth during trying times.
Conclusion
Honourable Speaker, I today table the following documents for the consideration of the House:
Gauteng is at work to make a meaningful change in the lives of our people.
Quote from Martin Luther King: "We're not where we want to be. And we're not where we're going to be. But we sure are a long way from where we were.
"We have come from a heroic past, we are determined that our actions in the present reshapes our society and we have a vision of the future that is unstoppable."
I thank you.