I have the privilege of presenting my 3rd Budget to this House. Admittedly for me it has been a learning process, and I have managed to accumulate more knowledge over the last three years in this area. If I was to analyse, in simple terms, my past two Budgets I would perhaps call them "making ends meet" Budgets. Similarly, if I was to compare the past two years' Budgets with today's, I would call this year's Budget the "economic breakthrough" Budget.

This year, not only will we meet our obligations to Health, Education and Social Services but, for the very first time, we will manage, with our limited resources, to strengthen and direct our obligations to the Economic sector as a generator of income to uplift and empower even the poorest of our communities.

At the risk of boring my audience at the beginning of my speech rather than at the end, I want to emphasise how important this milestone is. It is the old story of teaching people to fish rather than giving them fish. This swing to economic spending will result in attacking evils such as poverty, unemployment and crime, to create an even stronger economy in the Western Cape.

Mr Speaker, I have a personal dream, which I know will become a reality, in seeing our unemployment percentage in this Province reduced to a single digit figure in the near future: I would like, in an ideal world, for everyone in this Province to have a job, a roof over their head and food on their table.

I would like to dwell momentarily on taxation, saddling something of an old hobbyhorse of mine. I freely admit that I am still a proponent of introducing Provincial taxation, as envisaged in Section 228 of the Constitution, with National Government providing the tax room and Provinces being restricted to a particular ceiling. As politicians we go to our electorate every five years on a platform for re-election, and a most important part of that platform should not only be how you spend the money, but also how you levy tax.

Each of our nine Provinces has its strengths and weaknesses. Some Provinces have, through hard work and possible historical advantage, attained excellent results and it is my view that, in some form or other, these Provinces deserve to be rewarded by being allowed to be more self-reliant. I would respectfully submit that a candidate for such a course would obviously be the Western Cape. I will return to this topic later in my speech.

Mr Speaker, I have been reading the book "From Third World to First - The Singapore Story" by its brilliant, innovative and somewhat controversial former Prime Minister Lee Kuan Yew. It tells the story of how a former British colonial trading post became a thriving metropolis with the world's fourth highest per capita real income. It is not my function in a Budget speech to give a book review, but I believe the Singapore Story is an example of how a country can pull itself up by its bootstraps and succeed.

It is a story of succeeding against the odds, of hard work, of strong leadership, of taking your public with you, and above all not relying on the text book which says it can't be done. What Lee Kuan Yew is saying to the world is that to succeed you need to be different, but we now require to reach a new level of competence to truly be different, and turn this Province into the Singapore of Africa and a proud jewel in the crown of South Africa.

I believe it is of the utmost importance for us to show a keen competitiveness between Provinces, between cities and between towns. The present state of affairs, in which a Province receives its share of the fiscal cake whether it performs or not, simply blunts performance and has the effect of driving one into the cul-de-sac of mediocrity. I am advocating, Mr Speaker, a new era within our country and within our Province, in which we will be rewarded for performance, be it in Education, Health or the Economic sector. Again, this Budget provides the fuel for Provincial Government to deliver optimum performance.

In my Budget Speech in February 2000, I spoke about clusters of desirable outcomes, and explained how the Western Cape Provincial Government had, through a process of public consultation, set out its fiscal principles in the form of the Western Cape Revenue and Expenditure Policy Framework. In conjunction with this process, a series of strategic policy goals were set out, to which this Budget pays heed.

No Budget of this kind should be viewed in isolation. Indeed, it is a requirement of the Public Finance Management Act, 1999, not only that each Province table its annual Budget within two weeks of the national Budget, but also that multi-year projections be made as part of that process.

In this way, each successive Budget is part of an ongoing process, driven by an overarching medium-term strategy.

Challenges are set and met, and it is perhaps here that we in the Western Cape see our position as being distinct from that of the other Provinces. It is indisputable that, although poverty, HIV/AIDS and unemployment are factors affecting the whole of this country, the Western Cape is, in a sense, fortunate. Why? It is the Province with (relatively) lower levels of poverty, a better overall health situation, higher education standards and consequently greater overall prosperity than its fellow Provinces.

Nevertheless, I would like to point out that 82% of the Budget this year is again dedicated to the delivery of social services, principally for the benefit of low- and middle-income earners. However, the time is right for us to focus our attention on sustained economic development and therefore ultimately job creation, which are the key means of ensuring constant and stable growth and widespread prosperity in a dynamic economy.

Over the past two years, by maintaining our focus on social services spending to bolster our education system and improve healthcare facilities, we sought to consolidate the foundations for achieving our goals, to build a stable platform on which to grow. In doing so, we also ensured that social service delivery improved, thus benefiting the lower income groups. This year, with a much more stable foundation beneath us, we turn our Budget focus to the engine which will provide the impetus needed to really put us firmly on the path toward prosperity for all - economic development. We see this Budget as the fuel for the engine to deliver optimum performance.

Therefore, in shifting our focus (in relative rather than absolute terms) from welfare spending to infrastructure spending, we influence the single most important factor affecting the overall long-term prosperity of the people of the Western Cape: that is sustained economic development.

By dedicating more money to infrastructure development, we accelerate the delivery of basic services. At the same time, sustained economic growth promotes, in the presence of a secure community, economic and socio-economic stability. There can be little doubt that it is the lack of this stability which is a key barrier to the flow of foreign direct investment. When this barrier is removed, that investment, which itself gives rise to further sustained economic growth, will flow. Most important of all in my mind, however, is the boost to job creation which can be achieved with increased spending on infrastructure which is conducive to economic growth and to attracting investors to our Province.

Shortening the welfare queue, reducing (again in relative terms) spending on welfare initiatives, frees up funds for further investment in infrastructure and the other economic sectors within our Province, and so this positive cycle continues.

The time for shifting this focus is now, and nowhere will these positive results be demonstrated more plainly than in the Western Cape.

As usual, the Western Cape Provincial Budget is presented within the macro-economic context. The national Finance Minister gave an upbeat review in his Budget Speech last month of the performance of the country as a whole. Stable economic growth at 3%, bolstered by a marked recovery in household spending and encouraging export figures were the highlights, and all bear testimony to Mr. Manuel's steady hand at the helm.

This Province's performance is a very strong contributory factor to the national picture he paints of macroeconomic stabilisation. The Western Cape generates 13,7% of national economic activity, making it (after Gauteng and Kwazulu-Natal) the Province with the third highest level of economic activity. In per capita terms its production also surpasses that of Kwazulu-Natal, which has a much larger population.

In terms of retail sales, another measure of economic size, the Western Cape's 19,3% share in the national total in 1999 considerably exceeds that of Kwazulu-Natal.

Growth in retail sales between 1995 and 1999 in the Western Cape, and particularly in Cape Town, has far outpaced that of the country as a whole and of the most industrialised Province, Gauteng. Judging by these figures, economic growth in the Western Cape is approximately 1,7% per annum greater than for the national economy as a whole, and that margin is considerably larger when compared with the average of the other eight Provinces rather than all nine.

The economy of the Western Cape has a broad range of key sectors encompassing tourism, manufacturing, financial services, agriculture and other commercial sectors. With reference to agriculture, although the contribution of this sector to Gross Geographic Product in our Province has been declining in recent years, it remains of critical importance to the regional economy in terms of output, employment and exports. Nearly a fifth of national agricultural output comes from the Western Cape, and the local industry contributes fully 60% of the Province's export earnings. The sector's importance is further highlighted when we consider the great extent to which it is labour-intensive, therefore playing a significant role in employment.

Of similar importance, and arguably even greater on account of its growth potential, is the tourism industry. This contributes a considerable amount to Provincial employment and attracts approximately 30% of national gross tourism expenditure. Local tourists still predominate, but foreign tourism to the Province, and particularly to Cape Town, is already sizeable.

We expect enormous growth in tourism, particularly as international campaigns to market South Africa begin to impact on previously relatively untapped target markets such as the US and India. I will speak more on this topic in due course in my capacity as Minister of Tourism. In the interim, however, suffice it to say here that strategies are being finalised with the specific intention of creating a new, dynamic, co-ordinated focus to grow tourism to the Province to the degree that reaches its true potential as an important earner of revenue - and an important contributor to the economic upliftment of all the people of this Province.

No appraisal of economic performance, however brief, would be complete without bringing into context the socio-economic problems which this Province and indeed this whole country faces. As I mentioned earlier, poverty, HIV/AIDS and other health issues, education, unemployment and crime are factors affecting the whole of this country, and the Western Cape is no exception.

Although the Western Cape's per capita income is substantially higher than the national average, the Gini coefficient of income inequality of 0.58 is somewhat lower than the national average of 0.65, but nevertheless very high, and indicative of considerable skewing of income distribution in the Province. You will recall that with this measure, a coefficient of zero implies complete equality, and one [implies] total inequality, and that coefficients of 0.5 and above are generally judged by international standards as being excessive.

In absolute terms, depending on the criteria set to define a particular level of poverty, it is estimated that between 6% and 19% of the Western Cape's population lives in poverty, compared to between 25% and 42% respectively for the country as a whole. The same research shows that, irrespective of which criteria are used to define poverty, the Western Cape is the Province with the second least poverty, behind Gauteng.

Notwithstanding this, recent research suggests that despite continued inequalities and widespread poverty, strong community networks and a relatively broad base of smaller entrepreneurs have meant that the benefits of economic development are spread more widely here than in most other Provinces.

Although the level of unemployment here in the Western Cape is considerably lower than the national average, it is nevertheless high at 18%. Research shows that access to employment is the single most important requirement for reducing poverty and inequality. Despite the continued existence of low wage rates in certain sectors of the economy, low wages themselves are today less pervasive and, relatively speaking, contribute less to poverty than in the past. The crucial factor in alleviating poverty and redressing inequality lies rather in increasing the overall number of jobs, and to the extent that it is within the gift of any Provincial Government to influence this vital area, through directing policy towards creating and stimulating an environment conducive to job creation, this year's Budget has this goal squarely in its sights.

Our rather more developed status notwithstanding, an even better economic performance will be required to reduce the problems of unemployment, income inequality, poverty and crime, to more manageable proportions in future.

Although the Western Cape has many features which make it attractive to investors, those features need to be enhanced by improving the education and skills of the present and future labour force.

Mr Speaker, Budget reform is an ongoing process, not an event. Continual improvements are sought within each department in this Government, and Provincial Treasury is no exception.

To address the inefficiencies and level of services in the system which was inherited by this Government, a strategy of improving financial control and discipline and capacity building, combined with a stringent programme of austerity measures, was embarked upon.

This called for extreme care, particularly in light of regular phased-in reductions in the equitable share received by the Province, in managing the impact on service delivery. Hard decisions were taken which favoured social spending over infrastructure and economic development, and which entailed substantial cutbacks in personnel.

What has resulted, however, is the clear and pervasive understanding that all funding has to be addressed within available resources, together with widespread recognition of the distinct links between policy development, measurable objectives, medium-term planning and the Budget process.

The requirements of the Public Finance Management Act, 1999 have been a guiding principle in Provincial policy development, and although the stipulation that an ongoing system of Key Measurable Objectives (KMOs) be followed does not come into force until August 2002, this is now our second year of KMO formulation. They form an important component of our ongoing drive towards performance budgeting.

In a developing democracy such as this, fiscal policy at both national and Provincial level is of critical significance in view of the role that Government spending plays in promoting economic growth, creating sustainable jobs and improving social development.

Indeed, government spending has a substantial impact on society and the economy's performance. Given that the Western Cape remains heavily reliant on transfers from national Government, the relationship between national and Provincial fiscal policy must be a close one. The promotion of transparency, and ensuring that national economic policies are not prejudiced by Provincial ones, are key to a successful collaboration. Equally, the way in which, and the consistency with which, resources are distributed by national Government, is of paramount importance in maintaining fiscal stability at the Provincial level.

At the same time, the national Medium Term Expenditure Framework (MTEF) policy is intended to bring policies and expenditures together in three-year expenditure envelopes. This facilitates greater certainty and therefore greater scope for prudent budgeting and sound overall financial management. It fosters greater transparency, and public understanding of the Budget process. The MTEF also ensures a necessary degree of conformity and broad uniformity of purpose among Provincial and national fiscal policies.

Adherence to these principles is a priority for the Province and, to this end, the Provincial Treasury compiled the Western Cape Fiscal Policy 2001-2004 (or WCFP), which was adopted by Cabinet in August 2000. As a document it sets out policies for directing departmental budget allocations. It complements and contextualises the national MTEF policy, informs the Budget for 2001, and has as its policy goals both the twin policy themes of National Treasury's Medium Term Budget Policy Statement and the Provincial strategic outcomes identified by Provincial Cabinet. It also contains the sequential priority framework to be used as the basis for Budget adjustments for all additional revenue sources including equitable share and own revenue streams. In turn, it forms the basis on which Budget Statements 1 & 2, which I am tabling before this House today, were compiled.

Following on from this year's national Budget, national Government has allocated some R117 billion between the nine Provinces during financial year 2001/02.

The Western Cape's portion of the funds distributed by national in accordance with the equitable share formula, amounts to R9,762 billion, an increase over the R9,059 billion amount allotted for 2000/01 in the February 2000 Budget of 7,76%. In the MTEF context, though, this year's equitable share amount is a 3,96% or R372 million increase over the baseline amount for 2001/02 set out in that February 2000 Budget.

Within the equitable share amount for 2001/02 is an amount of R105 million for which notification was issued late. Whilst incorporated into the main Budget, that amount has not yet been specifically allocated. Project disbursements in relation to this latter figure have not been finalised, and in the interests of efficacy, it is our intention to allocate these funds in April 2001 to ensure that all parties concerned have sufficient time to make meaningful inputs. I believe that this process will allow for more considered expenditure and service delivery than would have been the case were we to have hurriedly allocated the expenditure in the main Budget.

Provincial Own Revenue for the Western Cape rose to R691 million, an increase of 33,7% on the 2000/01 figure of R517 million in the February 2000 Budget. Following the same rationale I gave for comparisons between equitable share numbers, this year's 2001/02 Budget figure is 20,5% higher than the MTEF baseline figure projected for 2001/02 in last February's Budget. Further increases are projected within the current MTEF period, to R771 million in 2002/03 and to R863 million in 2003/04.

The main components of the increase for this financial year are gambling taxes from casinos of R86 million, which only became operative in December 2000, and the increase in motor vehicle licence fees of R53 million. Own revenue presently represents just 6% of total revenue in the Western Cape, but it is demonstrably more significant when considering that it accounts for as much as 37% of the Province's discretionary funds, i.e. those funds over which the Province has spending control.

The Provincial Tax Regulation Bill has been seen in some circles as an alternative to Section 228 of the Constitution. It is certainly not an alternative, and in my view will only be something of a token gesture toward directing additional funding to Provinces. With the limited range of additional taxes which Provinces can introduce, I would envisage that it could bring in an amount of approximately R100 million and which, whilst an important additional income, would not be sufficient to make a real difference within our Province, or any of the other eight Provinces for that matter.

Conditional grants to the Province in 2001/02 are R1,998 billion, which is just over 16% of total revenue. This figure includes a new conditional grant of R49 million for infrastructure, for which notification was received late, and again, though incorporated within the main Budget, it is not yet specifically allocated and, for the same reasons I explained earlier, will be dealt with by means of an Adjustments Estimate in April this year.

As I have already mentioned, the Western Cape Fiscal Policy provides a sequential framework to be used as the basis for Budget adjustments for additional revenue sources. For the sake of clarity, let me explain that by "additional" revenue I mean that which is over and above the amounts set out as baseline amounts for the two future years in the MTEF period beyond the Budget year. In this context, additional revenue includes additional equitable share and own revenue streams that become available during the MTEF period 2001/02 to 2003/04, but excludes conditional grants which, by definition, are not for Provincial discretionary allocation. In compliance with the sequential framework of the Western Cape Fiscal Policy, the following priorities are addressed this year:

• R15,0 million is provided for inflation which reflects the increase from 5,2% to 5,7%, to maintain stability in services;
• R42,0 million is provided to accommodate increased social security grants announced nationally (and being both increased grant value and an enlarged number of beneficiaries); and finally
• R35,0 million is provided additionally for the improvements in conditions of service for public servants, again negotiated nationally.

After this initial top-slicing, the next priority is Province's contingent liabilities, which include R10 million in financial support for the Gambling Board, exchange rate depreciation adjustments of R8 million for items sourced overseas, R15 million in contributions to the State Information Technology Agency (SITA), and R50 million provision for other fiscal risks.

Second in line for claims against additional resources are special community safety projects, totalling R19,4 million.

The remaining funds are then split between infrastructure needs and other special needs in the proportion 70:30. Infrastructure allocations made under this section of the sequential framework comprise:

• Roads, which receives R77,5 million, or 60% of the infrastructure allocation;
• Buildings, for which R27,1 million, or 21% of the total is provided;
• Information Technology receives R 20,5 million, or 17%;
• Tourism, which is allocated R2,6 million, or 2%; and finally
• An amount of R1,5 million which has been devoted to capacity building in carrying out and processing Environmental Impact Assessments (EIAs) - the logic here is that EIAs are an essential activity in the infrastructure development process, the more efficiently we can progress the EIAs the sooner the benefits resulting from the new infrastructure can flow.

Special needs, which takes up the other 30% in this category of expenditure within the sequential framework, addresses the following five priorities:

• Transformation 2000, to which we have allocated R26 million in the coming financial year, within which amount is R6,3 million for Cape Gateway;
• Information Technology, R18,2 million in 2001/02, rising to R40,6 million and R41,7 million in 2002/03 and 2003/04, respectively;
• Improvement of financial management receives R8,0 million;
• HIV/AIDS and TB programmes are a particular focus area, and are allocated R11,3 million in 2001/02, increasing substantially to R34,4 million and R29,0 million in 2002/03 and 2003/04, respectively. It may interest some to note that the amount allocated to AIDS programmes by this Province during the coming financial year is more than 100% of the amount which national Government is giving us for expenditure on AIDS by way of conditional grant; and finally
• Rural development, receiving R3,0 million.

Taking account of all sources of revenue received by the Provincial Treasury, from the equitable share and conditional grants from national, and from own revenue, let me give the House a summary of the prominent items among the MTEF allocations in this year's Budget Statements.

The Departments of Education, Health and Social Services continue to disburse, as I remarked earlier, 82% of available funds, down in percentage terms (though constant in absolute monetary terms) from 85,2% last year, and projected to remain approximately at the new percentage level over the rest of the MTEF period. Bearing in mind the national rule of thumb ratio between social and economic spending of 85% and 15% respectively, the ongoing emphasis we are making on empowering the economic sector becomes more vivid.

The Department of Economic Affairs, Agriculture and Tourism sees its funding increase by R213 million or 24% over 2000/01 Budget, a clear example of the shift in focus we are making towards economic development. The most important features of this increased spending are the programmes of roads-related expenditure and the maintenance and rehabilitation of provincial buildings, by which I mean schools, hospitals, clinics and the like.

In line with the Premier's opening statement in Parliament that safety is one of our top priorities in the Western Cape, the budget for the Department of Community Safety will increase by 59,2% this year to R70,5 million. This increase takes account of the transfer to this department of Provincial Traffic Services, effected last year. This transfer aims to bring about greater alignment and co-ordination of Traffic Services' activities with the direction being forged by my colleague, Community Safety Minister Hennie Bester. If I deduct that part of the increase which pertains to that function shift, the funding increase to Community Safety amounts to R25,6 million.

We care profoundly for the safety of all the people of this Province and remain wholly committed to playing a decisive role in curbing crime. Although the numbers of police personnel deployed in each Province, their levels of remuneration and the level of investment in police infrastructure and other resources are decisions taken at a national level, we will for our part continue to monitor, support and augment the services provided by the South African Police Service, as is our function by law.

In order to achieve our goals in this regard, some of the additional funds in this Budget will go towards the establishment of a Provincial crime database and the roll-out of municipal policing expected later in the year.

In conclusion, let me say that I believe this Budget to be about delivery, not restraint, about striving for optimum performance, and about discipline. In this last respect, I caution myself when announcing this manifest change in tack toward economic development, that we are giving weighty undertakings here. Moreover, I must also cast my mind back to this time last year when in my Budget Speech I set out a series of seven challenges which then lay ahead. I believe that we have made substantial progress in meeting these challenges, but are fully cognisant of the fact that improvement is an ongoing process, not an event. Addressing the challenges I laid out last year:

Firstly, I said we must ensure the improvement of overall performance by seeing to it that Key Measurable Objectives translated into improved service. In measuring objectives, we are gauging change over time, of which a meaningful length in this context has yet to pass. This does not, however, alter the fact that meticulous preparation has been done in implementing the system, and that our commitment to this undertaking over time remains undiluted.

Secondly, I undertook to continue to evaluate new sources of revenue in liaison with the national Department of Finance. I have been a constant and vocal proponent, as I remarked earlier, of Provinces with a sustained performance record being given the chance to augment existing revenue streams with Provincial tax revenues.

Thirdly, I pledged to stabilise social delivery. Rigorous austerity measures in recent years have had their desired effect in streamlining social services. The cutbacks which seemed so severe then have meant that we are now able to plan and fund the ongoing maintenance of these services with accuracy and confidence. The allocation of resources which we are now able to direct, for example, at containing the scourge of HIV/AIDS is in line with the very high priority with which the problem is viewed by this Government. In education, despite the austerity measures I referred to earlier which historically saw unavoidable cutbacks having to be made in education over-expenditure, in the interests of enhanced fiscal discipline, the Western Cape remains the Province with the highest annual growth in its matric pass rate.

Fourthly, I undertook to look urgently to the building of infrastructure - this Budget is quite plainly focussed in this area.

Fifthly, I said we would facilitate job creation and higher economic growth, which again, is very much the main thrust of this Budget. We are committed to doing everything in our power to create an economic and socio-economic environment conducive to reaching the fullest possible potential for economic growth and job creation.

Sixthly, I said that we must correct the distorted income distribution in the Province. It is only through putting in place policies which facilitate increased access to jobs that this uneven distribution can be addressed by the Province. Once again, this Budget concentrates on that theme.

Finally, I gave an assurance about maintaining and improving fiscal discipline. I would venture to say that no other Province in this country has made the progress which the Western Cape has in formulating a Provincial fiscal policy which so comprehensively addresses both national and Provincial fiscal priorities.

The success of the initiatives outlined in this Budget, which will be brought to fruition through the programmes which you will hear about from my colleagues in due course, depends on co-operation at many levels. For their part, I am assured by my Cabinet colleagues of their full support and co-operation in meeting the challenges laid out by this Budget.

Mr. Speaker, I look forward now to driving this Budget, reporting to this House from time to time and to the committee structures. I look forward to the co-operation of this House in supporting growth, fuelling optimum performance and maintaining this Province's proud status as a valued, progressive, economically sound jewel in the crown of South Africa.

Before I take my seat I would like to thank the Premier for his leadership and guidance, members of the Cabinet, Minister Trevor Manuel and National Treasury, my colleagues on the Provincial Treasury Committee, the Director-General and Heads of Department and their staff, you, Mr. Speaker and Members of the House, and the Chairman and Members of the Standing Committee on Finance.

In my list of thanks, however, I leave for last my profound appreciation to Mr. Cedric Ismay, the Acting Head of Finance who, in the absence of Dr. J C Stegmann, has played a pivotal role in the Budget process. We have built up a strong rapport during the year and I thank him for his mighty contribution. I must also thank my team finance for their invaluable assistance.

Mr. Speaker, it remains only for me to table, in addition to the text of my speech, the following documents:

• Western Cape Appropriation Bill, 2001
• Budget Statements 1&2;