There are people who have had to survive on so little for so long in our society that their needs have withered away to barest necessity. Is it wrong to raise their expectations, to give them a sense of the things they have gone without? Is it wrong to argue that the strangers at my door should not be content with the scraps at the barrow? Any politics which wants to improve the conditions of their lives has to speak for needs which they themselves may not be able to articulate. That's why politics is such a dangerous business: to mobilize a majority for change you must raise expectations and create needs which leap beyond the confines of existing reality. To create needs is to create discontent, and to invite disillusionment. It is to play with lives and hopes. The only safeguard in this dangerous game is the democratic requirement of informed consent. One has no right to speak for needs which those one represents cannot intelligibly recognize as their own...when is it right to speak for the needs of strangers? Politics is not only the art of representing the needs of strangers; it is also the perilous business of speaking on behalf of needs which strangers have had no chance to articulate on their own.
As I present this budget to this Western Cape Parliament I am humbled by the daunting challenge contained in the words of Michael Ignatieff (I may add that the presence of my parents here for the first time in this House, and my partner, Rosieda, who has an inherent doubt about my ability to manage even our domestic finances, adds an intimidation dimension).
A budget is not neutral. It has to speak for the needs of strangers. It is often a choice about which strangers you choose to represent and whose needs you choose to prioritise.
Mr. Premier, the vision and direction you've given to this Government, and the clarity with which you've inserted the Western Cape into the national body politic, have given us the freedom to make the choices.
It's the choice that Gloucester made with insight only when he was blinded in Shakespeare's tragedy King Lear: His speech to the beggar went as follows:
Here, take this purse, thou when the heaven's plaguesHave humbled to all strokes. That I am wretchedMakes thee the happier. Heavens, deal so still!Let the superfluous and lust-dieted manThat slaves your ordinance, that will not seeBecause he does not feel, feel your power quickly;So distribution should undo excess,And each man have enough.
Shakespeare understood that the key to meeting needs was distribution. This is the central challenge that this budget starts to confront. How do we hold in balance the needs of those who are humbled and wretched, and those who are superfluous and lust-dieted?
I would like to congratulate Minister Manuel on his latest National budget as tabled in Parliament last week. Much of what he wishes to accomplish is echoed in the Provincial budget being tabled today, and for good reason. The key focus of the National budget reinforces the President's stand on poverty relief, reduction of vulnerability, and economic growth for all. And so does this one. One of our main fiscal strategies has to be to achieve sustainable and sensible synergy between the budgets of the various spheres of government, so that the sum of the parts is greater than the whole. Much preparatory work on this budget was done in close collaboration and rigorous interaction with the National Treasury, also taking on board various policy ideals of national departments, via the system of intergovernmental fiscal relations. Chapter 6 of our Fiscal Policy 2002-2005 expands on these issues.
We are making the break: National Government is our partner, not our enemy! This budget by its very design is pro-poor, pro-growth and developmental, directed at all the people in the Western Cape, but targeted so that those humbled and wretched, benefit more.
We are making the break! This also requires that the 10 strategic goals of this new Western Cape government are implemented. Some of the fruits will only be borne in the future, but we have to plant the seeds now. This is what the National Government and other successful economies around the world have done, and this will instil confidence amongst all in this Province's future, and in our Country's as well.
We are making the break from a difficult past. The Western Cape Government has gone through various stages since April 27, 1994. The first phase saw us acquiring the key constitutionally assigned functions, putting together workable governance systems, starting to deliver services to the full population. This required the better part of three years. The second phase saw us fighting massive deficits to bring expenditure in line with available revenue, while ensuring equity. This was a period of sacrifice and trauma, even though it was in our country's best interest. We could not support a situation where we are relatively well off, while the greater majority languished in absolute poverty. Fiscally, morally and socially that was and is untenable. These rationalisation exercises, painful as they were, proved necessary to position the Western Cape for an easier future.
Subsequently we needed to catch our breath, as it were, and that required a period of consolidation. This phase, from 1999, saw the launching of a new framework for public finances at national and provincial government spheres, the advent of the PFMA and the first serious steps in budget reform, trying to link policy to the actual pattern and thrust of government expenditure. All this contributed to where we are today, poised to make the break with the difficulties of the past and liberating the full potential of this Government to deliver.
More significantly, this budget signifies a decisive shift towards addressing the real needs of all sectors of the population in the Western Cape. We may even say that this budget is making the break towards people-oriented service delivery. For the first time there is a real sense that our people must come first and that our expenditure and, therefore, this budget, must reflect this new policy goal.
Our ten-point strategic framework is fully captured in the budget leaflet, and the background to it debated in our Fiscal Policy 2002-2005, published in December last year. I will nevertheless deal with them, covering directly or indirectly our 10 governmental goals. Our points of departure are: we must use this budget to stimulate the Western Cape economy; to open it up to wider participation; to admit more people to the mainstream of Western Cape society; and to bring the vulnerable ever more under our care. To this we are unashamedly committed: "Ave Caesar, morituri te salutant" (Hail Ceasar, those who are about to die, salute you!), meaning we are in the arena and have no other choice or wish ahead of us but to be prepared to commit whatever we have in the fight against those factors which condemn our people to poverty and lives of indignity and inequality.
Again Michael Ignatieff gives us insight as he describes how the needs of strangers can bind us. He describes the experience of the vulnerable as follows:
"?a social worker climbs the stairs to their room and makes sure they are as warm and as clean as they can be persuaded to be. When they get too old to go out, a volunteer will bring them a hot meal, ?when they can't go on, an ambulance will take them to hospital, and when they die, a nurse will be there to listen to the ebbing of their breath. It is this solidarity among strangers, this transformation ?.of needs into rights and rights into care that gives us whatever fragile basis we have for saying that we live in a moral community."
Some of us are in denial about the degree of rampant poverty still prevalent in the Western Cape and many tend to emphasize the Western Cape as more developed, with an economy outpacing the rest of the country, with lower levels of unemployment, a higher relative per capita income than the national average and many conditions associated with poverty ostensibly less severe than elsewhere in the country.
Besides being patronising, such people are living in a fool's paradise. From an economic perspective the Western Cape unemployment rate is unacceptably high by world standards at 13.7%, implying that at least 250 000 residents, mostly in urban areas, are without regular sources of income. In addition 27.3% of all households in the Western Cape exist on less than R12 000 per year. What makes this worse is the very skewed income distribution: the Coloured and African sectors of our population respectively accounts for 71% and 28% of the poorer sector of our community. This translates into a Gini coefficient which measures income inequality of 0,58 for the Western Cape. Rates of above 0,5 are internationally regarded as excessive. However, it is not only household income levels that are at issue, but also the degree of access of the poorer sector of our society to social and other basic services. The recent findings of differential access, depending on income levels, to basic municipal services in the Unicity is a stark reminder of the realities faced by a substantial number of our people.
Poverty is also largely associated with many other aspects of unsatisfactory living standards. Life expectancy is still low when compared to developed countries, and infant and child mortality rates are far too high; malnutrition and hunger are still rife amongst many; tuberculosis (a disease of poverty) is endemic; HIV/AIDS is claiming many victims; housing provision is in many cases still inadequate; access to clean water and sanitation services still needs further improvement; and alcohol, drug abuse and crime affect far too many members of our society, in both rural and urban contexts. A classical indicator of deep poverty is when women and youth carry the main burden of these pathologies.
3.1 A SAFETY NET
The answers to these challenges require short-, medium and long-term responses. Over the immediate short-term and sustained into the future are a succession of social grant increases to bring relief to the very poor and vulnerable. Minister Manuel has already referred to increases in social security grants. The child support grant increases by 18% in 2002/2003, 7.7% in 2003/2004 and 7.1% in 2004/2005. Social pensions and other grants increase on average by 8.8% in 2002/2003, 6.5% in 2003/2004 and 6.1% in 2004/2005. By far the greater majority of recipients of the latter pensions and grants are old age pensioners and the disabled, who, apart from our children, are perhaps the most vulnerable members of our society.
It therefore gives me great pleasure to say that these hikes are significantly higher than the expected CPIX inflation rates over these MTEF years, representing real increases in the income transfers to our social pension beneficiaries. In monetary terms this translates into additional transfers against baseline to the poor of R235 million in 2002/2003, R282 million in 2003/2004 and R484 million in 2004/2005 or more than a billion rand over the next three years by the Western Cape Government. These additions signify the first and immediate step in relieving poverty levels amongst the old, the disabled and the very young. The final phasing out of the previous child maintenance grant by March 2001 had a particularly severe effect on the income of many poor households in the Western Cape. However, the significantly higher levels in the child support grant will go a long way in compensating for this and the Province has seen a very rapid take-up of 122 506 children receiving this grant up to February 2002. It is expected that the take-up will increase steadily over the MTEF to reach a plateau of 160 000 by 2003/2004.
Such safety nets will merely buy us time so that we can invest time and money to understand more sharply the very specific causes of what appears to be persistently high levels of poverty. An amount of approximately R13 million has been included under Vote 1 for poverty relief, but perhaps a portion of this can be utilized to gain insight into the causes of persistent poverty. However, the causes of these challenges can to a large extent be found in our general history of inequality and exploitation and the specific history of the Western Cape's harshness to black Africans. As a result, a large part of our population, mostly Africans and Coloureds, do not have the skills to successfully take part in a modern economy, and they remain excluded from the mainstream. If the heart of our economic problem is this lack of skills - which determines both the access to employment and the productivity and earnings of those who do find jobs - then surely the key to full participation in the economy lies in how we put together our Human Resource Development Strategy.
3.2 INVESTING IN OUR CHILDREN
Our endeavours to reduce poverty levels over the medium-to long-term, require steps to enhance significantly economic growth towards two aims: generating employment and reducing income disparities.
If the poor are to benefit from economic growth, then we must ensure a substantial improvement in the quality of education so that it serves a broader Human Resource Development Strategy and the goals of long-term economic growth and equity through improved access to the labour market, and enhanced economic opportunities. All the hype about fostering investment, lowering tax rates and the like is not going to yield sufficient dividends for us as a nation to escape the poverty trap. The quality of teaching, as well as the quality and quantum of the learner throughput by the South African educational system must improve dramatically. We must get better value for money.
Despite our apparently good grade 12 results in the Western Cape, there are still substantive deficiencies in the performance of many schools which need to be addressed, like the quality of teaching, the dedication of teachers and principals, and the lack of perseverance of learners to continue to grade 12. This is a responsibility to be shared by us as government, the labour unions, parents and the learners themselves. I'm sure that my colleague at Education will debate this more intensively, but I need to make a number of remarks in this regard.
Although we have good enrollment rates in primary school, this drops substantially (on average by 25%) on reaching secondary school. The cumulative effect of high failure rates and high drop out rates mean that of 100 children entering primary school, a very low percentage reach grade 12 within the allotted 12 years. A particularly high loss of potential learners takes place from grade 10 onwards.
Even if we take into cognisance that there are other learning pathways outside the formal public schooling system (schools for learners with special education needs, adult education and training centres, technical colleges and independent schools and colleges) only about 73% of learners entering the formal schooling system initially, seem to get a grade 12 or equivalent qualification.
We cannot hope to eradicate poverty or reduce inequality sustainably without a dramatic turnaround in the delivery of our schooling system. Comparable numbers for countries like Japan, USA and France show losses of only between 1 and 4 per cent for the same age group.
On a macro level the 1996 Census shows that out of the total South African population of about 19 million people over the age of 25, only 3.6 million of those (or 19%) have matric or higher qualifications. The Western Cape fares a bit better, but not much, with an equivalent percentage of 25.5% (or 527 000) out of the 2 million people over 25 years of age. There is simply no way that we can meet the demands of a modern economy, let alone turn poverty around with these levels of education. If we don't get education right we run the real risk of subjecting our people and our youth to a lifetime of bondage and servitude.
Compared to our figures, studies show that in Organisation for Economic Cooperation and Development countries about 39% of the workforce have secondary education and higher, much higher than even the Western Cape. Furthermore, World Bank statistics show that as a country we perform (if that is the right word) over 30% worse in science and mathematics than our main trading partners, who also happen to be, by and large, our key potential investors. For investment to take off, or for us to be able to compete on world markets, we require constant technology transfer, but our low overall educational levels might well prove to be the main obstacle to increasing our economic growth. Growth in human capital is a necessary precursor for sustained development, and we must confront this challenge.
For this reason we have augmented our allocations, calculated from the 2001 MTEF forecasts, by R580 million to Education over the next three years. This is to keep their expenditure levels stable in real terms, in spite of earlier significant savings. Although we have made some adjustments to their allocations in the third year of the MTEF, I will consider further augmenting this depending on their performance in improving the degree of teaching quality and lowering the fall out rates significantly. I look forward to my colleague at Education delivering on this and reporting back to this House on results achieved. What is at issue is not money per sé, but value for money.
3.3 BOOSTING AGRICULTURAL EXPORTS AND MAINTAINING JOBS
The third leg of our fight against poverty is a boost to Agriculture, with real increases against baseline (after discounting for infrastructure) of 12.2% for 2002/2003, 23.6% in 2003/2004 and 33.9% in 2004/2005, strongly signifying our intention to improve employment and to reduce poverty in rural areas, where poverty is deepest. A substantive reason for the better economic performance of the Western Cape is closely tied to growth in agricultural export performance. It is estimated that the 14 000 farmers, of which 1500 are from previously disadvantaged communities, together with 220 000 farm workers, contributed close to R9 billion to the Province's GGP during 2001/02. Although this constitutes approximately 6 per cent of our estimated gross geographic product, agriculture is a significant provider of unskilled and semi skilled labour particularly in rural areas. The rationale behind the increased spending on Agriculture is to foster further research into enhancing our competitiveness on international markets and so boosting exports and secondly further advancing the settlement of small farmers. My colleague at Agriculture will further expand on this.
3.4 INVESTING IN INFRASTRUCTURE: HOUSES AND JOBS
Our fourth leg in combating poverty and unemployment is directed to infrastructure spending and redevelopment. Expenditure on infrastructure has been increased by just under R300 million for the coming financial year, R167 million for 2003/2004 and R133 million in the last year of the new MTEF. In nominal terms an increase over baseline of just under R600 million over the next three years. Beyond this point it is our intention to sustainably further fund infrastructure to deal with both backlogs in maintenance and new expenditures alike. Of these amounts R85 million has been set aside in 2002/2003 towards completion of the convention center, being erected on the foreshore in partnership with the Unicity and Sunwest. The benefits of increased funds to infrastructure are twofold. Firstly, it should revitalize the construction industry in the Province, secondly, stimulate urgently needed job creation over the medium term, and thirdly, and very specifically, create opportunities, together with monies already in the baseline, for historically disadvantaged persons and companies to participate in construction projects all over the Province. My colleague responsible for Public Works, Transport and Property Management, to give her full title, will further deal with this under Vote 10.
Allied to the provision for infrastructure, are the allocations for housing over the MTEF. For 2002/2003 we have a 14.5% increase, another real increase over this year's allocation, rising to R433 million to be spent on houses in 2004/2005. We will spend about R406 million on average over the three-year period to build houses - to meet new demands and to deal with backlogs. This will benefit the construction industry and possibly also the durable goods industry. It will have benefits such as better health and through being able to buy their own homes it will give dignity to the poor.
This government must ensure the efficient, timeous and appropriate spending of this R1 billion investment in infrastructure per annum over the next three years. This overall provision sharply accentuates the trend in increased capital spending and contributes significantly to government investment in fixed assets to aid medium to long-term economic growth and empowerment.
3.5 BUILDING BLACK ECONOMIC EMPOWERMENT
The fifth pillar on which this budget rests, is the newly instituted preferential procurement policy, which for the first time is introduced without the imposition of racial and gender ceiling limits. We want previously disadvantaged individuals to have dynamic access to our government's procurement system and other wide-ranging opportunities. Based on studies launched by the Tender Board, with the previous Chair, Ms Mercia Isaacs at the helm, the new procurement policy will have positive spin-offs for the economy as a whole, and is a challenge to black business to show their mettle. Although a lot of work requires to be done, I am pleased to report that by and large the support and enthusiasm of departments, public entities and the Tender Board (and its new Chair, Mr. Lesley Africa) have been quite gratifying. That makes me optimistic that this initiative will go some way in reducing disparities between different sectors of our communities over the next couple of years. I will deal more fully with this topic under my own Vote (Finance).
3.6 COMBATTING HIV/AIDS COMPREHENSIVELY
This brings me to the sixth leg, which tries to cope with the direct and indirect impact of the HIV/Aids pandemic. Although available statistics indicate a lesser impact, in the Western Cape than in other Provinces, the fact that it is growing means we need to fight HIV/Aids on all fronts and in a co-ordinated manner across all relevant departments and the three spheres of government. It is not a fight that government can hope to win on its own, and we need to join forces with all those committed in combating this scourge. Our integrated approach includes the provision of anti-retroviral drugs to prevent mother-to-child transmission, home-based care, but more importantly to focus on behavioural change towards prevention of HIV/Aids. Fighting HIV/Aids with drugs, hospital care and home-based care, necessary as they may be, they remain insufficient if we can't at the same time prevent the disease from spreading. With this in mind, increased allocations have been made within the Health vote for expanding STD treatment by private general practitioners, (although still subject to final Cabinet approval), condom protection, media and communication and voluntary counseling and testing. The Health vote has also increased its NGO funding to combat Aids.
All in all R56 million, most of it in the Health vote, has been set aside for 2002/2003, a similar amount in 2003/2004, rising to R63 million in 2004/2005 or R175 million overall for the next three years. The actual overall distribution over the next three years is R137 million to Health (of which R45 million comes from a national conditional grant), R30 million to Education, and roughly R8 million to Social Services. My colleagues at Health, Education and Social Services will expand more on these during the discussion of their votes.
3.7 QUALITY HEALTH CARE - AT ALL LEVELS
Closely allied to the war on HIV/Aids is health spending, this budget's seventh leg, aimed at narrowing disparities through improved access to social services. As might be well known by now, the National Department of Health has revised the conditional grants aimed at tertiary and associated services. Research has shown persistent inequitable funding of tertiary services across provinces, with both Gauteng and the Western Cape unfairly benefiting from the current funding arrangements, to the extent that they were using funding meant for tertiary services for other health services.
On the other hand, other provinces were being forced to use their equitable share funding for their tertiary health care services. In addition substantive inequitable per capita spending on tertiary services exists, with the Western Cape at the top of the scale and Northern Province far down on the lowest rung.
What this implies is a necessary revision of the current conditional grant system for academic health services, with the old central hospital services and professional training and research grants to be replaced by the national tertiary services and professional training and development grants from 2002/2003. The full effect to achieve a more equitable distribution of tertiary funds is due to be phased in over the next 5 years. As their names imply the individual focus of the new grants is rather different, and I am sure that my colleague at Health will expand on. In financial terms, however, the net result is a R40 million reduction in 2002/2003, R86 million in 2003/2004 and R63 million in 2004/2005, with further reductions totalling about R90 million for the next two years.
Mr Premier, we know you expressed concern about this and we promised a Management Plan - which I now present. Because the Public Health Sectors main clients are poor people - who need access to health, and because we have 5 years to ensure the intelligent restructuring of the system, we were not only able to compensate Health for these cuts, but in fact increased our allocation from our equitable share. Effectively Health gains R74 million in 2002/2003, R127 million in 2003/2004 and R304 million in 2004/2005. These amounts exclude other provisions to Health's advantage under Vote 1 (HIS) and Vote 10 (Public Works). But there is a catch. Health has a major problem now because they did not pursue the restructuring initiatives launched a couple of years ago. At the altar of short-term political gain we now have an important function ostensibly fumbling to achieve some ill-defined goal not as the masters of change, but the victims.
What is required is a revitalisation of earlier initiatives so that our health services and its facilities can be fully aligned with clear and unambiguously stated goals and frameworks for both services and management typologies. Cabinet has given my colleague and his department up to August of this year to come up with such a framework, covering both the direction Health must take and rationalisation in services and management practices it needs to undergo to become focused and managing the needs and resource envelope at issue.
This brings me to the question of the proposed semi-transfer of district health services to the Unicity. Given that the desired future structure of our health services is uncertain and that the requirements of current thinking on the correct approach to take in transferring services to municipalities are still muddled, I would be very hesitant to condone such a transfer under present circumstances. More about this later when discussing local authorities.
3.8 PROTECTING OUR PEOPLE
Moving away from the direct economic dimensions of fighting poverty brings me to crime which has a direct bearing on all other objectives that are to be attained in this province: Prevention of, or more realistically, reduction of crime. We desperately need to create a safer environment for our people. The additional expenditure by the national government on the SAPS will assist, but it also requires our active involvement. This requires a shift away from reacting to crime incidents (reactive approach), where we will play our role in the training of municipal police towards strategies for crime reduction and targeting prolific offenders (pro-active approach). The Truancy Project as an example is aimed at reducing juvenile offending and increasing school attendance in areas worst affected by gang activities.
Another example is increased attention to road safety enforcement, which gets extra funding over the last two years of the new MTEF. With due credit to the Honourable Member, Hennie Bester, Community Safety has been significantly emphasised as a key pillar of provincial government activities and also intergovernmental co-operation. The forthcoming year will be a consolidation of past initiatives, prior to taking off again in 2003/2004. My colleague at Community Safety will further expand on the theme of creating an environment less amenable to crime and to show that it doesn't pay.
3.9 DEVELOPMENTAL SERVICES
The ninth leg relates to our relationship with the Local Government sphere or municipalities. They form an integral part of our intergovernmental fiscal structure and many of the ideals spelt out above will be imperfectly realized if we do not integrate our developmental and other activities. The Premier has also alluded to this fact in his opening address. The challenge is to do this effectively as partners, each in its own right, whilst also complying with the spirit of the constitutional provisions, those in the Structures and Systems Acts and those envisioned in the Municipal Finance Management Bill.
Key amongst these are the requirements of section 156 (4) of the Constitution that requires the assignment to the municipal sphere of the administration of Parts A of Schedules 4 and 5 functions that necessarily relate to local government. What troubles me is that an exercise to identify such functions, has as yet not taken place in the Province. I'm furthermore under the impression that what discussions have taken place, or initiatives launched, have taken place piece-meal and are being contemplated on an agency basis. None of these are desirable approaches and are indeed not a reflection of good governance or in line with the constitutional spirit. On the other hand the local government sphere is going through the same transformation processes provinces had to engage in and manage from 1994. Thus it behoves us, together with Local Government and our national partners to reflect very carefully on what is to be achieved, how this is best accomplished and what time framework is relevant. Until this has been achieved and Local Government stabilised, any moves contemplated should be placed on hold. My colleague responsible for Local Government, our respective departments and I, will advise you on the way forward as soon as possible.
3.10 QUO VADIS
As is clear this budget is making the necessary resources available in a targeted fashion. The target is clear: Poverty. Now it is up to departments and all of us to deliver. In this sense all of us in the Executive, from the Premier down, and all heads of departments and our personnel are on probation. We have no intention of failing. This budget already begins to put our money where our mouth is. Now we must ensure that our money begins to provide peopleoriented service delivery.
I will now deal more intensively with the key shifts incorporated in the budget. Greater detail can be found in Budget Statement 1, which gives an overview of the budget and on a departmental or vote basis, in the relevant Budget Statement 2. The latter incorporates applicable policy developments, planned outputs and service delivery indicators for the main divisions or programmes of each respective vote. The Western Cape Parliament is asked to agree to these proposals as set out in the Western Cape Appropriation Bill, 2002.
On the expenditure side the annual budget provides for real increases of expenditure raising it to R13, 794 billion in 2002/03. This amounts to an 11.7% increase or R1, 448 billion on the 2001/2002 main budget. From an MTEF perspective (the April 2001 forecast position) the rise in expenditure is 5.3% or R695 million. The overall expenditure level increases to R14, 488 billion in 2003/04, a 5% year-on-year increase, further increasing by 5.3% to R15, 250 billion in 2004/05.
Not included in the expenditure level for 2002/03 is a limited contingency reserve provision totalling R102, 85 million, just under 0.75% of the gross budget for 2002/2003. This percentage is kept fairly stable across the MTEF. The rationale behind this is to provide a necessary buffer against external shocks (out of the ordinary droughts, floods, fires and such like) or previously identified contingencies, as described in Chapter 5 of our Fiscal Policy. Its main purpose is therefore to provide fiscal stability for departments and to prevent disruption to our service delivery aims. However, in the event of it not being required, in whole or in part, during a financial year the balance will be made available for prioritised expenditure, either in an adjustments estimate or rolled over in the following years' main budget, depending on the risks involved.
Having said this, the challenge remains to prevent growing under-recorded claims on the budget, expansion of contingent liabilities, the undermining of budget stability and integrity as well as government not meeting its obligations.
The reverse side of the coin is also to ensure that under-expenditure is prevented, whilst avoiding over-expenditure like the plague. For the latter no excuse is good enough and we have to begin to entertain disciplinary steps as advocated by the PFMA. At the same time, under-expenditure is a reflection of services not provided and while a softer touch is still relevant as that relates to capacity building and good decision making, more attention will focus on this, as was perhaps previously not the case.
At this point it will be appropriate to briefly focus on each vote, the rationale behind its budget allocation and here and there emphasising some of the departure points already conveyed. A few transversal issues first:
- The first relates to the extra allocation of R9, 460 million amongst Votes 1, 4, 5, 6, 7, 9, 10 and 11 for the day-to-day building maintenance, and carried through in constant real terms over the new MTEF. Its distribution is in accordance with recommendations from Public Works and its intention is to improve service delivery environments, to enhance accountability for and to contribute to capital building stock preservation, preventing unscheduled major maintenance interventions. This includes stock managed by the Western Cape Nature Conservation Board.
- Secondly, the shifting of R6, 716 million from Vote 1 amongst Votes 3, 4, 8, 9 and 10 in respect of the decentralisation of the personnel administration function. Commensurate shifts are affected in the outer two MTEF years.
- Thirdly, the shifting of R4, 981 million from Vote 3: Finance amongst Votes 1, 4, 8 and 9 in respect of the final round of decentralisation of the departmental accountant function on 1 April 2002. Similarly, corresponding shifts take place over the outer MTEF years and become part of baseline amounts of the receiving departments beyond that point.
Vote 1: Premier, Director-General and Corporate Services currently constitutes 2.7% of the budget and provides for expenditure of R367, 925 million in 2002/03, a 27.8% increase or R80, 089 million on the 2001/2002 main budget and a 15.6% or R49, 741 million increase on last year's MTEF forecast for 2002/03. These hefty increases originate chiefly from amendments made to this Vote by the previous government.
Our contributions amounted to R14, 983 million in 2002/2003 (and similar ballpark amounts over the outer MTEF years) as earmarked funding to absorb inflation and currency depreciation costs related to the Health Information System, the outcome of which is said to improve health care delivery. However, the rapidly rising costs and delays in implementation are a source of increasing concern requiring a series of trade-offs and a ceiling on acceptable levels of expenditure. Some work on this has already been done.
For functional training of personnel practitioners and associated personnel, R1, 501 million has been earmarked for 2002/2003 and further provided for in constant real terms over the MTEF. For the remainder, allocations to this Vote have been held constant in real terms pending institutional restructuring and any costs related thereto. Any alterations will be shown in the adjustments estimates to be tabled in the latter half of 2002.
Vote 2: Provincial Parliament constitutes 0.17% of the budget and provides for expenditure of R23, 748 million in 2002/03, a 18.2% increase or R3, 651 million on the previous budget and a 16% or R3, 283 million increase on last year's MTEF forecast for 2002/03. These comparisons include a special addition of R2 million for 2002/2003 to enhance the effectiveness of our legislative processes. The numbers for the outer MTEF years have also been adjusted for inflation and wage adjustments, so in nominal terms this Vote shows a constant rise.
Vote 3: Finance constitutes 0.44% of the budget. Except for shifts out of the Vote, no real changes have been made to the MTEF baseline or forecast allocations for 2002/03 and 2003/04, and this is the only vote where this is proposed. The suggested allocations for 2004/2005 simply allow the Vote to remain constant in real terms. A great deal of work on the further internal restructuring of functionalities and responsibilities of the Provincial Treasury requires to be done, concomitant with the strengthening and development of its human resource base. These changes relate to increasing the depth of its human resource capacity over time and not the number of personnel. This is vital to enable it, through fiscal policy, to
- Effectively act a as change agent to achieve specific socio economic objectives inclusive of introducing new practices
- Foster the attainment of value for money spending, and to
- Safeguard and promote the effective utilisation of provincial assets.
There is an urgency to track suitable provincial socio- and macroeconomic variables to better align policy and budgets. All these initiatives run together and it is my intention to use savings within this Vote, realised during 2001/02 to boost this process.
Vote 4: Community safety constitutes 0.9% of the budget. Given the substantial budget increases from the 2001/2002 main budget: from R71 million to R118 million for this year (and even more so from the MTEF base line), the major focus for this year has to be a consolidation of the gains made since April of last year. Further allocations of R 8, 400 million for 2003/04 and R 8, 820 million for the 2004/05 financial years have been made to extend road traffic law enforcement to a 24-hour coverage. Allowance has also been made for constant real growth for 2004/05 and further shifts from Vote 10 in 2002/03 to deal with public law transport and weigh bridge enforcement.
Vote 5: Education constitutes 32.7% of the budget and provides for expenditure of R4, 533 billion in 2002/03, a 6.8% increase or R290 million on the 2001/2002 budget and a 2% or R92 million increase on last year's MTEF baseline for 2002/03. This was achieved mainly by adjusting the previous allocations to realize constant real growth. Looking forward, the ratio of personnel expenditure to other expenditure, non-personnel funding could not be fully accommodated in real terms for 2004/05. Depending on performance, this will receive appropriate attention in future budget cycles.
Included in the gross allocations above, is a national conditional grant to promote HIV/AIDS education in primary and secondary schools of R11, 218 million for 2002/03, R9, 275 million for 2003/04 and R9, 869 million for 2004/05. A further national conditional grant of R 4, 108 million for 2002/03 and R6, 952 for 2003/04, is meant to enhance early childhood development, particularly for the poorest children in our Province. From 2004/2005 this grant has been subsumed into the equitable share to Education. A third national conditional grant of R17, 721 million in 2002/03 rising over the MTEF, supports financial management and quality enhancing initiatives in school education.
Media libraries have been shifted from the national Department of Education, for which R1, 345 million for 2002/03, R1, 418 million for 2003/04 and R1, 481 million for 2004/05, followed the function.
Vote 6: Health constitutes 27% of the 2002/2003 budget. Apart from the national conditional grants for tertiary services which was discussed earlier, adjustments were made to Health's portion of the equitable share to allow at least nominal growth over the MTEF, but allowing it to remain constant in real terms for 2004/05 on the 2003/2004 base. Overall the Vote increases by R206, 057 million from April last year or 5.8%, quite a feat given the reductions in the tertiary national grants. From the previous MTEF baseline the corresponding figures are R49 million and 1.3%.
Included in the above for 2002/2003, is a R5 million increase in the conditional grant for hospital management improvement, bringing it to R19 million in 2002/2003. Also included is another national grant of R28, 789 million for the integrated nutrition programme, essentially unchanged from the earlier MTEF estimate, and a further earmarked allocation of R9, 509 million to augment the current provision for improvement in financial management. R5, 894 million has been earmarked to ameliorate exchange rate costs on health equipment purchases. All these amounts, suitably adjusted, are carried forward to the outer MTEF years.
Intrinsic to these augmentations, are the realignment of the Health platform to specifically identified service goals within its expenditure envelope and the appropriate rationalisation of Health facilities to best meet the former. Additionally, as part of ongoing management improvement, the long-delayed legislative changes to enable the appointment of appropriate professional managers in health institutions, and not only medical practitioners, good doctors as they might otherwise be, has now become imperative. A further challenge has to be the re-engineering of hospital institutional structures to allow greater management autonomy and decision-making at institutional level within a broad health policy framework.
Vote 7: Social Services constitute 19.7% of the budget, increasing by R379, 591 million from April last year. The corresponding increase from the MTEF base is R215, 783 million. As we all know, and I expanded on this topic fairly extensively earlier in my address, social security grants have a direct beneficial effect on the income of the very poor and as announced the social security grants values sees significantly upward adjustment over the MTEF years. For the child support grant this translates into increases of R20 from R110 per month per eligible child from 1 April 2002, another R10 from April 2003 and also R10 from April 2004. The old age and disability grants jump by R50 from 1 April 2002, R40 from April 2003 and R40 from April 2004.
The rapid take-up rate and the capping of the budget allocation at 160 000 for child support grant beneficiaries in 2004/05 will necessarily bring about funding pressures and risks that need to be closely monitored.
Vote 8: Planning, Local Government and Housing constitutes 3.7% of the budget, with Housing making up close to 84% of the entire Vote in 2002/2003, rising to 85% in 2004/2005. Overall the Vote grows by R74 million from April last year to R505, 361 million in 2002/2003, then to R548, 273 million in 2003/2004, both constituting real growth, remaining constant in real terms through to 2004/05. For Housing a steadily growing national conditional grant provides for expenditure of R372, 778 million in 2002/03, up from the 2001/2002 budget of R321, 564 million or the previous MTEF provision of R342, 867 million. This makes reduction of existing backlogs feasible, although this will be influenced as to how wisely the housing monies are spent.
Included in the gross amount for the Vote is a new national conditional grant for local government support: R16, 500 million for 2002/03, R15, 100 million for 2003/04 and R13, 350 million for 2004/05. Additionally, A national conditional grant of R13 million for 2002/03, R13, 5 million for 2003/04 and R14, 31 million for 2004/05 provides for human settlement, assisting in funding projects aimed at improving the quality of the environment in urban communities. Out of the equitable share R1, 100 million for 2002/03 and for each of the two outer years have been earmarked for capacity building in the housing delivery environment.
The Municipal Finance Management Bill, which is expected to be enacted during 2002, will authorise provincial treasuries to exercise budgetary monitoring, supporting and advisory actions over certain local authorities. It also assigns a number of responsibilities to this Vote in addition to provisions captured in the Systems and Structures Acts. The Provincial Treasury and more specifically the Local Government component are in the process of establishing a draft framework to try and give systematic effect to the various requirements of the Constitution and other related legislation, so as to properly formalize our relationship with municipalities, inclusive of possible function shifts between the two spheres of government. Needless to say, the intended draft will be work-shopped with affected departments and organized local government, and also cleared and synchronized with national level initiatives.
Vote 9: Environmental and Cultural Affairs and Sport constitutes 1.4% of the budget proposals for 2002/2003 or R187, 469 million. This represents an increase of R37, 105 million over the main budget for 2001/2002. Overall the Vote grows in real terms, with constant real growth in the 2004/05.
R5, 342 million for 2002/03, R5, 837 million for 2003/04 and R6, 442 million for 2004/05 have been earmarked to absorb the pressure of exchange rate changes in respect of library book purchases. Although no additional funds were allocated to augment the existing provision for sport and in particular the promotion of school sport, it is an area that requires further work and consideration in the coming budget cycle.
Vote 10: Transport and Public Works constitutes 9.1% of the budget, or R1, 262 billion, up by R181 million from the estimated expenditure level for 2001/2002. As a consequence of the restructuring of the former Department of Economic Affairs, Agriculture and Tourism, Vote 10 into the two new votes, this Vote and Vote 11: Economic Development, Tourism and Agriculture, full direct comparisons with the baseline is difficult as support functions still need to be shifted. These will be captured in an adjustments budget later in 2002/2003.
Nonetheless, this Vote grows in real terms, with constant real growth in the 2004/05, in line with our policy stance, even though the allocations had to be adjusted to take account of the drop in expected property revenue. Overall, R514, 107 million over the MTEF period, i.e. R214, 543 million for 2002/03, R166, 659 million for 2003/04 and R132, 905 million for 2004/05 has been allocated additionally over previous MTEF estimates for physical infrastructure spending on buildings and roads.
Beyond these and included in the gross proposed allocation are a variety of other amounts:
- R2 million in 2002/03 and also over the medium term has been earmarked for the implementation of the National Land Transport Transition Act, previously a national conditional grant.
- A national conditional grant of R30 million for 2002/03, R31, 350 million for 2003/04 and R33, 231 million for 2004/05 provide for hospital revitalisation to transform and modernise hospitals in line with the national planning framework.
- A national conditional grant of R96, 210 million for 2002/03, rising to R144, 094 million for 2003/04 and R177, 848 million for 2004/05 for provincial infrastructure like roads, school buildings, health facilities and rural development. The latter share was shifted to Vote 11.
Vote 11: Economic Development, Tourism and Agriculture constitutes 1.9% of the 2002/2003-budget, or R259, 926 million. This includes a provision of R85 million in 2002/2003 towards completion of the convention centre. Overall allocations also grow in real terms, with constant real growth in the 2004/05. I have to mention a new national conditional grant for Agriculture that has been introduced, called Poverty Relief and Infrastructure Development and amounting to R1, 3 million for 2002/03 and R1, 8 million for 2003/04 for land care projects, to address degradation problems of natural resources and improve the socio-economic status of rural communities. Also incorporated into the gross amount for the Vote are the extra earmarked amounts for Agriculture of R10, 000 million for 2002/03, R15, 000 million for 2003/04 and R20, 000 million for 2004/05 to promote greater research into appropriate cultivars, quality and disease-free certification, small farmer settlement and rural development.
5.1 The Big Three
Social expenditure (Health, Welfare and Education) have consolidated around the 80% to 81% share of total expenditure. In actual fact it fluctuates between 81.9% in the April 2001 main budget and 79.7% in 2002/2003. Its relative share has declined slightly because of increased employment generating funds proposed for infrastructure and agriculture, especially in 2002/2003.
5.2 INFRASTRUCTURE
Infrastructure (roads, buildings and housing) spending shows a healthy increase from R769 million in the 2001/2002 main budget to R1, 09 billion in 2002/2003. As a percentage of government expenditure from 2001/2002 the relative proportions are 6%, 7.9% in 2002/2003, 7% in 2003/2004 and 6.9% in 2004/2005 in line with our earlier stated objective to keep infrastructure at substantially higher, but sustainable levels.
5.3 PERSONNEL
Personnel employment trends have tended to stabilize around the 68000 to 69000 mark. As a trend April 2001 saw just under 68000 employees, falling to shade over 66000 in January of this year.
Personnel expenditure as a percentage of gross estimated expenditure shows a constant negative trend over the last three years, from 55.92% in 1999/2000, to 53.42% in 2000/2001, to 51.45% in 2001/2002. Current estimates show a flatter, but still overall declining trend over the new MTEF: 51.25% in 2002/2003, rising slightly to 51.38% in 2003/2004 and further falling in 2004/2005 to 51.20%.
We have three main sources of financing for the proposed expenditures per Vote and for the purposes enumerated in my address. They are:
- Nationally derived revenue, broken down into conditional allocations and our equitable share
- Provincial own revenue
- Accumulated provincial reserves, inclusive of a smoothing element to sustain real 2002/2003 expenditure levels over the MTEF period.
Gross revenues are estimated to be R13, 678 billion for 2002/2003, R14, 367 billion for 2003/2004 and R15, 210 billion for 2004/2005. Percentage-wise this amounts to a year on year increase of 9,9% from 2001/02 to 2002/2003, 5,04% from 2002/2003 to 2003/2004 and 5,86% from 2003/2004 to 2004/2005.
The national equitable share portion constitutes 79,8% of the revenue estimate for 2002/03 compared to 78.4% of the previous year. Subsumed into the equitable share is R190, 893 million in 2002/2003 of the previous supplementary finance conditional grant as a reward for better provincial governance. The respective amounts for 2003/2004 and 2004/2005 are R186, 375 million and R186, 675 million. Discounting the latter results in a raise of the equitable share by R966, 172 million for 2002/2003 over April 2001 or R425, 972 million over the previous MTEF baseline, increasing by R530, 028 million in 2003/2004 and R1, 298 billion in 2004/2005.
A general word on the equitable share: adjustments to the formula have been made to reflect actual spending on education and social security grants, the details of which are captured in the National Budget Review 2002, as well as in our Fiscal Policy 2002-2005 and so I will not go into any closer examination of it. Suffice to say that these adjustments will tend to favour the poorer and younger provinces, with which, in line with my earlier remarks, we do not have a problem. In addition, we are still in the phasing-in process of the current equitable share formula, with 2002/2003 the last year, which allow us to and other provinces to reach their target shares by 2003/2004. However, by the same token, given that the National Treasury has indicated that possible further revisions are underfoot, we need to prepare ourselves so that we can intelligently, preferably from a socio-economic perspective, engage the latter on this issue when that becomes necessary.
Conditional grants form 14,3% of the revenue estimate for 2002/03 compared to 16% of the 2001/2002 year. Due to changes in the tertiary health services' grants and the phasing in of the supplementary finance grant into the equitable share, conditional grants in aggregate decreases by R36, 577 million from April 2001 or R156, 657 million from the previous MTEF baseline to R1, 961 billion in 2002/03, rising to R2, 153 billion in 2004/05, an increase of 9,8%.
Own revenue makes up 5,89% of the overall revenue estimate for 2002/03, a small relative rise (0.34%) over April 2001, but in quantum more significant: R107, 077 million over April 2001's main estimates. In relative terms it increases to 5,93% for 2003/04 of gross revenue, before slipping to 5,56% in 2004/05, chiefly because of lower interest revenue and no further increases in motor vehicle licenses so far anticipated for 2004/2005. Own revenue is estimated at R797, 952 million for 2002/03 increasing to R835, 643 million in 2004/05.
As an aside the critical challenge remains to improve provincial own revenue collection and reduce debtor levels, currently standing at over R500 million, mostly that of outstanding motor vehicle license payments. Here we need to follow the exemplary example established by SARS over the last two to three years. The Provincial Treasury has over the last year launched a number of initiatives, in collaboration with departments and the National Treasury, to improve debt collection administration and associated systems.
We are also exploring other sources of revenue, particularly the imposition of a fuel levy towards the latter part of the current MTEF period to further augment the resources available to upgrade and maintain our road system as the backbone of the economic infrastructure. As you will all know the Provincial Tax Regulation Process Act lays down an elaborate procedure to ensure that any new provincial taxes are indeed beneficial to the economy. As a dry run, to formalize our relationship with SARS as the chief collection agent for new taxes, and to assess the processes and systems required, the current administration and monitoring system for liquor licenses will be extensively reviewed, before proceeding with the economic cost-benefit analysis and other actions as required by the Act.
However, the overall revenue flows are insufficient to cover the expenditure proposals tabled today. The estimated revenue shortfall amounts to R299, 543 million for 2002/03, R166, 659 million in 2003/04 and R132, 905 million in 2003/04. This will be financed from accumulated reserves from previous financial years and with capital infrastructure spending being the main beneficiary. To further smooth variability in revenue streams especially in the middle MTEF year, and to ensure further consistent capex-linked service delivery expenditure, R81, 286 million from revenue available in 2002/2003 will be used to finance remaining revenue shortfalls in the 2003/2004 and 2004/2005 financial years.
A last word on the national revenue numbers: they are based on the formal notification received from the National Treasury, but, as has happened previously, Parliamentary discussions on the Division of Revenue Bill, together with late proposals by the National Treasury, might necessitate amendments down the line via a future adjustments estimates. For example, no provision is made in this budget for the Provincial Consolidated Municipal Infrastructure Programme, for which the Division of Revenue Bill designates R8, 357 million for 2002/2003, R8, 858 million in 2003/2004 and R9, 390 million in 2004/2005.
All of the above means very little if we don't at the same time improve our spending efficacy and thus the ability to deliver quality services on time. At the risk of belabouring the obvious, it will serve no purpose to advance money for all sorts of deserving causes if they don't deliver and do so efficiently. Significant gains have been made in policy making and strategic planning and linking that to budgets and actual spending. As a starting point, today all eleven departments will also table their full strategic plans for 2002/03. This augments the budget process, facilitates greater transparency and lays the table for future report back to this House on results achieved.
The year ahead will see much closer monitoring by the Provincial Treasury and also greater emphasis on, and involvement in, departmental planning, budgeting, delivery and proper measurable performance measures. However, we do appreciate that this is a two-way street and also a collective responsibility of all of us to ensure that eventually delivery of the right quality of services at the right time and for the right client takes place. We are certainly not there yet.
Part of the problem is the relative lack of accurate and suitable data and assessment of that data. As you will note, we have reasonable data on Education that can be used sensibly and to track attainment of our goals, but not really much on anything else that would enable us to draw useful conclusions and to measure performance adequately. If we don't get this right, which our predecessors unfortunately did not pay much attention to, then our policy statements, and more specifically this budget, and our 10 strategic goals remain theoretical. A further part of our strategies then for the future is for the Provincial Treasury to develop a relevant, trustworthy and dynamic socioeconomic database in collaboration with universities and other partners.
Our drive to achieve greater efficiency in spending has seen us dividing the diverse Department of Economic Affairs, Agriculture and Tourism into two, so that on the one hand, the newly proposed Department of Transport and Public Works can fully concentrate on infrastructure spending and proper management of the Province's fixed assets. With the Premier's indulgence, I've also relinquished my property (Asset) management portfolio to Minister Essop so as to ensure streamlined management of this important function. The other department to be weaned from the old behemoth is that of Economic Development, Tourism and Agriculture so as to foster proper focus on, and systematic encouragement of, sectoral economic development, private sector investment and small and medium business advancement.
These are the first steps. The next relates to Department of Provincial Administration, another headache and a perceived reason for much of the delayed development and inhibiting of service delivery by the Province. It seems that the coordination function given in legislation to the previous Premier and his head of department, the Director-general, was utilized to become an ever-tightening and controlling function, placing a damper on initiative and dynamic management. I am glad that the Premier in his opening address has indicated his willingness to reverse this unfortunate series of events, so that we can find the right balance between coordinated provincial functioning, loosening up the organization and the spirit of legislative requirements. Integrated Government does not mean locating all functions under the Premier, but means effective capacity to plan, co-ordinate and monitor across the whole of government.
Minister Fraser-Moleketi is keen to provide us with expert advice, perhaps utilizing the same team currently evaluating the President's Office, to redesign our structure - especially Vote 1 - so that we can achieve the goal of Integrated Government.
Madam Speaker, I table here all the documentation relating to the Budget. You will appreciate that this entire process has involved hard work, long hours and sacrifice. You will further appreciate that those tasked with preparing our MTEF and Budget have had to pause while the political upheavals occurred. I want to extend my thanks to all the Accounting Officers and their support teams, the personnel from Education's Reprographic Services, the Finance Department, led so ably by Dr JC Stegmann, and the Budget Team led by Cedric Ismay. These people, and their entire team - people like André Gildenhuys, Paul Pienaar, Shaheeda Sechel, Pierre Wiese, Nicole Petersen, Nelia Orlandi, Nichole Brinkhuis, Ella Smit, Heletta Avenant, Harry Malila and his Revenue Team, Klaas Langenhoven and his Programme Officers - deserve the praise of our government.
Dr Stegmann, convey our thanks especially for the enthusiastic way in which the strategic objectives of the new government were turned into expenditure patterns. I can understand why across the country - as expressed in the national Budget Council - people such as yourselves are appreciated as a vital resource.
Here in this Province you have succeeded - in adverse conditions - to put together a budget reflecting a dramatic shift from function planning to outcomes planning which has people's needs at its centre. You enable us to win back the trust of people - especially those most vulnerable amongst us.
Thanks also to Minister Manuel for his competent leadership of "Team Finance" and the constructive interaction with the National Treasury.
I want to acknowledge my organisation - the ANC - the oldest and greatest liberation movement, producer of a host of leaders from Sol Plaatje to Thabo Mbeki. If I have gotten more things right in this budget than I've gotten wrong, then it's because I am merely a product of the legacy of the ANC - a legacy rich in heroism, intellectualism and clarity of policy.
But let me also thank my family - my parents who continue to remind me of the needs of the poor, and my special advisor, Rosieda and Tahrir who thought a few months ago that they cannot possibly see less of me. They can be forgiven for hating this budget - hopefully not me - because it has begun to consume my time. Thanks very much for sticking it out.
Mr Premier, I table this budget in the hope that you are satisfied that we have responded to your call for a budget responsive to the needs of people -especially the poor, a budget which begins to overcome inequalities, and that you understand this budget as an expression of the Strategic Framework you've set.
The challenge is now with us. We must give life to dead numbers. We table this budget in the month of March, the month in which we celebrate our Human Rights. Hopefully this budget makes a contribution to Human Rights by turning needs into rights and rights into care. I call on the public service and communities to be volunteers in making this budget real - so that we go beyond basic needs. After all, people need food, shelter, employment and services - but they need more than this. The budget can give the money, but people must give the dignity.
To quote Michael Ignatieff again:
"the relation between what we need...to survive and what we need ... to flourish is more complicated ... Giving the aged poor their pension and providing them with medical care may be a necessary condition for their self-respect and dignity, but it is not a sufficient condition. It is the manner of the giving that counts and the moral basis on which it is given: whether strangers at my door get their stories listened to by the social worker, whether the ambulance man takes care not to jostle them ..., whether a nurse sits with them in the hospital when they are frightened and alone. Respect and dignity are conferred by gestures such as these. They are gestures too much a matter of human art to be made a consistent matter of administrative routine."
PR 17/2002ISBN 0-621-32303-9
