Provincial Treasury Budget Speech 2012

Honourable Speaker,
Cabinet Colleagues,
Leader of the Opposition,
Members of the Provincial Parliament,
Director-General and Heads of Departments,
All the staff of the Provincial Treasury,
Citizens of the Western Cape

Thank you for allowing me this opportunity to table the 2012/2013 budget for the Western Cape Provincial Treasury.

At the outset, I would like to issue my heartfelt appreciation to Dr JC Stegmann and his team for their expert guidance over the provincial budget process. Our results in last financial year have reconfirmed our position as South Africa's best run administration.

But, Speaker, our vision for this province does not stop there: we have set ourselves the target of becoming the best-run regional government in the world. One of the most critical factors upon which our success will be judged is our ability to eradicate corruption. We have already made significant progress toward this goal.

In 2010/2011, for the second consecutive year, each and every department of the Western Cape Government achieved an unqualified audit from the Auditor-General. We were the only province to secure this achievement, which stands in stark contrast to our provincial counterparts who racked up 32 qualified audits and four disclaimers between them.

We also spent more of our total budget than any other province in South Africa, just over 99%, ensuring that Western Cape citizens received the best possible service delivery. Through the implementation of a year round monitoring system that tracks our progress, we are once again due to spend around 99% of our allocation in 2011/2012.

We achieved another success in this year's mid-term budget process, when we gazetted the smallest adjustment to the province's budget since 1994. This means that each and every department, having gone through Provincial Treasury's rigorous budget process, spent their allocations according to their plans.

Despite several high-level challenges, we are determined to retain and improve upon this track record.

Before I proceed to give detail on our new and innovative priorities for the coming year, I would like to use this opportunity to initiate an open, and what I hope will be candid, debate about the state of South Africa's public service, which has been in rapid decline over the last decade.

In a recent academic essay, Barbara Lipietz and Ivor Chipkin launched a compelling argument for why South Africa's administration has reached its current degree of dysfunction. They argue that the dismantling of South Africa's bureaucracy which was build up over nine decades on the established principles of public administration, simply because of its association with the previous Apartheid regime, was a grave error.

With its demise went any sense of prescribed hierarchy and clear lines of accountability, as well as the "unglamorous" tasks of planning, organising, staffing, directing, reporting and budgeting.

The drafters of South Africa's post-1994 public service legislation adopted the principle of letting managers manage, with wide discretion, while holding them accountable for efficient and effective spending that was widely felt, especially by those who were left out of the cold during the years of Apartheid. In the beginning, this allowed the state to be much more responsive to the broader needs of the population, more equitable in its resource allocations and more agile.

This system worked relatively well until the early 2000s due largely to the type of people in command - passionate and highly skilled people who were intent on turning our country around - and a lingering emphasis on good financial administration.

By the mid-2000s, Speaker, the majority of these staff members had been systematically rooted out of the jobs that they loved and were replaced by cadres with less experience and far more self interest. Under their reign, the freedoms written into our laws began to be abused for personal gain. The public service has been allowed to run roughshod over our laws, including the core text governing the spending of the public's money, the Public Finance Management Act.

Recent newspaper articles confirm this under headlines that speak of the toxic mixture of politics and greed. As has been widely reported, several provinces are facing financial crisis. In 2010/2011, the various provinces racked up unauthorised expenditure of R16.8 billion, a telling sign of the prevailing disregard for proper procedure and breakdown in accountability. One notable exception, Speaker, is KwaZulu-Natal, where the Premier and Provincial Treasury have worked extremely hard to turn things around.

Provincial finances have been further compromised by the decision of National Government not to upgrade and fully integrate the computer systems that government employees use to manage government resources. Although it is acknowledged that these systems are extremely stable, we find ourselves in the technological equivalent of the Stone Age, with systems that are susceptible to maladministration. The latter has been made worse by the sub-standard administration of our current systems.

While we do not believe in throwing the baby out with the bathwater, we have resolved to go back to basics. In so doing, we will call upon the National Minister of Finance, Pravin Gordhan, who is earnestly engaged in finding solutions to the current problems, to consider our seven point plan to take the public service back:

• Firstly, national government must upgrade the public service's finance systems.
• We must develop Standard Operating Procedures across all departments and public entities.
• Entrench fiscal discipline through budget credibility, proper cash management and banking, and personnel management.
• Manage our fiscal performance through clearly set Annual Performance Plans and Quarterly Performance Reports that are subjected to continuous oversight.
• Entrench proper accounting and asset management.
• Develop standard structures, competencies and appointment requirements for CFOs.
• Strengthen the leadership role of treasuries.

In the coming year, Provincial Treasury has been allocated R154.286 million, a 7.95% increase on last year's budget. The four programmes of Provincial Treasury will steer the Western Cape Government, led by the seven-point plan I have just outlined, toward becoming a skilful and effective instrument of public policy, which is the driving force behind well run regional governments across the world.

In brief, the programmes will receive the following funding:

Programme One - Administration - receives 21.54% of the budget, or R33.243 million, to give strategic direction and quality financial support to me, the Head of Department and the Treasury team as a whole.

Programme Two - Sustainable Resource Management - receives 44.21%, or R68.204 million, to ensure that the province's budget and its financial assets are professionally managed, and to ensure that budgets across the board are utilised effectively and efficiently.

Programme Three - Assets and Liabilities Management - receives 19.86%, or R30.639 million, to ensure that our accounting systems, physical assets and supply chain management systems are effectively managed.

Programme Four - Financial Governance - receives 14.39%, or R22.22 million, to develop and drive financial practices that support our goal of reaching level three financial maturity by 2015.

Above and beyond these programmes is a set of new and innovative priority areas that will form the basis of the work of this department in the coming year. These were devised following a series of think-tanks that sought to address whether we understood the true nature and cause of lapses in our financial performance, and whether we have thus far been effective in turning them around. This process was in line with our principle of going back to basics. We have also taken heed of the various critiques that have been levied at us from time and time, and have reacted by becoming more agile, supportive, professional and responsive in the assistance that we provide.

Budget Management
Our first priority is to ensure that the province's departments, public entities and municipalities devise more responsive budgets that grow our province's economy, contribute to jobs, deliver services more effectively and enable all of our citizens to lead better lives.

In the coming year, we will place far greater focus on assisting our municipalities to achieve financial conformance. In so doing, we will replicate the high-level social, labour and economic data that we produce for the Provincial Economic Review and Outlook on an annual basis at local government level.

The Municipal Economic Review and Outlook, which we will launch later this year, will give insight into the major challenges and opportunities that lie within our municipalities, and allow us to budget without having to "fly blind". Together with the Provincial Economic Review and Outlook, these documents will be used to link the intentions of government with its plans and allow for greater synergy.

Public Finance
In 2012/2013, we also aim to improve the way that provincial departments and municipalities spend their budgets. We will place particular emphasis on ensuring that budgets are spent in line with their stated purpose, that data has integrity, that budgets are properly monitored and implemented and that there is a clear chain of accountability amongst financial managers.

We will pay special attention to municipalities that achieve notoriously poor financial outcomes year in and year out.

Supporting and Interlinked Financial Systems
Another top priority for Provincial Treasury in 2012/2013 is to encourage the national government to adopt new and improved financial technology that will remove the risk of public service corruption.

In response to instances of fraud committed by government employees, we conducted a thorough investigation of our accounting systems and have identified several loopholes that leave our funds vulnerable to abuse. We will strengthen our internal controls where we can by embracing new technologies, such as biometric scanning, that leave no room to cheat the system. We will also ensure that each and every staff member that uses our financial systems is fully trained in accordance with their system profile.

Fiscal Policy
To maximise our budget over the coming year and into the future, we will take a proactive approach toward ensuring that the Western Cape Government receives its fair share of nationally raised proceeds, and that our departments and public entities collect the monies due to them and explore other alternatives to generate revenue.

To achieve this, we will fund research initiatives into the national transfer system and funding models and actively lobby the national government for the fairer allocation of resources. We will also review our research on the current fuel levy, the casino tax exclusivity regime and the Government Motor Transport's funding scheme. In the past month, we gazetted legislation that will allow a second, tourism-orientated casino in the metropole. We hope to pass this legislation by the end of this year.

Immovable Asset Management
Our fifth priority is to improve the management of the province's fixed assets so as to increase their lifespan and reduce burdensome maintenance costs. In 2012/2013, we will further develop our best practice framework for infrastructure procurement by ensuring that it is aligned with the Construction Industry Development Board's recommendations. We will also improve the quality of the computer systems that control our assets.

Moveable Asset Management
We will pay equal attention to the monitoring of our moveable assets. To ensure that the province receives the benefit from its procurement efforts, we will embark on a transversal campaign to plan our procurement well in advance and source our goods more strategically. This will allow us to spend more efficiently and give our taxpayers better bang for their buck.

Our research in this regard will be shared with municipalities to allow them to achieve better value for money at local level.

To ensure that we procure our moveable goods from a wide range of local suppliers, we will roll out our highly successful Supplier Open Days across the province. During these engagements, new entrepreneurs and emerging businesses are given insight in to what it takes to tender for government business, become part of our supplier database, get financing and obtain the correct tax documentation. Since coming to power in the Western Cape, we have significantly increased the number and value of tenders that we award to historically disadvantaged individuals and women. This year, we will launch a supplier helpdesk to open access to government tenders to more small and emerging businesses.

Business Information and Data Management
In the coming year, we will support the province's employees to better fulfil their jobs through the introduction of a Business Information and Data Management Unit.

This team's vital tasks will be to close the knowledge gap between provincial and local government through the sharing of information and improved coordination within Provincial Treasury. This unit will also ensure that all the information produced by the department is documented and safeguarded for use by current and future members of staff. This cooperative approach will prevent duplication of effort.

Accounting
Lastly, but of equal importance, we will focus resources on further improving the quality and integrity of our financial reporting to ensure that all financial transactions and their values can be fully accounted for. The implementation of the latest accounting standards in this financial year will be key to achieving this goal.

Part of this plan involves assisting provincial departments, entities and municipalities to compile interim and annual financial statements so that budgets are monitored year round. Through this initiative, we will further improve audit outcomes and financial maturity ratings across the board in the years to come.

All of the above programmes are designed to refocus our work on the basic tasks of planning, organising, staffing, directing, reporting and budgeting.

Speaker, our success in the above initiatives, and in turning South Africa's troubled public service around, is highly dependent on our ability to build fit for purpose financial managers at provincial and local level. The current staff members of the Western Cape Provincial Treasury are leaders in their field, and set the example for treasuries across South Africa. To grow new talent, we have invested in a programme that invites learners from across the province to draft high level essays that deal with the pertinent issues of our economy. Up to 12 winners each year receive full bursaries to study finance at a tertiary institution of their choice. We run this programme in conjunction with Nedbank, because we know that we can build tomorrow's leaders better, together.

The Western Cape Provincial Treasury is playing its part to support Minister Pravin Gordhan's quest to address financial management weaknesses that are undermining service delivery in our country, and to fulfil the Auditor General's goal of achieving clean audits across the board by 2014.

Through this department's determination, we are fast tracking the revitalisation of the Western Cape public service. This will result in better service delivery and in making the Western Cape a better place for all.

We remain steadfast in our pursuit of becoming the best-run regional government in the world.

I thank you.