Summary

• Background
• Challenges
• Developmental State
• What has to be done?
• Governments Response
• Revenue
• Allocations
• Adjustments Estimate
• Way Forward

The Provincial Government of the Western Cape is committed to the strategy of iKapa Elihlumayo. A Xhosa term for ‘Growing the Cape’, this is the Province’s strategy to mobilise all the resources of government in the fight against poverty, improve the living conditions of our people and the expansion of the economy, ensuring that every one of our citizens benefits and so achieving the vision of “A Home for All”.

The iKapa Elihlumayo strategy ¹ is to ensure that everyone living in the Western Cape has a job; feels safe, secure, respected and feel at home – “ A Home for All.” Provincial government has set out eight strategic priorities on which it focuses over the short to medium term. These strategies are: -

• Human Resource Development including building internal social (our value system) and human capital (our abilities)
• Social Capital Formation
• Spatial Development Framework, including environmental improvement
• Strategic Infrastructural Investment Plan
• Economic Development that includes a Micro-economic Development Strategy covering all sectors
• Communication and co-ordination
• Improved Financial Management that incorporates Good Governance
• Improved provincial-local government interface

One of the greatest challenges facing our economy is that of unemployment and poverty. Although the Province has created nearly 200 000 jobs since 2000, unemployment persists and the manufacturing industry’s performance remains disappointing. This unemployment most severely impacts on our youth and the poor, with many earning less than R322 per month.

Another challenge facing this government is its desire to provide holistic governance, recognising that people’s needs are not compartmentalised as government departments are and thus government has to provide seamless service to the public. All government departments must communicate and work together in order to improve service delivery.

But government can not achieve this on its own, and needs better interaction with all the role players in society, needing to work in partnership with community organisations, trade unions and the private sector to achieve the ideal of a ‘Home for All’. To achieve this government has to take on the role of a developmental state.

The Provincial Government of the Western Cape intends to take a proactive developmental role, whereby its core functions are not limited to only providing good quality social services. Ultimately the objective is to see increased growth and decreased unemployment and inequality. This can only happen if meaningful partnerships are cultivated with relevant stakeholders, government becomes more efficient and have more appropriate mix of expenditure is found. The goal is not just to alleviate poverty but to create employment and prosperity for all.

Moving forward, Provincial Government is:

• Firstly transforming the Provincial Government to become a positive force in the Province. This involves the establishment of the government as an efficient, responsive and well-governed organisation;
• Secondly we want to consolidate and develop our relationship with our social and governmental partners.
• Thirdly we want to find and maintain the appropriate mix between social and economic expenditure and service delivery in the Province.

Provincial Government seeks partnerships with the private sector where government can provide strategically located land, infrastructure and logistics network better geared to needs of the private sector such as for freighting of goods, healthy and appropriately skilled workers serviced through broadly affordable system and the environment in which businesses can more easily set themselves up, to register, obtain operating licenses, become tax compliment.

The Private sector can assist by investing, especially in growing and profitable sectors, creating employment and in HRD investment and offering of “learnerships; providing affordable and well located residential, commercial and production opportunities for the poor and small businesses, opening up procurement to small businesses, “eliminating abusive practices” and offering their expertise and capacity in the deliver of services.

Civil society’s responsibility in this partnership includes meeting its obligations to the broader society, the state and business by preventing individual people becoming sick, alienated, criminal, insane, drug dependent and the general decay of the social fabric.

Labour’s role would be to assist with the transformation of the public service as well as the repositioning of the labour force in general.

Provincial Government also has to change the way it operates. It has to become a positive force in the Province. Essentially this involves the establishment of the government as an efficient, responsive and well-governed organisation that is able to:

• Think strategically --- identify the key actions that will unlock the kind of responses in the economy and social environment that will lead to increase growth, employment, participation in the economy;
• Act dynamically --- adapt the intervention as the world changes to ensure that actions are still relevant; and
• Learn from mistakes and successes.

Government services should be based on detailed and objective understanding of the need of the citizens and services should be directed to meeting those citizens’ needs and not meeting the interests of the departments and official. What the government has to offer in services should be well communicated and citizens need to be easily able to understand what services are on other and to obtain the services.

The lead strategies of iKapa Elihlumayo guides government and its social partners and increasingly organises the Provincial Budget around these strategies over the next 10 years to 2014. So the proposed funding approach, while these strategies are being finalised, is to keep the provincial budget stable on the one hand while compensating Health and Education for some of the pressure that they have been exposed to in recent years, on the other hand. These allocations will also give these departments to give effect to the HRD and Social Capital Formation Strategies.

As indicated above, we want to find the appropriate mix of expenditure on economic and social services in the Province. This means that a large part of government expenditure should be aimed at increasing the ability of people in the Province to support themselves. Naturally such expenditure should continue to be balanced with short-term poverty relief and social service delivery.

In support of its vision of a “ Home for All” and to support the clear strategic direction Provincial Government has committed itself to it is increasing allocation to the lead strategies. This eight point strategy guides government and its social partners over the next 10 years to 2014 and the Provincial Budget is increasingly organised around these strategies.

The Provincial Equitable Share transfer from national government shows negative real annual growth, averaging 1,4% over the next three years. In nominal terms it rises from a base of R10,5 billion in 2004/05 to R12,0 billion in 2005/06 and R13,7 billion in 2007/08.

Preliminary calculation shows that in Rand terms, conditional grant allocations, inclusive of provision for the new Social Security grant, rise from a base of R2,6 billion in 2004/05 to R7,4 billion in 2005/06 and R8,6 billion in 2007/08 primarily due to the change in financing arrangements for the delivery of Social Security grants. At about 6,1% of total provincial revenue over the 2005 MTEF, provincial own revenue remains a smaller supplementary revenue source for the Western Cape fiscus.

While the Western Cape faces a financing shortfall or ‘deficit’ of R213 million in 2005/06, R200 million in 2006/07 and R242 million in 2007/08, this will be funded by financing or accumulated reserves. Over the medium to long term, the Province must therefore expand its revenue base such as the proposed provincial fuel levy tax. This will increase funds that will enable government to invest in training, infrastructure, health services, etc., from which all will benefit.

The Human Resource Strategy (HRDS) aims at all people living in the Western Cape, but places special emphasis on the youth. Driven by the Department of Education (WCED) it responds to the impact of the skills mismatch between the labour market and employment opportunities. It is the most developed of the eight lead strategies. The WCED aims to offer more flexible and responsive FET programmes. A programme is currently being developed in which all learners will have access to career counselling. The WCED will continue to work with the Department of Economic Development and Tourism in planning course offerings at FET colleges. This will ensure maximal linkage between the HRDS and the Micro-Economic Development Strategy. The strategy will also address the high drop out rate in the education system. An addition R 1,3 billion will be allocated to HRD over the medium term with allocations of R186 million in 2005/06, R322 million in 2006/07 and R745 million in 2007/08. This includes provision for inflation, rising learner numbers, additional allocations for salary adjustments and pay progression for educators. Provision is also made for the introduction of a learner tracking system to improve the collection of data on the movement of learners inside and out of the education system.

The Western Cape’s vision of a ‘Home for All’ cannot be realised in a society that is plagued by high unemployment, particularly amongst the youth, high crime rates, high poverty rates, high arrest rate of children related to the high drop-out rate, drug abuse and increasing incidences of HIV and Aids. The Social Capital Formation Strategy (SCFS) is driven by the Department of Social Services and Poverty Alleviation and supported by the Department of Community Safety, Health and Cultural Affairs and Sport. Social Capital Formation, which includes the Extend Public Works Programmes, receives an additional R3,2 billion with allocations of R932 million in 2005/06, R823 million in 2006/07 and R1,459 billion in 2007/08. These amounts include additional allocations for Social Security, salary and inflation adjustments; and a health service load adjustment. Funding is also provided to take over non-metro Primary Health Care clinics currently still provided by municipalities.

These allocations include the large contribution from the Global Fund for HIV/AIDS amounting to R59,5 million in 2005/06 and R17,5 million in 2006/07.

The goal of the Strategic Infrastructure Plan (SIP) is to provide the physical infrastructure that supports growth, labour market participation and general well being in the Province. The mandate for the Strategic Infrastructure Plan requires it to cover the public works, transport, housing, urban infrastructure and roads functions of the Departments of Housing and Transport and Public Works. The SIP has identified a number of key alignment areas and stakeholders and the Department of Transport and Public Works is currently in the process of finalising the first draft of the SIP. These include the assessment of the existing infrastructure network, the links of the SIP to the MEDS and SCFS and the proposed rollout of a defined need for infrastructure in the Province. Additional expenditure of R358 million is provided with allocations of R7,7 million in 2005/06, R10,8 million in 2006/07 and R340 million in 2007/08. The expansion of the Provincial revenue base and the finalisation of the Strategic Infrastructure Plan, will allow further allocations for infrastructure development.

The Micro-Economic Development Strategy (MEDS) led by the Department of Economic Development and Tourism (DEDAT) and supported by the Department of Agriculture, aims at guiding and directing provincial involvement in private sector to ensure more appropriate levels of growth. Research for the MEDS is at an advanced stage. DEDAT has put in place a three-phase process to develop the MEDS, and set up a “scientific committee” consisting of practitioners drawn from its ranks and from Agriculture. New interventions are being designed to assist municipalities with the design of local economic development interventions. The Real Enterprise (RED DOOR) intervention will also be a flagship of the MEDS and provide integrated one-stop support to SMMEs. The allocations for the Micro-Economic Development Strategy will decline by R8,8 million in 2005/06, and R9,1 million in 2006/07. However, this will rise again by R15,3 million in 2007/08.

Provincial Spatial Development Framework (PSDF) will be a spatial framework that maps growth/decline of economic sectors over time and guides private sector and provincial and municipal government expenditure. In general the PSDF follows the approach of the National Spatial Development Perspective. The first draft of the PSDF will be released for comment by January 2005 and a final draft will go to the Provincial Cabinet by the second quarter of 2005. The key challenges to be addressed in the development of the PSDF are the clarification of the vision for the spatial development of the Province, specifically the role of towns in the province. The spatial vision should be closely tied to the path of the agriculture sector to be developed as part of the MEDS.

Good Governance: An additional R149 million will be allocated to fund Good Governance (PSDF, Improved Financial Governance and Improved Provincial-Local Government interface), with R20,8 million allocated in 2005/06, R44 million in 2006/07 and R83 million in 2007/08. This will mainly fund the Community Development Workers, financial system maintenance and to a lesser extent, Municipal Finance Management Act implementation and the establishment of the Youth Commission.

Improving Local-Provincial Government Interface requires the excellent co-operation and a well articulated common sense of purpose between the provincial and local government spheres on the one hand and between them and civil society and the business sector on the other. There are three aspects which this strategy addresses, namely the trends in local government budgets and how these can support iKapa Elihlumayo; the Powers and Functions dilemma and Co-operative governance.

Finally, the Department of the Premier will institute and drive a number of strategic changes that will include the internal HRDS which is in its first draft, internal SCFS that will be finalised in 2005 improved communication and improved coordination that is an ongoing process of improving and streamlining especially the cluster system in the Province.

In addition to the planning for the next three years the adjustments to the 2004/05 budget will already make a set of shifts towards a ‘Home for All’. Of an additional R384 million allocated to the Province in the Adjustments Estimate, the main beneficiaries are Health, Education as well as Transport and Public Works.

Health receives an additional R190 million to fulfil their role in terms of iKapa Elihlumayo and more specifically the building of social capital. This will enable it to increase patient service loads, improve in conditions of service of the employees, primary health care service and backlogs to municipalities. Further allocations will deal with linen shortages, increase vaccine stock levels, provide fire detection systems, improve Emergency Medical Services, maintain steam lines at Tygerberg Hospital, replace beds and trolleys, enhance revenue generation capacity, and shorten waiting lists for patients. The Global Fund grant of R29,404 million will go toward strengthening and expanding of the Western cape HIV and Aids prevention, treatment and care programme and further R20 million for other infrastructure projects.

Education receives an additional R142 million for the improvements in conditions of service, notch increases in respect of educators since 1996, to accelerate infrastructure delivery in relation to additional mobile and conventional classrooms, as well as for maintenance and to promote fiscal discipline in the spirit of the Public Finance Management Act.

Other allocations include R161 million for Housing, infrastructure provisions, road maintenance, the upgrading of Lentegeur and Mandalay stations to provide access for the disabled and security in support of the re-location of the Conradie Hospital to the Lentegeur Hospital, to upgrade eNatis (the electronic National Traffic Information System) computer technology at motor licensing registering authorities to improve service delivery, efficiency and create additional service points and for the replacement of Government motor vehicles.

Farmers in the Western Cape will receive R9 million for drought relief and R10 million to Economic Development and Tourism to sustain jobs in the clothing industry.

From this solid base it will be possible to introduce some of the desirable resource shifts identified in the lead strategies. These shifts will enable the delivery of services that will start bringing the Province closer to the vision of a ‘Home for All’.

The rollout of the iKapa Elihlumayo strategy by further development of the different strategies before the Budget is tabled in March 2005, followed by implementation from April next year.

Within one year government has designed and started implementing iKapa Elihlumayo, beginning to fulfill its contract with the people.

Over the next three years the following additional amounts are being set aside for the 8 strategies (consolidated into five for easier reading) and already within the Adjustments Budget, 2004, initial deposits towards some of the iKapa Elihlumayo strategies have been made (refer to Adjustment Budget statement)