2011-2014 MTBPS and 2010 Adjusted Estimates Speech
Not long ago, the world, followed closely by South Africa and the Western Cape, emerged from the worst economic recession since 1929. While we are out of the woods by technical definition, new risks have emerged that may compound the constraints we are already facing. These include the possibility of default on country debt in advanced economies, and fiscal consolidation which could dampen domestic demand. The negative spill over may affect our economy.
In crafting the 2011-2014 Medium Term Budget Policy Statement and the 2010 Adjusted Estimates of Provincial Expenditure, we were forced to take these risks and our constrained financial envelope into account. We were nevertheless intent on pursuing our vision of an open, opportunity society for all. To this end, we developed 12 strategic objectives that put together, have become the guiding philosophy behind our policy choices for the next three years.
During every step of the formulation process, we asked ourselves whether our plans would help or hinder growth. We also looked at where our spend would make the biggest positive impact on the people of this province.
Our strategic objectives were tailored after careful consideration of the major challenges that the people of this province are faced with. These include the need for better education and healthcare; homes, food security and public transport; the reduction of crime; and most importantly, more jobs.
In partnership with the private sector, these challenges are surmountable.
We will improve our education and health outcomes through targeted strategies that address the weak points in our systems. We will build homes together with prospective home owners, move more people over to quality public transport and address crime in collaboration with communities.
We will tackle job creation by promoting our province as a strong competitor in the areas of trade and business, as a centre of innovation and renewable technology and as a top international and domestic visitor destination.
The age old saying that time takes care of everything does not apply here as we cannot afford to wait. We must drive our priorities with the firm belief that providing services based on need and stimulating growth based on clear evidence of our competitive edges will lead us toward a society in which there are opportunities for all.
Over the next three years, the administration of the Western Cape will further entrench its position as the best run provincial government in South Africa by delivering improved services and an environment that encourages growth and jobs.
Economic outlook for the next three years
As an open economy that trades its goods and services outside of its borders, the Western Cape is influenced directly by the global and national economic environment.
The 2010 Provincial Economic Review and Outlook lists several risk factors arising out of developed economies, but on the whole reports a good start to 2010, with robust growth in developing markets. This has resulted in the upward revision of global growth estimates.
The South African economy is projected to grow at 3 per cent in 2010, by 3.5 per cent in 2011 and by 4.4 per cent by 2013. Although much improved, these figures will not facilitate the country's developmental needs, and partnerships with business and labour must be sought. Assuming that the global recovery continues, South Africa should see gradual but sustained growth.
The Western Cape economy, which has traditionally fared better than the national economy, is expected to grow by 2.8 per cent in 2010, by 3.2 per cent in 2011 and by above 4 per cent for the foreseeable future.
Our growth outlook is influenced by growth in export markets. As a factor upon which our development depends, promoting our most competitive sectors is a key policy priority over the medium term.
Over the past decade, the composition of the Western Cape economy has shifted from being manufacturing-based, toward being services-oriented. Whilst services are often regarded as non-tradable, we have been able to export the products of our film, tourism, financial services and business process outsourcing industries. As these sectors have grown, so too has the demand for skilled labour. We are in the fortunate position of having key academic institutions within the province that can assist us to meet these demands.
Whilst we are working on increasing academic opportunities for our citizens, this challenge is enormous because the majority of our labour force is unskilled.
Both our unskilled and skilled workers have been negatively affected by the economic downturn. A particular threat exists within the working age population below the age of 35 years, where over 70 per cent are unemployed despite being better educated than their older counterparts.
To address the rampant poverty and unemployment that we have inherited, we have looked to economies that we can learn from such as China and Brazil. There, poverty was significantly reduced through the encouragement of economic growth. We believe that the primary role of government is to promote an enabling environment so that jobcreating growth can occur. This involves the provision of basic services, and quality education and healthcare, so that citizens have the best possible chance of working for, and not against, growth.
We have also studied research devised to guide and support our growth plans. The 'Growth Potential Study of Towns in the Western Cape' makes a coherent case for a targeted approach to development based on nodes that have better potential for growth. Our role is to identify and drive the development of these areas.
Social outlook for the next three years
The Western Cape has a total population of 5.28 million people, of which two-thirds reside in the Cape Metro. The province is home to 1.77 million children under the age of 18 years, and 1.9 million people between the age of 15 and 34.
Of the total working age population, 21.8 per cent are unemployed. This is a rise of 1.3 per cent year-on-year. Roughly 36 per cent of our children are living in poverty, and 10.8 per cent live in households with no employed adults. These statistics suggest that a great many children are going hungry, and cannot afford the necessary materials that make schooling a comfortable and productive experience.
Our education outcomes confirm this. Over the past 5 years, our pass rates have declined. Our learners struggle with reading and writing and 85 of our schools were underperforming by 2009.
Drastic action is required to turn this around.
Our healthcare system has seen similar downturns in effectiveness. The burden of disease in our province, which consists of HIV and Aids, TB, and injuries from violence and traffic accidents amongst others, has been exacerbated by substance abuse, unemployment and poverty. It will take a transversal approach to address the causes pressurising our healthcare system.
The poor retention of medical staff has been partially addressed through the roll out of the Occupation Specific Dispensation.
The current housing backlog sits at around 500 000 units. The 'gap' market presents a unique problem in that these citizens neither qualify for home loans from banks, nor for a housing opportunity from government.
Anyone who follows the news will have read that the Western Cape is allegedly the 'stab capital' of South Africa. The recent murder of British tourist Anni Dewani in Gugulethu has once again led to global reporting about our crime rates. Tied to gangsterism and crime is again rampant substance abuse, with methamphetamine being the drug of choice.
The lack of safety and security amongst our societies negatively affects our communities and our economy, and it must be brought under control.
In dealing with the challenges outlined above, we have devised 12 strategic objectives that are outcomes based, and will be addressed transversally across government to achieve holistic solutions.
Governing for results
We are confident that the consistent application of our 12 strategic objectives will yield positive results. We will therefore reprioritise funding toward these objectives.
Our first and overarching priority, as mentioned above, is to create jobs. We will do this by fostering an enabling environment for private sector-led, government supported growth in our strongest sectors. The primary driver of these initiatives is the Department of Economic Development and Tourism.
Their initial concern has been to address the mismatch between our skills supply and skills demand as we move toward a services-oriented economy. Work on this has already begun. We have several competitive advantages to ensure our success in this regard, which include that our population is relatively better educated than the rest of the country and we host South Africa's best tertiary institutions. The private sector has partnered with us to offer apprenticeships and experiential learning opportunities to the province's young, unemployed graduates. Most recently, we joined forces with the Wholesale & Retail SETA to co-fund workplace learnership opportunities for 300 FET graduate students. The province gave R3.6 million to this initiative.
Under national guidelines, we will also set aside funding for the establishment of a Provincial Skills Development Forum. This body will provide a mechanism through which the public and private learning institutions can jointly devise appropriate skills programmes based on a needs assessment of our economy.
In our determination to attract more investment and export opportunities, we are intent on presenting a better value proposition to international markets. Our outward marketing efforts will be informed by the Future Cape vision and brand that we are currently developing to attract specific skills and investment into the province. Cutting red tape, ensuring that the province is free from corruption and building world-class telecommunications infrastructure are further steps we'll be taking toward achieving these goals. Recent remarks by National Finance Minister Pravin Gordhan on the relaxation of exchange controls and incentives for head offices will augment our plans.
Already we have several initiatives in the pipeline towards which funding will be prioritised: the IDZ in Saldanha Bay, the East City Design Precinct plan and the building of renewable energy technologies are key focus areas.
Our tourism industry, which currently contributes a 10 per cent share to the region's GDP, will be scaled up through targeted marketing campaigns in conjunction with national and local government, as well as the private sector.
Certain of the above functions will be transferred to the Western Cape Economic Development Agency.
The Department of Transport and Public Works, which is charged withdeveloping the infrastructure we require to enable economic growth, is putting plans in place to leverage off the provincial government's strategically located and sizeable property portfolio. The Regeneration Project is aimed at simultaneously reducing government's rental burden and revitalising the inner city precinct.
This department will also work toward a 13 per cent modal shift from private to public transport through the promotion of improved rail services, the formalisation of the minibus taxi industry and the development of other integrated transport networks.
Through the Expanded Public Works Programme, special focus will be placed on the improvement and upgrading of the 6 635 km of surfaced roads and 25 658 km of gravel roads in the province. Addressing the maintenance backlog, that has for so long been neglected, is also a priority.
The Department of Agriculture is focussed on achieving two primary goals: the creation of job opportunities, and the conservation of our natural resources.
To achieve these tasks, they have set themselves five strategic priorities.
The first, being increased competitiveness, will be driven by research into the service delivery needs of farmers across the province. The second-food security-will be tackled through increased agriculturalproduction at the primary level. To effect this requires a special focus on projects that encourage the transformation of the sector, which is this department's third priority. The fourth-developing alternate markets-will be driven by the department through partnerships with commodity organisations. One such initiative is run in conjunction with the fruit growers' commodity organisation Hortgro, where the department matches their spend on empowerment projects for new farmers rand for rand.
Countering the effects of climate change is their final priority, and adaptive technology, processes and practices will be explored across the value chain.
The Provincial Government of the Western Cape believes that access to quality education is the cornerstone of the opportunity society.
To this end, the Department of Education will continue to focus on three critical areas: improving academic performance in Literacy and Numeracy for grades 3, 6 and 9; improving National Senior Certificate performance and reducing our learner drop-out rate.
The 2010 literacy and numeracy results and the National Senior Certificate results will allow the Department to focus its strategies and determine new targets for school learners in 2011. Next year, the Department will also begin to target the early phases of learning.
Every decision taken in relation to education in the Western Cape will continue to be informed by the need to improve learner outcomes in this province, and deliver greater access to quality education.
WCED will ensure that the needs of learners are continually put first, and will do everything that they can to ensure that teachers are treated as the valued professionals that they are.
To ensure that quality staff members are retained, National Government has approved an Occupation Specific Dispensation for school and FET college educators.
The Department of Health will focus its efforts and budget on increasing wellness amongst Western Cape citizens.
There are currently around 3.8 million Western Cape residents that are uninsured and depend on the government for their wellness needs. The department is expecting more than 17 million patients to visit the 450 primary healthcare facilities located across the province. Their key outcomes over the medium term are to better the patient experience, reduce maternal and child mortality, improve emergency medical services and lower the incidence of HIV and Aids. In support of the latter, the number of people receiving anti-retroviral treatment will be expanded from 68 000 to 90 000. We are also on track to complete the construction of the Khayelitsha and Mitchells Plain hospitals, and the revitalisation of the George, Worcester and Paarl hospitals. During the medium term period, the construction of several new community health care centres and 18 forensic pathology labs will commence.
The Department of Health is also an integral player in the Provincial Government's transversal programme to address the burden of disease in the Western Cape. Together with the Departments of the Premier, Social Development, Economic Development and Tourism and Community Safety, we will launch a full scale attack on those upstream elements of our burden of disease that are completely within human control, but require behavioural change. These include alcohol abuse and road accidents. Currently, at least one-fifth of our provincial budget is spent responding to harms brought upon ourselves through our own actions. This money would be far better spent elsewhere and we are not against making an investment now to achieve this long term goal.
Further details on this department's medium and longer term outcomes will be outlined when it publishes its updated Comprehensive Service Plan and ten year strategic plan entitled 'Healthcare 2020'.
The Department of Community Safety is committed to making the Western Cape a safer place to live. Their goal is to becomepreventative agents, rather than reactive agents, of crime. Civilian oversight, security risk management and road safety management are key priority areas for this department.
In playing its part to tackle the province's burden of disease, this department has adopted a zero tolerance approach to road safety. Through the Safely Home campaign, road accident fatalities, traffic law enforcement and road safety awareness will be addressed. Together with the Department of Transport and Public Works, this department will wage an all out war on irresponsible drivers this festive season, with regular roadblocks and speed traps on all major and minor routes.
The Department of Human Settlements, which obtains the majority of its funding from the Human Settlement Development Grant, will upscale the provision of serviced sites from 18 000 to 31 000 by 2014/15. It will also work with communities to provide People's Housing Projects, which see new homeowners involved in the design and construction of their homes, under the supervision of a quality assurance team. Attention will be paid to improving the management of housing stock and the allocation of housing opportunities. To this end, high potential municipalities may become accredited housing developers.
The department will also acquire well-located land for further housing opportunities. Every effort will be made to encourage the private sector to consider a state-backed finance scheme so as to avert the risk of borrowing, accelerate the development of mixed housing and increase rental stock.
Discussions around the alignment of the Human Settlement Grant and Municipal Infrastructure Grant are already underway. In line with this initiative, the department envisages the creation of project management and professional resource teams to assist municipalities to address the human resource constraints related to the built environment.
The Department of Environmental Affairs and Development Planning is the custodian of our drive to mainstream sustainability and optimise the efficient use of our resources.
It has identified six focus areas for action over the medium term. These are: climate change mitigation, water management, pollution and waste management, biodiversity management, agricultural land-use management and built environment. The Green Scorpions will also target environmental criminals.
Over the next three years, this department will develop a Provincial Spatial Plan and implement land-use legislation. The latter is aimed at reducing red tape and speeding up development approvals across the province.
In conjunction with the Department of Economic Development and Tourism, this department will power a renewable energy revolution in the Western Cape. We are ideally located to take advantage of wind, solar and wave power, and we will therefore effect a shift toward a greener economy. Simultaneously, the Green Procurement White Paper will stimulate the recycling economy, mainstream 2Wise2Waste initiatives and explore the production of waste into energy.
The protection of our water resources is a key concern. Together withthe Department of Agriculture, the Western Cape has targeted a 10 per cent reduction in the allocation of water for agricultural purposes. In the interim, the national government has approved emergency funding of R50 million for livestock feed in the drought stricken Eden district, and R92 million for a desalination plant in MosselBay.
The Department of Cultural Affairs and Sport is mandated to increase social cohesion amongst citizens of the province. This will be done by encouraging civic and social participation, by empowering communities to expand their knowledge and by encouraging healthier living through active involvement in sports.
Key deliverables include better library services with internet access, museums, language and heritage services, and the implementation of a school sport strategy.
Ensuring that sport once again becomes an integral part of the learner experience is a special focus area. To this end, educators will become the central drivers of this strategy.
The reduction and alleviation of poverty is the prime concern of the Department of Social Development.
By strengthening its social welfare programmes, which include building resilient families, interventions to reduce poverty, dealing with youth crime and strengthening community development, this department will better the lives of the poor, the vulnerable and those in need of special care.
This department also plays a critical role in our fight to reduce the province's burden of disease. The Ke Mojo drug prevention programme and substance abuse services will assist near on 100 000 citizens over the medium term.
Services to elder persons and early childhood development initiatives are further key priority areas.
We are confident that many of the provinces social issues can be addressed through the restoration of families as the cornerstone of communities, and particular emphasis will be placed on bringing this to bear.
Together, the Provincial Parliament, Department of the Premier and Provincial Treasury are charged with ensuring that all of the above plans are accomplished within a clean, corruption-free and community responsive governance structure.
In one short year, we succeeded in raising the audit outcomes of the province's departments and public entities considerably. Indeed, during our year of governance we achieved a clean sweep of 25 unqualified audits, thanks largely to the work of the Red Flag team at Provincial Treasury. In maintaining the financial integrity of the province, they will bolster financial management practices across every department, entity and municipality. Financial Management Improvement Plans and In-Year Monitoring reports will be closely monitored so that deviances and risks are identified early on and corrected.
The Department of the Premier will assume responsibility of the internal audit, enterprise risk management and forensic investigation units so as to ensure that any anomalies are dealt with at the highest level. Legislation outlawing the rights of employees to do business with government, which is due to be passed shortly, will leave less room for unscrupulous behaviour amongst staff.
Through the modernisation programme, the human resources component has also been shifted to the Department of the Premier.This has resulted in efficiency savings of R18.7 million to date. Over the 2010 MTEF, the preliminary saving through this initiative amounts to R113.7 million.
To effect the levels of service delivery we require depends on each and every employee operating at maximum efficiency and with a sense of sagaciousness. Through the corporatisation of the HR function, we will be able to set standard levels of operation for provincial staff members and improve accountability for underperformance. The information technology service delivery improvement plan will provide much needed support to employees by ensuring that they have access to the technology they require to perform optimally.
The Provincial Parliament has introduced its own Parliamentary Service and Financial Management Bill which will increase financial governance of this entity.
The Department of Local Government will provide hands on support to municipalities within our ambit so that service delivery breakdowns are detected at an early stage here too. Municipalities have a key role to play in driving local economic development, and it is essential that their financial and regulatory procedures are beyond reproach. Together with national government and municipalities, this department will ensure that local communities have access to government services and information on socio-economic opportunities. Community Development Workers and Thusong centres will be used to bring this department's initiatives to the people.
I would like to thank the Department of Local Government for ensuring that it spent 100 per cent of its Municipal Infrastructure Grant. We were the only province to achieve this. Their dedication to this task is further evidence of our dedication to delivering services to the people of the Western Cape.
The Provincial Government of the Western Cape has the power to promote economic development, job creation and service delivery within our province. Our 12 strategic objectives are our response to the challenges that our citizens are facing, and put together, they have become the policy prerogatives of this administration.
The resource envelope and financing issues
As mentioned earlier in my speech, we have a limited fiscal envelope within which to achieve our goals. As such, every emphasis has been placed on funding only those programmes that are delivering value for money.
This has become particularly important because growth in projected government spending is due to moderate over the medium term expenditure framework. Our key priorities have been, and will remain, growth, education and healthcare.
Over the 2011 MTEF, provincial expenditure will be financed through national transfers (95 per cent) and provincial own receipts (5 percent).
National transfers to all provinces are set to increase by R40.1 billion over the MTEF period. These transfers include a R29.8 billion increase to the Provincial Equitable Share (PES) and a R10.3 billion addition to conditional grants over the next three years.
These increased allocations seek to address higher than expected personnel costs, infrastructure backlogs in education and roads, and a range of health priorities.
The Western Cape is estimated to receive conditional grants to the total value of R8.5 billion in 2011/12, R8.9 billion in 2012/13 and R9.7 billion in 2013/14. Put together, these contribute 22.8 per cent to the resource envelope over the MTEF period. The bulk of these grants will be utilised to address infrastructure challenges in our schools and on our roads, devolution of property rates and on a comprehensive HIV and Aids programme.
In addition to the above national funding allocations, Provincial Treasury has bid for a share of the R22.1 billion policy priority reserve that is yet unallocated. In accordance with our strategic objectives, we would target this funding toward infrastructure maintenance, skills development, library services, personal primary healthcare, economic infrastructure delivery and telecommunications.
Provincial own receipts are projected to increase from R1.8 billion in the adjusted budget to R1.9 billion in 2011/12. This growth is largely supported by donations from the Global Fund for HIV and Aids interventions, and is predicted to continue throughout the MTEF.
The overall fiscal envelope remains tight with limited room for the expansion of current services and as indicated above, every emphasis is being placed on doing more with less.
Provincial Adjusted Estimates for the 2011/12 financial year Speaker, through the tabling of the Western Cape Adjustments Appropriation Bill, 2010, the executive seeks Parliamentary approval for its revised spending plans for the current financial year.
This year's adjusted budget proposes an additional R1.2 billion spending for the 2010/11 financial year. Much of this relates to technical adjustments to the main budget in order to achieve fiscal stability over the current MTEF period.
The main additions proposed include the following:
- R313.5 million to cover higher than anticipated wage settlement costs in provincial departments;
- R71.4 million for the Occupation Specific Dispensation for the health sector;
- R134.6 million for technical adjustments to national conditional grants, which includes R83 million for the devolution of property rates grant and R50 million for the Agricultural Disaster Management Grant applicable to the Eden district drought;
- R384.3 million related to unspent conditional grants of 2009/10, of which R186.5 million relates to the Transport Disaster Management Grant;
- R13.9 million in rollovers arising from commitments related to unspent balances in 2009/10 and R64.6 million in revenue retention of 2009/10 for over recovered revenue; and
- A net amount of R65.6 million in additional funds from the Provincial Revenue Fund for technical adjustments, which includes shifts away from votes for deferred commitments and re-allocation in the 2011 MTEF.
The 2010 Adjusted Budget includes the funding for the functions of Human Resources (excluding the Department of Education and Health), Internal Audit and Risk Management, which have been centralised in a Corporate Services Centre under the Department of the Premier.
This Bill amends the Western Cape Appropriation Act of 2010, by the deletion of all housing related municipal allocations, enabling the Province to revise municipal housing allocations after the tabling of the adjusted budget. Resources can thus, after the Adjusted Budget, be shifted from non-performing housing projects in certain municipalities to better performing projects, which may be located in other municipalities.
What I have presented here today was developed after careful consideration of the major issues that our citizens face, weighted against the pressures on our fiscus and our determination to govern for results. We have focused on value added activities, and have used well-researched evidence to support our policy choices.
In all of our deliberations, we discarded the old in favour of a 'think big' approach to addressing the outcomes we wish to achieve, specifically the creation of jobs. If hosting this year's FIFA World Cup has taught us anything, it's that we can achieve far beyond our expectation, if only we put our minds to it and work together.
I would like to thank Premier Helen Zille and my colleagues in the Provincial Cabinet, as well as heads of departments and their staff, for their assistance in crafting this Medium Term Budget Policy Statement and the 2010/11 Adjusted Estimates.
I wish to thank Dr JC Stegmann and his dedicated team in the Provincial Treasury for their very hard work. Under his leadership, I am pleased to see that departments within the Western Cape are moving away from operating in silos and are beginning to work together, and each toward a level 3+ audit outcome. I must also specially thank the Red Flag team for making our outstanding audit results possible, and encourage them to make further improvements by the time Mr Nombembe visits us next year.
Through our combined efforts, we are sure to see positive change over the next three years.
Speaker, it is with pleasure that I table the 2010 Adjustments Appropriation Bill, the Adjusted Estimates of Provincial Expenditure 2010,the Provincial Gazette for the Adjustments to Local Government Allocations, the Provincial Economic Review and Outlook 2010, the province's 2011 - 2014 Medium Term Budget Policy Statement and my Speech for discussion and consideration by this House.
I thank you.
Mr A Winde
Minister for Finance, Economic Development and Tourism