Budget speech 2009 / 2010: Provincial Treasury (Vote 3)
As my two predecessors will no doubt also have experienced, being elected into the position of MEC of Finance all of a sudden exposes one to whole new world that covers just about everything from a local, provincial, national and even an international perspective. This changes one's outlook on the challenges we face as a country and as a province, both dramatically and subtly. It allows a bird's eye view on service delivery issues, overall socio-economic dilemmas, the state of government sector operations and the broad fiscal picture.
At a recent budget council, the new national Minister of Finance Pravin Gordhan, urged my colleagues and me to view ourselves as the "CFO's of our respective Provinces". This implies that I, as custodian of provincial finances, have to lay a strong foundation for the best possible return on resources expended, and be the key interlocutor with the Premier and the elected MECs of this house on how to both improve efficiency in our operations and best achieve service delivery targets. This role includes taking steps to achieve clean governance and full compliance to either PFMA or MFMA requirements, and importantly, fostering structured talent management, especially in the fields of general and financial governance.
Talent management would include finding solutions for the high vacancy rates in finance components across both local and provincial government spheres, career planning and competency building, or in the words of the Premier, achieving the objective of "fitness for purpose".
As the "CFO of the Province", it is required of me to ensure that greater attention is paid to budget implementation, there is better transparency in budget planning and execution, compliance is extracted and timely interventions are made where necessary. The achievement of these goals requires greater discipline by the members of this House, as well as the councilors of local municipalities.
In just about all cases of malpractice and meltdown in local municipalities, the lack of political accountability and responsibility can be ascribed as the main cause. It would appear that within this Provincial government, the lack of political responsibility has caused similar problems, which this administration has inherited. While I must thank the honourable Mr Strachan for the work that he's done, having handed over a Province that is generally financially well managed, he's also left us with a somewhat poisoned chalice, notably in Transport & Public Works, where the non-judicious use of consultants and a range of supply chain dilemmas have become evident, and Education, which appears to be overly bureaucratic.
Additionally, and I certainly can't blame this on my predecessor since the recession seemed to coincide with me taking office, we are confronted by a sharply deteriorating economic environment, with its knock-on effects on government revenues. As a Province, we are highly dependent on national income flows - in fact, around 93% of our revenue is supplied by National. And as you've heard Minister Gordhan convey this week, we are expecting some serious shortfalls, with government tax receipts already running R10-billion below what was estimated. If one looks at current domestic and international economic forecasts, although this is currently no more than a guessing game, the future over the medium term looks bleak.
Provinces generally have to run a tight ship due to the large share of their budgets that go into the social sector, with their substantive personnel components. The Western Cape is no exception. We don't have the luxury of significant own revenue streams, which would also have allowed borrowing, and the majority of what reserves we have, are being spent on roads infrastructure.
Municipalities, as part of their revenue projections for the new financial year, already had to factor in a possible drop in revenues to ensure sustainability. But this, and a necessary rise in rates caused mainly by electricity tariff increases, has resulted in a spate of tax-payer activism which we expect will gain momentum, especially if municipal budgets are not spent wisely.
We are also expecting a drop in own revenue. Gambling revenues alone are anticipated to contribute around R30-million less over the course of this financial year. With regard to the two other main sources of own revenue, hospital fees and motor license fees, only time will tell.
Given this situation and the need to mitigate the impact of the economic downturn, steps will have to be taken to reduce non-core departmental baseline costs, to cut out unnecessary or doubtful value expenditure and overall, increase efficiencies and better control over our finances. The Provincial Treasury has already identified a number of ways to do this, which include 1) tightening expenditure and cash management, 2) tightening supply chain and asset management, 3) improving accounting standards and transparency, 4) sharpening control over our financial systems and associated data integrity, 5) improving infrastructure spending and 6) assisting accounting officers and departmental CFO's to improve systems and process management within their departments.
Similar focus areas have been identified on the local government side, notably, steps should be taken to 1) help improve the compliance and inclusivity of the budget process 2) improve the capacity to deliver on a range of financial management requirements, including accounting, cash management, investments and borrowing, and 3) better supply chain management, disposal of fixed assets, infrastructure spending and revenue management.
The proposed municipal revenue management work will include assistance with tariff setting and appropriate modeling against the municipality's socio-economic base and service delivery requirements. Local Government MEC Bredell and I will also pay special attention to enhancing political accountability at this level. Nonetheless, as eluded, there is scope for the main political parties to agree on a practical code of conduct and the application of hard party discipline in the case of defaulters, particularly at council level.
That said, there is no doubt that we can't afford to continue to jeopardise service delivery at either the municipal frontier or within the Province. It is behoven upon us, as MP's who have constituencies, to take ownership of issues in the local municipalities under our ambit. Poor political leadership, and suffering caused by the last period of floor-crossings, has led to a major deterioration of service delivery.
If one looks over the 3rd quarter of the 2008/09 consolidated statements for local government capital and operating budgets', we see some worrying figures: The four best ranked municipalities of this Province, Cape Agulhas, Swartland, Overstrand, and Breede River have an average of 39% of debt owed to them exceeding 90 days. But, our worst municipalities, Saldanha Bay, Beaufort West, Witzenberg, Kannaland, Swellendam and Theewaterskloof, range from having 74.7% to 89.1% of the money owed to them by ratepayers outstanding over 90 days. We must be collectively accountable and responsible for improving these figures through good management and better political leadership. With collections like this, service delivery goes out of the window and the poor have to bear the brunt.
As with most finance institutions, Provincial Treasury has struggled in the past to recruit and retain sufficient numbers of capable and dedicated staff. It behoves me to convey to this House, that a fair degree of success has been attained over the last year in this regard, with the overall vacancy rate expected to go down from 37% as on 1 April last year to an expected 14% as at end of July this year.
By end July, we will be close to full-house in most units (internal audit, accountancy, financial management, HR, asset management and corporate governance). There are, however, some notable gaps within the key Public Finance and Budget Management groupings. We are satisfied with the caliber of the people that we have been able to recruit and retain: while most are still young and have lots of potential and new ideas, this is balanced by the fact that we have a lot of experienced, more battle hardened staff. This combination presents exciting possibilities, a number of which have already materialized, and bodes well for the year and MTEF period ahead.
That said, the current budget does not allow for filling of all remaining vacancies, and we are forced to freeze around 8% of the total establishment.
Given the work that lies ahead and the spin-off's for both local and provincial governments, we are faced with a bit of conundrum if we are to effectively deal with financial management improvement over both spheres in line with our more urgent responsibilities. The full costs of all transversal audits will in future be debited to this vote, whether that be at provincial or local government level. Of necessity, the recently initiated assessment into the utilization of consultants in the provincial sphere has had to be extended, as preliminary investigations found a number of concerns that demanded further examination.
Likewise, preliminary assessment of the utilization of our financial systems has also highlighted a number of deficiencies and risk areas that have to be dealt with. As I said earlier, the last two Local Government MTEC 3 processes have pinpointed a number of areas within municipalities that require further work.
We have been engaging vigorously with the Auditor-General, the Special Investigating Unit and the National Treasury to maximize the return on all these endeavours.
We've also initiated a process under the guidance of the BER to explore further revenue returns from the gambling industry related to license exclusivity. All-in-all, these initiatives are meant to extract greater efficiencies from the system on the one hand, and on the other improve revenue flows at both the local and provincial level. Financing of these endeavours is predicted to run over the balance of the MTEF, and as a matter of course will be dealt with at the time of the adjustment estimates, so that we only deal with real costs and have an opportunity to assess the value thereof.
I request that an amount of R134,682-million be allocated for the Provincial Treasury in 2009/10, which is just over 10% higher than the Adjusted Budget for 2008/09. As is evident, it is not my intention to deliver a technical vote speech today but rather focus on the forces that should be in place to ensure that I, and the Provincial Treasury, live up to our responsibilities.
With a relatively modest budget and with an expected complement of just 317 staff, the Provincial Treasury must be the driving force that guides all the other departments to stay on course within their own financial and fiscal constraints. We must also assist each department to deliver on the promises we made during the recent election. Therefore, the greatest challenge facing Vote 3 is to maximize how it spends its voted funds to steer all other departments within the Province to wisely spend their allocations to the best benefit of all the people living within the Western Cape. To a lesser extent the same applies to our municipal colleagues in the Province.
Speaker, I trust that I can bank on my predecessor and his party's support in seeing our initiatives and the deliverables of the Provincial Treasury through, not only in this year, but also over the balance of the term of this government.
Improving the state of financial governance and service delivery in the Province across both spheres - provincial and local - is also a responsibility of each and every MEC, the Premier, indeed, every member of this House.
It begins with good planning that systematically deals with our service delivery challenges and puts hard milestones in place for each of us to be measured on. This budget is a step toward this, but more has to follow in monitoring, so that we can ensure that we deliver on our undertakings. The Department of the Premier is working on a dashboard system, much like the City's, to improve monitoring and evaluation, but this House, through its various committees, must hold us as the executive, together with our officials, to account.
As I've indicated, a lot of work lies ahead of us, a significant chunk of which will run in tandem with the work of the Departments' of the Premier and Local Government. It's hoped that by the time we come to the adjustment estimates, and most certainly when I need to table the main estimates for next year, considerable progress will have been made in improving efficiencies and achieving clean governance. We must learn from past mistakes, be creative in our approaches, and bring new technologies and better corporate governance to bear.
I thank you.
Tammy Evans 082 378 2235