2013/14 Adjustment Budget Estimate Presented at the North West Provincial Legislature

2013/14 ADJUSTMENT BUDGET ESTIMATE PRESENTED AT THE NORTH WEST PROVINCIAL LEGISLATURE ON 12 NOVEMBER 2013

Hon Speaker;

Hon Deputy Speaker;

Hon Premier, Mme Thandi Modise

Hon Members of the Executive Council

Chairperson of Chairpersons

Chairpersons of Legislature Committees

Hon Members of the Provincial Legislature, (MPL’s)

Hon Executive Mayors and Mayors

Speakers of Councils

Chairpersons Provincial House of Traditional Leaders, KgosiZibi

Dikgosi Maapara-nkwe a gaetsho,

Leaders of Business, Civic and Religious organizations

Senior Government Officials

Esteemed Guests

Honourable Speaker, I have the honour to present to this august house the 2013/14 adjustment budget estimates of the North West Provincial Administration in line with section 31 of the PFMA.

Honourable Speaker, the thrust of the 2013 Adjustment Budget Speech is mainly ‘Increasing efficiency within government and obtaining better value for money’.

This is the fiscal path we must traverse in order to meet the increasing developmental needs of the people of this province and build a solid, sustainable economy for advancement of growth and development and stimulation of investor confidence and interest in the province.

Honourable Speaker, the provincial average spending as at 30 September 2013 stands at 48.34 percent or R14.1 billion expenditure of the allocated budget inclusive of roll-overs. The current spending trend is still 1.66 percent lower than the estimated 50 percent target as at 30 September 2013.

Whilst spending is below the expected target, it is also encouraging to note that there is a 4.24 percent increase when compared to the same period last year, 30 September 2012, where spending was at 44.10 percent or R11.6 billion of the allocated. In support of service delivery, provincial departments are urged to increase spending of their budgets and avoid huge under-expenditure.

Mindful of the service delivery backlogs and huge demands in the province, we have in recent year’s rigorously explored measures to increase spending and to that effect we had in recent years taken bold, decisive and correct decisions.

The Executive Council has since approved the allocations of the adjustment budget with priority on increasing EPWP employment opportunities for job-creation and funding of key government priority programmes.

This adjustment allocation outlines the provincial government’s commitment to:

Sustain and support key government priorities and other budget pressures

Increase budget spending and enforce fiscal discipline

Support budget cuts and redirects funds to other spending programmes

Reduce prospects of roll-overs of funds due to poor planning, budgeting and implementation of projects.

Avoid underspending due to slow progress in the implementation of infrastructure projects including maintenance

Minimize or curtail funding of projects with no clear business plans and reduce wasteful and fruitless expenditure

To strength and enforce the ‘Use it or Loose’ it principle

Implementing the NDP

Honourable Speaker, whilst many scientific researchers have shown that 19years of democracy South Africa is still faced with the major problem of social inequalities, economists and public opinion makers all agree that the National Development Plan is a roadmap that provides for solutions to address the socio-economic challenges of the country.

Business Leadership South Africa chairperson Bobby Godsell said, when looking at the country the glass was both half full and half empty. It was half full in that it reminded people it was a better country than it was in 1994, but half empty in that more needed to be done."Is this as good as it gets?" Godsell asked. The country needed to be stirred into joint action, he said.

He said some programmes carried the hope of the country working together. These included the National Development Plan (NDP) and the National Education Collaboration Trust (NECT).

"The NDP has given a framework for South Africans to think of the future," he said.

"It calls upon all South Africans to become a patriot."Indeed the NDP carries the hope for the future and as government we accept that there are challenges we must address to carry forward the aspirations and the wishes of our people (Mail & Guardian, 4th November 2013)

These sentiments are also echoed in the Minister’s Medium Term Budget Policy State, Minister Pravin Gordon as he said ‘We have a duty to broaden opportunities for those who do not have secure incomes, formal jobs, solid homes, electricity, water or access to health care. We have to share the benefits of growth, so that those of our people who are most vulnerable and disadvantaged can say “This economy works for me”.

Honourable Speaker, as Province we have moved swiftly during the tabling of the 2013/14 Provincial Budget to align Key Provincial Priorities with the National Development Plan which remains an overarching developmental path South Africa has adopted to address the socio-economic challenges we are facing as a country.

The Provincial Planning Commission is busy finalizing the Provincial Development Plan tailor-made to address specific and peculiar socio-economic challenges facing the province. The Provincial Development Plan would be aligned to the National Development Plan.

Key to the priorities of the Provincial Development Plan includes the following;

Employment through economic growth;

Mining collaboration strategy/planning;

Tourism development and small business support services;

Water infrastructure, Management and Services Provision;

Accelerate deployment of ICT infrastructure and increase utilization;

Rural SMME development;

Agro processing and beneficiation development;

Agriculture expansion

Honourable Speaker, for all intent and purpose, achieving some of the goals set out in the National Development Plan requires closer partnership between the provincial government and the private sector.

I therefore, wish to call upon business, particularly, the mining sector to partner with government to resolve the socio-economic challenges of the province in building a prosperous, sustainable economy in the North West.

Honourable Speaker, let me also highlight some of the key projects implemented by the provincial government to boost economic growth and development in the province:

• Mahikeng Airport runway upgrading project which incorporates, instrument landing, ground lighting andrunway, is at 70% completion stage and this lays solid foundation for the stimulation of the economic activity at the Airport and attraction of investors in the Cargo, Freight and Logistics’ business fields
• The development of the road network is progressing well inrural areas in the province, already two (2) Roads projects at (Ganyesa/ Tlakgameng and Manthe/ Cokonyane) have been completed in July and August and the Swartdam to Makapanstadt road known for its horrible potholes is ready for completion before December.
• Progress has also been the registered in the building of the Tribal offices to enhance administration of tribal authorities in the province, and this includes Bahwaduba Traditional offices in Mathibestad (Moretele), whichcurrently stands at 60% work done and completion is set February 2014.
• The building and revamping of clinics in the province has progress well and this include the Brits Hospital which has been completed in May 2013
• The building of low cost housing is on track and a number of house units have been built around the province and this includesMatlosana Emergency Storm Damaged (200 units build). The houses were fixed after being destroyed by heavy tornado, Matlosana Jouberton ext. 20 (260 units build). Newly build units,Maquassi Leeudoringstad ext. 4 (213 units build). Newly build units
• Substantive progress has also been made in the building of schools and most completed include Malebogo Primary which is between 76% - 99%, MM Sebitloane Special School (Hostel) which is between 26% - 50%. P. Moshawane Primary which is between 51% - 75%, Sunrise View Primary and secondary schools in Boiketong and Blydeville Primary school in Ditsobotla.

The Economic Outlook

Global Economy

Honourable Speaker, the Global Economic activity remains subdued. The Minister’s MTBPS has shown that in the euro area, which is our main trading partner, GDP growth of 1 per cent is expected next year, after negative growth during much of 2012 and 2013. The IMF has revised down the 2013 growth outlook for developing countries from 5 per cent to 4.5 per cent.

South African Economy vs. North West Economy

The global economic downturns have serious negative impact on developing countries and as a result, The South African economy recorded real Gross Domestic Product (GDP) growth rate of 3.0 per cent in the second quarter of 2013 which was driven mainly by a recovery in the manufacturing sector, following the notable contraction of this sector in the first quarter.

Despite the rebound, growth was below the estimated potential of around 3.5 per cent. National Treasury forecasts growth of about 2.1 per cent in the South African economy this year. This growth is expected to rise to 3.5 per cent by 2016 in line with the general global recovery.

The economy of the North West province on the other hand has grown significantly over the past decade with its real GDP having almost tripled to R181 billion. GDP grew by 3.2 per cent in 2011 and by only 1.5 per cent in 2012 following the mining strikes and slowdown in mining production, which is the main driver of the North West economic activity.

The Mining sector accounts for 33.6 per cent of the North West GDP followed by general government services 6 per cent making the North West economy a concentrated and not diversified economy as it is driven largely by these two sectors.

Infrastructure spending

Honourable Speaker, low spending or poor spending on Infrastructure Expenditure is the thin edge of the wedge and serious indictment to government and cannot be left unabated.

Whilst we appreciate that infrastructure departments have begun to move to the right direction, there are no guarantees that there is sufficient capacity to spend more than 90% of the allocated budget at the most by the end of the financial year, hence the budget cuts.

It is for these reasons in particularly, that serious consideration have been made for review of the infrastructure spending and provincial budget in general, in order to redirect some of the funding into other critical programmes, particularly, job-creation and water and sanitation projects.

This is in line with the psyche of government as pronounced by Minister Pravin Gordon in his MTBPS when he said ‘Government's approach to improving provision of public services is therefore focused on better use of existing resources and shifts in the composition of spending, rather than raising overall expenditure’

Honourable Speaker, there has also been slow spending of the R150 million allocated for the Premier’s Legacy Projects which includes;

• Taung Skull Project allocated R40 million within the Economic Development
• War on Poverty Initiative allocated R50 million within the Public Works, Roads and Transport
• Water, Sanitation and Mahikeng Revitalization allocated R60 million within Local Government

The underlying cause of underspending attributes to lack of effective monitoring mechanisms of implementing departments.

The relevance and significance of these projects however, cannot be questioned as they speak to the heart of service delivery, poverty alleviation and job-creation which remains government key priority programmes, however, the appointment of Project Managers (PMU) in the Premier’s Office will help fastrack the implementation of these projects through close monitoring.

Savings and investments

Purchase of the office park

Honourable Speaker, the Provincial Government (EXCO) approved the purchase of the Office Park Building for the department of Health.

After lengthy negotiations of the R400 million purchase price provincial government offered 385 million which was finally agreed upon by all parties. The economics of scales shows that the proposed lease agreement which the provincial government rejected would have cost government more than double the current purchase price in a period of ten (10) years.

The purchase of the office park is an important long term economic investment for the provincial government and a well-calculated decision with huge economic spin-offs for the province.

Notwithstanding, the fact that Minister Nxesi of the National Department of Public Works has embarked on the review of accommodation leases precisely to reduce long term office accommodation by government.

Cost-containment measures

The cost-containment measures have significantly contributed towards reducing risks of wasteful and fruitless expenditure in the province. This control measure that was put into place to curb excessive spending on items that are unrelated to service delivery has also contributed in the effective management of provincial budget.

In support of these measures and having noted the spending patterns of the departments, Executive Council approved reduction of R301million from the baseline budgets of departments and forms part of the adjustment allocations which totals to almost R1.8 billion.

The recently pronounced measures by the Minister of Finance on reducing government spending are not subject for interpretation but remains government policy and must be observed as such.

Safe to say the department of Finance will in on time review the current cost-containment policy to further re-align it with the new policy on government spending and in consultation with the National Treasury, where necessary we will introduce other control measures to ensure adherence.

Fighting corruption

Honourable Speaker, we will not succeed to give meaning to the notion of a true democratic society unless we uphold and promote the values of accountability, transparency and good governance in order to carry forward the aspirations of our people for better life. What we must appreciate and acknowledge is the fact that corruption eats at the heart of society and denies our people the right to dignity and pride.

It undermines our potential to unlock economic opportunities to advance growth and development of this province.I wish to applaud the Premier of this Province, Mme Thandi Modise for championing the cause to fight corruption; we really appreciate your unwavering commitment and leadership and guidance in this regard.

We recognize and appreciate the contributions and the role played by labour, business and civil society in fight against corruption and reiterate the commitment of the provincial government to free our administration from corruption andinject in the bloodstream of the provincial administration sound, financial practices, good governance and administration to build a successful and prosperous economy in the North West Province.

Honourable Speaker, in support of Premier’s commitment toward the fight against corruption and good governance, the Executive Council has approved the Provincial Risk Management Strategic Support Plan for implementation by all the departments. It is important to note that the plan has been aligned to the Public Sector Risk Management Framework and it seeks to assist departments to attain risk management maturity level 3 for effective controlled environment.

The creation of risk management maturity levels within departments will minimize risks of wasteful, fruitless and unauthorized expenditure and promote good financial practices and governance.

2013/14 Adjustment Budget Allocations

Hon Speaker, I have alluded to the fact that the Executive Council has approved the Budget Reductions and Reprioritizations of the provincial budgets.

The 2013/14 Main Budget of R28.566 billion tabled in March 2013 was reduced by R301 million in line with EXCO resolution and will be adjusted upwards by R1.8 billion as per sources of funding below, resulting in a net increase of R1.5 billion;

• R463 million rollovers from the unspent funds in the 2012/13;
• R301million reprioritized from slow spending programmes;
• R222 million from National adjustment budget;
• R849 million from our own provincial resources

Honourable Speaker, from the additional R222million received from the national adjustment budget an amount of R156.1 million relates to compensation of employees to deal with more than anticipated salary adjustments and the regarding of clerical workers, R21.9 million is for Provincial Roads Maintenance Conditional Grant which came as a result of the revision of the conditional grant formula, R358 thousand for improvement in salaries and other condition of service for FET colleges personnel and lastly an amount of R43.6 million for Emergency Relief Funds from the National Disaster Management Center.

Much as we are aware of the fact that, Adjustment Budgets is a process of availing funds that have become available to address unforeseen and unavoidable expenditures, expenditures in terms of Section 25 of the PFMA, appropriation of unspent funds from the preceding financial year (roll over’s) and transfer of funds following transfer of functions between departments in line with section 42 of the PFMA, it was therefore totally impossible to accommodate the aggregated requests of R1.8 billion from all the departments given government competing demands.

Creating employment opportunities through labour Intensive jobs.

The North West province is amongst the poorest provinces in the country with an unemployment rate of 24.7 per cent as at end September 2013, coupled with soaring levels of poverty, which is currently around 46 per cent; uneven spread of wealth as well as poor conditions of infrastructure that adversely affect the ability to attract potential investors.

We can appreciate the fact that whilst government has put into place programmes that provide young graduates with practical workplace experience; huge employment demands still exist in the unskilled and semi-skilled sector of society.

It is within that context that the provincial government has committed towards creation of labour intensive job opportunities in the province to address some of the immediate challenges we are facing.

Budget allocation for the labour intensive initiative is R176 million and job-opportunities to be created is 20 000 and there has been equitable distribution of these opportunities throughout the province and the project is expected to kickstart from the 1stDecember 2013 at an average stipend of R2 200 per month.

The labour intensive job opportunities will be distributed equitable throughout the province in accordance to four districts (NgakaModiriMolema we are targeting 5 652; Bojanala 5 098; Dr Ruth Segomotsi 4 459 and 4 791 forDr Kenneth Kaunda).