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1. INTRODUCTION

Mr Speaker and Deputy Speaker
Madame Premier and Members of the Executive Council
Members of the Legislature
Distinguished Guests
Ladies and Gentlemen

It is once again my pleasure to present the Free State Appropriation Bill for the 2000/2001 financial year.

Mr. Speaker,

The Budget that we are tabling today will provide a brief overview of the 2000/2001 budget process; set out the expenditure proposals and revenue estimates for 2000/2001 and conclude by highlighting strategic challenges that remain the subject of ongoing review during the 2000/2001 financial year

2. OVERVIEW OF THE 2000/2001 BUDGET PROCESS

The Free State development vision cited in the recently approved integrated rural development strategy seeks to develop a sustainable, growing economy geared towards making better the lives of all our people.

Government alone cannot meet the challenges that face our people and country. Building partnership with the people, mobilising energies and experiences of millions of South Africans, will certainly ensure that as a province, the Free State is on track to deliver services to all our people.

Planning and preparation will be essential to us to achieve our objectives and to deliver on our programmes. In the words of Mike Murdock..."failure to prepare is preparing to fail."

Ultimate global allocations to provinces from nationally collected revenue are based on a formula-driven division of revenue between National Government and Provinces, and between different provinces.

This process is driven by the Budget Council, which is a co-operative decision-making body, consisting of:

* The National Minister and Deputy Minister of Finance;
* Provincial MECs for Finance;
* Senior officials from the National Department of Finance, State Expenditure and Provincial Departments of Finance; and
* Representatives from the Financial and Fiscal Commission (FFC)

The work of the Budget Council is informed by the Technical Committee for Finance (TCF) and different so-called "4x4's" which focus on particular votes. Since 1998, sectoral joint committees have been established for Education, Health, Welfare, Transport and Infrastructure.

The main purpose of these committees, comprised of representatives from National and Provincial Treasuries, and the relevant departments, is to establish greater co-ordination between policy development and the financing of policies. The committees provide input into the Budget Council and joint MINMECs on issues such as managing transformation, developing coherent policy within sectors and setting norms and standards for service delivery.

As was the case last year, the Legislature will be asked to vote only on the budget allocation for the 2000/2001 financial year, and not for all three years of the spending projections.

Whilst it is accepted that the budget for the 2001/2002 and 2002/2003 of the MTEF-period, will be considered again during the course of 2000/2001 and revised according to new information and policy priorities, such indicative budgets, do afford departments the opportunity to enhance:

* The effectiveness of planning within the known budget constraint over the medium-term.
* Effectively time-sequenced project implementation and cash flow management aimed at reducing any possible need for rollover of funds only to exceptional cases.
* The ability of the provincial government to assess the multi-year cost implications of policy proposals.

We are all obligated, as members of the legislature, to ensure that multi-year budgets are in fact utilised to realise the objectives of the medium term expenditure framework.

EXPENDITURE PROPOSALS: 2000/2001

Mr Speaker,

In doing the best we can with what we have, in the words of Rowland Sill, I now wish to turn to the expenditure proposals of the 2000/2001 financial year.

The total provincial expenditure estimates for 2000/2001 amount to R7,517 billion.

Excluding the provision for improvement of conditions of service in 2000/2001, this represents a nominal increase of 9.3%, compared to the 1999/2000 voted budget.

EXPENDITURE PROPOSALS PER VOTE

Mr Speaker

I now take the opportunity to present to this House the expenditure proposals for different votes for the financial year 2000/2001.

PREMIER (VOTE 1)

The office and the department of the Premier and the capacity it needs to co-ordinate the province are critical to achieving identified provincial priorities.

Accordingly an amount of R49 million is provided for expenditure on this vote, which represents an increase of R2,267 million or 4,8% compared to the 1999/2000 budget.

PROVINCIAL LEGISLATURE (VOTE 2)

An amount of R37,647 million is provided for expenditure on this vote, which represents an increase of 2,8% compared to the 1999/2000 voted amount.

ENVIRONMENTAL AFFAIRS AND TOURISM (VOTE 3)

The budget of this vote increases with R10,7 million or 25% compared to the previous year, with R53,675 million being provided for expenditure in 2000/2001.

43,7% of the total budget will be utilised for resource and conservation management, to control the conservation of natural resources and to render scientific support services, whilst 29,5% of the budget will be devoted to tourism, to promote tourism and provide eco-tourism facilities at provincial resorts.

FINANCE, EXPENDITURE AND ECONOMIC AFFAIRS (VOTE 4)

An amount of R64,75 million is budgeted for this vote for 2000/2001.

R192,845 million was budgeted for this vote in 1999/2000 to fund the following:

* Departmental expenditure: R57,016 million
* Provincial debt repayment: R135,829 million

The budget of this department thus increases with R7,73 million or 13,6% compared to the 1999/2000 voted amount for departmental expenditure.

Of the total 2000/2001 expenditure estimate:

* will be spent on accounting control;
* will be spent on macro financial management; and
* 21,8% will be spent on trade and industry, liquor and consumer affairs and the promotion of small, medium and micro enterprises.

HEALTH (VOTE 5)

Mr Speaker,

The increase in this budget vote signifies our commitment to ensuring that we promote a healthy community in the province.

The role that would be played by the department of health in the reduction of the HIV/AIDS scourge cannot be over-emphasised.

Health remains the province's second largest vote with an allocation of R1,801 billion or 24,6% of total budgeted expenditure.

This represents an increase of R116,3 million or 6,9% compared to the previous budget.

Expenditure on District Health Services, Regional and Specialised Hospital Services and Central Hospital Services will account for 85% of total expenditure in 2000/2001.

EDUCATION (VOTE 6)

In our continued efforts to ensure that the schools work and deliver the quality of education that our people so deserve, the education vote receives the biggest slice of the provincial budget. This vote accounts for R2,95 billion or some 40,3% of total budgeted expenditure.

This represents an increase of R223,6 million or 8,2 compared to the previous budget, with some 77,9% of total expenditure in 2000/2001 to be spent on public ordinary school education.

SOCIAL WELFARE (VOTE 7)

The poverty eradication strategy for the Free State indicates that 66% of the Free State population lives in poverty. A level of poverty second to that of the Eastern Cape, for instance:

* Qwa Qwa at 88% of poverty level is probably one of the poorest areas in the country.
* The strategy seeks to reduce the poverty levels in the Free State from 63% of the population by 2010 and to 30% by 2020. It is for that reason that we continue to increase our allocations aimed at serving the needs of the poorest of the poor.

An amount of R1,260 billion is budgeted for Social Welfare, representing 17,2% of total budgeted expenditure.

This represents an increase of R38 million or 3,1% compared to the previous budget. Of the R1, 1 billion to be spent on Social Security:

* 6,9% will spent on family care
* 63,3% will be spent on care of the aged
* 21,9% will be spent on the care of the disabled
* 0,5% will be spent on social relief

LOCAL GOVERNMENT AND HOUSING (VOTE 8)

Local Government is at the cutting edge of political and socio-economic delivery to the people of our country and province. The transformation it is undergoing is critical to its viability. Provincial support to local government as well as to the institution of traditional leadership is therefore crucial.

R370 million or 5,1% of total expenditure is budgeted for Local Government and Housing, which is R238 million more than the 1999/2000 voted amount.

The large increase on this vote (180,4%) is ascribed to the inclusion of R218,3 million for housing aid and financing which will form part of this Department's budget from 2000/2001.

Expenditure will also increase as follows in respect of the following programmes in 2000/2001, compared to 1999/2000:

* 31,7% on housing, to promote effective housing provision and infrastructure.
* 23,8% on urban and rural planning and development, to promote physical planning and ensure the optimal execution of development policy.
* 16,9% on traditional affairs, to render administrative support services relating to traditional affairs and disaster management activities.

PUBLIC WORKS, ROAD AND TRANSPORT (VOTE 9)

An amount of R470,59 million, representing 6,4% of the 2000/2001 budget, is set aside for this vote.

This is R28 million or 6,3% more than the previous budget.

Total expenditure in 2000/2001 on major departmental programmes will be as follows:

* 34,7% on works infrastructure for the maintenance of land and buildings, engineering works and fixed equipment of provincial departments.
* 31,1% on works infrastructure for the maintenance and provision of road infrastructure.
* 11,7% on traffic management for traffic regulation and policing.
* 11,1% on state assets for the acquisition, management and control of state assets.

PUBLIC SAFETY AND SECURITY (VOTE 10)

Making our streets and houses safe, creating a safe environment for women, children and elderly, and in line with government's commitment to eradicate crime in the province, the allocation of the Public Safety and Security vote increases with R10 million or 21% compared to the previous budget, with R58,12 million being provided for expenditure on this vote in 2000/2001.

AGRICULTURE (VOTE11)

An amount of R109 million is budgeted for Agriculture, which is R23,25 million or 27,1% more than the previous year.

Expenditure on operations to enhance the performance of agricultural field and logistical support services, will increase by 29, 7%, which expenditure on support services to render supportive professional services relating to research, agricultural engineering services, soil conservation and training, will increase by 2,1%.

SPORT, ARTS, CULTURE, SCIENCE AND TECHNOLOGY (VOTE 12)

This department's allocation increases with 181,9% from the previous year to R88,588 million for the 2000/2001 financial year.

The main reason for the increase in the appropriation to this vote, is the provision of R57,8 million (or some 65,3% of the total budget) to fund transfer payments to PHAKISA Corporation in 2000/2001.

IMPROVEMENTS IN CONDITIONS OF SERVICE (VOTE 14)

In addition to the allocations to departments, an amount of R203,936 million is budgeted to fund improvements in conditions of service for the 2000/2001 financial year.

EXPENDITURE PROPOSALS PER STANDARD ITEM

The 2000/2001 estimated expenditure per standard item, is as follows:

* Personnel Expenditure: 62,4%
* Administrative Expenditure: 2,3%
* Stores and Livestock: 5,4%
* Equipment: 2,2%
* Land and Buildings: 0,4%
* Professional and Special Services: 4,4%
* Transfer payments: 21,7%
* Miscellaneous expenditure: 1,2%

Mr. Speaker,

I've already warned about the crowding out effect of the absolute size of the Provincial Salary Bill in previous years.

It is obvious that a salary bill in excess of 60% of total expenditure must necessarily have a significant crowding out effect on infrastructure and development spending, much against our stated objectives of reducing personnel expenditure to affordable levels.

For government to ensure quality public service delivery, in this province, the provincial administration in its entirety will have to continuously search for measures and strategies aimed at:

* Containing and reducing personnel cost in the medium and long-term.
* Reviewing district and regional service delivery structures to enhance cost-efficiency in operations.
* Assessing cost-effective options for outsourcing, joint ventures, partnerships and the accessing of external funding and facilities.

A RETROSPECTIVE VIEW ON EXPENDITURE ON VOTES

Given the reality of the huge backlog in basic social services in this Province, due to inequalities of the past, expenditure on social services (i.e. Education, Health and Social Welfare), will continue to dominate the budget of this, and other Provinces over the MTEF period and beyond.

The three social departments will jointly account for 82,1% of total expenditure in the 2000/2001 financial year. This compares well with other provinces if it is considered that it is expected that this average for all provinces will fall to 82,4% by 2002/2003 from a peak of 83,3% in 1999/2000.

I have already said in previous Budget Speeches that given the need to address other functions, such as maintenance of roads and infrastructure and capital development, improved outcomes from basic social services should not come through increased spending per se, but through efficiency improvements in basic social service delivery resulting from a re-direction in operating expenditure.

In this regard, it is significant to note that, compared to 1999/2000, in 2000/2001:

The Department of Health will:
* Keep personnel expenditure constant.
* Increase expenditure on stores and livestock by 25,8%.
* Increase expenditure on equipment by 21,6%

The Department of Education will:
* Reduce the percentage of the budget spent on personnel from 87,6% to 85,7%.
* Increase expenditure on equipment by 49,9%

The percentage of the budget spent on personnel will remain the same for the Department of Social Welfare

Mr. Speaker, the challenge facing this Province in the medium term will remain the need to continuously focus on strategies aimed at enhancing effective and efficient budget management and ensuring that all provincial expenditure satisfies the test of cost-effectiveness. Such an approach would ensure that budgets are managed in a manner that brings about continuous efficiency gains that would afford this Province an avenue to redirect funds into high priority areas.

3. 2000/2001 REVENUE ESTIMATES

Estimated total revenue for the Province for the 2000/2001 financial year, amounts to R7,5867 billion, which represents a nominal increase of some 13,9% compared to the 1999/2000 budget. If the amount for improvements in conditions of service is excluded, the nominal increase is 10,8%.

Transfers from the National Exchequer Account, accounts for 95,5% of this total, with provincial own revenue accounting for 4,5%. Based on the economic dynamics of this province, our own provincial revenue target of R338 million has been set for 2000/2001.

Monies prescribed by Law/Ordinance accounts for 72,9% of Provincial own revenue. This include, inter alia, items such as fees prescribed in terms of the Road Traffic Act and the Horse Racing and Betting Ordinance, patient fees, casino tax, etc.

The main reason for the deadline in the Provincial own revenue share over recent years, results from structural shifts in the underlying sources, which are unlikely to be reversed in the medium term. For example, hospital revenues dropped as patients with medical aid moved to the private sector, whilst there was also a deliberate policy shift towards a stronger focus on primary health care. Interest income in this province, like others, also declined substantially as the province had to incur deficit spending over the past few days.

Given the aforementioned, it is clear that the Provincial focus should remain one of implementing strategies and measures aimed at enhancing the efficiency and effectiveness of Provincial revenue and debt collection over the medium term.

4. THE WAY FORWARD - SOME CHALLENGES FOR CONSIDERATION

The period since 1994 has seen a number of important reforms aimed at improving budget planning, monitoring and macro financial management.

Such reforms included:

* The introduction of a 3-year medium-term expenditure framework;
* The institution of intergovernmental structures to inform budget allocations and the harmonisation of budgets, policy proposals and national priorities; and
* The enactment of the Public Finance Management Act of 1999, which comes into effect from 1 April 2000.

The common objective of all these reforms is to enhance transparency in budget decision-making and budget management by improving accountability in the use of public resources.

Viewed against the backdrop, the Public Finance Management Act can be seen as the last link in the chain of reforms aimed at strengthening the link between government spending and service delivery. In essence, this Act defines principles of accountability that devolve responsibility for service delivery to departmental managers. It clarifies the role and duties of Accounting Officers and lays the foundation for improved public accounting standards.

Mr. Speaker,

All of the aforementioned reforms, together with the provincial strategic plan and service delivery improvement programmes of line departments, now afford this House the necessary instruments that can be employed to ensure the implementation of this Budget in a manner that overall management and political responsibility for effective and efficient implementation and value-for-money in respect of the targeted mix of outputs and outcomes, are not compromised.

I would dismally fail in my duty if I do not put on record here today, that the days when this House was used as a platform to argue for totally unrealistic increases in budgets are gone forever!

Gone forever, are also the days when the structures of this House were used, or rather misused, to argue for adjustments in estimates to fund non-core functions and activities that do not even feature as part of the Provincial priorities. Not only do such irrational behaviour detract this House and its structures from effectively monitoring progress in provincially agreed and publicly announced service delivery plans, but it would set up Departments and individuals in Departments to become casualties and destroy their own futures and careers for not meeting the requirements and prescripts of the Public Finance Management Act.

It is inconceivable that this House or any of its structures would ever become party to a situation that would destroy the future and careers of Public Servants and Political Office Bearers of this Province. It thus goes without saying that key to the successful implementation of this budget is the ability of this House and the Provincial Administration at large, to view the attainment of service delivery objectives from a provincial-wide perspective and to facilitate the fostering of joint ventures and partnerships in service delivery and the creation of a culture of shared responsibility for achieving provincial objectives.

6. CONCLUDING REMARKS

Mr. Speaker

This Government has come full circle in its strategy to enhance the institution of effective, efficient and appropriate budgets.

* Firstly, the Reconstruction and Development Programme (RDP), set out this Government's vision for a better future, that encapsulated the vision of the freedom charter.

* Secondly, the growth, employment and redistribution (GEAR) strategy defined the parameters within which such vision could be realised.

* Thirdly, the institution of multi-year budgets within the medium term expenditure framework, created the instrument to facilitate effective resource-led planning and budgeting over the medium term.

* Fourthly, transformation of public service delivery reinforced the shift in budgeting from a focus on inputs to resource-led budgeting that focuses on outputs and outcomes.

* Fifthly, the Public Finance Management Act lays a new foundation for financial accountability in the Public Sector.

All of these reforms emphasised the seriousness of this Government to translate its vision into reality. In creating this reality, we sometimes had to walk the road less travelled. We did so, and will continue to do so in the future, with the full belief that he, who never walks except where he sees other men's tracks, will make no discoveries.

Whilst the inequalities of the past cannot be ignored, politics of blame will not be put bread on the table of the ordinary citizens of this Province. Whilst this Government has no illusions about the challenges it would face in the 2000/2001 financial year, I believe that if the fox, favoured by fortune, can conquer the lion, favoured by strength, so too, this House working together for the common good of the Free State citizen, can ensure that our walk along the endless path of unrealised possibility is both fast and smooth.

Mr. Speaker, I now wish to lay the following documents on the table, namely:

* The Appropriation Bill;
* The Estimate of Expenditure and Revenue;
* The Explanatory Memorandum; and
* The Development and Capital Item Budget

I want to thank each and everyone that contributed towards the tabling of this budget, in particular the Premier of the province, Madam Winkie Direko for her support and encouragement.

And the same appreciation goes to all members of the Executive Council.

I cannot but thank all members of this House for their co-operation with me and my department, in particular the chairperson of the Finance Committee, Honourable Aaron Mguni and his committee.

I thank the Head of Department and all departmental staff for the tireless work they have put in, ensuring the successful tabling of this budget.

Special thanks are extended to members of staff in my office for the sacrifice they have made, including dozing off on chairs in the corridors of the office, all done with the purpose of ensuring that today's presentation is a success.

To my family, my wife Naniwe, and children Miliswa, Sizwe and Lulama, I thank you for your patience and forbearance in the period of extended unavailability.

Madiba, nakuni kwa Faku, ndithi MAZ'ENETHOLE NINGADINWA NANGOMSO!

In conclusion, Mr.Speaker,
Eduardo Galeano, reflecting on his Latin American experiences in the book of Embraces, had the following to say about what he calls the system:

Functionaries don't function;
Politicians speak but say nothing;
Voters vote but don't elect;
The information media misinform;
Schools teach ignorance;
Judges punish the victims;
The military makes war against its compatriots;
The police don't fight crime because they are too busy committing it;
Bankruptcies are socialised while profits are privatised;
Money is freer than people are;
People are at the service of things

Clearly Mr. Speaker, we on the other hand, through our public commitment to Batho Pele, are at the service of the people and not things.

I THANK YOU

Issued by the Office of the MEC for Finance, Expenditure and Economic Affairs, Free State