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Introduction

Our struggle has always been about equity. Democracy has brought about the political and social emancipation of our people. Reflecting a commitment to a pursuit for equity the Premier in his opening address to the Provincial Legislature committed government and also urged civil society to "get the province working". He has spelt out various ways in which provincial government can contribute towards these goals and I need not repeat what he has already said.

As we advance in our cause to transform government and the way it delivers services we do so in the knowledge that more and more people's lives are being improved. Increasingly, government now delivers more and better services to more and more people. Discrimination in the provision of public goods and services has ended and today government is geared up to creating "a better life for all".

During 1999, following the return of the African National Congress to power in the Northern Cape, we reviewed the performance of government up to that point and thereafter tabled a new five year strategic plan. In that plan government has spelt out its intentions and is very clear in terms of what we seek to achieve as a government.

A budget is not just about numbers. Instead, the budget should be seen as government's response to its assessment of the aspirations of the people of South Africa.

Together with the national budget presented by my colleague the Honourable Minister of Finance, the budget that I table today must be seen in that light. Today I reveal the spending plans that we believe will permit government to do the things that are necessary to enable the delivery of the outputs that we have specified in our strategic plan.

In particular, the budget that I will present here today must be seen as our attempt to advance the cause of the people of the Northern Cape. I believe that it is a budget that will deepen the process of transformation and contribute further to the elimination of poverty and deprivation in our province. It is my fervent wish that one day we should be able to look back and say that our efforts have borne fruit and we helped replace despair with hope, sickness with health, ignorance with knowledge, homelessness with homes and unemployment with employment. When that day comes, we will be able to say that we have, as a nation, completed our democratisation.

And yet, there is so much that still needs to be done. We recognise that the suffering of our people is not yet over. In his opening speech to the Provincial Legislature, the Honourable Premier aptly reminded us that we still face many, many challenges. Reducing unemployment and poverty are uppermost amongst those challenges. But there is hope. Increasingly there are signs that our economy is recovering and economic growth rates are forecast to increase over the next year.

National Issues

As I have already stated, this provincial budget should be seen as complementing the national budget presented by the Honourable Minister of Finance in the National Assembly last week. We obviously share the Minister's ideals of growing the economy, eradicating poverty and offering protection to the poor and vulnerable members of our society.

It is by now widely accepted that the Minister's budget was a bold one. It has been hailed as a watershed budget in so far as restructuring of the tax system, setting targets for inflation and reducing the budget deficit is concerned. Together, it is estimated that these measures will give us every chance to achieve the predicted economic growth rate of 3.5% over the next year. This is of course very good news and is a reward for the fiscal discipline that the ANC government has exercised since coming to power.

At times it has been difficult and painful for us to resist the temptation to spend our way out of the social backlogs and poverty that our people have endured for so long. However, we have now turned an important corner and we must be grateful that our patience is beginning to bear fruit.

Mistakes are made not in the worst of times but in the best of times and we must be watchful and continue to exercise discipline. Now that our economy is showing signs of a sustained recovery it is important that we continue to exercise prudence in the way in which we manage our resources. If we do, we will surely succeed in our efforts to rejuvenate our local, provincial and national economies and provide the jobs needed to confront poverty and unemployment.

I would like to make a clear statement that we remain firmly supportive of national government's fiscal policy and its macro-economic strategy for growth and development.

Provincial Economy

The economy of the Northern Cape remains resource based. As such it offers challenges that are not necessarily unique but which will certainly necessitate innovative solutions. While we may never completely eliminate our reliance on the primary sector, that should not deter us from seeking to achieve growth in the secondary and tertiary sectors.

Our research has consistently revealed that there are prospects for increased secondary activity in the minerals and agricultural processing industries in particular. Moreover, it also reveals prospects for growth in the service sectors.

In the mining sector, the prospects for growth in the Northern Cape are extremely good. The new zinc mine and zinc refinery at Gamsberg, the new De Beers processing plant in Kimberley, the prospect of a ferro-manganese smelter in the Kalahari District, and the exploitation of the Kudu natural gas field are all major developments that will contribute to increased growth over the next few years.

In agriculture, the Premier also referred to the additional 4000 hectares of water rights that have been made available along the lower Orange River as well as the several infrastructural projects that are in the pipeline, all of which will stimulate the economy.

All in all there are strong signs that the provincial economy can sustain higher levels of growth in the coming years than it has done in the recent past. Good seasonal rains, the EU-SA trade agreement, the lowering of taxes and the stimuli for SMME development announced by the national Minister all offer the entrepreneur opportunities for growth. Not for a long time has the economic climate been as positive as it is now. The national Minister has predicted growth of 3.5% over the next year. There is no reason why this province should not mirror that performance if we all make a commitment to rallying around the Honourable Premier's call to "get the province working".

Developments on the Fiscal Front

Transformation can be painful, but it is as inevitable as it is necessary. In the last three no longer a number crunching technical exercise with no link between expenditure and the priorities of government.

Elected office-bearers now participate fully and take full responsibility for expenditure priorities.

We moved away from incremental budgeting methods, through a zero based budgeting exercise to our present multiyear planning of budgets known as the Medium Term Expenditure Framework (MTEF) which enables us to plan our expenditure far more efficiently.

In the past, departments started spending before budgets were approved. We have changed this and the process of approval now precedes spending.

We introduced the Early Warning System (EWS) as a means for better monitoring of expenditure to serve as a warning against potential over expenditure.

We devolved financial authority to Heads of Departments to improve management of resources and to ensure accountability of expenditure.

Our cash flow management processes are amongst the best. We continue on the path of inculcating among personnel a sense of fiscal discipline and acceptance of the notion that a budget is law.

All these endeavours are undertaken with our stated aim of sound financial management.

However, our task of transforming the financial systems in government is not yet complete.

This year sees the implementation of the Public Finance Management Act (PFMA) which seeks to refine the system of financial management in the public sector and improve on accountability of managers.

Another component in the basket of reforms is to change the budget process and the budget format in line with a performance based budgeting system, thereby focusing on outputs and outcomes of government activities.

The new budget format, known as the budget statement, is presented today as a pilot, and is intended to replace the current white book approach. The new format, which is consistent with the internationally recognised format known as the Government Finance Statistics (GFS) classification, consists of three chapters i.e. the budget statement No.1 which gives an overview of the budget and related information, a budget statement No.2 which outlines departmental estimates and policy priorities and a Budget Statement No.3, which outlines capital expenditure.

The changed format also facilitates information to be tabled per economic classification of expenditure and revenue. In the functional classification (i.e. how programmes are classified) we see the reordering of the structure of the various votes resulting in the votes being consolidated from 17 to 14.

This new format will enable government and the public to clearly determine provincial government's expenditure priorities for the financial year at hand as well as the following two years.

[The information is also available on compact disc]

Revenue

The Northern Cape receives the bulk of its revenue from the central fiscus. Nationally raised revenues are divided among the three spheres of government, after certain obligations such as the national debt and contingency reserves are first taken into account.

Thereafter an explicit revenue sharing formula is used to divide the provincial allocation amongst the nine provinces. This formula directs funds to provinces based on their demographic and economic profiles.

In terms of the Financial and Fiscal Commission's (FFC) original recommendations our equitable share would by now have declined to 1,9%. But due to our forceful counter arguments the national budget council approved a formula which initially secured a 2,6% allocation to be reduced to 2,3% over 5 years. At present our allocation is 2,44%. The good news is that it will stabilise at 2,4% and not reduce any further over the medium term.

Based on the above approach the Northern Cape's equitable share allocation for the 2000/2001 is just over R2,3 billion which includes the carry through costs of improved salary benefits of personnel.

In addition, the province also raises it own revenue from sources such as motor vehicle licences, hospital fees and gambling revenues.

Provincial Governments' right to raise revenue from other sources is an accepted fact but the nature of such revenue sources is still the subject of debate in South Africa with differing views emanating from the FFC and the Katz Commission. It is hoped that the matter will reach conclusion in the forthcoming fiscal year. In the National Budget Council we have taken the view that in the interim we need to draw up an "allowed list" of provincial taxes so as to ensure uniformity in provinces and avoid increasing the overall tax burden on our people.

Furthermore, provinces are not allowed to budget for a deficit. Hence we have to ensure that we bring expenditure in line with revenue. It would be futile for us to spend more than we have available, as deficits would only serve to put pressure on the available resources in subsequent years. I want to confirm this government's commitment to stay within our allocated budget and to continue on the path of rendering better services. We aim to do more with less and achieve this through efficiency gains. I believe we are better positioned than ever before to do so.

The total amount of provincial revenue from all sources for the financial year 2000/2001 amounts to just over R 2,5 billion (R2 512, 535 million) which is 11,6% more than the 99/2000 financial year.

The equitable share our province receives as well as a further allocation of R163,641 million which is granted subject to certain conditions, together constitute 96,5% of the province's revenue.

The total of revenue to be raised provincially amounts to R89, 031 million or 3,5% of our total revenue.

The main sources of provincial revenue are:

* Motor vehicle licences R44,335 million (which is an increase of R4,030 million and is the largest contributor of provincially raised revenue);

* Gambling and racing revenue - R17,448 million; and

* Hospital fees - R11,825 million (approximately R1 million more than last year).

The proportion of provincial revenue to nationally raised resources has remained stable. However, we need to embark on increasing our own revenue. In the last financial year our strategy has been not to increase service charges but rather to improve the efficiency of collecting that which is due. As a result we completed the review of the agreements with collection agencies in the case of motor vehicle licences and will closely monitor the implementation of these revised agency agreements. Earlier this year a new computerised information system for hospitals became operational. Once fully implemented it will go a long way in improving and increasing revenue collection.

Expenditure

The total available resources for allocation is

R2 512,535 million. Since R10,130 million is in respect of statutory expenditure, the amount to be voted in the Northern Cape Appropriation Act, 2000 is R2 502,405 million. This is R260,895 million more than the previous financial year and represents an 11.6% increase. These amounts do not include any Improvement of Conditions of Services (ICOS) but includes the carry through affects of previous Improvement of Conditions of Services (ICOS) as well as the housing funds, which were previously dealt with outside our budgets.

The increase in allocated resources has enabled us to ease some of the pressures on budgets, which was evidenced in the last few years.

Although we have to ensure the maintenance of certain basic services within the constitutionally defined obligations, in considering the allocations to various service needs we were motivated by our strategic development plan and the priorities outlined therein. The key approach was to strike a fine balance between current expenditure needs and the needs of additional priorities, to improve the ratios between consumption expenditure and capital development needs, to maintain social expenditure priorities yet move to stimulate economic growth. Achieving such balances is no easy task.

Debt Management Strategy

I am pleased to advise that over expenditure has been brought under control.

This is illustrated by trends over the past three (3) years which reflect a progressive decline from 5% to 3% (of the budget).

Due to the improved financial management systems we are able to predict that in the forthcoming financial year this problem will finally be eradicated.

Unfortunately past over expenditures have had the effect of putting pressure on the cash flows of subsequent years and we needed to devise a strategy to eliminate this problem. Whilst a final assessment can only be made after the current financial year ends current estimates are that the accumulated debt will amount to approximately R130 million.

Cabinet has approved a strategy that will see the elimination of this debt overhang over the Medium Term Expenditure Framework (MTEF) period. The sum of up to R44,269 million has been set aside for this purpose in the first year, R71,337 million in the second and
R63,683 million in the third. I am however confident the debt can be extinguished in two (2) years leaving resources available for allocation in the third year to further our developmental objectives. However, achieving these goals will depend on fiscal prudence that needs to be displayed by all of us in the short term.

Allocations to Departments

Let me now turn to the various allocations that are to be made to the respective votes for the 2000/2001 financial year. I will only seek to highlight the major ones or where new approaches are being tabled. Exact details of the various allocations can be found in the estimates of expenditure as well as the budget statement.

Education

Our development is directly linked to the capacity and skills of our people. Hence Education is a key component in the reconstruction and development of our province.

As a consequence the resource base for this service must always be adequately maintained. The allocation for Education is increased to R937,480 million and constitutes 37,3% of our total expenditure. This amount includes allocations for additional and special programmes such as the improvement of financial management capacity, Culture of Learning and Teaching Services (COLTS), ensuring that quality is maintained in professional teaching, and AIDS programmes in schools.

I am confident that with this allocation, which is 9% higher, the Department of Education has been placed on a sound footing to achieve its objectives. However, this is a quantitative assessment. The task to translate this into quality education must of necessity be that of learners and teachers in particular as well as government and civil society.

Social Welfare Services

Ensuring that a safety net exists for the elderly, the frail and the most vulnerable in our society is a key priority for us.

As a result an amount of R638,061 million (which includes works) has been provided for the Social Welfare Services and Population Development which represents a 6% increase over the previous year's allocation.

The key challenge faced by this department is to manage the growth on social security programmes whilst strengthening developmental programmes. Decisive policy decisions were needed and we took them. The phasing in of the Child Support Grant to replace the Child Maintenance Grants, as well as the re-evaluation of Disability Grants was necessary to ensure equity in the system of grants. Unfortunately there have been abusive and corrupt practices in the past where non-deserving recipients were accessing grants. This cannot be tolerated and we will ensure that with the re-registration and reassessment procedure only deserving persons are admitted.

I am sure that the increase in grants announced last week, will be welcomed by recipients.

I am also confident that in this financial year this department will be able to go far in its efforts to bring expenditure in line with it's allocation.

Health

A healthy nation is a productive one. In pursuance of that ideal we table an increase of 13,5% in the Health budget bringing the allocation to R418,357 million. This means that the health allocations make up 17% of our overall budget.

In addition to current health care programmes, resources to the extent of R23,480 million will be expended by the Health Department on programmes such as the training of Health professionals and the conducting of research.

To upgrade and rehabilitate hospitals the sum of
R8 million is availed, whilst over R10,5 million will be expended over the next three (3) years on capital backlogs in emergency medical services. A further R3,831 million will be availed annually to complement the current expenditures on pharmaceuticals (medicines and vaccines).

The baseline of this vote will finally be corrected in the second year of the Medium Term Expenditure Framework (MTEF) when the overall Health budget is increased by an additional R5 million. As with Education this vote ought to balance its expenditure with its resource base. As I reported last year a pressure on the resources of this vote that still exists, is the cross boundary primary health care services accessed by residents from the North West Province. We are working on resolving this situation.

Economic Services

Economic Development and job creation is a key concern for government and constitutes a core priority in our development strategy. Care was taken in ensuring that a shift is affected in support of programmes aimed at stimulating growth.

Accordingly, services such as Roads, Transport and Works, Agriculture, Nature Conservation and Economic Affairs and Tourism and Housing attract R337,469 million.

We have specifically targeted increases in programmes aimed at the development of tourism, the fishing industry, and gambling services, as well as the upgrading of certain key roads and facilitating the extended operations of nature reserves. The Housing programme, though addressing a social need, is a key component in stimulating growth and job creation. Hence the Housing allocation has been increased to R58,1 million whilst the Department of Economic Affairs and Tourism receives a R3,688 million increase to a total of R15,392 million.

Other Services

The other social and special services such as local government (excluding Housing), Provincial Safety and Liaison, Sport Arts and Culture are important services which have collectively been allocated R71,849 million.

These allocations demonstrate our commitment to re-orientated spending in line with our development strategy. We intend spending more on sporting infrastructure in the province whilst resources have been allocated to kick-start a municipal infrastructure programme aimed at eradicating the "bucket system" still prevalent in some areas of our province.

Crime and its management is an important priority. Whilst the Minister of Finance announced increases in the SAPS budget, the office of Safety and Liaison have been allocated added resources to facilitate their oversight role in respect of security and crime prevention services rendered by South African Police Services (SAPS).

In as far as the remaining votes are concerned which enable the functions of the Premier, the operations of Cabinet, certain corporate services such as Human Resources and Legal Services, and the Department of Finance, all are allocated a total of R75,345 million.

The operations of this legislature are key in ensuring the smooth functioning of democratic processes and facilitate the oversight role that this House and its various committees have to play in relation to the executive. For some time now members have expressed concerns on their ability to do so effectively due to budgetary constraints. In the past we have had to cut our coats according to available cloth. This is still the case. But it has become possible to table increases for the operations of the legislature in the sum of R4,444 million. This increases the total allocation to R28,221 million.

Constituency offices are important links between the legislature and the people. The constituency office allowance of members will also be increased from the present R3000.00 to R4000.00 per member. Nationally the allowances were increased to about R4500.00 some two years ago, but we could not follow suit due to financial constraints.

We have also budgeted R39,325 million under the Reconstruction and Development Programme (RDP) vote. These resources are earmarked for allocations to the Premier's bursary Fund to the extent of R3 million and a contingency reserve for unforeseen events such as disasters in the sum of R3,405 million, whilst the balance is mainly retained for debt redemption.

Though we have secured sufficient resources to commence and complete the legislature building, we have also reserved R32 million in the third year of the Medium Term Expenditure Framework (MTEF) to cover any unforeseen costs of the building or associated developments.

The Budget in Perspective

As we pursue our policy objectives, we do so by pruning expenditure commitments within the confines of available resources.

Overall Emphasis

We have sought to strike balances between current priorities and new imperatives. Hence we approved allocations to new programmes (such as the eradication of the "bucket system") to increasing spending on existing ones (such as medicines and vaccines)

Allocation to Economic Development Services in the Department of Economic Affairs and Agriculture have been increased by 22% with programmes such as Tourism and Small Medium Micro Enterprises (SMME) development receiving substantially increased resources.

However, the bulk of the expenditure is on social services such as Housing, Education, Health and Welfare. The total spending on these services amounts to R2,1billion [R2 051,998million] which is 82% of the total allocation.

Personnel Costs

We have committed ourselves to do more with less. One of the ways to achieve this is to limit the growth in personnel expenditure. We aimed to keep such expenditure below 50% of our total budget and once again we have succeeded in this regard as our personnel costs amount to 49,8%. This obviously enables us to spend more on programmes. However the problem of wage drift needs to be addressed. Automatic promotions due to the effluxion of time should be eradicated and replaced with a system that seeks to incentivise and reward performance.

Capital Expenditure

We have begun integrating our expenditure and strategic plans and to link capital and operating decisions more closely. Whilst capital expenditure can have economic benefits there are benefits that are not quantifiable such as better quality of care or better user satisfaction.

We have increased our capital expenditure by 67,2%, which is in line with the commitments made by the Premier in his opening remarks to this house.

For the 2000/2001 financial year capital expenditure will amount to R157,061million which is 6,1% of the total budget. Barring the allocation for Housing and excluding Reconstruction and Development (RDP) funds, capital expenditure by departments increases from R55,106 million (last year) to R92,246 million

In addition the allocation received for the building of the legislature over a two (2) year period increases our expenditure on capital to just under R200 million for the 2000/2001 financial year.

HIV / AIDS

AIDS is one of the greatest threats facing us. It is generally agreed that we should focus on the youth who are the most vulnerable section of our population. In the national budget some R75 million has been budgeted to fight this epidemic. Our Premier has previously committed this province to a co-ordinated strategy in fighting this disease. We will be accessing the funds for this fight. Apart from the current programmes co-ordinated by the Department of Health, we have dedicated some R2.9 million over Medium Term Expenditure Framework (MTEF) period specifically for programmes in our schools.

Conclusion

Government's budgetary policies play a pivotal role in stimulating growth, investment and jobs. Economic and fiscal policies are not the only factors which will facilitate the achievement of objectives but affordable and good quality services such as health and education, infrastructure and communications will improve the attainment thereof. In these matters I dare say that we are on course.

The budget is the product of a large collective and reflects the key priorities and joint responsibility of the provincial government.

Hence and in closing I wish to thank:

* The Honourable Premier for his leadership and support as well as my cabinet colleagues in the Executive Council for their co-operation and commitment to fiscal discipline.

* The National Minister and Deputy Minister, the National Department of Finance and members of the National Budget Council for their co-operative style in dealing with policy, budget processes and division of resources.

* The Honourable members of this House and especially those in the portfolio committee on finance for their past and future efforts in refining the budget processes.

* The officials of the department of Finance who laboured tirelessly to ensure that this budget is tabled correctly and on time.

* The Swedish firm SIPU and in particular Mr T. Pettersson for his valued experience and his assistance in the preparation of the innovative budget statements.

* To the various Accounting Officers and their staff for their co-operation in sound fiscal management.

* To all those who contribute to the upliftment of our province.

It is with pleasure that I table:
* The Appropriation Bill 2000
* The Estimates of Revenue and Expenditure for the year ending 31 March 2001
* And for the very first time, the budget statements for the 2000/2001 financial year and the Medium Term Expenditure Framework period.

Issued by Northern Cape, Finance

29 February 2000