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INTRODUCTION

Honourable Speaker,
The Premier,
Members of the Legislature,
Colleagues in the Executive Council,
Ladies and gentlemen,

I rise to address you for another year on the budget of vote 3, the department of Finance and Economic Affairs.

Each year, I ask myself, can we maintain the momentum and creativity of the previous year, can we maintain the high standards that we set ourselves in the department. Well, judge for yourselves.

PROVINCIAL PRIORITIES AND THE DEPARTMENTAL BUDGET

The Gauteng Executive has 3 key priorities that shape all of the departments' activities. Specifically, the priorities of growing the provincial economy and good governance shape the activities of the Department of Finance and Economic Affairs. Indeed, our vision and mission statements capture these priorities.

The vision of the department is of a provincial government that is financially well managed and contributes effectively to the economic development of Gauteng and South Africa.

In promoting this vision, three simple yet powerful missions drive this department:
* Promoting the economy;
* Ensuring sound public finances; and
* Building a professional administration.

In considering the budget of vote 3, it should be viewed within this framework and the following allocations:

A total of R550 million, or 71%, planned for spending to grow the provincial economy and R224 million, or 29%, to be spent in promoting the priority of good governance in the province. The total budget of the department sought for appropriation is R774 million.

Turning then to an overview of the salient issues of this budget and the context within which it should be considered:

OVERVIEW OF THE GAUTENG ECONOMY

The Gauteng province represents the largest economic sub-region in South Africa. According to the latest data published by Econometrix, the Gauteng economy accounts for 41% of the Gross Domestic Product (GDP) and 22% of the total population of the country. A sharp increase indeed from the 38% and 18% previously reported.

Rather than go into a detailed exposition of all of the sectors within the economy and bored this house to death, I would rather focus a few key sectors:

The financial and business services sector

The financial and business services sector (F & B) in Gauteng has grown the fastest of all the sectors over the 1996 - 1999 period. In fact its contribution to the GGP increased to 26%.

The key trends in the finance and business services sector relate to the increased use of "virtual banking" through the Internet, introduction of smart cards, the restructuring of uncompetitive retail banking sector, consolidation of the insurance industry and the outsourcing and strong demand for information technology services as main drivers of growth.

The value added in the sector remained constant at 3% from 1999 to 2000. This is after a decline of 1% in the 1998 to 1999 period. This should be considered against the backdrop of major players concentrating mainly in stabilising their operations during this period that saw mergers and the failed merger of banks, the closing of branches by certain major banks and the effects of the announcement by government to stop deductions on insurance companies and micro-lenders.

The Manufacturing Sector

The manufacturing sector has declined from 20.3% to 17.8% in its contribution to GGP in the period 1996 to 1999. Given that Gauteng contributes 35% of the total national manufacturing output, a similar trend has been observed within the GDP.

It is important to note, however, that its contribution to GGP in absolute terms has grown. In year 2000, sub-sectors that experienced considerable growth are iron and steel, motor vehicles parts, industrial chemicals, professional equipment, paper and paper products, rubber products, glass and glass products, and non-ferrous metals.

The strongest contributing sub-sectors are: metal products, machinery and household appliances at 35%, fuel, petroleum, chemical and rubber products at 14%, food, beverages and tobacco products with 10%, and wood and wood products with 9.5%, (Source: WEFA)

It is evident that the Gauteng provincial economy still plays a major role in the South African context in terms of its percentage contributions to the GDP. In particular, the evidence of sectoral contributions especially the finance and business services sector reflects the strength of the provinces in smart industries and re-enforces the slogan of Gauteng: The Smart Province. With the development in IT and telecommunications, Gauteng, has an emerging strength in advanced infrastructure.

The financial base is the strongest on the continent with a large share of the world's major financial institutions having a presence in the province. The financial sector is also well developed in emerging areas of global trends and has the capacity to provide complex and sophisticated finance to business.

STRIVING FOR HIGHER ECONOMIC GROWTH

But we are all in agreement: the current level of growth in the economy is not adequate if we are to meet the challenges that face us. Thus, in order to shift its economic trajectory, Gauteng's 1997 Trade and Industrial strategy informed a three-pronged approach toward developing Gauteng into the "Smart" Province of South Africa.

In the previous financial Year, the Blue IQ initiative was launched, with a R1, 2 billion budget, with a further R500 million allocation in year 4, and a mandate to deliver 10 mega projects in Gauteng. The Blue IQ initiative is our commitment to delivering on the three strategic thrusts identified through the Trade and Industrial Strategy, namely smart industries (in particular information and telecommunications), high value added manufacturing, and the services sectors (in particular business tourism). These projects are located in key economic nodes in the province such that it has the optimum social and economic impact.

The innovative approach taken by Gauteng, focusing on fast tracked delivery with strong accountability is showing results. Blue IQ has become the talk of town and has astounded its critics with its approach and progress.

A total of R152.7m was expended on the various projects in the financial year 2000/2001, and implementation is moving rapidly, with a number of projects already on site. I would like to briefly cover the progress made to date on some of the projects, and the key milestones targeted for this financial year:

Our investments to boost the manufacturing sector, realigning it to one of high value added, are beginning to take shape.

The Gauteng Automotive Cluster has begun to reap the benefits of the Automotive Industry Development Centre (AIDC), for which the province has provided R100 million over 3 years, that has recently been established. An industry advisory board consisting of key industry players has been put in place and the AIDC officially launched in May. It recently completed its first assignment.

Furthermore, agreements have been concluded with four tertiary institutions for the development and presentation of courses specifically designed to meet the needs of the automotive industry. It is envisaged that the first student intake would be in the January 2002.

A master plan for infrastructure upgrade to improve the competitiveness of the automotive cluster has been prepared for discussion.

As part of the regeneration process of the Wadeville Alrode Industrial Corridor, Blue IQ is making a significant investment in infrastructure development, road signage and several road infrastructure projects.

To date, taxi lay-byes, improvement of signage in Wadeville and Alrode and the construction of the K123 and the N3 off ramp have been completed.

The construction of shelters for informal traders and the taxi rank in Wadeville will be completed by August 2001. Design is underway for access control to industrial areas in Alrode with implementation scheduled to start in this month.

Garfield Rd, Ring Road West extension and the widening of Black Reef Road will enter construction phase in the third quarter of 2001. The extension of Grey Avenue is under design and due for tender in the first quarter of 2002.

The provincial manager (CEO) for Gauteng Manufacturing Advice Centre has begun duty. A budget of R10m per annum has been set aside for the financing, in partnership with National government and DANIDA for the GAUMAC. It is anticipated that the MAC will begin operations during the last quarter 2001.

Investment in the Tourism sector is aimed at boosting the business, sport and cultural tourism product of Gauteng.

Rather than repeat the input of my colleague Mary Metcalf, in giving you an update on the Cradle of Humankind World Heritage site and Dinokeng, it is appropriate to just say that we that we are well on track. We envisage that R million would be spent on the Cradle of Human and R million on Dinokeng this year. Imagine, the first of the "Big Five", buffalo roaming North East Gauteng by October this year.

The developments within the Newtown Cultural Precinct reflect the speed with which Blue IQ and its partners are working. If ever someone wants to seethe slogan of "turning Gauteng into a construction site" in action - I humbly ask that you visit this precinct. The place is a hive of construction.

The Metro Market including taxi rank, market and retail space has commenced and the upgrade of buildings and facilities in Newtown is already in progress.

The design team for the Mary Fitzgerald Square has been appointed and development of this area will commence in June 2001 with completion date set for December 2001

The tender for the construction of on and off-ramps for easy access into Newtown from the North and South of Johannesburg has been awarded. The winning design and tender for the bridge has been chosen, and will be officially announced shortly. Construction of the spectacular bridge will start around September/October this year.

The Development framework for Constitution Hill has been completed, and the report on the heritage handed over in May.

With all the institutional elements now finalised, bulk earthwork for construction will start in late July and construction on the court will commence in quarter 4, 2001

Our investment in the inner city has begun to pay dividends. It is home to 217 000 people, with over 800 000 daily commuters coming into the city centre each day. Office occupations have shown improvement. Old Mutual has let 10 000 square metres of space, the Boland Bank Building which was sold recently is now fully let; Carlton Centre which was 30% let in 1999 now stands at 90% let; Hunts Corner which was empty in July 2000 is currently 95% let - that is 14 259 square metres. Indeed our investment is paying dividends. Johannesburg is rising.

The Innovation Hub recently hosted its first milestone event to celebrate its achievements. During the last year, The Innovation Hub has established the governance structure and has opened the Hub2B, in pilot mode for creating a unique space that allows for the establishment of Innovation Hub Incubator. We already have seven innovative start-up companies working at this pilot site and reaping the benefits of the Hub concept.

The Innovation Hub has launched its CoachLab Leadership programme initially through the ITCoachLab focused on IT, to fast-track IT innovators, in partnership with the Innovation Hub, tertiary institutions and industry, where participating postgraduate students will work with an IT expert employed in the industry. Students gain real-life experience with mission-critical systems, credits for work completed in the ITCoachLab and an income while completing their postgraduate studies.

The Environmental Impact assessment of the final Hub site has been commissioned and road access planning is also under way.

Further more, we are very pleased with the initial response we have had from multi-national and national high-tech, IT and telecommunications companies, who have given their commitment to support this project.

The recent investment outreach trip to Singapore and Malaysia yielded valuable leads, with the Singaporean Trade Development Board and Temasek Holdings coming out to Gauteng to visit to the hub and identifying numerous investment opportunities. Blue IQ has been offered country partner status by the Asia Development Bank.Com. Follow up meetings are scheduled for late July to finalise these proposals.

The road infrastructure upgrades for the Johannesburg International Airport Industrial Development Zone have been finalised. The Atlas Road upgrade and the N12 interchange is currently in planning with tenders due in quarter 4 this year.

The application for declaration of the IDZ will be lodged with the Minister of Trade and Industry by October 2001.

The planning overview the City Deep Container Depot Industrial Development Zone has been completed, and two Industrial Development Zone sites were identified and an analysis of infrastructure and facilities completed.

A Housing Study tender has closed, and evaluation of tenders underway.

The construction of Rosherville West and lower Germiston roads are already under way for completion in quarter 4 2001, whilst the adjudication of tenders for the upgrade of Lower Germiston Road has been finalised and construction is schedule to start shortly. Finally, the design of the Cleveland Link Road is underway and construction is estimated to start in November 2001.

The application for the IDZ will be tabled in January 2002.

The Gautrain Rapid Rail Link has received much attention in the media and has been covered by MEC Mosunkutu. We are currently busy with the financial feasibility study and will be announcing the route in the near future, and an investor's conference is planned for September this year, with the aim to start construction in 2003.

The R1,7 billion investments in creating world class, 'smart' infrastructure to boost the competitiveness of our economy is substantial. However, the role of government is to create an enabling environment for private sector investment that then boosts growth and creates jobs. Thus we have set our goal as a measure of our return on investment (ROI) as R100 billion in foreign and local investment over the next ten years.

To ensure that the above initiatives achieve our objective of attracting investment into the Province the Gauteng Economic Development Agency will continue to play a critical role.

Its missions to date have proved important in generating investment leads for the province. In the previous year it undertook missions abroad that resulted in 31 potential joint venture projects being negotiated. It attracted some R420m investment into Gauteng, this constituting around 22% of total investment into the province of R2.02b. Its success is further evidenced by a 227% increase in its membership.

GEDA has planned an outward automotive components and parts mission to Brazil and a mission to New York to exhibit in the IT and telecommunication sector.

The Gauteng Gambling Board has continued to perform well in its responsibilities to regulate the industry and collecting taxes on our behalf. The Board has licensed 5 casinos that contribute R220 million in taxes to the provincial coffers annually; 18 bingo licenses of which 8 are operational, contributing R1,3 million in taxes; 120 bookmakers that cough up R20 million and 1 totalisation license that yields R47 million.

In the last year there were 65 raids on illegal gambling operations, 807 machines confiscated, 66 convictions secured with 2 acquittals and 2 cases withdrawn. Currently, there are 3 414 confiscated machines in storage.

The Board projects that it will collect R329 million on behalf of the provinces that have entrusted tax collection to it.

Consumer and Liquor Affairs and Business Regulation continue to operate within the department. The focus of consumer affairs is on consumer education and mediation and conciliation rather than resorting to the Consumer Court.

The Liquor Board continues to regulate liquor trading within the ambit of the existing legislation in the province by issuing and renewing liquor license and also dealing with issues of compliance with the liquor Act.

The department has refocused its strategy on Small and Medium Enterprises (SME) through harnessing the potential of its procurement activities to improve the business opportunities for SMEs. The sustainable development of SMEs requires a few ingredients, the most critical of which is access to business opportunities. Gauteng spends close to R4 billion per annum on procuring goods and services. Of this almost R1 billion is procured through SMEs. Strategic sourcing and targeting through leveraging GPG spend could easily double this figure.

The establishment of the Gauteng Provincial Government SME portal during this financial year will give us the vehicle to drive this strategy.

In keeping with our targeted sectoral approach to improving the performance of the economy, three Manufacturing Advise Centres will also be established in Ekurhuleni, Sedibeng and Mogale City to provide support to the SME's in the prioritised sectors. All three are intended to begin operations this financial year.

56% of all visitors to South Africa visit Gauteng and stay an average of 4 nights. This contributes some R12 billion annually to the economy. The key is to increase the number of visitors as well as to increase the average stay.

The Gauteng Tourism Authority is looking forward to becoming a fully-fledged regulatory body in this financial year.

Tourism development is high on the agenda of GTA to improve the tourism product offering of Gauteng. R6 million has been spent in developing the Alexandra tourism destination.

The Earth Summit, with an estimated 50 000 delegates and over 100 heads of state in September 2002 presents a wonderful opportunity to show case South Africa and Gauteng. GTA in strengthening its partnership outreach has secured opportunities for over 50 SMMEs for the Earth Summit.

Tourism is a key component to growing this economy and creates jobs. GTA has been allocated R25 million in addition to its annual budget for the development of tourism in this province.

CONTRIBUTING TO GOOD GOVERNANCE

Turning to the other key priority of the Provincial Executive:

The Gauteng Shared Service Centre

Quality service delivery and good governance are the driving force behind the Gauteng Shared Services Centre (GSSC). Shared services are an alternative service delivery model that has had wide acceptance in the public sector. Its is an enterprise approach to delivering administrative services, one that seeks to gain efficiencies in lower value added transaction processes as well as providing increased value to the GPG by leveraging scarce resources and skills, ensuring that they are shared across the GPG.

The first initiative of its kind in South Africa, the GSSC consolidates the provincial administration's internal support functions, namely Finance, Human Resources, Procurement and Information Technology, into a single organisational unit. This means that scarce resources are optimally utilised and officials can concentrate on delivering essential services to the people of Gauteng.

The implementation of the GSSC is a long-term journey. The GPG plans for a three-year timeframe for the full implementation of the SSC, a timeframe that is consistent with other major shared services projects around the world. An allocation of R125 million for the 2001/2002 financial year has been tabled. Once it is operational, it will be one of the first public sectors SSC in the world.

Within the GSSC, an Internal Audit Unit has been established in compliance with the Public Finance Management Act (PFMA). Significant progress has been made within the GSSC, a CEO has been appointed, the former Project Manager of the GSSC has been appointed the Chief Operations Officer and the General Manager of internal Audit together with his management have been appointed. These are highly skilled individuals, with good track records both in the public and private sector.

The first migration of staff took place in April this year that saw all the Internal Audit staff of GPG emigrates to the Shared Service Centre. This unit has begun offering services to the various departments.

We are currently at the pilot phase of the project that will result in the second wave of migration, which is planned for November 2001.

Public Finance Management Act

The PFMA has certainly elevated issues of good governance through transparency and accountability in financial management in the public sector in South Africa to the level of best practices in the world. This is benchmark legislation.

Treasury's focus for implementation centred on issues of reporting, internal audit, budgeting, and capacity building. A further R25 million has been set aside for the implementation in this financial year.

The province has met all reporting requirements set by the PFMA. All departments now have a Chief Financial Officer who will now champion the implementation of the PFMA. Treasury will be working closely with the CFOs to ensure that the departments do not only spend within budget, but also ensure quality of spend. Of concern however is the financial capacity within the Departments. To this end Treasury has made support available to each CFO in order to ensure that they are not disadvantaged in delivering on their mandate.

Within the Gauteng Shared Service Centre the Internal Audit Unit has been established and the Audit Committees have been constituted and trained in compliance with the PFMA.

The changeover from the Financial Management System (FMS) to the Basic Accounting System (BAS) has been completed. With it, the chart of accounts now reflects Government Financial Statistics (GFS) expenditure classification adopted by the World Bank and the IMF. For this I would like to congratulate Susan Woest and her team. They are the unsung heroes of this government.

Gauteng is one of few, if not the only provincial government in which all of its departments have complied with the PFMA in submitting financial statements in the new formats to the Auditor General within the 2 month period stipulated by the Act. Another of the amazing feats of the year. This was achieved in spite of technical hitches with the conversion from FMS to BAS, networks that collapsed with the strain of the traffic and last minute changes to reclassifying the previous years expenditure. Congratulations to all departments.

Treasury and the Financial Administration unit of the department continue to be the standard bearers.

I can with pride say that the financial position of the province is sound. We have closed the financial year ended 31 March 2001 with a surplus. Expenditure was within budget and own revenue collections exceeded budget.

All major own revenue items exceeded budget. The establishment of the treasury cash desk has ensured that we maximise the returns on the cash reserves in the money market. The treasury desk had an internal target of R50 million but even exceeded this by some R29 million, over 50%. We have budgeted R75 million for interest income for the present year. Well, I can share with you the latest investment report that I received. As at 31 May 2001, after only two months of activity, they have earned R25 million in interest income.

LEGISLATIVE PROGRAMME

The department will continue to review and update legislation in the interest of good governance and to keep pace with the new developments and changes in the environment in order to ensure an effective and efficient regulatory framework. The following pieces of legislation will be submitted to the legislature this year.

Liquor Bill

We intend to table the Gauteng Liquor Bill later this year. The Bill will be drafted within the framework of default legislation introduced at National level. The keys features of the intended legislation encompass a properly regulated industry that promotes the principle of self-regulation with empowerment a critical element.

Tourism Bill

We intend replacing the Gauteng Tourism Act, 1998 with a revised Gauteng Tourism Bill that seeks to ensure that the provincial government plays a more direct role in enhancing the role of tourism in the economy. The key principles of the legislation will be the introduction of an Advisory Committee on Tourism and the proper co-ordination of tourism and its impact on tourism development in the province.

Tender Board Act

The introduction of the PFMA has had consequences on a variety of practices and legislation in government.

Late in 2000, the National Cabinet adopted, within the ambit of the PFMA, a policy on procurement reforms. The reforms call for the phasing out of tender boards over a period of eighteen months commencing 1 April 2001.

In pursuance of the reform initiative we have opted to phase in implementation over this financial year with an end date of 31 March 2002. This requires that the Tender Board Act, 1994, be amended to extend the term of office of the existing Tender Board be to 31 March 2002.

Adjustment Appropriation Bill

It is the intention of Treasury to table the adjustment appropriation bill in late October or early November this year so as to ensure that changes to the budget are timeously done and capture. This will ensure that expenditure is properly planned and executed.

CONCLUSION

In my budget speech to this House in February of this year, I spoke of our historic past, our determined present and our unstoppable future. I think that the achievements of the department of Finance and Economic Affairs and its plans for the forthcoming year bears testimony to those words. We have chosen a difficult path, yes. A path that most would shy away from. But, we set ourselves very high standards. And we will have it no other way. We strive for the best. We will take on the most difficult challenges. We do so because we have faith and trust in the people around us. And as we have proven in the past, we have the team and the spirit to succeed.

I thank you.

Issued by Finance and Economic Affairs, Gauteng

5 June 2001