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Speaker
Honourable Premier of the Northern Cape
Members of the Executive Council
Members of the Provincial Legislature
Distinguished guests
Comrades and Friends

INTRODUCTION

The budget that I table before you today is a budget that re-affirms this government's unequivocal commitment to investing in economic growth.

We recognise explicitly that our strategies for the alleviation of poverty and underdevelopment cannot succeed unless we can locate our provincial economy on a sustainable economic growth path that sees the benefits of growth accruing equitably to all the inhabitants of the province. Indeed, without sustainable economic growth and poverty reduction we will not be able to achieve our national goal to create "a better life for all".

NATIONAL PERSPECTIVES

At a national level, both the State President and the Minister of Finance have alluded to the fact that our economic fundamentals are sound and that our economy has the latent potential to provide for the economic and social needs of our entire citizenry.

But let me remind you that we have reigned in our budget deficit, that we have dramatically reduced our net open forward position to manageable proportions, that we have massively improved the efficiency of revenue collection through SARS, that interest rates and inflation remain substantially lower than in previous years, and that by any measure our currency is substantially undervalued.

It is true that these are tough times globally. The global economy is in recession, demand for primary commodities has contracted massively, international tourism is pressured by the downturn in international air travel and international capital flows are less mobile than they may have been in the recent past, particularly in light of the Argentinean crisis and uncertainty about the robustness of the Japanese and American economy.

REFLECTIONS ON THE PROVINCIAL ECONOMY

Ordinarily for an economy like ours in the Northern Cape, dependent as it is on primary production and tourism, declining commodity prices, decreasing international tourism numbers and shrinking capital flows would not normally be good news. Ironically however, there would appear to be a silver lining in the cloud of the current global economic downturn for the Northern Cape.

Rand depreciation means that our primary commodity exports are extremely competitive. Furthermore, once current stockpiles and inventories for mineral commodities are exhausted and there is a positive shift in global economic fortunes, demand looks set to rise significantly. In agriculture, where commodities are usually perishable, the table grape industry has benefited through increased production and exchange rate devaluation. For our fledgling mariculture industry too, the price of export commodities such as West Coast Rock Lobster and Abalone have boomed as a result of the Rand's depreciation further enhancing the attractiveness of the mariculture sector for investment. Obviously, the Rand weakness and our non-aligned standing is good for the tourism industry.

Needless to say, we cannot rely on currency devaluation alone as a means to developing and maintaining our provincial economy on a sustainable basis. Rather, in the context of the New Partnership for Africa's Development (NEPAD) and within the framework of national economic policy we must endeavour to find the key to unlocking the as yet unexploited economic potential of the Northern Cape economy to create new wealth and provide for the economic needs of our people.

But what are provincial economic prospects? Where do we stand right now?

An examination of published data reflecting the share of the Northern Cape province in national Gross Domestic Product (GDP) reveals that between 1999 and 2000 the provincial share of GDP has increased in real terms at a rate greater than that of GDP itself. In other words, in real terms the provincial share of national GDP has grown - by something in the order of 2.3%. An examination of the sectoral breakdown of the Northern Cape's share of GDP as well as of Northern Cape GGP reveals that this growth was due mainly to growth in mining.

With projects like the De Beers Combined Treatment Plant and the Anglo American expansions at Aggeneys proceeding apace and due to come on stream soon, this trend in growth in GGP will undoubtedly continue.

We are well aware that certain sub-sectors in agriculture also continue to grow significantly. The table grape industry has almost become a barometer of agricultural prospects growing in terms of output by as much a 25% during the past season.

In mariculture, the proving of new technologies and recognition of the comparative advantage that exists on the Namaqualand coast has attracted significant investor interest from private sector project developers.

In summary, there is clear evidence of the fact that our provincial economy can sustain increased levels of economic activity that can in turn provide the economic opportunities for a greater number of our provincial population to enter and participate in the mainstream of our provincial economy both as labour and as entrepreneurs.

Although I do not wish to pre-empt the detail of the strategies and plans of my Executive Council colleagues who will speak in this House in the coming days and weeks during the budget debate, I would like to provide you with some insight into how we propose to go about actively promoting the further growth of our provincial economy.

OUR STRATEGY

The first point to make - and one that I will elaborate on during the course of this address - is that on average the budget allocations to the so-called "economic" votes will be increased by a greater proportion than those to the so-called "social" votes. In so doing, we are not robbing Peter to pay Paul. No. We acknowledge our obligation to maintain and continue to grow programmes directed at addressing backlogs in social services such as health, education, housing, water and sanitation and infrastructural development. But at the same time we recognise the need to direct increased resources to those spending agencies that can play a role in facilitating economic growth.

You might well ask how we intend to maintain social spending while simultaneously increasing allocations in favour of promoting economic growth. The answer is very straightforward. A reform of our provincial budgetary processes and improved financial management has put us in a position where we have greater latitude for discretionary spending on pro-poor policies and economic development strategies than we have ever had before. In this regard, I would like to thank my Executive Council colleagues and their officials for their assistance that they have provided through the provincial Budget Council process.

Secondly, we will be focussing on developing and strengthening partnerships for growth. In particular we will be re-defining our relationships with some of the national development financial institutions (DFIs) and the private sector. In this regard the Premier has already announced that the province will be establishing an economic development agency in the near future. This agency will be mandated to promote the development of new economic development projects in conjunction with the private sector and the DFIs.

Thirdly, and related to the previous point, we will be devoting increased amounts to a range of special funds for development as well as for the active and direct promotion of a limited number of economic development projects the identification and appraisal of which is already underway.

Fourthly, we will be increasing our investment in critical economic infrastructure that could facilitate economic growth and development.

DEVELOPMENTS IN FINANCIAL MANAGEMENT

In the last few years the various reforms that were introduced were successfully implemented. These range from the introduction of the Medium Term Expenditure Framework (MTEF) to the devolution of financial authority to Accounting Officers. Also the budget statement, which outlines in detail governments spending plans and expected outcomes, has become a useful tool by which performance can be measured. The implementation of the Public Finance Management Act (PFMA) is on course, which in the short term focuses on improving financial management and on matters of compliance. So, for example, in pursuance of this all Chief Financial Officers (CFOs) were appointed and commenced duties in January 2002.

This year will see the consolidation of the various changes. If we are to give meaning to the notion "Spend Better not more" it will be necessary to obtain the tools that would enable that. For years the Financial Management System (FMS) has been a bone of contention as it was seen as an inadequate system to meet out Financial Management needs. We will as part of the Financial Reforms during this year investigate the possibility of replacing the FMS with BAS (Basic Accounting System)

We have also set aside over R10,4 million to continue with enhancing Financial Management in the Province. This financial year also sees the termination of the Vote 13 facility, Improvement in Conditions of Service (ICOS) and Vote 14 Reconstruction and Development Programme (RDP). The ICOS will no longer be a separate Vote, as all such funds will be directly provided for in each Vote.

The RDP Vote was intended to be a short-term measure to facilitate refocusing of budgets. This was achieved some time ago but this province retained this Vote to accommodate special projects and transversal matters. So for example, the Debt Redemption Funds, the contingency reserve, allocations to the Bursary Fund, Innovation Fund etc were provided for under this Vote. As from this financial year these funds are relocated to various departments e.g. Innovation to Economic Affairs, Bursary to Premier's Vote, Debt Redemption and contingency reserves to Finance. These funds are ring fenced and may not be used for purposes other than those identified.

Furthermore all works are provided for in each Vote instead of in Public Works whilst Public Works will continue to operate as an agent for departments.

REVENUE

The structure of Intergovernmental Fiscal Relations result in the provinces being largely dependent on allocations made from centrally collected revenues.

The Northern Cape province receives 97% of its revenue from the central fiscus. These allocations are based on a revenue sharing formula that takes account of factors such as demography, the economic profile of a Province as well as inherited backlogs.

Over the years as a Province we have successfully presented a case for increased allocations. Since 1998 our share has grown by over a billion Rand. This has resulted in our per capita allocations being 20% above the national average. This situation is likely to remain for the next 3 years following when it is expected that the formula will be reviewed.

Based on this approach the Northern Cape's equitable share received from the central fiscus amounts to a 9% increase. This is equivalent to a real increase of approximately 4% (i.e. increase over and above inflation). The total resource envelope available for distribution, which includes our own provincially collected revenue and Conditional Grants, is R3,238 billion.

Provincial revenue is projected to be R87,187 million and is collected mainly from the following sources:

* Motor vehicle licenses - R53,680 million (the increased revenue will be generated by the increase in motor vehicle licence fees)
* Hospital fees - R 9,484 million (reduced projection to give effect to what is realistic)
* Gambling and Racing - R 6,305 million (the 34% increase in projected
* Revenue is based on the casino becoming operational)

The Provincial Tax Regulation Process Act was passed by National Government in 2001 and effectively bestows on Provinces some taxation powers. However, we need to take a cautious approach and to balance the need to raise revenue without unduly increasing the tax burden of citizens of the Province. Over the next year we will thoroughly examine these options and the potential impact on the regional economy before a final decision is made. To that end I have already appointed an Advisory Committee, comprising of a Tax Expert, a Chartered Accountant, an Economist, a Banker and a few state officials to commence preliminary investigations in this matter.

EXPENDITURE

Taking into account all sources of Revenue, the total resource available for distribution is R349, 1 million more than the last financial year. This amount includes ICOS.

The increased allocation allowed for a review of spending priorities and made possible an above inflation increase to both social and economic services.

DEBT MANAGEMENT

As a result of improved financial management, and vigilance on the part of the Treasury, the incidence of overspending was brought under control. For the financial year 2001/02, the projected over-expenditure will be less than 0,25% and for the forthcoming financial it will be completely eradicated.

However, the debt incurred in previous years still has to be extinguished. The Provincial Cabinet has approved a Debt Management Strategy that will result in the complete eradication of this debt by 2004.

In accordance with this strategy an amount of R41,266 million is set aside under the Finance Vote with an additional amount of R20, 683 million in the finance reserve for this purpose.

Provision is also made in the outer years of the MTEF for this purpose. I must stress however that if we are to succeed in our quest to eradicate this debt overhang, we cannot afford any incidence of over expenditure in the future.

ALLOCATIONS

I now turn to the part of this budget speech, which attracts the most interest ...i.e. the allocations that are proposed to the respective Votes for the 2002/03 financial years as well as the estimates for the outer years of the MTEF.

These budgetary allocations are informed by government's strategic objectives of economic growth and development, social transformation and the eradication of poverty as outlined by the Premier in his opening address to this House last week.

The key objective of this Budget is one, which seeks to maintain social development while at the same time it seeks to stimulate economic growth and innovation within the Provincial economy. This has proved to be a delicate balancing act and one that must be carefully managed.

Apart from these matters certain special interventions are also necessary. Thus the need to address the problem of urban decay in Galeshewe, the urgency towards poverty alleviation whilst stimulating innovation in new sectors of our economy in the medium term, are key interventions that have to be accommodated.

We are confident that we have achieved the right balance between the various competing needs within our Province. I will only highlight certain key areas. The detail of the budget is contained in the documentation provided here today and allows for careful scrutiny at the reader's leisure.

SPECIAL PROGRAMMES

Innovation Fund

The fund was established in the previous financial year with the objective of stimulating new ideas and directing the provincial economy towards manufacturing and those non-traditional sectors, which can be considered innovative. The fund will also be used as a tool to facilitate Black Economic Empowerment.

An amount of R15 million is set-aside for this purpose in the 2002/03 financial year and over a period of 4 years approximately R82 million will be availed for this purpose. From this coming financial year the Innovation Fund will be managed from within the Department of Economic Affairs and Tourism. We expect the project identification and business planning exercise to be completed by May 2002 with identified projects kicking off by the middle of this year.

Poverty Alleviation/Job Creation

Whilst macro level economic development initiatives can only be expected to yield returns in the medium term, certain short-term interventions are essential if we are to make an impact on the alleviation of poverty. During 2001 the Premiers Job Creation Project was undertaken on a pilot basis. Unemployed persons were employed on a casual basis to lay curbstones, paving, etc

These projects not only resolved pressing local infrastructure needs, but also created self-esteem within communities and reduced crime in areas where the programme was implemented. As a result of the success of these pilot projects it has been decided to progressively roll out the project over the MTEF period. The sum of R12 million is allocated for that purpose totalling R39 million over the 3 year MTEF period. The programme will be managed by the Department of Transport with the additional funds allocated to that vote.

Galeshewe Urban Renewal Program (GURP)

The GURP has been identified as a Presidential project and an urgent intervention is to be made by Provincial Government.

The Department of Housing and Local Government is tasked with the overall co-ordination of this project and an amount of R10 million has been allocated in their vote for this purpose, with R35 million availed over the MTEF period. The various Departments such as Health in addition to the projects undertake these funds; Education and Housing who over a period of 4 years will spend R150 million.

HIV/AIDS

This pandemic is a growing threat in our Province and has the potential to have a devastating impact on our economy.

Our strategy focuses the fight at all levels. Proactive preventative programmes in schools, in society at large, and in the workplace. Also resources are spent reactively on the Health Care of Patients in our Hospitals and Clinics.

Hence in various Departments (but particularly, Health, Education and Welfare) budgetary allocations are made. The allocations are increased to R18 million, which is a 64% increase over last years (R11m) allocation. Over the next two years over R40 million will be spent in this fight.

SOCIAL AND HUMAN DEVELOPMENT

The Province's 5-year Strategic Development Plan puts a high premium on the social and human development of our citizens. It is conventional wisdom that public expenditure on nutrition, health, and education is relatively productive. This is not only because of its direct impact on well-being but also because of its investment in the development of human capital

I now will outline the allocations to the various departments, which constitute this sector.

Social Services and Population Development

The provision of a safety net for the most vulnerable is a key priority for government.

Mr Speaker, we acknowledge that unemployment and the resultant poverty is very high in the Northern Cape. This results in a situation where the recipients of pensions are often the sole providers in some families.

However, despite this, we are obliged to ensure that only those who qualify are the ones who are the beneficiaries of social security benefits. Our Department of Social Services and Population Development and have done well in broadening access to pensions with the CSG target already achieved.

To give effect to the real increases in pensions that have already been announced, the allocation to the Department of Social Services and Welfare is increased by R57 million to R744, 174 million which represents an increased allocation of 8.3%. Social Services and Population Development now constitutes 22.98% of the total budget.

* These allocations include special programmes such as the Women's Flagship Programme and the fight against HIV/AIDS.

Education

The growth and development of our Province is inextricably linked to the quality of our human resources. Hence we have over the years consciously concentrated on investment in education. The 2001 matric results bears testimony to our efforts. However, we now need to continue on that path. As a consequence the education allocation is increased by R94,190 million which is a 9% increase. This brings the total education budget to R1,138 billion and is 35% of the total. These funds include the undertaking of special projects such as school infrastructure upgrades, Early Childhood Development, as well as the fight against HIV/AIDS in the schools. Allocations include amounts for the completion of 3 new schools whilst the allocation to the Premiers Bursary fund is increased from R4 million to R5 million.

Health

Having dealt above with the importance of a healthy mind, we now turn our attention to the equally important aspect of a healthy body and focus on the health budget.

The health allocation is increased by 12%. This means that the increase is R61,9 million bringing the total allocation to R562, 698 million. The health allocation now constitutes 17,38% of the total Budget.

Many special programmes are to benefit from these allocations. These are the rehabilitation of hospitals, provision of health infrastructure as well as improving the management of health facilities. Whilst the total for such programmes for the year at hand is R24 million, the 3-year MTEF will see R82 million being invested in this way. An amount of R27million is provided for the training of health professionals

Housing

In order to achieve our goals in respect of social and human development, increased spending on housing is crucial. In our 5-year strategy we estimated building 16,000 houses. This estimate is adjusted upwards. We now aim to provide 18,000 units. To realise this the housing funds are increased by R10,3 million to R75,809 million. This is 15,78% more than last year.

Sport, Arts and Culture

Sport, arts and culture can play a major contributing role in creating a climate that is favourable to economic growth, as well as keeping our youth focused on the importance of their own future development.

The allocation is increased by 26,4% to R33,456 million which is R6, 994 million more than the previous year.

ECONOMIC DEVELOPMENT

Sustained and equitable economic growth is a predominant objective of public expenditure policy since such investment has direct impact on growth. This is a fact, which underlies our strategy for growth and development.

As mentioned by the Premier, we need to spend more on infrastructure, address short-term job creation needs to alleviate poverty but also stimulate innovation in the medium to long term to create growth and eliminate unemployment and poverty. Creating an enabling environment for Black Economic Empowerment is part of this plan.

In pursuance of these objectives the allocations for the range of economic services is increased by 25% to a total of R380, 187 million.

By doing this we also increase the proportion of economic services by 1.5 percentage point. Economic services now constitute 11.74% of the overall budget.

The three departments central to this endeavour are the departments of Economic Affairs and Tourism, Agriculture and Transport.

Economic Affairs

The allocation to this department is increased to R23,394 million for 2002/03, which is 22% more than in the previous financial year. The Innovation Fund is shifted to fall under the auspices of this department, which also sees a doubling of its resources from R7 million to R15 million. The total in this Vote will be R38,394 million.

Agriculture

Agriculture is one of the cornerstones of our economy, and remains an area with substantial potential for economic growth. We need to consciously invest therein. In pursuance thereof the allocation is increased by 14.7% bringing the total allocation to R67,537 million.

Transport and Public Works

Public investment in infrastructure, whether economic or social is an essential precondition for growth. In pursuance of this goal the budget for the Department of Transport is increased by 10%. However if the special projects are taken into account, the overall budget is increased by R73, 090 million bringing the total allocation to R274, 256 million. Whilst there are many projects undertaken, such as the maintenance of infrastructure, two important projects need special mention, i.e. the special Poverty Alleviation / Job Creation projects (allocated R12 million) and the completion of the new Legislature Building (allocated R32 million).

PROTECTION SERVICES

In keeping with government's commitment to ensuring a safe and secure environment, which is deemed essential to attracting foreign investment, and ensuring economic growth, the budget of this Department is increased to R7, 122 million, which represents a 35% increase. We are confident that this will enable the Department to carry out its stated obligations.

LEGISLATIVE AND ADMINISTRATION SERVICES

Over the past few years much progress has been made in ensuring that the Legislature truly becomes a platform where the voice of our people can be heard. The oversight role of the Legislature cannot be compromised and hence it is imperative that this Vote is adequately resourced.

The allocation to enable the smooth functioning of the Legislature is increased to R32,401 million. This allocation includes the provision for statutory amounts and possible increments related thereto. The budgetary allocation also makes possible the increase of allowances for Constituency Offices to R6 000 per month.

The remuneration of members of the Executive Council will be moved from this Vote back to the respective departmental Votes.

Premier

The Premier's Office has the overall responsibility to lead the quest for the attainment of a climate where economic growth can take root and flourish. It is thus the hub of all activity and should be well resourced. The overall allocation is increased to R58,440 million representing an increase of 9.2%. The Bursary Fund is managed under the auspices of this Vote.

Finance

The Department of Finance is the custodian of public resources and plays a key role in monitoring expenditure. The allocation is increased by R2,109 million to R24,755 million which represents a 9% increase. Funds are also retained in the finance Vote for transversal matters. These are the contingency reserves for emergencies (R9.7 million), debt redemption (R41 million), finance reserve (R20, 6 million), implementation of PFMA (R5 million) and additional resources for HIV/AIDS (R5 million)

If all these dedicated funds are taken into account the Finance Vote is allocated R108,969 million.

Local Government

Adequate funding for local government is clearly an essential part of the overall growth strategy. This is especially the case if we consider the key role that local authorities have to play in growing local economies. The allocation for local government affairs is increased to R96,677 million. This includes a provision for various earmarked projects of which the most important are: GURP (R10 million), municipal support (R15, 55 million) and infrastructure needs (R3, 997 million).

Since housing provision is part of this Vote the total allocation is increased to R172,486 million which represents a 22% increase.

ANALYTICAL PERSPECTIVE OF SOME BUDGETARY MATTERS

Comparison between Social and Economic Services:

The primary purpose of provincial spending is aimed at social development i.e. health, welfare, education, arts and culture, etc. To that end the overall social service allocations are increased by R274 million to R2, 554 billion. i.e. 79% of the total budget.

Economic services are increased by R101 million which is 11.74% of the total budget. 1.5 percentage points have increased the share of economic services. This shift is in line with government's development strategy.

Capital Expenditure

Some years ago expenditure on capital was as low as 4% of the overall budget. Over the years we progressively increased the proportion of capital spending. This year spending will be increased to R272,529 million which represents a phenomenal growth of 31.4%. This results in the spending on capital being increased to 8.4% as a proportion of the overall budget.

Over the next 3 years spending on capital will be close to R770 million.

Personnel

We have always urged the need to achieve efficiencies in the process of delivering services. Achieving a 1% efficiency gain would free up several millions for other productive uses.

The good news is that spending on personnel as a proportion of the total budget declines from 49.6% to 47.1%. The 2.5% efficiency achieved on the salary bill alone frees up some R38 million for allocation to other services.

CONCLUSION

This budget that I have presented here today must be seen in the context of the ongoing challenges that we face as a province.

It details how government seeks to achieve the twin societal goals of growth and development and the elimination of poverty. But it also provides a useful guide to the private sector as to our intent with regard to measures we will introduce to stimulate private sector development, economic growth and job creation. In our view this forms the basis of our partnership for development.

We share a common destiny in this province. No matter what our colour, race, culture, religion or language. We are clearly tied together by a million visible and invisible threads, to quote President Mbeki.

As we declare ourselves ready and willing to work for development let us not forget to also display the spirit of Letsema (i.e. Voluntarism).

Mr Speaker, the Budget is a product of a large collective. Please allow me to express my profound appreciation to:

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

* The National Minister and Deputy Minister of Finance, the National Treasury 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 and in particular the Chairperson, Mr Asiya, for their past and future efforts in refining the budget.

* The officials of the Department of Finance and especially those in the Budget Office who laboured tirelessly to ensure that this budget is tabled correctly and on time.

* Mr. T. Pettersson for his valued experience and advice.

* The various accounting officers and their staff for their co-operation in sound fiscal management.

* A special thanks to the retiring Honourable Member Brazelle who, as the former MEC for Finance, was instrumental in setting up the Department of Finance

* All those who contribute to the upliftment of our Province

It is with pleasure that I table:
* The Northern Cape Appropriation Bill, 2002
* The Budget Statements for the 2002/03 financial year and the Medium Term
* Expenditure Framework period 2003/04 to 2004/05, which include the Estimates of Revenue and Expenditure for the year ending 31 March 2003
* The Northern Cape Interim Appropriation Bill, 2002, to authorise expenditure to be incurred before the annual budget is passed.

Thank you
Kea leboga
Ndiyabulela
Baie Dankie

Issued by Finance, Northern Cape

27 February 2002