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Madam Speaker
Honourable Premier
Members of the Executive Council
Members of the Provincial Legislature

Since World War II, fiscal reforms progressively migrated from detailed itemised budgeting and central controls towards a distributed approach enabling directors to be accountable for outputs rather than just inputs. Today world best practice dictates a much stronger alignment and integration of political priorities (articulated through policies and strategies) together with planning and budgeting. It is difficult to criticize this approach, at least at the conceptual level. However, it is undoubtedly ambitious, and will require huge improvements in planning, monitoring and evaluation processes.

Within the African context this might be an even more daunting task. The transition which developing countries experience is not unique and often they are aware of 'what not to do' but are not always clear on what needs to be done. Alan Schick labels this an "institutional identity crisis" where treasuries throughout developing economies find themselves locked in an old mode calling upon departments to account for the resources allocated rather than to align their resources with outputs.

Meanwhile back at the ranch, the 2004 elections were peacefully concluded and the legitimacy of both national and provincial legislatures and executives were clearly validated. Consequently the delivery targets and imperatives for the Country as a whole and the Province in specific were articulated by our Honourable President and Premier. These pledged activities require both devoted leadership and resources to magnify results, performance and outputs inspiring accelerated delivery. In this process Provincial Legislature has a far more vibrant and dynamic oversight role to play by asking, "what did we buy" rather than questioning the details of inputs made.

As a provincial treasury we commit ourselves to supporting, facilitating and creating a favourable environment in which to achieve the above-mentioned goals including the Provincial Growth and Development Plan (PGDP) targets. In this regard, a joint team had been established between the Office of the Premier and Provincial Treasury to harmonise the following high-level objectives:

• Align plans and budgets.
  
• Establish Integrated Development Plan (IDP) linkages.
  
• Strengthen clusters and departmental planning units.
  
• Monitor and evaluate PGDP targets.

Even though there are many other important reform and renewal projects in the strategic plan, special emphasis will be placed on the following four result areas:

Firstly to provide relevant economic information for planning and monitoring to assist in decision-making and the formulation of public policy. It is necessary to make effective choices with appropriate tools to select projects, which will have the most significant impact on poverty and unemployment. A system is needed to handle the flow and storage of all the information on a continuum starting from the budgeting phase to defining the criteria of social choices. This will assist in assessing needs, planning, implementing and providing accurate information about the province to the public.

In this regard a joint economic research unit is envisaged with the University of Fort Hare and the University of Connecticut, USA to advance the alignment of budgets with the PGDP. This initiative will also reinforce the capacity of the Budget Committee to gauge alternatives before they present the budget for approval to the Executive Council.

Secondly is the provision of quality Treasury services. In collaboration with South African Excellence Foundation, Treasury developed the Ikwezi Lomso Service Excellence Program with its main objective that of continuous quality improvement and the development of a professional climate that is highly responsive and client centred.

Consequently the above implies that a changing role and structure is envisaged for Treasury. This is in line with the spirit and content of the PFMA, which authorizes managers in a broad sense, including us as executing authorities, to be more in control of their own financial and non-financial resources thus enabling accelerated service delivery. This paradigm shift will require high levels of professional maturity, emotional intelligence, more technical skills and a flatter structure in which specialists could emerge as internal advisors in stewardship and peer review roles.

There are also further amendments to the PFMA underway which calls for additional financial transformation. Departments will have to participate in this process.

Madam speaker last year we committed ourselves to accelerate the process of devolving the Pre-Audit function to various departments. I am pleased to announce that the process has been finalized. However we want to alert the house that there are emerging risks out there that need to be managed.

We have referred in the past to imminent reforms in public procurement. We started the process in 2002 and even prepared a piece of legislation in this regard which were put on hold pending the anticipated new Supply Chain Management Framework from National Treasury. As an interim measure tender board delegations were increased to R5 million and R20 million for Interim Management Team (IMT) projects. As expected, National Treasury promulgated the Supply Chain Management Framework on 5 December 2003. A new provincial framework replacing the current procurement system will be in place on the 1st of August 2004 and the Tender Board Act will be repealed. The new framework will be structured in such a manner that it restricts suppliers involved in corrupt activities from supplying goods and services to Government Institutions. In terms of the Black Economic Empowerment (BEE) Act, targets will have to be adhered to and the aim is to increase procurement from BEE groups to 60% over the MTEF period.

The Municipal Finance Management Act, which aims at regulating financial management at local government level, will come into operation on 1 July 2004. It will bring about additional responsibilities mandating Treasury to ensure the implementation of financial reforms by municipalities and municipal entities. For the current financial year, Treasury will have to reposition itself to comply with its prescribed role in terms of this Act.

Thirdly a major challenge is ensuring that service delivery continues whilst simultaneously balancing constraints due to limited resources. There is an increased acknowledgement that Intergovernmental Fiscal Relations has matured to such an extent that provinces might exercise their borrowing powers within a preset framework to finance cash flow pressures.

Another stratagem is the promotion of a "just-in-time" approach for requisitioning cash transfers within a month of the actual cash needed instead of quarterly. Consequently holding cash in reserve to earn extra interest in the Province's own account.

One of the areas for improvement is own revenue collection. Provincial Treasury is in the process of investigating a revenue strategy. This includes exploring other possible revenue sources including provincial taxation. The analysis will include whether we should not borrow for infrastructure delivery. Borrowing depends not so much on size but the ability to service debt and prudent financial management.

In addition to the above strategies experience teaches us that we need to make provision for contingent liabilities. It is our view that we need to create such a cushion at this moment. Its primary purpose, if agreed, will be two-fold namely to deal with unforeseen and unavoidable circumstances and debt service cost.

The Norms and Standards Unit had been re-engineered to assist departments with improving compliance levels with the PFMA. An analysis of the results of the normative compliance survey indicates that a core issue is the different interpretations of the PFMA. It is on Treasury's agenda to provide guidance through developing a user manual assisting with interpretation and to focus on areas for improvement such as:

• Empowering of Audit Committees in order to strengthen the responsibility and accountability chain.
  
• Reviewing the overall Internal Control and Internal Audit Strategy.
  
• Clarifying delegations, responsibilities and accountabilities.

Provincial Treasury is required by the Division of Revenue Act to report on plans, projects and implementation of all infrastructure projects in the Province. In the light of this requirement we have taken responsibility for the IMT supported Rapid Infrastructure Development Agency (RIDA) as an institution to perform the latter.

This initiative further aims at accelerating infrastructure delivery by having full information on the status of projects. Reporting and monitoring guidelines, as the minimum acceptable standard for the management and documentation of all PDGP and Extended Public Works Programs (EPWP) and projects, will be developed. These standards will be the benchmark against which all Departments, Municipalities, Implementing Agents and Service Providers will be monitored by the joint team of Treasury and the Office of the Premier. In particular, the commitment and target of creating 200,000 jobs by the EPWP over the next five years will be closely monitored.

Fourthly the above challenges require a well-trained and knowledgeable workforce. Mindful of this fact, two years ago we established in collaboration with the University of Fort Hare the Public Financial Services Agency (PFSA). In the last twelve months we have provided basic training to managers and lower levels. To date 1,094 staff members attended 2,484 courses. We have 181 unemployed graduates on an internship program. These interns are capable of being placed in any department as support or permanent employees within the financial divisions. It is our intention to extend this program to deal with strategic management capabilities. PFSA is also working with the University of London to give content to this objective. It is hoped that a memorandum of understanding between SOAS of the University of London on the one hand and PFSA of the University of Fort Hare and Provincial Government on the other hand, will be signed this week.

In addition to the above PFSA conducted an annual financial skills audit, sampling 1,741 employees in 2003 and subsequently 2,107 in this year. This was done through using 40 unemployed graduates in 2003 and 47 this year.

Madam speaker we held a successful SADC conference on public finances on 4 and 5 June 2004. The conference was attended by delegates from as far as Uganda and Namibia. Speakers were from various African countries as well as the UK
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In conclusion and to summarise the following key result areas (details attached) will be our main focus:

• Provision of relevant economic information to evaluate public policy and impact.
  
• Provision of quality treasury services.
  
• Financial management and reporting for Provincial accounts and tracking of performance towards Provincial Growth and Development Plan (PGDP) targets.
  
• Development of a knowledge based organisation.

In order for Treasury to stay relevant in this changing environment, management will have to unlearn the old and acquire new personal, interpersonal and professional Intelligence, Knowledge, Enlightenment, Zeal and Information (IKWEZI).

Colleagues, Comrades and members of the public, you have been presented with an integrated strategy, endeavouring to illustrate the contribution, commitment and devotion of Treasury towards the National and Provincial Agenda. Key deliverables had been identified to infuse efficient and effective financial management. In the words of our Honourable President "Lets get down to work in a people's contract to build a better South Africa and a better World" and therefore also a better Eastern Cape for all.

I thank you.

For the summary of key result areas go to http://www.ecprov.gov.za

Issued by: Office of the MEC for Finance, Eastern Cape Provincial Government
7 June 2004

Source: Eastern Cape Provincial Government (http://www.ecprov.gov.za)