[ Home ] [ Speeches & statements ]

20 March 2006

Speaker,
Madame Premier,
Members of the Executive Council,
Honourable members of the legislature,
Distinguished guests,
Members of the media,
Ladies and gentlemen,

It gives me great pleasure to table the expenditure proposals for the Free State Provincial Treasury Vote for the 2006/07 - 2008/09 Medium Term Expenditure Framework (MTEF) period in this House, at a time when all provincial departments and municipalities are hard at work to lay the necessary stepping stones, to realise the objectives of the Free State Provincial Growth and Development Strategy (FSGDS), of:

* stimulating economic development and sustainable job creation
* developing and enhancing the development of infrastructure for economic growth and social development
* poverty alleviation through human and social development
* ensuring a safe and secure environment for all the people of this province promoting effective and efficient governance and administration.

Aggregate 2006/07 - 2008/09 MTEF expenditure proposals

‘With money in your pocket, you are wise and you are handsome and you sing well too.’ (Yiddish proverb)

Proposed allocations to my Department over the 2006/07 - 2008/09 MTEF period which starts on 1 April 2006 are R119,7 million in the first financial year, R125,6 million in the second year and R134 million in the 2008/09 financial year, which represents nominal year on year growth of five percent, five percent and seven percent respectively over the three year period.

Proposed expenditure on programme 1: Administration

Expenditure on this programme caters for all functions and activities aimed at supporting departmental specific operations through the provision of creative leadership and strategic management of the Department in accordance with legislation, regulations and policies to achieve overall departmental goals efficiently, effectively and economically.

R40,2 million or some 33,6 percent of total departmental expenditure is allocated to this programme in 2006/07 growing to R42,4 million in 2008/09, to cater for operations of the office of the MEC, management services, corporate services (including legal services and security management), financial management of the Department itself and internal audit services.

Proposed expenditure on programme 2: sustainable resource management

Proposed expenditure on this programme will be R11,6 million in 2006/07, R12,3 million in 2007/08 and R12,9 million in 2008/09 which represents some 10 percent of the total departmental budget to provide professional advice and support on provincial economic analysis, fiscal policy, public finance development and management of the annual budget process.

Expenditure proposals in respect of programme 3: Asset and liability management

This programme provides provincial policy direction aimed at facilitating the effective and efficient management of physical and financial assets, liabilities, Supply Chain Management Frameworks (SCMF), Public Private Partnerships (PPPs) and the implementation and maintenance of interlinked financial systems.

R52,7 million representing 44 percent of total departmental expenditure will be allocated to this programme in the first MTEF year, growing to R56,0 million and R63,0 million in the second and third year respectively.

Expenditure proposals in respect of programme 4: Financial governance

This programme accounts for 12 percent of departmental expenditure over the MTEF period with allocations of R15,1 million in 2006/07, R15,6 million in 2007/08 and R16,4 million in 2008/09 to fund functions aimed at promoting accountability through the substantive reflection of financial transactions of the province and compliance with financial norms and standards.

Initiatives in support of the Provincial Growth and Development Strategy (PGDS)

Mr Speaker, it is my believe that the aforementioned expenditure proposals represent the best of possibilities to give effect to the objectives of this department’s strategic plan, recently tabled in this House.

Both the strategic plan and these expenditure proposals, represent the end result of an intense exercise to plan the execution of departmental functions and operations in a manner that meaningfully supports the attainment of the goals and objectives of the PGDS.

To this end it is my considered view that I should not engage in the detail of sub programme expenditure proposals for the MTEF period, as such detail is already captured in the 2006/07 provincial budget statement tabled in this House on 17 February 2006. Instead, I will focus on areas identified for heightened focus during the 2006/07 financial year and the rest of the 2006/07 - 2008/09 MTEF period, aimed at further supporting the attainment of the objectives of the PGDS through the implementation of this department’s strategic and performance plans as such exposition will allow for more robust debate that will ensue in this House with regard to the 2006/07 Appropriation Bill.

More informed resource planning

‘The will to succeed is important, but what’s more important is the will to prepare.’ (Bobby Knight).

Whilst the provincial growth and development strategy creates a mandatory framework to uniform provincial resource planning and whilst the 2006/07-2008/09 provincial MTEF vote allocations seek to lay the starting blocks towards the attainment of the objectives of the growth and development strategy by directing resources towards those areas of operation that are mission critical to address the challenges the growth and development strategy seek to address, it would be naive to assume that this is sufficient for the ultimate realisation of long term targets of the growth and development strategy.

Consequently, the acceptance of the growth and development strategy as the means to address provincial challenges brings with it the challenge for the provincial treasury to further entrench its role as an important provincial change agent to ensure that resources are utilised in a manner that directly or indirectly effectively promote economic growth and development and social equity.

Mr Speaker, the person who cannot see the ultimate becomes a slave to the immediate and to meet this challenge, my Department has re-configured its sustainable resource management programme to enable the sub programmes dealing with economic analysis, fiscal policy and public finance to more aggressively engage in operations aimed at addressing the gap between provincial socio economic needs and key service delivery indicators.

In this regard, more work will be done to:

* build analytical capacity within the treasury to engage in a rigorous analysis of the economic, social, demographic, spatial and environmental context, to use such information gained to guide more informed engagement and agreement on the extent, origin, form and spatial location of poverty and social needs as well as development potential and investment opportunities at district and local municipality level

* assess the development impact of expenditure programmes at provincial, district and local municipality level

* estimate the size and composition of the provincial fiscal envelope over a period longer than the three year MTEF period, to provide a better multi year resource framework for long term infrastructure investment decisions and development agendas for clusters and local and district municipalities.

Whilst it will not be an easy exercise for the treasury to effectively engage in these and related operations remains important that work in this regard start in earnestly in the 2006/07 financial year, as it would assist to lay the foundation to:

* ensure that public infrastructure investment is focused in areas where greatest development potential and greatest need coincide

* promote training and capacity building in areas mission critical for sustained long term economic growth and development and in the process, promote the mobility of people through expanded skills, thus providing them with more choice as to where they want to stay

* better identify regional opportunities, spatial development patterns and demographic trends that can be harnessed to enhance the long term competitive and comparative national and international economic advantages of the province

* further enhance intergovernmental co-ordination and better define specific areas where the private sector can be involved to support the government’s development agenda.

Mr Speaker, at a fundamental level, focus on the issues that I have outlined will enable departments, public entities and district and local municipalities to develop more appropriate qualitative indicators to measure outcomes enabling a better mutual impact assessment process throughout the province.

More attention to monitoring the progressive implementation of the Municipal Finance Management Act (MFMA) in municipalities.

‘Failure can be divided into those who thought and never did and into those who did and never thought.’ (WA Nance).

Mr Speaker, one of the key issues informing budgetary allocations to individual departments was the need to create a resource framework in which it would be easier to more effectively align local economic developmental strategies to the PGDS and the provincial spatial development framework.

From a fundamental perspective this implies that the provincial treasury’s oversight over the implementation of the MFMA in municipalities should go beyond ensuring adherence to MFMA prescripts in terms of nominal compliance, to include an active role with regard to capacity building at the local government sphere to support more integrated resource planning between municipalities and provincial departments and more collaborative service delivery to end service users.

In this regard, I’m happy to report to this House that a memorandum of understanding (MoU) exists between my Department and our sister provincial Department of Local Government and Housing that clarifies the respective roles and responsibilities of these two departments and identifies areas that need joint collaborative effort in respect of the implementation of the MFMA in municipalities.

Mr Speaker, the Premier stated so aptly in her State of the province address on 10 February 2006, that we must report back to our people and continue to assess progress made in building a developmental system of local government especially with regard to the implementation of the MFMA and gaining from the lessons provided by project consolidate.

This house is well aware that the MFMA seeks to promote a government for the people, with communities and residents playing a pivotal role in service delivery. This necessitates that communities within municipal boundaries be part of the budget and Integrated Development Plan (IDP) processes, through considering and incorporating the concerns of the broader community into the municipal planning processes to ensure that resources are directed towards the legitimate service needs of communities.

Mr Speaker, with respect to this particular matter my Department will monitor adherence to a proper budget process and provide support where needed. Although the power to implement the MFMA has been assigned to the National Treasury, an important provincial milestone was reached in terms of its implementation when the National Treasury delegated oversight over 21 Free State municipalities to the Free State Provincial Treasury on 1 July 2005 opting to retain only four municipalities for oversight by the National Treasury. This demonstrates the National Treasury’s confidence in our ability and commitment to discharge such oversight functions.

To maximise local government service delivery and ensure continuous support and improvement, the MFMA does not only afford communities and residents the opportunity to become more involved in municipal governance but also brings the challenge of necessitating a much closer co-operative relationship within and between the different spheres of government. From a broad financial management perspective it means that municipal finance officials must be fully equipped and ready to implement the letter and spirit of the MFMA. This calls for a complete break with past practices characterised by a rules driven environment steeped in a bean counting culture largely out of step with modern management practices.

In this regard, the establishment of municipal budget and treasury offices provides the ideal once off opportunity to break with such past practices by setting up new structures comprised of highly qualified and competent professionals, promoting a new culture that provides municipalities with the necessary creative and visionary strategic financial leadership.

Mr Speaker, at risk of belabouring the point it is important to note that much of these reforms aim to foster greater emphasis on performance in executing mandated functions. Thus, for example, a Service Delivery and Budget Implementation Plan (SDBIP) must be drafted and adopted with a municipal multi year budget and made public by the mayor or executive mayor no later than 14 days after approval. It is further expected that the SDBIP will contain details in respect of the execution of the budget and include information on programmes and projects broken down by ward. Not only will it provide a commencement phase and completion dates, revenue and expenditure and quarterly service delivery targets and performance indicators but there should also be regular reporting on progress in respect of the programme or project which will again assist in facilitating better non-financial and financial reporting to empower councillors to perform their oversight responsibilities more effectively and efficiently. The reality of these and other reforms at local government places a huge responsibility on local government to gear up through revising policies practices and procedure that would support the attainment of the objectives and desired outcomes, such reforms seek to achieve.

Mr Speaker, a good memory implies never forgetting those in need and after the recent peaceful local government election in this province, I wish to use this public platform to openly commit my department not only to monitor the implementation of the MFMA in municipalities in terms of its legal mandate but to go beyond the call of duty to utilise all directorates within the provincial treasury, to engage municipalities in capacity building initiatives from the 2006/07 provincial financial year and beyond with regard to matters relating to, inter alia:

* asset registers
* cash flow and expenditure projections
* supply chain management training for members of bid committees
* the establishment of tender advice centres to assist communities with tender processes
* budget sustainability exercises and reporting
* strategic planning and the effective alignment of budgets with national, provincial and local priorities
* project management including planning, budgeting, implementation and contract management
* investment policy procedures
* effective implementation of audit findings and resolutions of the provincial public accounts committee (PROPAC) of the provincial legislature
* the functioning of internal audit units and internal audit committees
* the functioning of the Finance Committee of Councils (FCC).

Mr Speaker, it is my view that these and other initiatives will go a long way to foster closer working relations between the provincial treasury and municipalities and create a much needed platform to share best practice advice with local government as equal partners in the realisation of the full potential of this province. In this regard the provincial treasury must not only assist to ensure that financial management and capacity of municipalities are deepened but also ensure that provincial departments contribute in whichever way possible to ensure that local government initiatives aimed at ensuring that free basic services are provided, a proper waste management system is in place, the bucket system is eradicated, the built environment develops and the delivery of municipal infrastructure contributes to job creation.

Enhanced treasury focus on Supply Chain Management (SCM) frameworks

‘Nothing so conclusively proves a man’s ability to lead others as to what he does from day to day to lead himself.’ (Thomas J Watson).

Mr Speaker, an important reform instituted as part of this government’s intent to modernise the management of the public sector through giving managers the flexibility to manage so as to ensure the achievement of the broader policy objectives of government, within an improved financial management framework that satisfies the constitutional requirements of transparency and accountability, were the introduction of SCM frameworks in government departments, municipalities and public entities.

Although the particular legislative framework that governs SCM processes, practices and procedures, is adequately defined by the:

* Constitution of the Republic of South Africa (section 217)
* Preferential Procurement Policy Framework Act (Act No 5 of 2000)
* Public Finance Management Act, Act No 1 of 1999, as amended by Act 29 of 1999 (section 76(4)(c)
* Treasury Regulations (regulation 16(A), issued in terms of the Public Finance Management Act
* Broad Based Black Economic Empowerment Act (No 53 of 2003)
* State Information Technology Agency (SITA) Act.

A recent review of supply chain management practices in provincial departments and public entities by the provincial treasury, highlighted numerous and serious shortcomings in the application of supply chain management practices in the province.

Mr Speaker, members of this House will agree that it goes without saying that effective supply chain management practices in the public sector remain key to the achievement of the much-cherished objective of ongoing effective and efficient management of provincial resources. Because public resources are at a premium and the attainment of government priorities cannot be compromised, we do not have the luxury of allowing present shortcomings to sort itself out.

The provincial SCM unit in my Department will thus afford these matters the highest priority and take the necessary steps to ensure that the following critical elements of SCM processes are effectively and efficiently implemented in provincial departments and public entities in accordance with the prevailing legislative framework, namely:

* demand management
* acquisition management
* logistics management
* disposal management
* risk management
* supply chain performance monitoring and evaluation.

This matter will remain high on the agenda of the provincial treasury in the 2006/07 financial year and the treasury will ensure that where gaps exist, these are addressed as a matter of extreme urgency as the supply chain regime represents this government’s most direct of attempts to set a clear operative framework to ensure amongst other things:

* value for money in public expenditure, including for example, the generation of savings through arranging
* contracts for the purpose of generating advantages through economies of scale
* stores efficiency, appropriate and prompt response to user requirements and cost effective disposal
* management of fully depreciated and obsolete items
* effective supplier performance management in line with pre-determined norms and standards
* effective management of risks associated with all aspects of supply chain management processes, procedures and practices, and
* adherence to government policy in respect of matters relating to preferential procurement, broad based black economic empowerment (BBBEE), trade promotion, small business development, anti-corruption measures, promoting the proudly South African campaign, etc.

Mr Speaker, to ensure that matters relating to supply chain management receive the attention it deserves the provincial treasury will operationalise a suppliers’ management information system to report progress in utilising public procurement to develop small, medium and micro enterprises (SMMEs), enhance broad based black economic empowerment (BBBEE) and mainstream historically disadvantaged generators into formal economic activities. In addition, I can announce that the toll free hotline that I announced in the provincial budget speech of 17 February 2006, to afford the general public an avenue to report problems experienced by suppliers to government as well as incidences of suppliers not receiving payment for services rendered within the 30 days stipulated payment period will be launched very soon.

Mr Speaker, it remains important to appreciate that these and other measures aimed at fostering good supply chain management practices in the public sector, should not be viewed as mere instruments to ensure nominal compliance.

Instead it should be viewed as mandated necessities to ensure that government’s considerable spent on goods and services not only satisfy user needs, but meaningfully add to the promotion of this government’s developmental agenda.

What I’m saying, Mr Speaker, is that we should move with speed to a situation where every public sector official becomes well aware that supply chain management must be used consciously to snowball benefits accruing to this province from a broad range of other existing government policies and regulations, strategically aimed at:

* enhancing the internal and external competitiveness of the South African economy through, for example, outlawing anti-competitive practices between business, their suppliers and customers (Competition Act, Act 89 of 1998)

* levelling the playing field for small business to compete successfully in the economy (Small Business Act, Act 102 of 1996)

* ensuring equitable and fair labour practices. Here, for example, labour law would compel accounting officers to ensure that any supplier or contractor who abuses South African labour standards, be designated as ‘non-preferred’

* promoting the New Partnership for Africa’s Development (NEPAD) through supply chain management practices that recognises global interdependence in respect of the environmental base that sustain the planet, reversal of the skills loss from the African continent and the promotion of a global financial architecture that rewards good socio economic management and global governance

* promoting the ‘proudly South African’ campaign through whichever arising opportunities.

Mr Speaker, from everything that I have said with regard to the importance of supply chain management as an integral part of the public sector financial management system it should be clear that it calls for commitment to ensure that this framework is fully implemented and that the necessary changes do not only happen at policy and procedure level, but that all activities related to government spent are aligned to achieve the objectives of supply chain management. At an operational level it would for example mean that:

* when the departmental performance plan is finalised the impact of the functions to be performed in terms of goods, services, equipment and facilities that will be required must already be determined by supply chain practitioners and costed in the budget

* the cost of ownership of a particular type of asset or piece of equipment must already be known before budgets are finalised

* the setting of inventory levels, stores and warehousing practices must be known before the start of a particular year to inform cash flow projections and necessary tendering procedures throughout the financial year

* registers of tender defaulters must be in swing and this information must be made available to other departments and public entities.

Mr Speaker, Thomas Edison once remarked that opportunities are missed by most people because they are dressed in overalls and look like work. To those who may say that supply chain management need too many things to be done and issues to be addressed, I pose the question; ‘is it too much to ask those in the employ of this government to use the taxpayers’ money to the benefit of citizens of this Province?’

Stronger focus on improved infrastructure delivery

‘All glory comes from daring to begin.’ (Eugene F Ware).

The recent provincial budget speech indicated that infrastructure spending is anticipated to grow rapidly with 37 percent, 42 percent and 24 percent over the respective three years of the 2006/07 - 2008/09 MTEF period.

Mr Speaker, it is impossible for me firstly as a Free State civilian and secondly as a member of the Executive Council (ExCo) responsible for the finances of this province to over emphasise the need to use all available opportunities to enhance the effectiveness, efficiency and efficacy with which the required provincial infrastructure is delivered.

This calls for collaborative effort on many fronts to ensure that as part of improved alignment and guiding of the planning activities of various role players and agencies:

* better synergy is achieved between infrastructure need identification, planning and implementation between national departments operating in the province, provincial departments, district and local municipalities, provincial public entities and state owned enterprises operating in the province

* private sector operators are well informed to ensure that they are geared up to have sufficient and appropriate provincial capacity to assist in public infrastructure delivery

* inadequate staff capacity where it exists in service departments requiring infrastructure as well as public sector infrastructure delivery agents are addressed timeously in a sustainable manner

* effective and efficient forward planning processes and procedures for infrastructure delivery are well entrenched and internalised as part of the internal planning processes of end service delivery departments and public entities.

Whilst effective infrastructure planning processes do constitute the first step to link departmental budgets to the long term development objectives of the PGDS as it improve the allocation of resources to strategic priorities the provincial infrastructure plan alone is not a panacea to all service delivery management weaknesses.

Such infrastructure plan needs to be further supplemented by practices and support to ensure that the provincial infrastructure development improvement programme (IDIP) is effectively utilised as an enabling vehicle to provide the following critical support mechanisms, namely:

* strategic support and guidance for participating departments

* support for accessing funds, identifying alternative delivery mechanisms and accelerating skills acquisition and necessary capacity building in critical areas

* development and implementation of best practice infrastructure delivery management systems

* facilitating change and communication management

* clarifying responsibilities and optimising delegation of authorisation

* entrenching appropriate and enforceable governance and cooperation mechanisms for the department of public works, roads and transport and its client departments.

Concluding remarks

‘Unless people are united by a common aim each one’s hand will be against the rest.’ Lord John Maynard Keynes (father of modern economics).

Mr Speaker, my Department’s 2006/07 - 2008/09 MTEF expenditure proposals represent more than a response to provide constitutionally mandated services to other provincial departments, municipalities and public entities.

It constitutes more than an exercise in resource planning as it mirrors our unwavering commitment to be a leading change agent for improved economic growth and social equity through prudent financial management. To this end it is our firm believe that effective financial management and positive social impact are not mutually exclusive.

Mr Speaker, to build a future needs a foundation. The challenges and obstacles that need to be overcome to secure our brighter future have been identified. We have the flight plan to guide us in our quest to create economic value by offering innovative solutions.

Today, funding choices have been proposed in favour of those areas of operation that will enable us to dig deep today to discover tomorrow’s gems because an ounce of performance is worth more than a ton of preachment. We are eager to race towards the success that will enable us to add value and serve the greater good.

Let us join hands and just do it!

I thank you!

Issued by: Department of Finance, Free State Provincial Government
20 March 2006
Source: Free State Provincial Government (http://www.fs.gov.za)