2010/11 budget speech tabled by MEC for Economic Development in Gauteng, Firoz Cachalia
28 May 2010
“Gauteng, the birth place of humanity, is also the place where gold was first discovered, and so is also the birth place of South Africa’s modern economy. Today Gauteng is its heartland, containing many of its primary mining, industrial and financial hubs, contributing a third to national gross domestic product (GDP), and about 60% to national trade” these were the opening remarks by the MEC for Economic Development in Gauteng, Firoz Cachalia, when he tabled his department’s budget speech at the Gauteng Provincial Legislature today.
Presented against the backdrop of structural and cyclical challenges, where the global recession highlighted Gauteng’s external vulnerabilities and the Province’s sensitiveness to changes in the global economy, the MEC said the budget is the primary instrument available to the provincial government to foster economic development.
“The department has been allocated R1,1 billion for the current financial year, increasing to R1,2 billion and decreasing to R847 million in the outer year. A total of R3,2 billion has been allocated to the Department over the Medium Term Expenditure Framework (MTEF).”
Highlighting what is new in this budget, Cachalia said the department has worked intensively to reprioritise the budget to ensure that programmes and projects reflect the new policy mandate of the ruling party. Certain programmes have been terminated resulting to total savings over the
MTEF equivalent to R1,1 billion.
“More than R660 million net savings (savings less contractual obligations and costs) of the budget allocated to the department over the MTEF arose from the termination of the motorsport and CNBC Africa contracts,” he said.
According to Cachalia, the identified savings have been allocated to projects and programmes that would address the structural and cyclical challenges facing people in Gauteng coupled with transformative interventions that would promote decent work through endogenous and inclusive growth. R919 million was allocated to these new programmes.
“The net savings relinquished to the fiscus is R304 million in 2011/12, followed by a shortfall of R91 million in the following year. The resultant net savings relinquished to the fiscus is therefore R213 million,” he continued.
The department has been careful to ensure that the budget is effectively aligned to the provincial priorities. Below are some of the budget allocations over the MTEF:
Structural unemployment and the employment safety-net
The safety-net creates short-term employment of 2 days a week for a maximum 10 days a month, providing some income relief, including programmes like the Community Works and Expanded Public Works Programmes. For the Community Works Programme (CWP), the department has requested a roll-over of R30 million (identified from savings in the previous financial year) to set up an additional four sites to the existing 10 sites in the province. These are in Ekurhuleni, rolling out more sites in Sedibeng and the City of Tshwane (including Metsweding), because national government has established and operationalised 10 sites on the West Rand and in the City of Johannesburg. The cost to government per labourer is R150 per day, which includes the wage costs of R50 per labourer and non-wage costs (comprising tools of the trade, raw material, training and management) of R100. CWP creates 1 000 jobs per site in the first year, with the potential to increase to 4 000 jobs over the medium term. “We are identifying additional revenue sources to initiate six to 10 sites in the current financial year. The objective is to up-scale these short-term jobs as much as possible,” added Cachalia.
Cachalia emphasised that the employment safety-net does not create decent jobs, nor is it a substitute for decent work but it does provide income relief. “The promotion of decent work requires a fundamental transformation of the private economy,” he said.
Youth employability initiative
The Youth Employability Programme aims to connect school leavers to the job market as soon as possible by leveraging partnerships with placement agencies to prepare them for employment and connect through to the jobs network of government and non-state programmes (including Further Education and Training). The department will partner with the various metros, including Johannesburg, Tshwane and Ekurhuleni that are running youth unemployment and placement programmes. R76 million has been allocated to this programme over the MTEF.
Enterprise development: small, medium and micro enterprises (SMMEs) and cooperative financial and non-financial support
The department has allocated an additional R44,9 million over the MTEF to support SMMEs and cooperatives, through programmes including, mentorships in the automotive sector, database and a website for SMMEs and cooperatives. Linked to SMMEs and cooperatives is the community-led Local Economic Development initiatives aimed at stimulating economic activity in communities or in the local economy.
The department will transfer R11,5 million to municipalities for the establishment of shared industrial facilities to provide infrastructure that supports light industrial activities in marginalised areas such as townships.
Furthermore, R128,5 million, R131,9 million and R138,5 million has been allocated to the Gauteng Enterprise Propeller, providing financial and non-financial support to SMMEs and Cooperatives. GEP has developed a new micro-finance programme, providing business loans ranging from R10 000 to R250 000.
Industrial Sectoral Development Strategies including the Labour-intensive sectors
The department is developing detailed sector plans, working closely with manufacturers, the Sector Education and Training Authorities, the relevant labour union and the Department of Trade and Industry (DTI) to ensure that bottlenecks are assessed in the value chain and collectively, support the sector to stimulate employment and economic growth, increase local investment, develop a competitive advantage and promote exports. Through reprioritisation, R100,6 million has been allocated to economic and sectoral strategy development and sectoral support, with nearly 40 percent being allocated in the current financial year.
Another R25 million has been allocated to specific sectoral industrial policy interventions including the Gauteng Tooling Initiative, and Advanced Manufacturing Productivity Index, Talent Pipeline and Entrepreneurship Cadet Training, Investment attraction and research in the business services and transport equipment sectors. R226,4 million has been allocated to sector development in 2010/11 for both the department and the relevant agencies.
Infrastructure led growth
The department is currently finalising a modelling exercise that highlights the types of infrastructure investments that contribute the most to employment creation and growth. These high level policy decisions will guide the necessary infrastructure investments that will be entered into the Project Prioritisation Model, a tool developed by Blue IQ, to assess the viability of the project in terms of a series of pre-defined criteria.
DED will work with the main spending departments, infrastructure development, roads and transport, and of course, Finance to ensure that the Provincial Government leverages infrastructure spending effectively to promote growth and decent work.
The green economy and sustainable resource use
The green economy is considered to be the new growth sector for the 21st century. The department has developed a Green Economic Development Strategy for the province.
R130 million has been allocated over the MTEF (R19,5 million in 2010/11; R27,1 million in 2011/12 and R83,5 million in 2012/13) has been allocated to the following green projects, which include: R32 million (R8 million, R10 million and R14,4 million) for food security through the
Moringo Oliviera project; a little over R5 million for piloting waste sorting in informal settlements; and R77 million over the MTEF, for the AWESOME project or Alternate Energy from Waste (AWE), that is to create electricity from waste sources, where the bulk of the funds are allocated to infrastructure investment of roll-out of the programme initiatives in 2012/13.
For the current year, R7 million has been allocated for researching the feasibility of this programme together with the Department of Agriculture and the University of Pretoria, focusing on bio-technology while investing in agricultural development.
Committed to ‘greening’ the economy, the Department has allocated R20 million in 2011/12 and R30 million in 2012/13 to incentivise the development of a solar industry, focusing in particular on the solar water heater initiatives.
In addition, in 2011/12, R101,1 million has been allocated to the Climate Innovation Development Centre, together with the World Bank. This Centre is an SMME Incubation facility supporting innovations related to climate change products. R1,1 million allocated to the current year is for finalising the feasibility study assessing the current environment and indentifying opportunities to develop a competitive advantage in this sector. The Centre is expected to incubate approximately 150 SMMEs.
Cost of doing business
The department has completed a Cost of Doing Business Study which identifies the factors that raise the costs of economic activity and participation. These include: transport and logistics costs, traffic and unreliable public transport, poorly maintained roads, an inability to access government services, poor services delivery by government relating to the regulatory compliance and approval or issuing of licenses, inability to tap into government procurement, poor payment by government impacting cash-flow; crime and corruption.
Gauteng tourism and gateway 2010
The 2010 FIFA World Cup provides an unprecedented opportunity to expand the Tourism sector and to brand Gauteng as a strategic tourism destination within the African continent.
Gauteng through its world class stadiums at Soccer City, Ellis Park (Coca Cola) and Loftus Versfeld, will stage 21 of the 64 matches, including the opening and final games. Moreover, 19 of the 32 teams will be based in this province. Together with the Department of Sport, Arts and
Culture, and the Premier’s office, the Gauteng Tourism Authority has worked hard to grade accommodation and restaurants. Tourist attractions like the Maropeng, Cradle of Humankind, Walter Sisulu Square, Sharpville Memorial Site, Apartheid Museum, Mandela House Museum, Newtown Precinct, Freedom Park, etc. are all ready for the influx of tourists.
Cradle of Humankind and Dinokeng
Dinokeng is a game reserve in the process of being established, requiring R42 million over the MTEF for the procurement of a perimeter fence, the game and the land. The community of Steve Bikoville insists on a fence being erected because of concerns about their safety. The department has delayed the introduction of the animals until the safety of the people has been guaranteed and is committed to addressing their concerns about job creation and development as well as those of all stakeholders.
Agency performance and funding
Blue IQ’s budget has decreased from R1,2 billion to R727,7 million over the MTEF as a result of the termination of the motor sport contracts. Funds have been allocated to honour the contractual obligations arising from the termination of these contracts. R149 million has been allocated to the Automotive Industry Development Centre (AIDC) for anti-recessionary programmes, R16 million has been allocated for sectoral industrial policy interventions and R31 million has been allocated for SMMEs and cooperatives in the automotive sector. R130 million has been allocated to green jobs and the low carbon economy.
The Gauteng Economic Development Agency (GEDA) was originally allocated R192 million over the MTEF. The reprioritisation has identified R22 million in savings with additional allocations being awarded for the Gateway 2010 Project. The total MTEF allocation now is R173 million, with R66 million being allocated in the current financial year.
Overall savings for the Gauteng Film Commission (GFC) amounted to R18 million over the MTEF. The revised allocations amount to R16 million in 2010/11 followed by R15 million and nearly R16 million in the year thereafter. Gauteng Enterprise Propeller’s (GEP) savings amounted to R39 million over the MTEF. Revised allocations amount to R399 million over the
MTEF with allocations amounting to R129 million in the current financial year, followed by R132 million and finally by R139 million in the outer year.
Savings amounting to R46 million have been identified for Dinokeng over the MTEF. Allocations for new initiatives aligned to the mandate of the department resulted in additional allocations of R93 million over the MTEF. The allocations to Dinokeng increase to R179 million over the MTEF, with the bulk of the increases being allocated in 2010/11 for the Dinokeng Game Reserve and the Roodeplaat Tourism Hub.
The Cradle of Humankind had overall savings of R5 million over the MTEF, and additional allocations for the recapitalisation of Maropeng and bulk infrastructure for Magaliesburg and Lanseria amounting to R79 million for the same period. The budget allocation amounts to R73 million in 2010/11, followed by R65 million and finally R41 million in the outer year, resulting in R179 million over the MTEF.
Finally, the Gauteng Tourism Authority (GTA) required baseline adjustments stemming from under-spending in previous years that resulted in funds being allocated elsewhere. Their budget increases from R157 million to R171 million over the MTEF. An additional R14 million was allocated for the Gauteng Gateway 2010.
The capacity of the state and departmental restructuring
The agencies review process has been finalised. The departmental structure will be overhauled in accordance with recommendations accepted by the Gauteng Executive Committee. R15 million, followed by R20 million and finally R5 million has been allocated towards organisational restructuring over the three years of the MTEF.
The agency consolidation will result in the establishment of three agencies, a Growth and Development Agency (essentially consolidate Blue IQ, the Gauteng Enterprise Propeller and the Gauteng Economic Development Agency, a second agency grouping will be a marketing type agency comprising predominantly the Gauteng Tourism Agency and similar marketing functions that reside in the other agencies, and the third agency will be a regulatory agency, focusing on effective regulation (regulatory oversight and compliance). In the interim the Gauteng Gambling and Liquor Boards will not be consolidated until the latter operationally efficient and effective. Potential savings from the restructuring of the agencies is estimated at R100 million per annum.
The Gauteng Liquor Board
The Gauteng Liquor Board (GLB) has many weaknesses which manifests in backlogs regarding liquor licensing, regulation and compliance. This is why there is focus on turning the GLB around and capacitating it properly. The budget has increased by 74 percent from 2009/10 to R29 million in 2010/11. Special interventions are necessary to establish systems for effective tracking, monitoring a registry of licenses and enforcement. A total of R73 million, over the MTEF, has been allocated to improve the efficiency, service delivery and effective oversight and enforcement by the GLB.
Looking ahead: towards a new growth path
The department and its sister departments will also have to develop and implement action plans for the drivers of growth and development envisaged by the Gauteng Employment Growth and Development Strategy (GEGDS) that was recently adopted by the Executive Council. The GEGDS is a strategic framework which seeks to optimise the utilisation of all the levers of economic development in the Provincial Government’s “tool box”, including strategic procurement, bulk and strategic economic infrastructure, skills development, sector plans, incentivising and promoting innovation. All of this ongoing work will be consolidated into a new “Growth Path” for Gauteng, which is aimed at encouraging endogenous and inclusive growth (i.e. growth through the more productive utilisation of resources).
For more information contact:
Cell: 083 288 8915
Issued by: Department of Economic Development, Gauteng Provincial Government
28 May 2010