KwaZulu-Natal Legislature  

PIETERMARITZBURG: 4 August 2009

Madam Chairperson

At a post-election budget council, the new national Minister of Finance urged the Hon. MEC for Finance and her colleagues from other provinces to see themselves as the "CFOs of their respective provinces".

As custodians of provincial finances, the Finance MECs have to lay a strong foundation for the best possible return on resources expended, and be the key negotiators with the Premier and the fellow MECs in how to improve efficiency within their administrations and best achieve service delivery targets in their provinces.

This role includes taking steps to achieve clean governance and full compliance with either PFMA or MFMA requirements, and importantly, nurturing talent management, especially in the fields of general and financial governance.

 From what we have seen so far of the Hon. Finance MEC's performance, she has taken these tasks to heart. We in the Official Opposition particularly appreciate the openness on her part in dealing with our province's fiscal challenges, both past and present.

The MEC's attitude during her budget presentation and especially during  the recent briefing on health budget reveals a genuine commitment to greater openness and improved efficiency.

The additional challenges posed by the economic recession cannot be addressed adequately without a commitment to transparency. With 117,000 jobs shed in our province in the first quarter in the wake of a sharp contraction of 6.7 percent in our gross domestic product, a concerted effort between business, government and labour is needed.

So far, we have seen some success stories during this parliamentary term. OSD for social workers was finally agreed upon in June, and the medical doctors' labour dispute was resolved after a lengthy negotiation last month. The immediate challenge for the Hon. MEC for Finance is to improve communication between Treasury and government departments, and the embattled Department of Health in particular.

The Hon. MEC for Finance will no doubt learn from the rocky experience of the task team formed late last year to curb runaway expenditure in the Department of Health. The task team was expected to address the situation where the Provincial Treasury and the department could not agree on how spending patterns should be managed. There is little evidence that such an agreement exists today.

The challenge the Hon. MEC for Finance - together with the national Minister of Finance, will face in the long-term will be the need to reconcile the obvious calls for austerity and fiscal prudence with growing demands for increased spending from her political party.

Projects recently put on the table by various government departments include free higher education, extending the child grant to 18 years of age, extension of job opportunities to 500,000 individuals this year and eventually to 5 million, a comprehensive reform of pensions and the National Health Insurance.

While we in the IFP sympathise with many of these demands - and some of them are indeed our own policy - we must recognise that, if unchecked, the cost of their implementation will place an additional tax burden on our citizens in a time of recession.

Given the need to mitigate the impact of the economic crisis, the Hon. MEC for Finance may yet face an uphill battle as she takes steps to reduce non-core departmental baseline costs, cut out wasteful expenditure and increase efficiencies and better control over our finances.

In response to these challenges, the Hon. MEC for Finance has largely led by example. The 7.5 percent cut in the budget of the Provincial Treasury has been effected against Goods and Services. This cut should reduce spending on items unrelated to service delivery, such as consultants, travel and subsistence, and venues and facilities. But the cutback will also result in the reduction in the number of Municipal Support Programme from 15 to 6.

Since November 2007 the Provincial Treasury has lent support to 9 municipalities through the MSP. This support has had a significant effect on the 2007/2008 audit opinions of the municipalities supported by the programme. We would like to know to what extent the budget reduction has affected Treasury's aftercare in some of these municipalities designed to ensure the sustainability of the improvements instituted by the MSP.

In tandem with the budget cut against Compensation of Employees effected by the Department of Co-operative Governance, the budget cut against the Municipal Support Programme is bad news for those municipalities that depend on support and assistance from the provincial government. In this regard, the budget cut will put additional pressure on finding solutions for the high vacancy rates in finance components across both local and provincial government spheres, career planning and competency building.

In addition to staff-related pressures, most of our municipalities - as part of their revenue projections for the new financial year - already had to factor in a possible drop in revenues to ensure sustainability.

But this, and a necessary rise in rates caused mainly by Eskom tariff increases, has resulted in a fresh wave of ratepayer activism which is likely to gain momentum, especially if municipal budgets are not spent carefully. It would be irresponsible to view the current spate of municipal protests outside of the context of municipal finance.

Madam Chairperson, municipalities need help to manage their revenue. 

They need assistance with tariff setting and adjustment against their specific socio-economic base and service delivery requirements. This is one area where assistance from Treasury is essential. But effective control over municipal finances extends to enhancing political accountability. And this is an opportunity for all political parties represented in local government to agree on a practical code of conduct and crack the party whip, if necessary.

The Hon. Finance MEC's pledge to monitor very closely how departments procure their goods and services is welcome. Despite the many available tools for promoting openness in public procurement, the awarding of tenders remains open to corruption.  Audit reports are still just about the only publicly available source of information on tender processes.

Even so, tender irregularities tend to be exposed only after contracts have been awarded. Public information that can be used to prevent tender corruption from occurring in the first place, is virtually non-existent. The gap between tender regulations and policies - which often reflect best international practice - and actions of government bureaucrats remains.

As Members of this House, we would appreciate a similar level of openness as the Hon. MEC for Finance recently demonstrated with regards to cash flows in the Department of Health. Corruption is a product of bureaucratic discretion in the absence of accountability. At least partial public involvement in the tendering process would mean less discretion, more accountability - and ultimately less corruption.

Madam Chairperson, with a relatively humble budget and with a complement of 350 staff, the Provincial Treasury must be the driving force that guides all the other departments to stay on track within their own financial and fiscal constraints. Treasury will also have to assist each department to deliver on the promises made by the ruling party during the recent election.

The greatest challenge facing Vote 6 is to maximise how it spends its voted funds to steer all other departments to spend their allocations efficiently and effectively.

We in the Official Opposition hope that by the time we come to the adjustment estimates and most certainly when the Hon. MEC for Finance tables the main estimates for next year, progress will have been made in improving efficiencies and achieving clean governance.

The Provincial Treasury must learn from past mistakes, service our debt responsibly, while introducing better corporate governance. In pursuing these objectives, the Hon. MEC for Finance has our support.

I thank you.

Contact: Roman Liptak, 078 302 0929