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HONOURABLE SPEAKER & DEPUTY SPEAKER Introduction
However, funding remains a challenge for all sectors of our economy, and more investment is needed with a particular focus on addressing social and economic drivers. "……the choices and investments we make for the next 5 years will be based on an understanding between government, labour, business and civil society. The future of jobs is not only driven by digital demands but also human factors, it is important to embrace the new job and skills development opportunities the 4IR has to offer. This will enable us to place the Province on a sustainable development trajectory”. Honourable Members, the vision of the 6th Administration championed by our by our Honourable Premier Saul to build a modern, growing and successful province in line with the electoral manifesto of the ANC, the governing party. necessitated that we align our fiscal framework to the needs of the Northern Cape. Honourable Members, pronouncements by the Minister of Finance during the 2020 Medium Term Budget and Policy Statement that government’s medium-term policy priorities entail economic recovery from the international recession prompted by the coronavirus pandemic impact which is expected to be highly rough, and further interrupted by new waves of infection. The central policy goals of government over the next 2021 Medium Term Expenditure Framework (MTEF) are to yield public finances to a viable situation through positioning the economy for faster and broad-based growth. Honourable Speaker, the economic recovery plan is targeting short-term measures to enhance energy production, investment on infrastructure and public employment, together with key structural reforms that aim to raise long-term growth thereby improving public spending positive effect on Gross Domestic Product. Honourable Members, following extensive intergovernmental consultations at a national level, the Minister’s Committee on the Budget and the Budget Council meeting of 1st October 2020 followed by the Cabinet meeting of 25 October 2020, a debt stabilization fiscal framework plan for the coming 5 years was approved, this plan is underpinned by huge reductions across the system of Government. Honourable Speaker and Honourable Members, I hereby table –
Honourable Speaker, the 2021 preliminary fiscal framework provides for huge cuts in the baseline of the province relative to the 2020 Medium Term Expenditure Framework (MTEF). This provides the province with an opportunity to improve on the composition of expenditure moving forward. These reductions cannot be absorbed without looking at better ways of doing things, including using better and more effective service delivery models to maintain the current levels of providing services to our communities. National Government is looking at various modalities including implementing a system of allowing employees to exit the system without major disruptions towards service delivery, more so in your frontline services delivery sectors like health and education. Honourable Speaker, whilst we understand and support the move to stabilise our debt trajectory as a country, these cuts have major implications for the country and province because they affect core programmes and services of the provincial administration. As part of improving political oversight on the budget, the Honourable Premier, Dr Zamani Saul, has institutionalised quarterly engagements with all the Members of the Executive Committee (MEC) where each MEC accompanied by senior management will account to the Honourable Premier on the following areas: irregular expenditure, unauthorised expenditure, accruals, expenditure trends with particular emphasis on infrastructure performance and delivery. These engagements will ensure MECs take full responsibility for the performance of their respective departments. This becomes critical given the fiscal space we are currently operating in towards building a better society for our people. Economic Outlook Honourable Speaker, during the Medium Term Budget Policy Statement in October, Minister of Finance, Honourable Tito Mboweni indicated that the South African economy is expected to contract by 7.8 per cent in 2020. According to National Treasury, projections indicate that the national economy is expected to experience positive growth of 3.3 per cent in 2021, 1.7 per cent in 2022 and 1.5 per cent in 2023. National Treasury also indicated that based on current projections, output is only expected to return to pre-pandemic levels in 2024. There has also been a lot of pressure on government finances in order to assist the vulnerable and to prevent further devastation on the economy following the current economic crisis brought about by Covid-19. Honourable Speaker, according to National Treasury projections, gross debt is expected to reach 81.8 per cent of GDP this year. This is up from projections of 65.6 per cent in February 2020. Debt is expected to stabilise at 95.3 per cent of GDP in 2025/26. Increased interest spending resulting from the continuous accumulation of debt will crowd out other spending if there is not a major reduction in public spending. Interest payments already take 21 cents of every rand of main budget revenue. In view of the dire economic circumstances and challenges brought on by increasing government debt, we must recognise the pressure on the national and consider that the provincial budget framework is highly depended on national transfers in the form of the equitable share and grants which comprises almost 98 per cent of the total provincial budget. Honourable Members, the first charge against government revenue is interest on government debt. The bigger our deficit, the more we have to borrow, the higher the interest bill and the less money available to invest in social development, in poverty relief and in the development of our human resources. It is for this reason that reducing our debt burden is important. It is important because it will free up the resources we need to build the society we envision that is modern, growing ang successful for all. Honourable Speaker, Honourable President Cyril Ramaphosa announced the economic reconstruction and recovery plan for the country on 15 October 2020. I quote from the address by the President: “The interventions outlined in this plan will:
Honourable Speaker, the economy of the Northern Cape is also expected to be severely affected by the current economic crisis. There is however hope as more areas of the economy opened up, although not all at full capacity. The need for social distancing and reduced sizes of public gatherings is still preventing certain businesses from functioning at full capacity, but the opening of many industries in the economy is providing businesses with the opportunity to once again do business and to contribute to the economy and job creation. Further relaxing of lockdown regulations as announced by Honourable President Cyril Ramaphosa is expected to further assist the provincial economy together with the national economy in its road to recovery. Honourable Speaker, together with economic hardship, the crisis has been accompanied by wide spread job losses. According to Statistics South Africa (Stats SA), the national unemployment rate increased to an alarming 30.8 per cent in the third quarter of 2020. This is an increase of 1.7 percentage points from the third quarter of 2019. Comparing the third quarters of 2019 and 2020, the number of employed people decreased by 1.684 million, with the number of unemployed people decreasing by 201 000. When comparing the third quarter of 2020 to the second quarter of 2020, the unemployment rate increased by 7.5 percentage points and there was an increase of 2.238 million in the number of unemployed people, while the number of employed people increased by 543 000. Honourable Speaker, the unemployment rate of the province is below that of the country. In the third quarter of 2020, the provincial unemployment rate was 23.1 per cent. When looking at the annual changes, the unemployment rate decreased by 6.7 percentage points. The number of employed people decreased by 35 000 while the number of unemployed people decreased by 51 000. Employment decreased in most industries, with increases reported only in Mining and Finance. On a quarterly basis, the unemployment rate decreased by 2.0 percentage points with the number of employed people increasing by 31 000 and the unemployed increasing by 1 000. There was however a significant increase in the number of discouraged work-seekers over this period. Increases in employment were reported in Agriculture, Mining, Manufacturing, Construction, Finance, Community and social services and Private households. Revised 2020/21 Adjustment Budget Framework Honourable Speaker, as part of this adjustment, the province received an additional amount of R281 million from the Presidential Employment Stimulus towards different sectors. We are adding an amount of R138 million as our provincial share to this amount to allow us to have a comprehensive response towards creating a safety net to create job opportunities in different sectors in the province. We will spent a total amount of R419 million between now and end of March 2021. Honourable Speaker, we have received various pressures to consider for funding, however, given the limit resources at our disposal, we could not consider all the pressures. We are making available an amount of R47.8 million to fund urgent priorities in different departments. Furthermore, a total amount of R57.9 million represent rollovers from the previous financial year of which R56.9 million is in respect of equitable share while rollovers for conditional grants amount to R993 thousand rands. I want to bring to the attention of this house the fact that these funds are part of last year’s underspending by departments on the equitable share and conditional grants and is not necessarily new money. As part of the continues efforts to reduce the wage bill, Government has introduced an Early Retirement Dispensation without Penalties and total number of 43 applicants from various departments have been approved so far at a cost of R24 million. Honourable Speaker, whilst our numbers in the province have remained relatively stable over the last 4 years averaging 7 per cent or 1959, this growth in the appointments was mainly driven by the appointment of Community Health Workers and Expanded Public Works Programme (EPWP), however, growth in terms of expenditure over the same period grew by 38 per cent. This as a result of above inflation wage agreements, which have unfortunately led to the crowding out of other services of Government. Honourable Speaker, reductions on conditional grants in the province for the current financial year amount to R67.6 million as part of national prioritisation. Departmental Allocations Honourable Speaker, recently we were reminded by the President that coronavirus is far from over and it will stay with us for some time. As such an amount of R150 million has been added to the Department of Health as part of COVID-19 response. Department of Social Development received R72.2 million of which R42.3 million relates to the Early Childhood Development for additional duties of compliance support. Government will continue mitigating food insecurity and poverty to vulnerable households, in response to this an amount of R13.2 million has been provided for Food Relief Programme. Honourable Speaker, agricultural sector plays a key role in the provincial economy and is one of the frontline sectors in the war against the coronavirus pandemic. Food is needed daily and thus it is crucial to keep this sector sustainable. The Department of Agriculture, Land Reform and Rural Development has been allocated an amount of R62.9 million of which R20 million is in respect of business rescue plan for the rooibos factory and R35.5 million as an additional to the Land Care Programme grant for draught mitigation projects in the province. Honourable Speaker, included in this allocation is our response as government to the economic impact of COVID-19 which further demands interventions that will also address the structural problems that affected our economy before the impact of the coronavirus pandemic. To this end, R7 million has been available to support emerging entrepreneurs in the agricultural sector through the establishment of sheep feedlot systems. This will result in the establishment of an intensive sheep farming programme to ensure adequate supply of red meat provincially and nationally considering the frequent draughts experienced in the province. Honourable Speaker, an amount of R45.4 million has been allocated to the Department of Transport, Safety and Liaison of which an amount of R32 million has been provided to cover the costs related to the commission at South African Post Office. R10 million has been provided for Boegoebaai Port project to conclude the technical feasibility studies whilst the National Treasury is currently looking at the Treasury Approval 1 (TA 1). Subsequent to the attainment of TA 1 from the National Treasury, the project will progress into the procurement phase. Honourable Speaker a healthy biodiversity is of great significance to humankind due to its ability to provide numerous natural services for everyone while it has a potential to contribute to the provincial economy. The condition of our provincial nature reserves are in a poor state and in an effort to ignite our tourism sector in the province, we need to ensure that our nature reserves are in a good condition. To this end, an amount of R17 million has been allocated to the Department of Environment and Nature Conservation to revitalise our provincial nature reserves in the province. 2021 FISCAL FRAMEWORK Honourable Speaker, relative to the 2020 medium term expenditure framework, the provincial equitable share is reduced with an amount of R5.370 billion of which R1.545 billion in 2021/22; R2.1 billion in 2022/23 and R1.6 billion relate to the last year of the 2021 MTEF. Honourable Members, as already indicated that the provincial equitable share is reduced with an amount of R5.552 billion of which R4.746 billion relates to the wage freeze and compensation of employees fiscal consolidation while the remaining amount of R806.611 million relates to non-compensation fiscal consolidation reductions. These reductions are underpinned by government’s fiscal consolidation efforts to reduce the wage bill and spending levels in the country in order to stabilise the debt obligations. Honourable Members, in term of the fiscal framework aggregates, the original baseline on the provincial equitable share amount to R46.805 billion over the 2021 MTEF and is increased with an amount of R182.148 million due to the impact of new data updates to the Provincial Equitable Share (PES) formula. The revised equitable share allocation for the province amounts to R41.4 billion over the 2021 MTEF of which R13.6 billion is in 2020/21, R13.873 billion in 2022/23 and R13.901 billion relate to 2023/24 financial year. Conditional Grant allocations for the province amounts to R14.1 billion over the 2021 MTEF of which R4.5 billion is in 2021/22, R4.7 billion in 2022/23 and R4.9 billion in 2023/24 whilst provincial own revenue amounts to R1.5 billion over the 2021 MTEF. The net effect of all the adjustments on the provincial framework provides for total provincial receipts of R57 billion over the 2021 medium term expenditure framework. As to be expected, the social sector departments drives the expenditure of the province constituting 74 per cent of the total budget between social development, health, education and sport, arts and culture. Conclusion We are currently in the process of quantifying the actual impact of these cuts on core programmes of departments and to this end, a benchmark exercise will be held with the National Treasury in early December to demonstrate the detrimental impact that these cuts will have in our province. The outcome of these benchmark meetings will be presented to the Budget Council and Cabinet before the 2021 division of revenue is concluded. Honourable Speaker, the impact of the pandemic and subsequent lockdown is profound, on not only each individual but also the economy and the world at large. It is difficult to predict the exact timeframe for economic recovery, hence the importance to develop a strategy to assist all businesses in all economic sectors to overcome the negative socio-economic implications. Whilst this adjustment provides for immediate relief in the form of the Presidential Employment Stimulus coupled with specific provincial interventions, the Department of Economic Development and Tourism is in the process of crafting a medium to long term Recovery Plan for the province premised on the National Reconstruction and Recovery Plan of the Presidency. The Recovery Plan will identify economically viable and sustainable interventions that will promote the development, growth, diversification, transformation and recovery of the provincial economy. Honourable Speaker, allow me to quote Honourable President Ramaphosa when he said, “Difficult days indeed lie ahead. However, we have proven our resilience as a nation over the past five months. The task before us now is to apply the same energies with which we have battled this pandemic to the economic recovery effort. We are weathering a long and difficult storm. We are enduring great hardship and suffering unbearable losses. But we continue to stand firm against this onslaught. A ray of light is visible on the horizon”. Honourable Speaker, I place before you far more than a statement of revenue and expenditure priorities for debate. What we have here is an instrument by which the commitment and performance of Northern Cape Provincial Government can be measured. I have no doubt that the tighter fiscal environment has challenged us to respond to the wider social needs differently, compelling us to prioritise our policies and reprioritise our expenditures, within and between our budget lines. In conclusion, it is appropriate that I record my profound gratitude to Honourable Premier, Dr Saul, and all of my Executive Council colleagues, for your support and understanding in the formulation of this second adjustment Bill, and for your encouragement during the difficult period through which we have passed. I thank you. |
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NORTHERN CAPE SECOND ADJUSTMENT APPROPRIATION BILL FOR THE 2020/21 FINANCIAL YEAR
ADDRESS BY MR. A VOSLOO (MPL), MEC FOR FINANCE ECONOMIC DEVELOPMENT AND TOURISM ON THE OCCASION OF TABLING OF THE NORTHERN CAPE SECOND ADJUSTMENT APPROPRIATION BILL FOR THE 2020/21 FINANCIAL YEAR AND THE PROVINCIAL MEDIUM TERM BUDGET POLICY STATEMENT TO THE VIRTUAL SITTING OF THE NORTHERN CAPE PROVINCIAL LEGISLATUREIssued by Treasury