Home News No budget cuts over the next three years – Finance MEC

No budget cuts over the next three years – Finance MEC

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The MEC for Finance, Economic Development and Tourism. File picture: Abraham Vosloo

THE NORTHERN Cape MEC for Finance, Economic Development and Tourism, Abraham Vosloo, said funds from the adjustment budget would be invested in employing youths and appointing more front-line workers in the health and education sectors.

He added that adverse implications would result if critical posts were not filled speedily, during the tabling of the Northern Cape adjustment appropriation bill for the 2021/22 financial year and the provincial medium-term budget policy statement last week.

“We also need to balance the risk of overspending that may result in a bigger problem for the Province. Thus far, we have managed to balance the two in a manner that allows services to continue,” Vosloo said.

He indicated that there would not be further budget cuts over the next three years, after over R5 billion budget cuts were implemented in the 2021 medium-term expenditure framework (MTEF). “This will allow us some stability in the short to medium term.”

Vosloo stated that departments were allowed to reprioritise under-performing areas in order to compensate employees and appoint critical posts.

“Provincial Treasury does not determine which posts are critical or not, this decision is left entirely to departments to make such determinations based on service delivery imperatives.”

The MEC added that they were focused on reducing the provincial debt and freeing up resources for service delivery programmes, reducing irregular expenditure, consolidating municipal support programmes and implementing consequence management for poor performance.

“We need to be firm in implementing consequences for unauthorised and irregular expenditure. It is also a means of ensuring that scarce resources are directed towards service delivery programmes.”

Vosloo said they would streamline infrastructure investment in the Province that could yield a bigger impact on service delivery and the economy of the Province at large.

“The economy of the Northern Cape contracted by 0.6 percent in 2019, that was below the national economic growth of 0.2 percent over the same period. With the Covid-19 restrictions in 2020, the Northern Cape economy was also expected to have contracted. However, with fewer restrictions in 2021, we expect some recovery during this year.”

He pointed out that the Covid-19 pandemic had affected the economy and jobs.

“The annual unemployment rate in the Northern Cape increased by 1.8 percentage points from 23.1 percent in the third quarter of 2020 to 24.9 percent in the third quarter of 2021.

“The number of employed people decreased by 11,000 and the number of unemployed people increased by 5,000. The number of discouraged work-seekers increased by 45,000. On a quarterly basis, the unemployment rate decreased by 3.2 percentage points. The decrease in the unemployment rate was as a result of an increase in employment in all industries, except for construction and transport. The number of employed people increased by 19,000 while the unemployed decreased by 9,000.”

He noted that municipalities were structured to operate as private entities, where up to 90 percent of their revenue was generated by imposing cost recovery tariffs on services rendered.

“When municipalities do not collect revenue from their customers or communities do not pay for services rendered, the consequence is a failure by municipalities to pay creditors. This is the case in most of our municipalities in the Province.

“Municipalities are heavily reliant on the 10 percent grant and equitable share from national. This constitutes a fraction of the total income of municipalities.

“It is for this reason that when the equitable share tranches are withheld, municipalities cannot afford to pay salaries.”

Vosloo added that 18 municipalities in the Province had adopted unfunded budgets for the 2021/22 financial year.

“This is barely an improvement compared to 19 in 2020/21. Provincial Treasury has been working with municipalities to draw up credible repayment arrangements with creditors, especially Eskom and the water boards. However, municipalities end up defaulting on these arrangements due to cash flow challenges. Provincial Treasury has further assisted municipalities to draft budget funding plans to move these budgets from unfunded to a funded position over time.”

Vosloo stated that six municipalities – Dikgatlong, Kai !Garib, Renosterberg, Ubuntu, Magareng and Phokwane – were slow to implement financial recovery plans.

“Provincial Treasury and National Treasury are currently in the process of preparing a financial recovery plan for !Kheis Municipality, in an attempt to resolve the financial difficulties they are facing.”

He pointed out that the rising costs of delivering services, employee-related costs and the deteriorating revenue base of municipalities and the ability of residents to pay for services also placed municipalities’ finances under strain.

He said three departments had improved on their audit outcomes for the 2020/21 financial year.

“The auditor-general has noted that the Department of Economic Development and Tourism showed a significant improvement, where it is very close to obtaining a clean audit.”

Vosloo added that there were currently no disclaimer or adverse audit opinions in the Province.

“The majority of departments are maintaining the financially unqualified opinions with findings. This is by no means a matter of complacency, measures are in place to help them to obtain much more favourable audit outcomes.”

He stated that the cost of compensation of employees was driven by an increase in personnel numbers and remuneration.

“The increase in remuneration has been the highest as it accounts for the bigger share of the increase in spending and the growth in personnel numbers accounting for the remainder.

“Current expenditure on compensation of employees has grown from 56 percent in 2017 to 59 percent in 2021 of the total provincial budget.

“Over the same period, between 2017 to 2021, the compensation of employees spending increased by 23 percent. However, the growth in headcounts declined from 24,285 to 23,989. All departments experienced a decline in headcount numbers except for the social sector departments.”

He indicated that despite the reduction in headcount numbers across the Province, the departments of Health, Education and Social Development continued to experience positive growth.

“During April 2017 to September 2021, headcount numbers increased in the departments of Education, Health and Social Development, contributing 22 percent, 30 percent and 21 percent respectively. The growth is mostly in front-line personnel including teachers, social workers and clinical posts in Health.”

Vosloo added that in future all departments would be allowed to fill vacant and funded posts subject to the standard procedures and processes of the Department of Public Service and Administration.

“This will allow Provincial Treasury to manage headcount numbers with available funds while allowing space for critical funded posts.”

He stated that as of the end of March the provincial bank account showed a net positive amount of R365.1 million.

“This is a significant improvement compared to what the 6th administration inherited. As part of stabilising our cash flow reserves, we tabled a budget surplus of R63.6 million in the main budget. This amount has been set aside for debt redemption and to build enough reserves to finance urgent service delivery imperatives.”

He indicated that the original budget tabled in March this year was set to be adjusted with a net amount of R905.8 million.

“The additional money that the Province received includes R4.2 million for early childhood development, R2.7 million for human resource and training development grant for the appointment of medical interns and R649,000 is a top-up for the HIV, tuberculosis, malaria and community outreach grant.”

Vosloo said R156.2 million from the Presidential Youth Employment Initiative would be used to address poverty alleviation, mass employment, skills development for the youth, reduction of youth unemployment, creation of social values and the provision of decent job opportunities.

“Furthermore, R393.8 million has been provided to cover the public sector wage agreement of which R184.8 million and R116.5 million is allocated to the departments of Education and Health respectively and the remaining amount is shared among other departments.”

He added that R143.5 million from the provincial equitable share would be used to fund economic recovery initiatives.

“An amount of R271.6 million, or 27.9 percent, represents rollovers of both conditional grants and equitable share. This is not new money but merely a re-allocation of unspent funds needed to finalise committed programmes that are overlapping into the current financial year.”

He stated that Provincial Treasury had declared an amount of R35 million due to slow recruitment processes.

Vosloo added that the Province received an additional R20.1 million in the 2022/23 financial year in the form of equitable shares.

“The Province is also losing a net amount of R23.9 million over the 2022 MTEF.

“Other adjustments on the framework relates to an additional amount of R367 million in the first year of the 2022 MTEF to cater for the carry-through implications of the implementation of the 2021 wage agreement until a new and long-term wage deal is finalised.”

He added that the equitable share would amount to R42.4 billion, while conditional grants amounted to R14.1 billion and the provincial own revenue budget of the Province was expected to grow by 5.1 percent to R477.7 million in 2022/23.

“Of the total equitable share and own revenue budget of R14.7 billion in the 2022/23 financial year, R11.8 billion or 80 percent is allocated towards social sector departments, including education, health and social development, followed by the economic sector at R1.9 billion or 13 percent. Lastly, the governance sector accounts for R1 billion.”

Departmental Allocations:

Department of Education – R141.8 million for the Presidential Youth Employment Initiative that is set to create 6,793 job opportunities across the Province

Department of Roads and Public Works – total R33 million

Job creation initiatives, skills development – R30 million

Construction work programme – R3 million

Department of Economic Development and Tourism – total R13 million

Economic recovery initiatives – R7 million

Department of Sport, Arts and Culture – R1.5 million for the National Resistance Liberation Heritage Route programme, R3 million sport tourism

Department of Health – total R82.6 million

Presidential Youth Employment Initiative – R9.2 million

To assist the Department of Health to reduce accruals and address the shortfall on goods and services – R70 million

Department of Social Development – total R9.4 million

Presidential Youth Employment Initiative for the appointment of 80 social workers – R5.1 million

Early Childhood Development Grant – R4.2 million

Department of Agriculture, Land Reform and Rural Development – Economic recovery initiatives – R5 million

Provincial Legislature – R9 million

Office of the Premier – R2 million to upgrade provincial IT infrastructure

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