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Policy Speech 1999/2000
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Speeches and Media Release
 Provincial Treasury, Economic Affairs, Environment & Tourism

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 EASTERN CAPE PROVINCIAL GOVERNMENT

MEC FOR FINANACE AND PROVINCIAL EXPENDITURE

POLICY SPEECH - 1999/2000



Mr Speaker, Honourable Members.

The past year has been a dramatic one for the provincial Treasury in particular because the balance of outstanding debt a year ago was over 
R1 billion and was deteriorating. This forced us to agree to the assistance from the national Department of Finance in terms of section 
100(1)(a) of the Constitution.

In my Budget Speech I related some of the conditions attached to the section 100 agreement which resulted in the creation of the Treasury 
Debt Reserve of R1.1 billion which was suspended from the budgets of departments. Additional funds of R822 million were obtained from 
national government, most noteably the R597 million in respect of the overdraft of the former Transkei administration.

From the total Reserve of R1,9 billion Treasury is presently paying off R1,4 billion of debt. Additional amounts were allocated for such 
things as the social security backlogs, to cover the shortfall in revenue collection and the overexpenditure by some departments.

We are now faced with an outstanding debt of R756 million which Treasury is seeking to liquidate as a matter of urgency in the new 
financial year. If we can just place ourselves in the shoes of suppliers to the provincial government, especially the small and medium size 
businesses which government tries to empower, such businesses are daily facing financial stress and even collapse. The ones I am referring 
to are not those which have no work, but the ones which have supplied their goods and services, but who have not been paid.

The creation of the centralised pre-audit and bookkeeping functions within Treasury has been a necessary action to start to turn around the 
situation where there was little control over the expenditure of the provincial government. With the improvement in the levels of services 
to many of our people since the present government came into office, additional claims were laid on the fiscus to meet the cost of 
supplying these services. In consequences we needed to become more professional in the management of our resources.

There was a change in management of the Department of Finance and Provincial Expenditure from June 1998 accompanied by a series of 
structural and organisational changes. The programme structure was changed from 8 to 10 programmes which included the transfer of the 
Internal Audit programme to the Office of the Premier.

As a result of the centralisation of certain accounting functions in Treasury the Department of Finance and Provincial Expenditure needed 
to be restructured. This process was started in June 1998. At that time the staff complement was 233 personnel.

An organogramme was drawn up and was approved in December 1998. Together with some additions effective from 1 January 1999 the organogramme 
has a staff complement of 487. Some additional posts will still be required and will be under discussion during the next few months.

Together with supernumerary staff the budget has been based on a staff complement of 589.

The Department is now in the process of filling the organogramme. Existing appointed staff of the Department are being absorbed into the 
new structure. Work Study have undertaken evaluations of all departments to determine which posts could be transferred to the Department of 
Finance and Provincial Expenditure as a result of the function shift. The Department is in the process of negotiating for the transfer of 
the required number of staff from those identified. This is expected to be completed within a month.

Two other phases of the filling of posts exercise are to try to accommodate as many of the 65 supernumerary staff of the Department into 
the new structure and to advertise, mainly internally, but in some cases externally, for the remaining posts. Those of the Legal Advisor 
and Head of the Forensic Audit Unit are currently being interviewed.

I will focus now on the proposed budget for the for 1999/2000 and the plans for the year.

Programme 1: Administration

This programme encompases the activities of policy formulation by the MEC, the management of the provincial Treasury, the Department as a 
whole and the two chief directorates. An amount of 4.2 million has been budgeted for this programme.

Programme 2: Budget Office

The Budget Office is responsible for the preparation of the provincial budget as well as the function of Revenue Research. This is a new 
function for which a study has just been started to investigate how best the province can improve its revenue collection. The objectives of 
the study are:

* to provide important strategic facilitation for the establishment of an effective Revenue Research component
* to assess the current situation regarding revenue collection
* to identify the revenue drivers and collection points
* to develop a sustainable strategy to improve revenue collection
* to develop an implementation programme and
* to provide implementation support.
This project will include the updating or establishment of tariff registers and the formulation of legislation for the effective collection 
of revenue. Capacity building is a central focus of the project with the staff of the Revenue Research component assigned to the project on 
a full time basis.

The budgetary allocation is R3.5 million.

Programme 3: Expenditure Control

This is a new function within the Department and focuses on the monitoring of expenditure of departments in relation to their budgets. A 
complement of 17 posts has been approved and have been budgeted for.

The budgetary allocation is R2.2 million.

The Department has prepared a budgeting policy in terms of which many Items of expenditure are budgeted for in one programme. For example 
training fees, stationery and telephone costs are all provided for under Management Services. It was found not to be practical to split up 
such amounts into little bits for each programme.

Programme 4: State Purchases

This programme consists of the Tender Board Secretariat and the Logistics functions as well as Financial Dispensation. The Provincial 
Tender Board held a total of 15 meetings during 1998/99 and adjudicated on contracts valued at R416 million. The board which had been in 
office since 1995 stepped down when its term expired in October 1998 and a new board was selected. It started work in January 1999.

Logistics is responsible for the implementation of the provisioning administration system. Courses were conducted during the last year for 
200 officials to be trained in the correct procedures involving stores administration.

A decision has been made to implement the national government's computerised provisioning administration system called Logis. Once this is 
operational it will provide government with far better control over its stores.

Financial Dispensation is concerned with the application of Treasury Instructions. Applications for approvals or the waiving of the 
provisions of Treasury Instructions are administered by this component which consists of 6 posts of which only 3 are currently filled.

The budgetary allocation for this programme is R5.9 million.

Programme 5: Management Services

Management Services is responsible for departmental financial matters, personnel and auxiliary services.

The restructuring of the Department has placed a lot of work on this Directorate. To grow from 233 staff to close to 600 over a year is 
quite a challenge. Most of the posts have not yet been filled, but with the approval of the structure in December 1998 there has been a lot 
of activity in the last two months to start to absorb existing staff, effect transfers in relation to the function shifts resulting from 
the centralisation of various accounting functions, and the advertising of some posts. A lot more activity in this regard will be taking 
place in the coming months.

The budgetary allocation for this programme is R31.8. This includes personnel costs of R13.6 million for 167 staff including 65 
supernumerary personnel at a cost of R6.6 million. It is expected that most of these staff members will be placed in positions within the 
new structure of the Department.

Administrative expenditure for this programme totals R13.9 million. This may appear to be relatively high in relation to the personnel 
costs, which is due to the fact that a number of items are only budgeted for in this programme, instead of spreading them out amongst all 
programmes. It includes a provision for bursaries, the payment for the telephone account for all provincial government departments based in 
Bisho, training fees for the whole department, expected transfer costs of staff, and the costs associated with departmental transport.

Programme 6: Financial Management

This programme is responsible for the Pre-Audit function which involves the establishment of five regional offices and the head office 
operation. A staff complement of 130 posts for the regional structure has now been approved. With the assistance of Work Study the staff in 
each department which were affected by the function shift of centralising various accounting functions have been identified. The Department 
is currently negotiating with the other departments for the transfer of some of those staff members to Treasury. It is hoped that this will 
be completed within the next month.

The total number of staff in this programme is 216 posts and the budget to be voted is R15.5 million.

Programme 7: Financial Systems and Training

This is a new programme which involves responsibility for the Financial Management System and other computer systems impacting on the work 
of the Department. Financial systems support is provided, in cooperation with the Office of the Premier's Information Technology 
directorate.

A training component is also part of this programme to provide both general financial training and specific computer training, especially 
on the FMS system. Staff are still required for this function which is considered to be very important to build the needed capacity in the 
province regarding financial matters.

The budget to be voted is R6.9 million. This amount includes a provision for the development of new computer systems to provide a more 
efficient commitments facility, for the control of revenue and expenditure and for the preparation of budgets. The projects have been out 
to tender and are currently being adjudicated.

Programme 8: Financial Control

Under the Financial Control programme the functions of bookkeeping, suspense accounts and a new component called Forensic Audit 
Investigation will be located. The position of the head of the Forensic Audit Investigation unit is presently being filled from outside the 
government in view of the importance of obtaining appropriate investigative skills. This unit will deal with the detection and avoidance of 
fraud, such as related to the payment mechanisms in use. An important training function will be part of the work of this component as the 
starting point for ensuring effective fraud control is the implementation of proper systems of accountability by officials.

The budget to be voted for this programme is R19,2 million. This amount includes provisions for the use of consultants to assist with the 
closing of books going back to before 1995, as required by the Auditor-General, the reconciliation of the accounts of Tribal Levies and 
Trust accounts and making preparations for the introduction of proper debtor and creditor systems in line with Generally Accepted 
Accounting Practices.

Programme 9: Provincial Revenue Services

This programme is responsible for monitoring the collection of revenue within the province for the provincial government. Its work focuses 
on revenue inspections and ensuring that the staff of the revenue collection agencies are trained in how to collect, receipt and deposit 
moneys due to government.

This programme works with the Budget Office in that the latter is responsible for the policy aspects of revenue collection, whereas this 
programme deals with the practical collection of revenue. The study which was mentioned under programme 2 will greatly assist the 
collection effort of this directorate.

The budget to be voted is R4.8 million

Programme 10: Treasury Reserve

This is the amount set aside for the repayment of debts on behalf of the provincial government and the provision of funding for 
development.

In terms of the White Book the amount of R377 million was top sliced off the equitable share funding for the reserve. Amounts will be 
required to be deducted from the budgets of each department to make up the amount of R746 million. In view of the additional funding 
allocated to the Department of Finance and Provincial Expenditure resulting from the expectation of higher own revenues than at first 
estimated it appears that the Department will be able to contribute R12 million towards the Treasury Reserve for debt reduction.

Honourable Speaker, this brings me to the end of my policy speech for the Department of Finance and Provincial Expenditure. During the 
difficult circumstances which the province has faced over the last year resulting from the financial constraints it is believed that 
positive progress has been made in meeting the challenges. During the year ahead many of the plans which were conceived in the last year 
will be implemented. This should greatly ease the tensions and improve the level of service which the Department is required to provide.

I thank you.

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