Everything must change for provincial treasury

26 June 2018

Let me start by welcoming the last budget speech for the Provincial Treasury by the MEC for Finance. I say it is the last, because we know without any shadow of doubt that, after the elections in 2019, the budget speeches will be delivered by me. A DA provincial government will bring change to the people of this province, because they are tired of empty promises and poor service delivery.

The fact that I have tabled an alternative budget early this year proves that I am ready to take over the Provincial Treasury. This alternative budget forced the provincial treasury to make very serious admissions early in March 2018 and I consider it peremptory to mention these admissions:

1. That the province had a projected budget a budget deficit of R530 million for 2017/18;
2. The projected consolidated unauthorized expenditure of the province will amount to R883 million up to the end of March 2018 compared to available funds of R247 million to clear debt;
3. The rate of overspending by far outweighs the provision for debt;
4. This effectively implies that, based on the current debt obligation vis a vis available amounts to clear the debt, the province will take over 5 years to clear this debt.
5. This debt does not include accruals, but only the debt currently sitting in the books of the province.
6. Some provincial priorities have been considered despite the reduction to the equitable shares at the expense of reduced debt redemption;
7. The Adjustment Budget of 2018 must be strictly managed.

In May 2018 the National Treasury presented to the Select Committee on Finance and found that these projections of the Provincial Treasury were unreliable.

This is a serious indictment on the Provincial Treasury. It simply does not have control over the provincial fiscus. Especially if regard is had to the fact that provincial departments report to the provincial treasury monthly and quarterly in terms of section 40 (4)(c) of the PFMA on actual revenue and expenditure; projections of expected expenditure and revenue collection; and, where necessary, an explanation of any material variances.

In May, the Provincial Treasury presented to the Select Committee on Finance the following material facts:

1. The province closed with a budget deficit of R 86 million. Indeed, such is the financial distress of the province that we ended the past two financial years with a budget deficit;
2. This deficit does not account or provide for unauthorized expenditure of R903 593 million; cumulative irregular expenditure of R10.467 007 billion or cumulative accruals exceeding R1.434 billion.
3. The bulk of these accruals are owed by the department of Roads & Public Works and the department of Health. These accruals refer to goods and services that have been received or supplied during 2017/18, but will be paid during 2018/19 – or even later, if payment trends from the government is any indication.

This means National Treasury was correct when it said the projections of the provincial Treasury was unreliable. If you have such unreliable projections, how can you possibly be said to discharge your duty to exercise control over the provincial budget in terms section 18(1)(b) or of managing revenue and expenditure effectively in terms of section 18 (1)(c) of the PFMA?

The cumulative effect of the budget deficit, the outstanding accruals and other pressures such as the ever-increasing medico-legal claims is that there is less and less actual money available each year for current and future service delivery. Simply put, we are using 2018’s money to pay 2017’s accounts instead of paying for 2018’s services. So the province is caught in a devastating cycle where more money is used in each successive financial year to settle past debts rather than to deliver future services, which limits the opportunities for growth and economic expansion in the province even further.

Let’s be frank. A province with an expanded unemployment rate of 43% is not working. A province with 22 municipalities facing total collapse because their expenses exceed their income is not a success. A province where hospitals cannot provide clean linen to patients because they have run out of coal, where learners are functionally illiterate and where the youth have run out of opportunities is in desperate need of the type of change that only a DA-government can bring.

Part of the problem facing our provincial fiscus is the fact that the province has already plunged headlong over the fiscal cliff. Let me repeat what I have stated before: if this provincial government was a person, not even the VBS Mutual Bank would approve its loan applications.

And yet the provincial administration is not honest with itself, or with the public, about the budgetary pressures that it faces and the strain it places on service delivery. These pressures have a significant impact on service delivery by all provincial departments.

Now, when we talk to officials from the Provincial Treasury about the problems that poor service delivery brings, they are quick to say that it is the provincial departments with their specific mandates who need to shoulder their respective responsibilities and ensure that services are delivered to our communities. Indeed it is, but they forget an important element – that it is Treasury who, through the allocation of funds and the monitoring of its use, creates the environment for departments to deliver on their mandates.

Section 18 of the Public Finance Management Act empowers Treasury to ensure that there is good governance within the provincial administration and that this good governance, in turn, translates into efficient and effective service delivery. But Treasury uses these provisions selectively, with little to no evidence of improvement upon its’ implementation.

Let me use the example of revenue collection. Since the slice received from the national budget pie is not enough to feed all the mouths at the table, it is necessary to enhance the collection of provincial revenue so as to augment and supplement our provincial income. Our second largest source of provincial own revenue is, or should be, the revenue generated from health patient fees. Due to the continuous under-collection of revenue from health patient fees, Treasury had decided to intervene and assist the department of Health to improve on its revenue collection. We have heard about the appointment of revenue clerks and their allocation to different hospitals in the province to address the shortage of dedicated staff, the improvement of filing and billing systems as well as the installing of the Patient Administration system. Yet, despite the interventions, under-collection of revenue by the department of Health persists – and even worsened! In 2016/17, the department under-collected on health patient fees’ by 36%. One year laterand with the interventions of Treasury being implemented, it under-collected by 43%.

It cannot be that Treasury implements all its interventions and that revenue collection is then even poorer than it was before! Such an outcome suggests that Treasury needs to go back to the drawing board and re-evaluate the support it renders to departments in the management of the provincial finances.

This is but one example of many which shows that there is no political will left in the current provincial administration to implement the laws and regulations of our country to the benefit of our people.

The unpalatable reality is that Treasury is currently being used as a conduit to embark on a criminal escapade and is complicit in the funding of irregular, unauthorised, fruitless and wasteful expenditure and downright illegal activities carried out by various provincial departments. Treasury is legally obligated to ensure the proper management of the provincial purse; it is failing to do so and, as a result, the people of our province are left the poorer.

We have promised in the past that we will lay criminal charges against Accounting Officers, CFOs and Senior Management. I am finalising the affidavit in this regard and it will be ready soon.

In conclusion, I know we have honest officials in the provincial departments and we acknowledge their ethical work and professionalism. It is these officials who carry the hopes and aspirations of the poor people of this province. From Madibeng to Cassel. From Kuruman to Baga-Sehunelo. From Dithakong to Loopeng. From Ga-mopedi to Lotlhakajaneng.

As the Democratic Alliance we are committed to working with these officials when we take over this province in 2019 to use the budget to benefit the poor, the youth who are not in employment and in education. Change is coming to the Northern Cape Province in 2019.

While the President sings “Thuma mina”, I choose to sing a different song of the late Bra Hugh “Change”. To the looters of the public purse, everything must change. The people of this province want change. Everything must change, nothing is forever, and everything must change.

Believe me, it will change for the benefit of all the people of this province in 2019.

The Democratic Alliance does not support this budget.

I thank you.
Ke a leboga.
Baie dankie.

Issued by Boitumelo Babuseng, DA Provincial Spokesperson for Finance, Economic Development & Tourism, 26 June 2018