NC Budget 2018: DA’s alternative for Total Change which brings jobs, growth and service delivery

by Adv Boitumelo Babuseng, MPL – DA Provincial Spokesperson for Finance, Economic Development & Tourism

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Date: 05 March 2018

Release: Immediate

Note to editors: The following was presented today by the provincial leader, Andrew Louw, MPL, and the DA Provincial Spokesperson for Finance, Economic Development & Tourism, Adv. Boitumelo Babuseng, ahead of the tabling of the Northern Cape’s budget on Wednesday 7 March 2018. Please find the main preview here.

Introductory remarks:

The provincial government has shied away from taking the people of this province into its confidence and revealing the true financial state of the province in the past. This information is available through the annual consolidated financial statements, but usually omitted from the budget speeches made available to the people of this province. We therefore have to highlight today that the Northern Cape has already plunged over the fiscal cliff and a hard climb lies ahead for us.

The Democratic Alliance’s alternative budget proposals for the Northern Cape’s 2018 budget are rooted in the undeniable fact that the province has already plunged headlong over the fiscal cliff. If this provincial government was a person, not even the Bank of Baroda would bail it out. The following factors must be considered when drafting the budget:

• After operating with a surplus in prior years, the province closed the previous financial year with a deficit of more than R109 million and the bank overdraft at the end of the previous financial year stood at more than R351 million, which is an increase of 36% between the past two financial years;
• Outstanding accounts (accruals) exceeding R623 million have to paid during this financial year, so the province will be using 2018’s money to settle 2017’s debts instead of paying for 2018’s services. This creates a devastating cycle where more money is used in each successive financial year to settle past debts rather than deliver future services;
• Provision has to be made for contingent liabilities of more than R1.719 billion. The bulk of these contingent liabilities are the medico-legal claims against the department of Health, which have increased from R174 million in March 2015 to more than R1.2 billion in March 2017;
• Unauthorised expenditure of R671 million has to be funded from somewhere;
• There is also irregular expenditure of R10.872 billion which must be investigated to determine if the money was actually spent in the service of service delivery.

There is one calculation which perfectly sums up the dire financial straits in which the Northern Cape finds itself: Unauthorised expenditure, irregular expenditure, fruitless and wasteful expenditure, accruals due as well as the contingent liabilities for which provision has to be made amounts to more than R14.024 billion – which exceeds the Northern Cape’s equitable share for 2018/19 by more than R1.5 billion.
According to the Division of Revenue Bill tabled in the National Assembly, the Northern Cape can expect an equitable share of R12.475 billion and R4.387 billion in various conditional grants for 2018/19. We are often told that “there is not enough money” or that “Treasury didn’t want to give us money” to fund essential services or to finance critical mandates. While we definitely will not say no to extra funding, the reality is far more nuanced (and departments are too fond of easy excuses).

It is not simply that the Northern Cape does not receive sufficient funding, but that the available funding received is being misused or that revenue is not maximized. Despite Treasury’s many strategies, the department of Health undercollected patients’ fees by 36% in the previous financial year and the company which ran the Mittah Seperepere Convention Centre raised more revenue from it than the province did from gambling taxes. While the private companies reportedly earned R30 million from the government’s facility, gambling taxes only amounted to R23 million. The equitable share is abused or misspent, the conditional grants are not utilized fully and revenue due to the province is not being collected.

The budget proposals from the Democratic Alliance therefore aim at ensuring that the budget is allocated, spent and accounted for in a way which advances economic growth and service delivery. We might be constrained at provincial level by the populist policies announced at national level, but we need to implement the necessary structural changes which emphasise growth over redistribution in the province.

It is only through robust economic growth, which is capable of stimulating the sustained creation of sustainable jobs, that we can address the fiscal and social problems in the Northern Cape.
Our budget proposals focus on three main structural changes:

1) Reforming the corruption kitty known as the EGDF:
The Economic Growth and Development Fund serves a valuable purpose in theory alone. In reality, this vehicle for SMME development has become a kitty to fund corrupt practices. While we wait for the department of Economic Development & Tourism to finalise the overhaul of the transfer policy as announced in 2016, we suggest that the following principles must be followed when funding is allocated from this potentially valuable fund:
a) Payments must be made to entrepreneurs on the strength of their business plans, not their political affiliations or party membership. No more factories which are meant to build beds or bake biscuits, but which ultimately only serve to enrich a politically connected elite.
b) It is nice to support geographic representivity, but it is better to support solid business ideas and to invest in entrepreneurs based on their business plans rather than their home addresses. We do not want to impose strict quotas which seek to find entrepreneurs in specific regions irrespective of how feasible or innovative their ideas are; we instead want to find the Elon Musks irrespective of their regions.
c) Double dipping must be prevented. Simple measures such as liaising with the Northern Cape Tourism Authority, which already reports to the department, can be put in place to ensure that the provincial government does not fund the same event two or three times over.
d) Funding to entrepreneurs must be monitored to ensure that it is spent in accordance with the business proposals received.
e) Funding should only be allocated for legitimate economic growth and development projects. In the previous financial year, the single biggest allocation for SMME development in the Northern Cape was paid to a Johannesburg-based NGO named Christians for Peace in Africa. This is just one example of how the Economic Growth and Development Fund is not currently being used for its intended purpose.

As we have previously objected to baseline reductions in the funding, we suggest that the previously suggested amount of R29 million for the 2018/19 financial year be increased. Savings can be utilised from the offices of the chief directors in the department and reprioritised to provide better support for the deserving entrepreneurs in our province.

2) Opening up the Northern Cape for business
The Northern Cape Economic Development, Trade and Investment Promotion Agency (NCEDA) has largely failed in its core mandate of developing the provincial economy and attracting trade and investment opportunities. We can see this from the sluggish provincial growth and the fact that endless outbound missions fail to deliver concrete economic opportunities for the province.
To address these shortcomings, the Democratic Alliance will submit a Private Member’s Bill to restructure NCEDA, to streamline its functions and to ensure that it delivers on its core mandate of developing the provincial economy.

We will also launch investigations into how the entity has been mishandling the proposed development of the Special Economic Zone in Upington, which remains nothing more than an illegal escapade at this point in time.

3) Employing public servants to the public administration and not deploying cadres to a bloated, captured state
After National Treasury announced that a moratorium on the filling of vacant posts would be effected in the public administration, the Executive Council resolved to implement a moratorium on the filling of vacant posts in all provincial departments and provincial public entities. The moratorium was never intended to affect critical service delivery posts such as teachers, doctors, nurses and police officers. Yet despite the good intentions publicly declared by the provincial government, the fact is that the amount of posts in the provincial administration has increased by 2% in the first year that it has taken effect – and yet we continue to face critical shortages of key staff such as teachers and medical personnel. Indeed, while the department of Education made 187 appointments between April 2016 and March 2017, it lost a total of 518 employees during the same time!

The Democratic Alliance favours a lean, capable state rather than this bloated structure which serves as a network of patronage and cronyism. We therefore suggest:
a) A pay freeze for all but the lowest earners in the public administration for one year. The pay freeze will also include political office bearers, including all office bearers in the Democratic Alliance.
b) Performance bonuses that are truly related to quantifiable performance, not paid as a perk or part of someone’s salary.
c) Placing the rumoured restructuring of the Northern Cape Provincial Treasury, which will serve to deploy more warm bodies, on hold.

4) Cutting costs, not services
Cost containment has been a popular buzzword, but has not been effected in the Northern Cape. The Northern Cape Provincial Treasury has been in a process of developing provincialized cost containment measures since 2015, but spending on non-essential goods and services nevertheless continue to increase.

The Democratic Alliance suggests the following:

a) A moratorium on all foreign travel, especially the endless outbound missions which serve only to collect stamps in official passports and never deliver concrete economic benefits for the province.
b) A complete ban on talk shops masquerading as summits or colloquiums which serve only as ‘meet, greet and eat’ sessions. The people of the province cannot afford to continue footing the exorbitant catering bills. If it is deemed utterly necessary for officials from different regions to confer, alternative options such as teleconferences or video-conferencing should be investigated. It is time for our public servants to learn how to Skype.

Conclusion

It is undeniable that the Northern Cape is in the financial ICU, but fortunately the DA has the right medicine to nurse this patient back to health. Where we govern, we have already proven that our policies work and that their implementation creates jobs, stops corruption and delivers services.