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Speaking Notes Division Of Revenue Amendment Bill, 2018

13 November 2018, National Assembly

Madam Speaker,
Honourable Members,
Good afternoon.

INTRODUCTION

Every budget is a balancing act. There are always more demands for additional spending than any country will have the resources to fund. At a time when economic growth has disappointed us, and tax revenues are lower than projected, this is particularly true in South Africa.

We also acknowledge that we have a lot of work ahead of us in the task of improving governance and financial management across all three spheres of government. This is one of the three priorities we set out in the 2018 Medium Term Budget Policy Statement (together with implementing the economic stimulus and recovery plan, and reforming state-owned enterprises). Improving governance has to be a particular priority in any debate on the division of revenue, as it is the state of governance in our provinces and municipalities that will ultimately determine how well the funds we allocate in this Bill are used.

FISCAL SUSTAINABILITY

The way government is managing the increased costs resulting from the public sector wage agreement reached earlier this year offers a good illustration of our commitment to fiscal responsibility. Over the three years of the 2018 MTEF we estimate that the increase in compensation spending resulting from the wage agreement will cost national and provincial governments R30.2 billion more than we had budgeted to spend on wages.

However, we are committed to working within existing planned expenditure to accommodate this increased cost. Provinces, which account for 37% of this shortfall, have agreed to this approach in the Budget Council.

If we want to change the composition of our expenditure so that we spend a greater proportion of our budget on investment, particularly in infrastructure that can contribute to economic growth, then we have to manage compensation spending within existing limits.

Calls for us to breach our spending ceilings and add billions to compensation spending might sound like an easy way out to some members of the House. But that approach would not advance our long-term goals of ensuring the sustainable management of our fiscal resources, while increasing investment that creates the foundation for growth. This government is committed to making the hard choices necessary to achieve those goals and our approach to the implementation of the wage agreement demonstrates this.

RESPONDING TO URGENT NEEDS

While we are committed to staying the course on the implementation of our fiscal policy, that fiscal policy does make room for us to respond to changing circumstances and urgent needs that arise. This Division of Revenue Amendment Bill provides an example of this felxibility, allocating funds to respond to disasters and improve delivery in provinces.

As members have already noted, the Bill provides funding for the following:

  • R3 billion is allocated through this Bill for drought relief. A further R400 million for drought relief is also being provided separately to national departments. South Africa has been in the grip of a multi-year drought that has tested the resilience of our systems, and our citizens in the most severely affected parts of the country. In Cape Town we saw how citizens reduced their consumption of water to ensure the city did not run out of supplies, and managed to avert the so-called ¡§day zero.¡¨ Government across the three spheres had already spent billions on responding to the drought before the start of this financial year. Now we are announcing further allocations that will provide immediate relief for some of the consequences of drought and also improve resilience to future droughts by developing additional water sources (particularly ground water) and clearing thirsty alien vegetation so that we have greater stores of water available in future.
  • R636.3 million is provided for the repair of schools, hospitals, provincial buildings, municipal infrastructure and government subsidised houses that were damaged or destroyed by floods and fires.
  • R350 million has been reprioritised to fund the hiring of much needed medical specialists for the public health system, as part of government¡¦s commitment to rolling out National Health Insurance and ensuring that the right to healthcare established in our Constitution becomes a reality for all our citizens.
  • A further R150 million is reprioritised for the provision of new beds and linen in public hospitals.
  • This Amendment Bill also includes two initial allocations for detailed planning for infrastructure projects approved through the Budget Facility for Infrastructure. One project is for a proposed new academic hospital in Limpopo and the other is for improved public transport in Cape Town. This investment forms part of the economic stimulus package, and is a good example of our commitment to fund infrastructure projects that have passed through a rigorous planning and assessment process.
  • R800 million is added for the accelerated rollout of the School Infrastructure Backlogs Grant, which funds the replacement of inadequate school buildings (including mud schools) with modern facilities. After years of underspending and weak performance on this programme, it has turned a corner and is now able to be accelerated, delivering on our promise to improve infrastructure in rural schools. This is a tangible sign that government can turn around poorly performing programmes and improve delivery. We need to see many more such examples!

IMPROVING GOVERNANCE AND FINANCIAL MANAGEMENT

The delivery of all of the programmes funded through this Amendment Bill, and through the main Division of Revenue Act, depend on capable provinces and municipalities to implement them, and national departments that are able to execute their responsibilities in monitoring and supporting the implementation of conditional grants. Too often, weaknesses in governance have undermined this capability, particularly in local government. We are committed to reversing this, and improving the governance and financial management capacity of all spheres.

Turning around public institutions is not a quick or easy task. We need to assess the problems in each municipality and department and then be prepared to make whatever changes are needed to resolve those. The Constitution gives us powerful tools to do this, including the power, where necessary, to intervene in provinces and municipalities. We have not always been successful in using that power in the past, but we have learnt from these experiences and are now dedicating additional funds over the 2019 MTEF to improving the oversight of interventions and the preparation of Financial Recovery Plans for municipalities that are in financial crisis.

We are also working to improve the impact of the more than R2 billion per year in capacity support that we are currently providing to local government. This local government capacity building system will be reviewed during 2019 and reforms implemented.

The one ingredient that no turnaround plan can succeed without is political will. If leaders within municipalities and provinces are not committed to doing the right thing it is very difficult for national government to intervene and build capacity. Whereas if local leadership is strong and determined to ensure sound governance and effective delivery is prioritised, I believe we can overcome the many challenges we face. And national government will be here to support them.

CLOSING

I would like to thank the members of the Standing Committee on Appropriations, ably led by the Chairperson Yvonne Phosa, for their hard work in reviewing and considering this Bill so promptly, so that we can get on with the work of implementing the changes contained in it.

I urge all Members to vote to approve the 2018 Division of Revenue Amendment Bill.

Thank you.

     
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