Western Cape Government Budget Speech 2009

Western Cape Government Budget Speech 2009 EMBARGOED UNTIL 11AM / FEBRUARY 24, 2009 24 February 2009 Speaker Premier Leader of the Opposition Members of the Provincial Legislature Esteemed representatives of labour, business and civil society Director-General and Heads of Departments Honoured guests Molweni Nonke. Goeie môre almal. Speaker, in the State of the Province address, our Premier highlighted some of the many achievements of this ANC-led government since 2004, a reflection of our commitment and decisiveness to doing the right thing. But the Premier did more than this, she spoke of the many difficulties and problems that remain. Of what has been done and what remains to be done. Lynne Brown presented a vision of hope and progress and a future in which, if we work together, much more can be achieved. The Premier spoke of good and transparent governance and appealed to all the citizens of the province to become activists for change and development. It is into this framework, outlined by the Premier, that I present the 2009 Budget to this House. Government is about constantly improving the extent and quality of social and economic services. This Provincial Government has focused substantial 1 Western Cape Government Budget Speech 2009 resources on extending and improving the quality of our education and health systems and the expansion of the social security net. We have invested massively in infrastructure and services that raise the long-term growth potential of the economy. We have focused on agrarian reform, food security and services to rural citizens. We have emphasised policies and programmes that will contribute to our country’s commitment and efforts to deal with the environmental crisis and adapt to a changing global climate. Wherever possible we have used labour-intensive methods of delivering infrastructure and services and done much to support small enterprises, black economic empowerment, women, youth and the disabled. We say without fear of contradiction that much has been done. Much more can and must be done. We are confident that working together much more will be done. The points of departure for this provincial government are not reckless pre- election expenditure and empty promises. Neither do we make claim to easy victories. Instead we are guided by the principles which framed the national budget tabled by the National Minister of Finance, Trevor Manuel. At the core of this Budget is our conviction that to push back the frontiers of poverty – a national imperative that calls to all South Africans – we have to navigate the current economic crisis with a pro-poor outlook. It is in society’s interests to narrow the gap between rich and poor and to work together to make it happen. The economic outlook We all know the environment in which we work is not one of our own choosing. External factors play a massive part and must be considered even at this the second level of government. The global economic crisis, described by Minister Manuel as a storm, has hit us and all its effects are yet to be felt. The national 2 Western Cape Government Budget Speech 2009 Budget and recently published economic indicators have starkly highlighted our vulnerability to global market conditions. Partly because of better banking regulation, South Africa is less, but by no means unaffected. The negative effects of the overall economic downturn have been primarily felt through falling commodity prices with adverse affects on mining and employment, a reduction in household disposable income and domestic demand, decreases in exports and ongoing currency volatility. We are facing difficult times and have already witnessed job losses and company closures in this province. This is especially difficult because in a global recession whose depth and duration remains uncertain and in which general uncertainty, asset devaluation and loss of confidence are factors, government revenue growth has slowed faster and more substantially than anticipated. The economic forecast for global growth in 2009 has been revised downwards to just half a per cent. In South Africa, economic growth is projected to slow down from 3 per cent to 1.2 per cent in 2009. Just as our national economy will be affected, the economic outlook for the Province is negatively affected by the global financial meltdown. In addition, the economic outlook of our international markets is less favorable for Western Cape exports. As a result, the latest Bureau for Economic Research (BER) projections indicate that the Western Cape economy will grow at an average rate of 1.7 per cent in 2009, which is about 0.5 percentage points higher than the growth projection for South Africa for the same period. This is a substantial downward revision from a forecast of 2.5 per cent and 4.0 per cent projected for the Western Cape in October 2008 for 2009 and 2010 respectively. Of great concern is the projected downturn for the manufacturing 3 Western Cape Government Budget Speech 2009 sector, which is expected to contract by 2.1 per cent in 2009. This can be attributed mainly to lower demand for manufactured goods in the domestic market which results from shrinking household consumption expenditure. Recent Income and Expenditure Surveys have shown that the Western Cape is relatively, I must stress, relatively and marginally better off than the country as a whole if measured by per capita income and average household incomes. But the fact that the benefits of economic growth have not been shared equally in the Province remains a major concern and means that the poor are extremely vulnerable. Given the economic climate there is a real risk of job shedding. Three quarters of households in the Western Cape receive the bulk of their income from selling their labour power and this accounts for 65 per cent of total household income in the Province. Therefore Speaker we must not underestimate the challenge we are facing. Under the leadership of the Premier, the provincial Government is liaising with the Presidential Task Team which has been established to deal with the impact of the global crisis. It includes business, labour and government. In the province the Premier has led discussions with labour, business and representatives of civil society. High level summits with the leaders and representatives of the trade unions and business will be held shortly. The Provincial Government has already intervened to marshal resources and leverage national government support from industrial finance and other institutions for companies in distress. The Premier will announce the detail of the provincial interventions shortly after ongoing discussions and processes with labour and business have been completed. 4 Western Cape Government Budget Speech 2009 Revenue Despite a more challenging fiscal environment, in aggregate, the total provincial revenue envelope is set to grow by R3.1 billion or 12.1 per cent from R26 billion in 2008/09 to R29.1 billion in 2009/10. Over the 2009 MTEF, revenue will increase at an annual average rate of 9.3 per cent to reach R34 billion in 2011/12. On an annual basis, it is revised upwards by R3.1 billion in 2009/10, R2.3 billion in 2010/11 and R2.5 billion in 2011/12. At the municipal level, the restructuring of funding instruments related to the replacement of the Regional Services Council Levy, aims to compensate municipalities through taxes on fuel sales and the equitable share. The end result will be more equitable treatment of rural and poorly resourced municipalities. Speaker I would be failing in my duty in this regard, if I did not make reference to recent reports that the Mayoral Committee member for Finance in the City. Alderman Ian Nielsen suggests that “cuts in the national grants allocation to the City of Cape Town penalise the City of Cape Town for being well run”. There is a detailed explanation in the explanatory memorandum to the 2009 Division of Revenue Bill, which appears not to have been read by my esteemed colleague at the City. I understand Minister Manuel has responded in full. Suffice for me to state that overall the City’s transfers from the national government increases by over R40 million year-on-year. The current Regional Service Council Replacement grant will be subsumed by a fuel levy transfer equivalent. For those who may ask what happened to the provincial fuel levy the answer is clear – the tax is levied at a national level and it goes to amongst others, the City of Cape Town. We urge our esteemed colleagues in the City to read the documentation and resist the temptation of playing petty politics with budget allocations. 5 Western Cape Government Budget Speech 2009 Whilst the upward revenue adjustment builds on the momentum of rising government spending over the last couple of years, priority is given over the 2009 MTEF to allocate additional funds in areas where we have already made firm decisions on policy that have a high and clear impact on human development and the quality of life, as well as to protect critical areas of service delivery, most notably in education, health, welfare services, housing, roads and rural development. To further enhance the impact of our expenditure plans, certain amounts spread across the different votes have been earmarked. The practice of earmarking national and provincial expenditure priorities has been in place for a number of years. These have been revised in the light of tighter fiscal conditions, to improve monitoring, to emphasise key priorities, to prevent slippage into bells and whistles expenditure in some departments and migration into ‘soft’ policy options in those departments. The earmarked allocations therefore target early childhood development; teacher development; emergency medical services and roads and public works - planning, design, construction and maintenance.

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