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FINANCE PORTFOLIO COMMITTEE Mr N Nene
23 MAY 2006
NATIONAL TREASURY BUDGET: BRIEFING BY DIRECTOR GENERAL AND MINISTER
Document handed out:
FINANCE PORTFOLIO COMMITTEE
Mr N Nene
Presentation: National Treasury 2006/07 – 2008/09 Strategic Plan
National Treasury 2006/07 budget
The Director General presented the National Treasury budget and the Minister replied to questions. National Treasury spent R13.1 billion out of a R14.2 billion adjusted budget in the previous year. The core budget for 2005/06 was R9.8 billion, of which R9.6 billion had been spent. A key role for the National Treasury was to provide economic analysis and modelling support for the Accelerated Skills Growth Initiative South Africa (ASGISA). The presentation outlined National Treasury's key policy priorities, its critical revisions to its 2005 – 2008 strategic plan, the objectives and outputs of its various programmes, its revised targets as well as its personnel strategy.
The Minister commented that the surge of expenditure in the last quarter of every year did irk the Treasury but Parliament had to start using its extensive powers to bring some of the poorly performing provinces in line. The Committee could for example, ask the Treasury to reduce a province’s allocation due to under-spending. The Parliament was not fully utilising its powers.
Mr Lesetja Kganyago, the Treasury Director-General, noted that they were seeking approval from the Committee for their department's 2006/07, 2007/08 and 2007/08 budgets. The 2005/06 Annual Report in October would provide the final report on the previous year's spending including the audited financial statements. The National Treasury had spent R13.1 billion out of a R14.2 billion adjusted budget. The remaining unspent R1.1 billion included R841.6 million which was not transferred to provinces for their failing to adhere to conditions for grants. Also R69.9 million had been saved on the medical expenditure of retirees.
The core National Treasury budget of 2005/06 was R9.8 billion, of which R9.6 billion had been spent. A key role for the National Treasury was to provide economic analysis and modelling support for the Accelerated Skills Growth Initiative South Africa (ASGISA). The National Treasury also had a role in developing growth diagnostic and identifying key binding constraints.
With the Infrastructure Development Programme (IDIP), recent achievements included employing 13 technical experts to assist with infrastructure delivery. Spending on Capital Expenditure had increased by 24% and under-spending was reduced to 16% of a bigger budget. Medium-term plans included continuing support in education and deepen improved infrastructure planning and management.
With the Integrated Financial Management System, achievements included positioning of the State Information Technical Agency (SITA) for the Prime Systems Integrator role. The Systems Master Plan and the User Requirement Statements were also completed. To achieve accountability through effective management, asset management guides were rolled out in all departments, internal audit assessments were done for all departments, risk assessments were completed in the Northern Cape and enacted the Auditing Profession Act. In the medium-term, the National Treasury wanted to implement monthly management accounts and increase support to all stakeholders in respect of accounting, risk management and internal auditing.
The National Treasury had to make critical revisions to outputs and targets. In administration, the new objective was to provide strategic management and administrative support to the National Treasury, giving managerial leadership to the work of the Department. The outputs were to establish a fully capacitated internal audit unit by 2008/09, and facilitate the development of a strategic leadership capability. By the end of 2006/07, an organisational development framework for this had to be developed and implemented.
The objective for the Budget Office and Public Finance was to promote growth, social development and poverty reduction through sound economic, fiscal and financial policies, efficient revenue measures and the effective, efficient and appropriate allocation of public funds. The new output for the Budget Office was to create a central registry of all listed Government agencies, public entities and business enterprises.
The 2006/07 target was for the policy and legislative amendments to be approved. The 2007/08 – 2008/09 target was for the policies and legislation to be implemented. The outputs for the Public Finance were to provide expenditure analysis and financial management support. The new 2006/07 – 2007/08 target to have the inter-justice service sectoral expenditure review undertaken and have the monitoring for social assistance conditional grants phased in.
The objectives for Intergovernmental Fiscal Relations (IFR) were the same as those for the Budget Office and Public Finance. The key output here was to improve infrastructure delivery in the provinces. New outputs were to create a reporting and monitoring system for provincial infrastructure and provide for the review of provincial public entities. New 2006/07 – 2007/08 targets were to assign nine technical assistance teams to 18 Provincial Departments each year. The target for 2006/07 – 2008/09 was to provide quarterly reports for the provincial and local spheres and create databases in nine provinces where the reports would be published.
The objectives in economic policy were to promote growth, employment and macroeconomic stability through research and modelling of the economy. New outputs were to conduct research on growth and provide a microeconomic analysis. Targets for 2006/97 included providing research support for Cabinet makgotlas and providing research and policy outputs for key economic sectors by 2007/08 – 2008/09.
The objectives for the tax and financial sector were to promote growth, employment and macroeconomic stability through sound tax and financial sector policies and regional integration. Outputs for financial sector policy were to provide financial sector policy advice, legislation and regulations. The new targets were to submit a new draft of the Dedicated Banks Bill in 2007/08 and the Co-operative Banks Bill 2008/09. Outputs for tax policy were to provide tax policy analysis and advice. A new target for 2006/07 was to provide discussion papers on synthetic fuels and environmental taxes. A new output for International Financial Relations was to encourage international relations and financial integration. The 2006/07 – 2008/09 targets were for greater integration into SADC and SACU.
For asset and liability management, the objectives were to manage Government’s asset and liability portfolio in a way that ensured prudent cash management, asset restructuring, financial management and optimal management of domestic and foreign debt. Outputs were to reduce debt service costs to 3% of GDP by 2006/07, 2.8% by 2007/08 and 2.7% by 2008/09, improve the co-ordination of intergovernmental finances by saving of 2% on borrowing costs and provide a fully automated and integrated treasury management system. By 2006/07, the debt and investment management system had to be acquired and configured, its implementation complete by 2007/08 – 2008/09.
The objectives for financial accounting and reporting were to achieve accountability to the general public and the international community by promoting transparency and effective management in respect of revenue, expenditure, assets and liabilities in the public sector. The outputs were to implement specimen formats for consolidated and annual financial statements, implement a reporting framework and enhance service delivery capability of audit committees and internal auditors by having nine provincial training sessions and workshops per year.
In terms of staff, vacancies had to be filled with qualified, experienced and skilled staff; internal and external co-ordination along with information flow had to be improved; increased support to Departments had to be provided and the professional development of all the staff had to be continued.
The National Treasury had developed a personnel plan where vacancies had decreased from 299 to 152 between 31 March 2005 and 31 March 2006. The reasons for this reduction were the abolishment of non-budgeted positions, the appointment of interns into funded vacancies and tight project management in the filling of positions. They also planned to recruit 140 new employees during 2006/07.
Mr I Davidson (DA) said that the Committee had an oversight function but felt that their role became difficult when the Department started changing its own objectives with no explanation.
Dr Van Dyk (DA) asked if Treasury was satisfied that they had a firm grip on the budgetary processes of departments. Was the monitoring of the departments’ expenditure being done effectively?
Minister Manuel replied that budget issues were political ones. It was the Committee’s role to determine if what the money in the budgets bought was worthwhile and if this was done effectively. Budget issues were an expression of Cabinet, represented by the Minister of Finance. He then came before Parliament and stated how much should be appropriated. This was the law. The surge of expenditure in the last quarter of every year did irk the Treasury but Parliament had to start using its extensive powers to bring some of the poorly performing provinces in line. The Committee could for example, ask the Treasury to reduce a province’s allocation due to under-spending. The Parliament was not fully utilising its powers.
Ms J Fubbs (ANC) said that she thought that Treasury already had an Internal Audit Unit though it seemed as though it was only being set up now. What was the situation? Who had been doing the work?
Minister Manuel replied that the Treasury’s auditing work had been outsourced in the past but this had to be brought in-house.
Due to time constraints, the members of the Committee were not able to ask all the questions they wanted to.
The meeting was adjourned.
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