2017/18 ADJUSTMENT BUDGET SPEECH PRESENTED BY MRS

WENDY NELSON, MEC FOR FINANCE, ECONOMY AND

ENTERPRISE DEVELOPMENT, AT THE NORTH WEST PROVINCIAL
LEGISLATURE ON 09 NOVEMBER 2017

Honourable Speaker;
Honourable Deputy Speaker;
Honourable Premier, Rre Supra Obakeng Ramoeletsi Mahumapelo
Honourable Members of the Executive Council,
Honourable Members of the Provincial Legislature,
Chairperson of Chairpersons,
Chairpersons of Legislature Committees,
Executive Mayors, Mayors, Speakers of Municipalities
MMCs for Finance and LED of Municipalities,
Dikgosi tsa gaetsho tse di tlotlegang,
Leaders of the Progressive Labour Movements
All members of the business community, civic and religious societies,
Director General and Heads of Departments,
Chairpersons, Board Members and CEOs of State Owned Entities
CFOs of departments, state owned entities and municipalities,
Esteemed Guests

Honourable Speaker, the Medium Term Budget Review is an important

stage in the Budget Cycle which provides us with an opportunity to
reflect on both financial and non-financial performance in relation to the
commitments government made in the beginning of the financial year.

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Accordingly, this reflection and assessment serves as a basis for the re-
allocation of funds to areas which require additional resources without
impacting negatively on the agreed performance targets as reflected in
our performance plans. The adjustment budget proposals we are
presenting today, signify our commitment towards strengthening and
consolidating our efforts towards the implementation of government
programmes in order to meet the service delivery commitments informed
by the needs of our people.

Honourable Speaker, we continue to remind our people about our

commitment to the implementation of the National Development Plan
through Five Concretes. The adjustment budget proposals build on the
unprecedented progressive programme which started in 2014 under the
capable leadership of the Hon Premier SOR Mahumapelo. The
programme directly seeks to change the lives of previously marginalised
communities of our Province in particular those residing in Villages,
Townships and Small Dorpies (VTSD) areas by deliberately redirecting
government resources to such areas and encourage private sector to do
the same in the context of Saamwerk-Saamtrek.

The tabling of the Adjustment Budget Estimates takes place under

unfavourable socio and macro-economic conditions. For the country as
well as the Province, this requires us to continuously provide informed
decisive leadership in guiding the departments about the utilization of
scarce resources to the benefit of our people as we preside and
navigate over such complex economic challenges. Undoubtedly, this
challenging task demands collective wisdom and commitment from all of
us including opposition parties, so that we are able to deliver on the
mandates bestowed upon us by the electorate.

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In us addressing these challenges, we continue to draw our strength and
courage from the profound statement which was made by the
Honourable Premier Mahumapelo during the 2015 State of the Province
Address when he said: to overcome the challenges of poverty,
unemployment and inequality which are complicated by unfavourable
economic growth, we have embarked on the necessary Rebranding,
Repositioning and Renewal (RRR) of this Province as an instrument to
implement the NDP. In this regard we must strive at all times,
collectively, to be the best on all aspects of life as a Province.

Honourable Speaker, without state intervention, our communities run

the risk of being subjected to increased unacceptable levels of poverty,
unemployment and inequality which would further diminish the prospects
of our people to participate actively in the economy. The capitalist
system which is largely profit driven and characterized by capital
manipulation, labour and consumer exploitation, if left unchecked, will do
little to improve the economic fortunes of our communities in the VTSD
areas. It is for this reason that the fifth administration unashamedly
adopted the Agriculture, Culture and Tourism (ACT) and VTSD as the
economic pillars to radically transform the economy of the Province and
ensure inclusive growth.

In his maiden Mid-Term Adjustment Budget Speech, Minister Malusi

Gigaba said it is not in the public interest, nor is it in the interest of
government, to sugar-coat the state of our economy and the challenges
we are facing. It is only when we understand these challenges fully and
candidly that we will know what to do and can decide what course we
must take in addressing them, as well as what trade-offs we must make
in the national interest. The period ahead is not going to be an easy one.

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Our resolve is to remain on course and not to deviate irretrievably from
the fiscal consolidation agenda we embarked on a few years ago. We
will continue to optimize, squeeze and innovate to improve the quality
and efficiency of our spending.

Honourable Speaker, through these adjustment budget proposals,

Government demonstrates its commitment to optimise the utilization of
limited resources in our care, driven by the desire to address the
challenges faced by the majority of our people, particularly those
experiencing the brunt of unemployment, poverty and inequality.

Under the resolute leadership of Honourable Premier Mahumapelo, the

Fifth Administration deliberately implemented programmes that enhance
the active participation of communities in VTSD in the mainstream
economy by setting a target of 70 percent of our procurable budget to be
directed towards these areas. I can report that for the period ending March
2017, the Province recorded an expenditure of R5.4 billion on VTSD and
the latest data for the period ending September 2017 indicates that the
Province has already spent R699 million and we are working hard to
ensure that we meet the target of 70 percent.

Economic Outlook

Honourable Speaker, South Africa is currently experiencing persistent

low economic growth since the 2008 economic recession and has
recently recorded 2.5 percent of economic growth on the second quarter
of 2017 recovering from technical recession. Government Debt to GDP
ratio in South Africa averaged 38.65 percent from 2000 until 2016,
reaching an all-time high of 51.7 percent.

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Recent credit downgrading poses fiscal stress to our economy through
increased cost of borrowing in the future. This calls for all of us to jointly
exercise strict fiscal discipline with the prioritization of on-time
investment spending in VTSD and ACT as key economic pillars. The
North West population size reached 3.8 million in 2017 mid-year
estimate and is projected to reach an estimate of 4 million by 2021. More
than 50 percent of the population in our Province is made up of young
people which presents the Province with an opportunity to attain
population dividend.

Honourable Speaker, investment in education and other empowerment

programmes for young people, women, the elderly and people with
disability remains a priority of the 5th Administration. This population
structure constitutes a rebranding opportunity as the Province continues
to work aggressively on implementing programmes that will absorb our
young people in the mainstream economy through various projects that
are currently being implemented through the Youth Entrepreneurship
Service (YES) programme. Government encourages the youth to bring
on board new innovative ideas which would improve effective and
efficient service delivery models, further stimulate job creation for our
people and make our government more relevant to the imminent 4th
industrial revolution.

In 2016, the provincial economy recorded growth just below 1 percent.

Unemployment in the third quarter of 2017 was 26.2 percent reducing
from 27.1% in the second quarter with 84 000 jobs created in the third
quarter. This is a move in the right direction for the Province.

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Honourable Speaker, despite economic challenges facing our Country
and Province, we remain committed to addressing the challenges of
unemployment and poverty through fiscal discipline and improving on
both social and economic infrastructure development. Acceleration of
investment in ACT and related infrastructure initiatives will in the
immediate to long-term period yield desired return on investment
through economic growth, attraction of private sector investment and job
creation.

In support of entrepreneurship development, as the Bokone Bophirima

Province we have since the beginning of the current financial year
continued to support small businesses to establish and grow through
forged partnerships with various institutions such as the IDC, SAB and
DTI amongst others to ensure sustainable business development of all
emerging businesses in our Province.

2017/18 Revenue and Expenditure Performance

Honourable Speaker, as we table this Adjustment Appropriation Bill, I

have considered it necessary to provide the people of the Province with
a synopsis of the performance of provincial departments and public
entities for the first six months of the financial year.

The provincial revenue collection at mid-term has reached the required

target of 50 percent. After careful assessment of the projected revenue
to be collected in the next six months for three departments, it has
become necessary to readjust the targets downwards and ensure that
the 2017/18 revised targets are met.

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Our Province has recently hosted the National Revenue Workgroup
Forum where all the provinces together with National Treasury met to
discuss revenue enhancement initiatives and to share best practices.
Through these engagements we have identified new revenue sources
that we will implement in the coming financial year.

Honourable Speaker, to consolidate our revenue collection

enhancement efforts, we have ensured that the current financial year
and over the MTEF period departments and entities set the correct and
realistic tariffs that would support the provision of government services.
Alternative measures are being followed to collect outstanding motor
vehicle license revenue from municipalities.

The aggregate provincial performance for the first half of the 2017/18
financial year was R18.6 billion representing 47.53 per cent against the
main appropriation of R39.1 billion. This expenditure is dominated by
spending on Compensation of Employees (CoE) and Transfer
Payments. Performance on infrastructure and conditional grants by
provincial departments is lower than 47.53 percent, with the exception of
the departments of Health and Education and Sports Development.

The Executive Council has agreed to implement aggressive recovery

plans for improved spending and all the departments where spending on
infrastructure and conditional grants is lower than the anticipated target
will be supported by the Provincial Treasury and Office of the Premier
Monitoring and Evaluation Unit in order to achieve the required
expenditure levels.

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The main objective of the support programme is to monitor the
implementation of recovery plans and provide enforceable mitigation
strategies where required as well as reporting progress to the Executive
Council.

Honourable Speaker, PFMA requires that departments and entities

must ensure that the budget is implemented effectively, efficiently and
economically. To this end, having noted the actual expenditure patterns
of the previous financial years including the current financial year, EXCO
resolved at the beginning of the current financial year that, the budget of
all provincial departments recording expenditure below 50 percent
during the second quarter, will be reduced and such funds will be
redirected to the key provincial priorities.

Consistent with the Council resolution, the budgets of the provincial

departments which performed below 50 percent for the period ending
September 2017, have accordingly been reduced and such funds have
been redirected to key Provincial priorities in the context of the Five
Concretes.

Honourable Speaker, the 2017 Adjustment budget has been concluded

under weak economic growth trends, limited budgetary resources and
rising pressures on the fiscus. Consequently, the Minister of Finance
announced the downward revision of the overall economic growth for
2017 to 0.7 per cent in the Medium Term Budget Policy Statement
(MTBPS) from 1.3 per cent at the time of 2017 Budget in February of
this year.

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With limited fiscal maneuvering space, government departments and
public entities had no choice but to cap spending on non-core and non-
performing programmes and this is expected to continue over the 2018
MTEF. Any new additional request post the adjustment budget process
within the current financial year is to be funded through the
implementation of efficiency gains and reprioritization within the baseline
allocation.

Honourable Speaker, the adjustment budget is not a tool to expand our

baseline nor to introduce new spending priorities but rather a critical
legislative process to appropriate rollovers and provide funding for any
unforeseen and unavoidable expenditure during a financial year. It also
gives us an opportunity to assess progress on the implementation of the
set targets and where necessary to realign our plans with the view to
attain the goals of the National Development Plan.

The 2017/18 budget of R39.081 billion tabled on the 7th March 2017 is
adjusted with an amount of R808.992 million to R39.890 billion
representing an increase of 2.1 per cent. This adjustment is informed by
the following:

Conditional Grants: An amount of R30 million is converted from the

Health Facility Revitalization Component of the Indirect National Health
Insurance Grant to the Health Facility Revitalization Grant to enable the
Department of Health to complete crucial projects that were constrained
by budget pressures.

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Furthermore, an amount of R270.413 million has been approved as
rollovers in respect of various conditional grants, the details of which will
be dealt with in the respective departments. Consequently, conditional
grants have been adjusted by R300.413 million, from R7.552 billion to
R7.853 billion.

Provincial Own revenue

While noting improvement in the implementation of the Provincial

Revenue Enhancement Strategy, it is equally important to be realistic
with individual departmental capacity to collect own revenue. To this
end, the revenue target for three departments have been revised
downwards with an aggregate amount of R24 million to also provide a
credible base for expenditure budget.

Honourable Speaker, one of the sources of revenue that we have used

to fund additional requests is the saving from previous financial year.
The 2017 adjustment budget also includes donations received by the
provincial government. The details regarding the revenue sources are as
follows:

From the previous financial years under-spending, an amount of

R111.083 million was approved as rollovers to committed projects
in the current financial year. Furthermore, an amount of R412.516
million was identified to fund key priorities.
The Province received an amount of R6.280 million from Road
Traffic Management Corporation to amongst others assist with
Road Safety Education.

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 An amount of R2.7 million has also been received as a donation
for the training of young people as Artisans in the field of
Agriculture.

Through this source of revenue, an amount of R532.579 million has

been added to the 2017/18 budget. There is no additional allocation to
the Provincial Equitable Share and as a result the Province has
reprioritized and redeployed savings within the baseline.

As announced during the tabling of the 2017 Budget, the Provincial

Treasury issued a Treasury directive on compensation of employees to
guide departments and entities on issues of personnel budgeting and
filling of vacant positions. I can proudly announce that without
compromising critical service delivery, we managed to identify R148
million from compensation of employees and R26.5 million from
machinery and equipment.

The allocation for Infrastructure projects not committed have also been
reduced in line with the Council resolution that indicates, that all projects
must be committed before the end of the first quarter. An amount of
R54.5 million has been reallocated from uncommitted projects to areas
which will benefit the citizens of this Province.

Function Shifts

Honourable Speaker, EXCO approved the centralization of bursaries in

the Office of the Premier. This was done in order to facilitate the
Implementation of Kgetsi ya Tsie Bursary and Skills Development Fund
in the Province as part of Ikatisong School of Governance.
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An amount of R33.7 million will be reallocated to the Office of the
Premier and this allocation will be carried through over the MTEF.
Notably, departments will continue to service commitments for all
bursary intake prior 2016 academic year. In addition the IT function that
supports the financial system is moved from the Office of the Premier to
Finance, Economy and Enterprise Development.

The provincial government spending priorities are aligned to the

objectives of the NDP. Despite limited fiscal resources, government has
protected expenditure that supports the implementation of the Five
Concretes with the main objective to deliver services to the most
vulnerable communities of our province, with specific emphasis on ACT
and VTSD.

Departmental Allocations

As the Minister of Finance, Honourable Malusi Gigaba said during the

tabling of the 2017 Medium Term Budget Policy Statement, the
adjustment budget provided us with an opportunity to explore options
available to us to stretch the rands in our care to address the challenges
faced by the majority of the South African people particularly
unemployment, poverty and inequality and the myriad social problems
which emanate from these.

To this end, let me turn your attention to the adjustments made to

individual departments and the Provincial Legislature:

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 Office of the Premier

The budget of the Office of the Premier increases by R131.665

million. Through the visionary leadership of the Honourable Premier
Mahumapelo, the Fifth Administration took a decision to implement
programmes and projects that aims to address unemployment and
poverty alleviation in the Province. For this purpose, an amount of
R100 million have been set aside for amongst others VTSD Township
Economy, Environmental project and Mining Beneficiation Initiatives.

An amount of R33.666 million is reallocated to the Department from

other departments to finance the bursaries that have been centralized
in the office of the Premier. An amount of R2 million has been shifted
from the Office of the Premier to Finance for the IT function that
supports the financial system. Consequently, the budget for the Office
of the Premier increases from R648.857 million to R780.522 million.

Provincial Legislature

Honourable Speaker, we note with excitement the progress made

with the implementation of the expansion of the Legislature Precinct.
It is evident that given the speed at which the project is moving, the
Provincial Treasury will need additional funds to meet the
commitments of the current financial year in relation to the
infrastructure project.

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 An amount of R60 million is added to the Provincial Legislatures
budget specifically for the infrastructure project. In addition, the
Provincial Legislature receives R34.4 million to address its pressing
operational and maintenance costs.

Furthermore, an amount R3.516 million has been added to the

appropriation as a result of the approved unauthorized expenditure of
the previous financial years. The budget of the Provincial Legislature
therefore increased from R449.484 million to R547.400 million thus
enable this arm of the state to carry out its constitutional mandate.

Health

The Department receives R30 million for the Health Facility

Revitalization Grant for completion of crucial projects that were
constrained by budget pressures. Furthermore, an amount of R110
million was added to the baseline to assist the Department with the
project of mobile clinics and pressures on Medicine, Medical Supplies
and Laboratory services.

An amount of R60 million has been reprioritized within the

departmental baseline towards core functions. The Departments
budget will now amount to R10.600 billion from R10.461 billion.

Culture, Arts and Traditional Affairs

Honourable Speaker, the Department of Culture, Arts and Traditional

Affairs receives a net increase of R33.859 million after discounting
R7.116 million made up of a downward revision of the revenue target
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 by R500 thousand and a reduction of R6.616 million on
Compensation of Employees (COE), Machinery and Equipment and
the bursary allocation.

The Department received a rollover amount of R10.975 million for

Community Library Services Grant. An amount of R10 million is
availed for the procurement of vehicles for Traditional Leaders and
R20 million for the VTSD SAMA Awards. The budget of this
Department has increased from R711.440 million to R745.299
million.

Community Safety and Transport Management

The allocation of this Department increased by R94.459 million from

R1.984 billion to R2.078 billion. This net increase is a result of a
reduction of R9.516 million on COE, Machinery and Equipment and
the transfer of bursary funds to the Office of the Premier inclusive of
the additional amount of R103.975 million which amongst others
include funding for learner transport, safety education and rollovers.

Included in the additional allocation is an amount of R70 million to

address budget pressures for learner transport, a rollover of R2.144
million for Public Transport Operations Grant and other rollovers
amounting to R22.591 million.

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 Finance, Economy And Enterprise Development

Economy and Enterprise Development

The Departmental baseline allocation recorded a net decrease of

R7.560 million from R305.3 million to R297.708 million. The net
decrease is a result of the downward revision of the own revenue
target by R20 million and an additional amount of R16 million for the
implementation of the Liquor Licensing System, the VTSD Economic
Forum and Mining Development Lekgotla. Resultantly, the Gambling
Boards budget has also been decreased by R11.8 million from an
original budget of R89.6 million to R77.8 million.

Finance

Through reprioritization and the implementation of efficiency

measures, Finance identified an amount of R19.294 million to fund
pressing budget pressures in some of the provincial departments.
Furthermore, the IT function that supports the financial system has
been shifted from the Office of the Premier to Finance. As a result,
the budget is reduced from R486.299 million to R467.005 million.

Education and Sports Development

The Department received a rollover of R35.466 million for Learner

Teacher Support Material, and R2.673 million for conditional grants
rollovers. Furthermore an amount of R12 million is availed for the
completion of Manthe and Ipelegeng Sport Facilities, which process

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 will be led by the Provincial Treasury. An additional R3 million has
been allocated for the VTSD Golf Tournament.

Honourable Speaker, the budget of this department was reduced by

R60.407 million from COE, Machinery and equipment and the
transfer of bursary function to Office of the Premier. Resultantly, the
overall net reduction for this department amounts to R7.268 million
from the budget of R15.282 billion to R15.274 billion.

Local Government and Human Settlements

The Department received rollovers amounting to R234.043 million of

which amongst others R192 million is for the Human Settlements
Development Grant, R10.531 million for the completion of Disaster
Management Center and R18.830 million. The net increase of
R173.610 million is as a result of a reduction of R60.433 million from
COE and under-performing infrastructure projects. The total budget of
this department is therefore increasing from R2.710 billion to R2.883
million.

Tourism

The Department of Tourism received a rollover of R5 million for the

Taung Hotel school project and an amount of R10 million to fund
budget pressures in the Tourism Board. Amongst others, 70 percent
of these funds should be utilized for the marketing of the province as
a destination of choice and the balance for the filling of critical vacant
positions. After discounting savings from COE and machinery and
equipment the budget of Tourism increased by R12.155 million from
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 R245.761 million to R257.916 million to be enable them to market
the Province as a tourist destination.

Public Works and Roads

The Department receives a net increase of R137.282 million as a

result of an additional R100 million earmarked for payment of rates
and taxes, R53.655 million rollover for Provincial Roads and
Maintenance Grant and a reduction of R22,465 million from COE,
machinery and equipment and bursary allocation. Consequently the
budget of the department increases from R2.895 billion to R3.032
billion.

Social Development

Honourable Speaker, the budget for this Department reflects a

reduction of R7.214 million on COE, machinery and equipment and
bursaries. Furthermore an amount of R1.5 million has been reduced
from uncommitted capital projects towards key provincial priorities.
Resultantly, the overall budget of this department has been adjusted
downwards from R1.533 billion to R1.525 billion.

Rural, Environment and Agricultural Development

Honourable Speaker, given that agriculture is one of the pillars of

the provincial economy, the departmental baseline allocation have
been reprioritized and an additional R45 million added to the baseline
to fund programmes that support agricultural economic growth
initiatives by facilitating the establishment of an Agricultural Fund.
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 As a result of the downward revision of the revenue target by R3.5
million and the reallocation of the COE, Machinery and Equipment,
the departmental allocation increased with a net amount of R30.525
million from R1.371 billion to R1.401 billion.

Conclusion

In implementing the EXCO resolution, R263.866 million was reduced

from departments to fund amongst other provincial priorities, VTSD
Township Economy, Infrastructure, Mobile Clinics, Water and Sanitation
Projects and Rates and Taxes.

Honourable Speaker, in consideration of the adjustment budget

proposals, the critical elements that were considered relate to achieving
the set service delivery targets and aggressively improving the provision
of services in the Province pursuant to the achievement of the NDP and
the Five Concretes.

To achieve the set targets, Bokone Bophirima last year held its first
inaugural VTSD Economic Lekgotla with the aim of creating a platform
for government, private sector and interested investors to discuss
implementation of the radical economic plan for VTSD areas with the
aim of addressing the triple challenges of poverty, unemployment and
inequality within the province.

Through Lekgotla, the province has started to engage the private sector
with the aim of formalizing the strategic partnerships between
government and private sector on issues that would radically transform
the economy of the Province with reference to ACT and VTSD.

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Honourable Speaker, the Premier made commitment that the VTSD
Lekgotla will be an annual event. We are now proud to declare that this
year on 29 and 30 November, we will host the VTSD Economic Forum.
Its focus is to attract local, national and international investors by
exposing them to investment and trade opportunities available in the
province with special emphasis on ACT, VTSD and related industries.

In the context of Saamwerk-Saamtrek Government takes this

opportunity once more to call upon business, labour and civil society to
work in partnerships in implementing solutions that would result in
improved economic growth of 6 percent by 2019, drive the economic
agenda sustainable economic development and to ensure that the
growth is inclusive.

Honourable Speaker, as part of our continuous journey of building a

non-racial society and in the spirit of unity and celebration of the 100
years commemoration of our legendary leader and one of the founding
members of the African National Congress, I remain encouraged by the
words of OR Tambo when he said: We have a vision of South Africa in
which black and white shall live and work together as equals in
conditions of peace and prosperity,

The most important message that OR Tambo was communicating to all

of us in our diversity is that together, we must forge not only common
dreams and commitments, but must become the architects of the
dreams and ideals we share for our future generations.

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It is in this context that the 5th Administration continues to encourage all
sectors of the society to work together in creating a prosperous Bokone
Bophirima through the Saamwerk-Saamtrek philosophy.

Honourable Speaker, it is therefore not necessarily the amounts and

sizes of allocations to various departments that matter most, but our
ability to translate them into tangible service delivery outcomes that
seeks to transform the lives of our people which we can all be proud of
and celebrate in many years to come.

Honourable Speaker, I am truly humbled by the support of members of

this House and indeed, Honourable Speaker, the role of Legislature in
holding the Executive accountable and playing an oversight role over
institutions of governance, is the pillar of our democracy.

To the Chairperson of Portfolio Committees, thank you very much for

your support in ensuring that there is accountability and transparency in
the use of public funds.

To the Premier, special thanks for your visionary leadership, I really

appreciate the support you are giving the Members of the Executive
Council.

My colleagues in the Executive, we share collective responsibilities and

your continued support is very much appreciated.

The Head of Department of Department, Mr Ndlela Kunene, Senior

Managers, Departmental Staff Members and support staff in my office,
thank you very much for your commitment and dedication.

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Honourable Speaker, in conclusion I feel duty bound given the current
challenges that we have and the uncertain future economic outlook as
communicated to all of us by Minister Gigaba in his Mid-term budget
speech, to reiterate the visionary statement by Premier Mahumapelo
when he said: The past is an important platform from which to use the
present in order to shape the unknown future.

Drawing from this statement, the Bokone Bophirima Government

reaffirms its commitment to work with our communities to create a better
life for all through the current experiences.

I thank you.

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