Budgets of this province over the next few years are going to be severely constrained by a number of issues.
The poor state of the national economy which impacts on tax revenues for equitable share is going to hit us hard over the next few years. Government has already used what fiscal space it had when we experienced the downturn of 2009. National government basically has the option of cutting expenditure or raising taxes.
This month’s economists warned our growth rate for this year will be 2% rather than the 3% that was originally projected. There was also the shocking news that our GDP growth has declined sharply from 2.1% in the fourth quarter of 2012 to a mere 0.9% in the first quarter of this year it’s the lowest quarterly performance since the last recession.
Economists are warning us that our economy is in a rudderless state.
There is also the impact of the 2011 census which saw a population decline for the Eastern Cape of 267 000 people which in turn impacts on our equitable share. This will result in a 5.2 billion decline in equitable share over the next three years.
This year one sees conditional grants for Health decline by R121 million, Roads and Public Works R474 million and Education R493 million. In the next financial year our conditional grants will decline from R9, 461 billion to R8, 532 billion.
Of particular concern is the cutback on our roads budget. An efficient road network lies at the heart of a growing economy. I’m reminded of the words of John F Kennedy who said: ‘It was not the wealth of our nation that built our roads network rather it was our roads network that built the wealth of our nation’. Our accumulated roads maintenance backlog is over R13 billion and increasing by over R0, 5 billion per year. This in turn has continued implication for economic growth and job creation.
In May this year the report of the quarterly labour force survey showed that the official unemployment rate in the Eastern Cape increased from 29.8% to 30.2%. When one looks at our expanded definition of unemployment it stands at 45.8%.
The youth of our province are particularly hard hit when it comes to unemployment with 4 out of 10 being unemployed. It is therefore critical that we do everything in our power to ensure that the budget we have is directed towards creating economic growth – away from consumption – the expenditure on the high cost of personnel and unnecessary ‘nice to have’ items.
The Democratic Alliance is particularly concerned with regard to the high proportion of our budget that is spent on personnel. As a percentage of equitable share it rises over the MTEF period from 76.7% to 78%. Similarly as a percentage of the whole budget it rises from 64.9% to 66.7%. This means that when it comes to equitable share we only have a discretionary budget of 22%.
If this trend continues over the next 10 years we will simply amount to nothing more than an employment agency. What is more disconcerting is how we spend this money on salaries. An accepted norm for the distribution on salaries is 60% for core staff and 40% for support staff. In this province the ratio is the wrong way around. We spend 70% on support staff and only 30% on core staff. This means instead of spending funds on doctors and nurses we have too many clerks and administrators.
This is completely unacceptable. The priorities have become totally skewed.
There needs to be a major review of the organograms of all departments to ensure that expenditure is directed towards core staff and not support staff. This is one of the key problems that the province has – the efficiency of its service delivery. The root cause of the problem is the fact that we don’t have core staff to actually deliver the goods.
This problem is exacerbated when it comes to the department of education which is facing its most serious budget constraints in history. In its annual performance plan for 2013/14 the department points out that personnel costs take up 91.3% of its equitable share of the provincial budget excluding conditional grants, instead of 80% as regulated by the national norm. This means only 8.7% is available for transfers to schools and infrastructure.
Our province is losing too many skilled professionals. This province scores low on almost every important service delivery indicator that would make people want to live here. Child mortality, life expectancy, unemployment and a poor education system are all factors that contribute to an exodus from the Eastern Cape. This is a vicious cycle which ends up impacting on our allocation from national treasury.
Let me say in conclusion that the function of a budget is to assist in creating an environment that is conducive to creating jobs, reducing poverty and improving service delivery. Every rand that this province receives must be efficiently spent. When our budget is totally skewed in terms of consumption and away from economic growth this is not an efficient and effective budget. The foundation of a growth orientated province is an effective budget.
In conclusion, unless we change course we will enter a downward spiral of low growth, fewer jobs and rising social discontent.
It can be different. The Democratic Alliance has a vision for this province as one of rising Opportunity For All where the quality of education goes up, unemployment goes down, health care improves and where all communities feel safe and secure. What stands between this and the current reality is the political will or failing that a change in government.