The fiscal time bomb that this Province has been sitting on has now exploded. This was something that I warned about in July last year. The Eastern Cape is now in a massive financial crisis which could see over expenditure at the end of this financial year of between R2,5- and R3 billion.
If one couples the current over expenditure of the Department of Health of R1.8 billion, a shortfall of R320 million in the Education Department and adds onto that the projected over expenditure for other departments as well as the exposure of R600 million that this province still has in terms of back-pay, one could find that it may over expend between R2.5 and R3 billion.
This has horrific consequences for the next financial year. It will mean that what little increase we will receive from National Treasury will be completely absorbed by the current over expenditure. Given the fact that civil servants’ salaries will rise in the region of 7%, it means the province will go backwards in terms of service delivery.
This state of affairs was predicted by the Democratic Alliance as early as July last year and repeated during the December House sitting… We urged in July that the Provincial Treasury engage in an austerity campaign so that the resources of this province could be focused on core business.
The crisis in Health will now drag this province into another financial crisis. It is now time for the Premier to show her mettle and charge the relevant officials in terms of the Public Finance Management Act.
Firstly, over R400 million was paid out in back pay to civil servants by the Health Department without that expenditure being budgeted for. This is part of the cause of the Health Department’s crisis.
Secondly the Treasury has failed to comply with a House recommendation that was proposed by the DA and agreed to by the House, that Treasury report to the Legislature on a monthly basis on the state of the Province’s finances. Treasury was also meant to supply us with a plan within 30 days of how it was going to deal with the provincial over expenditure. This was directly linked to the scepticism which we had that the adjustment budget that was passed in December would be able to deal with the current financial crisis in the province.
I have today written to the Speaker of the Legislature requesting that the Provincial Treasury report to the Finance Portfolio Committee in accordance with the House resolution of December on the state of the province’s finances and what action is being taken to deal with the current crisis.
I also want to know from the Speaker what action the Legislature will be taking against the Provincial Treasury for failing to comply with a House resolution.
For further information, please contact Bobby Stevenson, MPL on 0827753444