Speech Notes: Consideration of the Appropriation Bill 2020

Issued by Retief Odendaal, MPL
Shadow MEC for Finance

Honourable Speaker,

Honourable Premier,

Leaders of Political Parties,

Members of the House

We are considering the proposed budget that is before us amidst the most challenging of times the world has known in recent history.

The COVID-19 pandemic has decimated the world economy and South Africa and the Eastern Cape has not been left unscathed. Whilst South Africa had some very serious fiscal constraints before our national lockdown started on 27 March 2020, COVID-19 has had a devastating impact on our economic growth projections as well as the state of our national fiscus.

When the Minister for Finance, Honourable Tito Mboweni, briefed us on his emergency budget two weeks ago, he said that South Africa was amidst “the worst recession in 90 years”.  As we sat listening to him painstakingly explaining how the National Budget is set to have a deficit of 15.7% of GDP which will result in a Debt-to-GDP ratio of 81.8% by the end of the current fiscal year, we must have all realised that we are in uncharted territory.

Against this backdrop we are today considering the provincial budget before us. Speaker, given the extraordinary times that we are in, this cannot just simply be business as usual. A number of historic, underlying fiscal problems continues to plaque this administration and will ultimately lead to a state of provincial paralysis if we don’t address it immediately.

COST OF EMPLOYMENT

Rising Cost of Employment (COE) is one of the biggest risk factors to the financial sustainability of the Eastern Cape. COE is currently standing at a whopping 67% of total budget whilst the administrations’ targeted total COE in relation to budget is actually 60%.

Whilst we value our civil servants and have a duty to look after their interests, it would be simply irresponsible not to acknowledge that the ever-increasing COE is a significant financial risk to the province. Should the administration manage to reduce COE to 60% of total budget, it will free up an additional R6 Billion for service delivery in the province!

Speaker, this province must have an action plan in place to systematically reduce the COE over a three year period. The DA suggests that all provincial departmental and provincial entity staff organograms be reviewed and that all non-critical administrative vacancies be frozen until the new organograms are in place.

MEDICO LEGAL CLAIMS

Medico-legal claims against the Department of Health is R30 Billion in the financial year at hand. Whilst the Honourable Premier has indicated that he will personally intervene and ensure that he oversees the work of a task team who will develop a strategy to deal with said claims, we have not yet seen any significant progress in reducing the number of claims against the department.

In the 2019/20 financial year, the provincial government has paid an amount of R191 million in awards to the top 10 Medico-legal claims in province! In addition the province have spent in excess of R150 million in the same financial year in legal costs to defend the department.

The majority of these claims are successful because the Department of Health does not have a proper record keeping system. Speaking as an attorney, medical records will be the single, most important source of information in a medico-legal claim. If there are no medical records kept and a specific claim is instituted against the department for medical negligence, the changes are fairly good that the claimant will be successful.

Speaker, why don’t we just make the investment? A proper record keeping system will come at a nominal cost considering the R30 Billion that is already looming in contingent liabilities

ACCRUALS AND OTHER OUTSTANDING PAYMENTS IN HEALTH

Total outstanding payables, including accruals, for the Department of Health was a staggering R3.18 Billion as at the end of the previous financial year. Just last week, the Honourable MEC for Health publicly stated that her department is factually insolvent.

Notwithstanding the aforesaid, amidst the COVID-19 pandemic, we are passing a budget in which we are essentially passing the buck! Why are we hesitant to deal with the single biggest financial risk in this provincial government?

I put it to you Speaker, that adopting this budget today without addressing the financial crisis in the Department of Health amidst the biggest health crisis in a century, is an irresponsible act that is compromising the health of each and every resident of the Eastern Cape. Bail this department out, or put measures in place to put it under administration immediately.

DECREASING INVESTMENT IN CAPITAL EXPENDITURE

The budget before us proposes that we only spent 5.4% (R4.63 B) of the total budget on capital infrastructure investment. Whilst the Honourable Premier has been vocal on economic growth and stimulating the economy, I put it to the Honourable Members of this House Speaker, that there will be no better economic growth injection in this province than a significantly increased provincial capital expenditure program.

We have for years said that we should follow an infrastructure-led growth agenda. During this recession, this is where government can and should invest funding.

NO MEANINGFUL FUNDING FOR CAPACITATION/ASSISTANCE AND/OR INTERVENTION IN LOCAL GOVERNMENT

Speaker, over the last two days we have heard far too often from members of both sides of the House that local government in the Eastern Cape is in serious trouble. The MEC Nqatha himself said that there is unfortunately not sufficient budget within his department to assist ailing and failing municipalities.

With 14 of our municipalities virtually imploding, I ask myself Speaker why are we not responsive to this situation? Why are we not budgeting sufficiently for the capacitation and/or assistance and/or interventions in these municipalities?

We should create a bailout fund for ailing municipalities that is coupled with an intervention package for these municipalities.

COVID-19 PROVINCIAL SUPPORT FOR STRUGGLING LOCAL BUSINESSES

Whilst national government has made significant support packages available for business, it is mind boggling that the Eastern Cape budget will be tabled without any form of support available for struggling businesses which may close their doors as a result of the COVID-19 pandemic.

If the Hon Mvoko is considering such a support package to be included in his adjustments appropriation which is apparently due to be tabled in September, a word of caution: “September may be far too late”.

GENERAL WASTEFUL EXPENDITURE

Whilst we welcome the budget cuts in respect of Travel and Subsistence as well as catering that the Hon Mvoko announced in April this year, the general wasteful expenditure trends of the provincial departments is still very evident in the budget before us.

Speaker, please consider the fact that the overtime budget increased from and amount of R222.6 million in the 16/17 financial year to a staggering R899.6 mil in the 2019/20 financial year – basically a 400% increase in 4 years!

Speaker, then consider the fact that cell phone related expenditure increased from R60.7 million in the 16/17 financial year to R373.5 Mil in 18/19 financial year -basically a 615% increase in 3 years!

Although the Hon Mvoko indicated that he would also want to see the province moving to a zero-based budgeting model, the inherent tendencies of departments to budget for non-core service delivery spend will have to be dealt with his department through a strictly enforced operational efficiency plan.

RATIONALIZATION OF PROVINCIALLY OWNED ENTITIES

During the financial year at hand the Eastern Cape is planning on spending R1,553 Billion on our provincially owned entities. That is a whopping 11.8% increase in budget for these entities on a year-on-year basis.

Notwithstanding the commitment by various politicians in the administration regarding proposed rationalization of these entities, no progress have been made with same thus far.

Speaker, the Premier has committed himself to this rationalization process. We expect to see results.

UNDERSPENDING BY PROVINCIAL DEPARTMENTS

During the 2019/20 financial year we have seen various provincial departments underspending their respective budgets in the amount of R897 billion. Speaker, it is high time that we punish habitual underspending departments by reducing their budgets.

When you have serious financial problems in other departments such as Health, continued underspending is criminal.

LATE PAYMENT OF SERVICE PROVIDERS

The continued late payment of service providers is unacceptable. As at the end of the previous financial year the provincial government owed R2.48 Billion to creditors where invoices have been due and payable for more than a month.

This is an unacceptable state of affairs and notwithstanding the personal commitment from the Honourable Premier that he will attend to this problem, we have seen virtually no improvement in this regard.

Another cause for concern is the fact that the province is also not paying their outstanding municipal debt. As at 31 December 2019 this provincial government owed various, mostly cash strapped municipalities R392.1 million.

CONCLUSION

Whilst the Democratic Alliance can accept that it is impossible to address all of our inherent fiscal problems within this budget, the fact that there is no meaningful change of direction by the provincial administration amidst these challenging times are ludicrous.

It would seem as if the Eastern Cape Provincial Government is in denial insofar as its fiscal realities are concerned. The fact that it is unwilling to address the unfolding financial crisis in the Department of Health is nothing less than provincial suicide.

The Democratic Alliance will not pull the trigger. You are on your own. The Democratic Alliance does not support the appropriation bill before us.

I thank you