Kwazulu-Natal Legislature Pietermaritzburg:
Thursday, 5 August 2010
By definition, the National Treasury must ensure
transparency, accountability and sound financial controls in the
management of the country's public finances. In doing so, the
National Treasury must act as a bulwark against institutional
corruption, which is behind a great deal of underdevelopment in our
Corruption causes, among other things, poor
quality goods and services, lack of efficiency, excessive costs, and
ineffective public programmes. It is widely accepted that that the
poor are the ultimate victims of corruption. It is they who suffer
the most from poor quality services or goods or non-delivery of
goods and services often resulting from corruption.
Political will is undoubtedly a critical factor in
the fight against corruption and the promotion of good governance.
Of course political will transcends grand speeches of which there
has been no shortage, not least in this House. Political will
incorporates leading by example and ensuring that corruption does
not take root or, when it does, taking prompt and firm action where
it is detected and supporting various law enforcement agencies when
they do their work in this regard.
One form of institutionalised corruption has to do
with the supply chain management processes given the vast proportion
of budgets – national, provincial and municipal - spent on
procurement of goods and services through the tender process. The
National Treasury does not have this problem under control. The
database for tenders awarded is not maintained, nor is it audited.
The register for tender defaulters remains empty six years since its
inception as part of the provisions of the Prevention and Combating
of Corrupt Activities Act.
In addition to the rampant corruption, we are
experiencing massive overspending in some of the key service
delivery departments, mostly notably in the public health care
system in all provinces, including ours, at present. Some of it
might be due to bad and inefficient financial management. But there
are cost drivers that need to be addressed not only in relation to
assessing the past overdrafts, but with an eye on preventing
overspending in the future.
Unless we begin to understand what those drivers
are, we are not going to be able to fund our system adequately. We
all know that the annual Division of Revenue Bills provide for a
substantial share of nationally collected revenue to go to provinces
with the aim of advancing economic development and strengthening
social services programmes that have a high impact on the quality of
life and social transformation. Problems with this model arise when
the funds allocated by the National Treasury to the provincial
governments and municipalities are insufficient or the mandates
carried out by these entities transcend the original budget
A common intergovernmental challenge relates to
the issue of unfunded mandates. Unfunded mandates arise when
policies are developed by national government and the responsibility
for implementation is allocated to provincial or local governments.
So far, the lower tiers of government have put up with such unfunded
mandates with a degree of resignation, but the cumulative nature of
these mandates means that they may prove unsustainable in the long
run. Unless the national government takes up its financial
responsibilities, the provincial governments may have to consider
their options in terms of the Intergovernmental Relations Framework
Act. This may include declaring an intergovernmental dispute.
All of us are aware of the pressure that wage
agreements in 2009 have placed on provincial spending over the MTEF
starting with the current financial year. Of the R33.9 billion added
to the provincial equitable share in 2010/2011, R30.9 billion was to
cover the cost of general wage agreements and occupation agreements
in health and education. While these additions should attract and
retain experience and skills in the public sector, it is a
substantial sum of money that does not necessarily translate into
additional service delivery outputs. We cannot afford to continue
expanding personnel expenditure, especially if we do not see
substantially improved quality of services from the public sector.
The management of our human resources is equally
critical. At the moment, for example, we do not have a national
human resource strategy which indicates specific targets for the
provision of health care workers, according to numbers of our
population. How can we plan ahead at provincial level if we do not
know what the basic package of care should be? This package of care
is going to be a very important focus. We have to start specifying.
I imagine the National Treasury will not
appreciate additional norms and standards because once these are
adopted then Treasury is held to account in terms of what the norms
are going to cost. But we need to know because there are far too
many critical vacancies and far too many people who are
inappropriately allocated in our health systems for us to be able to
take a good view of how well we are delivering.
Related to unfunded mandates is the issue of
intergovernmental debt, which, at least at provincial level, is
being currently addressed by our Provincial Treasury. One area where
we would like to appeal to the National Treasury for intervention
concerns debt owed by the lower tiers of government, such as
municipalities to state-owned enterprises, such as Eskom, where the
national government is a shareholder.
As the intergovernmental system evolves, we may
need to reconsider the appropriateness of current financing
mechanisms as well as the level of financing to provinces. A growing
developmental role of provinces demands a range of more
sophisticated and targeted financing mechanisms and a systematic
review of the level of financing for provinces, particularly in
respect of the vertical division of nationally collected revenue.
Provinces are no longer mere administrators of
health, education and social welfare services conceived at national
level. Provinces are increasingly moving towards enhancing regional
economic growth as they boost investment in key areas such as
infrastructure development and stimulate activity and participation
in the labour markets.
Such developmental engagement may in time require
a radical rehashing of financing mechanisms – namely unconditional
transfers - that is provincial equitable share; conditional
transfers - that is grants; provincial taxation powers; and
provincial borrowing powers – that are directed towards financing
specific yet complementary responsibilities.
It is critical that intergovernmental grants are
designed in such a manner that they support optimal outcomes. It has
become evident that there is a need to reform the municipal
infrastructure grant to appropriately respond to the different
demographic, economic, infrastructural and institutional challenges
faced by the 283 municipalities in the country, of which 61 are in
Our vision in this respect is simple: Let national
government establish frameworks and minimum standards. Let
provincial and local governments control funds and choose
priorities. Then hold them accountable. Let discipline be meted out
close to where government officials work and improve co-ordination
between different tiers of government by way of integrated
information systems. In addition, let us remove all remaining
constraints that prevent lower tiers of government from negotiating
partnerships with the private sector or working with NGOs and
I thank you.
Contact: Dr Lionel Mtshali, 078 302 0929