Debate on KZN 2011/2012 Mid-Term Budget Reviews
By Roman Liptak MPL
Shadow KZN MEC For Finance, KZN Legislature

Pietermaritzburg: Tuesday, 7 December 2011


Honourable Speaker 


The mid-term resolutions before us today demonstrate that our Finance Committee has expanded on its mandate beyond mere financial oversight to broad issues of good governance. These resolutions touch on challenges with investigations into fraud and corruption, disciplinary procedures, recruitment of public servants, blacklisting of service providers, and disaster management. I wish to thank the Chairperson of Finance Committee who has been driving much of this additional agenda.


Our first concern throughout these mid-term budget reviews has been about government waste. Much has been done to address this through the Provincial Recovery Plan. The Cabinet-approved cost-cutting measures have been critical in eliminating past overspending on items which are not essential to service delivery. However, there are still areas where waste continues unchecked and where cost-cutting measures are plainly not being implemented.


The provincial Legislature, for one, needs to apply cost-cutting measures to its money-guzzling public participation events. At mid-year, it had overspent its budget for its contentious Sectoral Parliaments by some R2.6-million. And even more seriously, Department of Education continues to grossly overspend on communication, consultants, contractors, office stationery, venues and facilities, and travel and subsistence.


The overall over-expenditure at mid-year at Education on these and similar items stands at R285-million and if the cost-cutting measures had been implemented, this amount could have gone some way towards off-setting the spending pressures this department is experiencing as a result of higher than budgeted for wage increases and the reversed “no work, no pay” deductions enforced by the recent court ruling.


From the Honourable MEC for Finance, I would like to know if all instances where cost-cutting measures are ignored by departments are being reported to the Cabinet, as they should be, and what action is being taken against Accounting Officers in the departments that are not implementing cost-cutting measures.


If these cost-cutting measures are here to stay, as the Hon. MEC for Finance has promised this House repeatedly, government departments need to handle them more consistently: Accounting Officers need to be able to quantify how much they are likely to save as a result of these measures and whether they have plans in place to redirect these savings towards service delivery.


Potential efficiency savings in other areas are also being neglected. Property payments in the Department of Education alone stood at R88-million at mid-year, while many government properties this department could be utilising instead of leased premises lie vacant throughout the province. Here we need closer cooperation with Public Works who need to deal more urgently with the challenges associated with the Fixed Asset Register of government properties across the provincial government.


Similarly, in the Department of Health, the previous concerns about uncompetitive prices of laboratory services charged by the NHLS are now more urgent than ever, as the NHLS dropped the previous flat rate in favour of charging for actual services rendered. We argue that this has opened the door for more of redundant and duplicate testing and potentially vast overspending.


It is regrettable that attempts to renegotiate the raw deal our Department of Health has got with the NHLS do not appear to have moved an inch since this issue first appeared in finance committee resolutions years ago. Our contract with the NHLS is essentially an underfunded mandate and if this contract cannot be renegotiated, we should be approaching National Treasury directly for funding to cover annual shortfalls. 


The contract Department of Health has with the NHLS makes the case for introducing more competition into our public healthcare more dif......... How can we argue for opening more procurement to competitive bidding if we are legally prevented from procuring essential laboratory services from the private sector at competitive prices? If the current costs charged by the NHLS are beyond what we can afford, how much more of an underfunded mandate will they be once we have fully implemented the National Health Insurance?


It is clear that our province has been repeatedly short-changed in compensation for managing the effects of natural disasters. From our discussions with the stakeholders it seems that the bottleneck is at national level. While our provincial authorities generally respond to disasters promptly, their national counterparts take too long with their verification procedures and, of course, the financial compensation for disasters from National Treasury comes late and far short of the actual cost incurred by the province.


Overspending as a result of inadequate planning and budgeting continues to be a challenge in many government departments. The Office of the Premier, for one, has overspent its budget at mid-year by close to R71-million. Some items of over-expenditure, such as new vehicles or renovations at the Premier’s Parkside residence, could have easily been foreseen and budgeted for appropriately.


It is ironic that the Office of the Premier should boast about the successes of the newly established Provincial Planning Commission and yet its own departmental planning and budgeting for the most basic overheads leaves so much to be desired.


Another initiative spearheaded by the Office of the Premier, the Youth Ambassadors, is also set to overspend. We in the Official Opposition have had reservations about this programme from the very beginning, not least because it was instituted halfway through the previous financial year and the initial funding had to be provided through adjustments.


Honourable MEC for Finance, I am sure you will agree that this is not how new policy initiatives should be introduced into the provincial budget. The overall cost of the programme has since more than quadrupled to more than R80-million with an overspending at mid-year sitting at R32-million. Despite all this lavish expenditure, we have yet to see the merits of these Youth Ambassadors on the ground.


Much like the Office of the Premier, this Legislature does not appear to have planned and budgeted adequately for all the anticipated work on the very building where we are sitting today. In this case as in the case of the Parkside residence, we need to see detailed project lists for all the necessary renovations.


In contrast to these examples of overspending, many other departments are projecting to underspend their budgets at mid-year and some budgets are likely to go unspent by the time this financial year ends. Low rates of spending are usually the case with conditional grants, but significant underspending at mid-year is now also a challenge for the equitable share expenditure in numerous departments.


Of great concern to us are instances of underspending on capital projects in the Departments of Public Works, Arts and Culture, and Sport and Recreation. In the Department of Education, which is set to overspend heavily on Compensation of Employees, it is service delivery programmes, such as Early Childhood Development, that show alarming levels of underspending. Social Development is also set to underspend on service delivery at mid-year, but we are hoping that the recent change in its political leadership will help address some going concerns, especially with regards to accountability.


Conditional grants, which largely coincide with the government’s stated service delivery priorities, are once again being underspent , some of them heavily. We certainly hope to avoid a repeat of last year’s surrender to National Treasury of R80-million of the department’s unspent housing grant for redistribution to other provinces. Again, we hope that the new political leadership in this depar............ where spending on conditional grants needs serious improvement is COGTA.


We are told that spending on conditional grants will catch up towards the end of the financial year. Quite frankly, we will believe this when we see it. Spending projections for most conditional grants are routinely overstated. Two areas where urgent action is needed are project management and procurement.


I have mentioned that this time round the Finance Committee focused more than before on measures that are in place in government to detect fraud and corruption. One area of concern to the committee is an apparent lack of controls to prevent such abuse as provision of free medical services by public hospitals to officials who should be paying for such services, or recruitment of disgraced public servants by other departments or other spheres of government.


Another concern is that fraud detection is done on the assumption that it is unknown to the officials in charge. However, some recent examples of unethical behaviour such as the appointment of a person facing serious criminal charges to head this Legislature’s Supply Chain Management unit shows that we need greater political will to uproot corruption if we are to succeed in these endeavours.            


I thank you.


Roman Liptak
078 302 0929