General KZN Budget Debate
By Roman Liptak MPL
Shadow KZN MEC for Finance

KwaZulu-Natal Legislature Pietermaritzburg: Thursday, 24 March 2011  

Madam Speaker 

The State of the Province Address created enormous expectations regarding job creation in this province. The subsequent budget, on the other hand, disappointed them.    It did little to explain how the provincial government would create 1.1 million jobs towards the latest national target of five million. There is little creativity or innovation in this budget on job creation. By contrast, there is much focus on government intervention at the expense of private sector initiative. 

The budget statements have taken us through the motions of this government's past job creation policies, mostly variations on the Expanded Public Works Programme and stipend-based jobs, which have only created short-term job opportunities, lasting on average for little more than one month, and where little or no transfer of skills takes place. These job opportunities have failed to make a dent on our unemployment despite substantial and ever increasing state investment. How much more can we flog this dead horse? 

Many of the jobs created as a result of these employment policies lack any economic justification or measurable performance targets. While SETAs are failing to produce enough plumbers, carpenters and bricklayers, this government is planning to turn out more community development workers, extension officers and youth ambassadors. How exactly are these CDWs, extension officers or youth ambassadors going to grow our small and medium enterprises?   

Yes, it is true that this government promotes job creation by supporting private enterprise. But its support for SMMEs remains marginalised, access to such funding remains politicised, and accountability for failure of these support programmes remains weak. The record of the “so-called” engines of job creation, such as the KZN Growth Fund and the SMME Fund within the Department of Economic Development, speaks for itself. Past SCOPA resolutions show that a large proportion of the businesses funded by the government have lasted only as long as they received public funding.  

Despite repeated promises of new jobs, our province has in fact been shedding them and indeed the only area where job creation has taken place is the public service. The public service wage bill has doubled over the past five years. An ever larger proportion of the provincial fiscus earmarked for salaries and administration means that less and less of our resources can credibly be spent on service delivery.

The immediate crisis we are facing is in the Department of Education where the budget allocation towards compensation of employees does not cover the salaries and OSDs for the teachers who are currently employed by the department, let alone the ones whom the department needs to employ to relieve its critical vacancies. The obvious victim of a growing public sector wage bill is service delivery. In the Department of Education, endless cuts in the Early Childhood Development programme are what ultimately pays our teachers’ salaries.   

This trend is simply unsustainable and by pledging to fill all funded vacancies – whether critical or non-critical – this provincial budget does nothing to reverse it. Unless we cap the number of civil servants and the proportion of funding spent on the public service wages, including various OSDs, against expenditure on service delivery, we will continue to face the prospect of employing more and more public sector managers with less and less to manage. 

We have long argued that a genuinely pro-poor budget is not one that vaguely commits the provincial government to job creation while it implements policies that erode sustainable employment in the private sector by over-regulation and a lack of incentives. The truth is that this same government, largely at national level, has been doing its best to stall job creation by imposing increasing compliance burdens on the job-creating private sector.  

In order to cre....nable jobs, this government must first accept that it cannot control job creation by dispending patronage. It must accept that participation of greater numbers of citizens of this province in its economy cannot happen without a radical expansion of opportunity. It must also accept that effective service delivery by government depends on a vibrant, free and growing private sector to generate the resources necessary for it. 

Our alternative proposal on job creation ensures that employment opportunities and opportunities for entry through entrepreneurship are not only maximised, but that access to such opportunities is made as open and equal as possible. We are proposing an escalating wage subsidy that would be administered by the Department of Economic Development. It would be offered to small businesses for a set time period for every new position created based on a proven track record of sustainable job creation. The subsidy would help grow the qualifying small businesses by lowering the cost of hiring unskilled labour.    

In addition, the escalation of the subsidy over time would provide sufficient incentive to create sustainable jobs. In contrast to the Expanded Public Works Programme, which creates temporary jobs with little transfer of skills, the wage subsidy structured over several years would provide enough time for the employee to internalise the work experience and for the new position to become fully-fledged and sustainable. 

Madam Speaker, many of this budget’s provisions seek to correct or reverse the previous policies of this government, such as rebuilding of faulty houses by the Department of Human Settlements or the endless restructuring of police by the Department of Community Safety and Liaison. Secondly, the budget focuses on building capacity for service delivery rather than on actual service delivery such as in the Department of Cooperative Governance. Both of these tendencies are costly and distracting and, quite frankly, seventeen years into democracy, they raise eyebrows. 

Another concern that runs across several departments are requests for additional allocations from departments which have previously under-spent their budgets. Roll-overs are frequently requested for programmes that have a history of under-spending. This is the case in the Departments of Agriculture; Economic Development; Human Settlements; and Cooperative Governance. While some underspending is due to the moratorium on the filling of non-critical posts, a large proportion of it impacts on service delivery. This House should consider reallocating these funds to key departments that are facing shortfalls and have better capacity for spending. 

Of similar concern is budgeting for the implementation of provincial legislation that is being challenged by practical delays or legal concerns. The legislative function of our nine provinces is limited and it is a pity that those few laws that we do pass are subject to inordinate delays in the legislative process and implementation. Examples here are the Financial Management of the KZN Legislature Act and the Provincial Consumer Protection Act that are unlikely to be passed any time soon and the KZN Liquor Licensing Act is being implemented too slowly. 

This government is obsessing about public participation but, at the same time, it stands in the way off effective parliamentary oversight and public scrutiny. We are organising public hearings, imbizos and taking Parliament to the people, but we are withholding forensic reports and keeping tender processes well out of public sight. Increased allocations for both the Office of the Premier and Treasury towards promoting transparency in the project management and disciplinary processes government are promising, but either of them will only be judged by the results they yield.  

The first one of these is a substantially increased allocation towards the Provincial Nerve Centre. This will only make sense if the additional monies improve the government’s overall project management capacity. As part of our alternativ.......roposed the establishment of a live access database that would allow the Premier, each MEC and all senior civil service managers live access to management information on every major project in the government to improve coordination across departments.

The database should also be accessible to municipalities in order to improve coordination of intergovernmental projects. The database would not only hold the right people to account, but it would also allow continuous monitoring of progress and ensure coherence between business plans and performance reports. If the R30-million allocation towards the Nerve Centre can match these expectations, it would be money well spent. 

Provincial Treasury is planning to spend more on expediting disciplinary processes. Unless this improvement takes the form of an inter-departmental live access database, which we propose for the Nerve Centre, it will not be effective. We need a reliable system to keep track of all ongoing cases of misconduct originating from forensic and other reports commissioned by the Legislature or otherwise and conducted by internal or independent investigators.  

Such a database should register the particulars of all cases and individuals under investigation with the details on the progress of disciplinary, civil and criminal proceedings. It could also assist with the recovery of funds such as the long overdue directors’ emoluments from the KZN Growth Fund board. 

Agriculture is crucial to maximising opportunities for economic growth and job creation in this province. The renewed focus on the funding of co-operatives and other agricultural ventures to create jobs in this sector must be commended. But in order for it to succeed, the many unresolved challenges currently plaguing government-sponsored planting projects, chief of them fraud, corruption and under-spending, must be addressed first. This is the first test for the project management and disciplinary initiatives of the Office of the Premier and Provincial Treasury. 

Turning our education outcomes around is a complex exercise. It involves upgrading and improving the skills of teachers, enhancing managerial skills amongst principals, strengthening accountability within the education system as a whole, providing quality learning and teaching materials and addressing the infrastructure backlog. Whereas the first four areas are predominantly matters of policy, the infrastructure backlogs can be addressed directly in budgetary terms. 

The backlogs of classrooms and school facilities would be eliminated faster if these structures were built for less money than the department currently spends per unit. This system favours politically-connected contractors who inflate prices, rush off work and get away with it because inadequate monitoring of performance and standards allows it. It is also of concern that the provincial government is spending time, effort and state funds on mending rather than expanding newly built school infrastructure. 

In order to ease the backlog of schools in need of maintenance work, we are proposing a fast-track option that would introduce gradual implementation of “rand-for-rand” schemes, on a voluntary basis, to co-fund maintenance of schools jointly by the Department of Education and the communities. This option would not only prioritise the execution of the project at hand, but it would also instil a sense of community ownership of school infrastructure. This could help safeguard schools against vandalism. 

Despite increasing efforts and volumes of state funding, the incidence of HIV/Aids, the single biggest crisis our healthcare system is facing, remains high. This crisis is made worse by the fact that our public health facilities are failing. While the public healthcare system continues to be grossly underfunded, significant portions of the funds that are available, such as the conditional grants set aside for HIV/Aids or hospital revitalisation, are not being used due to a lack of capacity. Other funds are not spent judiciously.......e National Health Laboratory Services.  

But this budget contains little to raise additional funding from private sector patients. This is why we are proposing the establishment of new 20 to 30-bed private patient wards in a number of public hospitals in this province. In the short term, attracting private patients into the public health sector would create a source of income for the public sector. In the long run, such cooperation between the two sectors could facilitate the transfer of private sector’s advanced managerial skills.  

As with other items of public infrastructure, the provincial government is falling behind on its quantitative targets in the construction of housing. Even in areas where these targets are met, the conditional grants go unspent, the procurement procedures are riddled with corruption and the quality of housing is substandard. The proposed changes in the funding and operational procedures are long overdue but it is unclear whether they will go far enough. 

Our own plan would honour the existing housing waiting lists and continue to spend the current housing budget to deliver housing units to those who are on the lists. To ensure that houses are allocated more expeditiously and fairly, we would improve the administration of housing stock and track the housing backlog through the development of a municipal data support programme. 

Secondly and in parallel to this process, we would introduce self-financing by way of a “rand-for-rand” subsidy. The state would provide a fully-serviced site and match the amount saved by a low-income first-time home buyer with credit history. To support such a scheme, the department would co-opt the private sector and encourage the development of a state-backed finance scheme that would significantly reduce the risk of borrowing.  

Such a scheme would encourage communities to actively participate in the design, construction and project management of their own homes and, in doing so, promote a sense of ownership and ensure that houses are built to acceptable standards. No one who builds his or her own house will build it poorly. It is encouraging to see signs of this thinking in the department’s approach today but the proportion of self-built houses is insufficient to inspire radical changes in the current housing policy.  

High levels of crime do not only hurt our communities, but also prevent economic development and job creation. Some challenges within the SAPS, such as the lack of ongoing training, shortages of equipment, and an absence of qualified station management, can be attributed to underfunding. Other factors such as endless restructuring of the police service and redeployment of specialist units point to a lack of understanding and commitment on the part of the Department of Community Safety and Liaison.  

We propose a targeted approach to improving police work by ensuring that each station has a fully equipped detective unit determined by the size of the community it serves. Clearer targets must be set to ensure that qualified individuals are attracted and retained by the SAPS and that they have the appropriate equipment and resources to do their jobs. The department must get serious about implementing systems that monitor and evaluate police performance and improve civilian oversight of law enforcement agencies.  

If we want our municipalities to fulfil their mandate more effectively, the Department of Cooperative Governance must assist them with improving the quality and content of their integrated development plans and hold them to account for their implementation.

The past interventions in local government have shown that the department does not place enough emphasis on the early detection of governance and service delivery breakdowns in municipalities.

 We believe in an interdepartmental and intergovernmental approach. Closer cooperation between COGTA, Provincial Treasury and the municipalities would result from the establishment of a dedicated helpdesk in the Department of Cooperative Governanc...... municipalities and detect areas of concern through parallel assessment.       

Transport is key to our province’s economic growth and job creation. The deteriorating road network and traffic congestion, on the other hand, are a growing obstacle to both. We broadly support the current efforts in upgrading and expanding our transport infrastructure in cooperation with the national department and municipalities. But, at the same time, we call for a new focus on investment into public transport as a way of improving access to economic opportunities, easing traffic congestion and addressing the growing concerns about air pollution. 

Our Department of Transport must engage all relevant stakeholders, including our powerful taxi industry, in devising a public transport scheme that is affordable and safe for commuters, integrated and environmentally friendly. Such a scheme should ideally be modelled on public-private partnerships to reduce the funding commitments by the provincial government and increase the participation of the private sector. One specific interdepartmental concern here is the provision of learner transport where a permanent and sustainable solution has yet to be found by the Departments of Transport and Education. 

Despite its shortcomings, this budget has got a lot going for it. There is a fresh emphasis on efficiency and fiscal prudence, both of which need to be encouraged. Much is expected of the new initiatives such as the Provincial Planning Commission. We hope that it will not disintegrate into another futile talk shop but that the private sector credentials of some of its appointees will help change the ethos of this government in favour of private sector-driven solutions. 

I thank you. 

Contact:
Roman Liptak
078 302 0929