Edited extracts from the 2008 KwaZulu-Natal Budget address by MEC for Finance and Economic Development Dr ZL Mkhize – 28 February 2008

In the last four years the provincial government has injected R124.4-billion into the regional economy. We have, in the same period, spent a total of R95.80-billion on the education and health sectors alone, 77% of the total allocations. We have spent R11.6-billion on capital and infrastructure projects, R314.3-million on cooperatives and SMME programmes.

What has this astronomical level of expenditure achieved?
Though not only a function of government investment, there has been a noticeable decline in the unemployment rate from 33% in 2004/05 to 29% in 2006/07 (Global Insight, 2008). Poverty rates have also declined from 54% in 2003/04 to 50.6% in 2006/07 (StatsSA). The backlogs in basic services have been steadily driven downwards. Nineteen new schools and 5 314 classrooms have been built, thanks mainly to the fast-track programme which commenced in December 2005. By the end of last year, 5 553 schools had been provided with potable water. An additional 325 schools have been connected to electricity in the last four years. 110 896 houses have been built in the last four years since 2004 (IGFR, 2007), and a total of 320 kilometres of the provincial road network have either been constructed or upgraded. Some 1 904 kilometres of local access roads have been constructed. No less than 4.4-million square metres of roads have been rehabilitated. In 2007/08 alone, 19 new primary health care clinics have been built, and three new community health care facilities constructed. More than two million people are now recipients of welfare grants in the province, and nearly 20-million people are expected to attend our primary health care facilities by the end of this financial year. Approximately 1 330 SMME businesses and 1 996 co-operatives have been funded in the last three years.

All of this is impressive, but, on further analysis, we are not entirely satisfied with the outcomes achieved for the level of expenditure. We constantly evaluate whether our government interventions have, in fact, made a difference proportional to the vast amounts of money we have expended on them.

Employment and poverty rates have not declined proportionately to the increase in government expenditure, and indeed inequality has not improved significantly. It is no coincidence that, in its January 8 Statement, the ruling party, the African National Congress, elevated the need to renew the fight against poverty and under-development. Similarly, the President referred to the creation of a national war room for the war against poverty in his State of the Nation address.

In this medium term period, we are going to focus on three things, namely:
· Fighting poverty through improved service delivery, focusing on the health and education sectors as priority
· Refining and improving our second economy interventions, with the emphasis on skills development, training and preferential procurement
· Upscaling investment in economic and social infrastructure

Integrated and efficient delivery of government programmes:
This budget provides substantial funding, some of it additional to baseline, to other interventions aimed at combating the pervasive effects of poverty and unemployment in the province.

In agriculture, we will be placing renewed emphasis on sustainable food security and increasing production through the agrarian revolution. The objective of this programme is to ensure that government reaches out to communities, making them independent and self-sufficient, thereby eliminating hunger, starvation and extreme poverty in our rural areas.

In support of the national initiatives announced in the State of the Nation address and by the Premier in his State of the Province address regarding land reform and restitution, we will be focusing on establishing sustainable agricultural co-operatives on communal land. The objective will not only be to improve food security, but to position communities to grow crops for export through the Dube TradePort when it opens for business in 2010. In this regard we will be exploring the concept of ‘one village one product’.

In the Department of Transport, we will be continuing to fund, in this budget, the successful labour intensive EPWP programmes being run by the department, such as Zibambele, as well as similar programmes in departments such as Works and Housing.

Second economy interventions
In keeping with our stepwise rise to prosperity, we are placing emphasis on three critical second economy interventions in this medium term. These are:
· providing an instrument that will enhance access to finance at a rural community level
· strengthening our BEE effort in the province
· the massification of the skills development effort in the province.

Notwithstanding the financial support available from Ithala for co-operatives and SMMEs, the public feedback reflects that the biggest hindrance to daily entrepreneurial activities at subsistence level remains the lack of access to micro-finance. Thus we are proposing to introduce, in this budget, a rural community saving and lending scheme for the business activities of small traders, to be managed through Ithala’s existing banking services in rural areas. The scheme will benefit from existing initiatives to encourage a culture of savings such as the Zibambeleni savings clubs, stokvels, etc.

Premised on the concept of financial service cooperatives where trust among members will provide the security for loans, the scheme will be aligned to traditional council areas and groups of co-operatives. It will focus on rural agricultural participants and street vendors in the main, stimulating entrepreneurial activity on the smallest scale. It is hoped that especially youth and women in rural and peri-urban areas will benefit. We are proposing in this budget an initial capitalisation of R10-million for the community lending and saving scheme, providing for lending from an amount of R200 up to R5 000 per case. The scheme shall be named Isilulu Sabahwebi. The loans will only be available for business and trading purposes to stimulate a culture of entrepreneurship at lower levels.

In support of this initiative, we also intend to focus attention on financial training, particularly for cooperatives. Pre-existing financial services cooperatives will be audited to avoid their automatic incorporation and importation of previous mistakes into the new scheme, while we learn from their experience.

Government procurement spend remains the key to ensuring the survival and long-term viability of both cooperatives and small businesses. We previously announced that 10% of government procurement spend would go to cooperatives. It has been difficult to assess the success of this policy largely because there were no systems in place to monitor this. We have now put these systems in place and treasury will be able to track this on a bi-monthly basis.

I trust that my colleagues, the MECs, will publicly indicate the 10% amount and services to be procured only from cooperatives, as well as the type and value of services that will be delivered only by SMMEs to the value of 40% of their procurement spend. When passing the votes and the budget, therefore, this House will be aware of targets that both Cabinet and portfolio committees can monitor.

Infrastructure
Many international studies confirm that infrastructure development is the foundation for economic growth and poverty reduction in developing countries (Gramlich, 1994; Aschauer, 1989; Day and Zou, 1994). Apart from the substantial increases in the baselines of departments for social and economic infrastructure over the MTEF period, this budget makes provision for additional funding for the following infrastructure projects currently underway in the province:
· An additional amount of R300-million has been allocated in the coming MTEF to partially finance the construction of the Moses Mabhida Soccer Stadium
· We have also made an additional amount of R315.1-million available over the MTEF to finance cost escalations associated with the Dube TradePort. The TradePort intends to grow cargo volumes from a number of sectors that use airfreight, including perishables and other dry cargo sectors, such as electronics, auto components, and clothing and textiles
· The Department of Transport receives an additional allocation of R516.2-million over the MTEF to finance the completion of the John Ross Highway and the construction and upgrading of the road network supporting King Shaka International Airport and the Dube TradePort
· The Infrastructure Grant to Provinces increases by R821.1-million over the MTEF, of which 81.2% will go towards education infrastructure.

Going forward emphasis will also be placed on maintenance spending to keep pace with the roll-out of new infrastructure. As a norm, at least 5% of infrastructure spending needs to be earmarked for maintenance work.

Contact the KZN DED:

Boyce Mntambo
Manager for Information & Communication Technology
Tel.: +27 33 264 2500
Fax: +27 86 679 6404
Email: mntambob@kznded.gov.za
Website: www.kznded.gov.za

Postal address:
Private Bag X001
Bishopsgate
4008

Physical address:
270 Jabu Ndlovu Street
Pietermaritzburg
3201