Chairperson, hon Deputy Minister and hon members, as is required by the Constitution, the Free State standing committee on public accounts, finance, office of the premier and the legislature held public hearings in Bloemfontein on 14 March on the Division of Revenue Bill, Bill 4 of 2012. Once again, I must raise my concern in this House that the SA Local Government Association, Salga, did not attend the public hearing even though they were invited to attend and make submissions. However, the fact that more municipal managers, chief financial officers, CFOs, and mayors attended the hearings is very encouraging. This year we also invited provincial departments to attend the public hearings but I am sad to report here that no provincial department attended.
The recovery from the financial and economic crisis that started in 2008 is slow and uneven. This resulted in weaker growth prospects for this financial year, not only on a national level but also on a provincial and municipal level. What we now need is a government that works better but costs less. We dare not disappoint and fail those who are in need of the benefits of the allocation made in the Division of Revenue Bill. We are all aware of the fact that the needs of our province far outweigh the available resources and each available rand will have to be stretched to its maximum. This can only be done if we all work together. Together we can do more.
This will, among other things, require communities in the Free State to participate actively in the protection of state assets in their own communities. Over and above this, it will require public servants in the Free State to display high standards of work and of ethics. We still see too many public servants involved in corrupt activities, abusing state resources, coming late for work, doing shopping during working hours and not performing their duties. Who can blame the public for having the perception that public servants are lazy, corrupt and without morals and ethics if we ourselves see these things on a daily basis. We cannot afford this. We now need a government that works better and costs less.
Because of the limited resources available, budget leakages must be stopped or there will not be sufficient resources to carry out our promises to the people for a better life and to eradicate poverty. The budget leakages I am referring to are, among others, corruption at all levels and wastage, which include the underutilisation of purchasing power and economy of scale; fruitless and irregular expenditure; maladministration; bad financial decisions; noncompliance with laws and regulations; and unethical business practices. It takes two to tango, therefore the public sector needs to come to the party too. There is no such thing as a free lunch.
Rooting out these leakages will enable us to obtain value for money and stretch the rand to its maximum. Value for money in this case also means that salaries paid to public servants must produce the required outcomes. Productivity within the Public Service needs to increase drastically. Chairperson, provincial budgets must create new and innovative ways to better respond to service needs and backlogs in provinces.
There is also a need for the distribution of financial resources in the country to go beyond the current equitable share formula and grants. This is because of the unique realities that exist in different provinces, but more so because of the inequalities that have been created by these very same instruments of the division of revenue. A province as small as the Free State, for instance, is faced with the following realities: a small, undiversified local economy, mainly based on mining and agriculture, with a low growth rate and an inability to create great wealth on its own; a relatively small private sector; a large, possibly overextended public sector and the fact that, under the current conditions, the public sector remains the main source of hope for a better life and for economic growth for the people of the province.
These realities require that our provincial budget must also be used to stimulate the provincial economy through direct interventions, unlike more industrialised provinces, where the economy has created its own critical mass. This implies that the responsibility placed on the provincial budgets of smaller provinces has a bigger and more critical role to play in making a meaningful impact and is an important tool to effect socioeconomic transformation. It is therefore important for National Treasury to revisit the formulas, especially those of the equitable share to provinces and municipalities.
I'm sure you will agree that the distribution of resources regarding infrastructure has been favouring the bigger provinces for decades, to the disadvantage of smaller provinces like ours. For a province like the Free State, the road budget received did not reflect the level of responsibility that the Free State carries in terms of the total road network in South Africa. It is important that I remind the House that the Free State is basically at the heart of the road network in South Africa. It has been badly pressurised by all major freight and transport movement in the country, without adequate national funding.
A further important aspect that needs urgent attention is the unfunded mandates from national departments to provincial governments. Currently, the unfunded mandate negatively contributes to the tight fiscal framework of provinces and should be reconsidered. In fact, this practice should be abolished or at least discouraged, since it places undue pressure on provincial budgets and is not sustainable.
A further issue that is of great concern to our committee is the current local government equitable share formula, which, in our opinion, needs urgent attention. Firstly, the fact that the development component of the formula is dormant disadvantages small municipalities. These smaller municipalities will therefore never be able to catch up with the larger municipalities in terms of economic growth and development.
Secondly, as a committee, we are not convinced that the revenue-raising capacity correction component of the formula is realistic and financially sound. In this regard, the committee will commission research to establish whether the current subtraction of 7% of the value of the equitable share from wealthier municipalities to make those funds available to poorer municipalities is sufficient and will have the required impact.
In conclusion, I suggest that in the wake of the recent ANC centenary celebrations, where we were all reminded of the great debt this nation owes to those who fought and suffered for this democracy, it is only proper that this Bill be dedicated to them. It should be our goal to ensure a better life for all. We will have to accomplish more with less. Therefore, we will have to work smarter. We need a government that works better but costs less. [Applause.]