House Chairperson, Mr Deputy President and hon members, section 214 of the Constitution of the Republic of South Africa requires that government ensures a transparent and equitable system to divide nationally raised revenue between the three spheres of government. The Division of Revenue Bill and its underlying allocations are the culmination of an extensive consultation process between all three spheres of government.
By setting the three-year allocations for the equitable shares and conditional grants for provinces and local government, the Division of Revenue Bill entrenches transparency and accountability in our governmental fiscal system. It allows all spheres of government to plan ahead and get down to the business of delivering services to the people.
The Division of Revenue Bill tabled in this House by the Minister of Finance on Budget day, 17 February this year, was, for the first time, processed in terms of the Money Bills Amendment Procedure and Related Matters Act, Act 9 of 2009, where a report was tabled with the 2010 Budget which explained how the division of revenue and national Budget give effect to, or the reasons for not taking into account the recommendations contained in the committee reports on the 2009 Medium-Term Budget Policy Statement. I am pleased to announce that the recommendations by the Standing Committee on Appropriations were taken into account when the 2010 Division of Revenue Bill was drafted.
This Division of Revenue Bill contains details on each grant, its purpose, criteria for allocating the grant and an account of the performance of each grant. Such information should contribute towards deepening parliamentary oversight over the executive.
It gives effect to the priorities articulated by the President in his state of the nation address on 11 February this year. These priorities are: Improving the quality of education, as we all know; upgrading health care; promoting public safety; supporting rural development; creating decent jobs; building sustainable human settlements; encouraging efficient local government; and combating corruption.
As government is shifting to target-based outcomes in order to increase efficiency and improve performance to support inclusive development, these priorities are unpacked in 12 measurable outcomes. Due to savings of R25,6 billion identified through shifting towards priorities, the budget framework allows us to provide an additional R112,2 billion in spending over the next three years in comparison with our spending plans from a year earlier. Of the additional resources, national departments will receive R56,2 billion or 50,1% of the additional resources; provinces R46 billion or 40,6%; and municipalities an additional R10,5 billion or 9,3% of this allocation. The largest growth in allocations is to local government where its share of the total available resource envelope increases from 7,3% in 2009-10 to 8,8% in the 2012-13 financial year.
Schedule 1 of the Bill - if I may just quickly go through the Bill itself - provides a summary of the allocation of funds to the three spheres of government. Of the R818,1 billion Budget for this year, national department functions amount to R527 billion. This includes debt service costs amounting to R71,4 billion and a contingency reserve of R6 billion. Provinces receive R261 billion and R30,2 billion is allocated to local government.
Schedule 2 presents provincial equitable shares and Schedule 3 allocates equitable shares to municipalities. Schedules 4 to 6 allocate conditional and other grants to provinces and local government. Schedule 7 allocates in- kind transfers to municipalities. Schedule 8 allocates incentives for provinces and municipalities to meet targets with regard to priority government programmes.
The Division of Revenue Bill provides for a substantial share of nationally collected revenue to go to provinces in order to strengthen social services programmes that have a great impact on human development, quality of life and social transformation. The increase over baseline for the next three years amounts to R45,6 billion. This is to sustain the social progress made in recent years, to meet government's broader developmental objectives and mitigate the effect of the current economic downturn. Including these revisions, allocations to provinces will amount to R322,9 billion in the 2010-11 financial year.
Members of this House need to be alerted to the fact that wage agreements of 2009 have placed pressure on provincial spending over the Medium-Term Expenditure Framework. Of the R33,9 billion added to the provincial equitable share, R30,9 billion is to cover the cost of general wage agreements and occupation-specific dispensation, OSD, 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 therefore cannot afford to continue expanding personnel expenditure, especially if we do not see a substantial improvement in the quality of service delivery from the public sector.
The President stressed in his state of the nation address that government will place education and skills development at the centre of its policies. A general adjustment of R3 billion over the MTEF is made to the provincial equitable share to cover health and education priorities. As in previous years, further investments are made to education to ensure that access and quality are improved.
Last year we announced that R500 million was added to the infrastructure grant for provinces to ensure that classroom space is available for Grade R learners entering the system. A further R1 billion was made available for schools to upgrade infrastructure, improve security and install libraries and laboratories. These improvements will become visible during this and next year.
R9 billion was added to the provincial equitable share to cover the cost of OSD agreements for educators and a further R1,2 billion was added to the FET colleges grant for OSD for lecturers. The future of this country depends on these additions being converted into improved teaching and learning at our schools. Collectively we have a responsibility to ensure that this happens.
In health, R3,9 billion is added to the provincial equitable share to cover the OSD agreements for doctors and health therapists. The HIV and Aids programme receives an additional R8,7 billion over the MTEF to ensure that sufficient resources are available for government to deliver on the commitments announced on World Aids Day.
The 2010 Budget introduces the Expanded Public Works Programmes for the social sector. In 2010 this grant will perform as a basic wage subsidy for nonprofit organisations working in home community-based care, allowing them to pay salaries to volunteers. This year an incentive model will also be developed for implementation in the 2011-12 financial year. This should create incentives for provinces to create labour-intensive employment that provides much-needed relief and support for the needy and vulnerable.
Over the next three years municipalities will receive R210,4 billion, including in-kind allocations and the sharing of the general fuel levy with metros, and an additional R12,2 billion. The local government equitable share receives a further R6,7 billion to protect the poor from increased electricity prices and secure the delivery of free basic services to all poor households.
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.
In the 2009 Budget the municipal infrastructure grant for cities was introduced to enable the cities to more effectively manage, support and account for built environment outcomes.
The allocations for capacity-building totalling R1,8 billion over the 2010 MTEF continue to be complemented by the Siyenza Manje programme, via the Development Bank of Southern Africa, to develop skills in engineering, planning and financial management within municipalities. The Department of Co-operative Governance and Traditional Affairs announced the Local Government Turnaround Strategy in 2009. Government works in a co-ordinated manner to ensure that capacity-building initiatives are implemented coherently and also create a supportive environment for municipalities.
Chairperson, I would like to thank the committee for the manner in which they dealt with the Division of Revenue Bill and I look forward to further engagements. We would want to say that the recommendations in the report will be implemented working together with the committee. It is clear that the allocations contained in this year's Division of Revenue Bill should put government in a better position to accelerate service delivery and improve the efficacy of public services. Thank you.