Chairperson, hon members, Minister and Deputy Minister, first of all, we do appreciate the opportunity to discuss this very important matter of the fiscal framework and revenue proposals and we will use this opportunity to reflect on some of the issues that pertain to the provinces.
In the next three months the NCOP will turn 15 years old. In this regard, we should therefore draw inspiration from the 100 years of the premier liberation movement of our people, the ANC, to take stock of whether the NCOP has fulfilled its strategic mandate of being the voice of the provinces in the national sphere of government.
We make this assertion because of our deep conviction that the greatest test of any democratic institution resides not in how it views itself, but in its unquestionable ability to inspire the confidence of the masses of the people by changing their material conditions of life for the better.
As a unique political construct, located at the intersection of our multisphere system of constitutional governance, the NCOP is better positioned than any other House in our country to act as a final arbiter in ensuring equitable distribution of our country's resources to provinces.
We would all agree that the fiscal envelope of our country has continued to shrink since the 2009 world economic meltdown, whilst the needs of our people continue to grow. This calls for hard and difficult choices on the part of policy-makers to prioritise spending in line with the needs our people, as articulated in the ruling party's 2009 election manifesto.
We start by accepting the National Treasury's analysis that as a government we should always attempt to do more within limited available resources.
Sporadic uprising in some municipalities continues to remind us that despite the shrinking fiscal envelope more still needs to be done in pursuit of our mandate of a better life for all. Perhaps one of the best solutions we could come up with may relate to budgeting systems, processes and practices, which I believe may need to be revised. We may perhaps also need to create new, innovative ways to better respond to service delivery needs and backlogs.
The provincial budget must respond to challenges on the ground, which to us is one important consideration of a credible budget. This alone, without sound planning, will not produce desirable outcomes.
There is a need for the distribution of financial resources in the country to go beyond the equitable share formula because of the unique realities that exist in different provinces, but more so because of geoeconomic inequalities that have been created by the legacy of apartheid spatial development planning.
Some provinces abound with industries and modern, world-class infrastructure, whilst others are defined by a high level of underdevelopment and a lack of infrastructure. Using the Free State province as an example, it is bedevilled by a small economy and has one of the lowest growth rates, compounded by a small private sector and an arguably overextended public sector.
Furthermore, the above challenge is coupled with the high unemployment rate of more than 50% of a labour force categorised as low skilled, 40% of whom are new entrants, youth, into the labour market. Other factors like high levels of income inequality and negative externalities related to neighbouring countries should be taken into account when funds are distributed between the different provinces.
This means that, as a province, through our budget, we also need to intervene or directly influence certain sections of the provincial economy, where it may not be the case with so-called big provinces because of the level of participation by the private sector.
Due to the above-mentioned thought process, for the Free State and other small provinces, the public sector remains a source of hope for the people of the province and economic growth. This implies that the responsibility placed on provincial budgets or smaller provinces has a bigger and more critical role and it is an important tool to effect socioeconomic transformation in provinces.
It is only fair or perhaps correct to agree that the distribution of resources regarding infrastructure has been favouring bigger provinces for decades to the detriment of smaller ones like ours. For a province like the Free State, the department of public works, roads and transport budget received from national government did not depict 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 this House that the Free State is basically at the heart of the road network in South Africa and it has been badly under pressure from all major freight and transport movements in the country.
If, as a country, we do not change our current approach in terms of how we generally distribute infrastructure resources, we are going to see big cities becoming bigger, migration to big cities increasing and more ghost towns emerging.
The implication of this for the Free State is that poor and deteriorating infrastructure restricts it from benefiting from its strategic geographic location.
Another important aspect that needs urgent attention is the unfunded mandates from national departments to the provincial government. Up until now, unfunded mandates had negatively contributed to the tight fiscal framework realised by provinces, and as a country we should ensure that we disband this practice.
Disbanding the practice will create sustainability, credibility and discipline in our budgets. Unfunded mandates also affect other projects in the context that funds are reprioritised from existing budgeted projects to fund them. In other words, national government should ensure that all new mandates that have financial implications are fully funded. In conclusion, there is a lack of flexibility regarding the infrastructure grant to provinces, or IGP. Provincial governments should be able to better respond to their provincial priorities through this grant. A shift towards increasing the flexibility of the IGP will boost the ability of provinces to also respond better to the tight and difficult times ahead.
Other than the IGP, the provinces' discretion regarding funds from national government is diminishing due to increased earmarked funds, and the conditional grants budget is growing faster than the equitable share funds.
If the above-mentioned trend continues, provinces are going to find themselves under extreme pressure and alternately table budgets that are extremely ambitious or overcommitted.
The last point relates to the capacity of low-grade municipalities, which do not even have a revenue base. As we lead the struggle for memory against forgetfulness, we should do so by recalling that the current configuration of municipal boundaries is our own policy choice.
The fundamental question is therefore what special dispensation we put in place in our funding systems for local government to target specifically the needs of these low-grade municipalities. To the extent that we delay in responding to this question, we are in a situation that needs to be addressed urgently.
For instance, in the province, some municipalities can hardly afford to attend to some of the urgent tasks like paying, in some instances. The province has been intervening in this regard, but for how long will we sustain this situation?
Chairperson, there cannot be any better time for all of us to act, rather than to grapple with these matters that are raised. However, the province does support the broad framework of the fiscal framework and revenue proposals. Thank you. [Applause.]