Hon Chairperson, hon members, my colleagues, members of the executive council, MEC, and hon Minister of Finance, let me join others who have commended the Minister for delivering a very impressive Budget.
As Gauteng, we support the fiscal framework that was presented but we want to take this opportunity to make it part of the national conversation about reforming our country's fiscal framework. So, there are issues that we want to raise. Before that, though, let me say that through the wisdom of the national government and the National Treasury, we as provinces have been able to get through the recession period fairly well. We are not out of the woods, though, and that is why we support the determination of the Minister and say that we still have to focus on two issues.
The first is fiscal consolidation, which speaks to the issues of reprioritisation to ensure that we do things that are core to service delivery. So, we have to sustain that for quite some time to ensure that our finances are fairly healthy. But, as we do that, we must not move away from our major infrastructure investment. Because of the stance we took, we did not go over the hill during the recession. It actually enabled us to take on quite a lot of issues.
The presentation of the Budget assisted us a lot. There have been discussions on conditional grants by management. The issue of infrastructure is very important and needs our attention. There are two issues arising from infrastructure. First, there is the issue of project management capacity within provinces, as it speaks directly to the extent to which we are able to spend money. The second is contract management, which also speaks to issues that the Minister raised earlier, namely the issues around value for money, something that is preponderant in the workings of the provinces.
One other area emphasised by MEC Cronj is the issue of conditional grants. What we have seen over time is the increase in conditional grants, which means the centre is taking more without giving more to provinces. This is something that needs to be discussed going forward, we think.
The other area at the centre of this, of course, is the issue of the equitable share, which has been revised and reviewed over time. It evolved from seven components to about five - education, health, economic activity, poverty and an institutional component. A province like Gauteng is specific in some respects and an issue that we want to come back to is that of economic activity and how we attend to it, because we feel it is not well developed in terms of the equitable share.
In this regard, notable changes have also come up and been looked at. In our view one of the biggest concerns is that the equitable share formula is still not flexible enough to deal with expenditure responsibilities that are driving the provincial budget. It is our view that we need to look at this, going forward.
At a provincial level, there are other challenges. For instance, provinces are expected to achieve more with the equitable share because the provinces are expected to perform more functions. Now the balance is going to be important because service delivery happens in the municipalities and at the level of the provinces - how do we back what is going to be important for us?
We also think that the equitable share does not sufficiently recognise the fiscal capacity of the provinces. And, again, we want to talk more about the economic component in that regard. The same equitable share is misaligned with the functions that are performed by the provinces. We have to look at the specificities of different provinces - Limpopo would come with its own special situation, so will KwaZulu-Natal, etcetera. In a province like Gauteng the issue of immigration is very important and puts a burden on education, health and human settlements.
Let me say, in the hope of not being misunderstood, that the developments that have taken place in the equitable share are welcomed, particularly in health. At one point this was not adequately addressed, as the province had a lot of medical aids and was adversely affected as a result.
We think that the current formula does not differentiate the expenditure needed across the provinces. There is a disjuncture in the way the other spheres are resourced, particularly vis--vis the expenditure requirements by different spheres of government. All these things would still be realised properly if we grow the economy - but again, going back to what the Minister raised in the Budget, there must be value for money, and there are issues around contract management that we thought we should deal with.
Over the years, in dealing with the challenges that are facing the provincial spheres of government, efforts have been made to tweak the provincial equitable share. However, we think it still had not provided or yielded sufficient desired outcomes. At worst, we think it has just shifted resources between provinces without addressing the funding challenges at the provincial level - and that is where we will put an invitation to the national government to intervene or to be very close to what is happening at the provincial level to understand the intricacies there.
Over the Medium-Term Expenditure Framework, MTEF, period the provincial share of the total budget remains at 43,8%, while the national percentage is increasing from 47,0% to 47,3% at the end of the MTEF. The area that should be of focus in dealing with the funding issues is around the vertical split. We should have more discussions on how to deal with it because it is important, given that it is assisting us to share ideas and resources for effective service delivery.
The role of provinces, particularly in economic development, should be clarified, because out of the five areas that I mentioned earlier, if we look at the weightings, the economic development part for Gauteng, and maybe one or two other provinces, is prominent yet the weightings are very low. In this sense, the cumulative effect would be that the equitable share is biased against urban provinces in favour of rural areas. This is important because there is an area where I come from in the Eastern Cape, Engcobo, so I also need that to be sorted out. But Gauteng contributes more than 35% of the gross domestic product of the country. So, how do we address the economic development aspect as far as the equitable share is concerned?
But at the end of the day I think the issues of fiscal discipline remain reprioritisation and the monitoring of the resources that we have. We support the Budget and the fiscal framework as presented by the Minister. [Applause.]