1 National

Treasury

NATIONAL TREASURY

Presentation to Portfolio and Select Committees on Finance

13 May 2002

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Treasury

Strategic Focus

Macro and micro policies for economic growth and income

redistribution;

Sound budgeting and financial management and equitable division

of resources between the three spheres of government;

Ensuring that tax policy is fair and targeted, enabling Government to

raise fiscal revenue efficiently, stable and equitably and in

accordance with macro economic objectives;

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Treasury

Sound management of Government’s financial assets and liabilities

through prudent cash management, asset restructuring, debt

management and public sector corporate governance;

Promoting and enforcing transparency and effective management of

revenue, expenditure, assets and liabilities in all spheres of

government;

Further refinement of organisational structure and staffing and

modernisation of human resource management, procurement and IT

systems.

Strategic Focus

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Treasury

Achievements – 2001/02

• Sound fiscal framework:– Robust revenue performance– Moderate budget deficit– Growth-oriented MTEF

• Improved budgeting and planning:– New format Estimates of National Expenditure– Provincial budget coordination– Publication of strategic plans

• Debt management:– International bond of the year– Reduction in domestic longterm debt

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Treasury

Achievements (cont.)

• Southern African Tax Institute• Development of Public-Private Partnerships:

– Conclusion of Albert Luthuli Hospital contract

• Development of asset management framework• PFMA implementation:

– Treasury regulations in place– Monthly and quarterly financial reporting– Steady progress in decentralised financial management

• International and regional engagement:– Promoting developing country interests in global economy

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Treasury

Strategic priorities – 2002/03

• Supporting economic growth• Renewed focus on poverty reduction and

strengthening infrastructure investment• Framework for procurement reform• PFMA implementation:

– Focus on measurable objectives– Enhanced expenditure monitoring

• Public sector policy coordination• Consolidation of internal organisation and

capacity building initiatives

7 National Treasury

Structure

Director-General

Maria Ramos

Budget OfficeIntergovernmental

RelationsAccountant-

General

Andrew Donaldson Ismail Momoniat Ismail Mamoojee

Public FinanceEconomic Policy &

International RelationsAsset & Liability

Management

Andrew Donaldson Lesetja Kganyago Brian Molefe

Specialist Functions

Corporate Services

Coen Kruger Simone le Hane

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Treasury

Staff Profile as at 31 March 2002

Management Employees below management

GENDER

81%

19%

MALE

FEMALE

53%

47%BLACK

WHITE

GENDER

43%

57%

MALE

FEMALE

53%

47% BLACK

WHITE

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Treasury

Corporate services – core capacity building initiatives

Programme 1

Restructuring near complete Recruitment of new staff underway Revised HR systems to be developed – focused on

performance management and training Chief Financial Officer appointed on 1 June 2001 Interim Financial Manual in place Fixed Asset register in place The audit committee has been established Risk assessment has been undertaken Preferential procurement policy implemented

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Treasury

Amounts to be voted: operational budget &

transfers(R million) 2001/02 2002/03 2003/04 2004/05National Treasury Operational BudgetPersonnel 114 162 181 200 Other 1 891 2 224 2 356 2 501 Acquisitions of assets 16 11 11 10 Transfer paymentsCurrent 4 620 4 938 5 533 5 988 Capital 1 892 2 658 3 008 3 411 Total 8 533 9 993 11 089 12 110

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Treasury

Estimate of Expenditure Operational budget

PROGRAMS VOTED BUDGET Increase/2001/2002 2002/2003 (Decrease)

R'000 R'000 %1 Administration 77 269 77 516 0 2 Expenditure planning

and budget management 65 009 105 274 62 3 Asset and liability management 19 728 31 465 59 4 Specialist functions 220 561 244 170 11 5 Financial accounting and reporting 90 340 146 092 62

Total operational budget 472 907 604 517 28

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Treasury

Economic and budget planning - Supporting economic growth and

development Economic policy and fiscal advice Promotion of sound international financial relations Budget reform Enhanced financial monitoring and reporting National and provincial infrastructure investment support Promotion of public-private partnerships Tax policy advice and analysis Financial regulation and liaison with SARB and FSB Coordination of donor-funded programmes Support for NEPAD

Programme 2

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Treasury

A PPP Unit was established in May 2000 Its primary function is to regulate PPPs. Its secondary function

is to promote sustainable PPPs through technical support to implementing departments

Unit builds capacity through conducting training courses, publishing guideline documents and providing updates / case briefs in a quarterly publication

Existing professional staff strength is five Areas of focus thus far are health, education, transport, IT,

accommodation and tourism / conservation Deal-flow is expected to increase substantially - further capacity

is being built

Public-Private Partnership (PPP) Unit - Demands and Capacity

Programme 2

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Treasury

Involvement in International Financial Forums

Programme 2

South Africa is a member of:G20,IMF, WB, AFDB and SADC

The key areas of focus are: Reforming the international finance architecture Increasing the voice of Africa in international forums

debt reliefpoverty reduction aid effectiveness

Facilitate the NEPAD economic governance and capital flow initiatives

Driving macroeconomic convergence & tax policy coordination in SADC (MOU to be signed)

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Treasury

Asset and Liability Management

Intergovernmental cash coordination through the CPD will be implemented in 2002/3

A commonwealth debt recording system was installed in 2002 and will be running live by Dec 2002

A debt risk management benchmark has been approved

Portfolio realignment will be completed in 2002

Active debt management continues to make debt service costs savings

Programme 3

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Treasury

Current work focuses on the restructuring of the OSTB to establish a Common Service Provider.

The focus of the restructuring process could be summarized as follows:

Procurement reformProgramme 4

CSPCen

tralis

ing

Supply chain policy and strategy Regulatory framework (norms and

standards) Compliance monitoring Database management and information Training Systems support General term contracts

Planning of requirements and budgeting Ad hoc procurement within delegations Accounting officers’ procurement

procedures Procurement under transversal contracts

arranged by CSP IT Procurement to SITA

Decentralising

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Treasury

It is anticipated that the State Tender Board Act will be repealed

during the second half of the current financial year. Current work priorities also include the following:

Finalization of Framework for Procurement and Provisioning

in terms of section 76 (4)(c) of the PFMA (completion

targeted for June 2002). Development of procurement policy strategy (completion

targeted for September 2002) and Progress towards adoption of e-procurement strategy

(ongoing).

Programme 4

Common Service Provider

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Financial management systems

Medium term goal: new Enterprise Application Solution (EAS): Work is in progress on -

Restructuring stakeholder/client environmentConducting and supporting business process re-engineeringConsolidating and setting business priorities; and Development of implementation strategies.

Enhancement of existing systems (BAS, FMS, PERSAL and LOGIS) continues, including:

Implementing of standard chart of accounts Migration from FMS to BAS

Programme 4

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Treasury

Implementation of the PFMA

Programme 4

Monitoring In process to develop a set of normative measures for financial

management in consultation with Auditor-General

Training Established a Validation Board to exercise qualitative control over

and accredit external training providers Inform departments of accredited courses on a regular basis Identify critical areas requiring training

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Treasury

Financial Management Improvement

Financial statement formats Preparations for consolidation Quality of management information improved Accounting Policies

Developed 28 February 2002 Compliance with ASB standards to be ensured Accrual Accounting Implementation Plan prepared Practices and Guidelines to support Accounting Policies

commenced Standard Chart of Accounts to comply with PFMA and GFS

requirements being finalized

Programme 5

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Provincial and local government transfers

National Treasury Conditional Grants only Programme 2 covers Division of Revenue Process Provincial transfers:

Supplementary grant phased out Reinforcement of infrastructure

Local government Focus on financial management improvement Municipal Financial Management Bill before Parliament Support for restructuring in large municipalities

Programme 6

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Focus on provincial infrastructure

Provincial infrastructure grant rose

from R0,8bn in 2001/02 to R2,8bn in 2004/05 Supporting increase in provincial capital spending

from R12,7bn to R18bn in 2004/05 Strong capital spending growth in second half of 2001/02 Main spending in education, health and roads Capacity improving, but further enhancement needed Review of provincial infrastructure underway

Programme 6

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Civil and military pensions, contributions to funds and

other benefits

Statutory obligations, administered by Pensions Administration Focus on Post-retirement Medical Benefits:

Provides for the funding of medical subsidy dispensation for former employees who retired before 01 July 1992 (full subsidy)

Provides for medical subsidy of pensioners who retired after 1 July 1992 based on conditions at retirement date

Negotiated and approved medical subsidy dispensation of civil servants is also applicable and applied to retired civil servants.

Programme 7

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Treasury

International transfers: Lesotho and Namibia rand monetary compensation Contribution to World Bank HIPC initiative African Development Bank contributions

SA Revenue Service Financial and Fiscal Commission Secret Services – NIA, SASS and SAPS Financial Intelligence Centre

Fiscal transfers

Programme 8

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Core functioning from October 2002

Drafting of Regulations is underway

Information Technology systems being developed

Money Laundering Advisory Council

Extensive international consultation

Cooperation with banks and other institutions in place

Financial Intelligence Centre

Programme 8

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Treasury

Thank You

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Treasury

Background information Vote 8

(R million) 2001/02 2002/03 2003/04 2004/05To be voted *10 749 9 993 11 089 12 110 Statutory:Provinces 105 336 119 452 128 466 137 089 State Debt 48 138 47 503 49 845 52 434 Total 164 223 176 948 189 400 201 633

* The Adjusted Estimates figure amounts to R10 749m whereas the 2002 ENE shows the Adjusted Appropriation as R8 532m. The difference is due to two function shifts i.e. R92m for the National Development Agency that moved to the Dept of Social Development and R2 123m for the supplementary grant to provinces that has become part of the statutory allocations to provinces.

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Treasury

Background Information Estimate of Expenditure

STANDARD ITEMS VOTED BUDGET Increase/2001/2002 2002/2003 (Decrease)

R'000 R'000 %Personnel expenditure 113 837 161 592 42 Administrative expenditure 30 607 47 435 55 Inventories 8 100 10 497 30 Equipment 19 161 14 039 (27)Professional and special services 309 412 380 192 23 Transfer payments 6 511 596 7 596 889 17 Miscellaneous 1 540 217 1 782 571 16 TOTAL 8 532 930 9 993 215 17

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Background Information

Estimate of Expenditure Transfers and related

PROGRAMS VOTED BUDGET Increase/2001/2002 2002/2003 (Decrease)

R'000 R'000 %6 Provincial and local government transfers2 234 000 2 405 000 8 7 Civil and military pensions 1 692 095 1 915 635 13 8 Fiscal transfers 4 133 928 5 068 063 23

Total 8 060 023 9 388 698 16