NATIONAL TREASURY Presentation to Portfolio and Select Committees on Finance 13 May 2002

1. NATIONAL TREASURY Presentation to Portfolio and Select Committees on Finance 13 May 2002 National Treasury

2. 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; National Treasury

3. Strategic Focus • 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. National Treasury

4. 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 National Treasury

5. 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 National Treasury

6. 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 National Treasury

7. Structure Director-General Maria Ramos Budget Office Intergovernmental Relations Accountant- General Andrew Donaldson Ismail Momoniat Ismail Mamoojee Public Finance Economic Policy & International Relations Asset & Liability Management Andrew Donaldson Lesetja Kganyago Brian Molefe Specialist Functions Corporate Services Coen Kruger Simone le Hane National Treasury

8. Staff Profile as at 31 March 2002 Management Employees below management National Treasury

9. Programme 1 Corporate services – core capacity building initiatives • 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 National Treasury

10. Amounts to be voted: operational budget & transfers National Treasury

11. Estimate of Expenditure Operational budget National Treasury

12. Programme 2 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 National Treasury

13. Programme 2 Public-Private Partnership (PPP) Unit - Demands and Capacity 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 National Treasury

14. Programme 2 Involvement in International Financial Forums 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 relief poverty reduction aid effectiveness Facilitate the NEPAD economic governance and capital flow initiatives Driving macroeconomic convergence & tax policy coordination in SADC (MOU to be signed) National Treasury

15. Programme 3 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 National Treasury

16. Programme 4 Procurement reform • 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: CSP Centralising Decentralising • 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 National Treasury

17. Programme 4 Common Service Provider • 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). National Treasury

18. Programme 4 Financial management systems • Medium term goal: new Enterprise Application Solution (EAS): Work is in progress on - • Restructuring stakeholder/client environment • Conducting and supporting business process re-engineering • Consolidating 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 National Treasury

19. Programme 4 Implementation of the PFMA 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 National Treasury

20. Programme 5 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 National Treasury

21. Programme 6 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 National Treasury

22. Programme 6 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 National Treasury

23. Programme 7 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. National Treasury

24. Programme 8 Fiscal transfers 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 National Treasury

25. Programme 8 Financial Intelligence Centre • 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 National Treasury

26. Thank You National Treasury

27. Background informationVote 8 * 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. National Treasury

28. Background InformationEstimate of Expenditure National Treasury

29. Background InformationEstimate of Expenditure Transfers and related National Treasury