National Treasury

1. National Treasury Budget Vote Presentation 1 June 2004

3. Towards a Ten Year Review • Economic consolidation • Sustained, steady growth • Lower inflation, interest rates • Well-diversified financial markets • Healthy public finances • Favourable trade and industrial environment • Implementation of RDP – 10 year review • Meeting basic needs • Growing the economy • Democratising the state and society • Developing human resources

4. Growth of 1% a year Investment shrinks 2,9% a year Inflation averages 14,3% Deficit up to 7,2% in 1993 Fin account net outflows of R46,1 bn Investment boycott Growth around 3% a year Investment expands 4,7% a year Inflation down to <6% Deficit down to around 3% Fin account, net inflows of R169,6 bn Unprecedented ratings upgrades 10 Years of Growth 1984-1993 1994-2003

5. Major Social and Economic Challenges Ahead • Reducing poverty • Halving unemployment rate by 2014 • Particularly among youth • Countering vulnerability • Narrowing inequalities • Nation-building • Culture of ‘ploughing back, not plundering’ • Bridging ‘two economies’ divide

6. Priority Framework 2004-2014 Increasing investment in infrastructure, industrial capital (16 to 25% of GDP) Improving education, training and skills development to raise productivity Fighting poverty and inequality through work opportunities, income support and empowerment Improved regulation of markets and public entities, and efficient public service delivery

7. New Roles For Treasury • Greater focus on policy coordination within government • Joint planning needed with key departments • Strengthen engagement with private sector, NEDLAC • More proactive, forward-looking • Greater scope and reach of policy • Expertise-intensive, knowledge-based • Relies on healthy relations with other departments, provinces and municipalities

8. Strategic Priorities 2004-2007 • Accelerate growth and enhance social development • Strengthen job creation and poverty alleviation initiatives • Deepen budget reform agenda and enhance transparency • Sharper focus on financial management reforms and accountability • Procurement reform • Efficient debt and financial asset management • Review of division of revenue • Strengthen relations with multilateral orgs., e.g. IMF; World Bank; NEPAD; SADC and AU

9. Accelerate Growth and Enhanced Social Development • Formulating growth-enhancing macro policies that contribute towards investment and job creation • Maintaining a sound, growth oriented fiscal stance • Supporting step-up in national, provincial and municipal infrastructure investment • Partly through PPPs • Further progress in liberalising exchange controls • Ongoing tax policy reform

10. Strengthen Job Creation and Poverty Alleviation Initiatives • Expanding sectoral policy capacity and monitoring service delivery progress • Increasing resources to provincial and local government to extend coverage and improve quality of basic and social services • Strengthening provincial and local government planning, budgeting, financial management and delivery capacity

11. Deepen Budget Reform Agenda and Enhance Transparency • Increase oversight into spending and service delivery • Improve use of measurable objectives • Incorporate non-business public entities into budget process • Greater attention to long-term expenditure drivers • Strategic planning over five years

12. Sharper Focus on Financial Management Reforms and Accountability • Review success of PFMA implementation • Improve financial governance especially over public entities • Future reforms to focus on improved outputs and performance accountability • Introduction of standard chart of accounts and new economic reporting format • Roll out of MFMA

13. Procurement Reform • Roll-out of the implementation of supply chain management practices • Aligning the PPPFA Regulations with the principles of the BBBEE • Prescribe minimum norms and standards for supply chain management • Facilitate transversal contracts on behalf of Government • Extending the principles of supply management to the local sphere of government

14. Efficient Debt and Financial Asset Management • Continuing to focus on debt cost reduction • Continuing diversification of funding instruments • Broadening investor base in government debt • Pursuing international credit rating upgrades • Reducing the realised losses on the Gold and Foreign Exchange Contingency Reserve Account • Improving cash management practices • Improving transparency through efficient dissemination of information • Developing on integrated Asset and Liability Management System • Reviewing and implementing risk management framework • Undertaking corporate governance review of state owned enterprises

15. Review of Division of Revenue • Review local government fiscal framework • Review provincial and local government equitable share formulae • Review infrastructure grant formulae • Probe provincial and municipal tax powers

16. Strengthen Relations With Multilateral Organisations • Give economic content to NEPAD and AU programmes • Increase economic integration within SADC • Improve role in international financial institutions – IMF/World Bank; Global Stability Fund etc – set Africa’s development agenda • Minister chosen to serve on Commission for Africa – Treasury to play key support role

17. Organisational Overview • New DG appointed • Approved posts 850; 485 Filled • Restructuring completed • Excess staff 19 and vacant posts 365 • Strategic Planning conference in July/August • Continuous improvement of financial manual • Consolidating parliamentary services • Continuing implementation of affirmative action and employment equity practices

18. Staff Profile as at 31 March 2004 Employees below Management Management GENDER GENDER RACE RACE

19. Estimate of Expenditure Operational Budget Programme VOTED BUDGET Increase/ Decrease 2003/04 2004/05 R’000 R’000 % 1. Administration 111 890 101 879 -9 2. Economic planning and budget management 128 263 140 207 9 3. Asset and Liability Management 42 831 42 271 -1 4. Financial management and systems 370 950 352 455 -5 5. Financial accounting and reporting 63 323 66 182 5 TOTAL OPERATIONAL BUDGET 717 257 702 994 -2

20. Estimates of Expenditure Transfers VOTED BUDGET Increase/ Decrease 2003/04 2004/05 R’000 R’000 % Operational budget 717 257 702 994 -2 6. Provincial and local government transfers 3 284 318 3 889 260 18 7. Civil and Military Pensions, Contributions to Funds and Other benefits 2 449 569 2 163 966 -12 8. Fiscal transfers 6 142 152 7 185 511 17 TOTAL BUDGET 12 593 296 13 941 731 11

21. Fiscal Transfers • Programme 8 Voted Budget MTEF MTEF • 2003/04 2004/05 2005/06 2006/07 • R’000 R’000 R’000 R’000 • International transfers • Lesotho and Namibia 304 633 176 367 199 037 224 627 • Contribution to HIPC 55 000 55 000 • African Development Bank 129 567 154 316 163 576 173 423 • SA Revenue Service 3 792 007 4 602 509 4 748 312 5 033 210 • Development Bank of SA 40 000 40 001 40 001 40 000 • World Bank Group 1 1 1 1 • Financial and Fiscal • Commission 12 679 15 394 15 577 16 073 • Secret Services 1 771 265 2 117 057 2 080 063 2 223 086 • Financial Intelligence Centre 37 000 21 866 23 617 21 410 • Commonwealth Fund - 3 000 3 000 3 000 • TOTAL FISCAL TRANSFERS 6 142 152 7 185 511 7 273 184 7 734 830

22. THANK YOU .