NATIONAL TREASURY

1

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

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

3
Strategic Focus

• Sound management of Governments 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.

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

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

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

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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
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Staff Profile as at 31 March 2002
Management Employees below
management
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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

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Amounts to be voted operational budget
transfers
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Estimate of Expenditure Operational budget
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Economic and budget planning - Supporting
economic growth and development
Programme 2

• 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

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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

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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)

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Asset and Liability Management
Programme 3

• 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

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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

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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).

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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

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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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Financial Management Improvement
Programme 5

• 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

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Provincial and local government transfers
Programme 6

• 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

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Focus on provincial infrastructure
Programme 6

• 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

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Civil and military pensions, contributions to
funds and other benefits
Programme 7

• 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.

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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

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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

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• Thank You

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Background information Vote 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.
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Background Information Estimate of Expenditure
29
Background InformationEstimate of Expenditure
Transfers and related