NATIONAL TREASURY STRATEGIC PLAN 2012/16

NATIONAL TREASURY STRATEGIC PLAN 2012/16

PRESENTATION TO PARLIAMENTARY FINANCE COMMITTEES

Presenter: Lungisa Fuzile | Director General, National Treasury | 08 May 2012

TREASURY AIMS AND OBJECTIVES

• Chapter 13 of the Constitution of the Republic of S outh Africa . According to section 216 (1) of the Constitution national legislation must establish a national treasury and prescribe measures to ensure both tran sparency and expenditure controls in each sphere of government.

• Chapter 2 of the Public Finance Management Act (PFMA) clearly defines the functions and powers of the department.

• Also, there are various other pieces of legislation that define the role of National Treasury, these include the MFMA, financial sector legislation e.g. Banks Act .

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TREASURY AIMS AND OBJECTIVES

• Develop fiscal policy framework and coordinate macro-economic policy

• Prepare a sound and sustainable national budget and equitable division of resources

• Equitably and efficiently raise fiscal revenue, while enhancing efficiency and competitiveness of the SA economy

• Sustainably manage and make effective use of govt’s financial assets and liabilities

• Promote transparency to improve financial accountability and enforce effective financial management

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GOVERNMENT’S OUTCOMES APPROACH

1. Improved quality of basic education2. A long and healthy life for all South Africans3. All people in South Africa are and feel safe4. Decent employment through inclusive economic growth 5. A skilled and capable workforce to support an inclusive growth path6. An efficient, competitive and responsive economic infrastructure network 7. Vibrant, equitable and sustainable rural communities with food security for all8. Sustainable human settlements and improved quality of household life9. A responsive, accountable, effective and efficient local government system10. Environmental assets and natural resources that are well protected and continually

enhanced11. Create a better South Africa and contribute to a better and safer Africa and World 12. An efficient, effective and development oriented public service and an empowered,

fair and inclusive citizenship

Treasury has fully adopted the outcomes approach in preparing this planning document. We directly contribute to the three highlighted outcomes

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ECONOMIC OUTLOOK - positives

• Growth forecast at 2.7% this year, accelerating to 4.2% by 2014, supported by an environment of stable macro economic conditions with interest rates at 30 year lows

• Fixed investment growth increased by 4.3% in 2011 following a contraction of 1.6 % in 2010. Projected infrastructure investment of R845 billion over the medium term

• Employment projected to grow by 850 000 jobs by 2014/15. According to StatsSAemployment increased by 365 000 (2.8%) in 2011, the unemployment rate was 23.9 per cent in December 2011

• Budget balance improved to 4.5 per cent from an estimate of 5.5 per cent in MTBPS

• SARS exceeded Budget 2012 revenue target by R4 billion in 2011/12 financial year

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ECONOMIC OUTLOOK - risks

• Inflation is now at 6% and it is projected to average 6.2 per cent in 2012 before slowing to 5.3 per cent in 2013

• Rising fuel prices & impact on food prices

• At around 75%, household debt stock remains high

• High unemployment, particularly for young people and the less skilled

• Though better than a year ago, capital flows remain somewhat volatile

• Global risks– European sovereign debt and banking risks– Rising international oil prices– Soft growth in China and India could slow demand for exports (particularly mining

exports)

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KEY FOCUS AREAS FOR PERIOD AHEAD

• Maintain counter-cyclical fiscal stance

– Real growth in non-interest expenditure averaging 2.6% over the medium-term;

– Additional allocations of R55.9 billion over the next three years, including 9.5 billion for an economic support package; and

– A shift from consumption to capital spending so that, from 2014 / 15, new borrowing will support productive investment

• Improve value derived from public funds spent

– Conduct expenditure reviews in selected programmes of government, to further inform budget-making going forward; and

– Implement a range of measures to improve supply chain management and combat corruption

• Consider financing options and funding models for l arge infrastructure programmes of Government

– Supporting the government build programme through sustainable funding and planning capacity

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STRATEGIC GOVERNMENT INITIATIVES

• Facilitating economic growth– National Treasury macroeconomic analysis aims to contribute to growth, productivity and

competitiveness enhancement, taking into account global economic developments.• Savings and retirement reform

– Discussion papers on next steps in retirement reform have been prepared; consultations with stakeholders in progress.

• Employment creation – R9 billion jobs fund has been established. First round of allocations completed (just under R2

billion allocated), second window now open. • Capacity building

– Financial management training continues, with special focus on municipalities.• Infrastructure development

– NDP grant is contributing to improved long term township regeneration strategies. Support for the PICC infrastructure programme major focus in year ahead.

• Strengthening intergovernmental financial relations– Improved budgeting and financial management, with special focus on municipal finance

recovery service. Targeted interventions in provinces are under way.• Cost effective procurement

– Treasury leads work of the Multi-Agency Working Group on Procurement. Second phase of review of procurement legislation this year.

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STRUCTURE & COMPOSITION OF PROGRAMMES

• Programme 1 – Administration

• Programme 2 – Economic Policy, Tax, Financial Regulation & Research (2 divisions – Economic Policy and Tax, and Fin Sec. Policy)

• Programme 3 – Public Finance and Budget Management (3 divisions – Public Finance, Budget Office and Intergovernmental Relations)

• Programme 4 – Asset and Liability Management

• Programme 5 – Financial Accounting and Reporting (2 divisions – Office of the Accountant-General and Specialist Functions)

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STRUCTURE & COMPOSITION CONT.

• Programme 6 – International Financial Relations

• Programme 7 – Civil & Military Pensions, Contributions to Funds & Other Benefits

• Programme 8 – Technical Support & Development Finance

• Programme 9 – Revenue Administration

• Programme 10 – Financial Intelligence and State Security

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PROGRAMME 1 - ADMINISTRATION

Responsible for the overall institutional managemen t and support for the department

Plans over the next 3 years:

• Supply Chain Management is implementing Strategic Sourcing to enhance demand, logistics and contract management and reducing cost

• Formalisation and implementation of ICT Governance in compliance to KING III. This will ensure the effective management of ICT risks

• Enhancing the department’s intellectual capital and institutional memory through effective knowledge management

• Enhance organisational integrity by performing value for money audits

• Actively promotes the Department’s zero tolerance stance to corruption and strives to preserve the National Treasury’s strong ethical culture

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Page 15 – SPPg. 10 – APP

PROGRAMME 2: ECONOMIC POLICY.., TAX, FINANCIAL REGULATION AND RESEARCH

Provide specialist policy research, analysis and ad visory services in the areas of macroeconomics, microeconomics, taxation, the finan cial sector, and regulatory reform.


• Develop and maintain economic forecasting models that facilitate sound policy making through in-depth economic analysis, including 3-year macroeconomic forecasts. Quarterly updates are also produced for internal use

• Monitor the exchange rate and explore policy measures to ensure competitiveness

• Formulate and implement annual tax proposals

• Produce policy paper on carbon tax proposal for Cabinet approval and submit proposal for the 2013 Budget

12Comprises 2 divisions: Economic Policy and Tax and Financial Sector Policy


PROGRAMME 2: ECONOMIC POLICY, TAX, FINANCIAL REGULATION AND RESEARCH CONT.

• Explore policy measures to increase private savings

• Conduct consultations and implement proposals related to strengthening the financial regulatory system (“A safer financial sector to serve SA better”)

• Publish a policy document with proposals on modernising the framework for inward and outward investment

• Explore models for financing the National Health Insurance (NHI) including different tax funding combinations, the role co-payments and single versus multiple payer systems

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PROGRAMME 3: PUBLIC FINANCE AND BUDGET MANAGEMENT

- Provide analysis and advice on fiscal policy and pu blic finances, intergovernmental financial relations, and expenditure planning and p riorities

- Manage the annual budget process and provide public finance management support


• Further strengthen alignment between budgeting and government’s strategic outcomes and performance management framework

• Strengthen capital projects assessment and approval process as part of government’s broader infrastructure investment coordination initiative, and in support of the PICC and major infrastructure projects in energy and transport

• Develop and publish a long-term fiscal sustainability report in order to contribute to public discussion and parliamentary oversight of the fiscus

14Comprises 3 divisions: Public Finance, Budget Office and Intergovernmental Relations

Page 23 – SPPg. 36 - APP

PROGRAMME 3: PUBLIC FINANCE AND BUDGET MANAGEMENT CONT.

• Extend the coverage of the consolidated account to include information on the consolidated accounts and borrowing of the whole of General Government

• Explore options for phased implementation of contributory social security reforms and retirement industry legislative amendments (coordinated effort with Programme 2)

• Undertake expenditure reviews in selected programmes of government, to further inform budget-making going forward

• Review of provincial and municipal equitable share formulae with a view to improve alignment with government objectives and address funding gaps

• Develop a programme to support cities in the management of their built environment

• Implement key local government budgeting and reporting reforms to improve budget execution and monitoring

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PROGRAMME 4: ASSET AND LIABILITY MANAGEMENT

Prudent management of government’s financial assets and liabilities

•

Plans over the next 3 years

• Arrange finance for government’s gross borrowing requirements of about R581 billion

• Maintain sound investor relations through roadshows and timely dissemination of information

• Continue to engage with rating agencies

• Actively manage government’s debt portfolio through buy-back and switch/exchange programmes – debt set to peak at R1.5 trillion or 38.5% of GDP by 2014/15

• Maintain debt service cost as percentage of GDP at sustainable levels – average 2.7% of GDP

• Optimise the use of public sector cash through broadening the coordination thereby reducing borrowing cost

• Strengthen financial oversight and monitor performance of Development Finance Institutions (DBSA and Land Bank in particular)

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PROGRAMME 5: FINANCIAL ACCOUNTING AND REPORTING

Facilitates accountability, governance and oversigh t by promoting transparent, economic, efficient and effective management in res pect of revenue, expenditure, assets and liabilities in the public sector.

Plans over the next 3 years

• Promote value for money through compliance monitoring in respect of adherence to sourcing principles

• Monitor implementation of revised preferential procurement regulations

• Facilitate review of supply chain management legislation in consultation with relevant stakeholders

• Facilitate and manage transversal term contracts

• Through introduction of the CPO, facilitate institutional reconfiguration for purposes of strengthening oversight of supply-chain management in government

17Comprises 2 divisions: Office of the Accountant-General and Specialist Functions


PROGRAMME 5: FINANCIAL ACCOUNTING AND REPORTING CONT.

• Review Treasury Regulations and issue Treasury Instructions as a step to enforce supply chain compliance and to counter fraud and corruption

• Maintain current systems (BAS, Persal, Logis and Vulindlela)

• Maintain and support new IFMS modules

• Implement completed IFMS modules in identified departments (completed modules include PMM, HRM, AM, BI and II*)

• Develop guidelines to strengthen the monitoring and oversight function of Parliamentarians

• Monitor improvements in financial management in national and provincial institutions and report to SCOPA & SCOF by August 2011

• Implement FM Capability Maturity Assessment in selected municipalities and entities

• Manage an academic support programme for CAs and other accountants in government

• Provide targeted support to priority departments and municipalities to improve financial management

18* PMM – Procurement Management Module; HRM – Human Resource Management; AM – Asset Management;

BI – Business Intelligence; II – Item Identification

PROGRAMME 6: INTERNATIONAL FINANCIAL RELATIONS

Manage South Africa’s interests in shaping regional and global policies that advances the economic, financial and development objectives of our country, and that of Africa


• Advance South Africa’s interests specifically, and those of Africa more generally, through regular strategic analysis, engagement and negotiation at financial and economic forums

– Exploring the modalities for the establishment of a BRICS-led development bank

• Increase Africa’s voice and South Africa’s influence in international institutions and fora

• Lead the reform of the governance and administration structures of African institutions

– Reform of the SACU revenue-sharing arrangement and other aspects of the 2002 Agreement

• Promote integration and strengthen links within Africa by creating an enabling environment for economic activity

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Page 44 – SPPg. 120 - APP

PROGRAMME 8: TECHNICAL AND MANAGEMENT SUPPORT & DEVELOPMENT FINANCE

• It provides specialised infrastructure development planning and implementation support, and technical assistance to aid capacity building in the public sector.

• This programme offers support to all three spheres of government.

Plans over the next 3 years• Renewable Energy Feed-In Tariff (REFIT) Programme by providing procurement and

technical advisory services

• Infrastructure Skills Development Grant aimed to strengthen the ability of selected municipalities and entities to effectively and efficiently deliver quality infrastructure

• Focus on third-party investment leverage with a range of township nodal, linkage and general improvement initiatives

• Budget Support to institutional transformation and improvement processes in the public sector

• Focus on the newly established Government Technical Advisory Centre (GTAC) to promote operational efficiency and increased learning on effective approaches to technical support and capacity building

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Programmes 7, 9 and 10

These Programmes report directly to Parliament

They include:

• Programme 7: Civil and Military Pensions, Contrib utions to Funds and Other Benefits

• Programme 9: Revenue Administration

• Programme 10: Financial Intelligence and State Secu rity

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Financial Resource Plan for 2012

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ProgrammesR'000

2011/12 Budget

2011/12 Preliminary Outcome

2012/13 Budget

1. ADMINISTRATION 281,067 254,534 318,324

2. ECONOMIC POLICY, TAX, FINANCIAL REGULATION AND RESEARCH 210,364 140,467 148,958

Operational budget 201,054 131,157 132,958

Transfers 9,310 9,310 16,000

3. PUBLIC FINANCE AND BUDGET MANAGEMENT 209,878 196,429 227,481


Transfers 33,036 33,036 37,268

4. ASSET AND LIABILITY MANAGEMENT 825,860 821,907 286,557


Land Bank 750,000 750,000 200,000

5. FINANCIAL SYSTEMS AND ACCOUNTING 608,020 504,861 686,324


Transfers 73,261 73,252 71,912

6. INTERNATIONAL FINANCIAL RELATIONS 876,839 857,787 1,038,179


Transfers 842,719 831,857 1,002,474

SUBTOTAL 3,012,028 2,775,985 2,705,823

Operational budget 1,482,292 1,247,590 1,536,635

Transfer budget 22,357,179 20,114,458 20,014,483

Percentage of operational to transfer budget 6.6% 6.2 % 7.7%

ProgrammesR'000

2011/12 Budget

2011/12 Preliminary Outcome

2012/13 Budget

7. CIVIL AND MILITARY PENSIONS, CONTRIBUTIONS TO FUNDS AND OTHER BENEFITS 3,776,909 3,314,173 3,348,310

8. TECHNICAL SUPPORT AND DEVELOPMENT FINANCE 4,641,940 2,863,296 2,404,773


Transfers 4,463,350 2,694,236 2,246,307

9. REVENUE ADMINISTRATION 8,653,573 8,653,573 9,194,374

10. FINANCIAL INTELLIGENCE AND STATE SECURITY 3,755,021 3,755,021 3,897,838

GRAND TOTAL 23,839,471 21,362,048 21,551,11822

Pg. 8 - APP

NATIONAL TREASURY STRATEGIC PLAN 2012/16

PRESENTATION TO PARLIAMENTARY FINANCE COMMITTEES

Presenter: Lungisa Fuzile | Director General, National Treasury | 08 May 2012

Appendices: Index

A. Human CapitalB. Operational and Transfer BudgetC. Spending by Programme D. Major Funded Initiatives

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Appendix A: Human Capital as at 31 March 2012

• Enrichment of the talent management programme with specific focus on attracting, developing and retaining high-performing and scarce skills

• Total staff complement = 1150, 55 % female, 80% black, 15 employees with disabilities. At senior management level, 66% is black, 43% is female

• The National Treasury has a vacancy rate of 9.5% (122 posts) compared to 14% (179 posts) at 31 March 2011.

• To recruit more people with disabilities to NT, in partnership with the CSIR (their National Accessibility Portal project) are advertising our recruitment needs directly on their site, this is aimed to empower people with disabililties through Information, Communication and Technology.

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Appendix B: Operational and Transfer Budget

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R 1 247 590

R 20 114 458

6.2%

Actual Exp 2011/12 R'000

Operational Budget

Transfer Budget

% of operational to

transfer budget

R 1 536 635

R 20 014 483

7.7%

Budget 2012/13 R'000

Operational Budget

Transfer Budget

% of operational to

transfer budget

Appendix C: Spending by Programme

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R 0

R 1 000 000

R 2 000 000

R 3 000 000

R 4 000 000

R 5 000 000

R 6 000 000

R 7 000 000

R 8 000 000

R 9 000 000

R 10 000 000

P1

P2

P3

P4

P5

P6

P7

P8

P9

P1

0

Actual Exp 2011/12 R'000

Budget 2012/13 R'000

Appendix D: Major Funded Initiatives

InitiativeActual Expenditure

2011/12(R’000)

Budget 2012/13(R’000)

Integrated Financial Management System 79,551 165,754

Infrastructure Development Improvement Programme

99,617 75,000

Jobs Fund 272,493 1,000,000

Neighbourhood Development Partnership Grant 808,413 658,132

TOTAL 1,260,074 1,898,886

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Documents

NATIONAL TREASURY STRATEGIC PLAN 2012/16