Budget 2002 & 2002 Appropriation Bill A brief overview... National Treasury

MTEF process Early discussion by the Ministers’ Committee on the Budget & Cabinet on policy priorities (May- July) Preparation and submission of departmental MTEF budgets (May to Aug) Review of departmental budget submissions (Aug) Division of revenue & medium term priorities (July-Aug) National & provincial MTEC allocation process (Sept-Nov) Medium Term Budget Policy Statement (early Nov) Preparation of budget documentation (Nov-Feb) Tabling of Budget in parliament (3rd week of Feb) National Treasury

Key players in process Cabinet Parliament Ministers’ Committee on the Budget Budget Council Budget Forum FOSAD Supporting technical committees National Treasury

Main steps in budget process Policy priorities Political scrutiny of departmental allocations (MinComBud) Fiscal framework Division of Revenue Cabinet approval Main steps in budget process Policy prioritisation stage May / June Feed into macroeconomic and fiscal framework Division of Revenue between national, provincial and local government (aug) Bidding process at MTEC in September MTBPS October Political scrutiny of departmental allocations by MinComBud in late October Cabinet approval in November Budget documentation Budget Day -3rd week in February Budget documentation Bidding process (MTEC) Budget Day National Treasury

Available Expenditure Fiscal framework Policy discussions at Cabinet Expenditure Debt Servicing Borrowings Tax Revenue Contingency reserve Available Expenditure Fiscal framework Debt servicing costs and contingency reserve topsliced. The additional available expenditure is then allocated in line with Government policy priorities National Treasury

Available Expenditure Division of Revenue Policy discussions at Budget Council, Cabinet National Share Available Expenditure Policy discussions at Cabinet Provincial Share Division of Revenue between national, provincial and local government is line with policy priorities. 2000 Budget saw Defence procurement - national share increased. 2001 Budget prioritised infrastructure and social delivery - incremental increases greater for provincial and local government shares Local Share National Treasury

Overview of 2002 Budget Economic and fiscal outlook: Growth recovery over years ahead Healthy balance of payments and fiscal trends Rand depreciation to boost trade Robust revenue performance allows tax relief Strong spending growth over next 3 years continued focus on infrastructure broadening of social security net reinforcing fight against crime partnering municipalities in extending services Moderate rise in deficit debt service ratio continues to fall National Treasury

Spending priorities over the MTEF Increased political oversight over budget process Priorities over the next three years: Infrastructure With emphasis on urban renewal and rural development Addressing poverty and vulnerability Child support grant extended to an additional 1,2 million children Spending on HIV/AIDS exceeds R1 billion/year over the MT Partnerships with municipalities: Improved access to affordable basic services Fight against crime 16 000 more police National Treasury

Main new allocations Local government gets additional R1,6 bn in 2002/03 and R2,4 bn in 2003/04 Provinces get R5,3 bn and R7,0 bn above baseline Social grant increases cost about R2,2 billion more next year Police to get R5,2 bn more over three years to hire 16 000 additional police Defence gets R3,9 bn over 3 years for currency depreciation Enhanced HIV/Aids programme: Additional R4,1 bn over 3 years National Treasury

Additional allocations R13,4 billion in 2002/03 and R17,9 billion in 2003/04 Positive real growth in all three spheres: National R6,6 and R8,5 billion Provincial R5,3 and R7 billion Local R1,6 and R2,4billion National share includes restructuring SA Post Office, UIF, currency depreciation and fight against crime Provincial priorities - social security grants, education, capital investment and maintenance Infrastructure and capacity building at local government level National Treasury

Spending by function National Treasury

Spending trends Non interest spending goes up 4,1% a year in real terms Balanced growth in all sectors over MTEF, particularly in social services, protection services and general government Interest on debt (as % of consolidated expenditure) declining from 17,5% to 15,7% in 2002/03 Personnel share of consolidated spending is expected to stabilise on 42,2% Capital spending expected to grow at an average of 18,1% over the MTEF National Treasury

Division of Revenue Strong growth in transfers to provinces (7,9% a year) and local government (18,3% a year) over the MTEF Priority pro-poor programmes: Early childhood education programme Bolster health system against the impact of HIV/Aids Higher social grants and increased take-up of child support grant Social and economic infrastructure Extension of basic municipal services National Treasury

Division of Revenue National Treasury

Addressing Local Government Challenges Establishment of new municipalities Restructuring service delivery Delivery of free basic services Expanding infrastructure Co-ordination of capacity building Financial management reforms based on Municipal Finance Management Bill National Treasury

Nat transfers to Local Government Rising rapidly by 18,3% from R6,5 bn in 2001/02 to R10,8 bn in 2004/05 Increases by R1,1 bn. R1,8 bn and R2,3 bn over MTEF Forms over 10% of LG finances Smaller municipalities receive larger share Include transfers to category C municipalities Municipal infrastructure development, especially in poor nodes identified in ISRDS and URP National Treasury

Local government transfers National Treasury

2002 Appropriation Bill & ENE Estimates of Expenditure accompanies Appropriation Bill tabled in Parliament on Budget Day Through the Appropriation Bill, the Executive seeks Parliament’s approval of its spending plans for the forthcoming year The ENE focuses on national spending plans, objectives, 3-year spending estimates, programme developments, outputs & service delivery indicators National Treasury

Main changes since 2001 Budget Presidency receives additional funds to support foreign travel & NEPAD Increased allocations to Parliament for improved administration & infrastructure Foreign Affairs - funds to cater for effects of rapid depreciation of rand and provide for expansion in SA’s foreign representation Home Affairs - funds to support critical systems development and to enhance service delivery capacity. IEC funding also increased for preparation of 2004 elections GCIS’s budget rises to accommodate increased capacity and expansion of multi-purpose community centres National Treasury

Main changes since 2001 Budget Treasury’s allocation increases to support implementation of SARS’s business re-engineering programme Further allocations to DPSA contribute to Government’s computer network and sustaining projects aimed at improving Gov service delivery DACST receives additional funds for Freedom Park, supporting cultural industries and in support of Biotechnology industry strategy National education spending rises in support of higher education sector restructuring & NSFAS National Treasury

Main changes since 2001 Budget Health receives funds to expand its HIV/Aids programmes Housing allocation increases to facilitate reduction of housing backlog & for increase in value of housing subsidy Correctional Services allocation rises to finance construction of additional prison space & to accommodate costs of increased nos of prisoners Additional amounts on Defence vote provide for shortfall on strat package due to depreciation of rand Justice receives more money for service delivery re-engineering & employ additional staff - prosecutors National Treasury

Main changes since 2001 Budget ICD capacity is increased to accommodate extension of mandate Safety and Security spending rises to recruit & train more police officers, upgrade IT, modernise vehicles Agriculture allocations increase to fund flood relief to farmers Communications spending rises to support restructuring of Post Office Further allocations to DEAT help finance World Summit, support maintenance of national park infrastructure & harbour walls, support tourism National Treasury

Main changes since 2001 Budget Additional funds to Labour for restructuring of the UIF Allocation to Land Affairs rises to support land redistribution Minerals and Energy spending increases to fund rollout of national electrification programme Additional amounts to Transport raise funding for rehabilitating national roads and rail networks, refurbishing the SARCC rolling stock and for improve law enforcement to ensure safety and security on roads Water Affairs and Forestry receives additional funds for investment in rural water and sanitation infrastructure, increasing access to clean water, and improving access to sanitation facilities National Treasury

Conclusion 2002 Budget supports poverty alleviation and growth Strong real growth in spending Especially on social grants, infrastructure, local govt. and fighting crime Large tax cuts for all R15 billion PIT relief Solid base for future economic growth laid Increased competitiveness and rising productivity National Treasury