1. Budget 2008 Briefing for the Joint Budget Committee 22 February National Treasury

2. 2 Agenda Performance information and accountability Medium-term policy objectives Social security (Budget Review - Chapter 6) Public service delivery (Budget Review - Chapter 7) Division of revenue and intergovernmental transfers (Budget Review - Chapter 8)

3. 3 Performance information and accountability The 2008 Estimates of National Expenditure includes updated programme objectives and measures, and selected performance indicators –Objectives are more detailed –Indicators are quantitative and trendable Improved tools for analysis and oversight but require further refinement –Do objectives align to real public service/government priorities, are they long-run in nature, do they lend themselves to quantitative measurement –Is there a clear distinction between objectives and specific outputs and targets that measure progress –Are the selected performance indicators useful –Are budget programmes appropriately scaled (i.e., programmes should group related activities contributing to the same set of objectives) –JBC could consider these questions in conjunction with departments and report recommendations

4. 4 Medium-term policy objectives 2008 Budget adds R115.6 billion to forward estimates Public spending continues to grow over the MTEF Further investments in economic and social infrastructure Strong emphasis on investment in programmes that improve the productive capacity Increased spending on social services particularly on education and health Support for poverty reduction programmes Investing in long-term income security and protecting the vulnerable

5. 5 Social security reforms Child Support Grant extended from 14 up to 15 years; conditionalities being considered Qualifying age for old age grant - phasing down of the qualifying age for men to 60 over the MTEF period: –Age 63-64 April 2008 –Age 61-62 April 2009 –Age 60 April 2010 Raising of means tests (disability, old age grants) under consideration SASSA administrative reforms under way

6. 6 Conditions of vulnerability and dependence Cash transfers continue to play an important poverty-reduction role Cash grants to the poor paid for out of general revenue to remain at around 3.3 per cent of GDP and over 15 per cent of non-interest government expenditure. Social assistance programme continues to provide minimum benefits in years ahead

7. 7 Second social security pillar Basic design and benefits Hybrid ‘scale-driven’ and ‘competition-driven’ system under consideration, initially covering all formal sector employees Contribution rate and its division between savings, unemployment insurance, disability and survivor benefits and administration costs to be determined Retirement annuities and rules for lump-sum payments are being investigated Opt-out rules at higher income levels being considered, with greater focus on income security at lower income levels Accreditation framework for private funds proposed – aiming at improved governance, administrative costs reductions Further consultation with labour, business and community required in the year ahead

8. 8 Wage subsidy and Collective administration Wage subsidy Further research on wage subsidy for workers below tax threshold Estimated total annual cost: about R25 billion Likely impact over 5-year period: poverty head-count reduction of 20%; 350 000 new jobs Other subsidies (e.g. targeted at school-leavers) being considered Collective administration Standard administrative IT infrastructure for all role-players (private/public) under consideration Consolidated payments by State being investigated: social grants, the UIF, compensation funds and the Road Accident Fund New system aiming at economies of scale in administration, simplicity and accessibility for beneficiaries

9. 9 Key Spending areas Increased social spending, specifically in education and health Stepping up anti-poverty initiatives Enhancing job creation and productive capacity of the economy Speeding up the pace of land and agrarian reform Further investment in infrastructure Enhancing state machinery for improved civic & immigration services & to address crime

10. 10 Additional funding per cluster Public spending grows strongly over the MTEF

11. 11 Economic services and infrastructure R3.8 billion - municipal infrastructure –part of this amount to augment local gov. resources –R1.8 billion for regional bulk Provincial infrastructure - R2.7 billion –additional funding for school building Investment in buses, taxi recapitalisation, roads and rail - R3.9 billion –R863 million for SANRAL - upgrading of the road network –R1 billion for SARCC – overhaul & upgrading of 1400 coaches –R1.3 billion for Shosholoza Meyl – incorporation to SARCC –R778 million for Taxi recapitalisation and buses

12. 12 Economic services and infrastructure Public transport infrastructure and systems - R2 billion Digital television & internet infrastructure - R984 million –ICT interventions Broadband Infraco – R727 million –Sentech receives a further R257 million over the MTEF R60 billion provision to support Eskom over five years

13. 13 Improving productive capacity Industrial development – R2.3 billion –increase production and improve export performance –improve support for small businesses Expanded Public Works Programmes – R1 billion –R750 million for DEAT EPWPs –43 500 more job opportunities to be created by DEAT EPWPs –remaining amount allocated to DPW Land restitution and redistribution – R1.9 billion –R1 billion to settle the outstanding 5 082 restitution claims –R900 million to speed up the pace of land reform

14. 14 Improving productive capacity Comprehensive Agricultural Support – R500 million –about 5 000 new extension officers to be recruited over the MTEF –post-settlement support for land reform & restitution beneficiaries Inspection services will also receive further support –additional funds for bio-security, food quality and safety status Human capital development and R&D – R760 million –R160 million for human capital and knowledge production –R600 million to replace the research vessel – Agulhas –contribute to climate change research PBMR – R3.5 billion –amount spread over the first two years of the MTEF

15. 15 Social services Increased social grant amounts and number of beneficiaries – R12 billion –part of the funding to protect purchasing power of social grants –absorb expected increase in number of beneficiaries. Higher education – R1.4 billion –for university subsidies Additional allocations via provincial equitable share for key programs in education, health and social development include: –Expansion of Grade R –Early childhood development –Services for children in conflict with the law –Combating TB –Expansion of home and community based care School Nutrition Programme – R1.8 billion Hospital revitalisation and tertiary services - R3.1 billion HIV/Aids prevention and treatment – R2.1 billion

16. 16 Justice and protection Forensic laboratories and policing– R1. 4billion –R250 million intended for upgrading of equipment at forensic labs –R530 million for appointment of 8 500 police officials –R640 million for the deployment 31 000 police officers to provide security during 2010 WC SAPS ICT for resource & evidence management - R1.3 billion –Upgrading and renewal of ICT network at SAPS –Providing a platform for better control of vehicles, dockets and firearms

17. 17 Justice and protection R300 million - judges, magistrates and public defenders –enhancing court efficiency a key priority over MTEF –amount allocated for appointment of approximately 50 judges, 170 magistrates, 171 public defenders R110 million for Legal Aid Board to improve its capacity Correctional facilities and personnel – R1.9 billion –improve capacity at correctional facilities – PPP five new centres –R300 million- personnel costs at the Kimberly Correctional Centre Military Skills Development & defence infrastructure – R1.4 billion –R700 million for recruitment of 12 590 young people –R700 million for defence infrastructure and general mordenisation

18. 18 Public administration and international relations Modernising the state –Enhancing civic and immigration services –R1.5 billion for Home affairs turnaround strategy –R1.2 billion for SARS – customs and systems improvements –SAMDI reconstitution into a public training academy –Single points of service to improve access to gov. programmes Improvement in planning and coordination across government –Developing systems to align PGDPs, IDPs to the NSDP –Better control at the boarder posts in the build-up to 2010 –Additional resources for Stats SA – poverty surveys and census Enhanced focus on international relations –continue to facilitate peace & post conflict reconstruction in Africa –Increasing missions in Asia and Africa –R717 million allocated for the construction of the PAP building

19. 19 Provincial priorities R45.7 billion added to provincial share –R33.2 billion to the equitable share and R12.5 billion to conditional grants Personnel adjustments –Interventions to recruit and retain social services personnel –2007 wage agreement –OSD for educators, health professionals, social workers In education –Grade R –Learners with special needs (inclusive education) –LSM for grades 10 to 12 –Education infrastructure needs In health –General baseline adjustment to stabilise the public health system –TB (MDR and XDR) –Comprehensive HIV and Aids strategy (preventative, HBC and ARVs)

20. 20 Provincial priorities In social development –ECD (in collaboration with education) –Secure care services for children in conflict with the law –Access home and community based care Infrastructure investment –Additional R2 billion for hospital revitalisation –Additional R2.7 billion for school infrastructure –R73.6 billion to be spent on capital in education, health, roads and transport over the next three years Roads, agriculture and SMME development Housing and human settlements –R2.2 billion added to housing subsidy programme –Just under R36 billion to be spent on the programme

21. 21 Local government priorities Additional allocations are towards: –Increasing the equitable share envelope in acknowledgement of: –increased service delivery costs due to tariff increases –increased demand following the rollout of basic infrastructure to the poor Support for poorer municipalities Step up of MIG –to allow further rollout of basic municipal infrastructure in poor communities –to provide each municipality with a reasonable minimum MIG allocation R2.2 m for 2008/09, $4.4 m for 2009/10 and R5 m for 2010/11 Enhanced funding of capacity-building initiatives in the area of financial management Further ensuring the readiness of the host cities for the 2010 FWC

22. 22 Allocations to local government Capital transfers to LG amount to R57 billion over the next three years: –R30.7 billion for MIG to step up infrastructure for basic services –R4.4 billion for stadium construction and upgrading –R10 billion to upgrade municipal infrastructure in stadia precincts and public transport infrastructure –R1.8 billion for regional bulk infrastructure –R6.6 billion for electricity infrastructure R4.2 billion by ESKOM and R2.4 billion by municipalities –R2.4 billion for the NDP grant

23. 23 Thank you Q&A