National Treasury

Presentation to Portfolio Committee on Finance - 8 May 2001

Aim

The National Treasury aims to promote economic development, good governance, social progress and rising living standards

through accountability, economy, efficiency, equity and sustainability in the

public finances

Key objectives

• Advance economic growth, employment and income redistribution

• Sound and sustainable national budget and equitable division of resources

• Raise revenue required equitably and efficiently• Sound management of State’s financial assets and

liabilities• Promote accountability through financial reporting,

systems and controls

National Treasury - structureDirector-General

Maria Ramos

Budget OfficeIntergovernmen-

tal RelationsAccountant-

General

Andrew Donaldson Ismail Momoniat Ismail Mamoojee

Public FinanceEconomic Policy &

International RelationsAsset & Liabi-

lity Management

Andrew Donaldson Lesetja Kganyago Brian Molefe

Specialist Functions

Corporate Services

Coen Kruger Simone le Hane

PIC

Ncedo Mlamla

Pensions

Frans le Roux

International and domestic relations

National Treasury

SA Reserve Bank

SA Revenue Service

Development Bank of SA

Budget CouncilFOSAD clusters

Financial Services Board

International Monetary Fund World Bank African

Development Bank

G20 forum

National Departments

Provincial Treasuries

Strategic overview: policy objectives

• Economic policy and financial oversight– Growth-oriented fiscal stance– Sound financial regulation & consumer protection

• Budget reform– Strengthened MTEF process– Improved intergovernmental cooperation– Establishment of PPP Unit

• Tax policy and revenue management– Broadening of tax base– Tax system modernisation and law reform

Strategic overview (cont.)

• Debt management aimed at reducing debt service costs in long-term

• Asset management– coordination of public enterprise borrowing– contribution to state asset restructuring process– broader oversight of cash management

• Strengthened international relations– participation in financial reform initiatives– international debt reduction– African and regional economic development

Strategic overview (cont.)

• PFMA implementation– legislative amendments & revision of regulations

– modernisation of reporting, accountability & controls

• Financial management reforms– Overhaul of government procurement processes

– Acquisition of new financial systems

– Establishment of Accounting Standards Board

– Support & monitoring of internal audit

– Development of accounting policies

– Consolidation of financial statements

Key publications

• Budget Review• Estimates of National Expenditure• Intergovernmental Fiscal Review• Medium Term Budget Policy Statement• Guidelines:

– Guide for Accounting Officers– Treasury Guidelines for budget submissions– Public-Private Partnership Guidelines

Vote 7

(R million) 2000/01 2001/02 2002/03 2003/04

To be voted 9 238 9 176 9 840 10 360

Statutory:

Provinces 96 186 104 136 112 560 120 216

State debt 46 347 48 138 49 651 51 022

Total 151 771 161 451 172 051 181 598

Amounts to be voted:operational budget & transfers

(R million) 2000/01 2001/02 2002/03 2003/04

National Treasury operational budgetPersonnel 114 118 126 133Other 1 734 1 956 2 177 2 281Acquisition of assets 36 10 8 9Transfer paymentsCurrent 6 085 6 735 7 012 7 410Capital 1 268 656 816 841Total 9 238 9 176 9 840 10 361

Estimate of ExpenditureOperational budget

VOTED BUDGET Increase/Programmes 2000/2001 2001/2002 (Decrease)

R’000 R’000 %

1. Administration 90 901 68 398 (33)

2. Expenditure planning and budget management 73 149 75 009 2

3. Asset and liability management 17 539 17 908 2

4. Procurement management and financial systems 243 736 311 483 22

5. Financial accounting and reporting 115 513 18 811 (514)

10. Auxiliary and associated service 5 230 5 321 2

Total operational budget 546 068 496 930 (9)

VOTED BUDGET Increase/Programmes 2000/2001 2001/2002 (Decrease)

R’000 R’000 %

6. Fiscal transfers 2 761 226 3 008 694 8

7. Civil pensions and contributions to funds 1 432 712 1 576 709 9

8. Military pensions and other benefits 137 018 145 386 6

9. Provincial and local government transfers 3 457 000 2 957 877 (17)

10. Auxiliary and associated servicesSecret services 890 042 983 307 9Audit 13 699 7 593 (80)Investment of public moneys 1 1 0

Total 8 691 698 8 679 567 (0.14)

Estimate of Expenditure(Transfers and related)

Estimate of Expenditure VOTED BUDGET Increase/

STANDARD ITEMS 2000/2001 2001/2002 (Decrease) R’000 R’000 %

Personnel expenditure 114 015 118 307 4

Administrative expenditure 28 751 31 723 9

Inventories 7 125 8 500 16

Equipment 37 178 12 801 (190)

Professional and special services 269 518 342 559 21

Transfer payments 7 353 202 7 092 390 (4)

Miscellaneous 1 427 977 1 570 217 9

TOTAL 9 237 766 9 176 497 (1)

National Treasury - employment

National Treasury Management Total

81476

Public InvestmentCommissioners

38

Restructuring of National Treasury

• Strategic plan

• Structure to be finalised

• Staff consultation

• Absorption framework

• Employment Equity

• Employee Assistance Programme

• Education Training & Development

Programme structure

1 Administration

2 Economic planning & budget management

3 Asset & liability management

4 Procurement management

5 Financial systems & reporting

6 Fiscal transfers

7 Civil pensions & contributions to funds

8 Military pensions & other benefits

9 Provincial & local government transfers

10 Auxiliary & associated services

Administration (programme 1)

(R million) 2000/01 2001/02 2002/03 2003/04

Ministry 1,0 1,1 1,2 1,2

Management 6,2 7,2 7,8 8,2

Corporate services 83,6 60,1 62,0 66,9

Total 90,9 68,4 70,9 76,4

Change to baseline 25,3 2,8 1,9

Corporate service functions

• Communication– Branding of National Treasury

– Annual Report and Website

– Focus on external stakeholders

– Refocus on internal communication - ethos of National Treasury

• Information technology– Call centre and infrastructure

Corporate services (cont.)

• Financial management– Implementation of PFMA

– Procurement reform

– Audit Committee appointed

– Internal Audit unit outsourced

• Legal services– Legal advice & drafting; management of litigation

Economic planning & budget management (programme 2)

(R million) 2000/01 2001/02 2002/03 2003/04

Public finance 14,7 15,7 16,2 17,4

Budget coordination 23,7 20,4 19,7 22,3

Intergovernmentalrelations

9,8 11,3 10,9 12,1

Economic policy &international relations

24,8 27,6 29,9 32,9

Total 73,1 75,0 76,7 84,7

Change to baseline 6,7 2,3 -0,2

Economic planning & budget management - policy priorities

• Budget reform: service delivery information• Promotion of growth, employment &

redistribution through sound public policies• Financial regulatory reforms: stability,

efficient markets, consumer protection• Strengthening infrastructure investment• Promotion of sound public-private

partnerships

Economic policy & budget management (cont.)

• Equitable allocations to provinces & local government

• Improved intergovernmental financial arrangements

• Sound management of international development cooperation

• Promotion of international & regional financial cooperation

Economic policy & budget management - outputs

• Macroeconomic & international financial policy advice

• Financial policy & regulatory advice

• Tax policy

• Sectoral & departmental policy advice

• Budget framework & division of revenue

• Budget documentation

• PPP agreements

• International cooperation agreements

• Framework for provincial & local grants

Asset & liability management (programme 3)

(R million) 2000/01 2001/02 2002/03 2003/04

Asset management 3,3 3,4 3,8 4,2

Liability management 14,2 14,5 16,2 17,7

Total 17,5 17,9 20,0 21,9

Change to baseline 2,4 2,2 4,3

Asset & liability management - priorities

• Meet annual borrowing requirement

• Manage foreign and domestic debt portfolios

• Restructuring and financial management of state assets

• Sound cash management

Asset & liability management - objectives & outputs

• Liability management– financing at favourable terms– contribute to development of the bond market– broaden and improve the international investor

base– minimise long-term debt cost, subject to

acceptable risk– efficient operational support

Asset & liability management - objectives & outputs

• Asset management– advise on restructuring of state assets– promote principles of sound corporate

governance– manage risk exposure of Government arising

from public enterprise borrowing & activities– resolve financial problems in SOEs– improve government cash management

Procurement management, systems & reporting (programmes 4 & 5)

(R million) 2000/01 2001/02 2002/03 2003/04

State Tender Board 12,0 12,6 13,0 14,5Procurement managmnt 8,7 9,0 11,4 11,9PFMA implementation 1,1 9,1 9,2 9,4Financial systems 171,2 223,7 244,7 257,3New integrated systems 50,7 57,1 80,6 83,6Financial reporting 3,7 9,6 7,1 7,8Financial managementimprovement

111,8 9,2 9,9 10,5

Total 359,2 330,3 375,7 394,7Change to baseline 10,0 48,3 60,2

Procurement management, systems and reporting - priorities & outputs

• Procurement & moveable asset managemnt– Phase out State Tender Board – Preferential procurement regulations– Procurement reform implementation

• Monitor & support PFMA implementation

• Financial systems– Maintain, support & enhance systems – Identification of integrated financial systems to support

new accounting requirements

Procurement management, systems and reporting - outputs (cont.)

• Financial reporting– Monthly reporting (PFMA sect 32)– Monthly & annual consolidated statements– Introduction of new format financial statements– Establish Accounting Standards Board– Define “generally recognised accounting practice”

• Administration of NRF and RDP Fund• Improve departmental banking services

– further extend electronic funds transfer

Procurement management, systems and reporting - outputs (cont.)

• Financial management– Establish internal audit in national & provincial

departments

– Financial management performance measurement system

– Implement management information system

• Training and skills development– On the job training programmes for financial staff

– Assistance to IPFA

Fiscal transfers (programme 6)

(R million) 2000/01 2001/02 2002/03 2003/04

SA Revenue Service 2 387,2 2 673,2 2 944,3 3 252,4

NDA 90,0 92,7 96,7 101,3

HIPC initiative 44,2 12,4

FFC 8,0 7,6 7,9 8,3

Lesotho & Namibia 134,5 138,2 151,8 151,8

African Dev Bank 97,3 97,0 104,2 104,2

Total 2 761,2 3 008,7 3 317,4 3 617,9

Change to baseline 227,1 365,9 491,7

Fiscal transfers - key outputs

• SA Revenue Service– Establish 6 processing centres by 2002

– Ongoing efficiency improvements

– Internal restructuring (“Siyakha”)

– Campaign against tax fraud

• FFC advice & recommendations• CMA payments to Lesotho and Namibia• Contributions to international debt relief and ADB

Development Fund

International strategic themes

• Regional integration– monetary & fiscal coordination in SADC and SACU

• Understanding & promotion of capital flows• Securing finance for development projects in

Africa• Supporting HIPC debt relief• Promoting interests of developing countries in

international trade

Civil and military pensions and other contributions (programmes 7 & 8)

(R million) 2000/01 2001/02 2002/03 2003/04

Post-retirementmedical schemes

1 000,5 1 100,0 1 252,9 1 306,4

Special pensions 275,0 300,0 312,0 326,0

Injury on duty 78,9 96,5 100,8 105,4

Civil pensions 78,3 80,2 84,1 88,2

Military pensions 137,0 145,4 151,5 158,4

Total 1569,7 1722,1 1901,3 1984,4

Change to baseline -6,4 -3,4 -24,5

Civil and military pensions & contributions to funds

• Outputs are payments in accordance with relevant legislation & agreements

• Contributions to post-retirement medical benefits main expenditure item

• Policy developments– Improved operational competencies

– Client service improvement plan

– PFMA implementation and GAAP compliance

– Improved management of contributions & membership

Provincial and local government transfers (programme 9)

(R million) 2000/01 2001/02 2002/03 2003/04

Provinces 3 107,0 2 547,9 2 452,0 2 472,0

Local government 350,0 410,0 570,0 590,0

Total 3 457,0 2 957,9 3 022,0 3 062,0

Change to baseline 595,0 247,9 252,0

Provincial grants - policy developments & outputs

• Provincial supplementary grants– Promotion of compliance with PFMA

– Realistic and credible budgets

– Pilots for hospital management reform

– Consolidation of financial management & planning grants

• Infrastructure grants– Flood reconstruction

– Rehabilitation of roads, schools, clinics, rural infrastructure

Local government grants - policy and outputs

• Restructuring grant– Modernisation and restructuring of large municipalities

– Credible and sustainable budgets

• Financial management grant– Three-year budgeting in local sphere

– GAMAP: new accounting standards

– Financial management reforms

– Division to approved pilots & roll-out plan

Auxiliary and associated services (programme 10)

(R million) 2000/01 2001/02 2002/03 2003/04

Secret Services 890,0 983,3 1042,0 1104,5

Service Charges 5,1 5,3 5,5 5,8

Audit 13,8 7,6 7,9 8,3

Total 909,0 996,2 1055,4 1118,6

Change 5,8 -86,2 -63,8

Auxiliary and associated services - process & outputs

• Financial transfers to SASS, NIA & SAPS– Transfer payments in line with approved

budgets– Accountability rests with agency heads

• Service charges provides for bank charges

• Audit provides for shortfalls of statutory bodies & municipalities in respect of Auditor-General charges

Public Investment Commissioners - Budget

(R million) 2001/02 2002/03 2003/04

Administration 5 142 5 553 5 998

Personnel 9 293 9 757 10 245

Equipment 1 942 2 097 2 265

Services 2 808 3 033 3 275

Restructuring /Upgrading 6 400 0 0

Total 25 585 20 441 21 783

Key objectives of the PIC

• Upgrading professional asset management capacity

• Integration of national economic priorities more fully into investment profile

• Review of restructuring / integration with GEPF

• Compliance with Employment Equity Bill

Investment profile 31 March 2000 (at book value)

Equities R52,5 bn

Fixed Interest Instruments R119,3 bn

Property R1,0 bn

On deposit and call R13,4 bn

Other R14,1 bn

Total R200,3 bn

Conclusion: Main changes to baseline

• Increase in SARS allocations

• Provision for Financial Intelligence Centre

• Increases in local government grants

• Merging of smaller provincial capacity-building grants into supplementary grants

• Adjustment to Secret Service allocations

• Termination of allocation for computer service (SITA)