/ 11 November 2016

Running a tight ship

MEC for Sport
MEC for Sport

The Limpopo government faces the challenge of having to fund growth needs such as infrastructure development while also attending to policy priorities of health, education and social spending and maintaining a rapidly expanding civil service “It’s a tough balancing act, but I think we are getting it right” says Rob Tooley, the MEC for finance in the province.

Tooley oversees a budget of R59-billion, about R3-billion of which is made up of conditional grants, and is thus already designated and likely to fall away after some time. The balance of R 56-billion is the provinces allocation from equitable share of nationally raised revenue as well as the provinces own fund raising capacity.

About 75% of the budget is directed towards health, education and social welfare spending which are government policy priorities. At the same time, about 72% of the budget is taken up by compensation of employees, whose ranks have expanded rapidly since 2010 as government remained the only sector that had created jobs through the recession that struck in 2008 and is the largest employer in Limpopo.

This leaves a limited amount of money to invest in infrastructure and fund industrialisation to help grow the economy. But Tooley is optimistic. “We have to be more efficient and focus more on serving the population,” he says.

In spite of the budget constraints they still manage to direct about R5-billion in spending to infrastructure. “If managed well, this can go far and have the desired impact” says Tooley. Almost half of which, or R 2-billion, goes to Human Settlements; Agriculture and Rural Development and the Department of Economic Development, Environment and Tourism abut R1-billion each while sports and recreation, which Tooley believes has a critical role in a diverse province like Limpopo, receives R400-million.

Government infrastructure spending is complemented at municipal level by spending the Municipal Infrastructure Grant and spending by State Owned Enterprises such as Transnet and Eskom as well as the private sector at national level. Limpopo is host to one of the largest rail projects in the R200-billion Waterberg Rail projects that carries coal from the region through Mpumalanga to Richards Bay in order to reach global markets.

Tooley says the province is steadily is improving its own fundraising capabilities, increasing revenue from R500-million in 2010 to R1-billion in the last financial year. Revenue sources include payments for vehicle licenses and traffic fines, technical and liquor licenses as well as various permits.

Between December 2011 and March this year, parts of the Limpopo government were under administration from National Treasury under section 100 of the constitution. Tooley says the decision may have been politically correct but administratively harmed the province. This is because he feels the mismanagement that led to administration was due to a lack of accountability and administration has helped restore that. The province has managed to wipe off a R2-billion overdraft and now has the buffer of a positive cash balance.

The effects of the administration are felt in a range of areas. From infrastructure projects, including houses that stands incomplete to schools that were damaged by storms and are yet to be repaired and civil servants who have not received a performance bonus for a number of years now.

Tooley notes that solving Limpopo’s economic challenges requires more than just financial resources but also leadership. Tooley notes that for example in land restitutions, many of the farms that were returned to rightful owners have collapsed. Tooley says the primary cause of this is a move from a single or handful of owners to multiple owners in a community. New owners require technical and financial assistance.

The province also has the challenge of developing its mineral beneficiation and agro processing capacity while mitigating the effects of climate change in agriculture. Tooley says the best way to create new jobs is through greenfield, or brand new projects, in mining and agriculture, but to achieve that, South Africa needs to transform its banking sector to be more inclined to fund new ventures. That would ease pressure on government finances.