1. 1National Treasury NATIONAL TREASURY Presentation to Portfolio and Select Committees on Finance 13 May 2002

2. 2National Treasury Strategic Focus 0Macro and micro policies for economic growth and income redistribution; 0Sound budgeting and financial management and equitable division of resources between the three spheres of government; 0Ensuring that tax policy is fair and targeted, enabling Government to raise fiscal revenue efficiently, stable and equitably and in accordance with macro economic objectives;

3. 3National Treasury 0Sound management of Government’s financial assets and liabilities through prudent cash management, asset restructuring, debt management and public sector corporate governance; 0Promoting and enforcing transparency and effective management of revenue, expenditure, assets and liabilities in all spheres of government; 0Further refinement of organisational structure and staffing and modernisation of human resource management, procurement and IT systems. Strategic Focus

4. 4National Treasury Achievements – 2001/02 Sound fiscal framework: –Robust revenue performance –Moderate budget deficit –Growth-oriented MTEF Improved budgeting and planning: –New format Estimates of National Expenditure –Provincial budget coordination –Publication of strategic plans Debt management: –International bond of the year –Reduction in domestic longterm debt

5. 5National Treasury Achievements (cont.) Southern African Tax Institute Development of Public-Private Partnerships: –Conclusion of Albert Luthuli Hospital contract Development of asset management framework PFMA implementation: –Treasury regulations in place –Monthly and quarterly financial reporting –Steady progress in decentralised financial management International and regional engagement: –Promoting developing country interests in global economy

6. 6National Treasury Strategic priorities – 2002/03 Supporting economic growth Renewed focus on poverty reduction and strengthening infrastructure investment Framework for procurement reform PFMA implementation: –Focus on measurable objectives –Enhanced expenditure monitoring Public sector policy coordination Consolidation of internal organisation and capacity building initiatives

7. 7National Treasury Structure Director-General Maria Ramos Budget Office Intergovernmental Relations Accountant- General Andrew DonaldsonIsmail MomoniatIsmail Mamoojee Public Finance Economic Policy & International Relations Asset & Liability Management Andrew DonaldsonLesetja KganyagoBrian Molefe Specialist Functions Corporate Services Coen KrugerSimone le Hane

8. 8National Treasury Staff Profile as at 31 March 2002 Management Employees below management

9. 9National Treasury Corporate services – core capacity building initiatives Programme 1 0Restructuring near complete 0Recruitment of new staff underway 0Revised HR systems to be developed – focused on performance management and training 0Chief Financial Officer appointed on 1 June 2001 0Interim Financial Manual in place 0Fixed Asset register in place 0The audit committee has been established 0Risk assessment has been undertaken 0Preferential procurement policy implemented

10. 10National Treasury Amounts to be voted: operational budget & transfers

11. 11National Treasury Estimate of Expenditure Operational budget

12. 12National Treasury Economic and budget planning - Supporting economic growth and development 0Economic policy and fiscal advice 0Promotion of sound international financial relations 0Budget reform 0Enhanced financial monitoring and reporting 0National and provincial infrastructure investment support 0Promotion of public-private partnerships 0Tax policy advice and analysis 0Financial regulation and liaison with SARB and FSB 0Coordination of donor-funded programmes 0Support for NEPAD Programme 2

13. 13National Treasury 0A PPP Unit was established in May 2000 0Its primary function is to regulate PPPs. Its secondary function is to promote sustainable PPPs through technical support to implementing departments 0Unit builds capacity through conducting training courses, publishing guideline documents and providing updates / case briefs in a quarterly publication 0Existing professional staff strength is five 0Areas of focus thus far are health, education, transport, IT, accommodation and tourism / conservation 0Deal-flow is expected to increase substantially - further capacity is being built Public-Private Partnership (PPP) Unit - Demands and Capacity Programme 2

14. 14National Treasury Involvement in International Financial Forums Programme 2 0South Africa is a member of: G20,IMF, WB, AFDB and SADC 0The key areas of focus are: ;Reforming the international finance architecture ;Increasing the voice of Africa in international forums Ÿdebt relief Ÿpoverty reduction Ÿaid effectiveness ;Facilitate the NEPAD economic governance and capital flow initiatives ;Driving macroeconomic convergence & tax policy coordination in SADC (MOU to be signed)

15. 15National Treasury Asset and Liability Management 0Intergovernmental cash coordination through the CPD will be implemented in 2002/3 0A commonwealth debt recording system was installed in 2002 and will be running live by Dec 2002 0A debt risk management benchmark has been approved 0Portfolio realignment will be completed in 2002 0Active debt management continues to make debt service costs savings Programme 3

16. 16National Treasury 0Current work focuses on the restructuring of the OSTB to establish a Common Service Provider. 0The focus of the restructuring process could be summarized as follows: Procurement reform Programme 4 CSP Centralising 0 Supply chain policy and strategy 0 Regulatory framework (norms and standards) 0 Compliance monitoring 0 Database management and information 0 Training 0 Systems support 0 General term contracts 0 Planning of requirements and budgeting 0 Ad hoc procurement within delegations 0 Accounting officers’ procurement procedures 0 Procurement under transversal contracts arranged by CSP 0 IT Procurement to SITA Decentralising

17. 17National Treasury 0It is anticipated that the State Tender Board Act will be repealed during the second half of the current financial year. 0Current work priorities also include the following: 0 Finalization of Framework for Procurement and Provisioning in terms of section 76 (4)(c) of the PFMA (completion targeted for June 2002). 0 Development of procurement policy strategy (completion targeted for September 2002) and 0 Progress towards adoption of e-procurement strategy (ongoing). Programme 4 Common Service Provider

18. 18National Treasury Financial management systems 0Medium term goal: new Enterprise Application Solution (EAS): Work is in progress on - 0 Restructuring stakeholder/client environment 0 Conducting and supporting business process re- engineering 0Consolidating and setting business priorities; and 0 Development of implementation strategies. 0Enhancement of existing systems (BAS, FMS, PERSAL and LOGIS) continues, including: 0 Implementing of standard chart of accounts 0 Migration from FMS to BAS Programme 4

19. 19National Treasury Implementation of the PFMA Programme 4 Monitoring 0In process to develop a set of normative measures for financial management in consultation with Auditor-General Training 0Established a Validation Board to exercise qualitative control over and accredit external training providers 0Inform departments of accredited courses on a regular basis 0Identify critical areas requiring training

20. 20National Treasury Financial Management Improvement 0Financial statement formats 0Preparations for consolidation 0Quality of management information improved 0Accounting Policies 0 Developed 28 February 2002 0 Compliance with ASB standards to be ensured 0 Accrual Accounting Implementation Plan prepared 0 Practices and Guidelines to support Accounting Policies commenced 0 Standard Chart of Accounts to comply with PFMA and GFS requirements being finalized Programme 5

21. 21National Treasury Provincial and local government transfers 0National Treasury Conditional Grants only 0Programme 2 covers Division of Revenue Process 0Provincial transfers: 0 Supplementary grant phased out 0 Reinforcement of infrastructure 0Local government 0 Focus on financial management improvement 0 Municipal Financial Management Bill before Parliament 0 Support for restructuring in large municipalities Programme 6

22. 22National Treasury Focus on provincial infrastructure 0Provincial infrastructure grant rose from R0,8bn in 2001/02 to R2,8bn in 2004/05 0Supporting increase in provincial capital spending from R12,7bn to R18bn in 2004/05 0 Strong capital spending growth in second half of 2001/02 0 Main spending in education, health and roads 0 Capacity improving, but further enhancement needed 0 Review of provincial infrastructure underway Programme 6

23. 23National Treasury Civil and military pensions, contributions to funds and other benefits 0 Statutory obligations, administered by Pensions Administration 0 Focus on Post-retirement Medical Benefits: 0Provides for the funding of medical subsidy dispensation for former employees who retired before 01 July 1992 (full subsidy) 0Provides for medical subsidy of pensioners who retired after 1 July 1992 based on conditions at retirement date 0Negotiated and approved medical subsidy dispensation of civil servants is also applicable and applied to retired civil servants. Programme 7

24. 24National Treasury 0International transfers: 0Lesotho and Namibia rand monetary compensation 0Contribution to World Bank HIPC initiative 0African Development Bank contributions 0SA Revenue Service 0Financial and Fiscal Commission 0Secret Services – NIA, SASS and SAPS 0Financial Intelligence Centre Fiscal transfers Programme 8

25. 25National Treasury 0Core functioning from October 2002 0Drafting of Regulations is underway 0Information Technology systems being developed 0Money Laundering Advisory Council 0Extensive international consultation 0Cooperation with banks and other institutions in place Financial Intelligence Centre Programme 8

26. 26National Treasury Thank You

27. 27National Treasury Background information Vote 8 * The Adjusted Estimates figure amounts to R10 749m whereas the 2002 ENE shows the Adjusted Appropriation as R8 532m. The difference is due to two function shifts i.e. R92m for the National Development Agency that moved to the Dept of Social Development and R2 123m for the supplementary grant to provinces that has become part of the statutory allocations to provinces.

28. 28National Treasury Background Information Estimate of Expenditure

29. 29National Treasury Background Information Estimate of Expenditure Transfers and related