Eastern Cape Finance MEC Mlungisi Mvoko has painted a bleak picture of the province’s economy amid the highest recorded unemployment rate in the country and a shrinking equitable share of funding from national government due to migration.
Mvoko was delivering his budget speech for the year 2020/21 at the legislature in Bhisho on Thursday afternoon – and there was little to cheer about.
The MEC said that, due to the declining economic growth, the provincial equitable share of funds was negatively affected, and the province lost R960 million during this year’s medium-term expenditure framework (MTEF) due to fiscal reductions initiated by national government.
“We also lost R2.4 billion during this year’s MTEF due to updates of new data in the provincial equitable share [PES] formula. The updates in the PES formula continue to reflect an outward migration of population numbers from the Eastern Cape to other provinces.
“Since the 2011 census, our province has lost R23.9 billion, due to changes in population numbers that determine budget allocations,” Mvoko said.
The MEC called on the province’s people to ensure that, when the census takes place next year, they are counted in order to help improve the equitable share allocation of funds.
According to Stats SA, “between 2011 and 2016, the Eastern Cape experienced a net migration of -489 686, which was a result of 939 765 people emigrating from the province and 450 078 moving to the province”.
Mvoko said the province, together with National Treasury, would continue to review the equitable share formula, to consider variations in the cost of delivering services among provinces.
Conditional grants to the province were also reduced this time due to some departments failing to spend their budget allocations.
To this end Mvoko said: “To make things worse, the conditional grant allocation was also reduced by R422.1 million over this year’s MTEF. I must stress that part of the reason for reducing the conditional grant allocations includes the underperformance on grant allocations.
“Therefore, I want to urge all departments to ensure that conditional grant allocations are fully spent, in line with conditions attached to them, to avoid future reductions from national government. Our total allocation has been reduced by R4.5 billion on the equitable share and conditional grants allocations over this year’s MTEF,” he said.
Mvoko said the situation was unlikely to change anytime soon. As indicated by Stats SA, the province’s economy contracted by 1.4% in the fourth quarter of last year.
He said the province was forced to “do more with limited resources” but, despite that, government had to ensure that it protected critical programmes despite the “depleting fiscus”.
Mvoko said they would intensify efforts to enhance provincial revenue collection to ease pressure on the equitable share.
The CPI inflation projections were also revised downwards by the Treasury, from projections that were originally used in determining provincial equitable share baselines.
“As a result of this downward revision of the CPI projections, R681.8 million was reduced from our provincial equitable share baseline pertaining to the compensation of employees.
“The adjustment to cost of employment is R331.8 million in 2020/21 and R349.9 million in 2021/22. This means that certain non-core positions will be frozen while focusing on key service delivery positions. The strict management of consultants’ usage will be enhanced to eliminate overuse,” he said.
Despite the sluggish economy, Mvoko said, government had a responsibility to serve its 6.7 million people in the province, through a budget of R266.8 billion in this year’s MTEF, of which R85.9 billion was allocated for the 2020/21 financial year.
The allocation is made up of national transfers, conditional grants, provincial own receipts and the provincial revenue fund.
As expected, the bulk of the province’s budget went to education, a 44% share of the provincial allocation. The education department was allocated R117.9 billion for this year’s MTEF period. Of the total MTEF allocation, R37.8 billion was allocated for the 2020/21 financial year.
The other large chunk of the province’s budget went to the department of health with an allocation of R83.1 billion for this year’s MTEF, of which R26.4 billion is for the 2020/21 financial year.
On unemployment, Mvoko said the province continued to face high unemployment levels, with the latest results of the Quarterly Labour Force Survey for the fourth quarter of last year, showing the rate of 39.5% compared with 29.1% for the country.
“However, we also welcome the slight improvement in the rate of employment in our province between 2018 and last year, which increased by 0.7%,” he said.
Meanwhile, the tabling of the budget was not without drama as members of the EFF blockaded gates at the Bhisho legislature, preventing cars from entering or exiting the premises.
The protest followed the removal of five EFF members of the provincial legislature last week during the state of the province address by premier Oscar Mabuyane after they rocked up wearing their red overalls that are not permitted at the legislature.
This resulted in a scuffle between the red berets and the legislature’s security personnel and it happened again at the debate early this week.
The budget speech was delayed by minutes and it took place under the watchful eyes of SA Police Service members who were deployed at the main entrance, while another security detail could be seen screening those entering the chambers and the public gallery.
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