NATIONAL TREASURY

STRATEGIC PLAN 2013/17

PRESENTATION TO PARLIAMENTARY FINANCE COMMITTEES

14 May 2013

TREASURY AIMS AND OBJECTIVES

• Chapter 13 of the Constitution of the Republic of South Africa. According to

section 216 (1) of the Constitution national legislation must establish a national

treasury and prescribe measures to ensure both transparency and

expenditure controls in each sphere of government.

• Chapter 2 of the Public Finance Management Act (PFMA) clearly defines the

functions and powers of the department.

• Also, there are various other pieces of legislation that define the role of National

Treasury, these include the MFMA, financial sector legislation e.g. Banks Act.

2

TREASURY AIMS AND OBJECTIVES

• Develop fiscal policy framework and coordinate macro-economic policy

• Prepare a sound and sustainable national budget and equitable division of resources

• Equitably and efficiently raise fiscal revenue, while enhancing efficiency and

competitiveness of the SA economy

• Sustainably manage and make effective use of Government’s financial assets and liabilities

• Promote transparency to improve financial accountability and enforce effective financial

management

3

STRATEGIC ALIGNMENT OVER THE MEDIUM – TERM

4

The National Treasury will remain steadfast in facilitating and supporting the

aims of :

• The National Development Plan (NDP)

• The Industrial Policy Action Plan (IPAP)

• New Growth Path (NGP)

• National infrastructure programme coordinated by the Presidential

Infrastructure Coordinating Commission (PICC); and

• Government’s Outcomes approach

GOVERNMENT’S OUTCOMES APPROACH

The National Treasury has fully adopted the outcomes approach and directly

contributes towards achievement of the following Outcomes of Government:

4. Decent employment through inclusive economic growth

9. A responsive, accountable, effective and efficient local government system

11. Create a better South Africa and contribute to a better and safer Africa and World

12. An efficient, effective and development oriented public service and an empowered, fair

and inclusive citizenship

5

ECONOMIC OUTLOOK - positives

• US showing signs of economic strength, and the same is true of EMs and SSA

• Domestic outlook

– Growth forecast at 2.7 per cent this year, accelerating to 3.8 per cent by 2015.

– Fixed investment growth increased by 5.7 per cent in 2012

• Public sector investment expected to average annual growth of 9 per cent over

next three years

• Employment projected to grow by 850 000 jobs by 2015 /16, largely in the private

sector

– According to StatsSA employment increased by 199 000 (1.5%) in 2012/13, however

the unemployment rate remains high at 25.2 per cent in March 2013

– SARS exceeded Budget 2013 revenue target by R4 billion in 2012/13 financial year

• This reflected growth in small and medium businesses and efficient admin

– National Development Plan provides a framework that can shift South Africa towards a

new trajectory of economic growth and job creation

6

ECONOMIC OUTLOOK - risks

• Global

– European sovereign debt and systemic banking risks

– US fiscal policy uncertainties

– Rising international oil prices

– Soft emerging market growth (especially China) slows demand for exports (mining in particular)

– Japan’s actions are viewed by some to be risky

• Domestic

– Somewhat sluggish growth, low revenue

– Inflation is currently 5.9 per cent

– High household indebtedness

– Unemployment, particularly for young people and the less skilled

– Current account deficit, currency volatility

– Soft commodity prices

– Need to drive structural reforms to lift growth potential as a matter of urgency

7

STRUCTURE & COMPOSITION OF PROGRAMMES

• Programme 1 – Administration

• Programme 2 – Economic Policy, Tax, Financial Regulation & Research

(2 divisions – Economic Policy and Tax, and Fin Sec. Policy)

• Programme 3 – Public Finance and Budget Management

(3 divisions – Public Finance, Budget Office and Intergovernmental Relations)

• Programme 4 – Asset and Liability Management

• Programme 5 – Financial Systems and Accounting

(2 divisions – Office of the Accountant-General and Specialist Functions / Office of the Chief

Procurement Officer)

8

STRUCTURE & COMPOSITION CONT.

• Programme 6 – International Financial Relations

• Programme 7 – Civil & Military Pensions, Contributions to Funds & Other Benefits

• Programme 8 – Technical Support & Development Finance

• Programme 9 – Revenue Administration

• Programme 10 – Financial Intelligence and State Security

9

CHANGES IN ORGANISATIONAL STRUCTURE

• Reconfiguration of Programme 5: Financial Systems and Accounting

– Integrated Financial Management System (IFMS)

This programme has been shifted to the Office of the Accountant—General

– Chief Procurement Officer

All existing SCM units from the division: Specialist Functions now report to the

Chief Procurement Officer with substantially beefed up capacity

• Reconfiguration of Programme 8: Technical Support and Development Finance

– The introduction of the Government Technical Advisory Centre (GTAC) will entail

migration of technical advisory functions presently located in this programme.

– Monitoring of performance of GTAC will be coordinated from Programme 8 in the

future

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PROGRAMME 1 - ADMINISTRATION

Provide leadership strategic management and administrative support to the department .

Plans over the next 3 years:

• Enhancement of the strategic sourcing principles that drive demand, logistics and contract

management and reduce cost

• Create a high performance culture by developing leadership and technical behavioural

competencies

• Provide adequate accommodation, compliant with occupational health and safety standards

• Actively promote the zero tolerance stance to corruption

11

Page 11 – SP

Pg. 9 – APP

PROGRAMME 2: ECONOMIC POLICY.., TAX,

FINANCIAL REGULATION AND RESEARCH

Provide specialist policy research, analysis and advisory services in the areas of

macroeconomics, microeconomics, taxation, the financial sector, and regulatory reform.

Plans over the next 3 years:

• Develop and maintain economic forecasting models for MTBPS and Budget Review

• Monitor the exchange rate and explore policy measures to ensure competitiveness

• Formulate and implement annual tax proposals such as the youth employment tax incentive

• Conclude the process to implement a carbon tax in January 2015

• Publish retirement reform legislative proposals

• Publish hedge fund regulations

• Publish “Twin Peaks” legislation

12 Comprises 2 divisions: Economic Policy and Tax and Financial Sector Policy

Page 15 – SP

Pg. 17 – APP

PROGRAMME 3: PUBLIC FINANCE AND

BUDGET MANAGEMENT

- Provide analysis and advice on fiscal policy and public finances, intergovernmental

financial relations, and expenditure planning and priorities

- Manage the annual budget process and provide public finance management support

Plans over the next 3 years:

• Strengthen alignment between budgeting and government’s strategic outcomes and

performance management framework, in cooperation with DPME

• Strengthen capital projects assessment and approval process

• Extend analysis on long-term fiscal sustainability in order to contribute to public discussion

and parliamentary oversight of the fiscus

• Undertake targeted expenditure reviews, including personnel spending and govt agencies

and public entities

13 Comprises 3 divisions: Public Finance, Budget Office and Intergovernmental Relations

Page 16 – SP

Pg. 24 - APP

PROGRAMME 3: PUBLIC FINANCE AND

BUDGET MANAGEMENT CONT.

• Continue with coverage of the consolidated budget and accounts to include information on

the whole of General Government

• Support the Department of Health in development of the NHI framework and financing

arrangements

• Support to provinces to improve performance in infrastructure delivery through the

implementation of incentive grants

• Implement the city support programme and improve alignment with neighbourhood

development partnership programme to strengthen management of built environment by

cities

• Review of local government infrastructure conditional grant system based on 2011 Census

• Implement key local government budgeting, financial management and reporting reforms

• Strengthen provincial budget oversight to improve budget execution and monitoring in

municipalities and provinces

14

PROGRAMME 4: ASSET AND LIABILITY

MANAGEMENT

Prudent management of government’s financial assets and liabilities

•

Plans over the next 3 years

• Arrange finance of government’s gross borrowing requirement of R610 billion over 3 years

• Maintain sound investor relations

• Contribute to the development of domestic capital market

• Deepen engagements with credit rating agencies through better coordination within and

outside government

• Actively manage government’s debt portfolio through buy-back and switch/exchange

• Maintain debt and debt service cost at sustainable levels

• Optimise the use of public sector cash through broadening the coordination to reduce

borrowing cost

• Exercise oversight over state owned enterprises to enable the achievement of

government’s policy objectives in a financially sustainable manner

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Page 20 – SP

Pg. 44 – APP

PROGRAMME 5: FINANCIAL SYSTEMS AND

ACCOUNTING

Facilitates accountability, governance and oversight by promoting transparent, economic, efficient and effective management in respect of revenue, expenditure, assets and liabilities in the public sector.

Plans over the next 3 years (OAG):

• Review Treasury Regulations, issue Treasury Instructions and Circulars as a step to enforce financial management improvement in the three spheres (e.g., systems of delegations, financial misconduct, etc.)

• Maintain and improve current systems (BAS, Persal, Logis and Vulindlela)

• Refocus the development, implementation and maintenance of IFMS

• Monitor the state of financial management in national, provincial and municipal institutions and report to SCOPA & SCOF annually

• Support financial management capacity development in all three spheres of government

• Provide targeted support to priority departments, municipalities and public entities to improve financial management

16

Comprises 2 divisions: Office of the Accountant-General and Specialist

Functions (Office of the Chief Procurement Officer)

Page 23 – SP

Pg. 56 – APP

To develop, regulate and support an effective SCM system to enable the efficient,

economic, effective and transparent utilisation of financial resources for improved

service delivery.

Strategic Objectives:

• Modernise and enhance the state SCM system

• Promote, support, monitor and enforce the transparent and effective

management of state procurement

• Develop the SCM capacity of public institutions

• Develop professional and competent SCM officials

• Manage transversal term contracts to achieve socio-economic objectives

17

PROGRAMME 5 CONT. : OFFICE OF THE CHIEF PROCUREMENT OFFICER

PROGRAMME 5 CONT. : OFFICE OF THE

CHIEF PROCUREMENT OFFICER (OCPO)

18

DDG:

Chief Procurement

Officer

CD:

SCM Policy, Norms & Standards

CD:

SCM Governance, Monitoring & Compliance

CD:

Strategic Procurement

CD:

Contract Management

CD:

SCM Client Support

CD:

SCM Information,

Comm. & Technology

Dir:

CPO Operations Management

PROGRAMME 5 CONT. : OFFICE OF THE

CHIEF PROCUREMENT OFFICER (OCPO)

Progress in the establishment of the OCPO:

• OCPO Visioning Sessions

• Transfer of existing Specialist Functions

• Consolidation of SCM functions

• Recruitment

• Strategic Support

• Development of a SCM transformation programme

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PROGRAMME 6: INTERNATIONAL FINANCIAL

RELATIONS

Manage South Africa’s interests in multilateral forums and institutions such as G20, OECD, MDBs, SACU, … with the view of shaping regional and global policies in the favour of Africa and SA

Plans over the next 3 years:

• Advance South Africa’s interests specifically, and those of Africa more generally, through regular strategic analysis, engagement and negotiation at financial and economic forums

– Continue exploration of modalities for the establishment of a BRICS-led development bank

– Use the G-20 forum of leading economies to find collective solutions for reviving global economic growth

• Increase Africa’s voice and South Africa’s influence in international institutions and for a

– Develop appropriate institutional mechanisms to support effective coordination of South Africa-OECD bilateral relationship

– Advocating the creation of a third chair for Sub-Saharan Africa on IMF Executive Board

• Lead the reform of the governance and administration structures of African institutions

– Reform of the SACU revenue-sharing arrangement and other aspects of the 2002 Agreement

• Promote integration and strengthen links within Africa by creating an enabling environment for economic activity

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Page 27 – SP

Pg. 81 – APP

PROGRAMME 7: Civil and Military Pensions,

Contributions to Funds and Other Benefits

Provides for non–contributory civil pensions, post retirement medical contribution

subsidies and other benefits for pensioners and their beneficiaries, administered on

behalf of National Treasury through a Service Level Agreement with the Government

Pensions Administration Agency ( GPAA)

Plans over the next 3 years:

• Automate core payment processes for Military Pensions, Special Pensions , Medical Accounts, and

Injury On Duty

• Automate the Post Retirement Medical subsidy application form for retirees in Departments and

medical scheme switches for members.

• Introduce a Client Liaison/Key Account management system for Departments and Key Stakeholders

that will improve turnaround time for pension payments.

• Conclude Service Level Agreements with Key Stakeholder Departments i.e. SAPS, Military Veterans ,

Compensation Fund and Medical Schemes.

• Research options for pre-funding employee benefits such as post-retirement medical subsidies and

injury on duty compensation, with a view to reducing the state’s unfunded liability.

21 Comprise 5 business Units : Military Pensions and Medical Accounts , Special

Pensions, IOD, Post Retirement Medical Subsidies and Other benefits

Page 31 – SP

Pg. 92 – APP

PROGRAMME 8: TECHNICAL AND MANAGEMENT

SUPPORT & DEVELOPMENT FINANCE

Provides technical assistance on project and programme management, support for

public-private partnerships, local government financial management assistance,

funding of neighbourhood development projects and support for employment creation

– New initiative over next three years: phasing in of integrated city support grant

Major projects over the next 3 years

• Renewable Energy Independent Power Producer Programme: second round of project

approvals has been completed

• Broadening of scope of the Neighbourhood Development Programme to support urban

network planning and implementation

• Strengthening of Municipal Financial Management support and Infrastructure Skills

Development Grant aimed to strengthen the ability of selected municipalities and entities to

manage infrastructure effectively

• Strengthening of Jobs Fund administration to accelerate project implementation: 66 projects

currently approved; third round of proposals now under review

• GTAC starts to exist as a standalone component in this MTEF

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Page 33 – SP

Pg. 100 – APP

Programmes 7, 9 and 10

These Programmes report directly to Parliament

They include:

• Programme 7: Civil and Military Pensions, Contributions to Funds

and Other Benefits

• Programme 9: Revenue Administration

• Programme 10: Financial Intelligence and State Security

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STRATEGIC INTENT

This update to the National Treasury’s Strategic Plan was written with the intent to

• Demonstrate the divergence from “Business as Usual”. A systemic and concerted focus

on ensuring an optimal exit from the global economic crisis

• Promote employment. Working on a range of measures to reduce unemployment rates,

with a special focus on reducing youth unemployment rates. The NDP proposes a range of

labour activation policies and these will be supported in due course.

• Ensure fiscal sustainability. A stable tax base and sustainable public finances anchor

South Africa’s economic stability. In this regard, actively considering fiscal policy choices and

maintaining a tax system that is fair, equitable and designed to promote inclusive growth will

remain high on the agenda.

• Improve the quality of public spending. We can do more with less – improving the

efficiency, and embedding a culture of efficiency in public spending is paramount to

achieving our goals. A number of measures, ranging from expenditure reviews to eliminating

wastage and strategically shifting the composition of resources spent in the public sector will

continue over the medium term.

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Financial Resource Plan for 2013/14

25 25

Pg. 7 – APP

Programmes 2012/13 2012/13

Preliminary

Outcome

2013/14

R'000 Budget Budget

1. ADMINISTRATION 319,867 296,832 341,691

2. ECONOMIC POLICY, TAX, FINANCIAL REGULATION AND RESEARCH 122,508 111,234 145,859

Operational budget 96,315 85,043 119,723

Transfers 26,193 26,191 26,136

3. PUBLIC FINANCE AND BUDGET MANAGEMENT 241,427 221,052 252,312

Operational budget 203,325 182,958 213,545

Transfers 38,102 38,095 38,767

4. ASSET AND LIABILITY MANAGEMENT 282,807 278,205 2,995,196

Operational budget 82,762 78,158 90,196

Transfers 200,045 200,047 2,905,000

5. FINANCIAL SYSTEMS AND ACCOUNTING 686,335 639,346 724,589

Operational budget 613,450 566,466 641,014

Transfers 72,885 72,880 83,575

6. INTERNATIONAL FINANCIAL RELATIONS 1,041,769 1,003,051 1,112,529

Operational budget 31,226 29,900 37,214

Transfers 1,010,543 973,151 1,075,315

SUBTOTAL 2,694,713 2,549,720 2,705,823

Operational budget 1,545,914 1,558,076 1,657,392

Transfer budget 19,631,690 19,461,034 23,898,568

Percentage of operational to transfer budget 7.87% 8.01% 6.94%

Programmes 2012/13 2012/13

Preliminary

Outcome

2013/14

R'000 Budget Budget

7. CIVIL AND MILITARY PENSIONS, CONTRIBUTIONS TO FUNDS AND OTHER

BENEFITS 3,351,760 3,343,603 3,497,031

Operational budget 49,742 174,836 51,857

Transfers 3,302,018 3,168,767 3,445,174

8. TECHNICAL SUPPORT AND DEVELOPMENT FINANCE 1,999,636 1,994,291 2,777,806

Operational budget 149,227 143,883 162,152

Transfers 1,850,409 1,850,408 2,615,654

9. REVENUE ADMINISTRATION 9,149,374 9,149,374 9,534,393

10. FINANCIAL INTELLIGENCE AND STATE SECURITY 3,982,121 3,982,121 4,174,554

GRAND TOTAL 21,177,604 21,019,109 25,555,960

NATIONAL TREASURY

STRATEGIC PLAN 2013/17

PRESENTATION TO PARLIAMENTARY FINANCE COMMITTEES

14 May 2013

Appendices: Index

A. Human Capital

B. Operational and Transfer Budget

C. Spending by Programme

D. Major Funded Initiatives

27

Appendix A: Human Capital Statistics as at 31 March 2013

• Create a high performance culture by attracting, developing and retaining

technical and behavioural competencies.

• Total staff complement = 1189, 67 % female, 80% black, 12 employees

with disabilities. At senior management level, 71% is black, 42% is

female.

• The National Treasury has a vacancy rate of 8.2% (106 posts)

compared to 9.5% (122 posts) at 31 March 2012.

• Partner with pipeline organisations to address the employment equity

barriers through targeted and integrated attraction, development and

retention practices.

28

Appendix B: Operational and Transfer

Budget

29

1,558,076

19,461,034

9.1%

Preliminary Outcome 2012/13 (R'000)

Operational budget

Transfer budget

Percentage of operational totransfer budget

1,657,392

23,898,568

6.9%

Budget 2013/14 (R'000)

Operational budget

Transfer budget

Percentage of operational totransfer budget

Appendix C: Spending by Programme

30

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

P1 P2 P3 P4 P5 P6 P7 P8 P9 P10

201213 Budget 201213 Prelim Outcome 201314 Budget

Appendix D: Major Funded Initiatives

31

Initiative

Prelim Outcome Budget

2012/13 2013/14

(R’000) (R’000)

Integrated Financial Management System 152,584 166,231

Infrastructure Delivery Improvement Programme 85,000 85,000

Jobs Fund 589,868 1,258,024

Neighbourhood Development Partnership Grant 658,132 653,041

TOTAL 1,485,584 2,162,296