Minister Baartman Speech: 2024/25 Adjustment Budget Second Reading Debate

Honourable Speaker,

On Tuesday, 26 November 2024, I tabled the Western Cape’s 2024/25 Adjustments Budget. This Budget is tabled in the context of significant global and domestic economic challenges however, room for cautious optimism in these turbulent waters remains.

We find ourselves navigating the stormy waters of economic uncertainty, escalating pressures on our frontline services, and unprecedented increases in natural disasters as we continue to battle with the adverse impact of climate change. 

We find ourselves having to do more, with less – for more people. 

But the Western Cape Government remains steadfast in our commitment to deliver for the people we serve. Because we are not a government that gives up when the going gets tough. We must sail our own ship. 

Global and National Economic Outlook

Globally, economic growth is projected to slow to 3.2% in 2024, while South Africa faced a more modest projected growth of just 0.9 per cent. Constrained by an enduring energy crisis, logistical inefficiencies, and structural weaknesses, the national economy remains under pressure. Compounding this is a national debt expected to peak at 75.5% of GDP by 2025/26, because national government has chosen to prioritise bailouts for failing state-owned enterprises over protecting frontline services like education, health and police.

The implications for provinces, including the Western Cape, are severe.

Western Cape Economic Outlook

At home, in the Western Cape, we are charting a course toward 1.0% growth in 2024 and 2.2% in 2025. Our official unemployment rate in the Western Cape now stands at 19.6% for the 3rd quarter of 2024; international tourist arrivals surged by 53% last year; and our murder rate has decreased by 8.7% to 16.2% as a total contribution to South Africa.

Children are remaining in school for longer, more people have access to healthcare and we have set ourselves an ambitious target of a R1 trillion economy by 2035, creating over 600 000 new jobs.

Provincial Equitable Share

Over the 2021 and 2024 MTEF years, our province has absorbed an R8.4 billion cut to our Provincial Equitable Share due to the impact of fiscal consolidation. In addition to this, the fiscal envelopes of provinces will not be increased over the next three years. This is essentially forcing down further budget cuts onto provinces. 

Equitable share and conditional grants make up more than 95% of the Western Cape Government’s revenue, which we use to anchor our spending priorities.

The Equitable Share is a pivotal source of funding and while we welcome the updated data adjustments to the formula, which will bring a phased-in increase of R674 million over the next three years, we are only receiving R65 million of this pot in the 2025 financial year. Additionally, this funding remains insufficient to meet the service delivery demands of our growing population.

The Western Cape Government will continue to advocate for a more equitable allocation formula within the PES that better reflects the realities of service delivery and demographic trends in our province but will also continue to lobby national government to increase the provincial envelope for all provinces.

Adjustments

Provincial Revenue and Reserves

To manage the in-year fiscal risks in the province, R2.8 billion has been raised provincially this financial year. Of this, R922 million will be reserved for unforeseen, unavoidable expenses. These reserves have been a crucial buffer in protecting the province against external shocks and they will be maintained. 

R678.9 million will be set aside for the 2025 MTEF, and R616 million will used in-year in this adjustment to bolster the 2024 budget.

We are thus allocating and adjusting R1.72 billion to address in-year fiscal risks and position the Western Cape to weather the storm.

Infrastructure

Our applications for disaster and infrastructure funding from National Government has been approved, and we will receive R1.198 billion through various conditional grants, including:

• R947 million for disaster-related infrastructure reconstruction and rehabilitation of infrastructure damaged between December 2023 and July 2024; and
• R251 million for the Western Cape’s Rapid School Build Programme, which forms part of R2.5 billion approval for school infrastructure over the 2024 MTEF.

We will allocate R38 million to accelerate service delivery through Human Settlements acceleration projects, R12.6 million will be used for agricultural infrastructure and operations, and R190 million will be added to the Asset Reserve in preparation for the 2025 MTEF.

Flood Disaster Response and Preparation for Fire Season

Over and above provision in our reserves, more than R21 million is allocated to disaster management, including R7 million for fire and water response, R5 million for clearing alien vegetation, R3 million for aerial fire support, and R6.2 million for humanitarian emergency relief and nutritional support through the Department of Social Development.

Jobs and Safety

We will adjust R10.4 million for expanding peace officer training, youth resilience, and neighbourhood watch programmes.

Energy and Water Security

R694.3 million will be invested in energy and water security over the MTEF, with R4.7 million allocated for our Green Hydrogen Master Plan.

In-Year Fiscal Risks

Of our provincial funding allocation, we have made provision for in-year fiscal risks, including R230.5 million for the Department of Health to address inflation on their goods and services and R250 million for the Western Cape Education Department for pressures on CoE. 

Further, in order to allow for manoeuvrability within the votes, we will unearmark the equitable share in their infrastructure components, amounting to R193 million and R600 million respectively to Health and Education should they wish to access and deploy these funds as a last resort. 

We will allocate R77 million for Microsoft licensing, R68 million for to enhance public transport systems, and R25 million for the Saldanha IDZ Freeport.

Concluding Remarks

This adjustment demonstrates our dedication to balancing service delivery demands with sustainable financial management, allowing us to remain resilient in the face of service delivery challenges and empowering us to to budgeting better for climate change and disasters.

Speaker, I wish to reiterate that of the total additional funding allocated from the Provincial Revenue Fund, R487 million (75%) of the provincial funding will contribute to frontline services in Health, Education and Social Development in this Adjustment Budget.

It is not just about weathering today’s storm but laying the foundation for a stronger, more resilient Western Cape – for storms make trees take deeper roots.

I thank you.