An Overview of Government’s Medium

Term Strategic Framework (MTSF) 2014-

2019 for the Standing Committee on

Finance

Outline Background to the Medium Term Strategic Framework 2014-2019

MTSF 2009-2014The National Development Plan

An overview of the 2014-2019 MTSF

Two overarching themes:1. Radical economic transformation2. Improving service delivery

Selective review of the priority outcomes

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BackgroundAccording to a 2003 DPSA report on the ‘Machinery of Government’ the MTSF: “would inform the business plans of Departments, as required by the National Treasury in terms of the requirements of the MTEF”The draft MTSF itself would emerge from an internal government process: “short, medium and long- term priorities are drafted by departments, refined by clusters and FOSAD [Forum of South African Directors-General], and finalized by Cabinet at the January Lekgotla”Annual reviews:

Relevant MTSF would be reviewed at mid-year Cabinet lekgotlaThis would inform the MTEF and government’s annual Programme of Action

MTSF 2004-2009 and MTSF 2009-2014Relatively high-level, informed by broad electoral commitments and scenario planning as well as the

internal planning process referred to above

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National Strategic Planning and the NDPGreen Paper on National Strategic Planning (2009) lays out the rationale for more extensive planning:mobilisation of society around a commonly agreed set of long-term goalsGreater coherence in government’s workLonger term planning is good for South Africa... will encourage a longer term view from all key

institutions, allowing them to invest with greater confidence

The Green Paper notes a change in the MTSF, becoming more detailed with the outcomes and targets being inputs into the Presidency’s performance management workOn the role of Parliament: “[will] need to develop mechanisms to oversee the planning process and to contribute to ensuring successful implementation of a national plan”Green Paper process culminated in the National Development Plan 2030: Our future, make it work

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From NDP to the MTSFIn the presence of the NDP as an overarching, long-term plan the MTSF process has been reoriented toward conversion of the NDP into medium-term 5 year plansCabinet decided in 2013 that the 2014-2019 MTSF should form the first five-year implementation phase

of the NDPMTSF has been aligned to the national governing party’s [2014] election manifesto

As with previous MTSFs the intention is that MTSF 2014-2019 will directly inform departments’ planning and oversight of plans and performance

Performance agreements between the President and each Minister will reflect the relevant actions, indicators and targets set out in the MTSF

National and provincial departments will submit strategic plans for the period 2015-2020 to Parliament and provincial legislatures by February 2015 incorporating relevant actions and targets in the MTSF

It appears that the process by which MTSF is developed has also remained the same: intergovernmental process across spheres of government

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Initial responses to the MTSFThe MTSF 2014-2019 was released by the Presidency on the 8th of August 2014 but there has been relatively little response to date

A recent report by one private economic consultancy suggests that few in the private sector are aware of the MTSF and there is significant scepticism among those who are

Some concerns have been expressed that the aim of reducing unemployment to 14% by 2019 (from 25.5% at present) may be unrealistic

Broader issue is the relationship between the NDP and MTSFNDP was based on wide consultation, though the final report was still subject to significant contestationThe MTSF is an internal governmental process that does not involve further external consultation with

stakeholders and citizensRemains to be seen whether the process from NDP to MTSF has addressed some stakeholder concerns

or/and introduced new ones

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Structure of MTSF 2014-2019Two overarching themes: radical economic transformation and improving service delivery

14 priority outcomes, building on previous MTSF and the NDP. Within each priority outcome there are:Broad objectives and themesA set of specific sub-outcomes specifying: actions required, Minister responsible, the relevant indicator with current baseline

and the MTSF target

A set of core ‘impact indicators’ – drawn from the sub-outcomes – that will be used to monitor and evaluate performance in the relevant area

Two perspectives particularly relevant to the Standing Committee on Finance:1. The role of SCoF in conducting oversight over the activities and performance of National Treasury, its agencies and SARS2. The role of SCoF in conducting oversight over alignment of the Budget, fiscal framework, revenue collection and various

money bills with policy priorities

Remainder of the presentation discusses two core MTSF themes and provides a selective overview of the priority outcomes with emphasis on issues particularly relevant to the Standing Committee

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Theme 1: Radical economic transformation

placing the economy on a qualitatively different path that ensures more rapid, sustainable growth, higher investment, increased employment, reduced inequality and deracialisation of the economy (MTSF 2014-2019)

Emerged from 2014 election manifesto

No technical definition of this notion: contested because ideas of ‘radical’ interventions vary depending on perspective

Broad agreement on the fact that radical change requires multiple, mutually reinforcing interventionsE.g. Changing the urban spatial distribution requires initiatives relating to: urban planning, local

economic development, transport infrastructure and services, housing, etc.

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Theme 2: Improving service deliveryImproving the capacity of the public service is one of the core issues addressed by the NDP, but it is an issue that relates to all other specific functions. MTSF notes that:backlogs remain and the quality of services is unevenchallenge is therefore to improve the quality and consistency of services, which requires improvements in

the performance of the public service, municipalities and service providers Measures to improve the capacity and developmental commitment of the state will therefore receive

high priority over this MTSF period

Local level: national and provincial departments of local government will focus on improving the quality of targeted

oversight and support available to municipalities focus on ensuring that municipalities provide and properly maintain an adequate core set of basic services

including water, sanitation, electricity, municipal roads, refuse removal and traffic lights

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Theme 2: Improving service deliveryProvincial level: particular attention will be given to the management of service delivery, human resource management and financial management

National level: bring greater predictability and stability to the management of the political-administrative interface by establishing the role of administrative head of the public service

Corruption: Prevent public servants doing business with the state; ensure transparency in public expenditure and contractual relations with the private sector; improve capacity to investigate and prosecute corruption cases; strengthen anti-corruption legislation

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Priority outcomes

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Outcome 4: the economyTwenty pages detailing ten sub-outcomes, which align to the elements of radical economic transformation already outlined above. Informed by the NDP vision to accelerate economic growth to reduce unemployment and inequality and create an inclusive society (decent employment through inclusive growth)Locates existing plans (Industrial Policy Action Plan (IPAP), New Growth Path (NGP), Agricultural Policy Action Plan (APAP), Minerals Beneficiation Action Plan (MBAP), National Infrastructure Plan, etc) within a broader frameworkAims to find a balance between creating a stable and supportive environment for growth and investment while at the same time addressing structural challenges in the economy and society Recognises that inequality is an obstacle to growth and investment so growth-oriented policies must address the distribution of ownership and incomeProvides a set of high-level impact/outcome indicators:

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Impact indicator Minister responsible for reporting on the

indicator

2009 Baseline Latest Baseline of the indicator

2019 target NDP 2030

1. GDP growth

(annualised and quarterly)

Finance GDP shrank by 1.5% in 2009

2.5% in 2012 5% growth in 2019 4.5% annual growth

2. Investment rate (% of

GDP)

Finance 22% in 2009 20.5% of GDP in 2012 25% of GDP 30% of GDP

3. Public sector

investment (% of GDP)

Finance 8.3% in 2009 7.8% of GDP in 2012 10% of GDP 10% of GDP

4. Share in household income of the poorest

60% of households

Economic Development 6.1% in 2009 5.6% in 2011/12 10% 10%

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Impact indicator Minister responsible for reporting on the

indicator

2009 Baseline Latest Baseline of the indicator

2019 target NDP 2030

5. Employment creation

Economic Development 1 million jobs lost in downturn from 2008 to

mid-2010

200 000 in year to March 2013 but over 300 000 in

2011

Annual employment growth to increase by 350 000 a year in 2014-15 and

thereafter the rate of employment growth to

increase, with targets set annually.

11 million more jobs, with annual targets set on a

rising scale

6. Official unemployment

rate

Economic Development 24% in 2009 25% in 1st Quarter 2013 14% in 2020 6%

7. Percentage of adults working in rural areas

Economic Development 20% of the labour force 20% in fourth quarter 2012

30% 40%

8. Investment in Research and Development as % of

GDP

Science and Technology 0.87% in 2009/10 0.76% in 2011/12 1.5% by 2019 No target specified but commitment made to

increasing investment in R&D

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Outcome 6: InfrastructureNDP identifies the need to invest in economic infrastructure to support the country’s economic and social objectivesto deliver electricity, water and sanitation, telecommunications and public transportto diversify the country’s industrial base, raise exports and compete internationally

Challenges: expand provision and coverage; maintain existing infrastructure; coordinate investment between government and private sector; create appropriate institutional, policy and regulatory environment

Issues of possible interest to the Committee:Sustainable financing of infrastructure plans given large demands in many sectors, including choice of

appropriate financing options (e.g. user pays versus financing from general tax revenues)Need for pricing to incentivise investment without hurting growthThe role of Regulatory Impact Assessments for infrastructure projectsAims for public investment to constitute 10% of GDP by 2019 (6.8% now)

Five sub-outcomes:

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Impact indicators [Energy Ministry]

Adequate generating capacity commissionedElectricity generation reserve margin increasedAdditional SA coal and gas enabled for energy production

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Outcome 7: Rural areasVision is to have rural areas which are, spatially, socially and economically well integrated

Economic growth, food security, jobs and improved access to basic services, quality education and health

Aim that by 2030 agriculture will create 1million new jobs

Need for leadership on: land reform, communal tenure security, financial and technical support to farmers, and the provision of social and physical infrastructure for successful implementation

Priorities:Sustainable land reformSmall famer development and support (financially and other wise)Growth of sustainable rural enterprises and industries – resulting in rural job creation

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Outcome 8: Human settlements strive to achieve measurable progress towards breaking apartheid spatial patterns with significant advances made towards retrofitting existing settlements offering the majority of South Africans access to adequate housing, affordable services in better living environments, within a more equitable and functional residential property market

Three sub-outcomes toward the above goal:Adequate housing and improved living environmentDevelop a functional and equitable residential property marketImprove institutional capacity and coordination for better spatial targeting (government)

One area that may be pertinent to SCoF is the role of development finance institutions (DFIs) in providing finance for developmental housing initiatives and projects

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Outcome 9: Local governmentGiven its role at the `front line’ of service delivery, local government has a critical role to play in the NDP’s vision but faces a number of key constraints. Some are addressed in general initiatives to improve the public service (see 12 below) but others require specific local government attention.

The five sub-outcomes are:Members of society have sustainable and reliable access to basic servicesIntergovernmental and democratic governance arrangements for a functional system of cooperative

governance strengthenedSound financial and administrative managementPromotion of social and economic developmentLocal public employment programmes expanded through the Community Work Programme (CWP)

MTSF also contains an updated list of 27 district priority areas based on limited access to basic services

National Treasury is responsible (with COGTA) for supporting and overseeing sound financial and administrative management, as per the relevant impact indicator

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Outcome 10: Environment NDP vision: South Africa’s transition to an environmentally sustainable, climate-change resilient, low-carbon economy and just society will be well under way by 2030

MTSF refers to three phases:1. 2014-2019: creation of a framework to implement the (above-mentioned) transition2. 2019-2024: implementation of sustainable development programmes and targeting greenhouse gas

emissions3. 2024-2029: final steps in the transition and reductions in poverty and unemployment assisting in

South Africa’s emissions peaking in 2030

Some issues possibly relevant to the Committee Potential short-run tradeoffs between environmental protection and economic objectives The possibility of future legislation on carbon taxes Constraints to economic activity from environmental limitations (e.g. water shortages)

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Impact indicators [NDT & DTI]

Increased FDIIncreased tourism arrivalsIncreased tourism spendIncreased value-added exports

“combines market integration, cross-border infrastructure development and policy coordination to diversify production and boost intra-African trade”

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Problem of excessive turnover of department heads

Identification of areas where departments/entities are not coordinating

NT to issue guidelines for financial delegations and support implementation of these

Regulations and guidelines should differentiate different kinds of procurementCapacity building and professionalising SCMProvide real-time operational supportEnsure transparency and effective oversightReview and simplify regulations and guidelines where necessary

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Outcome 13: Social protectionFollows from NDP vision of providing a minimum standard of living, while also recognising the developmental and transformative role of social protection

The overarching challenge is to develop a comprehensive system of social protection by 2030 while ensuring that the nature of the expansion is sustainable

Sub-outcomes:1. Strengthening social welfare delivery through legislative, policy reforms; capacity building 2. Improved quality and access of Early Childhood Development Services for children aged 0-4 3. Strengthened community development interventions 4. Deepening social assistance and expanding access to social security 5. Optimal systems to strengthen coordination, integration, planning, monitoring and evaluation of social

protection services

Relatively few impact indicators for this outcome: halve rate of stunting; access to social assistance up to 95% for those eligible; double number who can access labour-related social insurance; double access to Early Childhood Development

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Thank you

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