Bhisho taps into provincial reserves to fund R2bn budget deficit

The Eastern Cape government has been forced to dig into its provincial reserves to fund a R2bn deficit for the 2023/2024 financial year.

This was revealed by finance MEC Mlungisi Mvoko on Tuesday, when he delivered his 2023/2024 budget speech during a virtual sitting of the provincial legislature.

The budget totals R91.6bn, which represents a deficit of about R2bn.

To lessen the blow, Mvoko said R2.7bn would be sourced from the provincial reserves. 

“This, however, will pose a liquidity risk in the future, if we do not improve on provincial revenue collection to support our fiscal deficits.

“Our lead departments for revenue enhancement [public works and infrastructure, transport, health and economic development, environmental affairs and tourism] must come to the party.

“It is through their efforts that the province would adequately fund its priorities and the budget pressures we are experiencing.

“In accordance with the recommendations of the revenue research study that was conducted for new sources of revenue and efficiencies of existing revenue sources, the province is projected to collect R7bn by 2030, annually.

“We are gradually working towards reaching these targets through these new sources of revenue that were identified by the study.”

He said the province aimed to increase revenue by R26.1m in 2023/2024, R37.4m in 2024/2025 and R37.5m in 2025/2026 as part of its revenue enhancement plan.

“Our fiscal position remains tight, owing to the constrained state of the economy and the resultant budget losses we experienced in the recent past,” he said.

These conditions, Mvoko warned, required the government to continue with its financial balancing act.

In line with this, he said the budget for the 2023 Medium Term Expenditure Framework would be underpinned by specific principles.

These included:

• Resourcing economic development initiatives while protecting social services;
• Strengthening government capacity to implement infrastructure projects and deliver services; and
• Encouraging good governance and transparency.

He said the province’s growth was projected to come in at 1.7% in 2022, with an average growth of 1.2% expected over the medium term.

However, he province needed growth of about 5% to make any meaningful impact.

According to Mvoko, the turnaround strategy at the department of health was starting to yield a positive outcome.

“This is after we identified a number of challenges that are found in the healthcare system.”

At the core of the challenges were the medico-legal claims that are draining the provincial coffers, leaving the department with serious cash flow challenges.

“The multipronged strategy’s main purpose is to steer provincial health services into becoming more comprehensive and balanced in responding to individual patient, family and community health needs.

“It is looking at improving efficiencies across the system focusing on several pillars.”

These included optimisation of the budget, increasing income streams, decreasing losses and managing risk, digitalisation, improving efficiencies and cost savings.

“These measures, in a nutshell, seek to address the department’s cost of employment, their infrastructure and their supply chain processes.

“They also seek to decrease clinical risks, deal with fraud and corruption, digitalisation of systems and widen their revenue sources.

“We are happy now that, through the implementation of the strategy, [several aspects] have been achieved.”

Mvoko said the provincial government had curtailed the bleeding of funds from the health budget through upfront and lump sum medico-legal settlements by launching two critical legal defence strategies.

These were the stay of writs and the public health defence through the Noyila judgment that found in favour of the department recently in the high court in Bhisho.

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