Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1694846421753.pdf (South Africa)
Outline • • Introduction Summary of the 2021/22 adjustments • National allocations for COE: Realistic baselines • Employment and Livelihood support programmes • Roll-overs: Regulations versus requests • Virements: [Sections 43 of the PFMA] • In-year performance of National departments post adjustments • Division of revenue • • In-year changes to the provincial equitable share In-year changes to the provincial and local government conditional grants • Division of Revenue over the MTEF • Changes to provincial and local government equitable share • Changes to provincial and local government conditional grants • Efficiency and effectiveness of expenditure on conditional grants • Past performance by national votes • In Summary 2 Introduction • The focus of this presentation is on the National Adjustments Appropriation and the Adjusted Division of Revenue • The purpose of this presentation is to stimulate discussion on the content of the adjustments budget, which provides for: – Unforeseen and unavoidable expenditure – The Appropriation of monies already announced during the tabling of the annual budget – The shifting of funds between and within votes where a function is transferred or the utilisation of savings (not exceeding 8% of appropriation for a programme) – The roll-over of unspent funds from the preceding financial year • The revisions in the current year are mainly based on: – The allocation of the R11 billion provisionally allocated for the Presidential employment programme – Allocations to provide for the national and provincial government public sector salary adjustments – Roll-overs that could be the reason for slow spending estimates – Virements that are not in line with the provisions of the PFMA • The presentation further aims to highlight points for discussion when Members consider the adjusted budget and the division of revenue 3 ADJUSTED ESTIMATES 4 Summary of the 2021/22 adjustments Total estimated expenditure increases from R1 834.3 billion to R1 893.1 billion in 2021/22 The adjustments to vote
 appropriations are offset against the provisional allocations and contingency reserve and increases by R15 023.500 million, of which: • Significant and unforeseeable economic and financial events: R5 833.495 million • Unforeseeable and unavoidable expenditure: • Expenditure earmarked in the 2021 Budget speech: • Roll‐overs: • Self‐financing expenditure: • Declared unspent funds (reductions to vote allocations): R102.600 million R7 115.335 million R2 847.096 million R1 077.899 million (R1 952.925 million) Adjustments to estimates of direct charges against the National Revenue Fund amounts to R26 936.284 million more than anticipated at the time of the main Budget, of which: • Debt‐service costs (reduction): • Provincial equitable share: • National Revenue Fund payments: • PFMA section 70 payment: • Skills levy, and sector education and training authorities: • Magistrates’ salaries (reduction): (R507.139 million) R21 148.560 million R2 281.959 million R2 923.000 million R1 119.904 million (R30.000 million) Adjustments also include a contingency reserve of R2.961 billion and provisional allocations of R11 billion that have not been assigned to votes at the time of tabling the Adjustments Budget 5 National allocations for COE: Realistic baselines Significant and unforeseeable economic and financial events: R5.8 billion • The baselines for 2021/22 as estimated in the 2020 MTEF was between 3.3 per cent and 40.7 per cent higher than the 2020/21 revised estimate • After the reductions in 2021 to the baseline most departments in the sample still show a positive change since the 2020/21 revised estimates • • • • The yellow highlights are those departments that did not request additional funding Three of these departments also declared COE funds unspent: • Public Enterprises: R17 million • Higher Education and Training: R85 million • Communications and Digital Technologies: R8.425 million These three department also increased their baselines for 2021/22 by 40.7, 14.6 and
 22.8 per cent respectively, from the 2020/21 revised estimate The highlighted departments also show a positive change from the 2020/21 revised estimates, except for Parliament • A positive value means that departments have fiscal space to increase personnel numbers or implement increases • A negative value means that the department will have to reduce personnel numbers • The negative value of 5.6 per cent in Health should be a concern for government 6 Revised estimateReduction from 2020/21 MTEFAdjusted budgetChange from revised estimate for 2020/21R million2020/212021/222021/222021/221The Presidency385.2 -10.2%379.2 -1.5%2Parliament1 413.3 -12.9%1 396.1 -1.2%3Cooperative Governance371.4 -14.9%358.2 -3.6%6International Relations and Cooperation2 881.6 -12.8%2 852.0 -1.0%8National Treasury797.9 -12.8%862.8 8.1%9Planning, Monitoring and Evaluation297.4 -14.1%307.9 3.5%10Public Enterprises149.2 -16.2%176.0 17.9%13Public Works and Infrastructure558.7 -8.0%582.7 4.3%14Statistics South Africa1 476.1 -12.3%1 524.9 3.3%15Traditional Affairs74.2 -6.8%84.3 13.5%16Basic Education548.0 -11.7%549.2 0.2%17Higher Education and Training9 556.7 -5.8%10 311.6 7.9%18Health928.3 -8.6%876.1 -5.6%22Correctional Services17 224.5 -10.4%17 940.4 4.2%23Defence30 984.9 -7.7%30 659.6 -1.0%24Independent Police Investigative Directorate243.1 -7.5%239.2 -1.6%25Justice and Constitutional Development11 679.6 -9.1%12 560.3 7.5%27Office of the Chief Justice1 755.3 -11.3%1 768.8 0.8%28Police76 147.0 -9.6%78 168.3 2.7%30Communications and Digital Technologies302.2 -18.0%304.3 0.7%31Employment and Labour1 334.6 -10.1%1 428.4 7.0%32Environment, Forestry and Fisheries1 933.9 -10.8%1 956.3 1.2%33Human Settlements397.3 -11.0%410.9 3.4%34Mineral Resources and Energy1 017.6 -12.9%1 037.1 1.9%36Small Business Development150.7 -10.2%155.2 3.0%40Transport496.8 -10.8%542.6 9.2%Total176 653.8 -9.6%180 876.8 2.4% Employment and Livelihood support programmes Expenditure earmarked in the in the 2021 budget speech: R11
 billion • The presidential employment initiative will support the creation of more than 440 000 short-term jobs until March 2022 • Other interventions are expected to catalyse growth and job creation • The allocation for livelihood support covers income support for self-employed people in areas such as subsistence farming and micro-enterprises 7 R'000Description of xpenditureNational government 7 115 335 3Cooperative Governance284 000Municipal Infrastructure Support Agent 8National Treasury841 000Neighbourhood development partnership grant 17Higher Education and Training190 000R100 000 to national skills fund and Higher education institutions R90 000 (graduate assistance)18Health2 357 000R2.342 billion for the purchase of vaccines and R15 million for the allocation to Port Health Services 19Social Development208 000ECD conditional grant, and the National Development Agency’s volunteer programme20Women, Youth and Persons with Disabilities430 000National youth agency for youth development29Agriculture, Land Reform and Rural Development750 000Food security30Communications and Digital Technologies200 000Broadband goods and services31Employment and Labour258 000Trasfers to GTAC: Jobs fund32Forestry, Fisheries and the Environment318 000EPWP35Science and Innovation67 000Duzi Umngeni Conservation Trust (enviro-champs), water graduate employment programme andfor the Council for Scientific and Industrial Research (experiential training programme)36Small Business Development95 990Blended finance37Sport, Arts and Culture15 000Museums38Tourism108 000Infrastructure maintenance39Trade, Industry and Competition800 000IDC social employment fund:community based economic activities41Water and Sanitation193 345Regional bulk infrastructureProvincial government Equitable share 6 470 000 R6 billion for the basic education employment initiative, R120 million for the appointment of social workers, and R350 million for staff and assistant nurses as part of the presidential youth employment
 intervention 13 585 335 VoteTotal Roll-overs: Regulations versus requests o Treasury Regulations for departments, trading entities, constitutional institutions and public entities Issued in terms of the Public Finance Management Act, 1999 Section 6.4 Rollovers [Sections 30(2)(g) and 31(2)(g) of the PFMA] 6.4.1 • Funds appropriated but not spent in a particular financial year may be rolled over to a subsequent year subject to approval of the relevant treasury.
Such approval will be guided by the following limitations: o o Part 3: Planning and budgeting (a) Payments for capital assets: Unspent funds on payments for capital assets may only be rolled over to finalise projects or asset acquisitions still in progress.

(b) Transfers and subsidies: Savings on transfers and subsidies may not be rolled over for purposes other than originally voted for (c) Current payments: Savings on compensation of employees may not be rolled over.
o o A maximum of five per cent of a department’s payments for goods and services may be rolled over 6.4.2 Requests for rollovers must be submitted to the relevant treasury on or before the last working day of April, in a format determined by the National Treasury and must include- o o o o (a) the purpose for which the funds were appropriated (b) the reasons why the funds were not spent (c) proposed changes to the use of the funds (d) a disbursement schedule indicating the month(s) in which the expenditure is expected to be incurred.
6.4.3 Funds for a specific purpose may not be rolled over for more than one financial year, unless approved in advance by the relevant treasury.
8 • • Roll-overs: Regulations versus requests 9 R'000Notes1Presidency:spent 37% 5 203 R2.96 million for the implementation of action plans to address gender-based violence, and R2.243 million for compensation of employees2019 Presidential summit decleration againsts gender-based violenceand femicide - No data available against the target of 36 additional courts designated for this purpose3Cooperative Governance: spent 40.4% 94 200 Disaster assessment and evaluation services in KwaZulu-Natal6International Relations and Cooperation:spent 44.7 spent 33 000 Network connectivity (bandwidth) 14Statistics South Africa: spent 31.9% 412 960 Census 2021 pilot project: R344.649 million to purchase tablet computers; R200 000 for leave gratuity payments; R54.68 million for external computer advisors, advertising, communications and minor assets; and R13.431 million to appoint contract staff 16Basic Education: spent 55.6% 210 000 School infrastructure backlogs grant22Correctional Services:46.7% 102 712 R63.857 million for goods and services such as the procurement of uniforms, 9mm ammunitions, pepper sprays, filters, armour, leg irons, handcuffs, key bag pouches, holsters, shoulder straps and handheld metal detectors; and R38.855 million for the payment of outstanding invoices to the Department of Public Works and Infrastructure, and procurement of pistols Not sure about the reasons of the delay 25Justice and Constitutional Development:spent 42.2% 56 695 State capture commission28Police: spent 46.5% 1 000 536 R12.25 million for the semi-automated DNA processing system, R342.965 million for the upgrading of wide area network ICT infrastructure, R3.49 million for the conversion of 10 forensic response vehicles, R75 million for the upgrading of storage and disaster recovery capabilities, and R566.831 million for a payment to Polmed medical scheme for injury on duty cases29Agriculture, Land Reform and Rural Development: spent 35% 243 000 Subsistence producers selected in phase 1 of the presidential youth employment intervention Additional R750 million has been allocated in the adjustments budget 33Human Settlements: 40.6% 14 100 Transfer payment to UN Habitat to fund the Southern African Development Community strategy on informal settlements34Mineral Resources and Energy:spent 44.3% 60 700 R32.7 million for the non-grid electrification programme and R28 million for the solar water heater programme37Sport, Arts and Culture: 44.9% 31 790 R7.8 million for job creation projects funded through phase 1 of the presidential youth employment intervention and R23.99 million for the creation of jobs to monitor compliance with COVID-19 regulations at sport events R7.8 million will be allocated to art practitioners to showcase their work.
Additional R15 million has been allocated in the adjustment budget 41Water and Sanitation:32.2% 582 200 R582.2 million for operational payments for the Vaal River pollution remediation projectRegional bulk infrastructure grantVote and description of expenditure Virements: [Sections 43 of the PFMA] (1) An accounting officer for a department may utilise a saving in the amount appropriated under a main division within a vote towards the defrayment of excess expenditure under another main division within the same vote, unless the treasury directs otherwise.
• • • • • • (2) The amount of a saving under a main division of a vote that may be utilised in terms of subsection (1), may not exceed eight per cent of the amount appropriated under that main division.
(4) This section does not authorise the utilisation of a saving in: (a) an amount specifically and exclusively appropriated for a purpose mentioned under a main division within a vote (such as compensation of employees except for transfers and subsidies for the payment of severance/exit packages) (b) an amount appropriated for transfer to another institution; (excluding transfers and subsidies to other levels of government for purposes of paying levies and taxes imposed by legislation, may not be increased without approval of the relevant treasury (c) an amount appropriated for capital expenditure in order to defray current expenditure.
(5) A utilisation of a saving in terms of subsection (1) is a direct charge against the Revenue Fund.
10 Virements 11 VotesFromToMore than 8%Vote 16: Basic EducationSchool infrastructure backlogs grant operational budget2WorkbooksVote 17: Higher Education and TrainingVacant posts2National Student Financial Aid Scheme (administration)1Vote 18: Health National health insurance indirect grant (contractors)1Other grants23.20%Vote 20: Women, Youth and Persons with DisabilitiesConsultants1CompensationVote 25: Justice and Constitutional Development12.8%2Vote 28: Police Construction and upgrading of police stations1Overtime payments1Vote 30: Communication and Digital Technologies 12.60%Vote 32: Department of Environment, Forestry and FisheriesExpanded public works programme capital grant2South African Weather Service operations2 and South African National Parks operations2Vote 34: Mineral, Resources and EnergyTransfersFor other purposesVote 36: Small Business DevelopmentTransfersFor other purposes11.20%Vote 38: TourismTransfersFor other purposes11.90%Vote 39: Trade, Industry and Competition Current Transfers12.70% In-year performance of National departments post adjustments • National departments with expenditure less than 40 per cent and more than 60 per cent of the adjustments budget in the first six months of the 2021/22 financial year • Slowest spending: Military Veterans at 27.7 per cent despite a reduction in the budget 12 2021/22Apr 21 -Sep 21% ofAdjustedAdjustmentApr 21 -adjustedAppropriationappropriation Sep 21appropriation1 The Presidency 592 321604 57912 258223 55337.03 Cooperative Governance 100 875 870101 259 931384 06140 929 73440.48 National Treasury 41 055 70745 546 7074 491 00014 464 52031.89 Planning, Monitoring and Evaluation 453 950459 2135 263173 85837.910 Public Enterprises 36 291 81936 274 819(17 000)35 870 92098.914 Statistics South Africa 4 474 5904 931 640457 0501 570 80431.915 Traditional Affairs 171 392172 6901 29867 67939.217 Higher Education and Training 97 784 00597 889 005105 00070 251 83671.820 Women, Youth and Persons with Disabilities763 5391 195 508431 969469 96539.326 Military
 Veterans 654 367607 388(46 979)168 49927.729 Agriculture, Land Reform and Rural Development 16 920 39918 023 2601 102 8616 313 92635.030 Communications and Digital Technologies 3 692 8813 884 456191 5751 444 94337.232 Forestry, Fisheries and the Environment8 716 8489 099 737382 8893 079 97833.838 Tourism 2 429 6272 545 338115 711864 94334.041 Water and Sanitation 16 910 08017 735 057824 9775 710 34332.2980 583 9081 028 457 40847 873 500503 296 94248.9Vote number and titleActual expenditureR thousandTotal Summary picture of appropriations adjustments 2021/22 250000 200000 150000 100000 50000 0 30000 25000 20000 15000 10000 5000 0 Comparing appropriations and Adjusted appropriations (Top 10 appropriations account for 80% of total appropriations), Rmillions Appropriation Adjusted appropriation 4000 3000 2000 1000 0 Total adjustments appropriations: Top 10 make up 87.5% and Rest of votes 12.5% of total (Rmillions) Special appropriations (Rmillions) 4000 3000 2000 1000 0 -1000 -2000 Composition of Total adjustment appropriations: top ten votes for adj approprns make up 87.5% of total adj approprns (Rmillion) Declared Other adjustments Declared unspent funds Shifts between votes Amounts announced in the budget DIVISION OF REVENUE 14 Division of Revenue • National share includes: • Conditional allocations to provincial and local spheres • General fuel levy sharing with metropolitan municipalities • Debt-service costs • • The direct charges for the provincial equitable share are netted out The contingency reserve Provisional allocations • • Adjustment for national share includes money added in the Second Special • Appropriations Bill The 2021 Division of Revenue Amendment Bill provides for an increase in expenditure of 3.6 per cent for the current financial year • No additional allocation for local government through the DOR • Reflects governments attempt to further support the economy and pursue fiscal consolidation with projected revenue larger than estimated 15 R'0002021/22
 Main AllocationAdjustment2021/22 Adjusted AllocationNational1 232 566 66443 977 0211 276 543 685Provincial 523 686 35121 148 560544 834 911Local 77 999 13577 999 135TOTAL 1 834 252 15065 125 5811 899 377 731 In-year changes to the provincial equitable share • Additional allocations of R14.7 billion are added to the provincial equitable share for the wage agreement • Additional funds of R6.47 billion are added to the PES for the Presidential youth employment initiative R thousands Eastern Cape Free State Gauteng KwaZulu-Natal Limpopo Mpumalanga Northern Cape North West Western Cape Presidential Youth Employment Initiative Education school assistants 841 591 334 412 1 060 793 1 338 452 802 210 512 859 141 811 401 242 566 630 nurses 45 460 19 403 74 559 71 615 40 097 28 615 9 271 24 576 36 404 Social Development social workers 11 040 12 000 43 680 23 220 11 400 8 280 5 160 5 220 _ Public Service wage bill Total Change Total 6 000 000 350 000 120 000 14 678 560 21 148 560 16 Changes to the provincial and local government conditional grants • R81 million is added to the direct regional bulk infrastructure grant for George Local Municipality for the implementation of the portable water security and remedial works project • R150 million is reduced from the national health insurance indirect grant for the Limpopo Academic Hospital due to delays experienced in the project • R10 million is reduced from the health facility revitalisation grant for Western Cape for Klipfontein Hospital due to delays in the appointment of professional service providers for building design • R1.3 billion is reduced from the public transport network grant for the City of Cape Town to align to its revised implementation plan of myCiti phase 2A • R210 million is rolled over for the school infrastructure backlogs grant to complete
 projects that are part of the Sanitation Appropriate for Education initiative, which deals with the replacement and removal of inappropriate and unsuitable sanitation, including pit toilets at schools.
The funds are for schools in Eastern Cape, Free State, KwaZulu-Natal and Limpopo 17 Changes to the provincial and local government conditional grants (cont.)

• R97 million of the school infrastructure backlogs grant is reprioritised from the goods and services portion allocated to the Department of Basic Education for planning and oversight of the grant.
The Department of Basic Education will use these funds to fund a shortfall in the workbooks project • R243 million is reprioritised from various components of the national health insurance indirect grant to the human resources and training grant.
This will provide for the statutory obligation to place medical interns upon completion of their studies • R582 million is rolled over in the indirect regional bulk infrastructure grant to fund the operational payments for the Vaal River pollution remediation project in Emfuleni Local Municipality • R90 million is shifted from the direct component of the neighbourhood development partnership grant to the indirect component of the grant, to fund project preparation, planning and implementation for municipalities facing implementation challenges 18 Division of revenue over the MTEF • Provinces are responsible for: – basic education and – health services, – roads, – housing, – social development, and – agriculture • Municipalities provide basic services such as: – water, – sanitation, – electricity reticulation, – roads – community services • Provincial and municipal governments face multiple pressures over the medium term as government reduces spending growth and poor economic performance affects other revenue and funding sources • Over the 2022 MTEF period, transfers to provinces and municipalities will in the form of an equitable share and conditional grants is estimated to grow below inflation • Over the next three years, government proposes to allocate 48.4 per cent of available non-interest expenditure to national departments, 42 19 per cent to provinces and 9.6 per cent to local government Changes to provincial and local government equitable share • The provincial equitable share formula is updated annually to reflect demographic changes and demand for services based on need • Between 2022/23 and 2024/25, additional changes will be phased into the health component – which accounts for 27 per cent of the formula • Changes in the health component of the provincial equitable share include: – An updated the risk-adjusted capitation index (healthcare costs per person that accounts for 75 per cent of the component – by assessing the factors and weights used to compose the index) – The HIV variable will be
 integrated into other variables – Three variables will be added: • Premature mortality, which uses deaths below the age of 65 as a proxy for the burden of disease • A multiple deprivation index, which adjusts for differences in the social determinants of health (such as education and sanitation) • Sparsity, which accounts for the higher cost of delivering healthcare in remote and low- density areas • The local government equitable share formula will be updated to account for projected household growth, inflation and estimated increases in bulk water and electricity costs over the MTEF period 20 Changes to provincial and local government conditional grants over the medium term Changes to the structure of provincial conditional grants From 2022/23, the grant will consist of only: HIV, TB, malaria and community outreach grant • • A comprehensive HIV/AIDS component, funding HIV/AIDS- and tuberculosis-related services; and a district health component, funding community outreach services and services related to COVID-19, human papillomavirus and malaria The grant will be renamed the district health programme grant The mental health and oncology components introduced in this grant in the 2021 MTEF will be shifted to the direct national health insurance grant • • Comprehensive agricultural support programme grant • The colleges of agriculture have been shifted to the national government, as will the funding provided through this grant The early childhood development grant • Will be moved from the Department of Social Development to the Department of Basic Education from 2022/23 The provincial roads maintenance grant • In the 2021 Budget, an incentive component allocated based on provincial performance was allocated using the main formula of the conditional grant • Due to delays in developing objective allocation criteria, the incentive component will be removed from the grant baseline for 2022/23 The National Treasury will continue to work with the Department of Transport
 the incentive to develop objective criteria for component • Changes to the structure of local government conditional grants Municipal infrastructure grant • • the scope of The expansion of the grant, to help municipalities improve their asset management practices, has been delayed, so funds will not be indirect a allocated new to component of the the grant at beginning of 2022/23 Funds may be transferred during the year if the Department of Cooperative Governance and Traditional Affairs the work required to identify does municipalities this intervention need that 21 Efficiency and effectiveness of expenditure on conditional grants • In addition to the changes proposed by the 2021 MTBPS the PBO assessed the content and performance of Basic Education, Health, Human Settlements, Agriculture and Transport Conditional Grants as reflected in the schedules to the DORA and reported on in the 2019/20 annual reports of administering departments • The analysis showed that: – Performance outputs/indicators were not well defined – There was a mismatch between expected outputs and actual outputs – There was duplication of indicators/outputs – There was inconsistent or no reporting on actual non-financial information – In some instances, no targets were set for outputs – Overspending on some of the grants, accompanied by underperformance – Underspending that is accompanied by over performance – Reporting on the performance was not measured against set targets – There was incomplete performance information – The lack of proper performance information on conditional grants in the Annual Reports of departments makes it difficult to determine the effectiveness of expenditure and impact of the outputs delivered by government 22 Past performance by national votes • National departments have a history of underspending (diagram in annexure) • Under spending of capital budgets for four consecutive years since 2017/18 • According to the AGSA’s 2019/20 PFMA report, the number of
 departments incurring unauthorised expenditure increased from 20 to 22, with unauthorised expenditure increasing from R1.65 billion to R18.12 billion between 2018/19 and 2019/20 • Social development, health and education were responsible for 96 per cent of the overall reported unauthorised expenditure Expenditure by economic classification t n e c r e P 110.0 105.0 100.0 95.0 90.0 85.0 80.0 75.0 70.0 2016/17 2017/18 2018/19 2019/20 2020/21 Current payments Transfers and subsidies Payments for capital assets Payments for financial assets Expenditure by national votes Expenditure by national votes t n e c e P r 110.0 105.0 100.0 95.0 90.0 85.0 80.0 2016/17 2017/18 2018/19 2019/20 2020/21 In summary • • estimated expenditure increases Total R1 893.1 billion in 2021/22 The adjustments to vote appropriations are offset against the provisional allocations and contingency reserve and increase by R15 023.50 million • Adjustments to estimates of direct charges against the National Revenue Fund amounts to R26 936.28 million more than anticipated at the time of the main Budget from R1 834.3 billion to • Adjustments also include a contingency reserve of R2.961 billion and provisional allocations of R11 billion that have not been assigned to vote s at the time of tabling the Adjustments Budget • An analysis of the baselines for 2021/22 as estimated in the 2020 MTEF showed that compensation of employees increases by between 3.3 per cent and 40.7 per cent from the 2020/21 revised estimate The presidential employment initiative will not only support the creation of more than 440 000 short-term jobs, but also aims to catalyse growth and job creation and provides support for self-employed people • • Many roll-over and virement requests can only be approved by Parliament due to the legislation requirements not adhered to 25 In summary • Provincial and municipal governments face multiple pressures over the medium term because of government reductions in spending growth and poor
 economic performance that affects other revenue and funding sources • Changes to provincial and local government equitable share formulas aim to improve the equal division of revenue • Changes to conditional grant structures will also be implemented in Social Development and Education Provincial Roads 2022/23.
These changes are mainly in: • Health • Agriculture • • • Municipal infrastructure grants The PBO analysis of conditional grants also suggests administration of conditional grants including: • Content • Context (process and reporting) • Control (monitoring) • improved 26 Annexure 27 Summary of the 2021/22 adjustments 28 R thousandAppropriation by vote 980 583 908 15 023 500 995 607 408 Significant and unforeseeable economic and financial events5 833 495 Unforeseeable and unavoidable expenditure102 600 Expenditure earmarked in the 2021 Budget speech for future allocation7 115 335 Roll-overs 2 847 096 Self-financing expenditure1 077 899 Declared unspent funds(1 952 925) Direct charges against the National Revenue Fund830 023 039 26 936 284 856 959 323 Of which:Debt-service costs269 741 139 (507 139) 269 234 000 Provincial equitable share:523 686 351 21 148 560 544 834 911 Public sector salary adjustment– 14 678 560 14 678 560 Expenditure earmarked in the 2021 Budget speech for future allocation– 6 470 000 6 470 000 Subtotal 1 810 606 947 41 959 784 1 852 566 731 Provisional reduction to fund Land Bank allocation(5 000 000) 5 000 000 – Provisional allocations not assigned to votes12 645 203 (1 645 203) 11 000 000 Infrastructure Fund not assigned to votes4 000 000 (4 000 000) – Contingency reserve12 000 000 (9 039 000) 2 961 000 Total adjustments expenditure estimate1 834 252 150 26 000 581 1 860 252 731 Second Special Appropriation Bill, 202132 850 000 32 850 000 Total estimate expenditure1 867 102 150 26 000 581 1 893 102 731 Main budget revenue1 351 672 124 131 529 184 1 483 201 308 Budget balance(515 430 026) 105 528 603 (409 901 423) Appropriation(ENE) Adjustments appropriation (AENE)Adjusted appropriation • The cost of unemployment, poverty and inequality South Africa has extreme levels of structural unemployment, poverty and inequality (UPI) They are a huge burden on social, economic and political stability They have affected resilience to the Covid-19 pandemic and other risks They impose large costs on public
 finances that are not usually reported in government’s accounts • • • • • Therefore, while much attention is paid to the size of debt repayments to GDP; the costs to the government associated with UPI are not reported Further, the impact of UPI on the efficacy and impact of government spending and programmes is not adequately considered • E.g., crowding, poor infrastructure & equipment, lack of books plus malnutrition and poor living conditions lead to high rates of repetition and dropping out • NIDS-CRAM reports that school dropout has tripled from 230,000 pre-pandemic to 750,000 in May 2021 Pit latrines at an E. Cape school Source: Infrastructure News Consensus that fiscal measures to reduce inequality can support growth • • • • The IMF: “High inequality can be detrimental for macroeconomic stability and for sustained long-term growth.” At the top of the income distribution, our research shows that marginal tax rates can be raised without sacrificing economic growth (Kristalina Georgieva) The OECD says, “… tax policy has a particularly important role in addressing inequality and boosting economic growth.” The UN: “Highly unequal societies are less effective at reducing poverty than those with low levels of inequality.
They also grow more slowly and are less successful at sustaining economic growth.” Palma rations for income in 130 countries2016 Notes: bw = Botswana; na = Namibia; za = South Africa Western Europe: Market & disposable income Gini coefficients South Africa: Market & disposable income Gini coefficients