The fourth quarter figures published on Friday 30 April 2004 provide the first indication of total provincial spending for the 2003/04 financial year. Being the first estimates, these figures will be revised as provincial departments prepare their financial statements (and reconcile and close their books) for submission to the Auditor-General by 31 May 2004.
The fourth quarter spending report indicates that provinces spent R170,1 billion, or 99,5 per cent of their R171,1 billion adjusted budgets. This represents a year-on-year spending increase of R24,2 billion or 16,6 per cent between 2002/03 and 2003/04 confirming that provincial spending capacity continued to improve. In particular, provinces have performed considerably better on their capital spending, compared with last year.
Capital spending is R17,4 billion or 90,8 per cent of the total adjusted capital budget of R19,2 billion, an increase of R2,9 billion or 20,1 per cent compared with the 2002/03 financial year. The highest share of capital spending is in Public Works, Roads and Transport departments, which recorded 99,9 per cent spending compared to the R4,9 billion adjusted budget.
The preliminary aggregated provincial budget deficit is R2,3 billion. This deficit is largely funded from last year's rollovers and cash balances accumulated in previous years, so provinces have not had to borrow or overspend. This budget deficit is R1,6 billion lower than the projected deficit reported in the Budget Review in February, which is based on 9 months of actual figures and hence represent earlier projections.
Education expenditure totalled R59,8 billion or 100,4 per cent of the R59,5 billion adjusted provincial budget, and is R7,1 billion or 13,4 per cent higher compared with the 2002/03 financial year. It is the largest share of provincial expenditure at 35,1 per cent.
Social Development expenditure increased by R9,8 billion from R32,4 billion in 2002/03 to R42,2 billion in 2003/04, making it the second largest expenditure share at 24,8 per cent of all provincial expenditure.
Health expenditure of R37,1 billion is R3,9 billion higher compared with the 2002/03 financial year. Health spending comprises 21,8 per cent of all provincial expenditure.
Strong growth was experienced in education capital expenditure which rose to R2,9 billion, an improvement of R1,2 billion over the 2002/03 financial year.
National government transferred R144,7 billion of the equitable share, and R16,8 billion in conditional grants, to provinces for the 2003/04 financial year.
Provincial own revenue collected is R869,8 million higher than the R5,5 billion adjusted provincial own revenue budget.
This analysis is based on the statement of revenue and expenditure published by the National Treasury on 30 April 2004, and is available on the treasury website www.treasury.gov.za.
This report on the preliminary outcome of the 2003/04 provincial budgets, after a full year of spending (from 1 April 2003 to 31 March 2004) is compared with adjusted budgets. The adjusted budget combines the original February/March 2003 provincial budget with the October/November 2003 provincial Adjustments Budget. Table 1 indicates their revised budgets against which the preliminary year-end figures are compared.
Provinces spent R170,1 billion, or 99,5 per cent of their R171,1 billion adjusted provincial budgets. This is R24,2 billion or 16,6 per cent higher than the expenditure recorded at the end of the 2002/03 financial year.
2.5 per cent of their total budget, with the Eastern Cape spending 2,1 per cent more than its adjusted budget, and Limpopo, Mpumalanga, Western Cape all spending 2,5 per cent less. Spending capacity has therefore improved in all provinces.
Personnel expenditure is R81 billion or 47,6 per cent of total provincial spending.
Provinces have slightly overspent on social services (education, health and social development1), spending R139,1 billion or 100,9 per cent of the R137,8 billion adjusted budget for these services. Overall social services spent 81,7 per cent of total provincial spending.
Education expenditure totalled R59,8 billion or 100,4 per cent of the R59,5 billion adjusted provincial education budget, and is R7,1 billion or 13,4 per cent higher compared with the 2002/03 financial year. It comprised on average 35,1 per cent of total provincial expenditure, varying from the lowest in Northern Cape (31,1 per cent) and Western Cape (31,3 per cent), to the highest in Mpumalanga (38,7 per cent).
The education budget is largely personnel driven, comprising 83,3 per cent of the total education expenditure in provinces, totalling R49,8 billion or 100,4 per cent of the R49,6 billion adjusted provincial education personnel budgets. The share of personnel expenditure in education is the lowest in Gauteng at 74,6 per cent, and highest in Eastern Cape (86,5 per cent), North West (87,5 per cent) and Limpopo (87,9 per cent).
Health expenditure is R37,1 billion or 99,3 per cent of the R37,4 billion adjusted provincial budget. Health spending has increased by R3,9 billion or 11,6 per cent compared with the previous year. It comprises 21,8 per cent of total provincial expenditure, with personnel expenditure comprising 56,4 per cent of total provincial health spending.
Note that the share of health spending as a percentage of total provincial spending varies depending on whether provinces have academic or large central hospitals, which are concentrated in Gauteng, Western Cape, KwaZulu-Natal and Free State. For this reason, Gauteng has the highest share of health expenditure at 28,5 per cent, followed by Western Cape (26,7 per cent) and KwaZulu-Natal (24,2 per cent).
Provinces overspent on social development, spending R42,2 billion or 103,2 per cent of the 40,9 billion adjusted budget, representing an increase of R9,8 billion or 30,2 per cent compared with the previous financial year. This is mainly the result of the rapid acceleration in the take-up of the Child Support and Disability Grants due to the higher-than-anticipated number of beneficiaries.
Social development comprises an average of 24,8 per cent of all provincial spending, overtaking health to be the second largest spending item in provinces, after education. In 2002/03, social development expenditure as a share was 22,2 per cent of total provincial spending, slightly lower than health at 22,8 per cent. However, in spite of the average national share, the share of social development in some provinces is still lower than health, particularly in those provinces with academic hospitals, like Gauteng and Western Cape.
Its share varies greatly between provinces, with Eastern Cape (28,1 per cent) and Northern Cape (27,5 per cent) significantly higher than average, and Gauteng significantly lower than the other provinces at 19,2 per cent.
The preliminary outcome of provincial expenditure indicates that capital expenditure2 is R17,4 billion or 90,8 per cent of the adjusted provincial capital budgets. This is a significant improvement on last year, as provinces have spent R2,9 billion or 20,1 per cent more than the previous financial year. Capital expenditure comprises about 10,2 per cent of all provincial expenditure, with provinces like Gauteng having the highest share at 14,2 per cent, followed by Eastern Cape (11,5 per cent) and KwaZulu-Natal (10,1 per cent), with the lowest share in North West at 7 per cent.
The provinces that spent the highest proportion of its adjusted capital budget was the Free State at 97,3 per cent, Limpopo (95,7 per cent) and KwaZulu-Natal (95,5 per cent). The lowest level of capital spending is recorded by Northern Cape, spending 76,7 per cent of its adjusted capital budget. In absolute terms, the highest capital expenditure is in Gauteng at R3,9 billion, followed by KwaZulu-Natal and Eastern Cape both at R3,4 billion.
The extent of underspending on capital cannot be assessed at this stage, as the share of the remaining R1,8 billion may also be committed and not paid out due to the multi-year nature of capital projects. Almost half of the underspending on capital (R815 million) is in the housing sector.
The biggest provincial capital budgets are for Public Works, Roads and Transport. These departments have performed remarkably well, having spent almost all (99,9 per cent) of the R4,9 billion adjusted budget. The level of spending has significantly increased by R656,6 million or 15,5 per cent compared with spending at the end of the 2002/03 financial year. However, despite this improvement, there is a variation among provinces, as the public works, roads and transport departments in Mpumalanga spent only 78,7 per cent, followed by Free State at 83,7 per cent.
2 It is not clear what proportion of the capital spending are transfers, and what proportion of these transfers reflect actual spending.
Capital spending on education is recorded at R2,9 billion or 100 per cent of their adjusted capital budget. This level of spending shows great improvements compared with last year, as this year's spending exceeds that of 2002/03 by R1,2 billion or 76,5 per cent. Spending in Northern Cape (62,6 per cent) appears to be the lowest, while KwaZulu-Natal (106,6 per cent), Gauteng (105,5 per cent) and North West (103 per cent) all overspent their adjusted education capital budgets.
Capital spending on the health sector is lower, as a share, at R2,3 billion or 81,1 per cent. This is a R463,2 million or 16,8 per cent decline in spending compared with the previous year. Between provinces, Free State (40,7 per cent) and Northern Cape (45,7 per cent) recorded the lowest level of health capital spending while Eastern Cape (98,6 per cent) and KwaZulu-Natal (94,2 per cent) recorded the highest level of spending. It is also not clear to what extent the low Gauteng health expenditure of 62,2 per cent reflects under-reporting due to some spending being classified under its public works department.
Capital transfers to households through the housing subsidy grant amounted to R4,4 billion or 84,4 per cent of the R5,2 billion adjusted housing capital budget. Whilst the level of spending has increased by 12,2 per cent or R478 million compared with the 2002/03 financial year, the R815 million or 15,6 percent underspending is larger than that of any other sector (nominally and as a share). It is not clear to what extent transfers to local government and other public agencies are recorded as actual spending, particularly where such transfers have not been spent.
The lowest level of spending is recorded by Gauteng at 59,4 per cent followed by Western Cape at 64 per cent. The highest level of spending is recorded by Free State at 126,5 per cent and KwaZulu-Natal (100 per cent), which has spent all of its adjusted housing capital budgets.
 Provinces have collected R6,3 billion or 15,9 per cent more than the budgeted R5,5 billion own revenue for the 2003/04 financial year.
 The high rate of collection is an indication of the conservative revenue projections by provinces at the start of the financial year. The R5,5 billion budgeted amount is, however, less than the R5,9 billion actually collected in the previous year (2002/03).
Page 7 of 8 a low of 101,6 per cent collected in Limpopo to a high of 169,6 per cent collected in KwaZulu-Natal.
 National government transferred all of the R144,7 billion of the equitable share, and R16,8 billion in conditional grants, to provinces to date.
 In total, including adjusted provincial own revenue, provincial revenue at the end of the 2003/04 financial year is at R167,9 billion or 17,5 per cent higher than in the previous financial year.