Enquiries: Lungisa Fuzile Tel: 012 315 5158 Cell: 082 497 6397 E-mail: Lungisa. Fuzile@treasury.gov.
The fourth quarter provincial budget statement of receipts and payments published by the National Treasury on 28 April 2006 is the first estimate of spending outcomes for the 2005/06 financial year, which commenced on 1 April 2005 and ended on 31 March 2006. These figures may be revised as national and provincial departments finalise (and reconcile) their financial statements by 31 May 2006 for submission to the Auditor-General.
The figures in this fourth quarter report include the additional funds totalling R547,3 million allocated to provinces for conditional grants in the 2005 Adjusted Estimates of National Expenditure. Provinces have also contributed additional funding of almost R5,0 billion to their initial budget figures, which includes roll-overs from the previous financial year. This report also includes a comparative spending analysis over the 2004/05 financial year. Data for the 2004/05 financial year are extracted from the provincial audited annual financial statements.
In aggregate, provinces have spent 98,0 per cent or R214,8 billion of their adjusted budgets of R219,2 billion in 2005/06. This represents a significant spending increase year-on-year of 13,5 per cent or R25,5 billion over the audited R189,2 billion spent in 2004/05. Spending varies between the lowest share of 94,4 per cent in Free State and 95,8 per cent in North West to the highest at 99,8 per cent in KwaZulu-Natal and 98,6 per cent in Western Cape.
The year-end under expenditure of R4,4 billion or 2,0 per cent of adjusted provincial budgets in aggregate by provinces for the 2005/06 financial year is largely due to under expenditure in capital and conditional grants, in particular the social assistance transfers conditional grant.
Education expenditure totalled R72,0 billion or 99,6 per cent of the R72,3 billion total adjusted budget for education, and remains the largest item on provincial budgets.
The spending pattern reflects a R7,5 billion or 11,7 per cent increase compared with the audited spending in 2004/05.
Health expenditure totalled R46,9 billion or 99,5 per cent of the R47,2 billion total adjusted budget for health, and is the third largest item (after education and social development) on provincial budgets. The spending pattern reflects a 16,6 per cent or R6,7 billion increase compared with the audited spending in 2004/05.
The preliminary outcome for provincial social development departments indicates that provinces have underspent by almost R2,0 billion on their adjusted budgets, which appears to be the result of key initiatives introduced to address weaknesses in the grant administration system, with a specific focus on the disability grant, to stabilise the social development budgets.
In aggregate, provinces spent 94,0 per cent or R13,1 billion of their almost R14,0 billion adjusted capital budget between the various sectors. This is an improvement of 26,8 per cent over the previous financial year, exceeding the audited R10,4 billion spent in 2004/05 by R2,8 billion.
Due to the anticipated underspending on capital, R91,0 million of the Health Revitalisation conditional grant was re-allocated between provinces during the 2005 Adjusted Estimates process. Further, R746,7 million of the provincial infrastructure conditional grant has been withheld with Free State (R51,4 million), Gauteng (R277,3 million), Limpopo (R318,9 million), Mpumalanga (R57,1 million) and Northern Cape (R42,0 million) being the affected provinces.
Education provincial departments spent relatively low on capital at 83,0 per cent or R2,8 billion of their R3,4 billion adjusted budgets, which is 18,5 per cent or R436,7 million more than spending over the previous financial year.
Health provincial departments, year-on-year, significantly improved on spending on capital with a preliminary outcome of 92,4 per cent or R3,8 billion against their R4,1 billion adjusted health capital budgets, which is 53,0 per cent or R1,3 billion more than the previous financial year.
The highest share of provincial adjusted capital budgets is for public works, roads and transport departments at 34,3 per cent. The sector spent 106,4 per cent or R5,1 billion against its combined capital adjusted budgets of R4,8 billion for the 2005/06 financial year.
Total personnel expenditure in aggregate is 99,0 per cent or R95,7 billion of the R96,7 billion adjusted personnel budget. Both provincial education and health departments, in aggregate, underspent on their personnel budgets in 2005/06, with the exception of Limpopo which overspent by R532,5 million in education personnel.
Provincial own revenue collected is 19,7 per cent more than the adjusted forecast of R6,1 billion at R7,2 billion. National government transferred R134,7 billion in the form of the equitable share grant and R73,4 billion in conditional grants for the 2005/06 financial year.
The budgeted figures are based on the adjusted estimates of provinces, which were tabled in their provincial legislatures during November 2005 and also cater for amendments made to the adjusted estimates in the case of Eastern Cape and KwaZulu-Natal (approved by their legislatures on 20th February and 29th March 2006, respectively).
This analysis is based on the statement of receipts and payments, published by the National Treasury on 28 April 2006 and is available on the treasury website www.treasury.gov.za. The information is based on the Section 40(4) PFMA reports signed by each head of provincial department to their provincial treasury by the 13th April 2006, and submitted to the National Treasury on the 21st April 2006. Queries on spending or budget numbers should therefore, in the first instance, be referred to the relevant head official of the provincial department, and in the second instance to the head official of the provincial treasury. Queries on conditional grants may also be referred to the relevant head official of the administering national department.
The analysis presented here is restricted to financial information only, but provincial departments should be in a position to provide complementary non-financial performance information, in some cases, to at least up to the third quarter (as such information comes with a longer lag of 2 to 4 months) relative to the targets set in their Strategic and Performance Plans tabled in provincial legislatures. Such information is necessary to measure outputs and performance and to assess value for money. This preliminary assessment will provide a valuable basis for determining any possible overspending pressures or underspending risks after provinces have tabled their adjusted estimates.
Except for social development, where figures on beneficiaries are published, no other sector is publishing non-financial data at this stage. However, work is under way to extend reporting on service delivery in other departments.
The preliminary outcomes indicate that provinces have spent 98,0 per cent or R214,8 billion of their adjusted budgets of R219,2 billion for the 2005/06 financial year. Spending is at a similar level in percentage terms against spending over the 2004/05 financial year, however, in nominal terms, spending is 13,5 per cent or R25,5 billion higher than last year when provinces recorded audited spending of R189,2 billion.
Among provinces, spending ranges from the lowest share of 94,4 per cent in Free State and 95,8 per cent in North West to the highest at 99,8 per cent in KwaZulu-Natal and 98,6 per cent in Western Cape.
Social services adjusted budgets total R179,4 billion, and comprise 81,9 per cent of the total R219,2 billion combined provincial adjusted budgets in 2005/06. Table 2 indicates that provinces have spent 98,6 per cent or R176,9 billion of the adjusted R179,4 billion budget for the three social services (education, health and social development). This is 13,7 per cent or R21,3 billion more than the audited spending over the same period in 2004/05.
Education adjusted budgets of R72,3 billion comprise 33,0 per cent of total provincial adjusted budgets. Table 3 indicates that education expenditure is at 99,6 per cent or R72,0 billion of the total adjusted education budgets, an increase of 11,7 per cent or R7,5 billion compared to the audited R64,4 billion spent in 2004/05.
Spending between provinces for education ranges from the lowest rate in Gauteng at 96,3 per cent and Mpumalanga at 97,0 per cent to the highest in Limpopo and KwaZulu-Natal at 102,9 per cent and 101,5 per cent, respectively.
Spending on goods and services (mostly learner support material) in education is recorded at 98,8 per cent of the R7 248 million adjusted budget which comprises approximately 10,0 per cent of total provincial education budget. It is a national priority to increase both the level and share of this item.
The bulk of education expenditure is on personnel (80,8 per cent), amounting to 99,9 per cent or almost R58,2 billion of the adjusted education personnel budgets of R58,3 billion. It appears that adequate provision was made for pay progression and incentives targeted at school-based educators in provincial education budgets. Spending between provinces ranges from the lowest in Gauteng and Free State at 96,2 per cent and 97,1 per cent to the highest in Limpopo and North West at 106,5 per cent and 100,5 per cent respectively.
Education capital expenditure is lower at 83,0 per cent or R2,8 billion of the R3,4 billion adjusted budget. However, this is significantly higher by 18,5 per cent or R436,7 million than the audited spending on capital over the same period last year. Capital spending for education between provinces ranges from the lowest in Mpumalanga at 52,3 per cent and Free State at 74,7 per cent to the highest in Northern Cape at 103,3 per cent and North West at 97,0 per cent.
Health adjusted budgets totalling R47,2 billion comprise 21,5 per cent of the total provincial adjusted budget. Table 6 indicates that health expenditure is at 99,5 per cent or R46,9 billion of the total health adjusted budget, representing an increase of 16,6 per cent or R6,7 billion compared to the audited spending of the previous financial year.
Limpopo and Eastern Cape have spent the lowest share of their adjusted health budgets at 94,0 per cent and 98,3 per cent respectively. The highest shares are recorded in Northern Cape at 105,8 per cent and Gauteng at 101,3 per cent respectively.
Table 7 indicates that health personnel expenditure is R25,4 billion or 99,4 per cent of the adjusted health personnel budget, an increase of R2,0 billion or 8,5 per cent compared to the audited R23,4 billion spent in 2004/05. Four provinces (Eastern Cape, Free State, Mpumalanga and North West) recorded overspending in health personnel budgets while the remaining five provinces recorded a total saving of R343,3 million with Gauteng and Western Cape the largest at R177,3 million and R136,4 million respectively.
Spending on non-personnel non-capital items in health, which includes medicines, drugs and other current expenditure is recorded at 101,3 per cent or R17,7 billion of the R17,5 billion adjusted budget, an increase of 23,6 per cent or R3,4 billion compared to the audited R14,4 billion spent in 2004/05. Like education, the level and share of this allocation is regarded as critical for better health outcomes.
Capital expenditure in the health sector is slightly lower at 92,4 per cent or R3,8 billion. However, this is significantly higher by 53,0 per cent or R1,3 billion more than the R2,5 billion spent for the same period last year (table 8). Between provinces, the lowest rate of spending is in Northern Cape at 75,5 per cent and Limpopo at 77,5 per cent with Gauteng and Western Cape recording the highest rate of spending at 114,4 per cent and 97,3 per cent respectively.
Social development adjusted budgets of R60,0 billion comprise 27,4 per cent of total provincial adjusted budgets.
Provincial social development expenditure for the 2005/06 financial year is recorded at 96,7 per cent or R58,0 billion of the R60,0 billion adjusted budgets. This represents an increase of 13,8 per cent or R7,0 billion above the audited R51,0 billion spent last year.
Table 9 further indicates that, in aggregate, provincial social development departments underspent on their 2005/06 adjusted budgets by approximately R2,0 billion. All provinces recorded an underspending with Free State and Gauteng reflecting the largest at R464,2 million and R424,1 million respectively.
Among provinces, there are varying degrees of year-on-year growth in spending with Mpumalanga spending 19,5 per cent and Limpopo spending 16,0 per cent more while Free State and Eastern Cape reflect the lowest increases of 11,4 per cent and 11,6 per cent respectively.
Table 10 indicates that provinces spent 97,1 per cent or R53,8 billion of the R55,4 billion adjusted budget on Programme 2: Social Assistance. This has resulted in an underspending of R1,6 billion with none of the nine provinces reporting an overspending. The largest underspending is recorded in Free State and Gauteng at R417,7 million and R381,2 million respectively. The spending trend is very similar to that of provincial social development spending as programme 2 accounts for 92,7 per cent of total social development expenditure and 25,0 per cent of total provincial expenditure.
Table 11 reflects social grants beneficiary numbers by type of grant and by province over the twelve month period ending March 2006. There is a steady average monthly growth in beneficiary numbers of 1,9 per cent over the twelve month period rising from 8,8 million in April 2005 to 10,9 million in March 2006.
The bulk of beneficiaries as at end of March 2006 are for the Child Support Grant (7,0 million) and Old Age Grant (2,1 million) which includes Grant-in-aid. Beneficiaries of the Child Support Grant have the highest monthly average growth of 2,9 per cent.
Between provinces, KwaZulu-Natal and Eastern Cape have the highest number of recorded beneficiaries at approximately 2,5 million and 2,1 million beneficiaries respectively followed by Limpopo at 1,6 million.
June 2005 through March 2006. As a result, Mpumalanga reflects the highest average monthly growth of 11,0 per cent over the twelve month period, however, it is hugely influenced by the large increase in May 2005.
Table 12 reflects social grant payments by type of grant and by province over the twelve month period ending March 2006.
March 2006. This declining trend in social grant payments is the result of a decline of social grant payments from December 2005 to March 2006.
Provinces have spent 94,0 per cent or R13,1 billion of their almost R14,0 billion adjusted capital budgets ("payment for capital assets"). This is significantly higher by 26,8 per cent or R2,8 billion more than the audited R10,4 billion spent over the same period last year. However, provinces in aggregate underspent by R844,1 million with only Gauteng overspending by R337,2 million by the end of the 2005/06 financial year.
Table 13 provides total capital spending information by province, which indicates significantly low rates of spending in North West at 82,3 per cent and Mpumalanga at 82,6 per cent to the highest in Gauteng at 116,2 per cent and Western Cape at 95,9 per cent. In absolute terms, KwaZulu-Natal has spent the most at R3,4 billion followed by Gauteng and Eastern Cape at R2,4 billion and R1,5 billion respectively. It should be noted that the Integrated Housing and Human Settlement Development grant (formally the housing subsidy grant) is now classified under transfers and subsidies, and not capital.
The biggest adjusted capital budgets in provinces are in public works, roads and transport departments at 34,3 per cent or R4,8 billion of the total provincial capital adjusted budget of R14,0 billion. Spending for these departments is relatively higher than in other sectors at 106,4 per cent or R5,1 billion which is higher by 12,3 per cent or R560,1 million more than the audited R4,5 billion spent last year over the same period.
Between provinces, the lowest rate of spending is recorded in Free State at 77,0 per cent and Limpopo at 88,8 per cent, whilst Gauteng and KwaZulu-Natal recorded the highest rates of spending at 185,7 per cent and 105,4 per cent, respectively. The high spending rate against adjusted budget in Gauteng may be due to public works capital expenditure including some health and education capital spending or due to economic misclassification.
Table 15 indicates that provinces spent 102,9 per cent or almost R5,0 billion of their R4,8 billion housing conditional grant. These spending figures are a significant improvement compared to last year with audited spending increasing by 14,9 per cent or R646,0 million from R4,3 billion spent over the same period last year.
2005 Act No.
Table 16 reflects spending on 2005/06 conditional grant allocations as at 31 March 2006 for all provinces. It excludes conditional grants roll-overs from the 2004/05 financial year and spending on general purpose conditional grants (Schedule 4 grants) like National Tertiary Services, Hospital Professions Training and Development, and the Provincial Infrastructure grants, as reporting against these grants cannot be separated from the province's health and capital budgets.
Spending on the Comprehensive Agricultural Support Programme and Integrated Social Development Services Grant (also Schedule 4) is subsumed in a range of programmes across provincial departments and therefore no separate reporting is required in terms of the Division of Revenue Act, 2005 (Act No. 1 of 2005).
The total conditional grant allocation for all grants (including additional allocations published in the Government Gazette of 7 December 2005) is R75,1 billion (excluding provincial roll-overs) with social development making up the bulk with R55,9 billion.
Against the total allocation of R63,5 billion, which excludes provincial roll-overs and Schedule 4 grants, the rate of conditional grants spending amounts to 98,0 per cent or R63,2 billion.
Specific grants that show low rates of spending include Forensic Pathology Services (14,9 per cent), Disaster Relief (83,8 per cent) and Hospital Revitalisation (84,2 per cent). This is to be expected due to the late introduction of some of these grants during the 2005 Adjusted Estimates.
Land Affairs 8 000 - 8 000 8 000 1.
National Treasury 3 730 773 - 3 730 773 2 984 113 1.
Provincial roll-overs, as submitted by provinces in their In-Year Management, Monitoring and Reporting Model, amount to R1,4 billion which includes roll-overs for Integrated Housing and Human Settlement Development of R393,7 million, Provincial Infrastructure of R199,0 million, Social Assistance Transfers grant of R138,0 million, Hospital Revitalisation of R126,9 million and National School Nutrition Programme of R113,2 million amongst others, which are excluded from the table, but were available for spending during the 2005/06 financial year. If the provincial roll-overs, which are at the disposal of provinces, are taken into consideration, the rate at which conditional grants are being spent changes from 98,0 per cent to 94,4 per cent which also includes spending, in aggregate, on Schedule 4 grants.
Table 17 indicates that provinces have significantly improved their rates of conditional grant spending, excluding the Schedule 4 conditional grants, with only one grant i.e. Hospital Revitalisation grant having five or more provinces spending less than 90,0 per cent of their grant budget. The majority of grants fall over the 95,0 per cent spending range with the only a few between the 90,0 per cent and 95,0 per cent spending range. On the face of it, these spending trends exhibit a marked improvement in conditional grant spending as compared to previous financial years.
Percentages represent actual expenditure of main budget as published in the Division or Revenue Act, 2005 (Act No.1 of 2005) and the Adjusted Estimates Gazette dated 07 December 2005 but excludes provincial roll-overs.
Personnel expenditure ("compensation of employees") is at 99,0 per cent or R95,7 billion of the R96,7 billion adjusted personnel budgets (table 18). Spending to date is 8,9 per cent or R7,8 billion higher than the audited R87,9 billion spent last year. Gauteng and Western Cape recorded the lowest rates of personnel spending at 96,1 per cent and 96,3 per cent respectively while Limpopo, North West and Mpumalanga recorded the highest rates at 103,4 per cent, 99,9 per cent and 99,6 per cent respectively.
Provincial Revenue includes budgeted equitable share allocations of R134,7 billion, conditional grants of R75,1 billion and own revenue of R6,1 billion (post adjustments).
National government transferred all of the R134,7 billion of the equitable share, and 97,7 per cent or R73,4 billion in conditional grants, to provinces by the end of March 2006.
Preliminary outcomes suggest that provinces have collected 119,7 per cent or R7,2 billion of their adjusted own revenue budget of R6,1 billion.
The total provincial revenue received and collected to date is recorded at 99,7 per cent or R215,3 billion of total adjusted revenue budget of R215,9 billion.
Table 19 indicates that the R6,1 billion adjusted budget amount is almost identical to the audited R6,2 billion own revenue collection for the entire 2004/05 financial year. The R7,2 billion collected to date is 16,1 per cent or R1,0 billion more than own revenue collected for the previous financial year. The collection rate varies from 98,4 per cent in Northern Cape and 107,3 per cent in KwaZulu-Natal, to a high of 148,7 per cent in Eastern Cape and 128,7 per cent in Mpumalanga. This is not necessarily as a result of efficiencies in the own revenue collection process but rather a result of lower revenue forecasts.