The fourth quarter figures provide the first estimates of total provincial spending for the 2002/03 financial year. These figures are, however, not final, as provinces are still reconciling and closing their books, in preparation for finalising their financial statements for submission to the Auditor-General by 31 May 2003. It is therefore advisable to wait for the final figures before any definitive conclusions can be made. The National Treasury will publish the final figures in June.
The fourth quarter figures indicate that provincial year on year spending increased sharply between 2001/02 and 2002/03, confirming that spending capacity, especially on capital, improved considerably. Provinces spent R145,8 billion, or 98,7 per cent of their total revised budget of R147,7 billion. This is R23,2 billion more than the expenditure last year.
The preliminary consolidated provincial budget deficit is R3,1 billion, financed mainly from last year's rollovers and cash balances accumulated in previous years. The budget deficit is R198 million lower than the estimated projected deficit reported in the Budget Review, and R792 million higher than the projections in the 2003 Intergovernmental Fiscal Review (IGFR). The Budget Review and Intergovernmental Fiscal Review were based on 9 months and 10 months of actual figures respectively, and hence represent earlier projections.
Provinces are performing well on their capital spending compared to last year. Capital spending is R13,8 billion or 84,3 per cent of the adjusted capital budget of R16,4 billion. This is R2,5 billion or 21,8 per cent more than the expenditure at the same time last year. The bulk of the remaining R2,6 billion on capital may also be committed on projects, but the extent of such commitments are not available at this stage. This analysis is based on the statement on revenue and expenditure to be published by the National Treasury today (30 April 2003), and is available on the treasury website www.treasury.gov.za.
National government transferred R123,5 billion of the equitable share grant, and R13,5 billion in conditional grants, to provinces for the 2002/03 financial year.
Social development expenditure increased by R8,7 billion from R23,8 billion in 2001/02 to R32,5 billion in 2002/03.
Health expenditure of R33,2 billion is R3,5 billion higher compared to 2001/02 financial year.
Strong growth in education capital spending. Present expenditure of R1,7 billion is R277 million higher than in 2001/02.
Provincial own revenue is R1,3 billion higher than the R4,4 billion adjusted own revenue budget.
This report on the preliminary outcome of the 2002/03 provincial budgets after a full year of spending (from 1 April 2002 to 31 March 2002) is based on their budgets as adjusted (through their Adjustments Budgets). Table 1 indicates their revised budget against expenditure and the possible under expenditure per province.
 Provinces spent R145,8 billion, or 98,7 per cent of their total revised budget of R147,7 billion. This is R23,2 billion more than the expenditure at the same time last year.
 Personnel expenditure is R74,0 billion or 50,7 per cent of total provincial spending.
 Provinces have budgeted R117,9 billion for social services, which include spending on education, health and social development1. Spending on social services is at R118,4 billion or 0,4 per cent higher than the adjusted budget.
o School Education: Education expenditure is at R52,7 billion or R119 million higher than the adjusted budget of R52,5 billion. This is largely due to Eastern Cape overspending its personnel budget by R573 million. Education spending is R5,8 billion higher than the 2001/02 financial year. The education budget is largely personnel driven and expenditure on personnel is R45,7 billion or 2,5 per cent higher than the adjusted budget of R44,6 billion.
o Health: Health expenditure is R33,2 billion or R211 million more than the adjusted budget of R33 billion. Health spending is R3,5 billion higher than the 2001/02 financial year.
1 It should be noted that education, health and social development expenditure is by department, and not functional expenditure classification as presented in the Budget Review.
o Social Development: Provinces spent R32,5 billion or R145 million more than the adjusted budget of R32,4 billion. This represents a massive increase over the R8,7 billion compared to spending in 2001/02. The reason for this is the acceleration in the take-up of the Child Support and Disability Grants, as well as payment of approximately R1 billion of the R2 billion social grant arrears (transferred on the last day of the previous financial year) during the 2002/03 financial year.
 Capital expenditure for the year is R13,8 billion or 84,3 per cent of the capital budget. This is a significant improvement on last year, as provinces have spent R2,5 billion more compared to last year, representing an increase of 21,8 per cent on capital spent last year.
 The extent of underspending on capital cannot be assessed at this stage, as the share of the remaining R2,6 billion may also be committed and not paid out due to the multi-year nature of capital projects.
 Provinces with the highest proportion of capital spending are Limpopo, North West, Western Cape and Mpumalanga who each spent more than 90 per cent of their adjusted capital budgets, with the lowest being Eastern Cape and Free State at just under 70 per cent. In absolute terms, the highest capital expenditure is in Gauteng at R3,4 billion, followed by KwaZulu-Natal (R2,8 billion), Eastern Cape (R1,8 billion) and Limpopo (R1,5 billion). Capital spending in all provinces increased sharply compared to 2001/02.
2002/03 Adjusted Expenditure as % Actual vs.
Eastern Cape 2 746 662 1 817 196 66.
Western Cape 1 551 690 1 398 330 90.
Total 16 360 581 13 792 096 84.
The biggest provincial capital budgets are for public works, roads and transport. These departments are performing the best, having spent their entire budget of R4 billion. The spending compares well with the full-year spending of R3,1 billion 2001/02. Between provinces, the lowest spending is Northern Cape (88 per cent), whilst Eastern Cape recorded 125 per cent2.
Table 4: Capital Expenditure: Public Works, Roads and Transport 2002/03 Adjusted Expenditure as % Actual vs.
Eastern Cape 488 317 614 252 125.
Total 4 024 049 4 128 982 102.6% 3 064 444 1 Some public works capital expenditure reports include some health and education capital spending, e.g.
Education departments have spent 73 per cent or R1,7 billion of their budget. This level of spending exceeds the full-year spending of R1,4 billion in 2001/02. The spending in Free State (38,9 per cent) is relatively low, whilst Mpumalanga, North West, Northern Cape, Eastern Cape and Western Cape all record over 85 per cent spending.
Health departments have spent 86,8 per cent or R2,2 billion of their budget. This level of spending is at the same level in 2001/02. Between provinces, the lowest share of spending is in North West, Eastern Cape and Northern Cape with Gauteng recording the highest share at 122,1 per cent.
2 Some of the public works reports contain some of the capital spending for education and health. This is the case in Western Cape and Gauteng, hence the "overspending" in Gauteng. The monthly reports are not always fully reconciled when submitted for publication. The financial statements produced by 31 May 2003 will reconcile such spending to the correct departments.
Table 6: Capital Province Expenditure: Health 2002/03 Adjusted Budget R'000 Expenditure as at 31 March 2003 % R'000 Actual vs.
Eastern Cape 541 715 294 340 54.
Expenditure in housing is R3,8 billion or 75,9 per cent of the adjusted budget of R5 billion. The Eastern Cape classified its spending on housing as current and, if corrected, the level of spending on housing will be much higher than reflected. The other provinces, except Northern Cape, show spending of above 85 per cent.
Province 2002/03 Adjusted Budget Expenditure as at 31 March 2003 % Actual vs.
Eastern Cape 795 526 19 803 2.
 Provincial own revenue is R1,3 billion higher than the R4,4 billion adjusted own revenue budget.
 The higher level of revenue collected compared to budgeted revenue is an indication of provinces being conservative in their revenue projections in their initial budgets, as the R4,4 billion adjusted budget is still less than the R4,9 billion actually collected in the previous year (2001/02).
 National government transferred R123,5 billion of the equitable share grant, and R13,5 billion in conditional grants, to provinces for the 2002/03 financial year.
 In total, including provincial own revenue, provincial revenue at the end of the financial year is R142,7 billion or R16,3 billion higher than in 2001/02.