Third quarter spending reports indicated that provincial spending is well on track, with provinces spending R121,4 billion, or 71,1 per cent of the R170,7 billion adjusted budget. This represents an increase of R16,9 billion or 16,2 per cent over the same period in 2002/03. Given that last quarter spending is higher than the first three quarters, provinces are expected to spend their budgets by the end of the year.
Key spending pressure is from social grants, which continue to rise rapidly. Provinces spent R30,7 billion or 75,2 per cent of the 40,9 billion adjusted budget. This represents a sharp increase of R6,9 billion or 29,2 per cent from the R23,8 billion in 2002/03 for the same period. This is mainly attributed to the rapid take-up of the Child Support and Disability Grants.
Spending on health expenditure is at 70 per cent, or R26,2 billion, which is R2,4 billion or 10 per cent higher compared to the same period in 2002/03 financial year. Education expenditure has seen strong growth at R43,5 billion (73 per cent) and is R4,5 billion (11,5 per cent) higher when compared to the same period last year.
Capital spending has also improved at R10,8 billion or 57,1 per cent of the adjusted capital budget of R18,9 billion, an increase of R2,5 billion or 30 per cent over the same period for the last year (2002/03). Capital spending on roads and public works is highest at 64,5 per cent. Provincial education departments have also greatly improved their capital spending capacity compared to last year.
Provincial own revenue collected is R4,4 billion or 81,4 per cent of the R5,4 billion adjusted own revenue budget. In addition, national government transferred R107,7 billion of the equitable share grant, and R12,2 billion in conditional grants, to provinces by 31 December 2003.
This analysis is based on the statement of revenue and expenditure published by the National Treasury on 30 January 2004, and is available on the treasury website www.treasury.gov.za.
This report, on the outcome of the 2003/04 provincial budgets after nine months into the financial year (from 1 April to 31 December 2003), is based on their budgets as adjusted through their Adjustments Budgets. Table 1 indicates their revised budget against which the nine-month figures are compared.
 Provinces spent R121,4 billion, or 71,1 per cent of their R170,7 billion adjusted budget. This is R16,9 billion or 16,2 per cent higher than the expenditure recorded after the same period last year.
 Provinces have budgeted 81 per cent of their budget (or R137,8 billion) for social services, which include spending on education, health and social development1. Spending on social services after three quarters of the year is at R100,4 billion or 72,8 per cent of the adjusted budget.
 School Education: Education expenditure is recorded at R43,5 billion or 73 per cent of the adjusted budget of R59,5 billion and is R4,5 billion or 11,5 per cent higher compared to the same period during the 2002/03 financial year. With education budget being largely personnel driven, expenditure on personnel is R37,1 billion or 74,9 per cent of the R49,6 billion adjusted personnel budget.
 Health: Health expenditure to date is at R26,2 billion or 70 per cent of the adjusted budget of R37,4 billion. Health spending has increased by R2,4 billion (10 per cent) compared to the same period in 2002/03.
 Social Development: Provinces spent R30,7 billion or 75,2 per cent of the 40,9 billion adjusted budget, representing an increase of R6,9 billion or 29,2 per cent over the same period in 2002/03. This is mainly the result of acceleration in the take-up of the Child Support and Disability Grants as well as payments of Social Grant Arrears due to the higher-than-anticipated number of beneficiaries. The trend indicates that that provincial social development budgets may come under some pressure in the coming months.
 Personnel expenditure of R59,8 billion (73,5 per cent of the budgeted personnel expenditure) also represents 49,3 per cent of total provincial spending.
 Capital expenditure2 after nine months is R10,8 billion or 57,1 per cent of the capital budget. This is a significant improvement on last year, as provinces have spent R2,5 billion (30 per cent) more compared to the same period last year, when provinces had spent 50,9 per cent.
 The provinces with the highest proportion of capital spending are the Eastern Cape, spending 67,8 per cent, Limpopo spending 64,4 per cent and Free State spending 64,1 per cent of their adjusted capital budget. The lowest level of capital spending is recorded by North West, spending 35,8 per cent of its adjusted budget.
 In absolute terms, the highest capital expenditure is in Gauteng at R2,4 billion, followed by Eastern Cape at R2,2 billion, and KwaZulu-Natal at R2,1 billion.
 Capital spending has increased sharply in all provinces except in North West and Western Cape as compared to the same period in 2002/03. The Eastern Cape has significantly improved its spending capacity as spending has increased by R930,8 million or 70,6 per cent over the same period during 2002/03.
 It is difficult to assess what the projected out-turn will be on capital spending, including any underspending. Typically, most capital spending has a slow uptake in the first part of the year, and tends to be underestimated as some provincial departments do not reconcile their suspense accounts (eg North West housing department). For all these reasons, capital spending rises rapidly in the last quarter. Reporting, planning and project management reforms are in the process of being implemented to improve the reporting on capital, to ensure a more even flow of payments between the four quarters. However, these reforms will take at least three years to implement to all 116 provincial departments.
Total 18 850 538 10 761 274 57,1% 8 274 855 2 It is not clear to what proportion of the capital spending numbers are transfers, and what proportion of these transfers reflect actual spending.
 Table 4 shows that the biggest provincial capital budgets are for Public Works, Roads and Transport. These departments are performing the best, having spent R3,2 billion or 64,5 per cent of the R4,9 billion adjusted budget. The level of spending has significantly increased by R298,7 million or 10,4 per cent compared with the same period last year.
 Between provinces, the lowest spending is KwaZulu-Natal (53,6 per cent), whilst Gauteng records 89,3 per cent3. However, it should be noted that the Gauteng spending here probably includes some health and education capital spending.
 In absolute terms, Northern Cape has recorded the lowest level of spending with R57,4 million and Eastern Cape recording the highest with R766,5 million as at the end of December 2003.
Eastern Cape 1,074,361 766,497 71.
Free State 186,082 114,495 61.
Gauteng 462,493 413,235 89.
KwaZulu-Natal 1,109,850 594,397 53.
Limpopo 600,543 425,971 70.
Mpumalanga 316,867 184,184 58.
 Table 5 shows that capital spending on education is recorded at R1,6 billion or 54,5 per cent of their 2,9 billion adjusted capital budget. This level of spending shows great improvements compared to last year, as this year's spending exceeds that of 2002/03 by R489,3 million or 45,3 per cent.
 Spending in Northern Cape (29,3 per cent) and Eastern Cape (45,7 per cent) appears to be the lowest, while North West and Mpumalanga recorded the highest expenditure with 75,8 and 65,3 per cent respectively.
 Table 6 shows that capital spending on the health sector is lower as a share, at 49,9 per cent or R1,4 billion. There has been a considerable increase of R323,3 million or 29,8 per cent on Health capital spending as compared to the same period last year.
 Gauteng (15,3 per cent) and Free State (25,3 per cent) recorded the lowest level of health capital spending while Eastern Cape (75,4 per cent), KwaZulu-Natal (65,3 per cent) and Limpopo (64 per cent) recorded the highest level of spending. However, provincial departments like the Gauteng health department have not reconciled their monthly reports with their public works department, and hence probably underestimate their actual spending on capital in health.
 Table 7 shows capital expenditure in housing (largely spending on housing subsidies) at R2,8 billion or 56,3 per cent of the R4,9 billion adjusted housing capital budget. The level of spending has significantly increased by R447,9 million or 19,4 per cent as compared to the same period of the 2002/03 financial year.
 These housing figures do not fully account for past roll-overs and transfers (eg to SA Housing Fund and municipalities), making it difficult to assess spending against actual housing budgets.
 The lowest level of spending is recorded by North West at 2,6 per cent followed by Western Cape at 38,3 per cent and Gauteng at 43,2 per cent. The highest level of spending is recorded by Free State at 85 per cent and Mpumalanga at 78,7 per cent. However, the North West department of housing appears not to have not reconciled its suspense accounts, so its reported figure is seriously under-stated.
 Provinces have collected 81,4 per cent of the budgeted own revenue of R5,4 billion for the year, collecting R4,4 billion after nine months.
 The high 81,4 per cent collection may be an indication of provinces being conservative in their revenue budgets, as the R5,4 billion budgeted amount is still less than the R5,9 billion actually collected in the previous year (2002/03). The collection varies from a low of 72,2 per cent in Northern Cape to a high of 99,6 per cent collected in KwaZulu-Natal.
 National government transferred R107,7 billion of the equitable share grant, and R12,2 billion in conditional grants, to provinces to date.
 In total, including adjusted provincial own revenue, provincial revenue as at 31 December 2003 is at R124,2 billion or 26,3 per cent higher than in the same period last year.