The second quarter provincial budget report covers spending for the first six months of the 2005/06 financial year, which ended 30 September 2005.
Provinces have spent 46,8 per cent of their main budget, or R100,1 billion of R213,7 billion.
Provinces spent 40,4 per cent or over R4,8 billion of their R11,9 billion combined capital budgets.
Personnel expenditure by provinces is at 48,7 per cent or R47,1 billion of the R96,7 billion budget including the recent public service increases.
The greatest potential spending pressure is in education departments, where provinces have spent 49 per cent or R34,4 billion of their R70,2 billion budget, an increase of R4,3 billion or 14,2 per cent over the same period last year. However, capital expenditure in education is relatively low at 34,1 per cent or R978,8 million for the first six months.
Health expenditure is at 47,2 per cent or totalled R21,7 billion, which is R3,4 billion higher compared with the same period last year. Capital expenditure in health is lower at 35,2 per cent or R1,2 billion, however, it is substantially higher compared to the same period last year.
The highest share of provincial capital budgets is for public works, roads and transport departments at 36 per cent. The sector spent 50,7 per cent or R2,2 billion against its total capital budget of R4,3 billion after the 2nd quarter of the financial year.
Provincial own revenue collected thus far is at 55,9 per cent or R3,3 billion of the total own revenue budget of R5,9 billion. National government has transferred R70 billion of the equitable share, and R38,7 billion in conditional grants to provinces, during the first six months of 2005/06.
The budgeted figures for provinces are based on the 2005/06 provincial budgets (main budgets) tabled in March 2005.
This analysis is based on the statement of receipts and payments, published by the National Treasury on 28 October 2005 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 15 October 2005, and submitted to the National Treasury by 22 October 2005. 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 information presented here is restricted to financial information only, but provincial departments should be in a position to provide complementary non-financial performance information at least up to the first 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 second quarter information will provide a valuable basis for determining potential overspending pressures which provinces must take into account when preparing their adjustment budgets.
Table 1 indicates that provinces have spent 46,8 per cent or R100,1 billion of budgeted expenditure after six months into the current financial year. Spending to date is at the same level in percentage terms against spending over the same six month period in the 2004/05 financial year. However, in nominal terms, spending is 14,6 per cent or R12,8 billion higher than for the same period last year when provinces had spent R87,3 billion. Between provinces, spending ranges from the lowest share of 45,4 per cent in Limpopo and 45,8 per cent in North West to the highest at 49,8 per cent in Mpumalanga and 49,3 per cent in Northern Cape.
Social services budgets total R175,8 billion, and comprise 82,3 per cent of the total R213,7 billion provincial budget in 2005/06. Table 2 indicates that provinces spent 47,7 per cent or R83,9 billion of the budgeted R175,8 billion for the three social services (education, health and social development). This is 15 per cent or R10,9 billion more than spending over the same period in 2004/05.
Social development budgets at R59,7 billion comprise 27,9 per cent of total provincial budgets.
The second quarter spending figures indicate that provincial social development budgets have stabilised. Provinces registered spending of 46,5 per cent or R27,8 billion of their R59,7 billion budget (Table 3). This represents an increase of 13,2 per cent or R3,2 billion above the R24,5 billion spent over the same period last year.
Between provinces, there are varying degrees of year-on-year growth in spending with Mpumalanga spending 28,8 per cent and Gauteng spending 27,8 per cent more while North West reflects a decline of 1,7 per cent and Eastern Cape increasing only 6,1 per cent.
Table 4 reflects social grants beneficiary numbers by type of grant and by province over the six month period ending September 2005. There is a steady average monthly growth in beneficiary numbers of 2,4 per cent over the six month period rising from 8,8 million in April to 9,9 million in September 2005. The bulk of beneficiaries are for the take-up of Child Support grants (6,2 million beneficiaries) and Old Age (2,1 million beneficiaries) which includes Grant-In-Aid take-up for the month of September. Child Support Grant beneficiaries reflect the highest monthly average growth of 3,8 per cent. Between provinces, KwaZulu-Natal and Eastern Cape have the highest number of recorded beneficiaries at 2,2 million and 1,9 million beneficiaries followed by Limpopo at 1,5 million. Mpumalanga has the most volatile fluctuation in beneficiary numbers rising sharply in May and then steadying over June through September. But Mpumalanga still reflects the highest average monthly growth of 23,8 per cent over the six month period.
Excludes "Social Relief of Distress" which is included in the overall Social Assistance Transfers Grant.
The Old Age Grant includes "Grant-in-aid".
Table 5 reflects social grant payments by type of grant and by province over the six month period ending September 2005. As with beneficiary numbers, there has been a steady average monthly growth in grant payments of 2,4 per cent over the six month period rising from under R4,0 billion in April to almost 4,5 billion in September 2005. The majority of payments are for Old Age (R1,8 billion) which include Grant-In-Aid payments, Child Support grant payments (R1,3 billion) and Disability grant payments (R1,1 billion) in September 2005. Care Dependency (3,4 per cent), Child Support (3 per cent) and Old Age (2,8 per cent) grant payments have the highest average monthly growth over the six month period. Between provinces, KwaZulu-Natal and Eastern Cape records the highest payments of social grants of R981,3 million and R798,6 million followed by Gauteng at R677 million. Gauteng and Mpumalanga have the highest average monthly growth in social grant payments of 10,6 per cent and 5,9 per cent respectively.
Education budgets of R70,2 billion comprise 32,9 per cent of total provincial budgets. Table 6 indicates that education expenditure is at 49 per cent or R34,4 billion of the total education budget, an increase of 14,2 per cent or R4,3 billion compared to the R30,1 billion spent over the same period in 2004/05. Spending between provinces for education ranges from the lowest rate in North West at 48,1 per cent and Mpumalanga at 48,7 per cent to the highest in Northern Cape at 51,9 per cent and Gauteng at 49,7 per cent.
The bulk of education expenditure is on personnel, amounting to 50,3 per cent or R28,9 billion of the education personnel budget of R57,5 billion. Spending on goods and services (mostly learner support material) in education is recorded at 36,3 per cent or R2,3 billion of its R6,3 billion budget.
Education capital expenditure is somewhat low at 34,1 per cent or R978,8 million of the R2,9 billion budget. However, this is marginally higher than the R942,4 million spent on capital over the same period last year. Spending between provinces ranges from the lowest in KwaZulu-Natal at 14,8 per cent and Northern Cape at 28,5 per cent to the highest in North West at 60,5 per cent and Western Cape at 58,4 per cent.
Health budgets totalling R45,9 billion comprise 21,5 per cent of the total provincial budget. Table 8 indicates that health expenditure is at 47,2 per cent or R21,7 billion of the total health budget, representing an increase of 18,5 per cent or R3,4 billion compared to spending after the second quarter of the 2004/05 financial year.
Limpopo health has spent the lowest share of its budget after the first six months at 40,7 per cent with Western Cape spending 45,5 per cent. The highest shares are recorded in Eastern Cape and Northern Cape both at 51,2 per cent.
Capital expenditure in the health sector is relatively low at 35,2 per cent or R1,2 billion. However, this is significantly higher at 61,3 per cent or R467,9 million more than the R763,7 million spent for the same period last year (Table 9). Between provinces, the lowest rate of spending is in Limpopo at 18,6 per cent and North West at 23,4 per cent with Gauteng and KwaZulu-Natal recording the highest rate of spending at 57,7 per cent and 44,2 per cent respectively.
Provinces have spent 40,4 per cent or over R4,8 billion of their R11,9 billion capital budgets ("payment for capital assets"). This is significantly higher (31 per cent or R1,1 billion) than the R3,7 billion spent over the same period last year.
Table 10 also provides capital spending information by province, which indicates significantly low rates of spending in Limpopo at 28,8 per cent and North West at 35,8 per cent to the highest in Mpumalanga at 52,4 per cent and Gauteng at 48,9 per cent. In absolute terms, KwaZulu-Natal has spent the most at R1,2 billion followed by Eastern Cape at R717 million and Gauteng at R712 million.
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 capital budgets in provinces are in public works, roads and transport departments at 36 per cent or R4,3 billion of the total provincial capital budget of R11,9 billion. Spending for these departments is relatively higher than in other sectors at 50,7 per cent or R2,2 billion which is appreciably higher at 31,6 per cent or R521,4 million more than the R1,6 billion spent last year over the same period. Between provinces, the lowest rate of spending is recorded in Limpopo at 36,9 per cent and Northern Cape at 37,9 per cent, whilst Mpumalanga and Free State recorded the highest rates of spending at 70,6 per cent and 63,5 per cent respectively.
As noted above, the Integrated Housing and Human Settlement Development grant (formally the housing subsidy grant) expenditure is no longer treated as capital. Table 12 indicates that provinces spent 44,3 per cent or R2,1 billion of their R4,8 billion housing conditional grant. These spending figures are a significant improvement compared to last year with spending increasing by 25,7 per cent or R439 million from R1,7 billion over the same period last year.
Table 13 (overleaf) reflects spending on all 2005/06 conditional grant allocations as at 30 September 2005 for all provinces. It excludes conditional grants rollovers from the 2004/05 financial year and spending on general conditional grants (schedule 4) 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 Housing and Human Settlement Development grant (also schedule 4) is subsumed in a range of programmes across provincial departments and therefore no separate reporting is required.
The total conditional grant allocation for all grants is at R74,6 billion (excluding rollovers) with social development making up the bulk with R55,9 billion. Against the total allocation, the rate of conditional grants spending (excluding schedule 4 grants) amounts to 40,3 per cent.
Specific grants that show low spending include Hospital Revitalisation (29 per cent), Hospital Management and Quality Improvement (29,4 per cent), Mass Sport and Recreation Participation Programme (32,1 per cent), Social Assistance Administration grant (36,8 per cent), HIV and Aids (Education - Life Skills) (36,9 per cent) and Integrated Nutrition Programme (Health) (37 per cent). Overall only two grants, namely Human Settlement and Redevelopment and Land Care Programme have recorded spending of over 50 per cent against total available funds excluding rollovers.
Provincial roll-overs, as submitted by provinces in their In-Year Management, Monitoring and Reporting model, amount to R785,6 million which includes rollovers for Integrated Housing and Human Settlement Development of R308,5 million, Provincial Infrastructure of R93,1 million, Hospital Revitalization of R89,1 million and Social Assistance Transfers grant of R60,3 million amongst others which are excluded from the table, but are available for spending during the 2005/06 financial year.
National departments administering the above conditional grants, monitor transfers, spending and outputs on the conditional grants they administer.
Table 14 below indicates that provinces are spending slowly on conditional grants excluding the schedule 4 conditional grants. It indicates that five or more provinces have spent less than 35 per cent of their grant budget after six months for the following grants: Land Care Programme, Hospital Revitalisation, Hospital Management and Quality Improvement and Mass Sport and Recreation Participation Programme.
The table also indicates the number of provinces spending at slightly higher levels between 35 and 45 per cent (inclusive) and greater than 45 per cent of their conditional grant budgets. Although the rate of spending is encouraging and improved over previous financial years, overall spending still lies below average.
Percentages represent actual expenditure of main budget as published in the Division or Revenue Act, 2005 (Act No.1 of 2005).
Personnel expenditure ("compensation of employees") is at 48,7 per cent or R47,1 billion of the R96,7 billion budget. Spending to date is 12,2 per cent or R5,1 billion higher than the R42 billion spent last year. Free State and Western Cape recorded the lowest rates of personnel spending at 47,2 per cent and 47,3 per cent respectively while Eastern Cape and Limpopo recorded the highest rates at 50,2 per cent and 49,9 per cent respectively.
Provincial Revenue includes budgeted equitable share allocations of R134,7 billion, conditional grants of R74,6 billion and own revenue of R5,9 billion.
National government transferred 52 per cent or R70 billion of the equitable share, and 51,9 per cent or R38,7 billion in conditional grants, to provinces after six months of the current financial year.
After six months, provinces have collected 55,9 per cent or R3,3 billion of budgeted own revenue of R5,9 billion.
The total provincial revenue received and collected to date is recorded at 52,1 per cent or R112 billion of total budgeted total revenue of R215,2 billion.
The R5,9 billion budgeted amount is slightly less than the R6,2 billion collected in the previous year (2004/05). The R3,3 billion collected thus far is 23,6 per cent or R630,6 million more than what was collected by the end of September for the previous financial year. The collection rate varies from 42,7 per cent in North West and 48,2 per cent in Limpopo, to a high of 77,2 per cent in Eastern Cape and 74,6 per cent in Mpumalanga. It appears at this stage that most provinces will exceed their collection of budgeted own revenue projecting to over collect by 7,4 per cent or R435,1 million.