year to date provincial budget report
3 May 2007
1. The fourth quarter provincial budget statement of receipts and payments,
published by the National Treasury in terms of Section 32 of the Public Finance
Management Act, 1999 (PFMA) on 30 April 2007 is the first estimate of spending
outcomes for the 2006/07 financial year which commenced on 1 April 2006 and
ended on 31 March 2007. These figures may be revised as national and provincial
departments finalise (and reconcile) their financial statements by 31 May 2007
for submission to the Auditor-General (AG).
2. The budgeted expenditure figures take account of revisions effected in
the provincial adjustment budgets which include R1,6 billion allocated to
provinces for conditional grants in the 2006 adjusted estimates of national
expenditure and additional funding by provinces of almost R3,4 billion, which
includes roll-overs from the previous financial year.
3. This report also includes a comparative spending analysis over the
2005/06 financial year. Data for the 2005/06 financial year are extracted from
the provincial departments' audited annual financial statements as published in
their annual reports.
4. It should be noted that the 2005/06 financial year figures have been
adjusted to exclude Programme 2: social assistance grants of provincial social
development departments which were shifted to national government with effect
from 1 April 2006. This makes the 2006/07 figures and the 2005/06 figures
comparable.
5. In aggregate, provinces have spent 98,7 percent or R185,6 billion of
their combined adjusted budgets of R188 billion in 2006/07. This represents a
significant spending increase year on year of 15,2 percent or R24,5 billion
over the audited R161,1 billion spent in 2005/06. Spending varies between
provinces with the lowest share of 96,6 percent in North West and 96,8 percent
in Western Cape to the highest at 103,6 percent in Free State and 101,3 percent
in Northern Cape.
6. The preliminary under expenditure outcome of R2,4 billion or 1,3 percent
of adjusted provincial budgets in aggregate by provinces for the 2006/07
financial year is largely due to under expenditure in seven provincial
education departments and to a lesser extent in capital and conditional
grants.
7. Education expenditure totalled R78,8 billion or 98,3 percent of the R80,1
billion combined adjusted education budgets and remains the largest item on
provincial budgets. The spending pattern reflects a 9,4 percent or R6,8 billion
increase compared with the audited spending in 2005/06.
8. Health expenditure totalled R53,6 billion or 100,6 percent of the R53,3
billion combined adjusted health budgets and is the second largest item (after
education) on provincial budgets. The spending pattern reflects a 14 percent or
R6,6 billion increase compared with the audited spending in 2005/06.
9. Provincial social welfare services preliminary outcome for the 2006/07
financial year is recorded at 97,8 percent or R5,2 billion of the R5,3 billion
adjusted social welfare services budgets.
10. Total personnel expenditure in aggregate is at 98,7 percent or R104
billion of the R105,5 billion adjusted personnel budgets. This represents under
expenditure of R1,4 billion of which the bulk is in provincial education
departments with the exception of Eastern Cape and North West which overspent
in total by R323,5 million in education personnel.
11. In aggregate, provinces spent 97,3 percent or R15,6 billion of their
almost R16,1 billion adjusted capital budgets between the various sectors. This
is a significant improvement of 22,2 percent over the previous financial year
exceeding the audited R12,8 billion spent in 2005/06 by R2,8 billion.
12. Provincial education departments, year on year significantly improved on
spending on capital with a preliminary outcome of 96,5 percent or R3,7 billion
against their R3,8 billion adjusted education capital budgets which is 38,9
percent or R1 billion more than the previous financial year's audited
outcome.
13. Provincial health departments spent 93,1 percent or R4,7 billion of
their R5 billion adjusted health capital budgets which is 21,4 percent or
R819,3 million more than audited spending over the previous financial year.
14. The highest share of adjusted provincial capital budgets is for public
works, roads and transport departments at 34,3 percent. The sector spent 104,6
percent or R5,8 billion against its combined adjusted capital budgets of R5,5
billion for the 2006/07 financial year.
15. A total of R144,4 million of the integrated housing and human settlement
development grant has been stopped (not transferred) by the national Department
of Housing due to a lack of spending capacity, with Eastern Cape (R85,3
million) and Mpumalanga (R59,1 million) being the affected provinces.
16. Provincial own revenue collected is 11,5 percent more than the adjusted
forecast of R7 billion at R7,9 billion. National government transferred R150,8
billion in the form of the equitable share and R27,4 billion in conditional
grants to provinces for the 2006/07 financial year.
Detailed analysis of the 2006/07 budget (preliminary outcome)
17. The budgeted figures take account of revisions effected in the adjusted
estimates of provinces which were tabled in their provincial legislatures
during November/December 2006 and also cater for amendments made to the
adjusted estimates in the case of the Limpopo and Gauteng provinces (approved
by their legislatures on 8 March and 26 March 2007, respectively).
18. This analysis is based on the statement of receipts and payments
published by the National Treasury on 30 April 2007 and are available on the
treasury website (http://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, and submitted to the National Treasury
by 20 April 2007. 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.
19. The analysis presented here is restricted to financial information only
but provincial departments might be in a position to provide complementary
non-financial performance information at least up to the third quarter of the
2006/07 financial year relative to the targets set in their annual performance
plans, tabled in their respective provincial legislatures.
Total expenditure
20. The preliminary outcomes indicate that provinces have spent 98,7 percent
or R185,6 billion of their adjusted budgets of R188 billion for the 2006/07
financial year. Spending is at a similar level in percentage terms against
spending over the 2005/06 financial year (98,3 percent). However, in nominal
terms spending is 15,2 percent or R24,5 billion higher than last year when
provinces recorded audited spending of R161,1 billion.
21. Between provinces spending ranges from the lowest share of 96,6 percent
in North West and 96,8 percent in Western Cape to the highest at 103,6 percent
in Free State and 101,3 percent in Northern Cape.
Social Services
22. Adjusted social services budgets total R138,7 billion and comprise 73,8
percent of the R188 billion combined adjusted provincial budgets in 2006/07.
Table 2 indicates that provinces have spent 99,2 percent or R137,5 billion of
the adjusted R138,7 billion budget for the three social services (education,
health and social welfare services). This is 11,6 percent or R14,3 billion more
than the audited spending in 2005/06.
Education
23. Adjusted education budgets of R80,1 billion comprise 42,6 percent of
total adjusted provincial budgets. Table three indicates that education
expenditure is at 98,3 percent or R78,8 billion of the total adjusted education
budgets, an increase of 9,4 percent or R6,8 billion compared to the audited R72
billion spent in 2005/06.
24. Spending between provinces for education ranges from the lowest rate in
Gauteng at 94,7 percent and Mpumalanga at 96,6 percent to the highest in
KwaZulu-Natal and Free State at 100,9 percent and 100,2 percent
respectively.
25. Seven provinces (except Free State and KwaZulu-Natal) recorded a
combined preliminary under spending on their adjusted education budgets of R1,5
billion with Gauteng the largest at R647,9 million. Most of the under spending
in Gauteng at R606,7 million, is for education personnel.
26. The bulk of education expenditure is on personnel (79,2 percent), which
amounts to 99 percent or R62,4 billion of the adjusted education personnel
budgets of R63 billion.
27. Spending between provinces ranges from the lowest in Gauteng and Western
Cape at 93,7 percent and 97,5 percent to the highest in Eastern Cape and North
West at 102,4 percent and 101,3 percent respectively.
28. The preliminary outcome on goods and services (mostly learner support
material) in education, is recorded at only 89,4 percent or R7,9 billion of the
R8,8 billion adjusted budget. The bulk of the goods and services under spending
of R933,3 million is recorded in Eastern Cape at R392,2 million.
29. A notable improvement is in education capital expenditure at 96,5
percent or R3,7 billion of the R3,8 billion adjusted education capital budgets.
This is significantly higher by 38,9 percent or R1 billion more than the
audited spending of R2,6 billion in 2005/06.
30. Capital spending for education between provinces ranges from the lowest
in Eastern Cape at 78,9 percent and Mpumalanga at 85,5 percent to the highest
in Gauteng at 112,6 percent and KwaZulu-Natal at 108,4 percent. However,
expenditure reflects wide fluctuations compared to the audited outcome of last
year. Some provinces show very significant improvements while others reflect
negative year on year growth.
Health
31. Adjusted health budgets totalling R53,3 billion comprise 28,3 percent of
the total adjusted provincial budgets. Table 6 indicates that health
expenditure is at 100,6 percent or R53,6 billion of adjusted health budgets,
representing an increase of 14,0 percent or R6,6 billion compared to the
audited spending of the previous financial year. Four provinces (Free State,
Gauteng, Limpopo and Northern Cape) recorded a total overspending in their
adjusted health budgets of R834,7 million with Gauteng and Limpopo the largest
at R372,2 million and R264,8 million respectively.
32. North West and Eastern Cape have spent the lowest share of their
adjusted health budgets at 96,2 percent and 98,2 percent respectively. The
highest shares are recorded in Northern Cape at 107 percent and Limpopo at
104,8 percent respectively. Both provinces have slightly exceeded their
adjusted budgets.
33. Table 7 indicates that health personnel expenditure is at 99,5 percent
or R28,8 billion of adjusted health personnel budgets, an increase of 13,2
percent or R3,4 billion compared to the audited R25,4 billion spent in
2005/06.
34. Spending on non-personnel non-capital items (NPNC) in health which
includes medicines, drugs and other current expenditure is recorded at 104,2
percent or R20,2 billion of the R19,4 billion adjusted health NPNC budgets, an
increase of 13,6 per cent or R2,4 billion compared to the R17,8 billion spent
in 2005/06. Seven provinces (except Eastern Cape and North West) recorded a
total overspending in their health NPNC budgets of R869,8 million with Gauteng
the largest at R329,7 million.
35. Capital expenditure in the health sector at 93,1 percent or R4,7 billion
of the almost R5 billion combined adjusted health capital budgets, is lower
than the total capital expenditure against total adjusted capital budgets share
of 97,3 percent. However, this is higher by 21,4 percent or R819,3 million more
than the R3,8 billion spent in the 2005/06 financial year.
36. Between provinces the lowest rate of spending is in KwaZulu-Natal at
84,6 percent and Northern Cape at 85,2 percent with Limpopo and Free State
recording the highest rate of spending at 111,8 percent and 104,1 percent
respectively.
Social Welfare Services (Social Development)
37. Adjusted social welfare services budgets at R5,3 billion, comprise 2,8
percent of total adjusted provincial budgets.
38. Provincial social welfare services expenditure for the 2006/07 financial
year is recorded at 97,8 percent or R5,2 billion of adjusted social welfare
services budgets (Table 9). This represents an increase of 22,6 percent or
R954,9 million above the audited R4,2 billion spent last year (excluding social
assistance grants).
39. Between provinces, there are varying degrees of spending with the lowest
being in North West at 87,7 percent and KwaZulu-Natal at 95,4 percent while the
highest being Limpopo at 102,1 percent and Eastern Cape at 100,9 percent.
Housing and Local Government
40. Adjusted housing and local government budgets at R10,4 billion comprise
5,5 percent of total adjusted provincial budgets.
41. The preliminary outcome on housing and local government spending is at
94,5 percent or R9,8 billion of the adjusted housing and local government
budgets (Table 10). This represents an increase of 24,2 percent or R1,9 billion
on the R7,9 billion audited outcome in 2005/06.
42. Spending varies between provinces with the lowest being in Western Cape
at 81,8 percent and Eastern Cape at 86,3 percent while the highest are
Mpumalanga at 100 percent and Northern Cape at 99,7 percent.
43. Most of the housing expenditure is on the integrated housing and human
settlement development conditional grant (formally the housing subsidy
grant).
44. Table 11 indicates that provinces spent 96 percent or R6,5 billion of
their R6,8 billion housing conditional grant. These spending figures are a
significant improvement compared to last year with audited spending increasing
by 30,7 percent or R1,5 billion from the R5 billion spent in 2005/06.
45. However, a total of R144,4 million of the housing conditional grant has
been stopped (not transferred) by the national Department of Housing due to a
lack of spending capacity, with Eastern Cape (R85,3 million) and Mpumalanga
(R59,1 million) being the affected provinces.
Personnel expenditure
46. Total provincial personnel expenditure ("compensation of employees") is
at 98,7 percent or R104,0 billion of the R105,5 billion adjusted personnel
budgets, representing a substantial under expenditure of R1,4 billion.
47. However, the preliminary outcome is 8,7 percent or R8,4 billion higher
than the R95,7 billion spent last year. Western Cape and Gauteng recorded the
lowest rates of personnel spending at 96,4 percent and 96,9 percent
respectively while Northern Cape and Eastern Cape recorded the highest rates at
100,4 percent and 100,2 percent respectively.
Overall capital budgets and expenditure
48. Capital expenditure is another area of notable improvement. This is
partly the result of the Infrastructure Delivery Improvement Programme (IDIP)
which encourages infrastructure budgets to be aligned with spending capacity of
departments. The programme's aim is to facilitate improvements in the capacity
of departments both in terms of skills and efficiency in the delivery
management systems.
49. Provinces have spent 97,3 percent or R15,6 billion of their almost R16,1
billion adjusted capital budgets ("payment for capital assets"). This is
significantly higher by 22,2 percent or R2,8 billion more than the R12,8
billion spent in 2005/06.
50. However, provinces in aggregate under spent their adjusted capital
budgets by R434,7 million with Free State overspending its adjusted capital
budget by 32,1 percent or R266,5 million (mainly on roads infrastructure) at
the end of the 2006/07 financial year.
51. Table 13 above provides total capital spending information by province,
which indicates somewhat low rates of spending in Eastern Cape at 90,7 percent
and Mpumalanga at 90,8 percent to the highest in Free State at 132,1 percent
and Limpopo at 99,5 percent. In absolute terms, KwaZulu-Natal has spent the
most at R3,5 billion followed by Gauteng and Eastern Cape at R2,5 billion and
R1,9 billion respectively.
52. The biggest adjusted capital budgets in provinces are in public works,
roads and transport departments at 34,3 percent or R5,5 billion of the total
adjusted capital budgets of R16,1 billion. Spending for these departments is
higher than in other sectors at 104,6 percent or R5,8 billion which is 18,7
percent or R911,2 million more than the audited R4,9 billion spent last
year.
53. Between provinces, the lowest rate of spending is recorded in Limpopo at
86,9 percent and Mpumalanga at 94,7 percent, whilst Free State and Northern
Cape recorded the highest rates of spending at 173,1 percent and 104,8 percent
respectively.
Conditional grants
54. The total adjusted conditional grant allocation for all grants is R27,6
billion (including Schedule 4 grants and provincial roll-overs) with health
making up the bulk at R10,5 billion.
55. Table 15 reflects the preliminary outcome on conditional grant
allocations for all provinces. It excludes spending on general purpose
conditional grants (Schedule 4 grants) like national tertiary services, health
professions training and development and the provincial infrastructure grants
as reporting against these grants cannot be separated from the provinces'
health and capital budgets.
56. Spending on the comprehensive agricultural support programme grant (also
Schedule 4) is subsumed in a range of programmes and therefore no separate
reporting is required in terms of the Division of Revenue Act, 2006 (Act No 2
of 2006).
57. Against the total adjusted allocation of R16,2 billion, which excludes
Schedule 4 grants, the rate of conditional grants spending amounts to 94,6
percent or R15,3 billion.
58. Specific grants that show low rates of spending include Agricultural
Disaster Management (44,1 percent), Forensic Pathology Services (55,4 percent)
and the Land Care Programme (80,6 percent).
59. Table 16 indicates selected conditional grant spending rates as at 31
March 2007. It further indicates that four or more provinces have spent less
than 90 percent of their grant budget at the end of the financial year for the
following grants: land care programme, forensic pathology services and hospital
revitalisation.
60. The table also indicates the number of provinces spending at higher
levels between 90 and 100 percent and greater than 100 percent of their
conditional grant budgets.
61. Although the rate of spending is encouraging and reflects an improvement
over previous financial years, overall conditional grants spending still lies
below the total provincial average of 98,7 percent.
62. Spending on the Further Education and Training (FET) college sector
recapitalisation grant is at 100 percent or R470 million and reflects actual
transfers from the provincial education departments to the FET colleges.
63. Table 17 indicates the actual amounts transferred by provincial
education departments to colleges and amounts spent by colleges, as provided by
the national Department of Education. FET colleges' expenditure is at 89
percent or R418,4 million of the R470 million transferred from the provincial
education departments.
Provincial revenue
64. Provincial revenue includes budgeted equitable share allocations of
R150,8 billion, adjusted conditional grant allocations of R27,6 billion and
adjusted own revenue allocations of R7 billion. The total equitable share and
conditional grants transferred to provinces and own revenue collected by
provinces for the 2006/07 financial year is recorded at 100,4 percent or R186
billion of total adjusted revenue budgets of R185,3 billion.
65. National government transferred all of the equitable share (R150,8
billion) and 99,5 percent or R27,4 billion in conditional grants to provinces
for the 2006/07 financial year.
66. The preliminary outcome on provincial own revenue suggests that
provinces have collected 111,5 percent or R7,9 billion of their adjusted own
revenue budgets of R7 billion, which is 2,8 percent or R216,2 million more than
what was collected for the previous financial year.
67. The collection rate varies from 90,7 percent in Northern Cape and 103,5
percent in Limpopo, to a high of 123,2 percent in North West and 117 percent in
Mpumalanga. Most provinces exceed their collection of budgeted own revenue,
which often reflects understatement of targets rather than improved fiscal
effort.
Issued by: National Treasury
3 May 2007
