It has been six months since these cost-cutting measures were implemented. At the time of implementation, the projected over expenditure for the 2009/10 financial year in the province was R5.6 billion (as per September 2009 in year monitoring (IYM) figures). By December 2009, this projected over expenditure had declined to R2.559 billion. In January 2010, the projected over expenditure further declined to R2.255 billion. It must be emphasised that the main reason for the projected over expenditure is the funding shortfall in the implementation of the Occupation Specific Dispensation (OSD) and the higher than budget wage agreement for the public servants. The shortfall for two expenditure areas in KwaZulu-Natal is some R1.1 billion.
The latest projected expenditure figures which are based on the February 2010 projections indicate that the province will end the 2009/10 financial year with an over expenditure of R1.599 billion or 2.5 percent of the adjusted budget. This is a marked improvement when compared to the 2008/09 expenditure outcome and the September 2009 projections.
According to the provincial recovery plan which I have alluded to earlier and have discussed with the members of the media before, you will recall that the implementation of the cost-cutting measures would have resulted in an over expenditure of R1.7 billion in 2009/10. It is therefore pleasing to note that the projections as at February 2010 indicate an over expenditure of R1.599 billion. This means that the provincial expenditure has outperformed the recovery plan by R101 million according to the February 2010 projections. It must be emphasised that these are projections and might slightly change when the March figures are finalised.
Eleven departments, namely the Provincial Legislature, Agriculture, Environmental Affairs and Rural Development, Economic Development and Tourism, Provincial Treasury, Human Settlements, Community Safety and Liaison, Cooperative Governance and Traditional Affairs, Social Development, Public Works, Arts, Culture, Sport and Recreation are projecting to reduce their spending by more than the amounts indicated in the provincial recovery plan and this indicates that the Cabinet approved cost-cutting measures appear to be having a positive effect on the spending levels of these departments.
Two departments, namely, the Office of the Premier and The Royal Household are projecting to spend exactly in accordance with the provincial recovery plan.
The Department of Health is projecting a significant over expenditure of R1.939 billion (which is an improvement of R207 million when compared to January’s projected over expenditure of R2.146 billion). The over spending is due to pressures in all programmes (except programme eight: health facilities management) with the bulk being against programme two: district health services and programme four: provincial hospital services. It is clear that this Department still has challenges in containing its expenditure as a result of the OSD and the higher than budget wage agreement, but the trend is also positive.
At economic classification level, this pressure is primarily against compensation of employees (R1.173 billion was R1.273 billion in January 2010), Goods and services (R750 million was R836 million in January 2010) and building and other fixed structures (R19.997 million was R16.819 million in January 2010). As was stated in previous reports, this falls short of the agreed reduction in spending of R600 million (provincial recovery plan), but is starting to approach the targeted level.
Generally, the departments are showing a real commitment to the provincial recovery plan.
Background
In the 2008/09 financial year, the aggregated audited actual expenditure for the province of KwaZulu-Natal amounted to R55.529 billion compared to the final appropriation of R53.200 billion, resulting in an over expenditure of R2.328 billion or 4.4 percent. The reasons for this over expenditure were mainly the implementation of the Occupation Specific Dispensation (OSD) in the Departments of Health and Education which were significantly higher than budget. Although additional funding was allocated in the 2008/09 adjustments budget to address this pressure, the amounts allocated were not sufficient to fully fund these two expenditure areas.
As a result of this over expenditure in 2008/09, and the persistent high rate of expenditure that prevailed in the 2009/10 financial year, Cabinet took a bold decision to implement cost-cutting measures across all provincial departments and entities as contained in the provincial recovery plan with effect from October 2009 onwards. The following are some of the cost measures implemented:
* Freezing of all posts (in exceptional circumstances, the executive authority can approve the filling of essential/critical posts with a report being sent to the Office of the Premier and the Provincial Treasury)
* No furniture or equipment to be bought (excluding those that are funded by conditional grants)
* Essential training should be done in-house (exceptions to be approved by the HOD)
* Overseas trips be rationalised
* Business class travel only for MECs and HODs (and MPLs, where applicable)
* Car hire bookings, class of vehicle to be lowered
* Catering for meetings be stopped
* Kilometre controls be implemented on travelling (1750 kilometres per month per official unless there are exceptional circumstances, the exceptions should be approved by the HOD)
* Officials to travel together unless absolutely unavoidable
* Only essential trips be undertaken
* Meetings, strategic planning sessions and workshops to be held in departments’ offices instead of private venues
* Air travel should be limited to important meetings with only one official to attend on behalf of the department, unless otherwise required
* No team building exercises or year-end/ Christmas functions (only permitted if paid for by the staff themselves)
* Cut down on unnecessary overnight accommodation. Staff to sleep over only if the total distance to and from the destination is more than 500 kilometres
* Where there are one-day meetings in other provinces, officials must travel there and back on the same day (where possible)
* No performance bonuses to be paid from 2010/11
* No promotional items to be purchased (t-shirts, caps, bags, etc)
* No leave conversion payments (leave to be taken)
* Strict control of overtime
* Re-evaluate the hosting of provincial events (including budget dinners)
* Transversal cell phone policy to curtail costs
* Embark on a process to investigate spending on travel including hotel and flight bookings
* Bulk media buying
* Subsidised vehicles for officials, policy review
* Eliminate fraud and corruption in the public service
* Strengthen supply chain management to eliminate collusion between suppliers and government officials.
Cabinet further instructed all departments to ensure that legitimate service delivery should not be compromised as a result of the implementation of these cost-cutting measures.
It is also clear that these are measures of good governance and should be internalised by all government institutions as a way of doing business without compromising service delivery.
Conclusion
Treasury is currently finalising expenditure figures for March 2010 which is the end of our financial year and these will be tabled at Cabinet and at the legislature once finalised. It is my belief that the cost-cutting measures are beginning to bear fruit. As a result of the positive impact of these measures on expenditure, I would like to indicate that Cabinet has agreed to continue with the implementation of the recovery plan until there is no over-expenditure in the province. Even after the over expenditure has been eliminated, these measures need to remain as they are pillars of fiscal prudence and good governance. By implementing these measures, the province will be able to augment its fiscal capacity so that it can be able to finance core service delivery and invest in projects that will improve the economic performance of KwaZulu-Natal.
Enquiries:
Musa Cebisa
Cell: 071 6878 777
Issued by: Provincial Treasury, KwaZulu-Natal Provincial Government
15 April 2010
Source: Provincial Treasury, KwaZulu-Natal Provincial Government (http://www.kzntreasury.gov.za/)
