The purpose of this statement is to brief the media on the audited budget performance of the province for the 2008/09 financial year, based on the final March In-Year Monitoring report submitted by the provincial departments. These numbers correspond with the numbers reflected in departments' Annual Financial Statements which have been signed off by the Auditor-General.
Provincial own revenue
The province over collected its budgeted own-revenue by R106,6 million in 2008/09. This is very positive, as it indicates an improvement in revenue collection measures by provincial departments. Several departments contributed to this over collection. The Department of Transport, Education, Office of the Premier, Health and Agriculture, all over collected against revenue budget. The over collection can be attributed to a number of factors such as the increase in the number of companies paying their outstanding licence fees, as well as a large number of renewals of drivers licence cards. 2008/09 also witnessed an increase in the gaming and casino activities resulting in an over-collection on casino taxes. The Health Department has also strengthened its health patient fee collection through rapid processing of medical aid claims.
Expenditure
The audited expenditure results show that the province overspent its budget by R2,5 billion in the 2008/09 financial year. There are several areas of expenditure that explain this over expenditure. The main area is the Compensation of employees associated with the implementation of the Occupation Specific Dispensation (OSD) in the Departments of Health and Education. There have always been budgetary shortfalls associated with OSD not only in KwaZulu-Natal, but in most provinces. The increases in the number of patients receiving anti-retroviral treatment in the Department of Health as well as the general increases in medical inflation have also put pressure on the Health budget.
Construction and fuel costs have also increased significantly in the past year or so and have resulted in infrastructure departments also over spending particularly, the Department of Transport and Housing.
Conditional grants
Expenditure on conditional grants was almost on target at 97,3 percent in 2008/09. This is a substantial improvement compared to the 2007/08 expenditure outcome. In 2007/08 the aggregated expenditure on conditional grants was about 93,8 percent.
Measures to finance the over expenditure
The Provincial Cabinet has approved a plan to finance the over expenditure over a three year period, starting from the current financial year. As indicated by the MEC for Finance in her budget speech tabled in June 2009, a 7,5 percent reduction of goods and services budgets in all provincial departments has been effected. These reductions will yield savings of R876.5 million in 2009/10; R1,02 billion in 2010/11 and R1,1 billion in 2011/12 (refer to the budget speech).
We must hasten to indicate that these savings will not affect core service delivery of the provincial government. All provincial departments have identified areas where savings will be realised and these include but not limited to:
* advertising and communication
* travel and subsistence
* venue hire
* office furniture
* events
* the use of consultants
* improvements in the procurement of goods and services so that government purchases goods and services through competitive tender processes
* non filling of none critical administrative posts
* reduction of unnecessary overtime payments, and so on.
It is our view that with these cost cutting measures now in place, the province will realise the necessary savings to finance the over expenditure.
Issued by: Department of Finance, KwaZulu-Natal Provincial Government
10 September 2009
