In terms of Section 31 of the Public Financial Management Act (PFMA), a MEC for Finance must table the Adjustments Estimate in the Legislature annually. This Adjustments Budget formalises any changes that are being made to the Main Budget that was tabled in the Legislature on 9 March 2012 (i.e. on Provincial Budget Day), and may provide for the following:
- Appropriate funds that have become available to the Province as per Section 31(2) (a) of the PFMA.
- Cater for unforeseeable and unavoidable expenditure as per Section 31(2) (b) of the PFMA.
- Expenditure in terms of Section 31(2) (c) read with Section 25 of PFMA, i.e. in emergency situations.
- Appropriate funds for expenditure already announced by the MEC for Finance during the tabling of the main budget as per Section 31(2) (d) of the PFMA.
- Cater for the shifting of funds between and within votes in terms of Section 31(2) (e).
- Provide for the utilisation of savings under the main division within a vote for the defrayment of excess expenditure under another main division within the same vote, commonly referred to as virements and as governed by Section 31(2) (f).
- Accommodate Treasury-approved roll-over requests for those departments who could not spend the entire amount voted by the Legislature in that particular year, as per Section 31(2) (g) of the PFMA.
Also in terms of the Treasury Regulations (Section 6.6.3) , where a National Adjustments Budget allocates funds to a province, the relevant Provincial Treasury must table an adjustments budget in the Provincial Legislature to formalise the allocations received from National Treasury.
These sections of the PFMA and Treasury Regulations therefore set the legal framework for the Adjusted Budget that is being tabled in the Legislature today.
Provincial Treasury does not make changes to the provincial departments’ budgets in isolation. It is, in fact, a very participative process that involves a lot of interaction at various levels. This takes the form of informal consultation between Treasury and the departments, but also through formal bilateral meetings with the departments, where Provincial Treasury engages face-to-face with the departments.
These formal meetings occur at least three times a year, and are a good platform for departments to highlight any spending pressures; how and why they arise; and what can be done to fund these from internal reprioritisation. If internal reprioritisation is not a feasible option, such requests are taken forward by Treasury for consideration for additional funding, depending on the availability of funds in the fiscus. Additional funds are only allocated once the Ministers’ Committee on the Budget (MinComBud) and Cabinet have given the go-ahead for these allocations to be made.
Treasury reviews and considers these funding requests in the context of the 12 national outcomes and the Provincial Growth and Development Plan (PGDP), as well as from domestic priority areas, among others.
Also, at a national level, Provincial Treasury attends numerous forums with National Treasury where provinces are able to voice any shortfalls that may exist in their budgets, such as higher than budget wage agreements, etc. This is a very important aspect of inter-governmental relations as this often is the process that determines whether provinces receive additional funds from the National fiscus.
Financing the Adjustments Budget
Having said this, the province receives R1.057 billion in additional funding from National Treasury. The lion’s share of this goes towards funding the higher than budgeted 2012 wage agreement (which, together with some provincial funding, renders some 93 per cent of this wage shortfall funded, with the minor balance having to be found by departments from within their existing baselines).
National Treasury also provides additional funding in the form of conditional grant funding for the Health Infrastructure Grant (R180 million), Hospital Revitalisation Grant (R20 million) and the AFCON Health and Medical Services Grant (R3 million).
Besides funding received from National Treasury, the province is able to add substantial funds to departments’ baselines using provincial cash resources. To explain, this Adjustments Budget is financed to a large degree from the positive net financial position that occurred at the end of the 2011/12 fiscal year. While the province marginally over-spent in that year, it also over-collected its own revenue substantially and also maintained its budgeted surplus of R948 million.
These three factors together resulted in the province ending the year with a positive net financial position of R1.4 billion. Other than that, the province had kept R800 million in its bank account as a contingency reserve in the event that the Department of Health had to pay the National Health Laboratory Services (NHLS) the outstanding amounts the NHLS claimed they owed. This was being disputed by the department, and the matter was referred to an arbitration process. The arbitration ruled in Health’s favour and this contingency reserve therefore also became available for allocation to departments.
The Adjustments Budget therefore provides additional funding to a number of provincial departments, some in the form of roll-overs and some in the form of additional funding provided from provincial cash resources. These are discussed below:
Roll-overs
National Treasury approved a provincial conditional grant roll-over of R162.725 million, as follows:
- Land Care grant - R705 000
- National School Nutrition Programme - R27.714 million
- Housing Disaster Relief grant - R27.637 million
- Technical Secondary Schools Recap - R1.801 million
In addition, the Province has approved provincial roll-overs amounting to R111.784 million. A roll-over is only approved where funds were committed in 2011/12, but could only be spent in 2012/13 (normally because the invoice is only received in the new financial year. The departments that received roll-overs for various commitments from the previous year are listed here:
- Office of the Premier - R5.132 million
- Agric, Enviro Affairs & Rural Dev - R4.905 million
- Economic Development and Tourism - R28.256 million
- Provincial Treasury - R24.899 million
- Royal Household - R5.383 million
- Co-operative Governance & Traditional Affairs - R29.024 million
- Public Works - R14.185 million
Additions to departments’ budgets
In view of the current economic climate and the negative impact that the 2011 Census data will have on KwaZulu-Natal’s (KZN) equitable share received from National Treasury going forward, it was clear that this Adjustments Budget would be one of the last opportunities for a while to allocate funds to departments. As such, a number of times during the speech I will indicate that some funds are being ring-fenced now for allocation in the 2013/14 budget only. A significant portion, though, is being funded now, in the 2012/13 budget.
The paragraphs below highlight some of the allocations that are being made. This list is not exhaustive, but focuses on some of the significant allocations:
- Agriculture, Environmental Affairs and Rural Development receives R20 million in 2012/13 for its campaign to control the outbreak of rabies in the Province.
- R34 million is added for transfer to the Agri-business Development Agency (ADA) in 2012/13 for feasibility studies to be undertaken, business plans preparation, capacity building and project management.
Provincial Treasury receives additional funding for a number of transversal projects, but these will only be allocated to them in 2013/14:
- R9 million in 2013/14 for the Feasibility Study of the Government Office Park.
- R20 million in 2013/14 for Operation Clean Audit.
- R8 million in 2013/14 for the Supply Chain Management SCM Procurement Tool.
- R10 million for SCM Contract Management.
- R8 million in 2013/14 for forensic investigations.
Provincial Treasury also receives R10 million for the Infrastructure Crack Team in 2012/13 and a further R10 million in 2013/14. This allocation allows the Infrastructure Crack Team to reach more departments and also allows Treasury to assist various municipalities to unblock blocked infrastructure projects.
Four million is added to Provincial Treasury in 2012/13 for the Thuthuka Bursary Fund, with a further R4 million allocated for this in 2013/14 and R4 million in 2014/15. The purpose of the Thuthuka Bursary Fund is to annually place 100 students at selected SAICA-accredited universities in special undergraduate BCom Accounting education programmes. The accredited universities that are part of the programme are the University of Johannesburg, Stellenbosch University, University of Pretoria, University of Cape Town, Free State University and the Nelson Mandela Metropolitan University.
The Thuthuka Bursary Fund is looking for academically strong learners who aspire to become Chartered Accountants. Students who do exceptionally well in Mathematics and have excellent marks in the other subjects and qualify for university entrance may apply
- The Department of Health receives R50.580 million in 2013/14 to upgrade the regional laundry at Dundee.
- R8.485 million is allocated to the Office of the Premier for the Zimele Developing Community Self Reliance project in 2012/13. A further amount of R7.555 million will be allocated to the department in the 2013/14 MTEF. Zimele has led social development and women’s empowerment projects in KZN since 2007.
Approximately 1 200 women are now involved in the self-sufficiency project and have collectively accumulated savings of more than R350 000. These new business owners invest these funds back into their businesses and communities while also supporting new business and local social development programmes. The aim of these funds is to empower women in rural areas to develop their communities and achieve self-sufficiency by owning and operating small businesses.
- Human Settlements receives R49.248 million in terms of unspent funds from prior years for spending on various housing projects.
- The Department of Health receives additional funding of R185.963 million for the pressures that exist against its infrastructure budget. These pressures arise from the fast-tracking of certain infrastructure projects, such as the Phoenix Mortuary, as well as the Pomeroy and Dannhauser Community Health Clinics. In addition, the department is acquiring additional laundry equipment to address a crisis in the Province, largely resulting from ageing equipment. There are also pressures at the Ngwelezane Hospital related to the upgrade of electrical systems, as well as office and residential accommodation projects across the Province. The Department also receives R12 million for its vaccine campaign.
- Provincial Treasury receives R8 million in 2012/13, R7 million in 2013/14 and R8 million in 2014/15 for the development of a Light Industrial Development Park at Bhongweni. This project aims to develop the infrastructure and institutional arrangements and operationalise a light industrial park that will be operated as a small business incubator to attract, train, mentor and assist the development of skilled artisans. These will be absorbed as employees or entrepreneurs into the industrial sectors of the Greater Kokstad area and beyond. Agriculture, manufacturing, services, construction and quarrying industries are the main economic drivers in this area, and these industries require a high number of skilled artisans.
The Department of Agriculture, Environmental Affairs and Rural Development receives the following additional funds:
- R50 million towards the development of Makhathini. The Department already has funding of R98.302 million in its baseline for this, including the transfer to Mjindi for operational and maintenance costs. The balance is used to implement the projects listed in the Makhathini Integrated Master Development Plan. There are currently 23 projects that are at various stages of implementation totalling some R105 million. These projects can all be implemented in the current financial year, dependent on the level of funding received. These projects include the construction of drainage canals, infield sub-surface drainage, rehabilitation of the main canal and formalising stock watering points, regravelling of infield roads, electrical and mechanical repairs, infield valves and water meters, construction of the new Marula pack house, construction of the input store for Makhathini farmers, construction of a sale yard at Jozini and Umhlabuyalingana, construction of an abattoir, among others.
- R25 million is added towards the construction of stock watering dams. The Department is in the process of implementing the approved livestock intervention programme aimed at re-igniting and maximising the livestock potential in KZN. The provision of stock-watering dams forms a critical part of this programme. The increase in the number of dams will mean that livestock will not have to walk such long distances to access water and this has a direct impact on the condition of the herd.
COGTA receives additional funding for the following, among others:
- R13 million in 2012/13 for improving disaster management centres’ capabilities. This includes enhancing the establishment of the PDMC in Mkondeni with a full communication system linked to all districts and other municipal centres. The funds will also be used to purchase relief stock for humanitarian purposes, such as blankets, plastic sheeting and tents.
- R5.200 million is added for the formalisation of 13 towns. The purpose is to uplift the town for improved service delivery to take place. This requires town planning to be undertaken for the industrial and residential areas to be clearly defined. Also, plans need to be devised for water pipes and roads. Tenure of land needs to be formalised so that legal ownership of land can be formalised. A land audit also needs to be undertaken.
- R42.500 million is added for massification projects. This includes the provision of water, electricity and sanitation to households.
The Department of Transport receives R205 million in 2012/13 for the upgrading and rehabilitation of various roads. These include the main road P700 linking Ulundi to Empangeni, the main road P271 from Paulpietersburg to Piensrand in the Zululand District, the main road P714 from Tongaat to Sibudu in the Ilembe District, among others. It also provides for the construction of a pedestrian bridge over the Tugela River in Msinga to provide desperately needed access to 5 schools, the Tugela Ferry Clinic as well as to agricultural land.
Ezemvelo KZN Wildlife receives R28.137 million in 2012/13 and R19.003 million in 2013/14 for the fight against rhino poaching in KZN. This is termed the Rhino Security Intervention plan and also provides for stipends for rhino community ambassadors.
R23.399 million is added to Mjindi for its infrastructure and equipment requirements (e.g. purchasing of new pumps and valves for the pump stations, centre pivots, purchase of road maintenance equipment, combine harvesters, fertilizer spreader, planter, tractors, among others).
Public Works receives R25 million in 2012/13 for the procurement of an asset management system, to better manage the portfolio of assets under its control in line with the relevant legislative requirements i.e. GIAMA.
Besides these allocations, the province had budgeted R40 million when the 2012/13 Main Budget was prepared for allocation to Strategic Cabinet Initiatives as and when they arise. Due to significant demand on these resources, R52 million is added to this fund and the R92 million Strategic Cabinet Initiatives fund is allocated as follows:
The Department of Sport and Recreation receives R5.700 million toward the hosting of the Soccerex Africa Forum which was held in October 2012. This event focused on growing football’s legacy in Africa and brought together over 1 000 senior decision makers in the football fraternity to share their expertise.
The Office of the Premier receives R15 million being KZN’s contribution toward the hosting of AFCON in January and February 2012.
Economic Development and Tourism receives R3.800 million for the Manchester United Tour.
Economic Development and Tourism receives R9 million towards the Women’s Golf Championship. This tournament took place in July 2012.
The Office of the Premier is allocated R2 million for the Presidential Imbizo held in Umzimkhulu in July 2012.
Economic Development and Tourism receives R5 million for the Nelson Mandela Golf Tournament. The opening golf tournament of the 2012/13 European Tour season will be in honour of former president Nelson Mandela and will be hosted in KZN. This event takes place in December 2012.
Office of the Premier receives R5 million for the National Choral Music Awards. The National Choir Festival is a national choral music competition conducted at district and regional/provincial level culminating in a National Final. The final will be hosted by KZN in December 2012.
Economic Development and Tourism receives R28 million for the North Sea Jazz Festival. This festival is in line with the strategic vision of KZN to promote tourism, economic growth, social cohesion and international showcasing. It is expected that this festival will attract a local and international audience of 25 000 in the first year, and thereafter keep growing. Job creation of a projected 2 000 jobs prior, during and post the festival is expected with a projected contribution of R298 million to the economy of KZN.
Economic Development and Tourism receives R10.527 million for the hosting of the Metro Music Awards. These awards are scheduled to take place in November 2012. The primary objective of these awards is to reward, acknowledge and showcase local music talent for exceptional artistic work produced. These awards are not only a celebration of the arts though, but have matured to become a key driver of local tourism of the hosting province. They have significantly contributed towards the economic growth of hosting cities by affording opportunities to SMMEs.
Economic Development and Tourism receives R5 million for the Volvo European Golf Championship. This event is scheduled for January 2013. This event will be expanded to include business seminars around the event, with delegates coming in from the Middle East, South America, among others. This will allow KZN to establish an extremely strong tourism and destination platform sending a powerful message on the intent, stability and ambition of KZN and South Africa to the international world.
Economic Development and Tourism receives R2.973 million for hosting the BRICS Summit. This summit is aimed at enhancing business synergies between South Africa and the business sector from the BRICS member states. The 2013 BRICS summit will be the fifth annual BRICS summit, an international relations conference attended by the heads of states or heads of government of the five member states, namely Brazil, Russia, India, China and South Africa. The summit will be held in Durban, South Africa in 2013.
After allocating all these funds, KZN remains with a positive net financial position of R850 million.
This, in a nutshell, explains the adjustments to KwaZulu-Natal’s budget as tabled in the Provincial Legislature today.
Enquiries:
Musa Cebisa
Cell: 071 687 8777
