Fourth Quarter Expenditure Hearings: Provincial Treasuries

Meeting report

National Treasury Overview presentation
Ms Julinda Gantana, Chief Director: Provincial Budget Analysis: National Treasury, highlighted the quarterly reports for all provinces. The key priorities outlined included education and health. In Education, textbooks were provided to Grade 10-12. In Health, more emphasis was placed on the provision of Multi Drug Resistant (MDR) and Excessively Drug Resistant (XDR) tuberculosis treatment in 2007. Social welfare services included the expansion of Early Childhood Development (ECD) and other services like community based care and rehabilitation. The preliminary outcome for the 2007/08 was at 98.8 %, or R213.5 billion, spending of their adjusted budgets. There was preliminary under-spending in 8 provinces of about R2.6 billion. Gauteng and Limpopo province had provincial adjustments, including second adjustments of about R2.7 billion. Seven provinces under-spent their education budgets with Gauteng and Mpumalanga under-spending significantly, followed by North West and Free State. Four provinces overspent their health budgets; KwaZulu-Natal had a figure of R977.1 million and the Gauteng province R519.2 million.

Some of the challenges that were addressed through the 2007 Adjusted Estimates of National Expenditure were the impact the re-demarcation had on the North West province because of the sheer magnitude of the “shock”, combined with the use of incorrect data resulting in extreme budgetary pressures on North West education.

The Chairperson indicated that there should be a provincial breakdown in the sharing of the information to know which provinces spent so much.

Ms Gantana then spoke to education, indicating that there was preliminary under-spending of R1.5 billion in 7 provinces, being an increase of R9.7 billion or 12.3% compared to the previous year.

The Chairperson again requested that district by district figures should be indicated to know exactly which departments over spent or under-spent.

Ms Gantana indicated that the Treasury wanted to get provinces to gazette in the current year. There was capital spending at R3.3 billion, representing a decline of R375.6 million compared to the audited outcome of last year. North West province overspent looking at the year by year expenditure.

In terms of infrastructure there was some concern because of the decline of R3.3 million in school infrastructure. All other departments’ budget, with the exception of Department of Education, had changes in the budget and in the North West province there was a low growth of 2 %. In public ordinary schools there was over-expenditure in 5 provinces in the year on year growth rate. These were Free State, KwaZulu-Natal, Limpopo (with the highest figure), Northern Cape and North West province. Four provinces overspent on the provincial personnel expenditure in education because there was an overestimation in the number of personnel that were moved. Eastern Cape had a step-up in non-personnel expenditure but there was still a problem because the question remained if the budgets were really in line, in view of the fact that there was overspending while there were concerns about growth.

In the Departments of Health the spending was at R62.4 billion or 102.3% against the adjusted budget. The four provinces of Kwazulu Natal, Gauteng, Free State and Western Cape had overspent their adjusted budgets. The capital spending was at R5 billion and there was an increase of 7.2%, which was a step-up compared to the audited spending last year. In all 9 provinces there was over expenditure in central hospital services.

In social welfare services there were adjusted budgets at R6.4 billion, 3% of total provincial adjusted budgets. There was still under-expenditure in the social welfare budget after it was reduced. There were varying degrees of spending. There had been a low rate of spending in North West province (88.7%) and Mpumalanga (92.3%). Western Cape (100%), Eastern Cape and Limpopo province (99.8%) reflected the highest rate of spending. In central hospital services expenditure there was over expenditure in all 9 provinces and that was a huge problem. 

The housing conditional grant spending (including provincial roll-overs) had preliminary under-spending of R445.2 million in 7 provinces. It was highlighted that in compliance with section 27 of the 2007 Division of Revenue Act (DORA) the National Department of Housing had re-allocated funds between provinces following demonstrated capacity to spend in Gauteng province (R350 million) and Northern Cape (R100 million). There was also a low level of personnel spending in both Mpumalanga and Western Cape (99.9%) and in Gauteng (100.1%). In the area of capital spending for payments for capital assets there was preliminary under-spending of R2.2 billion in all provinces.

The biggest capital budgets in provinces were in the areas of public works, roads and transport departments at 38% or R7.3 billion of total capital budget of R19.1 billion. There was also under-expenditure in all 9 provinces.  The Free State showed under-expenditure of R106 969. There was a step-up from the year January 2008 to March 2008 in payments for capital assets. Conditional grants were adjusted for all grants, which were at R33.3 billion. If the Gautrain was excluded then the preliminary outcome was R15.1 billion or 92.2%. The reported higher expenditure for the Gautrain was inclusive of the provincial portion. The Further Education and Training (FET) colleges’ expenditure was at 100.6% and this information was given by the Department of Education. This referred to R643 million of the R639.3 million transferred from the provincial Education Departments. In agriculture there was generally low spending in conditional grants.

Discussion
The Chairperson indicated that Provincial Treasury and all other departments must be present from the North West Province at another occasion, as the North West Province was the most worrying in terms of over-and under-spending.

The Chairperson also asked whether the budgets for the provinces were really in line as they were suppose to be. He asked what the lessons were that could be learned from the Free State and Northern Cape and what were the balancing and problem issues that arose from the figures outlined.

The Chairperson questioned the figures of the Northern Cape Province because he stated that there were still reports awaited from National Treasury.

The Chairperson stated that in the North West Province toilets were built in 2006, and opened when NCOP took parliament to the people. They had been unused for two years. The money had been allocated to the province and this issue must be discussed further.

Mr D Botha (ANC, Limpopo) stated that schools received money for materials and in his province of Limpopo only half of the schools had received what they should have received for their materials. He asked if there was in fact delivery on the ground with the conditional housing grants. He added that there were disaster management grants, but the provinces did not plan for the years when there would, for example, be drought.

Mr E Sogoni (ANC, Gauteng) stated that there seemed to be further problems in that students would sometimes only do their theory exams at the FET Colleges; when no money was received for the practical studies those students who could not afford to pay for the practicals would end up not being qualified and therefore being unemployed.

Mpumalanga presentation
Mr Sophney Tshukudu, HOD, Mpumulanga Department of Finance, stated that the over and under-spending areas would be highlighted only as there were a number of areas where this occurred. There was not full spending in the areas of disaster management grant over and the Forensic pathology services grant. The figures were contained in the written presentation. The reasons were cited as a further transfer of funds. The Department of Health gave reasons why spending was low but the Province stated that they had identified reasons and challenges themselves. The Hospital Revitalisation grant was another area in which there was low spending of 44%, and that had led to National Treasury withholding funds. In respect of the Infrastructure Grant for education, that Department had underspent. In respect of most of these cases, he explained that there were roll overs. If those were discounted, then the spending would in fact be reflected as higher. This was the main problem.

Mr Tshukudu highlighted that capacity constraints were a problem. Sometimes the departments would sit with problematic people and then they would try to use them in areas involving infrastructure. Often there would be a problem in planning and implementation because there were not properly qualified people in place. There were certain interventions, but it remained very difficult and the capacity building remained problematic.

Mr Tshukudu noted that in the area of roads and transport, there had been spending of 100%. In community library services there was also spending of 100%.

Mr Tshukudu said that there should be a move away from dependency on the Department of Public Works (DPW) and the issues of accountability and tendering process should be taken into account. The main point was that the problem lay with lack of capacity and proper planning. IN Mpumulanga there had been a lot that had been done. He added that his Department had individually visited the hospitals, looked at the needs of the hospitals and indicated those needs to the Department of Health. Backlogs in Department of Education had occurred and the problems were identified. There was an attempt to reprioritise what should be done in the province and there was real movement to solve problems.

Discussion
Mr B Mkhaliphi (ANC, Mpumalanga) stated that there were alarming reports coming from the provinces but the question remained whether the work was being done, because he did not see that this was happening. He supported the HOD of Finance of Mpumalanga, stating that more support should be given to provinces and less dependency should be placed on the Department of Public Works.

The HOD added that outsourcing had its own problem and that is why he stated that assistance should be given to the sectors of health and education.

Mr M Robertsen (ANC, Eastern Cape) indicated that the Department of Public Works would bring in private people but the work was not being done correctly.

Mr Botha asked whether money must really be taken away from the -provinces when there was under-spending. He questioned whether this was the right way to go about it.

Mr Sogoni stated that another problem as the lack of forward planning, and he questioned specifically whether there were enough people to do such planning.

Mr Robertsen felt that there should be less emphasis on the theoretical parts and more emphasis on real implementation of work.

Mr Sogoni stated that there were meetings taking place, but agreed that it was important that implementation should occur “by the book” so that there was implementation.

Ms A Mchunu (IFP, Kwazulu Natal) asked whether rotational deployment should not happen,  whereby people at the top would rotate responsibilities with people at the bottom to make implementation smoother.

The Chairperson stated that there were issues around performance. People should be doing their work properly. Certain people were being rewarded for work well done, whilst within some local government sectors there was very little happening.

Northern Cape Presentation
Mr Sello Mokoko, HOD: Northern Cape Department of Finance, stated that his province projected to under-spend on the capital expenditure (CAPEX) budget by R121.3 million (1% of the adjusted budget). The total expenditure on conditional grants amounted to R785.2 million (87% of the total infrastructure budget). The total expenditure on conditional grants amounted to R1.1 million (87.4% of the adjusted budget). The biggest allocation went to the Department of Health.

Mr Pakes Dikgetsi, MEC: Finance, Northern Cape, stated that the province had a process of Peer Review and the National Treasury had asked that this process must be taken up with the Department of Health. Mr Mokoko added that there was an adjusted budget for conditional grants and he stated that there was money rolled over from the previous year. The challenges were being addressed in the Department and there was continuous interaction about the challenges.

In the area of agriculture and land reform, there was an adjusted budget of R44.3 million, of which R8.8 million represented Infrastructure Grant to Provinces (IGP). There was non-compliance of suppliers to tender specifications and slow-delivery by service providers even where the contracts were allocated on time. In social services and population development there was an adjusted budget of R27.2 million. The major reasons for slow expenditure related to the implementing agent of the Department of Public Works. In the Department of Education the total spent was 101% of the adjusted budget, as here the grant was overspent by 1%, which had put pressure on the system, in addition to FET recapitalisation where the grant was also overspent by 1%.

The reasons given for the under-spending in the community library services grant was that the Municipal Information System specifications from the national Department were outstanding, which delayed the process, and the appointed supplier could not finish all 40 container libraries.

Discussion
Mr Sogoni asked how did departments and their staff check the information and verify it. The reports previously given differed from those given today. 

Mr Robertsen indicated that the problem lay with the Department of Public Works.

Mr M Goeieman (ANC, Northern Cape) stated that there should be a penalty clause in contracts to hold people accountable. He further asked what the situation was now in the province and what interventions were taken.

Mr Mkhaliphi stated that there were three departments that over spent or under-spent. He therefore asked if there was proper planning for the CAPEX programmes or the IGP.

Ms D Robinson (DA, Western Cape) asked why were tenders awarded initially. She suggested that surely there should be thorough investigation of the service providers within municipalities.

Ms Mchunu asked whether there was no time period placed on antiretroviral (ARV) treatment given.

Mr Botha stated that in some instances the Northern Cape Province had performed fairly well, compared to other provinces, and the good should also be highlighted.

Mr Sogoni asked what was done when there was over-spending or under-spending. He further asked how it was possible that over spending could be allowed.

Mr Goeieman indicated that the Northern Cape was taking a hands-on approach, but that there was some scepticism in the comment around housing. He asked what the Department did  in terms of money. He noted that it seemed that the expenditure in education had been planned that way. He further asked how one could assess that a province had performed well.

Mr Dikgetsi, responded that there were a number of cross-cutting issues and that the departments would be taking all views into consideration and would look at the issues raised.

Mr Mokoko stated that in respect of the issue around verification, there would be checks on information and reports before they sent information and data to the National Treasury, and would ensure that the reports were signed off by the relevant people.

The meeting was adjourne