28 August 2007

 

JOINT BUDGET COMMITTEE: EXPENDITURE REPORT

FIRST QUARTER 2007/08: DRAFT 3

 

 

INTRODUCTION

 

In pursuing the ideal of building a democratic society through reconciliation and socio-economic transformation, the challenge for government has been how to optimally align and utilize the nations resources. It is the responsibility of Parliament, as the guardian of the public interest, to ensure that government is responsive to the needs of the people. To accomplish this Parliament has established a variety of mechanisms and instruments, predominately various specialized committees, to effectively monitor government spending plans and performance.

 

The Joint Budget Committee (JBC) was established to, amongst other things, monitor and report on government expenditure as provided in reports published by Treasury in terms of Section 32 of the Public Finance Management Act. The JBC has reviewed and reported on departmental spending on a quarterly basis. In accordance with this practice, this report provides an analysis of departments’ expenditure for the first quarter of the 2007/08 financial year.

 

The report is divided into two substantial sections. The first section includes a general analysis of spending in terms of the economic classifications of total, current, transfer and capital expenditure and in so doing highlights instances of atypical departmental expenditure. The second expands of these observations and examines spending in selected Departments.

 

SECTION ONE: REVIEW OF FIRST QUARTER EXPENDITURE

 

1. TOTAL EXPENDITURE

 

Total expenditure, consisting of current expenditure, transfer payments and capital expenditure for the national and provincial spheres for the 2007/08 financial year is estimated at R530 billion - representing an increase of approximately R60 billion compared to 2006/07. In the national sphere, that is excluding the provincial equitable share, the estimate is reduced to R 261 billion. By the end of the first quarter of 2007/08, national departments had spent R66.7 billion or 22.33% of the national budget. This compares favourably with the R55.7 billion or 21.44% noted in the first quarter of the previous financial year.

 

Table 1 represents Departments’ expenditure at the end of the first quarter.


Table 1: Departmental Expenditure at the end of the First Quarter

R'000

Total Budget

Total Expenditure

% Total Exp. for 1st Quarter

2006/07 % First Quarter Exp.

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

 

 

Voted Amounts

299,177,741

66,792,673

22.33%

21.44%

9.10%

7.29%

5.93%

 

 

 

 

 

 

 

 

Central Government Administration

40,798,702

3,710,326

9.09%

8.66%

2.32%

3.17%

3.63%

The Presidency

254,741

50,761

19.93%

17.87%

7.00%

5.96%

6.97%

Parliament

835,714

146,516

17.53%

14.11%

9.05%

3.72%

4.75%

Foreign Affairs

3,856,363

584,857

15.17%

20.09%

1.47%

3.95%

9.75%

Home Affairs

3,314,589

491,638

14.83%

18.48%

4.37%

6.42%

4.04%

Provincial and Local Government

28,844,175

1,560,021

5.41%

3.81%

1.86%

1.77%

1.81%

Public Works

3,693,120

876,533

23.73%

25.59%

3.17%

10.03%

10.53%

 

 

 

 

 

 

 

 

Financial and Administrative Services

22,782,011

5,801,692

25.47%

20.68%

7.96%

11.82%

5.68%

Government Communications and Information Services

375,812

115,326

30.69%

26.41%

20.56%

6.41%

3.72%

National Treasury

19,708,178

4,333,375

21.99%

20.89%

4.82%

12.21%

4.96%

Public Service and Administration

357,283

74,132

20.75%

20.67%

6.33%

5.63%

8.79%

Public Service Commission

105,357

23,079

21.91%

21.23%

7.13%

8.25%

6.52%

S A Management Development Institute

71,126

16,720

23.51%

23.17%

7.19%

8.53%

7.79%

Statistics South Africa

1,100,289

187,469

17.04%

16.06%

4.40%

5.65%

6.99%

 

 

 

 

 

 

 

 

Social Services

102,686,269

30,742,537

29.94%

31.57%

15.47%

8.90%

5.57%

Arts and Culture

1,608,019

403,079

25.07%

24.59%

12.77%

5.22%

7.08%

Education

16,000,923

7,826,605

48.91%

47.43%

24.61%

18.68%

5.62%

Health

12,655,132

3,012,675

23.81%

23.39%

6.91%

9.31%

7.58%

Labour

2,032,865

560,242

27.56%

21.70%

4.52%

19.05%

3.99%

Social Development

67,232,108

17,935,360

26.68%

29.88%

15.74%

5.52%

5.42%

Sport and Recreation South Africa

3,157,222

1,004,576

31.82%

21.97%

5.94%

25.12%

0.76%

 

 

 

 

 

 

 

 

Justice and Protection Services

79,940,717

15,621,268

19.54%

18.29%

6.13%

6.07%

7.34%

Correctional Services

10,742,331

2,362,586

21.99%

17.57%

5.99%

7.21%

8.80%

Defence

25,922,255

4,149,803

16.01%

14.39%

4.43%

4.24%

7.34%

Independent Complaints Directorate

80,891

16,605

20.53%

21.91%

5.63%

8.09%

6.80%

Justice and Constitutional Development

7,277,770

1,379,833

18.96%

18.92%

5.51%

6.84%

6.61%

Safety and Security

35,917,470

7,712,441

21.47%

21.26%

7.52%

6.89%

7.06%

 

 

 

 

 

 

 

 

Economic Services and Infrastructure Development

52,970,042

10,916,850

20.61%

16.14%

6.95%

7.26%

6.40%

Agriculture

2,281,166

433,140

18.99%

18.05%

4.82%

8.48%

5.69%

Communications

1,423,533

306,893

21.56%

10.32%

1.86%

8.14%

11.56%

Environmental Affairs and Tourism

2,590,771

825,489

31.86%

33.44%

17.00%

7.71%

7.16%

Housing

8,877,608

1,502,852

16.93%

20.87%

5.87%

4.77%

6.29%

Land Affairs

5,678,519

1,317,048

23.19%

9.67%

6.95%

9.51%

6.73%

Minerals and Energy

2,966,113

770,564

25.98%

13.88%

7.80%

10.24%

7.94%

Public Enterprises

1,063,966

1,051,591

98.84%

20.51%

66.17%

15.59%

17.08%

Science and Technology

3,142,479

586,628

18.67%

20.28%

9.38%

5.41%

3.87%

Trade and Industry

4,845,583

1,001,561

20.67%

12.15%

5.35%

9.19%

6.13%

Transport

15,857,923

3,290,369

20.75%

14.39%

7.60%

6.28%

6.86%

Water Affairs and Forestry

5,306,347

882,306

16.63%

16.07%

3.69%

8.63%

4.30%

 

The Table illustrates that nine Departments spent more or equal to 25% of their total budgets. These included the Departments of Arts and Culture, Government Communications and Information Services, Education, Labour, Social Development, Sport and Recreation, Environmental Affairs and Tourism, Minerals and Energy, and Public Enterprises. The remaining twenty-five Departments spent less than 25% of their budgets with the lowest spenders being the Departments of Provincial and Local Government, predominantly due to their transfer schedule, Home Affairs, Defence, Foreign Affairs and Water Affairs and Forestry.

 

2. CURRENT EXPENDITURE

 

Current expenditure is categorised into two main components, namely compensation of employees or personnel expenditure and goods and services. Compensation of employees includes most payments to government employees, except social contributions and payments to government employees working on capital projects (classified as a capital payment). Goods and services cover all goods and services used by a government department or entity.

 

Current Payments in the national sphere for 2007/08 was estimated at R 89.97 billion, which represents an increase of R10 billion compared in the revised estimate for 2006/07. Departments’ spent R18.37 billion, or an average of 20.42%, of their Current Budgets during the first 3 months of this year; a reasonable improvement compared to the 19.7 % in the first quarter of 2006/07. It should be noted, however, that due to the relatively predicable nature of current expenditure and specifically compensation of employees, there is a risk of underspending in this category.

 

Table 2 represents Departments’ overall Current Expenditure for the first quarter 2007/08

 

Table 2: Current Expenditure at the end of the First Quarter

R'000

Total Current Budget

Current Exp. for First Quarter

% Cur. Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Voted Amounts

89,967,889

18,373,632

20.42%

6.45%

6.32%

7.66%

 

 

 

 

 

 

 

Central Government Administration

7,466,875

1,361,701

18.24%

3.65%

6.23%

8.35%

The Presidency

223,138

42,476

19.04%

4.47%

6.79%

7.78%

Parliament

574,826

82,836

14.41%

2.31%

5.38%

6.72%

Foreign Affairs

2,772,176

492,177

17.75%

2.05%

5.22%

10.49%

Home Affairs

2,079,228

351,772

16.92%

4.58%

5.99%

6.35%

Provincial and Local Government

352,077

68,818

19.55%

5.97%

5.99%

7.59%

Public Works

1,465,430

323,622

22.08%

5.22%

8.78%

8.08%

 

 

 

 

 

 

 

Financial and Administrative Services

4,620,815

881,662

19.08%

12.03%

6.46%

0.59%

Government Communications and Information Services

250,515

70,788

28.26%

13.18%

9.54%

5.54%

National Treasury

2,684,869

501,753

18.69%

5.21%

6.80%

6.68%

Public Service and Administration

335,291

72,319

21.57%

6.48%

5.76%

9.34%

Public Service Commission

103,663

22,757

21.95%

6.99%

8.38%

6.59%

S A Management Development Institute

40,293

8,814

21.87%

5.68%

8.40%

7.80%

Statistics South Africa

1,076,763

178,748

16.60%

4.42%

5.65%

6.53%

 

 

 

 

 

 

 

Social Services

3,594,735

613,533

17.07%

4.78%

6.21%

6.07%

Arts and Culture

256,233

69,736

27.22%

5.47%

8.54%

13.21%

Education

731,023

87,246

11.93%

2.89%

4.65%

4.40%

Health

860,193

130,633

15.19%

4.08%

6.41%

4.69%

Labour

1,159,812

247,579

21.35%

6.83%

7.73%

6.79%

Social Development

389,836

57,117

14.65%

4.00%

4.33%

6.32%

Sport and Recreation South Africa

197,638

21,222

10.74%

3.46%

2.91%

4.36%

 

 

 

 

 

 

 

Justice and Protection Services

65,177,048

13,970,116

21.43%

6.75%

6.79%

7.90%

Correctional Services

9,678,717

2,246,157

23.21%

6.39%

7.27%

9.55%

Defence

15,930,305

3,212,673

20.17%

5.68%

5.98%

8.51%

Independent Complaints Directorate

76,527

16,208

21.18%

5.88%

8.50%

6.80%

Justice and Constitutional Development

5,902,483

1,079,249

18.28%

5.13%

6.57%

6.58%

Safety and Security

33,589,016

7,415,829

22.08%

7.64%

7.07%

7.36%

 

 

 

 

 

 

 

Economic Services and Infrastructure Development

9,108,416

1,546,620

16.98%

4.47%

2.94%

9.57%

Agriculture

921,407

174,817

18.97%

4.58%

6.64%

7.75%

Communications

321,689

62,316

19.37%

7.59%

5.91%

5.87%

Environmental Affairs and Tourism

639,646

141,693

22.15%

6.34%

7.72%

8.09%

Housing

393,596

50,332

12.79%

3.44%

3.77%

5.58%

Land Affairs

1,265,561

211,133

16.68%

3.99%

6.08%

6.62%

Minerals and Energy

574,130

108,146

18.84%

4.73%

6.16%

7.94%

Public Enterprises

129,421

26,483

20.46%

234.88%

-224.77%

10.36%

Science and Technology

222,226

42,168

18.98%

5.36%

7.19%

6.43%

Trade and Industry

871,828

140,448

16.11%

4.21%

5.44%

6.47%

Transport

722,666

85,353

11.81%

2.07%

6.66%

3.08%

Water Affairs and Forestry

3,175,667

530,214

16.70%

4.57%

6.01%

6.12%

 

Table 2 illustrates that only two Departments spent more or equal to 25% of their current budgets as at the end of the first quarter. These were the Departments of Arts and Culture and Government Communications and Information Services. The remaining 32 Departments spent less than 25% of their current budgets and 21 of them less than 20%.

 

Table 3 illustrates Departments’ with the highest current expenditure at the end of the first quarter.

 

Table 3: Highest Current Expenditure to date

R'000

Total Current Budget

Current Exp. for First Quarter

% Cur. Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Government Communications and Information Services

250,515

70,788

28.26%

13.18%

9.54%

5.54%

Arts and Culture

256,233

69,736

27.22%

5.47%

8.54%

13.21%

Correctional Services

9,678,717

2,246,157

23.21%

6.39%

7.27%

9.55%

Environmental Affairs and Tourism

639,646

141,693

22.15%

6.34%

7.72%

8.09%

Public Works

1,465,430

323,622

22.08%

5.22%

8.78%

8.08%

 

The above-mentioned departments spent plus-minus 25% of their current budgets by the end of the first quarter, which is considered to be an appropriate level of expenditure. Government Communications and Information Services spent the highest portion by the end of June at R70.8 million or 28.26% of its budget. The second highest was the Department of Arts and Culture with R69.7 million or 27.22%. This is of particular interest considering the relatively high number of vacancies in the Department noted in previous years.

 

Table 4 illustrates Departments’ with the lowest current expenditure at the end of the first quarter.

 

Table 4: Lowest Current Expenditure to date

R'000

Total Current Budget

Current Exp. for First Quarter

% Cur. Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Sport and Recreation South Africa

197,638

21,222

10.74%

3.46%

2.91%

4.36%

Transport

722,666

85,353

11.81%

2.07%

6.66%

3.08%

Education

731,023

87,246

11.93%

2.89%

4.65%

4.40%

Housing

393,596

50,332

12.79%

3.44%

3.77%

5.58%

Parliament

574,826

82,836

14.41%

2.31%

5.38%

6.72%

 

The Department of Sport and Recreation spent the lowest share of their Current budget, R21.2 million or 10.74%. The second lowest was the Department of Transport, at R85 million or 11.81%. During the previous financial year the Department of Sports and Recreation spent 61.19% of its current budget; Transport 66.07%; Education 88.63% and; Housing 95.56%. As can be seen from the figures above, the aforementioned Departments are following the same trends as last financial year were money were shifted using virements from compensation of employees to other line budgets.

 

3. TRANSFER PAYMENTS

 

Transfers and subsidies include all unrequited payments made by a government department or entity. A payment is unrequited if the government department or entity does not receive anything directly in return for the transfer to the other party. Both current and capital transfers are included in this item. Departments’ transferred R47.7 billion, or 23.53%, of their Transfer budgets during the first 3 months of the year.

 

Table 5 represents Departments’ overall Transfer expenditure for the first quarter of 2007/08.

 

Table 5: Transfer Payments to date

R'000

Total Transfer Budget

Transfer Payments for First Quarter

% Transfer Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Voted Amounts

202,562,856

47,655,465

23.53%

10.46%

7.80%

5.26%

 

 

 

 

 

 

 

Central Government Administration

31,320,269

2,263,289

7.23%

2.13%

2.51%

2.58%

The Presidency

24,716

7,868

31.83%

31.75%

0.13%

-0.05%

Parliament

247,903

63,356

25.56%

25.15%

0.00%

0.40%

Foreign Affairs

640,153

72,501

11.33%

0.00%

0.01%

11.31%

Home Affairs

508,523

128,269

25.22%

8.43%

16.63%

0.16%

Provincial and Local Government

28,486,832

1,490,832

5.23%

1.81%

1.69%

1.74%

Public Works

1,412,142

500,463

35.44%

2.87%

15.71%

16.85%

 

 

 

 

 

 

 

Financial and Administrative Services

18,117,413

4,907,652

27.09%

4.73%

12.29%

10.07%

Government Communications and Information Services

123,087

43,810

35.59%

35.59%

0.00%

0.00%

National Treasury

17,011,419

3,830,554

22.52%

4.76%

13.07%

4.69%

Public Service and Administration

18,868

1,438

7.62%

4.36%

3.26%

0.00%

Public Service Commission

27

0

0.00%

0.00%

0.00%

0.00%

S A Management Development Institute

29,216

7,200

24.64%

8.21%

8.21%

8.21%

Statistics South Africa

1,176

-298

-25.34%

0.00%

-24.40%

-0.94%

 

 

 

 

 

 

 

Social Services

99,000,698

30,120,364

30.42%

15.87%

9.00%

5.56%

Arts and Culture

1,346,644

333,343

24.75%

14.21%

4.61%

5.94%

Education

15,265,892

7,738,264

50.69%

25.66%

19.35%

5.68%

Health

11,760,745

2,879,301

24.48%

7.14%

9.52%

7.82%

Labour

835,993

310,526

37.14%

1.46%

35.53%

0.15%

Social Development

66,832,820

17,876,478

26.75%

15.81%

5.52%

5.41%

Sport and Recreation South Africa

2,958,604

982,452

33.21%

6.09%

26.61%

0.51%

 

 

 

 

 

 

 

Justice and Protection Services

10,901,375

1,205,487

11.06%

3.21%

2.13%

5.72%

Correctional Services

30,859

7,048

22.84%

8.31%

7.66%

6.87%

Defence

9,607,151

895,979

9.33%

2.44%

1.43%

5.45%

Independent Complaints Directorate

48

5

10.42%

0.00%

10.42%

0.00%

Justice and Constitutional Development

943,241

222,952

23.64%

9.00%

7.29%

7.35%

Safety and Security

320,076

79,503

24.84%

8.87%

7.17%

8.80%

 

 

 

 

 

 

 

Economic Services and Infrastructure Development

43,223,101

9,158,673

21.19%

8.34%

8.45%

4.40%

Agriculture

1,308,824

234,852

17.94%

4.95%

9.86%

3.13%

Communications

1,094,301

242,892

22.20%

0.16%

8.74%

13.30%

Environmental Affairs and Tourism

1,947,449

678,207

34.83%

20.50%

7.62%

6.70%

Housing

8,477,441

1,451,636

17.12%

5.98%

4.81%

6.33%

Land Affairs

4,014,373

950,178

23.67%

7.19%

9.74%

6.75%

Minerals and Energy

2,382,824

662,094

27.79%

8.57%

11.25%

7.97%

Public Enterprises

933,620

1,024,948

109.78%

42.84%

48.91%

18.03%

Science and Technology

2,917,799

543,827

18.64%

9.68%

5.28%

3.68%

Trade and Industry

3,956,163

857,438

21.67%

5.62%

10.00%

6.06%

Transport

15,093,723

3,204,620

21.23%

7.89%

6.28%

7.06%

Water Affairs and Forestry

2,030,204

332,929

16.40%

2.19%

12.72%

1.48%

 

Table 6, below, illustrates Departments’ with the highest Transfer expenditure at the end of the first quarter.

 

 

 

 

 

 

Table 6: Highest Transfer Expenditure to date

R'000

Total Transfer Budget

Transfer Payments for First Quarter

% Transfer Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Public Enterprises

933,620

1,024,948

109.78%

42.84%

48.91%

18.03%

Education

15,265,892

7,738,264

50.69%

25.66%

19.35%

5.68%

Labour

835,993

310,526

37.14%

1.46%

35.53%

0.15%

Government Communications and Information Services

123,087

43,810

35.59%

35.59%

0.00%

0.00%

Public Works

1,412,142

500,463

35.44%

2.87%

15.71%

16.85%

 

The Department of Public Enterprises transferred the highest percentage of its allocated budget at R1.02 billion or 109.78%. The Department of Education transferred the second highest at R7.7 billion or 50.69%. At the end of the 2006/07 financial year Public Enterprises transferred 89.88% of its transfer budget, Education 100%, Labour 102.49%, Government Communications and Information Services 100%, and Public Works 99.48%.

 

Table 7 illustrates Departments’ with the lowest Transfer expenditure at the end of the first quarter.

 

Table 7: Lowest Transfer Expenditure to date

R'000

Total Transfer Budget

Transfer Payments for First Quarter

% Transfer Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Provincial and Local Government

28,486,832

1,490,832

5.23%

1.81%

1.69%

1.73%

Public Service and Administration

18,868

1,438

7.62%

4.36%

3.26%

0.00%

Defence

9,607,151

895,979

9.33%

2.44%

1.43%

5.46%

 

The Department of Local Government transferred the lowest percentage of its budget by the end of the first quarter with R1.49 billion or 5.23% being allocated. The Department of Public Services and Administration transferred R1.5 million or 7.62% of its budget. It should be noted that the Transfer Spending varies between Departments depending on their specific transfer schedules and agreements with the recipient entities.

 

4. CAPITAL EXPENDITURE

 

Capital assets comprise five main categories, namely buildings and other fixed assets, machinery and equipment, cultivated assets, software and other intangible assets and land and sub-soil assets. Expenditure on goods, such as items worth less than R5000, are not included under capital expenditure but categorised as goods and services.

 

Table 8 represents Departments’ overall Capital expenditure for the first quarter of 2007/08. Departments’ spent on average 11.49% of their Capital budgets during the first 3 months. They spent on average 3% of their Capital budgets during April, 4.86% during May and 3.13% during June. Average departmental spending on Capital budgets is much lower than Current and Transfer expenditure.

 

 

 

 

 Table 8: Capital Expenditure to date

R'000

Total Capital Budget

Capital Exp. for First Quarter

% Capital Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Voted Amounts

6,646,996

763,576

11.49%

3.48%

4.87%

3.13%

 

 

 

 

 

 

 

Central Government Administration

2,011,558

85,336

4.24%

0.36%

1.55%

2.33%

The Presidency

6,887

417

6.05%

0.00%

0.00%

6.05%

Parliament

12,985

324

2.50%

0.00%

1.50%

0.99%

Foreign Affairs

444,034

20,179

4.54%

0.00%

1.67%

2.87%

Home Affairs

726,838

11,597

1.60%

0.94%

0.51%

0.15%

Provincial and Local Government

5,266

371

7.05%

5.26%

0.49%

1.29%

Public Works

815,548

52,448

6.43%

0.01%

2.44%

3.98%

 

 

 

 

 

 

 

Financial and Administrative Services

43,783

12,378

28.27%

4.57%

6.55%

17.15%

Government Communications and Information Services

2,210

728

32.94%

19.68%

8.51%

4.75%

National Treasury

11,890

1,068

8.98%

0.20%

5.14%

3.64%

Public Service and Administration

3,124

375

12.00%

2.02%

6.40%

3.59%

Public Service Commission

1,667

322

19.32%

16.20%

0.60%

2.52%

S A Management Development Institute

1,617

706

43.66%

26.28%

17.38%

0.00%

Statistics South Africa

22,350

9,019

40.35%

3.51%

7.06%

29.78%

 

 

 

 

 

 

 

Social Services

90,836

8,640

9.51%

2.70%

5.55%

1.26%

Arts and Culture

5,142

0

0.00%

0.00%

0.00%

0.00%

Education

4,008

1,095

27.32%

3.69%

20.38%

3.24%

Health

34,194

2,741

8.02%

0.59%

9.53%

-2.11%

Labour

37,060

2,137

5.77%

0.86%

1.59%

3.32%

Social Development

9,452

1,765

18.67%

11.86%

3.06%

3.76%

Sport and Recreation South Africa

980

902

92.04%

67.76%

9.39%

14.90%

 

 

 

 

 

 

 

Justice and Protection Services

3,862,294

445,665

11.54%

3.95%

5.01%

2.58%

Correctional Services

1,032,755

109,381

10.59%

2.14%

6.66%

1.79%

Defence

384,799

41,151

10.69%

2.48%

2.37%

5.85%

Independent Complaints Directorate

4,316

392

9.08%

1.32%

0.90%

6.86%

Justice and Constitutional Development

432,046

77,632

17.97%

3.01%

9.62%

5.34%

Safety and Security

2,008,378

217,109

10.81%

5.36%

3.69%

1.76%

 

 

 

 

 

 

 

Economic Services and Infrastructure Development

638,525

211,557

33.13%

10.57%

14.25%

8.32%

Agriculture

50,935

23,471

46.08%

5.97%

6.18%

33.93%

Communications

7,543

1,685

22.34%

3.82%

17.08%

1.45%

Environmental Affairs and Tourism

3,676

5,589

152.04%

15.32%

49.51%

87.21%

Housing

6,571

884

13.45%

1.64%

9.21%

2.60%

Land Affairs

398,585

155,737

39.07%

14.05%

18.10%

6.92%

Minerals and Energy

9,159

324

3.54%

0.36%

3.08%

0.10%

Public Enterprises

925

160

17.30%

0.00%

15.46%

1.84%

Science and Technology

2,454

633

25.79%

12.18%

4.81%

8.80%

Trade and Industry

17,592

3,675

20.89%

3.09%

13.68%

4.12%

Transport

41,534

396

0.95%

0.15%

0.58%

0.23%

Water Affairs and Forestry

100,476

19,163

19.07%

6.51%

8.74%

3.82%

 

Table 9 illustrates Departments’ with the highest Capital expenditure at the end of the first quarter.

 

Table 9: Highest Capital Expenditure to date

R'000

Total Capital Budget

Capital Exp. for First Quarter

% Capital Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Environmental Affairs and Tourism

3,676

5,589

152.04%

15.32%

49.51%

87.21%

Sport and Recreation South Africa

980

902

92.04%

67.78%

9.39%

14.87%

S A Management Development Institute

1,617

706

43.66%

26.28%

17.38%

0.00%

Agriculture

50,935

23,471

46.08%

5.97%

6.18%

33.93%

Statistics South Africa

22,350

9,019

40.35%

3.51%

7.06%

29.78%

 

The Department of Environmental Affairs and Tourism spent the highest percentage of its budget at the end of the first quarter at R 5.5 million or 152,04%. The Department of Sport and Recreation South Africa spent the second highest share at 92.04%. At the end of the 2006/07 financial year, Environmental Affairs and Tourism spent 83.31% of its Capital budget, Sport and Recreation 26.03%, The SA Management Development Institute 109.92%; Agriculture 189.21%, and Statistics South Africa 77.31%.

 

Table 10 illustrates Departments’ with the lowest Capital expenditure at the end of the first quarter.

 

Table 10: Lowest Capital Expenditure to date

R'000

Total Capital Budget

Capital Exp. for First Quarter

% Capital Exp. for First Quarter

April % Exp.

May % Exp.

June % Exp.

 

 

 

 

 

 

 

Arts and Culture

5,142

0

0.00%

0.00%

0.00%

0.00%

Transport

41,534

396

0.95%

0.15%

0.58%

0.22%

Home Affairs

726,838

11,597

1.60%

0.94%

0.51%

0.15%

Parliament

12,985

324

2.50%

0.00%

1.50%

1.00%

Minerals and Energy

9,159

324

3.54%

0.36%

3.08%

0.10%

 

The Department of Arts and Culture spent none of its Capital budget (0%), whilst the Department of Transport spent 0.95%. During the 2006/07 financial year, the Department of Arts and Culture only spent 0.79% of its allocated budget, Transport 33.44%, Home Affairs 156%; and Minerals and Energy 144%.

 

 

SECTION TWO: FIRST QUARTER EXPENDITURE IN SELECTED DEPARTMENTS

 

Based on the general analysis of expenditure in Section One as well as 2007 Budget Priorities as indicated in the Estimates of National Expenditure the Joint Budget Committee (JBC) identified a number of Departments to engage with in greater detail. These included the Departments: of Public Enterprises; Education; Transport; Housing; Home Affairs, Safety and Security and; Provincial and Local Government.      

 

Department of Public Enterprises

 

The Department of Public Enterprise (DPE) has oversight responsibilities over the affairs and performance of state-owned enterprises (SOE). In this role, it acts as the shareholder-representative of government, ensuring that state-owned enterprises are commercially viable and contribute to the growth of the country’s economy. The department further ensures that SOEs business strategies are aligned with sector departmental policies and regulatory frameworks such as the Public Finance Management Act (PFMA).

 

The Departments budget for 2007/08 was R1.064 billion. At the end of the first quarter, total expenditure amounted to R1.052 billion or 98.84% of the Departments total budget. Of this amount R1.025 billion was transfer expenditure allocated to the SOEs.

 

 The original Approved Drawings on the National Revenue fund indicated that the Department planned drawing R438.4 million during the first 3 months. The transfers to the SOEs therefore resulted in a deviation of approximately R500 million. The Minister of Finance also indicated that R3 billion would be set aside as contingency money for the SOEs whilst the funding for the Pebble Bed Modular Reactor (PBMR) and InfraCo remained subject to the approval of business plans and resolutions of outstanding regulatory requirements. In light of these issues, the Joint Committee agreed to solicit explanatory information for the Department in respect of its spending for the first quarter.  

 

Department of Education

 

In South Africa, education has been identified as one of the most significant areas of investment for meeting the challenges of the 21st century. The aim of the Department is therefore to develop, maintain and support the South African education and training system for the 21st century. Policy Priorities for the Department for 2007/08 financial year included, amongst others, the popularisation of the teaching profession, the improvement of access and quality in general education, developments in Further Education and Training (FET), the intensification of the implementation of no-fee schools policy and the extension of the primary School nutrition programme to Secondary Schools.

 

The Department of Education was the second highest spending Department for the quarter with expenditure of R7.8 billion or 48.91% of its total budget. Although this was inline with previous spending trends – during the first quarter of the previous financial year the Department spent R6.7 billion or 47% of its total budget – the Department spent R 600 million less then the planned R 8.4 billion in the Approved Drawings on the National Revenue Fund. In addition, in relation to expenditure in terms of the economic classifications, the Department spent 50.69% of its transfer budget during the first quarter, 27.23% of its capital budget but only 11.93% of its current budget of which R 44.2 million or 16.83% was personnel expenditure – well below the linear benchmark of 25%. In light of this, the Committee agreed to examine aspects of the Department’s expenditure for the quarter more closely.

 

It’s important to note that 95.41% of the Department’s budget is allocated through transfer payments, most of which is directed at higher education institutions, public entities and transfers to provinces for conditional grants in terms of the Division of Revenue Act. Of the Department’s total budget, 74.1% is directed at to higher education institutions. In this regard, the Department has a standing arrangement with National Treasury according to which 50% of the total grant is transferred during the first quarter with the remaining 50% paid over the months up until November. This is done to assist these institutions with their cash flow management. During the first three months of the year the Department therefore transferred R6.596 billion or 55.22%.

 

In terms of monitoring transfer expenditure to higher education institutions, the Department explained that it does so via monthly reports and annual reports, which included annual financial statements. Conditional grants were monitored in accordance to the Division of Revenue Act, which required receipt of receiving monthly financial reports and quarterly narrative reports. These reports were the checked against the approved business plans for each province. Public entities were monitored through quarterly reports, which included financial and performance information based on approved strategic plans of the public entities.

 

Department of Transport

 

The Department of Transport positions itself as the ‘Heartbeat of South Africa’s Economic Growth and Social Development with the objective of providing an enabling environment not only for transport mobility, but also for the use of transport as a catalyst for economic growth, poverty alleviation and social inclusion. The Department also has a major role in infrastructure development in preparation for the FIFA World Cup and beyond.

 

The Department of Transport spent R 3.3 billion or 20.75% of its total budget during the first quarter. Of the R3.3 billion spent thus far, R3.2 billion was transfer expenditure. This noted the Department spent only R85 million or 11.81% of its current budget of R722.666 million. In light of this, the JBC examined aspects of the Department’s expenditure and specifically current expenditure, in greater detail.

 

In general terms, the Department explained that underspending in both current and capital categories during the quarter was a consequence on the longer-term nature of certain projects, delays in invoices and claims and because certain critical posts could not be filled. In this regard expenditure was expected to increase during the year. 

 

Concerning current expenditure specifically, the Department highlighted the relatively high level of vacant posts, partly due the restructuring of the Department the high number of resignations experienced during the past financial year. Although the reduction of the vacancy rate in the Department was identified as a priority, the number of filled posts only increased slightly between April 2006 and March 2007 due to 63 resignations with 66 posts remaining vacant. It is important to note that the size of the Department was increased in 2006 with an additional 99 posts, which brought the total to 1022, being established. Of this number 414 posts were not funded by the budget. During the previous MTEF budgeting process, additional funding of R15 million per annum was allocated in order to enable the Department supported these posts.

 

Of the amount allocated to current expenditure, R541.8 million was assigned to goods and services. During the period under review the Department spent R56.233 million or 10.39% of budget for this purpose. Within the Department’s Programmes underspending on goods and services was most acute in Transport Regulation (Programme 3) and Integrated Planning and Inter-Sphere Coordination (Programme 4) respectively.

 

Department of Safety and Security

 

The key strategic priorities for the South African Police Service (SAPS) remain those highlighted in the SAPS Strategic Plan (2005-2010) which are to combat organised crime, combat serious and violent crime, reduce the incidence of crime against women and children and improve the services provided by the SAPS in general. The total budget of the Department for the 2007/08 is R 36 billion.  During the first quarter, the Department spent R7.7 billion or 21.47% of its budget. In light of the lower then linear benchmark of 25%, the Joint Budget Committee opted to seek explanatory information from the Department. In its response to the Committee, two substantive issues were raised.

 

First, concerning current spending and specifically good and services, the Department highlighted that expenditure was affected due to the new arrangements by Public Works relating to the devolved budgets, especially pertaining to the payments for planned maintenance, property rates and taxes and leasehold expenditures with the latter claimed quarterly and not monthly. The Department indicated that this environment was being monitored closely and interventions would be embarked upon were considered necessary.

 

Second, with regards to slow spending for capital assets at R 217 million or 11% of the allocated R 2 billion for the year, the Department indicated that this was the trend as the more than 50% of the total provision for capital assets where allocated for the purchasing of vehicles. Orders are placed at the beginning of the financial year, with specific delivery schedules commencing from the second quarter. In addition, the Department indicated that orders have been placed for other capital related purchases such as vehicles, firearms, helicopters which were again expected to delivered later in the year.

        

The Department concluded that spending typically followed an S-Curve and so the evident spending patterns was expected and in accordance with the strategic plan. Expenditure would nevertheless be closely monitored.

 

Department of Provincial and Local Government

 

The medium-term policy priorities and budgetary allocations of the National Department of Provincial and Local Government (DPLG) resonate with the broader objective of government, which is to grow and strengthen the capacity of local government structures. For the last four financial years, the budget of the Department has grown substantially and driven, mainly, by substantive growth in provisions for the local government equitable share and the municipal infrastructure grant. For 2007/08, Local Government policy priorities have increased due to socio-economic demands, as national Government strives to utilise public infrastructure investment as a vehicle to address underdevelopment and eradicate poverty.

 

This Department spent the lowest percentage of its budget during the first quarter of the financial year with expenditure of R1.56 billion or 5.41 % of its budget. Around 96% or R28.487 billion of the Department’s budget, however, consists of transfers through Programme 6: Provincial and Local Government Transfers.  Included in this amount is R400 million to facilitate the eradication of the bucket system for sanitation. The reason for the low expenditure during the first quarter was due equitable share transfers being made in three transfers in line with the published payment schedule with the first payment due in July 2007. During the previous financial year the first payment was made during July (R6.77 billion), the second in November (R5.1 billion), and the final payment in February (R8.42 billion). This noted, the Departments current expenditure for the first 3 months of the financial year was R69 million or 19.55% of its budget.

 

Department of Home Affairs

 

The Department of Home Affairs has a mandate to protect and regulate the interests of the inhabitants of the Republic in respect of individual status, identity and specific rights and powers, and to promote a supporting service to the effect. It is also responsible for managing migration, ensuring national security, economic development and promoting good international relations.  The strategic priorities for the Department for 2007 were primarily to improve capacity to deliver on its mandate – to deliver core services to its clients. This includes measure to address the department’s structural and operational reorganization especially in the frontline offices. In addition, the Department has prioritized the need to increase its human resource compliance particularly at senior management level. 

 

The Department of Home Affairs was the second lowest spending Department during the first three months managing to spend R492 million or 14.83% of its budget. In addition, the Department spent less then the amount stated in the Approved Drawings on the National Revenue Fund, which suggested expenditure of R699.38 million. At the end of the previous financial year the Department under spent its budget by R237 million or 8%. Thus far the Department spent R352 million or 16.92% of its current budget, R128 million or 25.22% of its transfer budget, and R11.6 million or 1.6% of its capital budget. Given the lower then linear benchmark of 25% expenditure for the quarter especially in respect of current and capital spending, the Joint Budget Committee opted to seek additional information from the Department. In its response to the Committee,

 

Department of Sport and Recreation

 

South Africa is plagued by disparities in the access to sport, particularly in the historically disadvantaged communities. As part of the transformation process, Sport and Recreation South Africa (SRSA)’s main focus is improving access to sport and recreation at all levels of participation, with particular emphasis on its expanded responsibility of co-ordinating the hosting of the 2010 FIFA World Cup. The strategic objectives of the Department for 2007 included, amongst others, to facilitate increased levels of participation of South Africans in sport and recreational activities and to raise the profile of sports especially amongst decision-makers in the face of conflicting and competing priorities.

 

The Department of Sport and Recreation spent R1 billion or 31.82% of its total budget of R3.1 billion during the first quarter - significantly higher then the previous year. Of the R1 billion spent, R982 million was transfer expenditure. This noted, the Department only spent R198 million or 10.74% of its current budget during the first three months.

 

Department of Housing

 

The mandate and mission of the Department is to establish and facilitate a sustainable process that provides equitable access to housing or all within the context of affordability of housing services and access to social amenities and economic opportunities. Notably within the Department’s strategic objectives and framework, the Department has formulated the Breaking New Ground (BNG) housing strategy which aims to, amongst other things, accelerate housing delivery, improve the quality of housing products, ensure a single and efficient housing market restructure and integrate human settlements and use the provision of housing as a job creation instrument.  

 

The Department spent R1.5 billion or 16.97% of its total budget during the first quarter - R 300 million less than the amount stated on the Approved Drawings on the National Revenue Fund. In this regard, the Department only spent R50 million or 12.8% of its current budget, R1.45 billion or 17.12% of its transfer budget, and R884 thousand or 13.45% of its capital budget. Furthermore, it should be noted that the Department under spent its budget by R171 million or 2.3% at the end of the previous financial year. In light of the lower then linear benchmark of 25% and the risk of underspending, the Committee decided to seek explanatory information from the Department, which subsequently responded by giving a detailed breakdown of expenditure by programme.

 

In this regard, the reported underspending of R 23.2 million, or 20% of the total allocation of R116.4 million, in Programme 1: Administration, was attributed to the ordering of goods and services for which delivery and invoices remained pending. The Department anticipated that expenditure would start to increase as the year progressed. With regards to Programme 2: Housing Policy Research and Planning, the expenditure of R4.422 million or 5% of the allocated R89.979 million, was attributed to a delay in the payment of invoices on the information management systems as well as a delay in the service level agreement with the SITA due to the reviewing process that which were now in the process of approval. The Department assured the Committee that as soon as these service level agreements were approved expenditure would increase. Concerning Programme 3: Housing Implementation Support, the Programme spent R15.5 million or 10% of its budget of R147.9 million. The Department indicated that underspending was a consequence of the slow implementation of Accreditation on Municipalities Project. Expenditure in this regard was again expected to improve in the next quarter as business plans were received, reviewed and approved.

 

When reflecting on housing expenditure it should be noted that 98.01% of the Department’s budget of R8.5 billion was appropriated to Programme 4: Housing Development Finance – where the Integrated Housing and Human Settlement Grant and the operational budgets for the various public entities are located. Of this R1.4 billion or 17% was spent during the period under review. The Department indicated that this was in line with projected expenditure with the transfer of funds to provinces based on inputs received from the different provincial governments and project life cycles. Expenditure is therefore likely to peak later in the year.

 

Regarding the monitoring of transferred funds, the Department indicated that they received monthly reports on financial and non-financial information that was reviewed and followed-up with provinces. Conditional grants were monitored in accordance to the Division of Revenue Act. The Department visited their provincial counterparts to review expenditure as well as revise their monthly cash flows when required. In addition a Chief Financial Officers Forum has been re-established where issues of non-spending in relation to business plans are debated.