DIVISION OF REVENUE AMENDMENT BILL, 2020WESTERN CAPE

1

STRUCTURE OF THE PRESENTATION

This presentation covers:

1. Timeline of Division of Revenue responses to COVID-19

2. Impact of COVID-19 on provinces and municipalities and the Division of Revenue response

3. Changes to provincial allocations

4. Changes to local government allocations

2

TIMELINE OF THE DIVISION OF REVENUE-RELATED RESPONSE TO COVID-19

• Response enabled through 2019 Division of Revenue Act:• Release of funds from Provincial and Municipal Disaster Relief Grants in

March and May 2020

• Reallocations approved in terms of s20(6) of R4 billion in uncommitted grant funds for disaster alleviation in 2019/20 municipal financial year

• 2020 Division of Revenue Act was enacted on 23 June 2020 • Gazetted frameworks include additional conditions to allow for COVID-19

spending from existing grant baselines (Gazette published on 3 July)

• Enables the reprioritised use of about R7.4 billion in grant funds for provinces and R9 billion in grant funds for local government

• The Special Adjustment Budget tabled on 24 June 2020 includes a Division of Revenue Amendment Bill that includes:• Additions to new COVID-19 component of the HIV, TB, Malaria and

Community Outreach Grant• Additions of R11 billion to the local government equitable share• Downward adjustments to some conditional grants (to fund other COVID-

response activities) 3

COVID-19 IMPACT ON NATIONAL FINANCES

• GDP expected to shrink by 7.2% in 2020

• National revenue is expected to be R304bn less than budgeted for

• Expenditure as a % of GDP increases while revenue drops (“the Hippo’s mouth”), resulting in a 14.6% main budget deficit

• Debt service costs increase to R21.50 of every R100 of revenue collected

4

Debt-service costs as a proportion of main budget revenueIn-year revenue compared with Budget forecasts (2020 prices)

Main budget revenue and expenditure

HOW THE COVID-19 RESPONSE IS BEING FUNDED

• The increased government spending to respond to COVID-19 is funded in part by increasing the deficit and in part by reprioritising resources

• The President announced that R130 billion would be reprioritised • R30 billion of this was to come from provinces (excluding conditional grants)

• In the adjustment budget, R100.9 billion in reprioritisations were effected

• Reprioritised funds come from:• Savings on activities (travel, venue hire, catering) that are no longer possible

• Unspent funds due to lockdown regulations (e.g. most infrastructure grants could not be spent under level 4 and level 5 regulations)

• Identifying possible under-spending (provinces underspent their grants by R3.4 billion in 2019/20, and we identified potential underspending of R5 billion in local government that could be reallocated in 2019/20)

• Reprioritisations of this scale will however require the implementation of some projects to be delayed

5

IMPACT OF THE COVID-19 PANDEMIC ON PROVINCES

• Provincial governments are responsible for the key services at the frontline of the pandemic response including:• Public health system

• Schools

• Social welfare services

6

Equitable

share

Funds reprioritised to: Total

R thousand Health Other

sectors

Eastern Cape 13.3% 1 988 374 662 791 2 651 165

Free State 5.6% 835 589 278 530 1 114 119

Gauteng 20.8% 3 126 485 1 042 162 4 168 647

KwaZulu-Natal 20.7% 3 105 174 1 035 058 4 140 231

Limpopo 11.6% 1 735 434 578 478 2 313 913

Mpumalanga 8.2% 1 228 288 409 429 1 637 718

Northern Cape 2.6% 396 847 132 282 529 130

North West 7.0% 1 045 383 348 461 1 393 844

Western Cape 10.3% 1 538 426 512 809 2 051 234

Total 100.0% 15 000 000 5 000 000 20 000 000

Reprioritisations for COVID-19 expected within provincial budgets

• Provinces will fund their COVID-19 responses primarily through reprioritisation

• Provinces have committed to reprioritise at least R20 billion

• These shifts are not shown in the Bill as they are changes within provincial budgets (there are no changes to the provincial equitable share in the Bill)

IMPACT OF THE COVID-19 PANDEMIC ON LOCAL GOVERNMENT

Revenue pressures

• Full revenue impact is still uncertain, but metros reported an aggregate 30% drop in revenue in April 2020

• Several municipalities saw revenue drop by 40% to 60% in April

• Many municipalities were already in financial distress (and others at risk) before the pandemic

Spending pressures

• Local government spending pressures as a result of the pandemic include:• Impact of increased indigence due to economic downturn

• Provision of sanitisation of public transport facilities and vehicles in order to allow the economy to reopen

• Provision of water, sanitation and waste services at higher frequency in informal settlements and poorly served rural communities in order to enable stay-at-home policies to be implemented

• Provision for temporary shelter for the homeless

DIVISION OF REVENUE RESPONSE

The challenge for the Division of Revenue • COVID-19 pandemic places large additional spending pressures on provinces and

municipalities at the same time that their revenues are decliningApproach to response• Focus is on reprioritising within each sphere (each province and municipality will

have to adjust their own budgets)• LG budgets for 2020/21 were finalised during the pandemic, but will be adjusted to

take account of national adjustments and further reprioritisations as the need arises

• Equitable shares should be protected to provide a level of budget stability and the LG equitable share increased to compensate for lost revenue and support COVID-related spending

• R16 billion within conditional grant is repurposed for the COVID-response• Parliament has already approved changes to several grant frameworks to allow this

repurposing of grant allocations (changed grant frameworks have been gazetted)• R4 Billion in reallocations towards COVID-response were approved in 2019/20

• Downward adjustments to some conditional grants will contribute to funding for the nation-wide response. Provincial grants are adjusted down by R7.2 billion and local government conditional grants by R3.6 billion

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CHANGES IN THE CLAUSES AND SCHEDULES

• The main purpose of the DoRAB is to amend “Column A” of the DoRAschedules which shows the allocation for the current year

• The new “Column A” created by the DoRAB shows the original allocation, the adjustment and the new allocation so as to maximise transparency in the adjustment process

• “Column A” is amended for schedules 1, 3, 4 (Parts A & B), 5 (Parts A & B), 6 (Parts A & B), and 7 (Part A & B)

• The 2020 DoRAB clauses also allow for the creation of additional payment dates for the local government equitable share (currently only 3 transfers are provided for)

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Schedule 1 from 2020 DoRA

Schedule1 from 2020 DoRAB

Column A Column B

Forward Estimates

2021/22 2022/23

R'000 R'000 R'000

National1,2 1 152 839 556 1 195 617 107 1 245 458 677

Provincial 538 471 528 573 989 526 607 553 532

Local 74 683 326 81 061 819 87 212 717

TOTAL 1 765 994 410 1 850 668 452 1 940 224 926

Spheres of Government2020/21

Page 1R'000 R'000 R'000

National1,2 1 152 839 556 32 180 670 1 185 020 226

Provincial 538 471 528 - 538 471 528

Local 74 683 326 11 000 000 85 683 326

TOTAL 1 765 994 410 43 180 670 1 809 175 080

Spheres of Government 2020/21

Main

Allocation

Column A

Adjustment

2020/21

Adjusted

Allocation

CHANGES TO HEALTH GRANTS

In addition to the reprioritisations in the provincial equitable share (including R15 billion for health departments and R1 billion for facilities provided by public works departments), the health sector also benefits from changes to conditional grants:

Additional funds

• R2.8 billion has been added to COVID-19 component of HIV, TB, malaria and community outreach grant which had an initial gazetted allocation of R605 million bringing the total for this component to R3.4 billion• This component funds spending for PPE and ventilators, and hiring of additional

staff, including the Cuban medial personal, to respond to the pandemic

Reprioritised funds

• Funds within community outreach services component of the HIV, TB, malaria and community outreach grant for will be used for screening and contact tracing for COVID-19. About 10 000 community healthcare workers have already been trained to do this job

• R1.1 billion within health facilities revitalisation grant to provide additional capacity through upgrade and refurbishing health facilities

• R298 million within national tertiary services grant to strengthen intensive-care unit capacity

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REPRIORITISATION WITHIN EDUCATION GRANTS

To support sanitisation and sanitation

• R600 million has been reprioritised from direct education infrastructure grant to an indirect school infrastructure backlogs grant to provide potable water and safe sanitation for all schools that lack such access

• R4.4 billion is reprioritised within education infrastructure grant for• trucking of water to refill water tanks at schools• purchase of sanitization material and equipment• fund salaries at EPWP rate for temporary (2020/21 only) assistants to screen learners,

clean and sanitise school facilities, if required

• R50 million within national school nutrition programme grant for additional sanitization in food preparation and distribution areas and provision of PPE for food handlers (this grant also allows for feeding outside of schools if schools are closed due to a declared state of disaster)

• R20 million from learners with profound intellectual disabilities grant to provide PPE to support provision of education to children with severe to profound intellectual disabilities

To support catch-up activities

• R30 million from maths, science and technology grant

• R40 million from HIV and AIDS (life skills education) grant to provide education measures to respond to the pandemic

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CHANGES TO OTHER PROVINCIAL GRANTS

• R89 million has been reprioritised within early childhood development grant to prepare ECD sites for reopening

• R10 million has been reprioritized within community library services grant to sanitise libraries, provide hand sanitizer for library users and issue PPE for staff

• R337 million has been reprioritised within public transport operations grant to sanitise buses and public transport facilities

• R58 million within mass participation and sport development grant to compensate the sport sector for loss of earnings due to cancelled events

• R378 million has been added to provincial emergency housing grant (shifted from other human settlements grants) to swiftly provide emergency housing to allow people to socially distance or self-isolate where required

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SUMMARY OF CHANGES TO PROVINCIAL ALLOCATIONS (1 OF 2)

13

R million

Budget

2020

Revision Adjusted

allocation

Amount

repurposed

within

Equitable share 538 472 – 538 472 20 000

Direct conditional grants 110 785 -3 961 106 823 7 379

Agriculture, Land Reform and Rural Development 2 153 -438 1 716 –

Comprehensive agricultural support programme 1 522 -317 1 205 –

Ilima/Letsema projects 549 -121 428 –

Land care programme: poverty relief

and infrastructure development

82 – 82 –

Basic Education 19 564 -2 349 17 216 4 540

Education infrastructure 11 008 -2 221 8 787 4 400

HIV and AIDS (life skills education) 247 -60 187 40

Learners with profound intellectual disabilities 243 – 243 20

Maths, science and technology 401 -68 333 30

National school nutrition programme 7 666 – 7 666 50

Cooperative Governance 138 – 138 –

Provincial disaster relief 138 – 138 –

Health 49 267 2 846 52 113 1 991

HIV, TB, malaria and community outreach 24 387 2 846 27 233 605

Health facility revitalisation 6 368 – 6 368 1 066

National tertiary services 14 069 – 14 069 298

National health insurance grant: health professionals 289 – 289 23

Statutory human resource, training and development 4 155 – 4 155 –

Human Settlements 17 493 -1 728 15 765 378

Human settlements development 16 621 -1 728 14 892 –

Title deeds restoration 578 -378 200 –

Provincial emergency housing 295 378 673 378

SUMMARY OF CHANGES TO PROVINCIAL ALLOCATIONS (2 OF 2)

14

R million

Budget

2020

Revision Adjusted

allocation

Amount

repurposed

within

Public Works and Infrastructure 834 – 834 –

Expanded public works programme

integrated grant for provinces

421 – 421 –

Social sector expanded public works

programme incentive for provinces

414 – 414 –

Social Development 915 – 915 65

Early childhood development 915 – 915 65

Sports, Arts and Culture 2 076 -536 1 539 68

Community library services 1 479 -312 1 167 10

Mass participation and sport development 597 -224 373 58

Transport 18 343 -1 756 16 587 337

Provincial roads maintenance 11 593 -1 756 9 837 –

Public transport operations 6 750 – 6 750 337

Indirect conditional grants 4 060 202 4 262 200

Agriculture, Land Reform and Rural Development 36 – 36 –

Ilima/Letsema indirect 36 – 36 –

Basic Education 1 736 540 2 276 –

School infrastructure backlogs 1 736 540 2 276 –

Health 2 288 -338 1 949 200

National health insurance indirect 2 288 -338 1 949 200

WESTERN CAPE PROVINCIAL ALLOCATIONS (1/2)

WESTERN CAPE

R'000 R'000 R'000

EQUITABLE SHARE 55 207 631 - 55 207 631

CONDITIONAL GRANTS: 13 190 508 (113 123) 13 077 385

Agriculture, Forestry and Fisheries 167 064 (30 296) 136 768

Comprehensive Agricultural Support Programme Grant 111 555 (21 212) 90 343

Ilima/Letsema Projects Grant 50 464 (9 084) 41 380

Land Care Programme Grant: Poverty Relief and Infrastructure Development 5 045 - 5 045

Basic Education 1 587 566 (169 312) 1 418 254

Education Infrastructure Grant 1 091 162 (159 441) 931 721

HIV and AIDS (Life Skills Education) Grant 19 878 (4 802) 15 076

Learners With Profound Intellectual Disabilities Grant 28 499 - 28 499

Maths, Science and Technology Grant 35 479 (5 069) 30 410

National School Nutrition Programme Grant 412 548 - 412 548

Cooperative Governance and Traditional Affairs - - -

Provincial Disaster Grant - - -

Provincial Disaster Recovery Grant - - -

DescriptionTotal: 2020/21

Adjustments

Main

appropriation:

2020/21

National adjusted

appropriation: 2020/21

Note that provincial disaster grants remain unallocated in the Bill. Funds are allocated in response to a disaster (e.g. drought)

WESTERN CAPE PROVINCIAL ALLOCATIONS (2/2)

R'000 R'000 R'000

Health 6 893 733 552 220 7 445 953

HIV, TB, Malaria and Community Outreach 1 867 472 552 220 2 419 692

Community Outreach Services Component 179 583 179 583

HIV and AIDS Component 1 562 888 1 562 888

Malaria Elimination Component - -

TB Component 66 458 66 458

Covid-19 component 36 708 552 220 588 928

Human Papillomavirus 21 835 21 835

Health Facility Revitalisation Grant 698 793 - 698 793

National Tertiary Services Grant 3 426 618 - 3 426 618

National Health Insurance Grant 19 480 - 19 480

Statutory Human Resources, Training and Development 881 370 - 881 370

Human Settlements 1 975 503 (246 697) 1 728 806

Human Settlements Development Grant 1 907 551 (202 265) 1 705 286

Title Deeds Restoration Grant 67 952 (44 432) 23 520

Provincial Emergency Housing Grant - - -

Public Works 68 933 - 68 933

Expanded Public Works Programme Integrated Grant for Provinces 25 983 - 25 983

Social Sector Expanded Public Works Programme Incentive Grant for Provinces 42 950 - 42 950

Social Development 87 152 - 87 152

Early Childhood Development Grant 87 152 - 87 152

Sport, Arts and Culture 269 617 (57 384) 212 233

Community Library Services Grant 186 126 (34 700) 151 426

Mass Participation and Sport Development Grant 83 491 (22 684) 60 807

Transport 2 140 940 (161 654) 1 979 286

Provincial Roads Maintenance Grant 1 067 344 (161 654) 905 690

Public Transport Operations Grant 1 073 596 - 1 073 596

TOTAL: ADJUSTED NATIONAL TRANSFERS 68 398 139 (113 123) 68 285 016

DescriptionTotal: 2020/21

Adjustments

Main

appropriation:

2020/21

National adjusted

appropriation: 2020/21

R20 BILLION PACKAGE FOR LOCAL GOVERNMENT

Allocation of the R20 billion package for local governmentSpending priorities

(per the President’s

speech)

Funding modality Source of

funding

Amount

• Increased

operational

expenses (at a

time when

revenues are

declining)

• Food and shelter

for the homeless

Addition to the LG Equitable Share: Add

to basic services component to

compensate for the higher numbers of

indigent households. Add to community

services component for other services

such as cemeteries and crematoria and

PPE for workers

Additional

funds

R11 billion

• Water and

sanitation

infrastructure

Urban Settlements Development Grant,

Integrated Urban Development Grant,

Municipal Infrastructure Grant (MIG),

Regional Bulk Infrastructure Grant and

Water Services Infrastructure Grant

Reprioritise

within these

grants

R6.6 billion

• Sanitisation for

public transport

Public Transport Network Grant and MIG

for provision of extra hand washing

facilities, hand sanitizer and physical

distance marking through

Reprioritise

within these

grants

R2.4 billion

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LOCAL GOVERNMENT EQUITABLE SHARE

• Additions to the local government equitable share provide relief to stretched municipal finances to support their COVID-19 response

• Uses components of existing formula to add funds

• Each municipality will determine how best to use the funds to respond to local pressures• Monitoring of funds through the municipal Standard Chart of Accounts

municipalities must record spending against COVID-19 project code

• Funds added through 2 components of existing formula:• Basic services component (R7.5 billion), sufficient to increase FBS to further

1.4 million households

• Community services component (R3.5 billion), subject to revenue adjustment factor so it assists poorer municipalities more. Reaches municipalities responsible for environmental health, cemeteries and crematoria

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LGES INCREASE PER MUNICIPAL TYPE

• Striking a balance between COVID hit areas (mostly urban) with poor and rural municipalities

• Number of poor HHs increased by 13.9% (BS)

• CS increased by 41.5% and subjected to Revenue Adjustment Factor

19

M unicipal type

Allocation

R'000

Percentage

increase

Metros 2 974 834 27%

Secondary cities 1 379 817 13%

Large towns 783 478 7%

Small towns 1 590 041 14%

Mostly rural municipalities 2 752 098 25%

Districts without w&s func 118 459 1%

Districts with w&s func 1 401 279 13%

SUMMARY OF CHANGES TO LOCAL GOVERNMENT ALLOCATIONS

20

R million

Budget

2020

Revision Adjusted

allocation

Amount

repurposed

within

Equitable share 74 683 11 000 85 683 –

Direct conditional grants 43 819 -3 599 40 219 9 034

Municipal infrastructure 14 671 – 14 671 4 401

Integrated urban development 948 – 948 190

Urban settlements development 11 282 -1 100 10 182 2 257

Integrated city development 317 – 317 –

Public transport network 6 446 -1 902 4 544 1 096

Neighbourhood development

partnership

559 -68 492 –

Integrated national electrification programme 1 859 -500 1 359 –

Rural roads asset management systems 108 – 108 –

Regional bulk infrastructure 2 006 – 2 006 401

Water services infrastructure 3 445 – 3 445 689

Municipal disaster relief 354 – 354 –

Energy efficiency and demand-side

management

218 -22 196 –

Municipal emergency housing 159 – 159 –

Infrastructure skills development 153 -8 146 –

Local government financial management 545 – 545 –

Expanded public works programme

integrated grant for municipalities

748 – 748 –

Indirect conditional grants 7 628 -1 008 6 620 409

Integrated national electrification programme 3 001 -1 000 2 001 –

Neighbourhood development

partnership

63 – 63 –

Water services infrastructure 579 – 579 –

Regional bulk infrastructure 3 857 – 3 857 409

Municipal systems improvement 128 -8 120 –

WESTERN CAPE LG EQUITABLE SHARE ALLOCATIONS FOR 2020/21 (1 OF 2)

21Source: Division of Revenue Amendment Bill 2020

R'000 R'000 R'000

WESTERN CAPE

A CPT City of Cape Town 3 081 195 428 395 3 509 590

B WC011 Matzikama 60 792 8 222 69 014

B WC012 Cederberg 53 069 7 698 60 767

B WC013 Bergrivier 48 940 6 415 55 355

B WC014 Saldanha Bay 96 832 12 781 109 613

B WC015 Swartland 102 195 14 209 116 404

C DC1 West Coast District Municipality 96 113 3 134 99 247

Total: West Coast Municipalities 457 941 52 459 510 400

B WC022 Witzenberg 101 915 14 170 116 085

B WC023 Drakenstein 164 466 22 866 187 332

B WC024 Stellenbosch 149 804 20 828 170 632

B WC025 Breede Valley 127 591 17 739 145 330

B WC026 Langeberg 85 039 11 449 96 488

C DC2 Cape Winelands District Municipality 238 441 444 238 885

Total: Cape Winelands Municipalities 867 256 87 496 954 752

B WC031 Theewaterskloof 103 419 15 364 118 783

B WC032 Overstrand 117 318 17 004 134 322

B WC033 Cape Agulhas 32 155 4 305 36 460

B WC034 Swellendam 34 118 4 579 38 697

C DC3 Overberg District Municipality 74 636 2 912 77 548

Total: Overberg Municipalities 361 646 44 164 405 810

Number Municipality

2020/21

Main

Allocation

Adjustment

2020/21

Adjusted

Allocation

Local Government Equitable Share Allocations, 2020 MTEF

WESTERN CAPE LG EQUITABLE SHARE ALLOCATIONS FOR 2020/21 (2 OF 2)

22Source: Division of Revenue Amendment Bill 2020

R'000 R'000 R'000

WESTERN CAPE

B WC041 Kannaland 29 803 4 208 34 011

B WC042 Hessequa 47 294 6 236 53 530

B WC043 Mossel Bay 101 192 14 163 115 355

B WC044 George 163 760 22 768 186 528

B WC045 Oudtshoorn 78 568 11 222 89 790

B WC047 Bitou 104 346 17 322 121 668

B WC048 Knysna 94 039 13 957 107 996

C DC4 Garden Route District Municipality 162 480 3 227 165 707

Total: Garden Route Municipalities 781 482 93 103 874 585

B WC051 Laingsburg 17 704 1 948 19 652

B WC052 Prince Albert 22 985 2 940 25 925

B WC053 Beaufort West 67 109 10 371 77 480

C DC5 Central Karoo District Municipality 31 965 827 32 792

Total: Central Karoo Municipalities 139 763 16 086 155 849

Total: Western Cape Municipalities 5 689 283 721 703 6 410 986

Number Municipality

2020/21

Main

Allocation

Adjustment

2020/21

Adjusted

Allocation

Local Government Equitable Share Allocations, 2020 MTEF

WESTERN CAPE LG CONDITIONAL GRANTS ALLOCATIONS FOR 2020/21

23Reduction to the Public Transport Network Grant includes a reduction of R1 billion from the City of Cape Town that was allocatedfor a project funded through the Budget Facility for Infrastructure that the city will not be able to spend in 2020/21

2020/21

Main

Allocation

Adjustment

2020/21

Adjusted

Allocation

R'000 R'000 R'000

Infrastructure transfers to local government 4 896 866 -1 497 764 3 399 102

Direct transfers 4 704 279 -1 446 116 3 258 163

Municipal infrastructure grant 442 423 - 442 423

Integrated urban development grant 106 139 - 106 139

Urban settlements development grant 1 481 604 - 144 459 1 337 145

Public transport network grant 2 143 619 -1 219 383 924 236

Integrated city development grant 65 944 - 65 944

Neighbourhood development partnership (capital) grant 101 536 - 34 600 66 936

Energy efficiency and demand-side management grant 27 000 - 2 700 24 300

Integrated national electrification programme (municipal) grant 167 190 - 44 974 122 216

Regional bulk infrastructure grant 19 471 - 19 471

Water services infrastructure grant 137 000 - 137 000

Rural roads asset management systems grant 12 353 - 12 353

Indirect transfers 192 587 - 51 648 140 939

Neighbourhood development partnership (technical assistance) grant 10 000 - 10 000

Integrated national electrification programme (Eskom) grant 110 000 - 36 648 73 352

Regional bulk infrastructure grant 72 587 - 15 000 57 587

Capacity building transfers to local government 179 324 - 265 179 059

Direct transfers 170 324 - 170 324

Infrastructure skills development grant 17 200 - 17 200

Local government financial management grant 46 645 - 46 645

Expanded public works programme integrated grant for municipalities 106 479 - 106 479

Indirect transfers 9 000 - 265 8 735

Municipal systems improvement grant 9 000 - 265 8 735

5 076 190 -1 498 029 3 578 161 Total Western Cape Municipalities

Conditional Grant Allocations, 2020 MTEF

Thank YouThe Division of Revenue Amendment Bill, 2020, which includes details of changes

to allocations to each province and municipality is available at:

http://www.treasury.gov.za/documents/National%20Budget/2020S/

The gazetted conditional grant frameworks for 2020 (including COVID-19 provisions) are available at:

http://www.treasury.gov.za/documents/National%20Budget/2020/dor.aspx

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IMPLICATIONS FOR FUTURE BUDGETS

• The Division of Revenue Amendment Bill only makes changes to 2020/21 allocations

• If spending plans remain unchanged (passive scenario) we will see a sovereign debt crisis

• Cabinet has chosen the active scenario to stabilising debt below 90% of GDP. This will require a major change in planned spending

• Changes to MTEF allocations will be announced in the MTBPS in October

• National Treasury intends to re-assess spending areas in a “zero-based” budgeting approach

• NT and PTs intend to use spending reviews to assess key service delivery programmes in the next budget process

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Debt outlook scenarios

WHAT THE DIVISION OF REVENUE AMENDMENT BILL IS PROPOSING TO AMEND

Section 30(2) of the PFMA says that a national adjustments budget may only provide for:

a) adjustments required due to significant and unforeseeable economic and financial events affecting the fiscal targets set by the annual budget;

b) unforeseeable and unavoidable expenditure recommended by the national executive or any committee of Cabinet members to whom this task has been assigned;

c) any expenditure in terms of section 16;

d) money to be appropriated for expenditure already announced by the Minister during the tabling of the annual budget;

e) the shifting of funds between and within votes or to follow the transfer of functions in terms of section 42;

f) the utilisation of savings under a main division of a vote for the defrayment of excess expenditure under another main division of the same vote in terms of section 43; and

g) the roll-over of unspent funds from the preceding financial year.

26

Division of

Revenue Act

[Act 4 of 2020]

Act passed by Parliament and signed by the President in June 2020, contains:• Clauses of the Act set requirements for

transfer of funds, reporting on funds, conditions that may be set for grants and enforcement mechanisms

• Schedules to the Act contain equitable share and grant allocations

Division of

Revenue

Amendment

Bill

[B 9-2020]

Government

Gazette

No. 43495

3 July 2020

202 page gazette signed by the Minister of Finance contains:• Grant frameworks setting out conditions and

responsibilities for each conditional grant• Conditions allow for repurposing of

allocations to respond to COVOD-19• Allocations per individual municipality• Supplementary detail for allocations (e.g.

split per grant component)Div

isio

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f R

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d o

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get

Day

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all o

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(plu

s Ex

pla

nat

ory

Mem

ora

nd

um

)

Bill tabled on 24 June 2020 contains:• In-year adjustments to allocations, consistent

with limitations in S30 of the PFMA to respond to COVID-19

Another DoRAB will be tabled around October with the MTBPS to deal with other aspects of S30 that were not dealt with in this Special Adjustment Budget

ANNEXURE: CHANGES TO THE DIVISION OF REVENUE FOR 2020/21

27

2019/20 2020/21

R billion Revised Budget 2020 Revised % change

Division of available funds

National departments1

749.4 757.7 790.3 4.3%

Provinces 613.1 649.3 645.3 -0.6%

Equitable share 505.6 538.5 538.5 –

Conditional grants 107.6 110.8 106.8 -3.6%

Local government 123.3 132.5 139.9 5.6%

Equitable share 65.6 74.7 85.7 14.7%

Conditional grants 44.5 43.8 40.2 -8.2%

General fuel levy

sharing with metros

13.2 14.0 14.0 –

Provisional allocation

not assigned to votes2

– -7.8 -7.8 –

Contingency reserve – 5.0 5.0 –

Non-interest expenditure 1 485.8 1 536.7 1 572.7 2.3%

Debt-service costs 204.8 229.3 236.4 3.1%

Main budget expenditure 1 690.6 1 766.0 1 809.2 2.4%

Percentage shares

National departments 50.4% 49.2% 50.1%

Provinces 41.3% 42.2% 41.0%

Local government 8.3% 8.6% 8.9%

1. Includes provisional allocation for the COVID-19 relief package

2. Includes proposed compensation reductions, support to Eskom, amounts for Budget Facility for Infrastructure

projects and other provisional allocations

REPRIORITISATION WITHIN LOCAL GOVERNMENT GRANTS

To provide for sanitisation of transport facilities

• R1.1 billion within Public Transport Network Grant

• R1.4 billion within the Municipal Infrastructure Grant

To provide for water and sanitation (and repairs to municipal-owned quarantine facilities)

• R3 billon within Municipal Infrastructure Grant

• R190 million within Integrated Urban Development Grant

• R2.3 billion within Urban Settlement Development Grant

To provide for purchase and installation of water tanks and water trucking for three months, and implementation of source development or bulk linkage projects to replace need for water trucking

• R401 million within direct Regional Bulk Infrastructure Grant

• R689 million within the direct Water Services Infrastructure Grant

• R409 million within indirect Regional Bulk Infrastructure Grant

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DROUGHT RELIEF (RELEASED IN TERMS OF 2020 DORA, NOT PART OF DORAB)

29

Provincial Disaster Relief Grant allocations, 2020/21

R'000 2020/21 allocations

Eastern Cape 35 000

Free State -

Gauteng -

KwaZulu-Natal 4 000

Limpopo 18 640

Mpumalanga 12 160

Northern Cape 35 689

North West 8 000

Western Cape 25 000

Total 138 489

• Release of R138.5m from the Provincial Disaster Relief Grant for drought relief has been approved

• The applications were coordinated by NDMC and the agriculture sector (2 provinces chose not to apply for additional relief)

• Allocations reflect the severity of drought • The Department of Water and Sanitation has also

allocated R562m within their grants for drought related projects in 2020/21

Vegetation condition index March – May 2020