PRESENTATION ON PRESENTATION ON EASTERN CAPE EASTERN CAPE

PROVINCIAL EXPENDITURE PROVINCIAL EXPENDITURE OUTCOME OUTCOME

AS AT 31/12/2013 AS AT 31/12/2013

SELECT COMMITTEE ON FINANCE SELECT COMMITTEE ON FINANCE 04 FEBRUARY 201404 FEBRUARY 2014

1

• Summary of provincial receiptsSummary of provincial receipts

• Summary of expenditure by vote & economic classificationSummary of expenditure by vote & economic classification

• Conditional grants performance projected for the yearConditional grants performance projected for the year

• Infrastructure performance projected for the yearInfrastructure performance projected for the year

• ConclusionConclusion

PRESENTATION OUTLINE

2

SUMMARY OF PROVINCIAL RECEIPTS

• 100% of the Equitable share was received from National

• Of the conditional grants, R3.420 million was not received by the province for the Social Sector EPWP Incentive grant for Provinces (R0.390 million) and the Public Works EPWP Incentive grant for Provinces (R3.030 million) due to these departments not submitting the necessary quarterly reports timeously and the current slow spending on these grants

Table 1: Eastern Cape Receipts, December 2013

(R'000) Original

budget

2013/14

Adjustment Adjusted

budget 2013/14

Actual

Receipts to

date

Projected

Receipts

(January to 31

March 2014)

Total

Receipts

Over (-) /

Under (+)

Spending

Actual as %

of Adjusted

Budget

Equitable Share 50 164 506 92 108 50 256 614 37 623 381 37 623 381 75 246 762 - 74.9%

Conditional Grants 9 461 231 190 949 9 652 180 7 471 660 7 475 080 14 946 740 3 420 77.4%

Ow n Source Receipts 836 061 (14 359) 821 702 786 083 217 601 1 003 684 (181 982) 95.7%

TOTAL 60 461 798 268 698 60 730 496 45 881 124 45 316 062 91 197 186 (178 562) 75.5%

3

• The over collection on own receipts amounts to R181.982 million and is mainly due to the following:o Over collection of interest amounting to R108.165 million by Provincial Planning

and Treasury resulting from the slow spending trends by departments; ando Over collection of R10.628 million by Roads and Public Works due to the sale of

old machinery that was auctioned off in the Cacadu regiono Over collection of R10.493 million by Health is due to over collection on the use of

public health facilities by private doctors. There was also an improvement in the collection of patient fees from the Department of Justice (awaiting trial prisoners) as usually claims from this sector are delayed by 5 to 6 months

o Over collection of R17.053 million by Rural Development and Agrarian Reform from the sale of biological assets to commercial farmers

o Human Settlements over collection of R10.556 million is due to interest earned on trust accounts by administrators (e.g. municipalities)

o Transport’s over collection of R15.094 million is attributable to more than anticipated collection on motor vehicle licences

SUMMARY OF PROVINCIAL RECEIPTS (cont’d)

4

SUMMARY OF PROVINCIAL EXPENDITURE BY VOTETable 2: Eastern Cape Payments by Department, December 2013

Department (R'000) Original

budget

2013/14

Adjustment Adjusted

budget 2013/14

Actual

Spending to

date

Projected

Spending

(January to 31

March 2014)

Total

Spending

Over (-) /

Under (+)

Spending

Actual as %

of Adjusted

Budget

BASIC EDUCATION 26 972 076 566 804 27 538 880 20 861 818 6 677 065 27 538 883 -3 75.8%

HEALTH 16 584 328 599 219 17 183 547 12 062 450 4 999 960 17 062 410 121 137 70.2%

SOCIAL DEVELOPMENT AND SPECIAL

PROGRAMMES 2 015 204 28 637 2 043 841 1 389 978 643 984 2 033 962 9 879 68.0%

OFFICE OF THE PREMIER 458 109 750 458 859 299 594 153 312 452 906 5 953 65.3%

PROVINCIAL LEGISLATURE 409 191 42 719 451 910 346 866 104 522 451 388 522 76.8%

ROADS AND PUBLIC WORKS 3 670 311 271 508 3 941 819 2 565 198 1 354 536 3 919 734 22 085 65.1%

LOCAL GOVERNMENT AND TRADITIONAL

AFFAIRS 840 869 214 624 1 055 493 780 495 222 154 1 002 649 52 844 73.9%

RURAL DEVELOPMENT AND AGRARIAN

REFORM 1 714 488 28 293 1 742 781 1 225 697 517 084 1 742 781 -0 70.3%

ECONOMIC DEVELOPMENT AND

ENVIRONMENTAL AFFAIRS 1 070 858 317 269 1 388 127 788 058 598 002 1 386 060 2 067 56.8%

TRANSPORT 1 532 362 37 081 1 569 443 1 089 259 443 511 1 532 770 36 673 69.4%

HUMAN SETTLEMENTS 2 830 080 2 830 080 1 871 190 809 195 2 680 385 149 695 66.1%

PROVINCIAL TREASURY 374 872 (22 374) 352 498 242 133 99 838 341 971 10 527 68.7%

SPORT, RECREATION, ARTS AND CULTURE 715 108 27 604 742 712 523 391 194 846 718 237 24 475 70.5%

SAFETY AND LIAISON 69 979 5 589 75 568 49 090 26 521 75 611 -43 65.0%

TOTAL 59 257 835 2 117 723 61 375 558 44 095 217 16 844 530 60 939 748 435 810 71.8%

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• Overall the Province spent R44.095 billion or 71.8 per cent of its adjusted budget of R61.375 billion with the projected under expenditure for the financial year amounting to R435.810 million when comparing total spending with the adjusted budget

• The following departments are mainly contributing to the projected under spending:o Human Settlement’s, R149.695 million is mainly on the conditional grant due to the

poor performance by contractors, contractor cash flow problems, poor planning as well as poor project implementation and management

o Health’s, R121.137 million is mainly due to delays in the filling of prioritized vacant posts (in Alfred Nzo, Chris Hani, Joe Gqabi and OR Tambo), delays in the capturing on Persal and payment of the newly recruited Community Health Care Worker’s, slow payment of HR accruals, non-payment of PMDS and delays in the appointment of various clinical specialists

o Local Government and Traditional Affairs, R52.844 million is mainly is due to the R40 million that the department will surrender to the Provincial Revenue Fund which was a transfer to the King Sabata Dalindyebo Local Municipality. The amount was meant to finalise MIG projects, however a roll over in this regard was subsequently approved by National, hence the savings

o Transport’s , R36.673 million in mainly due to delays in the submission of Proof of Delivery (POD) forms for scholar transport as well as savings due to traffic officers not working overtime as planned

SUMMARY OF PROVINCIAL EXPENDITURE BY VOTE (cont’d)

6

o Roads and Public Works (DRPW), R22.085 million is mainly under CoE due to the delays in the implementation of the annual recruitment plan. The bulk of these posts were only advertised in December 2013 and is anticipated that these posts will be filled by the end of the financial year.

o Sport, Recreation, Arts and Culture’s, R24.475 million is due to delays in the transfers to the Buffalo City Metropolitan Municipality for library services, due to the municipality’s dissatisfaction with the transfer amount. The department has engaged with the municipality to resolve the impasse. Failing this attempt the money will be utilised to cover the cost of the newly built Mdantsane Library

SUMMARY OF PROVINCIAL EXPENDITURE BY VOTE (cont’d)

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SUMMARY OF EXPENDITURE – ECONOMIC CLASSIFICATION

• Compensation of Employees is projecting to overspend by R65.678 million mainly due to Education (R236.910 million) due to a budget shortfall as a result of the payment of accruals in respect of temporary educators, substitute educators staff and promotional posts

• Notwithstanding the over expenditure, Health is projecting to under spend on CoE due to reasons already provided above

Table 3: Eastern Cape Payments by Economic Classification, December 2013

Item (R'000) Original

budget

2013/14

Adjustment Adjusted

budget 2013/14

Actual

Spending to

date

Projected

Spending

(January to 31

March 2014)

Total

Spending

Over (-) /

Under (+)

Actual as %

of Adjusted

Budget

Current Payments 48 111 932 1 519 617 49 631 549 36 171 298 13 296 986 49 468 285 163 264 72.9%

Compensation of employ ees 38 477 979 339 470 38 817 449 28 606 845 10 276 283 38 883 127 -65 678 73.7%

Goods and Serv ices 9 633 656 1 179 840 10 813 496 7 562 704 3 020 704 10 583 408 230 088 69.9%

Interest and rent on land 297 307 604 1 749 - 1 749 -1 145 289.57%

Transfers and Subsidies 7 800 829 249 905 8 050 734 5 874 430 2 064 398 7 938 828 111 906 73.0%

Capital Payments 3 344 774 348 501 3 693 275 2 048 760 1 483 147 3 531 907 161 368 55.5%

Payments for financial assets 300 (300) - 729 - 729 -729 -100.0%

TOTAL 59 257 835 2 117 723 61 375 558 44 095 217 16 844 531 60 939 749 435 809 71.8%

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SUMMARY OF EXPENDITURE – ECONOMIC CLASSIFICATION• Goods and services is projecting to underspend by R230.088 million due to the

following departments:o Education under expenditure amounts to R131.231 million and is mainly due to

delays in the procurement processes for the school furniture. Furthermore, the department intends to realise savings from goods and services and payments for capital assets in order to mitigate the projected over expenditure on CoE

o Transport under expenditure of R37.637 million is due to delays in the submission of Proof of Delivery (POD) forms for scholar transport before payments can be effected

• Transfers and Subsidies is projecting to underspend by R111.906 million mainly due to Human Settlement amounting to R131.943 million resulting from the poor performance by contractors, contractor cash flow problems, poor planning as well as poor project implementation and management

• Payments for capital assets is projecting to underspend by R161.368 million mainly due to Education (R148.234 million) resulting from the delays in the procurement processes between the department and the DRPW (its implementing agent).

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CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d)Table 4: Eastern Cape Conditional Grants Payments, December 2013

Conditional grant (R'000) Original

budget

2013/14

Adjustment Adjusted

budget 2013/14

Actual

Spending to

date

Projected

Spending

(January to 31

March 2014)

Total

Spending

Over (-) /

Under (+)

Actual as %

of Adjusted

Budget

Agriculture: Comprehensive Agricultural Support Programme grant 219 055 4 571 223 626 124 384 115 132 239 516 -15 890 55.6%

Agriculture: Ilima/Letsema Projects grant 43 845 1 722 45 567 44 763 992 45 755 -188 98.2%Agriculture: Land Care Programme grant: Poverty Relief and Infrastructure Development 15 866 - 15 866 10 353 5 513 15 866 - 65.3%

Basic Education: Dinaledi Schools grant 12 620 - 12 620 5 589 7 031 12 620 - 44.3%

Basic Education: Education Infrastructure grant 1 010 870 - 1 010 870 880 885 129 985 1 010 870 - 87.1%

Basic Education: HIV and Aids (Life Skills Education) grant 34 895 - 34 895 31 370 3 525 34 895 - 89.9%

Basic Education: National School Nutrition Programme grant 949 162 - 949 162 708 853 240 309 949 162 - 74.7%Basic Education: Technical Secondary Schools Recapitalisation grant 31 648 2 947 34 595 5 696 28 899 34 595 - 16.5%

Health: Comprehesive HIV and AIDS grant 1 273 296 26 080 1 299 376 914 152 381 468 1 295 620 3 756 70.4%

Health: Health Infrastructure grant 216 816 3 998 220 814 167 404 59 189 226 593 -5 779 75.8%

Health: Hospital Revitalisation grant 336 719 - 336 719 194 441 162 699 357 140 -20 421 57.7%

Health: Nursing Colleges and Schools grant 9 257 2 266 11 523 10 420 2 200 12 620 -1 097 90.4%

Health: Health Professions Training and Development grant 188 560 2 380 190 940 120 437 66 638 187 075 3 865 63.1%

Health: National Health Insurance grant 4 850 2 376 7 226 3 739 2 745 6 484 742 51.7%

Health: National Tertiary Serv ices grant 743 621 40 996 784 617 504 582 288 228 792 810 -8 193 64.3%Higher Education and Training: Further Education and Training Colleges grant 296 421 1 395 297 816 216 168 75 609 291 777 6 039 72.6%

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CONDITIONAL GRANTS PERFORMANCE FOR THE YEARConditional grant (R'000) Original

budget

2013/14

Adjustment Adjusted

budget 2013/14

Actual

Spending to

date

Projected

Spending

(January to 31

March 2014)

Total

Spending

Over (-) /

Under (+)

Actual as %

of Adjusted

Budget

Human Settlements: Human Settlements Development grant 2 429 631 - 2 429 631 1 569 070 709 906 2 278 976 150 655 64.6%

Human Settlements: Housing Disaster Relief grant 94 172 94 172 76 543 17 629 94 172 - 81.3%

Arts and Culture: Community Library Serv ices grant 72 492 10 019 82 511 57 099 21 061 78 160 4 351 69.2%Sport and Recreation SA: Mass Sport and Recreation Participation Programme grant 61 334 7 536 68 870 44 829 18 758 63 587 5 283 65.1%

Public Works: Prov incial Roads Maintenance grant 1 102 836 189 554 1 292 390 677 516 614 874 1 292 390 - 52.4%

Transport: Public Transport Operations grant 183 960 - 183 960 130 841 53 119 183 960 - 71.1%

Public Works: EPWP Integrated grant for Prov inces 79 577 - 79 577 69 127 12 691 81 818 -2 241 86.9%Public Works: Social Sector EPWP Incentive grant for Prov inces 49 728 - 49 728 25 488 14 975 40 463 9 265 51.3%

TOTAL 9 461 231 295 840 9 757 071 6 593 749 3 033 175 9 626 924 130 147 67.6%

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• Overall the Province spent R6.593 billion or 67.6% of its adjusted budget of R9.757 billion for conditional grants with the projected under expenditure for the financial year amounting to R130.147 million

• Human Settlements Development grant is the main contributor with a projected under spending by R150.655 million due to poor performance by contractors, contractor cash flow problems, poor planning as well as poor project implementation and management.

• Even though Provincial Roads Maintenance grant is projecting to breakeven at year end, PPT is of the opinion that the department will likely under spend by R272.224 million as it is still in the process of appointing contractors as well as delayed procurement and capacity challenges in the department

• The following conditional grants spending is significantly low despite projections to spend all funds by year end:o The likely under spending on Technical Secondary Schools Recapitalisation grant

amounts to R13.293 million due to delays in the awarding of tenders for new workshops in technical high schools

o The likely under spending on Comprehensive Agricultural Support Grant amounts to R10.102 million. This is mainly due to delays as a result of the changes by the national department on the composition of projects under the grant to favour food security which impacted on the planning and spending of the grant

o The likely under spending on Dinaledi Schools grant amounts to R13.293 million due to delays in delivery of mobile science laboratories procured for these schools

CONDITIONAL GRANTS PERFORMANCE FOR THE YEAR (cont’d)

12

13

INFRASTRUCTURE ADJUSTED BUDGET & EXP(APRIL 01- DEC 2013) Vote Depar tment 2013/ 14

Main

budget

2013/ 14

Adjusted

Budget

Cummula

tive

Actual

Exp April -

Decembe

r 2013

Remainin

g

projectio

ns

J anuary

to March

2014

(Over)/ un

der

spending

compared

to adj.

budget

utiliz ing

remaining

Proj. at

the end of

Mar14

Vote 06 Education 1 308 232 1 656 101 983 049 332 867 340 185

Vote 03 Health 1 045 007 1 051 271 808 507 192 740 50 024

Vote 08 Rural Dev. 142 748 99 390 81 845 50 199 (32 654)

Vote 04 Social Dev. 48 838 53 305 29 972 9 744 13 589

Vote 05 DRPW 2 228 945 2 466 617 1 513 282 958 956 (5 621)

Vote 07 Local Govt. 9 840 11 220 4 963 3 362 2 895

Vote 10 Transport 4 000 22 900 102 640 22 158

Vote 14 DSRAC 34 890 47 768 30 018 8 146 9 604

Vote 11

Human

Settlements 2 526 803 2 523 803 1 645 613 677 708 200 482

7 349 303 7 932 375 5 097 351 2 234 362 600 661Total

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• The Province has spent R5.097 billion (64.3%) of its total adjusted infrastructure budget of R7.927 billion with the projected under spending amounting to R600.661 million

• The majority of the budget is allocated to four departments: ₋ Human Settlements (34.4%), DRPW (30.3%), DoE (17.8%) and DoH (14.2%)• The departments of Education, DRPW and Human Settlements are generally

underperforming in infrastructure spending in the 2013/14 financial year and Treasury has engaged these departments to determine the blockages. The following key reasons are cited:o Instability in Planning / Skewed projections towards the end of the financial year

which is further exacerbated by the Dec/Jan closure of the construction industryo Lack of Contract Management and Project Management capabilitieso Late / Delayed closure of projects

• The relevant engagements through the Infrastructure governance structures (Technical Sub-Committee, CBC -Sub Committee, CBC and EXCO) has commenced to resolve the bottlenecks in the infrastructure value chain

INFRASTRUCTURE PERFORMANCE – 2013/14 YEAR (cont’d)

CONCLUSION• Overall the Province spent R44.095 billion or 71.8 per cent of its adjusted budget of

R61.375 billion with the projected under expenditure amounting to R435.810 million. Given the capacity challenges in some of the departments, particularly on infrastructure spending, the under expenditure will likely be more than projected

• Province is still continuing to experience poor planning in infrastructure delivery. IDMS has been rolled out to Education and Health and should therefore assist these departments in improving its planning

• DRPW is seriously looking at its structure to improve the capacity challenges• Continued poor performance by contractors and cash flow issues:o The small contractor development programme does not seem to yield the desired

results and therefore will have to be strengthenedo Adherence to the 30 day payment process is assisting in addressing the contractor

cash flow problems• Poor project management is being addressed by improving the capacity

15