1 Provincial Budgets and Expenditure Review: 2003/04 – 2009/10 5 September 2007

2 Prov. Budget and Exp Review 8 chapters in the document –Introduction –Education –Health –Social Development –Housing –Agriculture and Land –Roads and Transport –Trends in Provincial Budgets

3 Intergovernmental Fiscal System (1) 3 spheres of government –Independent, interrelated and based on principles of cooperative governance All with different functions (exclusive and concurrent) Provinces and municipalities have key service delivery responsibilities –Matters testing the robustness of Intergov. system Misalignment between policy objectives and resource allocation Sphere accountable for delivery Does assignment of powers and functions align itself toward efficiency and effectiveness –Review of provincial and local government underway (65 questions)

4 Intergovernmental Fiscal System Vertical Division of Revenue

5 Funding of Provinces National transfers (97 per cent) the largest share of provincial revenue –Own revenue (3 per cent) Equitable share 81,4 per cent of provincial revenue Conditional grants 15 per cent of provincial revenue –Health conditional grants largest share

6 Improved access to social services Improved access –Eradication of segregation policies –Infrastructure: schools and health facilities –Increased school enrolment 12 million learners in school compared to 8 million in 1985 Out of age learners are being phased out –Increased coverage of social security grants 3,6 million beneficiaries in 2001 compared to 12 million currently –Free basic health care –Low cost housing 2,4 million housing units completed and in the process of completion (1994/95 to 2006/07)

7 Real expansion in provincial budgets driven by growing transfers Equitable share largest share of national transfers to provinces – 81,4 per cent –Grows at 7,6 per cent per year in real terms over the MTEF –Government continues to prioritise social services funded through ES Large growth in conditional grants –Housing grant grows from R4,6 bn in 2003/04 to R11,5 bn in 2009/10 –Growth in health grants mainly in HIV and Aids and hospital revitalisation –Infrastructure grant to provinces R8 bn by 2009/10 (R3 bn higher than current levels) Provincial revenue trends

8 Provincial expenditure trends Between 2003/04 and 2009/10, expenditure has grown from R131,9 billion to R257 billion: a real growth rate of 6,9 per cent a year Budgeted to spend R210,5 billion in 2007/08 –nominal growth of 13,2 per cent from 2006/07 outcome –real growth of 7,8 per cent from 2006/07 outcome Over the MTEF, increase to R257 billion in 2009/10 at an average annual growth rate of 11,4 per cent Capital spending sustains its upward growth path (13,1 per cent average annual over the MTEF) Provincial spending trends vary between provinces Provinces must continue to maintain healthy balance between –Revenue streams and expenditure –Social and non-social services spending

9

10 Education (1) Nearly 12 million children are enrolled in the public schooling system compared to around 8 million in 1985 –KZN, EC and LP accommodate more than 50% of learners, educators and schools –Over-age enrolment in schools has gradually been managed downwards –More learners are staying in school longer – as evidenced by the increasing numbers writing the Grade 12 examinations Over educators employed in public schools –average learner educator ratio of 33:1 compared to an average ratio of over 50:1 in 1994 –Significant progress in reducing high learner educator ratios in poorer provinces with the ratios ranging from 29:1 in NW to 35:1 in MPU

11 Education (2) Expenditure increased by 9,4% (4,8% real) per year from R60,3bn in 2003/04 to R78,9bn in 2006/07 –Grows further by 10,8% (5,8% real) per year to R107,3 billion by 2009/10 Level of growth is driven by key interventions: –The no-fee schools policy was introduced in 2007 Schools falling within the lowest 40 per cent income quintile are deemed poor and exempted from paying school fees 55,2 per cent of schools (13 912) covering 41,8 per cent of learners (just under 5 million learners) Over R3 billion is to be spent on no-fee schools in 2007/08 –Capital spending grows sharply from R2,6bn in 2003/04 to R3,7bn in 2006/07 and will reach R5,2bn by 2009/10 This reflects government’s commitment: –To ensure that school infrastructure backlogs are addressed –That each child be accommodated in fully equipped classrooms

12 Education (3) Personnel spending is largest share of provincial education budgets –Spending decreased from 82,4% in 2003/04 to 79,3% in 2006/07 and decrease further to 76,6% by 2009/10 The trend has allowed space for other key inputs needed to improve quality of education –However, personnel still show significant growth at 8% (3,5% real) from 2003/04 to 2006/07 and 9,5% (4,6% real) from 2006/07 to 2009/10 –Various personnel interventions drive these increases R4,2 billion for pay progression in 2004/05 R2 billion to bolster management and administration (06/07) R6 billion for targeted personnel interventions (08/09 onwards)

13 Education (4) Grade 12 results used as yardstick for performance –Learners writing exams have increased Suggest greater throughput rate –Learners passing exams have increased in 1999 compared to in 2006 However, percentage pass rate dropping –Learners passing with university endorsement 16,3 per cent –Total number of passes in maths and science increasing Passes in maths higher and standard grade dropping Science higher grade passes down but SG passes up

14 Health (1) Real annual growth of 6,7% from 2003/04 to 2009/10, with strong real growth on goods and services (8,0%), capital assets (13,2%) and compensation of employees (6,1%) Personnel accounts for approximately 53,6% of total budget, with R8bn higher spending in 2006/07 than in 2003/04 –Policy initiatives in place to increase the number of health personnel –Improved remuneration of health professionals via a new wage dispensation –This will increase the compensation budget by 10,8% annually, from 28,7bn in 2006/07 to R39,1bn in 2009/10 –Of the employed in the sector, were health professionals (58,8%)

15 Health (2)

16 Health (3) Primary health care services have expanded significantly –20 million more patient visits annually than eight years ago Health personnel employed increased by 7160 over the past year and by since 2004 –The scarce skills and rural allowance strategy contributed to this –Resulted in the recruitment of doctors, nurses, ambulance personnel and 531 pharmacists since 2002

17 Health (4) By March 2007, the HIV and Aids programme had patients on treatment at 313 sites across 53 health districts, compared to patients treated one year earlier –This is in addition to the persons treated in the private sector and by non-governmental organisations (NGOs) –Mother-to-child transmission prevention programmes and voluntary counselling and testing programmes also expanded coverage over the last year and are now available in almost all public sector facilities The hospital maintenance, rehabilitation and construction programme is currently contributing to the revitalisation of over 40 hospitals

18 Social Development (1)

19 Social Development (2) Social assistance function now with national sphere provinces can now focus attention on the delivery of developmental social welfare services All provinces rely strongly on NGOs as partners to service delivery Competition for scarce resources causes significant challenges within the sector viz. the employment of qualified Social Workers.

20 Social Development (3) Sector intends to strengthen its capacity –Training and employment of Social Auxiliary workers –increase Social Worker graduates with the awarding of about 1000 bursaries per year (medium to long term) Spending on social welfare services set to treble over the seven year period –Budgets grew by 17,3% annually from R3,2bn in 2003/04 to R5,2bn in 2006/07 –Trend continues over the MTEF period and will see social development budgets reaching R8,7 billion by 2009/10

21 Social Development (4) With budget increases of this magnitude, the sector is in a good position to scale up preventative programmes, as well as early intervention and protection services In 2006/07, provinces spent R5,2 billion on social development activities –There was underspending of R119,8m which represents 2,3% of budgets –The underspending was mainly on compensation of employees (which highlights the difficulty the department is having with attracting Social Workers)

22 Social Development (5) Expenditure in the Social welfare services programme grew by 15,2% annually from R2,0bn in 2003/04 to R3,1bn in 2006/07 –By 2009/10, provinces are budgeting to spend R5,6bn on these services Transfers to non-profit organisations grew by 20,4% annually (2003/04 to 2009/10) –From R1,2bn in 2003/04 to R2,2bn in 2006/07 –The growth in the budgets is sustained in the years ahead –Transfers to NGOs will amount to R3,7bn by 2009/10

23 Housing (1) Housing subsidy allocations grow sharply over the review period from R4,6 billion in 2003/04 to R11,5 billion in 2009/10 Underspending dropped considerably Over 3 million subsidies approved 2,4 million houses completed and in the process of completion

24 Housing (2) Affordability for households falling outside of the subsidy programme –Housing finance through finance sector charter and credit-linked subsidies Availability of land Inclusionary housing –Achieving a better balance of race and class –Identifying suitable land for low-cost housing –Stepping up social housing –Stimulating the sector to deliver affordable housing

25 Agriculture and land The land and agrarian reforms programs are by far the most important programmes driving transformation –Access to commercial agricultural sector by previously disadvantaged groups The land reform programme is important in addressing the skewed land ownership patterns –1,7 m hectares of land redistributed to HH Agriculture important rural economic development –Stimulating rural economies –Food security Agriculture budgets double from R3bn in 2003/04 to R6bn by 2009/10

26 Roads and Transport Consolidated expenditure on roads: –National and provincial roads budgets increased rapidly (17,6% annually) from R7,0bn in 2003/04 to R11,2bn in 2006/07 Infrastructure expenditure on roads and transport –In 2006/07, infrastructure budget was R8,5bn Road and traffic safety EPWP: Roads and Transport –In 2006/07, sector had 238 EPWP projects across provinces –Most in KZN at 74 (31% of total); EC at 67 (28%); LP with 41 (17%) and GP with 35 (15%) –KZN created most jobs or 73% of total jobs created (49 597

27 Conclusion Provincial spending continues to grow in real terms Strong growth in capital expenditure Detail analysis is presented in chapters for education, health, social development, agriculture, housing, and roads and transport Non-financial information needs to be improved to have proper assessment of performance