1. Presentation to the Select Committee on DIVISION OF REVENUE BILL
03 March 2009
Presented by:
Cathy Motsisi
Chief Financial Officer

2. Contents Background on EPWP Conditional Grants EPWP
Conditional Grants – Devolution of Property Rates

3. Background to EPWP 2
The first phase of the Expanded Public Works Programme achieved its 1 million work opportunities targets a year ahead of schedule
The second phase of the EPWP to scale up further to contribute significantly to halving unemployment by 2014
Cabinet approved the high level proposals for EPWP 2 in June 08 and the Business Plan at the Lekgotla in January 2009
R 4.2 billion was allocated over the MTEF to scale up the EPWP
Agreement at the PCC for DPW to set targets for provinces and municipalities and for them to report to DPW
EPWP 2 implementation to start on 1 April 2009

4. As part of the contribution to the income of the poor, the target for 1-million work opportunities through the Expanded Public Works Programme was attained in 2008, a year earlier than envisaged in the 2004 electoral mandate. This has created the possibility massively to expand this programme and improve its quality.
SONA, 6 February, President Kgalema Motlanthe
I propose that participating departments, provinces and municipalities should be challenged to exceed their targets for creating EPWP jobs over the period ahead, and so the contingency reserve this year has been increased to allow for additional funding of employment projects in the 2009 Adjustments Appropriation, if sufficient progress is made.
Budget Speech, 11 February, Trevor Manual MP

5. (Scale up from 210 000 FTEs in Y1 to 610 000 FTEs in Y5;
Goal of EPWP Phase 2
To create 2 million Full Time Equivalent (FTE) jobs for poor and unemployed people in South Africa so as to contribute to halving unemployment by 2014, through the delivery of public and community services.
(Scale up from FTEs in Y1 to FTEs in Y5;
Equivalent of 4, 5 million work 100-day work opportunities in 5 years )
EPWP to enable government to act as an employer of last resort as part of the Anti-Poverty Strategy 5

6. Critical Success Factors for EPWP 2
Make creation of paid work the primary objective of the programme (Employer of last resort)
Locate clear political and administrative accountability for EPWP work creation targets across all spheres of government
Align EPWP outputs with the core mandates and programmes of implementing public bodies
Provide fiscal incentives to accelerate scaling up of EPWP outputs across all spheres of government
Mobilise non-state capacity to deliver additional EPWP work opportunities

7. Key Components of EPWP 2 (… 1)
Targets and accountability across Government
Each public body to have annual employment creation targets
Political and Administrative heads to commit and held accountable for achieving these targets
EPWP Fiscal incentive
Incentive for public bodies to create EPWP employment through providing R50 for every person-day of work created
Phased in over the next two years to all sectors, provinces and municipalities 7

8. Key Components of EPWP 2 (… 2)
Non-State sector
Mobilise the capacity outside the state (NGOs, CBOs, Non-profits) to create work for EPWP targets group
Work will focus on a wide range of activities as identified by local communities or the NGO’s and CBO’s
Funding provided on the basis of the wage incentive
Technical Support to spheres, sectors and implementing bodies
Implementing bodies requiring capacity can access support through the EPWP Unit and other support programmes like the Technical Assistance Unit from National Treasury 8

9. 1. Targets and Accountability across all spheres of Government
Overall Phase 2 targets will be distributed across all spheres of government and the five year period so that:
Each public body has a clear target for each financial year
It is clear which programmes/ activities of the public body are expected to contribute to the target
The targets are adjusted annually over the MTEF in line with budgets available and performance of each public body
Targets are calculated by applying an employment factor in FTE/ R million to grants received by public bodies
Respective political and administrative heads to be held accountable for achieving respective targets
EPWP Unit to manage the setting, monitoring and feedback process for performance in relation to all targets 9

10. Phase 2 targets in Full Time Equivalents broken down per sphere of government
Local
Provincial
National
Non-State
Totals
60 548
22 698
8 696
72 658
28 999
20 870
94 939
40 991
41 739
56 272
76 522
76 570

11. Phase 2 targets in 100-day work opportunities broken down per sphere of government
Local
Provincial
National
Non-State
Totals
20 000
48 000
96 000

12. 5-Year Targets for KZN Province per Sector
Infrastructure
Environmental
Social
W.O.
FTE's
25,912
10,129
7,890
1,539
16,878
13,239
29,540
12,155
8,205
1,970
20,254
14,752
38,005
15,883
10,520
2,791
27,849
19,670
49,406
20,502
14,464
3,838
39,453
27,046
62,190
25,526
19,724
5,234
53,799
36,880

13. Phase 2 targets in Full Time Equivalents broken down per Provincial Govt
E Cape
Free State
Gau-teng
KZN
Lim
Mpum
N Cape
North West
W Cape
Totals
12,732
8,349
21,091
24,908
13,070
8,880
5,384
22,867
13,177
117,554
15,102
9,726
24,224
28,878
15,364
10,357
6,342
25,301
15,083
136,630
20,059
12,951
32,472
38,344
20,434
13,793
8,455
32,863
20,087
181,667
26,572
17,371
44,978
51,386
27,239
18,490
11,288
44,046
27,195
243,527
34,401
22,893
58,802
67,640
35,587
24,350
14,779
57,989
36,312
320,692
108,866
71,290
181,567
211,155
111,694
75,870
46,247
183,066
111,853
1,000,070

14. Phase 2 targets in 100-day work opportunities broken down per Provincial Govt
E Cape
Free State
Gau-teng
KZN
Lim
Mpum
N Cape
North West
W Cape
Totals
32,078
18,115
36,618
50,680
30,649
19,505
13,031
31,763
23,807
247,325
36,034
20,544
43,398
57,999
34,578
22,094
14,629
36,592
27,462
281,720
46,798
26,979
56,023
76,373
45,142
28,993
19,085
48,226
35,560
370,420
62,506
36,533
90,097
103,323
60,691
39,234
25,705
64,912
50,171
501,283
81,326
48,124
118,581
135,713
79,439
51,660
33,744
84,939
66,769
659,286
258,741
150,296
344,717
424,089
250,499
161,487
106,193
266,432
204,770
2,060,034

15. Phase 2 targets in Full Time Equivalents for Local Municipalities by province
Eastern Cape
9,779
11,735
15,334
19,793
24,644
Free State
3,993
4,792
6,261
8,082
10,063
Gauteng
11,028
13,233
17,291
22,320
27,789
KwaZulu-Natal
13,081
15,697
20,511
26,476
32,964
Limpopo
8,046
9,655
12,616
16,285
20,276
Mpumalanga
4,182
5,018
6,557
8,464
10,538
North West
5,240
6,288
8,216
10,606
13,205
Northern Cape
1,259
1,511
1,975
2,549
3,173
Western Cape
3,946
4,735
6,187
7,986
9,944
Total
60,554
72,665
94,949
122,562
152,596

16. Phase 2 targets in 100-day work opportunities for Local Municipalities by province
Eastern Cape
28,559
32,557
41,886
54,452
68,541
Free State
11,661
13,294
17,103
22,234
27,987
Gauteng
32,204
36,712
47,232
61,402
77,289
KwaZulu-Natal
38,201
43,549
56,027
72,836
91,681
Limpopo
23,497
26,787
34,462
44,801
56,393
Mpumalanga
12,212
13,922
17,911
23,285
29,309
North West
15,303
17,445
22,444
29,177
36,727
Northern Cape
3,678
4,192
5,394
7,012
8,826
Western Cape
11,523
13,137
16,901
21,971
27,656
Total
176,837
201,595
259,361
337,170
424,410

17. 5-Year Targets for selection of Local Municipalities [Infrastructure only]WO
FTEs
Amatole
7,917
2,711
9,026
3,253
11,612
4,251
15,096
5,487
19,001
6,832
Jhb
10,444
3,576
11,907
4,292
15,319
5,608
19,914
7,239
25,067
9,013
Ekur-huleni
9,880
3,383
11,263
4,060
14,491
5,305
18,838
6,848
23,712
8,526
Tshwane
5,992
2,052
6,831
2,462
8,789
3,217
11,425
4,153
14,381
5,171
eThek-wini
11,972
4,099
13,648
4,919
17,558
6,428
22,826
8,297
28,732
10,330

18. EPWP Incentive Bonus Allocation
2009/10
R’000
2010/11
2011/12
TOTAL
Provinces
151,419
400,000
800,000
1,352,419
Municipalities
201,748
554,000
1,108,000
1,863,748
Non-State Sector
80,500
359,621
308,740
748,861
Provision for Capacity
22,033
33,149
56,000
111,182
Total cost to intermediary
9,500
21,030
18,360
48,890
465,200
1,367,800
2,291,100
4,124,100

19. EPWP Phase 2 FTE PERFORMANCE TARGETS KwaZulu-Natal 84,180 Western Cape
2007/08
EPWP PERFOR-MANCE
PAYMENT THRES-HOLD
FTE PERFORMANCE TARGETS
TOTAL FULL YEAR AMOUNTS
DORA ALLOCATION
2009/10
Indicative allocation (if 100% of target is achieved)
-25% for Q4 for prov
 Infrastructure Only for 09-10
FTE’s 
 FTE’s
(Entire Province)
-50% for Q4 for munis
FISCAL INCENTIVE TO PROVINCES
29,076
31,434
48,794
199,643
151,419
KwaZulu-Natal
11,716
6,791
16,551
112,240
84,180
Western Cape
919
2,003
500
Gauteng
348
2,594
Eastern Cape
7,660
5,836
9,314
39,989
29,992
Mpumalanga
1,407
2,760
3,345
6,730
5,047
Free State
3,967
2,407
5,075
30,678
23,008
Limpopo
1,335
5,208
5,245
417
North West
1,388
2,731
3,565
9,589
7,192
Northern Cape
336
1,103

20. ELIGIBILITY THRESHOLD FTE PERFORMANCE TARGETS TOTAL FULL YEAR AMOUNTS
EPWP Phase 2
2007/08 EPWP PERFORMANCE
ELIGIBILITY THRESHOLD
FTE PERFORMANCE TARGETS
TOTAL FULL YEAR AMOUNTS
DORA ALLOCATION
2009/10
FTE/ R million
Payment for FTE perf targets - threshold
-25% for Q4 for prov
For All parties
-50% for Q4 for munis
FISCAL INCENTIVE TO MUNICIPALITIES
43,792
31,849
66,091
393,779
201,748
Eastern Cape
8,476
2,587
9,692
81,716
41,273
Nelson Mandela
508
464
610
1,673
837
Amatole District Municipality
1,203
679
1,444
8,795
4,398
Tsolwana
235 21
259
2,726
1,363
Intsika Yethu 60 56 72
186
500
Emalahleni
107 42
128
998
Sakhisizwe 96 29
115
986
Chris Hani District Municipality
1,152
601
1,382
8,982
4,491
Ukhahlamba District Municipality
562
305
674
4,251
2,126
Alfred Nzo District Municipality
4,553
389
5,008
53,117
26,559

21. 2- EPWP Fiscal Incentive
The EPWP incentive is based on paying all public bodies that create work above a minimum threshold for the EPWP target group an incentive of R50 per day for every day of work created
R4.1 billion has been allocated to DPW over the MTEF to pay out the incentive to public bodies and this is expected to grow to at least R 5 billion per annum by 2014
Eligible public bodies that want to participate in the incentive will enter into an agreement with DPW
While indicative performance targets and incentive amounts are set for each eligible public body, they will only be able to claim the incentive upon proving that work has been created
Basis for measuring EPWP performance
Number of FTE’s per million Rand of infrastructure budget, taking into account the different portfolios of infrastructure and the rate at which each can contribute to employment creation
Each public body must meet a minimum eligibility threshold before they can start accessing the incentive
The incentive is not paid out for work created below the eligibility threshold, but is paid for all work created above this threshold

22. 2- EPWP Fiscal Incentive
Eligibility: In order for provinces and municipalities to become eligible for the incentive they must:
Report to DPW on the EPWP
Meet minimum employment creation targets based on their available budgets
Meet equity targets for number of youth, women and disabled EPWP workers
Agreements: Eligible public bodies will enter into agreements with DPW which will specify:
Targets to be met by the public body
Amounts that can be claimed by the public body for reported EPWP work created
Reporting and verification and audit requirements through the EPWP Management Information System
EPWP workers may not be paid less than R50 per day
Appropriation of funds
Eligible public bodies should incorporate the incentive allocation into their budgeting and planning process but take into account that payment by DPW will occur quarterly, after employment has been created

23. 2- Fiscal Incentive: Allocations to Municipalities
45 Municipalities have been included for indicative allocations based on their performance
At least an additional 15 municipalities are expected to become eligible in
Total projected incentive allocations to the municipalities is R201 million
FTE target for municipalities for is FTE’s
Most eligible municipalities are already reporting on the EPWP Management Information System

24. 3- Non-State Sector
Phase 2 of the EPWP will also see the introduction of the “Non-State” sector of the EPWP
In this sector, the wage incentive will also be provided to Non-State bodies like NGO’s, CBO’s and other non-profit organisations whose activities also create work for the EPWP target group
R80 million of the wage incentive has been allocated to the non state sector for
The sector is projected to grow rapidly as many existing non-state programmes have the potential to grow rapidly through the injection of the wage incentive
The Non-State Sector will be managed by DPW with oversight from other key departments, but will be implemented with the assistance of an intermediary
Two sets of programmes will be implemented:
Area based: These will include programmes within a specific area that will generally involve a large range of activities as identified in consultation with the community and local government
Activity based: These will include programmes by non-state actors that have specific focus areas such as health care, child care, community safety etc

25. 4- Technical Support
The EPWP unit, in cooperation with the Sector lead departments and the provincial coordinating departments will increase capacity to provide technical support to those public bodies that require it
Public bodies who are not able to meet targets or meet all specified requirements should request technical support
Areas in which technical support will be provided are:
Developing plans to meet targets
Identifying suitable projects and programmes
Design of projects and programmes
Implementation support
Reporting
In addition to the EPWP Unit, the Technical Assistance Unit in National Treasury will also be able to support public bodies
Support programmes for the Environmental and Social Sector are being reviewed and strengthened

26. Institutional Arrangements
The EPWP organizational structure is currently under review for future growth of the programme
There is significant work in progress with regard to the building of capacity and enhancement of the M&E, Financial Management, Internal Audit components to enable proper management of the incentive allocation
The budget structure of the department will also be reviewed to ensure that the programme is clearly identifiable and visible as a flagship programme of the department.
EPWP Systems will also be improved to provide credible institutional memory and proper audit trail.

27. 5- Way forward
Targets have been set for all public bodies and the EPWP Unit will, together with the provincial coordinating departments, be briefing all public bodies about their targets and
The EPWP unit is currently finalising the operational and audit procedures for the EPWP fiscal incentive
EPWP Phase 2 will start on 1 April for National Departments and Provinces and 1 July for Municipalities
A country-wide briefing programme is scheduled to take place in the next two months and cover, amongst others, the following bodies:
Provincial Executive Committees
Mayoral Committees
Officials involved in implementing EPWP projects
Officials involved in coordinating and managing the EPWP in provinces and municipalities

28. Conclusions
Employment creation remains the key priority of government and the EPWP remains the most important vehicle for government to directly create employment for the poor
Strong political leadership on the EPWP has proven to be critical in Phase 1 of the programme and will be equally important in Phase 2
The introduction of a framework to increase accountability on EPWP performance and a fiscal incentive to reward performance and increase budgets for those that are performing, is expected to provide a huge boost to increasing the scale of the EPWP over the next five years

29. Devolution of Property Rates Funds Grant

30. Background
The devolution of property rate funds was introduced in the current financial year, 2008/09 to ensure that Provinces take over the responsibility of paying property rates and Municipal charges on properties that were administered by National Government on their behalf.
This devolution was done after a consultative process with provinces through workshops and provincial visits to determine the state of readiness of the provincial departments.
The main strategic goal of the devolution was to enable Provincial Accounting Officers to be fully responsible and accountable for the management of all aspects of property portfolio deemed Provincial.

31. Allocation for the Devolution of Property Rates
2008/09
2009/10
2010/2011
2011/2012
TOTAL
Provincial Treasuries
889,325
996,538
1,096,192
1,161,964
3,254,694
Allocation Criteria
The properties were extracted from the national public works asset register
Calculations were based on the 2006/07 financial year’s expenditure

32. Achievements
A total budget of R889 million was allocated in a form of which R667 million was transferred in September and the balance of R222 million in February 2009.
List of properties were verified and the degree of accuracy ranged from 95-99% depending on the Province.
Training was provided to all the provincial department and 8 out of the 9 provinces are paying on IE Works.
Quarterly performance reports were also submitted by provincial departments to DPW The process has now been fully implemented and the transfers are taking place according to set timeframes.
The payment schedule for next year has also been amended to enable the release of transfers to take place from June to around October to enable Municipalities to receive their payments on time.

33. Challenges & Solutions
Obtaining funding from NT to clear arrears rates for the five provinces; Western Cape, KZN, Mpumalanga, Eastern Cape and Limpopo.
Reconciliation and validation of the claimed arrears
Capacity to conduct the validation exercise
To this end, the department is working closely with NT to achieve the above and settle the outstanding balances.
There is also a parallel process of reviewing the readiness of Provinces for taking over the grants as earmarked funds in their baseline.

34. I thank you