1. 2007 Adjustments Appropriation Presentation to Parliament 7 November 2007

2. Content Budget outcome for 2006/07 financial year
Spending performance for 2007/08 (April – September)
Components of the Adjustments Budget
Summary of adjustments
Unforeseeable and unavoidable
Amounts already announced in 2007 Budget
Roll-overs
Salary adjustment
Self financing
2007/08 Adjusted Budget
Conclusion

3. Context of presentation
Presentation does not provide a comprehensive explanation of individual expenditure decisions – details provided in Adjusted Estimates of National Expenditure 2007
Presentation outlines the legal and procedural basis for expenditure included in Adjustments Budget

4. 2006/07 Budget outcome
R476.2 billion available for spending in 2006/07
In total 1.3% or R6 billion not spent
R1.5 billion not transferred to provinces due to capacity constraints or non-compliance with DoRA
Excluding conditional grants: The National Treasury, Correctional Services, Justice and Constitutional Development, Transport, Water Affairs and Forestry and Public Enterprises contributed R2.5 billion of the underspending.
R’ billions
2006/07
Under spending
Under spending %
Main Appropriation
260.0
Adjustments Appropriation
6.2
Total Appropriated Funds
266.2
5.6
2.1%
Statutory payments
210.0
0.4
0.2%
Total available expenditure
476.2
6.0
1.3%
The Department of Provincial and Local Government requested an amount of R817,740 million to be rolled over for the Municipal Infrastructure Grant. The funds were not transferred to municipalities due to time and capacity constraints.
The National Treasury did not transfer conditional grants to Local Governments: Restructuring Grant: Municipalities for Nelson Mandela Bay; Cape Town; City of Tshwane (R180 million).
In terms of Section 22(1) and 22(2) of the Division of revenue Act, (Act No.1 of 2006) a schedule 5 allocation (including the Further Education and Training College Sector Recapitalisation Grant) that is not spent at the end of the financial year must be surrendered to the National Revenue Fund. National Departments of Education, Health and Housing submitted coordinated requests to the National Treasury for the roll-over of these unspent conditional grants.
The request from the Department of Housing (R458,317 million) for the Integrated Housing and Human Settlement Development Grant was not recommended as roll-over funds.

5. Spending for 2007/08
Departments usually spend slightly less than half in the 1st 6 months
Last year 45.2% of total budget had been spent at this point
Too early to assess if March ‘spike’ in expenditure will recur
R’ billions
Adjusted Appropriation
April – Sept
Spending %
Central Government and Administration
42.5
15.8
37.2
Financial and Admin Services
21.9
9.8
44.8
Social Services
105.4
56.2
53.3
Justice and Protection Services
81.7
35.0
42.8
Economic Services
61.7
25.1
40.7
Total appropriation by vote
313.3
141.9
45.3

6. Components of the Adjustments Budget
PFMA , section 30(2), states that adjustments budget may provide for:
Significant and unforeseeable economic and financial events affecting the fiscal targets
Unforeseeable and unavoidable expenditure recommended by a committee of Cabinet
Any expenditure in terms of section 16 of the PFMA
Money to be appropriated for expenditure already announced by the Minister during tabling of annual budget
The shifting of funds between and within votes
f) Utilisation of savings under a main division to be used to defray over-expenditure on another main division
g) Roll-over of unspent funds from preceding financial year

7. Unforeseeable and unavoidable expenditure
Definition:
Expenditure that was not foreseen at the time of the tabling of the Budget and is now deemed to be unavoidable.
The following cannot be considered as unforeseeable and unavoidable expenditure (Treasury Regulation 6.6.1):
Expenditure that, although known when finalising the estimates of expenditure, could not be accommodated within allocations;
Tariff adjustments and price increases
Extensions of existing services and the creation of new services that are not unforeseeable and unavoidable.

8. Unforeseeable and unavoidable expenditure
Of the R3.8 billion recommended for unforeseeable and unavoidable expenditure, R754 million is related to natural disasters and animal disease.
Transfers to municipalities
Funding for damage related to storms and tidal surges in KwaZulu-Natal in March 2007 (R180.9 million)
In-year provision for costs of repairing flood damage occurring in June 2007 on the Cape West Coast
(R6.9 million – R4.7 million to the province)
Emergency drought relief expenses
(R100 million - R14.9 to national Department of Water Affairs and Forestry)
Transfers to provincial agriculture departments
Uninsurable agricultural losses amounting R300 million as a result of drought, fire or flooding
R100 million on the national Department of Agriculture’s vote for compensation to farmers for the culling of pigs to curb the spread of classic swine fewer
R46 million of spending by the national Department of Water Affairs and Forestry for remedial work related to flood damage or drought.

9. Unforeseeable and unavoidable expenditure per department
R’million
Provincial and Local Government
National Disaster funding in respect of Kwa-Zulu Natal, West Coast District, as well as for eradication of the bucket system
387.8
National Treasury
Budget pressures in North West province following boundary changes, for increased incidents of MDR and XDR TB and West Coast district flood damage
654.7
Public Service and Administration
Communication during public sector strike
13.9
Education
National education recovery plan
200.0
Health
Comprehensive HIV & Aids care
50.0

10. Unforeseeable and unavoidable expenditure per department (continued)
R’million
Defence
Support of health sector during the public service strike
45.7
Agriculture
Uninsurable agricultural losses and compensation for culling in respect of classic swine fever
400.0
Housing
Emergency housing in the North West province
105.0
Land Affairs
Restitution in Richtersveld land settlement claim
250.0

11. Unforeseeable and unavoidable expenditure per department (continued)
R’million
Public Enterprises
South African Airways restructuring
744.4
Trade and Industry
Coega IDZ infrastructure commitments and small medium enterprise incentives
524.7
Transport
Bus subsidy shortfall
300.0
Water Affairs and Forestry
Urgent flood related problems (secondary alien vegetation invasion, river and flow gauging works) and drought relief
161.9
Total

12. Amounts announced in 2007 Budget
There are two items in this category included in the Adjustments Appropriation Bill:
R28 million for Alexkor, mainly for restructuring but also for VAT for the last transfer to Alexkor approved in the Special Adjustments Budget.
R678.7 million for the Pebble Bed Modular Reactor project of which R307.7 million is for operation and contractual spending for the period January to March 2008 and R371 million is for VAT both for previous transfers in 2006 and 2007 and this current transfer.

13. Roll-Overs In terms of Treasury Regulation 6.4:
Funds appropriated but not spent in previous financial year rolled over to a subsequent year subject to relevant treasury approval
Unspent funds on payments for capital assets may only be rolled over to finalise projects or assets acquisitions still in progress.
Savings on transfer payments and subsidies may not be rolled over for purposes other than what was originally voted for.
Savings on compensation of employees may not be rolled over. A maximum of five per cent of a department’s payments for good and services (excluding compensation of employees) may be rolled over.
Funds may not be rolled over for more than one financial year unless approved in advance by the National Treasury.

14. Roll-Overs per department
Funds rolled over from 2006/07 to 2007/08
R'million
Presidency 17
Foreign Affairs
263
Home Affairs
206
Provincial and Local Government
818
Public Works 67
Government Communication and Information System 1
Public Service and Administration 13
Public Service Commission 3
South African Management Development Institute 60
Statistics South Africa 57
Education
196

15. Roll-Overs per department (continued)
 Funds rolled over from 2006/07 to 2007/08 continued
R'million
Health
385
Labour 5
Sport and Recreation South Africa
Correctional Services
513
Defence 83
Justice and Constitutional Development
262
Agriculture 89
Environmental Affairs and Tourism
200
Minerals and Energy 9
Trade and Industry
109
Transport
386
Water Affairs and Forestry
314
Total
4 060

16. Salary Adjustment Vote R’million Defence Provincial governments
Government Communication and Information System
Correctional Services
Safety and Security
Water Affairs and Forestry
Public Office Bearers
109
1 185 2
128
469 21 3
Total
1 917

17. Self-financing Expenditure per Department
R’millions
Government Communication and Information System 2
Public Service Administration
0.3
Correctional Services
1.1
Defence
132.2
Communications
1.2
Water Affairs and Forestry
45.1
Total
181.9

18. Adjusted National Budget 2007/08

19. Conclusion
Total additional amounts added to the budget equal R16.7 billion
The revised budget framework makes provision for about R5.2 billion in under spending at a national level, in addition to the R3 billion contingency reserve set aside in the budget
The total estimated level of spending rises by R8.5 billion, from a budgeted R533.9 billion to a revised R542.4 billion
The revised estimate of the budget surplus rises from R10.7 billion to R10.8 billion or 0.5% of GDP