1. 1 Provincial Budgets and Expenditure Review 2002/03 – 2008/09 17 October 2006

2. 2 Prov. Budgets and Exp Review (1) Two separate publications –Local government –Provinces Why two separate publications –Scope of LG has grown substantially over the years and warrants a separate review –The LG financial year is different from the provincial and national financial year

3. 3 Prov. Budget and Exp Review (2) Provincial budgets, expenditure and service delivery trends –Builds on the 2005 Provincial Budgets and Expenditure Review –Covers past expenditure and future budgets (2002/03 to 2008/09) –Provides consolidated information –Allows comparison between provinces –Critical document to inform on service delivery Released one week before MTBPS –Assist in shaping the 2007 Budget Inform policy priorities Guide provincial EXCOs in budget preparation

4. 4 Prov. Budget and Exp Review (3) Importance for portfolio and select committees –Coincides with the tabling of annual reports and thus informs the debate Are targets set in strategic plans achieved? Are we getting value for money? What are the service delivery challenges? Do we have data to measure service delivery performance? –Platform for accounting officers to account –Foster good governance and transparency Report on government performance –Policy analysts, Public, etc

5. 5 Prov. Budget and Exp Review (4) 8 chapters in the document –Introduction –Education –Health –Social Development –Housing –Agriculture and Land –Roads and Transport –Trends in Provincial Budgets Annexures: –Extensive financial information –1 st attempt of non-financial data

6. 6 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 Provinces and municipalities implement pro-poor programmes Continued need for provinces and municipalities to improve their service delivery capacity

7. 7 Intergovernmental Fiscal System (2) Key concurrent functions –School education, health, social welfare and housing Policy formulation and setting of norms and standards a national competence Implementation mainly at provincial level –Coordination challenges that arise Is there alignment between provincial budgets and national policy priorities? –The Review highlights how each of these concurrent functions are structured Which sphere is responsible for what

8. 8 Intergovernmental Fiscal System (3) Revenue sharing arrangement –Vertical Division of Revenue Between the 3 spheres Informed by assigned service delivery responsibility and revenue raising capacity of each sphere Based on governments policy priorities –Horizontal Division of Revenue Among the 9 provinces –Division of Revenue Bill Reflects the vertical and horizontal DOR –Culmination of an extensive intergovernmental consultative process Approved by both houses of Parliament/NCOP

9. 9 Intergovernmental Fiscal System (4) Vertical Division of Revenue

10. 10 Intergovernmental Fiscal System (5) Funding of Provinces Provinces determine own budgets guided by national policy priorities –National transfers (96,4 per cent) the largest share of provincial revenue Own revenue (3,6 per cent) –Equitable share 82,3 per cent of available resources Unconditional transfer Provinces have discretion on how to allocate based on government priority Main source of funding for social services –Conditional grants 14,1 per cent of available resources Health conditional grants second largest share Performance and evolution of conditional grants need thorough review

11. 11 Intergovernmental Fiscal System (6) Consolidated Provincial Revenue

12. 12 Provincial expenditure trends (1) Biggest budgets at provincial level –51,4 per cent of non-interest spending taking place in provinces –Education, health and social development constitute 76,5 per cent of provincial spending –Non-social services include on average 23,5 per cent of provincial spending Housing and sustained human settlements Agricultural support to farmers Construction & maintenance of provincial roads Running provincial administrations & governance –Greater focus on provincial budgets, expenditure and performance needed

13. 13 Provincial expenditure trends (2) Total spending between 2002/03 and 2005/06 –Increased by R45 bn to R161,1 bn between 2002/03 2005/06 Real growth of 6,6 per cent per year (exclude social security grants) –Budgeted to reach R221,9 bn by 2008/09 A further R60 bn added (Real growth of 9 per cent per year) –Areas of growth Education, health and social development Capital spending more than doubled from R8,2 bn in 2002/03 to R19,8 bn in 2008/09 –Delivery capacity improving

14. 14 Provincial expenditure trends (3)

15. 15 Provincial expenditure trends (4) Spending on social services –Education, health and social development –Makes up 76 per cent of total provincial spending –Spending nearly doubles from R88,8 bn in 2002/03 to R162,9 bn in 2008/09 Grew 6,7 per cent in real terms annually between 2002/03 and 2005/06 Budgeted for real growth of 4,9 per cent a year over the next three years Bulk of social services are pro-poor Rural provinces share of social services higher than urban provinces

16. 16 Education

17. 17 Education (1) Education spending –Nearly doubles from R53,2 bn in 2002/03 to R94,9 bn in 2008/09 –Equity and access improved –Capital spending grows sharply –Spending on LSM grows New curriculum statement NPNC also growing strongly –Pay progression for educators Backlogs Career-pathing, scarce skills, management

18. 18 Education (2)

19. 19 Education (3) There appears to be a lag in quality improvements Trends in matriculation results suggests improved quality and reduced inefficiencies: –actual numbers passing the exam increased from 322 492 in 2003 to 347 184 in 2005 –Matriculation pass rate improved from below 50% in 1997 to 73,2% in 2003. Drops to 68 % in 2005. –Growing trends in passes in maths (55 % of those who wrote) and science (71,1 % of those who wrote)

20. 20 Health

21. 21 Health (1) Health spending –South Africa’s total health expenditure as a proportion of GDP is relatively high Public sector funding at 3.4% of GDP compares favorably with middle income countries. Relatively high expenditure influenced by large private health sector, escalating wage costs and the growing burden associated with HIV / Aids –Nearly doubles from R32,9 bn in 2002/03 to R60,6 bn in 2008/09 –Grows 5,9 per cent in real terms annually Improving equity Primary health care, emergency ambulance and HIV and AIDS programme funding growing strongly

22. 22 Health (2) Health spending –Capital more than doubles between 2002/03 and 2008/09 From R2,2 bn in 2002/03 to R5,5 bn in 2008/09 Growth in both buildings and equipment budgets Growth in per capita health funding –Spending grow from R853 per head in 2002/03 to R1 178 in 2005/06 Primary health care more than doubles –R5,6bn in 2002/03 to R11,7 bn in 2008/09 Emergency medical services –Significant step up (14,3 % real growth)

23. 23 Health (3) Improved equity and access Net gain of 16 000 health professionals –Over 10 000 additional nurses being employed –Increase in EMS personnel –Gradual improvement in public sector doctors per 1 000 uninsured persons All rural provinces show a net gain moderate decrease in WC and Gauteng 77 doctors per 100 000 uninsured population remains a concern –32 282 health science students in training in various disciplines

24. 24 Social development

25. 25 Social Development This chapter reviews the role of provincial social development: –in the context of vulnerability; –the institutional arrangements underpinning social development; –policy initiatives and legislative reforms; – spending, budget and service delivery trends in the sector – as well as focusing on overall expenditure and performance in the different programmes and large subprogrammes.

26. 26 Fundamental Restructuring in the sector Social Security moved to the National Sphere in –No longer part of provincial budgets from 1 April 2006 –Administered by SASSA Provincial Social Development Responsible for Community Development and Welfare services. Provinces are now able to focus on improving the funding and delivery of developmental social welfare services.

27. 27 Social Development (2) Social development spending –Social welfare services programme Child care, protection services, care for older persons, substance abuse, prevention and rehabilitation, disabilities, victim empowerment, HIV and Aids Largest share of social development budgets Stepped up significantly; set too grow 22 per cent per year over the next three years –The Children‘s, Old Persons, Child Justice Bills to have an impact on social services budgets moving forward –Development and research –Stepping up of welfare personnel spending To increase the number of social workers

28. 28 Social Development (1) Social development spending –More than doubled from R2,7 bn in 2002/03 to R7,4 bn in 2008/09 An annual growth of nearly 21 per cent in real terms Significant step up of social welfare services All provinces experience very high growth rates from 16,6 per cent in Western Cape and 34,0 per cent in Eastern Cape –Strong growth in transfers to NGOs More double over period under review Recognises greater role of NGOs –Capital spending set to grow sharply From R145 million in 2005/06 to R391 million in 2008/09

29. 29

30. 30 Non-social services spending

31. 31 Non-social services spending Include, among others, –public works, roads and transport, housing and agriculture Key in economic growth, job creation and food security –Approximately 25 per cent of provincial spending –More than doubles between 2002/03 and 2008/09 Sharp growth in housing expenditure to fund comprehensive housing strategy (R4 bn in 2002/03 to R8,7 bn in 2008/09) Sharp increase in roads budgets (from R5,2 bn in 2002/03 to R11,7 bn in 2008/09) Growth in agriculture budgets (R2,6 bn in 2002/03 to R5,2 bn in 2008/09)

32. 32 HOUSING

33. 33 Defining the Public Housing environment SA public housing driven by government policy to provide low and medium income h/hlds with affordable housing This is achieved through a range of delivery mechanisms incorporating essential services i.e. water, sanitation, roads and electricity It aims to attract a range of community services necessary for integrated and sustainable human settlements i.e. Public transport,Municipal services, Social infrastructure i.e. Schools, health and recreational facilities, Commercial

34. 34 Delivery progress Construction of 1,9 million new houses Transfer of 1,6 million government-owned houses to residents Over 2,8 million subsidies approved since the introduction of the programme Property assets worth over R37 billion have been transferred to poor households Spending more than double from R4 bn in 2002/03 to R8,7 bn in 2008/09

35. 35 Agriculture and land

36. 36 Background A range of policies aim to modernize the sector and promote broad inclusiveness and equity i.t.o land ownership The land and agrarian reforms programmes are by far the most important programs driving transformation Agriculture contributes –4% to GDP –10% of total employment –Significantly to foreign exchange earnings

37. 37 Institutional arrangements Agriculture is a concurrent function shared between national and provincial departments National is responsible for formulating policies while provinces are the implementing spheres National is separated into two departments: –Land Affairs – responsible for land reform programmes –Dept of Agriculture – accountable mainly for farmer settlement and support The sector also enjoy support from numerous state agencies such as Land Bank, Agriculture Research Council, ARC, etc

38. 38 Budget trends in National Dept of agriculture and sub-programmes

39. 39 Provincial restitutions and claims

40. 40 Provincial budget and expenditure trends

41. 41 Personnel vs Non-Personnel Expenditure

42. 42 Provincial expenditure by programme

43. 43 Provincial expenditure by programme The majority of expenditure is for administration and farmer support and development Total expenditure for the 2005/06 financial year amounts to R4,1 billion and is budgeted to increase to R5,2 billion by 2008/09 Spending is driven mainly by the farmer support and development programme which primarily aimed at unlocking the agricultural potential of the provinces

44. 44 Concluding Remarks Government continues to streamline agricultural reform by ensuring representivity by all citizens of South Africa Through programmes such as CASP, LRAD and MAFISA, support is provided to beneficiaries to ensures sustainability of all reform projects

45. 45 Roads and transport

46. 46 Consolidated spending on roads The three spheres of government spent a total of R12,9 billion on roads in 2005/06. –National accounts for R1.8 billion (13,9%) of the total aggregate. –Provinces account for R7.6 billion (58,7%) –Municipalities account for R3.5 billion (27,4%) of the total aggregate In 2005/06 –890 km of surfaced roads upgraded and 2 218 resealed –EPWP programme extensive in roads sector 47 000 jobs created

47. 47 Provincial transport spending Provincial spending on roads –Roads expenditure account for 4,7% of total provincial budgets –Strong growth from R5,2 bn in 2002/03 to R7,6 bn in 2005/06 –Set to reach R11,8 bn by 2008/09 Spending on road traffic management and safety stepped up –Provinces currently spending R1,5 bn –Budget to spend R1,8 bn by 2008/09

48. 48 Provincial transport spending Overload control –Remain a priority to minimise damage to road network –1,1 million heavy vehicles weighed at 97 weighbridges country wide –64 362 penalties issued Public transport infrastructure and system prioritised –Spending doubled from R684 million in 2002/03 to R1,3 bn in 2006/07 –Set to grow sharply as funds are committed for 2010