1. 1 PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATIONS Comments on the 2009 Medium Term Budget Policy Statement Venue: GH46, Good Hope Building, Parliament

2. 2 Purpose of Presentation To present to the committee the Department’s considerations on the Medium Term Budget Policy Statement and the financial performance in the 2 nd Quarter

3. 3 EXPENDITURE OUTCOMES six months ending Sept 2009

4. 4

5. 5 Overall spending trends Overall budget R36.527 billion adjusted appropriation for 2009/10 Expenditure for April – Sept. 2009: R15.309 billion or 41.9% of adjusted appropriation as against 34.6% of the 2008/09 adjusted appropriation. The main increase compared to previous year is related to increases in municipal costs and the replacement of the RSC levies with sharing of fuel levy by Metros.

6. 6 Overall spending trends Current payments Appropriation for full fiscal year: R433 million 6 months spending: R182.million or 42% Compensation of employees (46.5%) Goods and services (39.0%) Year-on-year spending is similar for compensation (46.9% - 2008/09 and 46.5% - 2009/10) and goods and services (43.7% - 2008/09 and 39.% - 2009/10)

7. 7 Transfers and subsidies Appropriation for full fiscal year: R36.080 billion 6 months spending: R15.122 billion or 41.9% Provinces and municipalities (41.9%) Departmental agencies and accounts (50.5%) Public Corporations and private enterprises (80.8%) Non-profit institutions (56.6%) Households (92.4%) Year-on-year spending is similar across most categories except to Non-profit institutions and Households. Overall spending trends

8. 8 Payments for capital assets Appropriation for full fiscal year: R13.3 million 6 months spending: R4.8 million or 36.3% Machinery and equipment (36.3%) Year on year spending shows decrease in capital spending capacity (53.% - 2008/09 and 36.3% - 2009/10) due to vacant posts not yet filled.

9. 9 REVISED ALLOCATIONS: MTBPS

10. 10 LG Transfers by CoGTA: Prior Adjustment Local Government Transfers 2009/102010/112011/122012/13 AdjustedMedium-term estimates appro-MTEF Baseline priation Equitable Share (LGES)24,355,50229,267,70631,889,90133,484,396 Municipal Systems Improvement Grant (MSIG) 200,000212,000224,720235,956 Municipal Infrastructure Grant (MIG) 11,433,49412,528,88415,068,55115,821,979 Total35,988,99642,008,59047,183,17249,542,324

11. 11 Revision to Baseline 2009/10 - 2012/13 R12.4 billion is added to LG share Local Government R Million2009/102010/112011/122012/13 2010 MTEF AdjustedMTEFTotal LOCAL 835 1,600 3,000 7,800 12,400 Equitable Share 509 1,200 2,500 4,500 8,200 Conditional grants (direct transfers) 326 400 2,900 4,200 Municipal Infrastructure Grant 2882,500

12. 12 Additional Funds: Equitable Share The Equitable Share increased by R8,2 billion over the MTEF – For 2009/10 the increase is R509 million to compensate municipalities for the increased cost of providing free basic electricity to poor household Department currently working on the split through the formula (focus to be on household with services and without access to services)

13. 13 Additional Funds: MIG The MIG is revised upwards by R2,5 billion over the MTEF to augment municipal capital budgets – For 2009/10 the increase is R288 million (part of the roll-over for funds stopped from underspending municipalities during 2008/09 financial year) Department currently working on the allocation for NT to gazette. In total, 50 municipalities will benefit from the R288 million.

14. 14 Conclusion The department acknowledges the revenue shrinkage due to the current economic conditions and appreciates the R2,5 billion made available for MIG and the R8,2 billion for Equitable Share over the MTEF The Municipal Systems Improvement Grant (MSIG) need to be increased over the MTEF in view of LG Turn Around Strategy, Operation Clean Audit. The grant indicates a modest increase versus the Financial Management Grant (MSIG - R236 mil vs FMG – R404 mil)

15. 15 Thank You