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Provincial Budgets and Expenditure Review 2001/02 – 2007/08 15 September 2005 1 Provincial Budgets and Expenditure Review 2001/02 – 2007/08 15 September 2005 1

Prov. Budget and Exp Review (1) • Unlike previous reviews, focuses only on provincial Prov. Budget and Exp Review (1) • Unlike previous reviews, focuses only on provincial finances and performance – Scope of LG has grown substantially over the years and warrants a separate review – Difference in municipal and provincial/national financial years – LG to be published immediately after the LG elections • In time for use by new political office bearers 2

Prov. Budget and Exp Review (2) • Provincial budgets, expenditure and service delivery trends Prov. Budget and Exp Review (2) • Provincial budgets, expenditure and service delivery trends – Builds on the 2004 Trends in Intergov. Finances – Covers past and future budgets (2001/02 to 2007/08) – Provides consolidated information – Allows comparison between provinces – Critical document to inform on service delivery • Released before 1½ months MTBPS – Assist shaping the 2006 Budget and Min. Mecs • Inform policy priorities • Guide provincial EXCOs in budget preparation 3

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

Prov. Budget and Exp Review (4) • 9 chapters in the document – – Prov. Budget and Exp Review (4) • 9 chapters in the document – – – – – Introduction Education Health Social Development Housing Agriculture and Land Roads and Transport Personnel Trends in Provincial Budgets • Annexure A: – Extensive financial information 5

Intergovernmental Fiscal System (1) • 3 spheres of government – Independent, interrelated and based 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 6

Intergovernmental Fiscal System (2) • Key concurrent functions – School education, health, social welfare 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 7

Intergovernmental Fiscal System (3) • Revenue sharing arrangement – Vertical Division of Revenue • 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 8

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

Intergovernmental Fiscal System (5) Funding of Provinces • Provinces determine own budgets guided by Intergovernmental Fiscal System (5) Funding of Provinces • Provinces determine own budgets guided by national policy priorities – National transfers (97 per cent) the largest share of provincial revenue • Own revenue (3 per cent) – Equitable share 65, 4 per cent of national transfers • Unconditional transfer • Provinces have discretion on how to allocate based on government priority • Main source of funding for social services – Conditional grants 34, 6 per cent of national transfers • Social assistance grant payments reason for large conditional grant share • Health conditional grants second largest share • Performance and evolution of conditional grants need 10 thorough review

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 9: Trends in Provincial Budgets Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 9: Trends in Provincial Budgets 11

Chapter Outline • Introduction • Provincial Revenue Trends – National transfers to provinces • Chapter Outline • Introduction • Provincial Revenue Trends – National transfers to provinces • Provincial equitable share • Conditional grants – Provincial own revenue • Provincial Expenditure Trends – Social services spending – Non-social services spending – Personnel expenditure – Payments for capital assets • Conclusion 12

Introduction • • SA’s Intergovernmental System places provinces at the epicentre of government’s delivering Introduction • • SA’s Intergovernmental System places provinces at the epicentre of government’s delivering programme Concurrent functions such as: – School Education – Health – Social Welfare Services – Housing Social Services are approximately 82 per cent of total provincial spending Non-social services includes: – Agricultural support to farmers – Construction & maintenance of provincial roads – Provincial administrations & governance functions Delivery of social services continues to be a pillar of government’s transformation agenda Improved & expanded social service delivery linked to strong economy Budget has become key instrument of co-operative governance 13

Provincial Revenue Trends • • • National transfers are the largest source of funding Provincial Revenue Trends • • • National transfers are the largest source of funding for services provided by provinces – Equitable share & conditional grants The change in the financing mechanism for social security grants impacts on the analysis in this Review Provincial share of nationally raised revenue above 96 per cent Equitable share largest share of national transfers – 64 per cent – Grows at 4 per cent per year in real terms over the MTEF – Government continues to prioritize social services funded through ES The type and number of Conditional Grants reflect the evolution of the intergovernmental fiscal system – Three types: Recurrent, capital and transitional and capacity building – As system matures, transitional and capacity building grants will be phased out – The increase CG transfers mainly due to social security grants 14

Provincial Revenue Trends 15 Provincial Revenue Trends 15

Provincial Revenue Trends 16 Provincial Revenue Trends 16

Provincial Revenue Trends: Own Revenue • 2, 7 per cent of total revenue in Provincial Revenue Trends: Own Revenue • 2, 7 per cent of total revenue in 2005/06 declining marginally to 2, 5 per cent in 2007/08 • Budgeted at R 5, 9 billion in 2005/06, R 6, 1 billion in 2006/07 and R 6, 4 billion in 2007/08 • Average annual growth rate of 0, 9 per cent between 2004/05 and 2007/08 • Provinces tend to understate their own revenue forecasts - declines from the 2004/05 preliminary outcomes of R 6, 3 billion to R 5, 9 billion (5, 7 per cent) • Own revenue is made up of tax receipts (casino taxes, horse racing taxes, liquor licences and motor vehicle licences), non-tax receipts, transfers received, sale of capital assets and other own revenue collected • Motor vehicle licence fees are the biggest source of revenue - 41, 6 per cent 2004/05, and is set to rise further to 48, 3 per cent by 2007/08 • The drop in non-tax revenue is due to sharp decline in interest revenue 17

Provincial Revenue Trends: Own Revenue 18 Provincial Revenue Trends: Own Revenue 18

Provincial Expenditure Trends • Between 2001/02 and 2004/05, expenditure has grown from R 122, Provincial Expenditure Trends • Between 2001/02 and 2004/05, expenditure has grown from R 122, 7 billion to R 188, 9 billion: a real growth rate of 8, 4 per cent a year • Budgeted to spend R 213, 8 billion in 2005/06 (nominal growth of 13, 2 per cent, real growth of 8, 6 per cent from 2004/05 outcome) • Over the MTEF, increase to R 253, 6 billion in 2007/08 at an average annual growth of 10, 3 per cent or 5, 1 per cent faster than inflation • Capital spending sustains its upward growth path (9, 5 per cent average annual over the MTEF) • Social development one of the fastest expenditure growing items in provinces • Provincial spending trends vary between provinces • Provinces must continue to maintain healthy balances between revenue streams and expenditure 19

Provincial Expenditure Trends 20 Provincial Expenditure Trends 20

Social Services Spending • Social services spending makes up the bulk of provincial expenditure Social Services Spending • Social services spending makes up the bulk of provincial expenditure – approximately 82 per cent • This includes Education, Health and Social Development • Grew by 8, 8 per cent in real terms over the period 2001/02 to 2004/05 • Over the MTEF, expected to grow by a further 4, 6 per cent in real terms • Spending doubles over the seven-year period from R 100, 4 billion in 2001/02 to R 206 billion by 2007/08 • Bulk of social services goes to programmes targeted at poor persons and households to improve the quality of life for South Africans • The more rural, poorer provinces’ share in social services spending is higher than urban provinces • Significant changes in the composition of social services are evident, e. g. Social security grants 21

Social Services Spending 22 Social Services Spending 22

Social Services Spending 23 Social Services Spending 23

Non-Social Services Spending • • Include, among others, public works, roads and transport, housing Non-Social Services Spending • • Include, among others, public works, roads and transport, housing and local government, agriculture, sport and environmental affairs Approximately 18 per cent of total provincial expenditure Economic functions delivered are very important for economic growth and job creation Grew at an average annual rate of 13, 8 per cent between 2001/02 and 2004/05 Slowing down slightly but the strong recovery continues through 2007/08 The strong growth will strengthen programmes such as: – The new housing strategy – The comprehensive agricultural support programme (CASP) – The expanded public works programme Doubles between 2001/02 and 2007/08 from R 22, 3 billion to R 45, 9 billion Contribution towards stimulating economic growth, creating employment opportunities and reducing poverty 24

Personnel Expenditure • Success of containment of personnel costs to acceptable and sustainable levels Personnel Expenditure • Success of containment of personnel costs to acceptable and sustainable levels - from 55, 2 per cent (2001/02) to 46, 5 per cent in 2004/05 and to 43, 6 per cent by 2007/08 • Provincial education and health departments employ over 658 000 personnel – Largest contributor is education (R 57, 5 billion or 59, 4 per cent of total provincial personnel spending in 2005/06) – Education grows by 7, 5 per cent from 2004/05 to 2005/06, 7, 1 per cent in 2006/07 and 6, 8 per cent in 2007/08 – Health is at R 25, 8 billion or 26, 7 per cent in 2005/06 – Slight decline in Health growing by 10, 8 per cent in 2005/06, 7, 7 per cent in 2006/07 and 5, 9 per cent in 2007/08 • Personnel spending growth is still well above inflation • Over 65 per cent of total provincial personnel spending is concentrated in four provinces (KZN, EC, GT, LIM) 25

Personnel Expenditure 26 Personnel Expenditure 26

Payments for Capital Assets • Includes spending on construction, rehabilitation of buildings, roads and Payments for Capital Assets • Includes spending on construction, rehabilitation of buildings, roads and other immovable assets • Excludes spending on housing subsidy (capital transfer) – NERF • Grew robustly between 2001/02 and 2004/05, at an average annual rate of 18, 6 per cent • Rising at an average annual rate of 15 per cent from R 11, 9 billion in 2005/06 to R 13, 9 billion in 2006/07 and R 15, 3 billion in 2007/08 over the MTEF • 36 per cent of capital spending is on roads and transport followed by Health (29, 4%) & Education (24, 1%) • Preliminary capital spending outcomes (2004/05) show R 1, 8 billion underspending in provinces – present some challenges • The infrastructure delivery improvement programme (IDIP) aims to make infrastructure delivery more efficient and effective 27

Payments for Capital Assets 28 Payments for Capital Assets 28

Conclusion • Provincial spending continues to grow in real terms • Social Development fastest Conclusion • Provincial spending continues to grow in real terms • Social Development fastest growing item over the last three years and continue to rise rapidly over the MTEF • Growth (SD) has no impact on other spending – robust growth in education, health and infrastructure • Strong growth in capital expenditure – nearly triples over sevenyear period – Positive contribution to economic growth and employment creation – However, underspending in 2004/05 indicates capacity constraints that inhibit certain sectors from delivering infrastructure in line with the resources available – The infrastructure delivery improvement programme (IDIP) aims to make infrastructure delivery more efficient and effective • Detail analysis is presented in preceding chapters for school education, health, social development, agriculture, housing and roads and transport and personnel 29

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 2: Education 30 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 2: Education 30

Education Chapter Outline • Overview of Education Landscape • Review of key provincial expenditure Education Chapter Outline • Overview of Education Landscape • Review of key provincial expenditure trends (2001/02 to 2004/05) and budgeted expenditure (2005/06 to 2007/08) • Brief review of selected public school education outputs and quality 31

Education Landscape • Three bands: General education and training (grades R to 9) Further Education Landscape • Three bands: General education and training (grades R to 9) Further education and training (NQF levels 2 to 4 – including grades 10 to 12 and FET Colleges) Higher education • Concurrent function: Provincial: Funding/Provisioning and Delivery of GET and FET National: - Policy/Monitor/Support to provinces - Sole responsibility for Higher Education 32

Education Landscape (Provincial Education) Biggest component: Public Ordinary Schools (84, 4% of 2004/05 education Education Landscape (Provincial Education) Biggest component: Public Ordinary Schools (84, 4% of 2004/05 education spending) Number of Learners, Educators and Schools in Public Ordinary Schools by Province: 2002 Numbers Province Learners Educators Ratio Schools Learner: Educato Leaner: School r Eastern Cape Free State Gauteng Kwa. Zulu-Natal Limpopo Mpumalanga Northern Cape North Western Cape 2 064 927 693 213 1 482 253 2 680 993 1 816 200 903 789 194 062 887 649 915 270 64 974 21 947 44 651 71 624 55 155 24 870 6 334 29 451 25 225 6 150 2 281 1 915 5 560 4 561 1 856 459 2 247 1 460 3 336 2 304 3 774 2 482 3 398 3 487 3 423 7 395 3 627 3 3 6 3 33

Education Landscape (Provincial Education) Second biggest component: FET Colleges Full-time equivalent (FTE) and head Education Landscape (Provincial Education) Second biggest component: FET Colleges Full-time equivalent (FTE) and head count students and institutions in the public further education and training sector by province Pre April 2002 Province Eastern Cape Free State Gauteng Kwa. Zulu-Natal Limpopo Mpumalanga Northern Cape North Western Cape Full-time equivalent 13 489 9 792 47 161 22 744 13 100 7 655 3 Head Counts 34 854 24 291 135 227 65 073 37 072 24 067 8 2003 Former Technical Colleges 2 6 1 1 3 3 2 4 1 0 New FET Colleges 8 4 8 9 7 3 34

Prov. Expenditure Trends 35 Prov. Expenditure Trends 35

Provincial Expenditure Trends 36 Provincial Expenditure Trends 36

Composition: Prov education spending 37 Composition: Prov education spending 37

Provincial Expenditure Trends 38 Provincial Expenditure Trends 38

Provincial Education Programmes 39 Provincial Education Programmes 39

Provincial Expenditure Trends (National School Nutrition Programme) From 1 April 2004, the education sector Provincial Expenditure Trends (National School Nutrition Programme) From 1 April 2004, the education sector has been responsible for the implementation of the national school nutrition programme NUMBER OF BENEFICIARIES R’ 000 BUDGET ALLOCATED TARGETED 2004/05 REACHED 2004/05 TARGETED 2005/06 GROWTH RATE 2004/05 2005/06 Eastern Cape Free State Gauteng Kwa. Zulu-Natal Limpopo Mpumalanga Northern Cape North Western Cape 948 574 164 852 325 036 1 255 950 912 800 491 362 111 284 300 678 149 035 934 912 234 534 356 268 1 187 118 1 157 193 492 687 119 925 338 440 156 509 999 364 246 857 337 859 1 251 140 1 002 609 492 687 122 200 336 464 156 617 5, 1% 33, 2% 3, 8% -0, 4% 9, 0% 0, 3% 8, 9% 10, 6% 4, 8% 177 259 49 100 75 730 181 420 153 125 64 079 22 469 72 401 36 617 194 288 53 817 83 006 198 849 167 836 70 235 24 628 79 357 40 135 8, 8% 8, 8% 8, 8% Total 4 659 571 4 977 586 4 945 797 5, 8% 832 200 912 151 8, 8% 40

Education performance (1) • Relative to inputs, outputs and quality of education remain a Education performance (1) • Relative to inputs, outputs and quality of education remain a concern • Trends in matriculation results suggests improved quality and reduced inefficiencies: – Between 1999 and 2003 numbers writing exam declined from 511 474 to 440 267 - increasing to 467 985 in 2004 • (actual numbers passing the exam increased from 249 831 in 1999 to 330 717 in 2004) – Matriculation pass rate improved from below 50% in 1997 to 73, 2% in 2003. Slight drop to 70, 7% in 2004. – Growing trends in passes in maths and science 41

Education performance (2) Except for North West, increase in number of endorsements. Sharp increases Education performance (2) Except for North West, increase in number of endorsements. Sharp increases in LIM, FS and NC 42

Education performance (3) 43 Education performance (3) 43

Education performance (4) 44 Education performance (4) 44

Education performance (5) Key issues for discussion • Are matric results the only yardstick Education performance (5) Key issues for discussion • Are matric results the only yardstick for performance? – Recent standardised international tests show South Africa as a weak performer – 2001/02 Systemic evaluation (Grade 3) showed poor numeracy and literacy skills of learners • Can progress be measured? Data problems? – Quality and availability of data a great concern • Key challenges remain - need to improve the quality of education - need to achieve better outcomes 45

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 3: Health 46 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 3: Health 46

Summary This Chapter: • Provides an overview of health funding in the public sector Summary This Chapter: • Provides an overview of health funding in the public sector context. • Reviews key policy & sectoral developments. • Examines overall expenditure trends. • Focuses on expenditure & service delivery trends in key service delivery areas. • Focuses briefly on aspects of personnel in the sector. 47

Key trends • Real budget growth exceeds 4% per annum • Improving equity • Key trends • Real budget growth exceeds 4% per annum • Improving equity • Primary health care, emergency ambulance and HIV and AIDS programme funding growing strongly • Capital and NPNC expenditure significant real growth • Under-spending on capital and conditional grants • Professional personnel increased by 2605 after scarce skills and rural allowance • Weaknesses in sectoral non-financial information 48

The Public Sector Context: Total Health Funding in South Africa § There are large The Public Sector Context: Total Health Funding in South Africa § There are large differentials between private and public spending. § Nearly 60% of health funding goes towards funding private health care, while only the wealthiest 15% are insured. § Only 40% of health funding goes towards the majority of the population 49

50 50

Public Health Sector Funding in Middle Income Countries • South Africa’s total health expenditure Public Health Sector Funding in Middle Income Countries • South Africa’s total health expenditure as a proportion of GDP is relatively high • Public sector funding at 3. 4% of GDP compares favourably • Influenced by large private health sector, escalating wage costs and the growing burden associated with HIV / Aids 51

Health funding flows 2004/05 52 Health funding flows 2004/05 52

Provincial health expenditure, 2001/02 to 2007/08 53 Provincial health expenditure, 2001/02 to 2007/08 53

Provincial health expenditure, 2001/02 to 2007/08 • Between 2001/02 – 2004/05 growth exceeded 15% Provincial health expenditure, 2001/02 to 2007/08 • Between 2001/02 – 2004/05 growth exceeded 15% annually in Northern Cape, Mpumalanga, North West & Limpopo, implying that basic health services were significantly strengthened. • The medium term sees growth in all provinces, with growth above 11% in KZN, Eastern Cape & Northern Cape. • KZN now has the largest provincial health budget. • The 20. 3% per capita increase in Limpopo’s budgets in 2005/06 helps to close the spending gap. 54

Primary health care per capita spending trends § Substantive increase in PHC from 2001/02 Primary health care per capita spending trends § Substantive increase in PHC from 2001/02 (R 121) to 2005/06 (R 207) reflects national policy of improving access and support lower levels of care. § Significant expenditure growth, though large disparities still exist. § Department of Health has set PHC utilisation target at 3. 85 visits per year for uninsured persons. 55

Provincial emergency medical services expenditure, 2001/02 to 2007/08 § Funding for EMS grows strongly Provincial emergency medical services expenditure, 2001/02 to 2007/08 § Funding for EMS grows strongly to R 1. 7 billion in 2005/06. § Unit costs vary significantly among provinces due to problems in information systems, population density, distances and variations in staffing models. 56

Provincial HIV and Aids expenditure, 2001/02 to 2007/08 § Provinces have budgeted R 1. Provincial HIV and Aids expenditure, 2001/02 to 2007/08 § Provinces have budgeted R 1. 7 billion in 2005/06 for specific interventions. § AIDS treatment programmes have been initiated in all 53 health districts, 42 367 people on treatment by December 2004 § Widespread rollout of voluntary counseling and testing (427 sites in 2002 to 3369 in 2004) and Mother-child prevention programmes. Male condoms distributed increased from 150 million in 1998 to 360 million in 2004 57

Revitalisation hospitals close to completion § Need higher quality project business & implementation plans. Revitalisation hospitals close to completion § Need higher quality project business & implementation plans. § Strengthening national programme unit & provincial departments through the infrastructure development improvement programme. 58

Trends in scarce health professionals 59 Trends in scarce health professionals 59

Personnel per 100 000 population 60 Personnel per 100 000 population 60

Trends in scarce health professionals • Professional personnel numbers rose (2605 employees), suggesting improving Trends in scarce health professionals • Professional personnel numbers rose (2605 employees), suggesting improving stability • Increases noted in pharmacists (27. 9%), dieticians (15. 1%), speech therapists (18. 6%) & physiotherapists (9. 1%). • While number of doctors did not increase, redistribution noted among provinces, following rural allowance strategy. • While progress is noted, the lack of skilled personnel in rural areas remains a problem. • Access to personnel varies considerably across provinces. 61

Conclusion 1. 2005 / 2006 budget showed 8. 6% real growth. 2. Key emphasis Conclusion 1. 2005 / 2006 budget showed 8. 6% real growth. 2. Key emphasis on strengthening primary health care and implementing the district health system, expanding programmes to counter HIV / AIDS, and revitalising health infrastructure. Ambulance budget & goods and services (NPNC) continue to improve. 3. Greater attention to hospital budgets, Modernisation of Tertiary services and improving staffing levels required in future budgets 4. Publishing and disseminating health information needs to be improved. 62

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 4: Social Development 63 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 4: Social Development 63

What does Social Development Chapter Address? • Key developments in social development sector • What does Social Development Chapter Address? • Key developments in social development sector • Provincial social development expenditure • Expenditure by economic classification and by programme • Preliminary outcome for 2004/05 • Conditional grant funding • Personnel expenditure and numbers • Social assistance transfers • Social assistance compensation of employees • Social welfare services, developmental support services and populations trends • Conclusion 64

Key developments in Social Development Sector Pages 48 and 49 address: • Social Assistance Key developments in Social Development Sector Pages 48 and 49 address: • Social Assistance Function shift from provinces to national government – Social Assistance Act, 2004 • Establishment of South African Social Security Agency – South African Social Security Agency Act, 2004 • Reforming of social welfare services, administration and financing – Child Justice Bill, 2002 – Children’s Bill, 2003 – Older Person’s Bill, 2003 65

Provincial social development expenditure trends Table 4. 1 shows from page 49 – Overall Provincial social development expenditure trends Table 4. 1 shows from page 49 – Overall expenditure more than doubled over 3 years from R 23, 8 billion in 2001/02 to R 51 billion in 2004/05 – An annual growth of 28, 8 per cent or nearly 21 per cent in real terms – Growth in expenditure mainly driven by increasing beneficiary numbers in child support and disability grants – All provinces experience very high growth rates from 21, 3 per cent in Western Cape and 33, 3 per cent in Free State 66

Provincial social development expenditure trends (cont. ) expenditure in social development is expected to Provincial social development expenditure trends (cont. ) expenditure in social development is expected to moderate between 2004/05 and 2007/08 due to: – Phasing of extension of child support grants to 14 years to be completed by end of 2005/06 – Disability grants almost at full coverage – Improvements within the administration, especially key initiatives to address weaknesses in disability grant processes and procedures – Expenditure is however, expected to exceed R 70 billion by 2007/08 – Provides a strong growth of nearly 12 per cent per year or 6. 4 per cent in real terms – Rapid growth in provincial social development expenditure – rose to 26. 9 per cent of overall provincial budgets in 2004/05 – Set to increase to nearly 28 per cent in 2007/08 67

Expenditure by economic classification • Expenditure by economic classification consists of (pages 50 -51 Expenditure by economic classification • Expenditure by economic classification consists of (pages 50 -51 and Table 4. 2): – – • • Compensation of employees Other current payments Transfers and subsidies (mostly social assistance transfers) Payment of capital assets Highest proportion of social development expenditure on social assistance grants which increases from 86. 5 per cent (2001/02) to 88. 5 per cent (2004/05) with slight decline to 87. 6 per cent (2007/08) Compensation of employees is expected to grow at 17. 5 per cent a year – Driven by improved capacity for services and re-grading of social workers salaries – Also increase in both personnel numbers and average remuneration (also see Table 4. 6) • • Other current expenditure grows by 13. 2 per cent a year Non-grant transfers and subsidies (not-for- profit organisations) set to grow by 14. 3 per cent 68

69 69

Expenditure by Programme • Social development programmes consist of (page 51 to 52 and Expenditure by Programme • Social development programmes consist of (page 51 to 52 and Table 4. 3): – – – • • Administration Social assistance Social welfare services Development and support services Population development trends Greater expenditure on social assistance transfers than any other programme Generally higher growth in expenditure on administrative capacity than on welfare services growing from R 1, 6 billion (2001/02) to R 2, 1 billion in 2004/05 Much of growth in expenditure on social welfare services is for salaries of social workers Average annual growth in administration at nearly 30 per cent 37 per cent growth in development and support reflects the conditional grant funding introduced for food relief programme in 2003/04 Social welfare services programme grew at about 2. 4 per cent in real terms or 9 per cent in nominal terms (around R 2 billion in 2004/05) Growth further accelerates in social welfare services to nearly 12 per cent per year and in population development and support services to 28. 1 per cent between 2004/05 to 2007/08 70

Preliminary Outcome for 2004/05 • Preliminary outcome on page 52 and Table 4. 4. Preliminary Outcome for 2004/05 • Preliminary outcome on page 52 and Table 4. 4. • Adjustment of approximately R 3, 3 billion to provincial budgets on 2004/05 budgets • Adjustments to address unexpected growth in disability grants • Resulted in moderate over expenditure of R 135 million • Over expenditure in KZN and Eastern Cape • Over expenditure mainly due to: – Growing numbers in beneficiaries – High average grant payments related to delays in processing of grants – Costs of back pay to beneficiaries 71

Conditional Grants Funding • • Before 2004/05 the bulk of social development expenditure was Conditional Grants Funding • • Before 2004/05 the bulk of social development expenditure was funded by the equitable share allocations Conditional grants in social development are: – Food Relief – Home and Community Based Care (HIV and Aids) – Extension of the Child Support Grants (until 2004/05) • From 2005/06 the bulk of social development expenditure funded by conditional grants (see Table 4. 5) – Social assistance Transfers – R 52 billion (2005/06); R 57 billion (2006/07) and R 61, 8 (2007/08) – Social Assistance Administration – R 3, 3 billion (2005/06); R 3, 5 billion (2006/07) and R 3, 7 billion (2007/08) – Integrated social development services grant – R 338 million (2005/06); R 411 million (2006/07) and R 432 million (2007/08) – HIV and Aids - R 138 million (2005/06); R 139 million (2006/07) and R 143 million (2007/08) • Consolidated in conditional grants expenditure at R 55, 9 billion (2005/06); R 61, 2 billion (2006/07) and R 66, 1 (2007/08) 72

Personnel expenditure and numbers • Personnel expenditure and numbers are covered on page 53 Personnel expenditure and numbers • Personnel expenditure and numbers are covered on page 53 to 54 and in Table 4. 6 – Personnel expenditure grew at an annual average rate of 15. 9 per cent – Over the period from 2004/05 to 2007/08 personnel expenditure is projected to grow by an annual average of 17. 5 per cent – Rapid growth in personnel expenditure driven by: • strong growth in personnel numbers • Increases in average remuneration • Re-grading of social workers 73

Social assistance transfers • Social assistance transfers expenditure – covered in pages 55 to Social assistance transfers • Social assistance transfers expenditure – covered in pages 55 to 62 and in Tables 4. 7 to 4. 16 – Values of grants covered in Table 4. 7 – Social grants expenditure by grant type and by province in Table 4. 8 – Social assistance expenditure as a % of total social development expenditure – Table 4. 9 – Social grants as a percentage of GDP in Table 4. 10 – Social grants beneficiary numbers by grant type and provinces – Table 4. 11 – Pensions to older persons (SOAP and WV) – Table 4. 12 – Disability grant numbers and expenditure – Table 4. 13 – Care dependency grant numbers and expenditure – Table 4. 14 – Child support grant numbers and expenditure in Table 4. 15 – Foster care expenditure and numbers – Table 4. 16 74

Social Assistance Transfer (cont. ) • Social assistance transfers covered in the pages show: Social Assistance Transfer (cont. ) • Social assistance transfers covered in the pages show: – Social grants represents about 90 per cent of total social development expenditure – Beneficiary numbers grew from 3, 6 million in April 2001 to 9, 4 million in April 2005 – Growth reflected over this period: • • • Old Age at 2. 8 per cent Disability at 20. 1 per cent Foster care at 31. 4 per cent Care dependency at 31. 3 per cent Child support grants at 55, 1 per cent 75

76 76

Compensation of employees in social assistance programme • See also page 62 and Table Compensation of employees in social assistance programme • See also page 62 and Table 4. 17 – Doubling of expenditure on compensation of employees within this programme – Expenditure on compensation of employees indicates • Strengthening of provincial capacity • Appointment of permanent staff • Utilization of contract staff 77

Social welfare services and other programmes • See pages 63 to 65 and Tables Social welfare services and other programmes • See pages 63 to 65 and Tables 4. 18 and 4. 19 – Social welfare services expenditure – Number and level of social workers • • Social welfare expenditure Table reflects expenditure by subprogramme and by province Subprogrammes in this programme are: – – – • • • Administration Treatment and Prevention of substance Abuse Care of the Aged Crime prevention, rehabilitation and victim empowerment Services to the Disabled Child and youth care and protection Most other social development services provided by social workers and probation officers Growth in social welfare services shows a progressive shift towards welfare and development support expenditure Major share of expenditure in development support programmes – HIV and Aids and poverty alleviation programmes 78

Conclusion • Recent years massive expansion in provincial social development budgets • Real poverty Conclusion • Recent years massive expansion in provincial social development budgets • Real poverty orientated budget, especially to provide income transfers to poor and vulnerable individuals and households • However, exponential growth in social development expenditure has put severe pressures on other provincial expenditure responsibilities • Far reaching initiatives within social development sector: – Centralization of social assistance function – Establishment of social security agency – Designing and finalization of the social welfare service delivery model 79

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 5: Housing 80 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 5: Housing 80

Institutional arrangements • Housing is a concurrent function – National determines • Policy and Institutional arrangements • Housing is a concurrent function – National determines • Policy and strategy and sets delivery goals • Monitor and evaluate performance – Provinces • Promote, coordinate and implement housing policy • Approve subsidies and projects • Provide support to municipalities who act as developers – LG • • • Are mainly developers Provide bulk engineering services Land town planners, approval of building plans Community infrastructure Can execute the housing mandate only if accredited 81

Delivery progress • Funds for housing has increased – from R 3, 3 bn Delivery progress • Funds for housing has increased – from R 3, 3 bn in 2001 to R 4, 4 bn in 2004/05 – budgeted to grow to R 6, 9 bn in 2007/08 • R 32, 4 billion spent on housing delivery since 1994/5 – Construction of 1, 79 million new houses • Transfer of 549 597 government-owned houses to residents • Property assets worth over R 37 billion have been transferred to poor households since 1994 82

Delivery: Type of subsidy by province 83 Delivery: Type of subsidy by province 83

Delivery: Subsidised housing units 84 Delivery: Subsidised housing units 84

Challenges • Housing backlog growing • Stagnating property values for low cost housing – Challenges • Housing backlog growing • Stagnating property values for low cost housing – Non-appreciation of assets • Sustainable communities and the built environment • Greater role for municipalities – Capacity and possible accreditation 85

Comprehensive plan for sustainable human settlements • The Comprehensive plan for sustainable human settlements Comprehensive plan for sustainable human settlements • The Comprehensive plan for sustainable human settlements introduces: – Area-based human settlements development model – Sustainable human setllements • Include social and economic infrastructure – More flexible housing subsidy mechanisms to cater for greater range of housing needs • Sustainable housing market • Improve the value of the house as a capital asset – Devolution of subsidy administration to municipalities • Focus on metros 86

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 6: Agriculture 87 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 6: Agriculture 87

Agriculture and Land • Introduction – The importance of agriculture in the economy • Agriculture and Land • Introduction – The importance of agriculture in the economy • Overview of budget and expenditure: – Provincial expenditure trends – National Agriculture and land reform trends • Service delivery trends on selected programmes • Conclusions: Opportunities & challenges 88

Budget & Expenditure Trends: Overview • Objectives to broaden access to Agriculture: – increase Budget & Expenditure Trends: Overview • Objectives to broaden access to Agriculture: – increase access to agricultural land – improve productivity – broadening access to finance and skills (managerial & technical), – reduce vulnerability to natural disasters, and enhance job creation potential. • Aggregate budget grows by 11, 7% over the 2005 MTEF from R 4, 6 bn in 2004/05 to R 6, 4 bn in 2007/08. • It increased from R 3, 1 bn in 2001/02 89

Provincial Expenditure Trends • Spending increased by about 50% from R 2, 3 bn Provincial Expenditure Trends • Spending increased by about 50% from R 2, 3 bn in 2001/02 to R 3, 4 bn in 04/05, will rise by annual average 11% to R 4, 7 bn in 2007/08 – Table 6. 1 • Strong growth in personnel, rising by average 8, 9% over the 2005 MTEF, but declining as a proportion of total expenditure – from 69, 4% in 2001/02 to 51, 9% in 2007/08 - Table 6. 2 • Proportion of non-personnel spending grows from 30, 6% in 2001/02 to 48, 1% in 90 2007/08

Provincial Expenditure By Programme 91 Provincial Expenditure By Programme 91

National Expenditure Trends 92 National Expenditure Trends 92

Land Reform • Spending on land reform increases from R 735 m in 2001/02 Land Reform • Spending on land reform increases from R 735 m in 2001/02 to R 1, 6 bn in 2004/05, rising to R 5, 2 bn in 2007/08 • Restitution increases at an annual average of 48% from R 1, 2 bn in 2004/05 to R 3, 8 bn 2007/08 • By Dec. 2004, 57 257 claims were settled out of a total of 79 694, and 164 000 HH benefited – Table 6. 7 93

Land Reform • Total land transferred up to Dec 2004 is about 2. 8 Land Reform • Total land transferred up to Dec 2004 is about 2. 8 m ha, • Redistribution Land transferred (2 m ha) to about 200, 000 HH • Largest land trasfered in NC (28%), followed by EC (16%), KZN(15%) and FS(12%) • EC (29%) accounts for largest number of HHs followed by NW (23%), and NC is the lowest (4%) 94

Opportunities And Challenges • Strong growth in agriculture and land reform expenditure • Increasing Opportunities And Challenges • Strong growth in agriculture and land reform expenditure • Increasing pace of land reform increases the need for farmer support programmes • CASP was introduced in 2004/05 to complement LRAD • It has six main priority areas: – – – Information and knowledge management Technical and advisory assistance Training and capacity building Marketing and business development 0 n-and off farm infrastructure Financial support 95

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 7: Roads and Transport 96 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 7: Roads and Transport 96

Outline • • • Introduction Institutional arrangements Roads infrastructure Traffic management & safety Public Outline • • • Introduction Institutional arrangements Roads infrastructure Traffic management & safety Public transport Conclusion 97

Part 1: Roads Infrastructure • • • Extent of Provincial Road network – 344 Part 1: Roads Infrastructure • • • Extent of Provincial Road network – 344 000 Number of registered vehicles – 6. 8 million Consolidated Roads Budgets – R 10. 6 billion Provincial roads expenditure patterns Expenditure on roads maintenance Service delivery outputs both capital and maintenance 98

Part 2: Revenue Collection • Trends on revenue collected from motor vehicle licences • Part 2: Revenue Collection • Trends on revenue collected from motor vehicle licences • Revenue collected from RTA fees • Administering agents • Motor vehicle licence fees per province 99

Part 3: Traffic Management & Safety • Initiatives geared towards improved traffic management and Part 3: Traffic Management & Safety • Initiatives geared towards improved traffic management and safety • Expenditure in traffic management • Overload control measures • Effectiveness of overload control per province • Traffic personnel per province 100

Part 4: Public Transport • Bus subsidies • Spending on national bus subsidies • Part 4: Public Transport • Bus subsidies • Spending on national bus subsidies • Public transport expenditure 101

Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 8: Personnel 102 Provincial Budgets and Expenditure Review: 2001/02 – 2007/08 Chapter 8: Personnel 102

Introduction • This Chapter highlights the following: – Institutional arrangements in the public service Introduction • This Chapter highlights the following: – Institutional arrangements in the public service – Policy developments in personnel – Personnel spending and employment trends – 2004 Wage agreement 103

Legal framework and institutional arrangements • Legislation that govern the public service: – Public Legal framework and institutional arrangements • Legislation that govern the public service: – Public Service Act – Employment of Educators Act – South African Police Services Act – National Prosecuting Authority Act – South African Defence Force Act • PSCBC is the major negotiating chamber for national and provincial governments • SALGA caters for local government • Personnel policy development has undergone these phases: – 1 st phase (1994 -1997): Unification of the highly fragmented dispensations – 2 nd phase (1997 -2000): Alignment of personnel costs with public priorities – 3 rd phase (2001 -current): Ability to deliver quality services 104

Policy developments • To improve service delivery and align personnel spending with the service Policy developments • To improve service delivery and align personnel spending with the service delivery objective, the following are put in place: – 2004 Wage agreement – first multi-year wage agreement based on inflation projections – Macro benefits – housing and medical aid (GEMS) allowances – Introduction of pay progression, career pathing and retention of scarce skills – Introduction of Incapacity Leave and Ill-health Retirement policy – Enable restructuring in government to allow for excess employees to leave the public service 105

Personnel spending trends (table 8. 1) • Slower growth in personnel expenditure has been Personnel spending trends (table 8. 1) • Slower growth in personnel expenditure has been a success (55, 5% in 1997/98 of total expenditure to 46, 5% in 2004/05) • In 2004/05, provinces spent R 87, 9 billion, a 4, 4% real increase from 2003/04 due to: – 2004 Wage Agreement – Employment increase in 2004 • Expectations: – Slower growth rate for personnel expenditure (low inflation environment) • Provincial share of personnel expenditure: – KZN 20, 4%, EC 16, 3%, GP 15, 4%, LP 14, 2%, WC 9, 5%, NW 8, 2%, FS 7, 1%, MP 6, 7% and NC 106 2, 2%

Provincial employment trends • 2004/05: employment increased by 2, 2% (table 8. 3) – Provincial employment trends • 2004/05: employment increased by 2, 2% (table 8. 3) – Significant increases experienced in GP 6, 7%, LP 4% and MP 4, 2% – Employment contraction in EC 1, 9% • Technical skills people (levels 6 -9) comprises of 62% of provincial employment • Shift towards employing more SMS in provinces (table 8. 4): – Ratio decreased from 1: 436 (in 2001) to 1: 263 (in 2004) – Significant increases in EC, LP and NW 107

2004 Wage Agreement • First multi-year agreements (3 years) based on inflation projections (forward-looking) 2004 Wage Agreement • First multi-year agreements (3 years) based on inflation projections (forward-looking) • Introduced pay progression system and addressed backlogs in educator remuneration • Provided macro benefits – housing and medical aid allowances (GEMS) • Addressed the need for the development of policies around the attraction and retention of scarce skills in the public service 108

Conclusion • To achieve good personnel management, the following needs to be in place: Conclusion • To achieve good personnel management, the following needs to be in place: – Restoration of balance in the use of resources – personnel vs. non-personnel expenditure – Performance based remuneration dispensation – Flexible remuneration dispensation for professionals – An empowered public service to drive the development and implementation of policy 109