Provincial Budgets: 2011/12 Financial Year First Quarter Provincial Budgets and Expenditure Report, August 16 2011

Summary

1. Published by the National Treasury in terms of Section 32 of the Public Finance Management Act (PFMA), this provincial budget statement of receipts and payments covers spending for the first quarter (April to June 2011) of the 2011/12 financial year. The statement is available on the Treasury website.

2. The information in the statement comes from the Section 40(4) Public Finance Management Act (PFMA) reports submitted by heads of provincial departments to provincial treasuries, who, in turn, submitted the information to the National Treasury. Queries on spending or budget numbers should therefore, in the first instance, be referred to the head of the relevant provincial department, and in the second instance to the head of the relevant provincial treasury. Queries on conditional grants may be referred to the head of the administering national department.

3. The budgeted figures in the first quarter publication take account of the 2011 Estimates of Provincial Revenue and Expenditure, which were presented to the provincial legislatures during March 2011.

Overall Expenditure Trends - First Quarter

4. In aggregate, provinces have spent R83.8 billion, or 22.9 percent, of their combined budgets of R365.5 billion for the first quarter.This represents a spending increase of 10.8 percent or R8.1 billion compared with the same period last year when provinces had spent R75.7 billion.

5. Education expenditure for the first quarter is R37.9 billion or 24.6 percent of the R154.2 billion combined education budgets, an increase of 14.3 percent or R4.7 billion on the first quarter for the previous financial year. It remains the largest item on provincial budgets (42.2 percent).

6. Health expenditure totalled R25.1 billion, or 22.9 percent, of the R110 billion combined health budgets, and is the second largest item on provincial budgets (30.1 percent). This represents an increase of 7.7 percent or R1.8 billion on the first quarter for the 2010/11 financial year.

7. Social development expenditure for the first quarter is R2.4 billion or 20.5 percent of the R11.7 billion combined social development budgets.

8. Personnel expenditure (compensation of employees) is in aggregate R50.6 billion or 23.8 percent of the budgeted R212.2 billion as at 30 June 2011.

9. In aggregate, provinces have spent R5.1 billion or 18.4 per cent of their R27.6 billion combined capital (payments for capital assets) budgets. This is an increase of 21 percent when compared to the same period of the 2010/11 financial year.

10. Provincial education departments have spent R1.9 billion or 23.9 percent of the budgeted R7.8 billion for capital expenditure. This is R861.5 million or 86.8 per cent more than what was spent in the first quarter for the previous financial year.

11. Provincial health departments have spent R1.5 billion or 16.5 percent of the budgeted R9.2 billion for capital expenditure, which is R116.2 million or 7.1 percent less than the first quarter for 2010/11.

12. After health, the second biggest share of provincial capital budgets is for the public works, roads and transport departments (30.8 percent), which have spent R1.5 billion or 17.2 percent of the combined capital budget of R8.5 billion as at 30 June 2011.

13. Provincial own revenue collected for the first quarter is at R2.6 billion or 25.8 percent of the budgeted own revenue of R10.3 billion. National government has transferred R72.1 billion of the equitable share and R16.5 billion of conditional grants to provinces during the first quarter of the 2011/12 financial year.

14. A more detailed analysis of the expenditure outcome as at 30 June 2011 is set out in Annexure A.

Annexure A

Details analysis for the first quarter of the 2011/12 financial year

1. The budgeted figures for provinces are based on the 2011 Estimates of Provincial Revenue and Expenditure documents tabled in the provincial legislatures during March 2011.

Total Expenditure

2. Table 1 indicates that in the first quarter provinces have spent R83.8 billion or 22.9 percent of the combined budgeted expenditure of R365.5 billion. Spending against budgets is the same in percentage terms when compared to the first quarter of the 2010/11 financial year. Spending in nominal terms is 10.8 percent or R8.1 billion higher than last year, when provinces had spent R75.7 billion.

3. Among provinces, spending is the lowest in the North West and the Western Cape (both at 20.9 per cent of their budgets) and highest in the Eastern Cape and Gauteng (both at 24.2 percent).

Social Services

4. Provinces have budgeted R275.9 billion for social services, including education, health and social development.

5. The first quarter outcome on social services is recorded at R65.5 billion, or 23.7 percent of the total provincial social services budgets for 2011/12.

Education

6. Education budgets of R154.2 billion comprise 42.2 percent of total provincial budgets. Table 3 indicates that education expenditure is at R37.9 billion or 24.6 percent of the total education budget. This is an increase of 14.3 percent, or R4.7 billion, on the R33.2 billion spent over the same period in 2010/11.

7. Spending by provinces on education in the first quarter ranges from 21.9 percent in the North West and 22.6 percent in the Northern Cape, to 25.7 percent in the Eastern Cape and 25.3 percent in Mpumalanga.

8. The first quarter outcome on goods and services (including learner and teacher support materials) in education is recorded at R2.8 billion, or 18.3 percent of the budgeted amount of R15 billion.

9. The bulk of education expenditure is on personnel (75.2 percent). Current spending on education personnel amounts to R28.5 billion, or 24 per cent, of the R118.6 billion budgeted for personnel (table 4). Spending by provinces on personnel expenditure in education ranges from 23.2 percent in the Western Cape, to 25 percent in the Eastern Cape.

10. Education capital expenditure is at R1.9 billion, or 23.9 percent, of the R7.8 billion budget. This is 86.8 per cent higher than the spending over the same period of the previous financial year. Education capital expenditure is lowest in the Eastern Cape at 8.5 percent and highest in Mpumalanga at 43.6 percent.

Health

11. Health budgets, totalling R110 billion, comprise 30.1 percent of total provincial budgets.

12. Table 6 indicates that, at R25.1 billion or 22.9 percent of the total health budget, health expenditure increased by 7.7 percent, or R1.8 billion, on the same period in 2010/11.

13. The Western Cape and Mpumalanga provinces spent the lowest share of their health budgets at 20.9 percent and 21.1 percent respectively. The highest shares are recorded by Gauteng at 24.8 percent and the Eastern Cape at 24.7 percent.

14. Table 7 indicates that health personnel expenditure is R15.8 billion, or 24.3 per cent, of the health personnel budget, an increase of R2.1 billion, or 15.3 per cent, on the R13.7 billion spent over the same period in 2010/11.

15. Spending on non-personnel non-capital items, including medicines, drugs and other current expenditure, is at R7.8 billion, or 21.8 percent, of the R35.9 billion budget.

16. Capital expenditure in the health sector is at R1.5 billion, or 16.5 percent, a decrease of R116.2 million or 7.1 percent on the R1.6 billion spent over the same period last year.

17. Spending by provinces varied, with the lowest rates of health capital expenditure being in Mpumalanga at 12 percent and KwaZulu-Natal at 13.5 per cent, and the highest being the North West and the Free State at 26 per cent and 21.6 percent respectively.

Social Development

18. At R11.7 billion, the social development budget comprises 3.2 percent of total provincial budgets.

19. Provinces registered spending of R2.4 billion, or 20.5 percent, of the total R11.7 billion budget. This represents an increase of R339.5 million, or 16.4 per cent, on the R2.1 billion spent over the same period last year.

20. There are varying degrees of spending among provinces, the lowest being the Western Cape at 14.8 percent and KwaZulu-Natal at 17.6 percent while the highest are Limpopo at 26 per cent and the Northern Cape at 23.5 percent.

Human Settlements and Local Government

21. The human settlements and local government budgets, at R21 billion, comprise 5.7 percent of total provincial budgets.

22. Spending by human settlements and local government is R3.9 billion, or 18.7 per cent, of the R21 billion budget. This represents an increase of R320 million, or 8.9 percent, on the R3.6 billion spent over the same period last year.

23. Spending levels by provinces varied, with the lowest being Limpopo at 15.9 percent and the Western Cape at 16 percent, while the highest spenders are the Free State at 36.1 percent and the Northern Cape at 21.8 per cent.

Human Settlements Development Conditional Grant

24. Most of the human settlements and local government expenditure comes from the Human Settlements Development conditional grant.

25. Table 11 indicates that provinces have spent R2.7 billion, or 18 percent, of the R14.9 billion Human Settlements Development grant budget. These spending figures are R326.8 million or 13.9 per cent higher than the same period last year.

26. It should be noted that in the 2011/12 financial year, the portion of this grant that goes to cities for internal infrastructure has been removed and added instead to the Urban Settlements Development conditional grant in the local government sphere. This resulted in decreased spending trends in certain provinces when compared to the same period last year.

Personnel expenditure

27. Personnel expenditure (compensation of employees) for the first quarter of the 2011/12 financial year is at R50.6 billion, or 23.8 percent, of the combined R212.2 billion budget.

28. Spending to date is R4.8 billion or 10.4 per cent higher than the R45.8 billion spent over the same period last year.

29. Spending ranges from 22.9 percent and 23 percent in the Western Cape and the Northern Cape respectively, to 24.7 percent and 24.1 percent in the Eastern Cape and Mpumalanga respectively.

Overall Capital Budgets and Expenditure

30. By the end of June 2011, provinces had spent R5.1 billion or 18.4 percent of the R27.6 billion capital budget (payments for capital assets). This is a significant increase of 21 percent compared to the same period in 2010/11.

31. Table 13 provides capital spending information by province and shows low rates of spending in both the Western Cape and the Eastern Cape at 15.8 percent and Mpumalanga at 16.9 percent, and high rates in the Northern Cape at 30.2 percent and Limpopo at 22.7 percent. However, in absolute terms, KwaZulu-Natal has spent the most, with total spending of R1.3 billion followed by Limpopo at R748.8 million and the Eastern Cape at R594 million.

32. Provincial education departments have spent R1.9 billion, or 23.9 percent, of their R7.8 billion education capital budgets. This is a significant increase of R861.5 million, or 86.8 percent, compared to spending over the same period in the previous financial year.

33. Provincial health departments have spent R1.5 billion, or 16.5 percent, of their R9.2 billion health capital budgets, which is R116.2 million or 7.1 percent less than the same period for 2010/11.

34. At 30.8 percent, the public works, roads and transport departments have the second highest share of provincial capital budgets (after health). The sector has spent R1.5 billion or 17.2 percent against its combined capital budgets of R8.5 billion as at 30 June 2011.

Conditional Grants

35. The total conditional grant allocation is R69.4 billion (including Schedules 4, 8 and 9 grants), with health making up the bulk at R23.9 billion.

36. Table 14 (overleaf) reflects spending by all provinces on conditional grant allocations as at 30 June 2011. It excludes expected conditional grant roll-overs from the 2010/11 financial year, and excludes spending on Schedules 4, 8 and 9 grants. Schedule 4 grants specify allocations to provinces to supplement the funding of programmes or functions funded from provincial budgets.

The Expanded Public Works Programme (EPWP) Incentive grant for provinces (Schedule 8 grant) specifies incentives to provinces to meet targets with regard to priority government programmes. The provincial disaster grant (Schedule 9 grant) specifies funds that are currently not allocated to specific provinces that may be released to provinces to fund disaster response.

37. Against the total allocation of R35.7 billion (which excludes Schedules 4, 8 and 9 grants), the rate of conditional grants spending amounts to R6.2 billion, or 17.3 percent.

38. Specific grants that show low rates of spending include:

a. Dinaledi Schools (0.4 percent)
b. Social Sector Expanded Public Works Programme Incentive (2.8 percent)
c. Land Care Programme: Poverty Relief & Infrastructure Development (5.5 percent)
d. Devolution of Property Rate Funds (7.6 percent)
e. HIV and Aids (Life Skills Education) (8.1 percent)
f. Ilima/Letsema Projects (9.9 percent)
g. Community Library Services (12.6 percent)

39. Table 15 indicates selected conditional grant spending rates as at 30 June 2011.

40. The table further indicates that eight provinces have spent less than 15 per cent on the Land Care Programme grant, HIV and Aids (Life Skills Education) grant and Devolution of Property Rate Funds grant. Six provinces have spent less than 15 per cent on the Community Library Services grant.

Provincial Revenue

41. Provincial revenue includes equitable share allocations of R288.5 billion, conditional grants of R69.1 billion and own revenue of R10.3 billion. The total provincial revenue received and collected as at 30 June 2011 is R91.3 billion, or 24.8 percent, of total revenue of R367.9 billion.

42. Within the first quarter of the current financial year, national government has transferred R72.1 billion or 25 percent of the equitable share to provinces, and R16.5 billion or 23.9 percent in conditional grants to provinces.

43. After three months, provinces have collected R2.6 billion or 25.8 percent of the budgeted own revenue of R10.3 billion, which is R569.2 million, or 27.4 percent, more than what was collected by the end of June for the previous financial year.

44. The collection rate varies from 16.6 percent in Mpumalanga and 20.2 percent in Limpopo, to a high of 32.4 percent in the Eastern Cape and 31 percent in KwaZulu-Natal.

Annexure A - Tables - [PDF]

Statement issued by the National Treasury, August 16 2011

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