Presentation to Select Committee
on Finance:
KZN’s Provincial Expenditure
19 June 2015
1
Overall Provincial Budget
Performance by Department
2
Provincial Own Revenue - 2014/15 Preliminary
Outcome
Table 1: Summary of provincial own receipts by Vote - 2014/15
R thousand
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Office of the Premier
Provincial Legislature
Agriculture and Rural Development
Economic Development, Tourism and Enviro. Affairs
Education
Provincial Treasury
Health
Human Settlements
Community Safety & Liaison
The Royal Household
Co-operative Governance and Traditional Affairs
Transport
Social Development
Public Works
Arts and Culture
Sport and Recreation
Total
Preliminary
Actual
Final
Appropriation
Over/
(Under)
% collected
(1)
(2)
(3) = (2) - (1)
(4) = (1) / (2)
1 612
3 503
32 077
135 108
95 570
850 967
289 681
28 923
74
79
23 471
1 656 834
8 725
19 464
1 576
402
479
703
21 302
8 770
73 199
839 470
246 161
1 830
85
109
3 203
1 572 160
6 931
8 252
715
275
1 133
2 800
10 775
126 338
22 371
11 497
43 520
27 093
(11)
(30)
20 268
84 674
1 794
11 212
861
127
336.5
498.3
150.6
1 540.6
130.6
101.4
117.7
1 580.5
87.1
72.5
732.8
105.4
125.9
235.9
220.4
146.2
3 148 066
2 783 644
364 422
113.1
3
2014/15 Preliminary Outcome
• The bulk of KZN’s own revenue is derived from 4 main sources - Motor vehicle
licences by Transport, Casino and Horse racing taxes and Interest, dividends and
rent on land by Provincial Treasury, as well as Health patient fees by Health
• The aggregated preliminary revenue collected amounted to R3.148bn
compared to the Final Appropriation of R2.784bn, resulting in a substantial
over-collection of R364.422m or 13.1%
• The departments largely responsible for the over-collection are Economic
Development, Tourism and Environmental Affairs, Transport, followed by
Health, Human Settlements, Education, COGTA, Provincial Treasury, Public
Works and Agriculture and Rural Development
4
Comparative Analysis
Revenue Rankings
No.
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15φ
1 GP
2 351 735 GP
2 631 046 GP
2 838 931 GP
3 615 798 GP
3 946 391
GP
4 349 100 GP
4 964 753
2 WC
1 935 003 WC
1 937 413 WC
2 067 680 KZN
2 482 057 KZN
2 664 702
KZN
2 573 308 KZN
3 148 066
3 KZN
1 698 357 KZN
1 857 203 KZN
2 038 599 WC
2 228 412 WC
2 301 793
WC
2 466 836 WC
2 907 833
4 EC
965 989 EC
765 529 FS
806 645 FS
865 214 EC
1 019 034
EC
1 281 188 EC
1 451 441
5 NW
626 467 FS
650 957 EC
747 565 EC
845 202 NW
866 284
NW
978 857 LIM
1 413 763
6 FS
593 187 NW
601 394 NW
724 970 NW
783 567 FS
804 556
FS
889 120 NW
892 144
7 LIM
539 803 LIM
579 314 LIM
584 674 LIM
586 572 MP
703 634
LIM
844 955 FS
888 992
8 MP
512 077 MP
503 801 MP
524 471 MP
301 481 LIM
680 632
MP
777 442 MP
862 494
9 NC
165 631 NC
181 115 NC
213 280 NC
225 676 NC
263 591
NC
283 001 NC
296 985
φ
Notes: Preliminary Outcome
5
Revenue Issues
KwaZulu-Natal
• Transport
– Migration of motor vehicles (esp. heavy trucks) to cheaper provinces
– KZN’s tariffs are high hence the deliberate reduction in the inflation of
MVL fees to reduce leakages to other provinces
• Provincial Treasury
– The slow down economic activity is directly related to gaming and
betting activities
• Health
– Manual revenue collection system
– Backlogs in submission of accounts to RAF
• Economic Development, Tourism and Enviro. Affairs
– Delays in the implementation of new tariffs due to delays in
promulgating the KZN Liquor Licensing Act
6
Revenue - Recent
Developments/Initiatives
•
•
•
Casino and Horse racing taxes, with effect from April 2014, fall under
Provincial Treasury
Transport and Provincial Treasury are the two largest generators of
own revenue for the province
Development of Revenue Enhancement Strategy for Health
o
•
•
•
•
•
Incl. a revenue retention incentive for over-collections on patient fees
Revenue forums and bi-lateral meetings with departments to share
best practices
Health engaged a service provider to assist with submission of
accounts to the RAF
All departments are now charging for Tender Document fees
Closer collaborative efforts between PT and departments
Closer monitoring of staff debt growth
7
Expenditure - 2014/15 Preliminary Outcome
Table 2: Summary of Provincial expenditure analysis by Vote - 2014/15
R thousand
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Office of the Premier
Provincial Legislature
Agriculture and Rural Development
Economic Development, Tourism and Enviro. Affairs
Education
Provincial Treasury
Health
Human Settlements
Community Safety and Liaison
The Royal Household
Co-operative Gov. & Traditional Affairs
Transport
Social Development
Public Works
Arts and Culture
Sport & Recreation
Total
Preliminary
Actual
Adjusted
Appropriation
Virement Post
Adj. Est.
Final
Appropriation
Under/
(Over)
% spent
(1)
(2)
(3)
(4) = (2) + (3)
(5) = (4) - (1)
(1) / (2)
686 081
458 782
2 003 549
2 909 788
39 673 330
673 998
31 298 562
3 860 536
179 238
61 837
1 502 149
9 051 941
2 485 407
1 388 623
714 918
451 203
683 775
483 590
2 131 046
3 008 455
39 594 931
708 726
31 119 465
3 858 443
179 692
61 337
1 505 395
9 050 885
2 489 760
1 391 763
730 120
455 317
-
683 775
483 590
2 131 046
3 008 455
39 594 931
708 726
31 119 465
3 858 443
179 692
61 337
1 505 395
9 050 885
2 489 760
1 391 763
730 120
455 317
(2 306)
24 808
127 497
98 667
(78 399)
34 728
(179 097)
(2 093)
454
(500)
3 246
(1 056)
4 353
3 140
15 202
4 114
100.3
94.9
94.0
96.7
100.2
95.1
100.6
100.1
99.7
100.8
99.8
100.0
99.8
99.8
97.9
99.1
97 399 942
97 452 700
-
97 452 700
52 758
99.9
8
2014/15 Preliminary Outcome
•
•
•
As at the end of 14/15, the aggregated expenditure for the year amounts to R97.400bn,
compared to the Final Appropriation of R97.453bn, resulting in under-spending of
R52.758m or 0.1%
The Final Appropriation contains all additions to the budget which were formalised in
the 14/15 Adjustments Estimate, as well as the R236m additional funding for the HSDG
and other provincial allocations which were formalised in the Second Adjustments
Estimate, and the post-Adjustments Estimate virements undertaken thus far
However, Education did not include the additional funding of R355m in their preliminary
March IYM, which means that, if this is included, KZN is actually under-spent by
R407.758m
9
Table 3: Summary of conditional grants by Vote - 2014/15
R thousand
Agriculture and Rural Development
Comprehensive Agricultural Support Programme
Land Care grant
EPWP Integrated Grant for Provinces
Ilima/Letsema Projects grant
Economic Development, Tourism and Environmental Affairs
EPWP Integrated Grant for Provinces
Education
Education Infrastructure grant
HIV and AIDS (Life-Skills Education) grant
National School Nutrition Programme grant
FET College Sector grant
Technical Secondary Schools Recap. grant
Dinaledi Schools grant
EPWP Integrated Grant for Provinces
OSD for Education Therapists
Social Sector EPWP Incentive Grant for Provinces
Health
Comprehensive HIV and AIDS grant
Health Facility Revitalisation grant
Health Professions Training and Development grant
National Tertiary Services grant
National Health Insurance grant
EPWP Integrated Grant for Provinces
Social Sector EPWP Incentive Grant for Provinces
Human Settlements
Human Settlements Development grant
Community Safety and Liaison
Social Sector EPWP Incentive Grant for Provinces
Co-operative Governance and Traditional Affairs
EPWP Integrated Grant for Provinces
Transport
Provincial Roads Maintenance grant
Public Transport Operations grant
EPWP Integrated Grant for Provinces
Social Development
Social Sector EPWP Incentive Grant for Provinces
EPWP Integrated Grant for Provinces
Public Works
EPWP Integrated Grant for Provinces
Arts and Culture
Community Library Services grant
EPWP Integrated Grant for Provinces
Sport and Recreation
Mass Participation and Sport Development grant
EPWP Integrated Grant for Provinces
Social Sector EPWP Incentive Grant for Provinces
Total
Preliminary
Actual
Final
Appropriation
Under/
(Over)
% spent
(1)
(2)
(3) = (2) - (1)
(1) / (2)
319 760
212 632
10 854
4 181
92 093
13 120
13 120
319 760
212 632
10 854
4 181
92 093
16 827
16 827
3 707
3 707
100.0
100.0
100.0
100.0
100.0
78.0
78.0
3 200 609
1 385 781
83 651
1 253 920
355 330
53 649
21 953
2 937
41 581
1 807
6 380 773
3 206 610
1 362 572
291 241
1 497 952
17 237
2 581
2 580
3 510 523
3 510 523
2 565
2 565
3 471
3 471
2 832 553
1 788 158
984 952
59 443
5 746
3 746
2 000
3 167
3 167
110 657
108 555
2 102
93 608
83 448
2 102
8 058
3 193 492
1 385 781
81 547
1 253 300
351 475
52 833
21 458
2 937
41 581
2 580
6 434 734
3 257 992
1 362 469
292 837
1 496 427
19 848
2 581
2 580
3 509 045
3 509 045
2 580
2 580
3 471
3 471
2 752 384
1 788 158
904 783
59 443
5 746
3 746
2 000
3 168
3 168
124 856
122 754
2 102
95 595
85 435
2 102
8 058
(7 117)
(2 104)
(620)
(3 855)
(816)
(495)
773
53 961
51 382
(103)
1 596
(1 525)
2 611
(1 478)
(1 478)
15
15
(80 169)
(80 169)
1
1
14 199
14 199
1 987
1 987
-
100.2
100.0
102.6
100.0
101.1
101.5
102.3
100.0
100.0
70.0
99.2
98.4
100.0
99.5
100.1
86.8
100.0
100.0
100.0
100.0
99.4
99.4
100.0
100.0
102.9
100.0
108.9
100.0
100.0
100.0
100.0
100.0
100.0
88.6
88.4
100.0
97.9
97.7
100.0
100.0
16 476 552
16 461 658
(14 894)
10
100.1
Conditional Grants - 2014/15 Preliminary
Outcome
• Table 3 shows the Preliminary Actual expenditure incurred in 14/15 on national
conditional grants by department and grant
• It is noted that the Final Appropriation takes into account the increase of the
HSDG by R236m that was tabled and formalised in the Second Adjustments
Estimate (moved from Limpopo to various provinces)
• The conditional grant allocation was over-spent by R14.894m, with the main
contributor to this over-spending being Transport
• The spending at year-end is 100.1% of the annual conditional grant budget
11
Infrastructure - 2014/15 Preliminary
Outcome
Table 4 Summary of Infrastructure expenditure analysis by Vote - 2014/15
R thousand
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Office of the Premier
Provincial Legislature
Agriculture and Rural Development
Economic Development, Tourism and Enviro Affairs
Education
Provincial Treasury
Health
Human Settlements
Community Safety and Liaison
The Royal Household
Co-operative Governance & Trad. Affairs
Transport
Social Development
Public Works
Arts and Culture
Sport and Recreation
Total
Preliminary
Actual
23 358
6 382
209 013
540 775
2 216 919
31 665
1 654 385
184 389
10 114
55 892
6 510 012
137 005
108 631
60 864
62 392
Adjusted
Appropriation
17 097
4 685
127 686
540 747
1 862 349
31 883
1 632 855
108 720
8 863
85 152
6 552 451
135 133
109 168
70 257
58 378
Virement Post
Adj. Est.
11 811 796
11 345 424
115 549
(29 800)
126
-
Final
Appropriation
17 097
4 685
243 235
540 747
1 862 349
31 883
1 632 855
108 720
8 863
55 352
6 552 451
135 133
109 168
70 383
58 378
Under/
(Over)
(6 261)
(1 697)
34 222
(28)
(354 570)
218
(21 530)
(75 669)
(1 251)
(540)
42 439
(1 872)
537
9 519
(4 014)
85 875
11 431 299
(380 497)
%
Spent
136.6
136.2
85.9
100.0
119.0
99.3
101.3
169.6
114.1
101.0
99.4
101.4
99.5
86.5
106.9
103.3
12
2014/15 Preliminary Outcome
•
The table indicates actual infrastructure expenditure at 103.3% of the annual budget, showing
an over-spending of R380.497m. This amount is made up of various over- and under-spending
in departments, as indicated below:
– Education over-spent by R354.570m. The department stopped various infrastructure projects
as a result of the budget reprioritisation undertaken during the Adjustments Estimate.
However, the R860m budget reprioritisation undertaken in the Adjustments Estimate to ease
spending pressures against Compensation of employees included projects that were already
committed and contracted. As mentioned, the department was allocated an additional R355m
in the 14/15 Second Adjustments Estimate to assist with outstanding payments relating to
projects which were already committed and could therefore not be easily stopped. The
department did not include this amount in their budget column in the IYM. Once this
additional funding is taken into account, the department will reflect minor under-spending of
R430 000
– Health over-spent by R21.530m due to higher than anticipated maintenance and repair of
health facilities
– Human Settlements over-spent by R75.669m due to higher than anticipated spending on the
maintenance and repair of housing stock
13
Fiscal Sustainability
14
Analysis of spending from 2009/10 to
2014/15
Table 5 Summary of provincial expenditure vs budget by department: 2009/10 to 2014/15
2009/10
2010/11
R thousand
Actual
Budget
Over/ Under
Actual
Budget
2011/12
Over/
Under
Actual
Budget
2012/13
Over/
Under
Actual
Budget
2013/14
Over/
Under
Actual
Budget
2014/15
Over/
Under
Actual
Budget
Over/
Under
1. Office of the Premier
429 103
435 718
6 615
423 807
451 361
27 554
485 600
491 105
5 505
675 821
687 539
11 718
699 086
762 405
63 319
686 081
683 775
(2 306)
2. Provincial Legislature
288 238
309 896
21 658
310 909
345 161
34 252
380 588
401 373
20 785
431 718
431 042
(676)
450 119
454 820
4 701
458 782
483 590
24 808
3. DARD
1 970 012
1 999 301
29 289
2 045 856
2 228 840
182 984
2 475 378
2 481 989
6 611
2 849 212
2 854 220
5 008
2 810 376
2 850 023
39 647
2 003 549
2 131 046
127 497
4. DEDTEA
2 425 318
2 492 401
67 083
1 631 736
1 724 798
93 062
1 534 144
1 577 558
43 414
1 685 848
1 789 685
103 837
2 515 207
2 514 971
(236) 2 909 788
3 008 455
98 667
9 616 39 673 330 39 594 931
(78 399)
5. Education
26 230 746 26 058 854
6. Provincial Treasury
7. Health
8. Human Settlements
613 902
523 449
20 349 276 18 329 163
(171 892) 28 760 756 29 570 060
(90 453)
388 936
692 500
809 304 33 799 217 33 227 001
(572 216) 35 588 285 35 672 863
84 578 37 587 146 37 596 762
303 564
119 699
94 895
390 325
510 024
(2 020 113) 20 678 687 22 120 186 1 441 499 24 791 118 24 669 096
518 340
613 235
(122 022) 27 390 532 27 290 930
577 541
653 971
(99 602) 29 531 410 29 219 210
76 430
673 998
708 726
34 728
(312 200) 31 298 562 31 119 465
(179 097)
2 492 647
2 573 713
81 066
3 089 237
3 112 556
23 319
3 042 495
3 084 991
42 496
3 377 771
3 377 820
49
3 617 002
3 648 370
31 368
3 860 536
3 858 443
(2 093)
125 272
127 638
2 366
129 186
140 744
11 558
145 239
150 139
4 900
135 892
161 334
25 442
171 922
175 847
3 925
179 238
179 692
454
9. Comm Safety & Liaison
10. The Royal Household
40 407
40 643
236
50 364
47 149
(3 215)
59 409
60 643
1 234
61 367
65 361
3 994
67 896
68 746
850
61 837
61 337
(500)
11. COGTA
1 023 420
1 093 918
70 498
1 052 179
1 061 903
9 724
1 106 349
1 155 995
49 646
1 314 550
1 316 127
1 577
1 242 496
1 246 342
3 846
1 502 149
1 505 395
3 246
12. Transport
5 164 996
5 231 798
66 802
5 958 923
5 952 652
(6 271) 6 639 855
6 628 044
(11 811) 7 650 308
7 643 794
(6 514) 8 055 187
8 046 081
(9 106) 9 051 941
9 050 885
(1 056)
13. Social Development
1 361 280
1 361 280
-
1 438 163
1 668 182
230 019
1 934 257
1 952 956
18 699
1 985 386
2 062 167
76 781
2 329 906
2 315 947
(13 959) 2 485 407
2 489 760
4 353
14. Public Works
796 169
798 625
2 456
1 114 209
1 333 583
219 374
1 182 268
1 212 970
30 702
1 133 311
1 352 388
219 077
1 270 253
1 313 731
43 478
1 388 623
1 391 763
3 140
15. Arts and Culture
259 157
267 323
8 166
349 369
364 922
15 553
369 752
369 818
66
479 744
479 857
113
698 686
691 026
(7 660)
714 918
730 120
15 202
16. Sport and Recreation
239 342
266 187
26 845
276 740
311 065
34 325
307 836
358 333
50 497
364 151
384 163
20 012
406 268
407 297
1 029
451 203
455 317
4 114
(64 952) 97 399 942 97 452 700
52 758
Total
63 809 285 61 909 907
Percentage over/ under-spent
(1 899 378) 67 699 057 71 125 662 3 426 605 78 643 830 78 332 035
-3.07%
4.82%
(311 795) 85 642 236 86 182 525
-0.40%
540 289 92 030 501 91 965 549
0.63%
-0.07%
0.05%
2014/15 information is as per March Preliminary IYM
15
Analysis of spending from 2009/10 to
2014/15
•
•
•
•
•
Cost-cutting has been in place in KZN since 2009/10 when the Provincial Recovery Plan
was first implemented as the province was projecting over-expenditure of some R5.6bn in
that year
Since 11/12, KZN has had a less than 1% variance in terms of provincial over- or underspending
Province has remained cash positive since May 2010
Figure 1 shows the provincial cash position since March 2007 and up to December 2014. It
also shows the year that cost-cutting started
KZN reports on its spending trends to the Provincial Executive Council on a monthly basis
– Allows for immediate corrective action to be undertaken if there is projected over-expenditure
•
KZN also reports mid-year and close-out spending to the provincial Finance Portfolio
Committee
– Good team work exists in terms of oversight between Provincial Legislature and PT
•
Have formal bilaterals with all departments 3 times a year to look at budget and spending
– Informal engagements on a nearly daily basis
16
Effectiveness of cost-cutting
C
o
s
tc
u
tt
i
n
g
17
Effectiveness of cost-cutting
•
•
•
•
•
•
As can be seen in the graph, KZN was in overdraft from about March 2008, with the
overdraft reaching concerning levels from December 2008
The Provincial Recovery Plan was implemented from October 2009, and this included the
implementation of a number of cost-cutting measures
These cost-cutting measures are reviewed annually to see if they are still applicable or to
see if they can be strengthened
Cost-cutting remains in place in KZN for the foreseeable future and are viewed as
elements of good governance rather than a once-off initiative to contain costs
KZN turned the corner very quickly when it comes to repaying the overdraft with the
province being in the black since May 2010
KZN Treasury has recently undertaken an assessment on just 4 of the spending items that
were targeted for cost-cutting, and these include catering, leave gratuities and travel
claims. The aggregate savings over the period under review (i.e. from 09/10 to the end of
14/15) was in the region of R2bn
18
Fiscal Position
Table 6 Equitable share allocation cuts - 2013/14 MTEF
1. Census data cuts
2. Provision to buffer the impact of the 2011 Census
3. KZN's baseline reductions after buffer
4. 1%, 2% and 3% cuts
5. Total equitable share reductions
2013/14
(1 123 908)
289 915
(833 993)
(170 703)
(1 004 696)
2014/15
(2 387 435)
656 600
(1 730 835)
(358 424)
(2 089 259)
2015/16
(3 260 935)
1 224 143
(2 036 792)
(554 928)
(2 591 720)
• This table is included as a reminder of the amounts KZN lost when the 2011 Census was
used to update the ES formula and when NT imposed 1, 2 and 3% cuts to lower the
expenditure ceiling
• Was dealt with by cutting all departments’ budgets proportionately
• This comes after all departments’ Goods and services budgets were cut by 7.5%, as part
of the Provincial Recovery Plan (from 09/10)
19
Fiscal Position
Table 7 KwaZulu-Natal: Revisions to the Provincial Equitable Share (PES) - 2015/16 MTEF
R thousand
Provincial Equitable Share (PES)
Adjustments to baseline due to new data updates in PES formula (phased-in)
Provision for 2011 Census impact to losing provinces
Adjustments to baseline due to function shifts to the National Department of Higher Education & Training
Programme 1: Administration (3.2% of CoE and 5% of that CoE to get G&S)
Programme 6: Adult Basic Education and Training
Programme 9: Auxiliary and Associates Services (payments to SETA -1% of function shift CoE)
Programme 9: Auxiliary and Associated Services (external examinations share of 3.9%)
Adjustments to baseline due to function shifts to the National Department of Health
Port Health Services
National Health Laboratory Services (NHLS)
Reduction to the PES due to fiscal consolidation cuts
Total PES for 2015/16 MTEF
Variance 2015/16 MTEF vs 2014/15 MTEF
2015/16
83 347 554
(159 360)
(280 136)
(66 081)
(187 232)
(9 728)
(17 095)
(92 387)
(20 379)
(72 008)
(561 725)
82 253 946
(1 093 608)
2015/16 MTEF
2016/17
87 887 479
(87 769)
321 958
(295 547)
(70 120)
(197 155)
(10 254)
(18 018)
(96 885)
(21 459)
(75 426)
(843 789)
86 885 446
(1 002 034)
2017/18
92 113 167
(271 402)
(310 123)
(73 482)
(207 013)
(10 746)
(18 882)
(101 663)
(22 597)
(79 066)
–
91 429 978
(683 189)
Total Revisions
263 348 200
(518 532)
321 958
(885 806)
(209 683)
(591 400)
(30 728)
(53 995)
(290 935)
(64 435)
(226 500)
(1 405 515)
260 569 370
(2 778 830)
20
Fiscal Position
• Table 7 shows changes to KZN’s allocation over the 15/16 MTEF made by NT:
– Phasing in of the data that informs the ES formula results in a decrease over the
MTEF of R159.360m, R87.769m and R271.402m
– Buffer funding was supposed to fall away in 16/17. NT has agreed to leave this for a
further year due to fiscal consolidation cuts and R321.958m is given in 16/17
– Various function shifts in Education result in R280.136m, R295.547m and
R310.123m being moved from the provincial to the national sphere
– Various function shifts in Health result in R92.387m, R96.885m and R101.663m
being moved from the provincial to the national sphere
– Fiscal consolidation cuts result in KZN’s ES being cut by R561.725m in 15/16 and
R843.789m in 16/17
– Unlike other years, NO ADDITIONAL funding was given by NT
21
Fiscal Position
• The fiscal consolidation cuts and data updates to the ES budget reductions are,
once again, quite significant for KZN
• Considering that significant cuts had already been effected against all
departments’ budgets in 09/10 during provincial recovery plan period, and
again when the Census data cuts were implemented in 13/14, it was felt that
the departments would be unable to cope with another major cut
• Had to think differently in terms of funding this cut
• Besides this, it was felt that, despite NT not funding any portion of the 2014
wage agreement shortfall, Education and Health should at least receive a
portion of the carry-through costs of the 2014 wage agreement (funded from
the provincial fiscus)
• Provincial fiscus therefore provides 40% of the required amount to these 2
depts, with the balance having to be sourced from within their baselines
• As NT was not funding this, the 40% also had to be sourced from within the
22
provincial budget
Fiscal Position
• Some tough choices had to be made, but this is a natural consequence of a
period of fiscal consolidation. The following were then identified as areas
where KZN sourced the required funding to cover these shortfalls:
– The Strategic Cabinet Initiatives fund of R100m per annum was put on hold during
this period of fiscal consolidation
– The government office precinct project for which R600m had been allocated, was
put on hold during this period of fiscal consolidation
– KZN has continued to budget for a Contingency Reserve, with this being set at just
above R1bn per annum over the 14/15 MTEF. This Contingency Reserve is now
capped at R750m per annum over the 15/16 MTEF, and this released some funding
to finance the budget cuts
– R240m is carried forward from the 14/15 Net Financial Position to fund parts of the
15/16 MTEF equitable share reductions
• This financing plan therefore meant that none of the dept’s equitable share
budgets were cut and service delivery spending was protected
23
Provincial Fiscal Framework
Table 8 Summary of provincial fiscal framework
R thousand
1. Receipts
Baseline Allocation
Transfer receipts from national
Equitable share
Conditional grants
Provincial own receipts
Increase / (Decrease) in allocation
Transfer receipts from national
Equitable share
Conditional grants
Provincial own receipts
Revised allocation
Transfer receipts from national
Equitable share (after update of formula data & fiscal consolidation cuts)
Conditional grants
Provincial own receipts
Provincial cash resources
2. Planned spending by departments
3. Contingency Reserve
2015/16
2016/17
2017/18
103 665 526
100 671 247
83 347 554
17 323 693
2 994 279
(1 535 759)
(1 536 626)
(1 093 608)
(443 018)
867
102 711 237
99 134 621
82 253 946
16 880 675
2 995 146
581 470
101 961 237
106 474 835
103 286 051
87 887 479
15 398 572
3 188 784
984 043
983 471
(1 002 033)
1 985 504
572
107 632 456
104 269 522
86 885 446
17 384 076
3 189 356
173 578
106 882 456
110 859 962
107 511 739
92 113 167
15 398 572
3 348 223
2 629 921
2 635 771
(683 189)
3 318 960
(5 850)
113 523 383
110 147 510
91 429 978
18 717 532
3 342 373
33 500
112 773 383
750 000
750 000
750 000
24
Provincial Fiscal Framework
•
Table 8 shows KZN’s fiscal framework, taking into account the baseline cuts, function
shifts, changes to conditional grants, own revenue updates and the provincial cash
resources used to fund various provincial priorities
•
Line 1 shows:
– ES decreases in 15/16 by R1.094bn, R1.002bn in 16/17 and R683.189m in 17/18. This is the
effect of the period of fiscal consolidation, due to the decrease in the PES, as well as various
function shifts including, among others, Port Health (to NDOH), FET and AET functions (to
DHET) and aspects of the NHLS costs (to NDOH)
– There are a number of changes to the CG over the 15/16 MTEF, with these decreasing by
R443.018m in 15/16, but increasing by R1.986bn in 16/17 and R3.319bn in 17/18
– Minor revision to provincial own receipts with an increase of R867 000 in 15/16 and R572 000
in 16/17 and a decrease of R5.850m in 17/18
– Provincial cash resources indicates the amounts the province allocated to various priorities,
but with these funded through previous years’ Net Financial Position calculations
•
Line 2 shows that depts are planning on spending R101.961bn, R106.882bn and
R112.773bn over the MTEF
•
Line 3 shows that KZN is budgeting for a Contingency Reserve of R750m per annum over
the MTEF
25
Provincial Fiscal Framework
• The Contingency Reserve is being kept for a number of reasons:
– The outcome of the 2015 wage negotiations were not known when the
2015/16 MTEF was tabled. If NT does not fund any portion of this, the province
will have to fund this from within its baseline
– The negotiations regarding the amount that the province owes to NHLS are still
ongoing. This debt could place a significant demand on the provincial fiscus
– It is therefore prudent to keep a Contingency Reserve that will act as a buffer in
the event that these potential cost pressures become reality
26
Provincial Fiscal Framework
• As mentioned, KZN’s conditional grant allocations are also being affected by the
fiscal consolidation
• National Treasury indicated that all provincial conditional grants will be reduced
by the same proportion, with the exception of a few grants that are linked to
essential service delivery programmes or are smaller grants that fund important
operational expenditure
– The baselines of the Comprehensive HIV and AIDS grant and the NSNP grant were protected
from the cut
– The Further Education and Training (FET) Colleges grant and the Occupational Specific
Dispensation (OSD) for Education Sector Therapists grant were also protected from the cut
• Budgets of KZN’s departments are presented in the next slide
• Despite various cuts, there is still growth in departments’ budgets
27
Provincial Budget – 2015/16 MTEF
Table 9 Summary of provincial payments and estimates by vote
R thousand
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Office of the Premier
Provincial Legislature
Agriculture and Rural Development
Economic Development, Tourism and Enviro Affairs
Education
Provincial Treasury
Health
Human Settlements
Community Safety and Liaison
The Royal Household (moved to OTP)
Co-operative Governance and Traditional Affairs
Transport
Social Development
Public Works
Arts and Culture
Sport and Recreation
Total
Audited Outcome
2011/12
2012/13
2013/14
524 129
697 795
721 074
380 588
431 718
460 929
1 782 966 2 109 591 2 005 528
2 226 580 2 421 869 3 311 354
32 809 703 34 556 731 37 156 042
411 205
557 733
623 448
24 791 118 27 390 533 29 531 410
3 042 495 3 377 771 3 617 002
145 239
135 892
171 922
1 106 349 1 314 550 1 242 496
6 639 855 7 650 308 8 055 187
1 934 257 1 985 386 2 329 906
1 182 268 1 133 311 1 270 253
369 752
479 744
698 686
307 836
367 751
414 968
77 654 340 84 610 682 91 610 205
Main
Adjusted
Revised
Appropriation Appropriation Estimate
2014/15
751 370
745 112
745 112
491 186
483 590
483 590
2 133 126
2 169 946 2 169 946
2 883 969
3 013 455 3 013 455
38 918 092
39 066 103 39 092 741
878 315
708 472
667 134
30 914 196
31 119 465 30 919 465
3 600 282
3 622 443 3 622 443
181 295
179 692
179 692
1 348 076
1 486 694 1 486 694
9 060 595
9 050 885 9 050 885
2 497 952
2 489 760 2 489 760
1 369 361
1 391 763 1 392 088
705 112
730 120
730 120
456 379
455 571
455 571
96 189 306
Medium-term Estimates
2015/16
743 214
465 494
2 203 074
2 973 459
42 142 355
712 151
32 981 786
3 584 685
187 069
1 368 043
9 341 457
2 630 481
1 389 666
783 914
454 389
2016/17
746 934
480 352
2 290 677
3 080 528
44 210 091
707 768
34 741 665
3 776 080
198 470
1 436 920
9 735 659
2 767 560
1 449 782
819 399
440 571
2017/18
784 281
504 370
2 409 455
3 219 734
46 488 066
708 506
36 873 548
4 011 284
200 285
1 508 766
10 274 611
2 905 938
1 526 583
894 444
463 512
96 713 071 96 498 696 101 961 237 106 882 456 112 773 383
28
Macroeconomic Framework
29
Macroeconomic Scene
Nationally
• Eskom capacity constraints
• Poor economic growth outlook
– Lower taxes (PIT, VAT and CIT)
• Recently ended mining strike in the platinum belt
– Lower corporate and income taxes
• SA downgraded to one level above junk status
– Increased borrowing costs
– Less FDI, lower employment potential
• Exponential growth in COE
– Crowding out of service delivery
• 2011 Census data of Provincial Equitable Share
30
Population
distribution in
KZN
Darker shaded
= bigger
population
•
•
•
•
In 2011 when the Census was undertaken, KZN was
proportionately less populous when calculated as a % of the
national population. Of significance is that we did not have
fewer people living in KZN, but that our proportion of the
national total had dropped – resulted in cuts in our ES. Therefore
have less money, but our service delivery needs have not
decreased
In terms of the change in the Age Cohort, there has been a
significant increase in the no. of males between the ages of 2029, a smaller increase in this age cohort in females. There has
also been a decline in males and females in the 0-19 age cohort,
while there is growth in the 60-80+ age cohort
Urbanisation continues with more than 50% of the KZN
province expected to live in urban areas by 2024
The unemployment rate (expanded definition) has increased
from 38.53% in Q2 of 2011, to 40.42% in Q1 of 2015
Gross Domestic Product
Sector Performance
Primary Industries
Agriculture, forestry and
fishing
Mining and quarrying
Secondary Industries
Manufacturing
Electricity, gas and water
Construction
Tertiary industries
Wholesale & retail trade;
hotels & restaurants
Transport , storage and
communication
Finance, real estate and
business services
Personal services
General government services
GDPR at constant 2005
prices (non-seasonal
adjusted annualized)
GDPR at constant 2005
prices (seasonal adjusted
annualized)
2014q1
-1.67
2014q2
5.09
2014q3
7.93
2014q4
2.06
2015q1
6.50
-1.97
6.72
12.21
4.49
6.47
-1.00
-0.54
-2.39
-1.37
6.58
2.20
1.99
1.11
3.57
2.36
-0.52
-1.39
-0.76
3.18
2.09
0.30
-0.16
-1.23
3.14
2.23
0.83
0.39
-0.36
3.31
1.89
0.87
0.56
0.30
2.35
1.89
1.38
0.43
1.14
0.61
0.59
2.01
2.69
2.51
2.85
2.69
2.90
2.14
2.33
2.16
2.87
1.87
3.14
1.49
3.38
1.58
3.19
1.35
2.45
1.21
1.63
2.07
1.57
2.06
1.61
1.95
2.35
1.43
1.87
1.66
1.76
Economic Performance
% change
Main and sub indices of Kwazulu-Natal Barometer
Agriculture Index
Mining Index
Manufacturing Index
Electricity Index
Construction Index
Transport Index
Trade Index
Government
Finance, Real Estate and Business Services Index
Kwa-Zulu Natal Growth Index
Kwa-Zulu Natal Stress Index
Kwa-Zulu Natal Barometer
•
•
•
•
•
•
•
•
•
•
% Change on a
year ago
-2.8%
1.6%
-0.7%
-2.4%
-3.4%
18.2%
2.1%
6.0%
9.6%
5.3%
4.4%
0.9%
% Change on a % Change on a on 3 years
month ago
Quarter ago
ago
-0.2%
-1.1%
-3.3%
-1.4%
-1.8%
0.7%
-1.4%
-0.4%
2.0%
-5.9%
3.1%
-3.8%
-5.4%
-7.7%
-16.9%
-5.4%
-7.3%
29.0%
-0.5%
2.0%
8.2%
-0.8%
4.8%
7.2%
1.6%
6.3%
11.3%
-1.5%
0.4%
8.6%
-1.2%
-3.6%
7.7%
-0.3%
4.2%
0.8%
Growth positive short-term
Government spending booms
Agriculture on downward slope
Mining slowing down
Manufacturing declined
Electricity down
Construction’s outlook bleak
Transport and communication does not disappoint
Lower business confidence hampers Trade index growth
Finance, real estate and business services boosted by property market
Main and sub indices of the KwaZulu
Investment Monitor
% Change from a
% Change on a year ago
quarter ago
Transport Equipment
16.3%
0.5%
Buildings
3.5%
14.1%
Civil Construction
-0.6%
7.4%
Machinery
0.4%
7.7%
ICT Equipment
1.3%
6.2%
Transfers
10.7%
6.1%
Total Investment Index
2.7%
6.8%
•
•
•
•
•
•
Transport equipment boosted by local projects
Building investment supported by non-residential and commercial buildings
Civil construction down
Transfers investment surprises with double-digit growth
Machinery investment looking up
ICT equipment investment growth slowing down
Gini coefficient
KwaZulu-Natal, Total
0.68
0.66
0.64
0.62
0.60
0.58
0.56
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Summary of KZN’s economic outlook
• The economic outlook for KZN is somewhat less optimistic than last year and earlier
(January 2015) expectations, despite the lower oil price, which has already and will
continue to put pressure on inflation which in turn will keep interest rates lower for longer
• The lower oil price has also, to some degree, improved the current depressed levels of
consumer confidence and has given consumers some debt breathing space
• The weaker exchange rate and moderate improvement in global economic conditions
should also support the KZN manufacturing and transport sectors
• Unfortunately, continued electricity constraints, labour concerns, logistical bottlenecks,
digital un-competitiveness and economic policy divide will hamper the growth prospects
for 2015
• Provincial economic growth is therefore estimated at 1.8 per cent for 2015 compared to
2.1 per cent estimated in January 2015
Provincial Growth and
Development Strategy and
Plan
(and Poverty Eradication
Master Plan)
39
Macro Policy Focus on Eradication of
Poverty firmly embedded in the
National Development Plan and the
2014- 19 MTSF
Working Together For A Secure and Prosperous Future.
40
Six pillars of the National Development Plan
The objectives of the plan are the elimination of poverty and the
reduction of inequality through:
 Uniting South Africans of all races and classes around a common programme
to eliminate poverty and reduce inequality;
 Encouraging citizens to be active in their own development, in strengthening
democracy and in holding their government accountable;
 Raising economic growth, promoting exports and making the economy more
labour absorbing;
 Focusing on key capabilities of both people and the country with focus on
skills, infrastructure, social security, strong institutions and partnerships both
within the country and with key international partners;
 Building a capable and developmental state; and
 Strong leadership throughout society that work together to solve our problems
Providing leadership towards achieving KZN Vision 2030.
41
14 MTSF Outcomes as implementation
framework of the NDP:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Education
Health
MTSF
2019
Safety
MTSF
Employment
2014
Skilled work force
Economic infrastructure
Rural development
Human settlements
Developmental local government
Environmental assets and natural resources
Better South Africa
Development oriented public service
Social protection
Transforming society and uniting the country
MTSF
2024
Working Together For A Secure and Prosperous Future.
2030
Vision
42
Macro Policy Focus on Eradication of
Poverty firmly embedded in the
Provincial Growth and Development
Strategy and Plan
Working Together For A Secure and Prosperous Future.
43
NDP/ MTSF / PGDP Alignment and
positioning of OSS
1
4
M
T
S
F
O
U
T
C
O
M
E
S
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Education
Health
Safety
Employment
Skilled work force
Economic infrastructure
Rural development
Human settlements
Developmental local
government
Environmental assets
and natural resources
Better South Africa
Development oriented
public service
Social protection
Transforming society
and uniting the country
1. Job creation
7
2. Human
resource
development
P
G 3. Human and
community
D
development
P
G
O
A
L
S
3
0
P
G
D
P
O
B
4. Strategic
infrastructure J
E
5. Environmental C
sustainability T
I
6. Policy and
V
governance
E
7. Spatial equity S
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Unleashing the Agricultural Sector
Industrial Development through Trade,
Investment & Exports
Government-led job creation
SMME, Entrepreneurial and Youth
Development
Enhance the Knowledge Economy
Early Childhood Development, Primary
and Secondary Education
Skills alignment to Economic Growth
Youth Skills Dev & Life-Long Learning
Poverty Alleviation & Social Welfare
Health of Communities and Citizens
Sustainable Household Food Security
Promote Sustainable Human Settlement
Enhance Safety & Security
Advance Social Capital
Development of Harbours
Development of Ports
Development of Road & Rail Networks
Development of ICT Infrastructure
Improve Water Resource Management
Develop Energy Production and Supply
Productive Use of Land
Alternative Energy Generation
Manage pressures on Biodiversity
Adaptation to Climate Change
Policy and Strategy Co-ordination & IGR
Building Government Capacity
Eradicating Fraud & Corruption
Participative Governance
Promoting Spatial Concentration
Integrated Land Man & Spatial Planning
44
Alignment of Strategic Plans
WARD BASED
PLANS
45
STRATEGIC
GOALS
1
2
KZN PGDS
STRATEGIC FRAMEWORK
JOB CREATION
HUMAN RESOURCE
DEVELOPMENT
3
HUMAN &
COMMUNITY DEVELOPMENT
7
4
STRATEGIC
INFRASTRUCTURE
5
ENVIRONMENTAL
SUSTAINABILITY
6
GOVERNANCE AND
POLICY
7
SPATIAL EQUITY
Aspire to …
• Gateway
• Human & Natural Resources
• Safe, Healthy & Sustainable
Living Environments
• Healthy Educated
Communities
• employable people are
employed
• Equitable society
• Basic Services
• More equitable Society
• World Class Infrastructure
• Investors Confidence
• Skilled Labour Force
• Focus on People centredness.
• Strong & Decisive Leadership
• Foster Social Compacts
Vision
2030
1.
2.
3.
4.
5.
STRATEGIC
OBJECTIVES
Unleashing the Agricultural Sector
Enhance Industrial Development through Trade, Investment
& Exports
Expansion of Government-led job creation programmes
Promoting SMME, Entrepreneurial and Youth Development
Enhance the Knowledge Economy
6. Early Childhood Development, Primary and Secondary
Education
7. Skills alignment to Economic Growth
8. Youth Skills Development & Life-Long Learning
9.
10.
11.
12.
13.
14.
Poverty Alleviation & Social Welfare
Enhancing Health of Communities and Citizens
Enhance Sustainable Household Food Security
Promote Sustainable Human Settlements
Enhance Safety & Security
Advance Social Capital
30
15. Development of Harbours
16. Development of Ports
17. Development of Road & Rail Networks
18. Development of ICT Infrastructure
19. Improve Water Resource Management & Supply
20. Develop Energy Production and Supply
21.
22.
23.
24.
Increase Productive Use of Land
Advance Alternative Energy Generation
Manage pressures on Biodiversity
Adaptation to Climate Change
25.
26.
27.
28.
Strengthen Policy and Strategy Co-ordination & IGR
Building Government Capacity
Eradicating Fraud & Corruption
Promote Participative, Facilitative & Accountable
Governance
29. Actively Promoting Spatial Concentration
30. Facilitate Integrated Land Management & Spatial
Planning
46
46
Poverty Eradication Master Plan
prepared through an Operation
Phakisa Labs approach, adopted by
the Provincial Executive Council and
now ready for
IMPLEMENTATION
Working Together For A Secure and Prosperous Future.
47
PEMP 5 Pillars and 29 Game Changers
Working Together For A Secure and Prosperous Future.
48
PGDP
STRATEGIC
GOALS
1
2
JOB CREATION
Poverty Eradication
Game Changers
Aspire to …
Game Changer 1
Social Protection
HUMAN RESOURCE
DEVELOPMENT
Game Changer 2
Agriculture Deepened
3
HUMAN &
COMMUNITY DEVELOPMENT
STRATEGIC
INFRASTRUCTURE
5
ENVIRONMENTAL
SUSTAINABILITY
6
GOVERNANCE AND
POLICY
7
5
7
4
SPATIAL EQUITY
Game Changer 3
Enterprise Development
Game Changer 4
Employment Creation
Vision
2030
Game Changer 5
Skills Development
49
49
PEMP 5 Pillars and 29 Game Changers
AWG
10
AWG
6
AWG
8
AWG
8
AWG
1
AWG
1
AWG
8
AWG
12 + 14
AWG
12 +14
AWG
3
AWG
1
AWG
1
AWG
1
AWG
8
AWG
6
AWG
7
AWG
1
AWG
1
AWG
8
AWG
16
AWG
2
AWG
2
AWG
15
AWG
4
AWG
2
AWG
7
AWG
7
AWG
2
Working Together For A Secure and Prosperous Future.
AWG
7
50
Institutional Framework and
Structure for implementing the
Poverty Eradication Master Plan
Working Together For A Secure and Prosperous Future.
51
The PGDP Institutional Structure
PROVINCIAL EXECUTIVE
COUNCIL
SPCHD
CLUSTER
ESID
CLUSTER
OSS OSS
OSS
OSS
OSS
A A A A A
A A A A A
WWWW W
WWWWW
G G G G G
G G G G G
1 2 3 4 5
1 1 1 1 1
2 3 4 5 6
OSS
OSS
OSS
A A
A A A
WW
WWW
G G
G G G
G&A
CLUSTER
OSS
OSS
OSS
A A
W W
G G
1 1
1 1
7 8
0 1
POVERTY ERADICATION
6 7 8
OSS
JCPS
CLUSTER
OSS
OSS
OSS
A
W
G
9
Working Together For A Secure and Prosperous Future.
52
Implementation Approach
1. TARGET:
 most deprived households
 in most deprived wards
 in most deprived municipalities
2. WHERE IS THIS:
 KZN has 3.2 million households living in conditions of extreme poverty
 The majority of these households live in the now identified 169 poorest
wards
 Most of these wards are located in the 5 local municipalities ranked as the
poorest in the province, namely Msinga, Umhlabuyalingana, Maphumulo,
Vulamehlo and Nkandla
Providing leadership towards achieving KZN Vision 2030.
53
Implementation Approach
3. TARGETED APPROACH IMPLIES THAT WE NEED TO:
 Focus in Phase 1 on the 5 most deprived municipalities in KZN
 In Phase 2, move to the five most deprived wards in each district
 In Phase 3, expand to all 169 poorest wards in KZN
 In Phase 4, deal with the rest
Providing leadership towards achieving KZN Vision 2030.
54
WHAT DO WE DO WHEN WE GET THERE
HH Profiling
and
Community
profiling
Provision of
Comprehensive
Services
Monitoring &
Evaluation
Provision of Immediate
Services
Identification of
individuals and
households
•
•
HH with
Malnutrition
cases
mod/sever
Income <
R443 per
Capita/No
food/
• Departments
• Municipalities
• Civil Society
and
• Private sector
• The provision
of the social
relief package.
• Profiling
forms issued
with tracking
register
• Referral
Register
• Community
profile for
resources/pro
jects/capabili
ties
• Development
of the
appropriate
package
• Pillar 1: Social
Protection
• Pillar
2:Agriculture
• Pillar
3:Enterprise
Development
• Pillar4:
Employment
Creation
• Pillar 5: Skills
Development
• Baseline
• Monitoring of
service delivery
• Documenting of
cases exiting from
poverty
• Cyclical challenges
• HH is more
resilient
• Reduced
vulnerability
• Behaviour change
has commenced
• Moving towards
independence
• Community project
sustenance
through
community based
plans/IDP
Providing leadership towards achieving KZN Vision 2030.
55
Thank You
56