Statistics South Africa, the Department of Arts and Culture, and the Department of Trade and Industry, made submissions, the purpose of which was to determine whether the adjustments sought, were justified.
Statistics SA said several of its proposals were linked to the forthcoming national census, with expenditure peaking at over R2 billion next year. Underspending was largely due to lower than forecast tender prices, while the shifting of funds was to cater for the decentralising of the Dwelling Frame Unit project on the one hand, and the centralising of IT software purchases on the other.
The Department of Arts and Culture was seeking roll-overs resulting from under-expenditure on World Cup projects and the moratorium imposed on the Cultural Development and International Cooperation programmes while irregularities were being investigated. Virements and shifts totalling R58m were mainly due to misallocations.
The Department of Trade and Industry said that while it had a good track record of spending its budget, a number of challenges had led to the current under-expenditure, among which were the Automotive Investment Scheme (AIS), the Film Incentive Scheme, the overall impact of the economic recession, and its
17,9% vacancy rate. The Department’s message to the business community was that it would be very short-sighted to allow the current economic situation to lead to lower investment. In the global context,
The Chairperson opened the meeting by saying its purpose was to determine whether the adjustments sought by the Departments attending the hearing, were justified. He said the Committee needed to be convinced that roll-overs were acceptable if a budget had been underspent, for instance, or whether there were sound reasons for the shifting of funds from one area of the budget to another. Frequent changes cast doubt on the credibility of budgets, and the care with which they had been established in the first place, and the Committee intended applying stricter control.
Statistics South Africa submission
Mr Pali Lehohla, Statistician-General, said the Department had spent R783,4m by the end of September 2010, of which R600m was for Departmental expenses, while the balance of R183,4m was earmarked for the forthcoming national census. An amount of R723m remained for projected spending until the end of the year, while a further R715m remained for the census. He pointed out that the census was a R3 billion project in total, and that the money required for the next five months would be spent. The project would reach a peak during the next financial year, when expenditure would be over R2 billion.
The Chairperson said that the Department’s strategic plan should have been the basis on which the census budget was formulated. The fact that the Department was now proposing roll-overs and the shifting of resources would suggest poor planning. He also criticised the lack of information to justify the R200m for the acquisition of processing infrastructure and materials in the census fund.
Mr M Swart (DA) said that rather than putting expenses into a budget and not spending them, they should be deferred to the following year’s budget.
Mr Lehohla said one of the reasons the Department had underspent was because tendered prices had come in much lower than had been forecast. It was therefore considered prudent to roll over these excess funds in order to help finance next year’s higher census costs. As far as the shifting of funds was concerned, there were two main areas. The first involved the Dwelling Frame Project, where R300m had been spent to date, but which now needed to be handled on a de-centralised provincial basis, rather than directly from Pretoria. The other related to the need to centralise IT software purchases.
The Chairperson urged the Department to look carefully at the issues of planning and capacity-building, which the Committee would monitor closely in future, and wished them success with the census.
Arts and Culture submission
Ms Veliswa Baduza, Acting Director-General, said her Department was seeking an adjustment of R34,525m to the main appropriation of R2 406,7m, comprising R30,625m in roll-overs and R3,9m for salary increases. The roll-overs had resulted from an under-expenditure of R12m on World Cup projects, while a further R18,625m was unspent as a result of the moratorium imposed on the Cultural Development and International Cooperation programmes while irregularities were being investigated. The R12m would be used to supplement the budget for operational costs such as legal services, machine rentals, audit fees and State Information Technology Agency (SITA) accounts, as there were insufficient funds in the administration budget. The R18,625m would be used to subsidise the 2009-10 Investing in Culture second payments of various projects.
Virements and shifts had resulted in R58,267m being allocated to Goods and Services, of which R10m had been moved from the capital works budget for Heritage Promotion, to the office accommodation budget, and the balance of R48,267m had been shifted from Households to Goods and Services to cater for various projects such as Heritage Day, Freedom Day and Women’s Day, which had been wrongly allocated. A further R100m had been shifted from Heritage Promotion to Arts and Culture in Society, to cover repair and maintenance projects at the six playhouses (theatres) subsidised by the Department.
Ms Baduza admitted that some of these adjustments were the result of poor budgeting, but said this was a “cleaning up” process which she hoped would not be repeated in the future.
Mr Swart asked what had been envisaged when an amount of R423m was budgeted for capital works in the Heritage Promotion programme.
Ms Baduza said museums and historical buildings were public entities that were run independently, but the buildings belonged to the government. Any repair or maintenance project costing more than R30 000 had to be paid for by the Department.
Mr Swart queried whether the transfer of R10m from a capital budget in order to pay accommodation leases, contravened regulations.
Ms Baduza said the contravention could be condoned, with the approval of National Treasury.
Ms R Mashigo (ANC) asked what had happened to the Library Project, which was intended to enhance literacy, particularly in poorer and rural areas.
Ms Baduza said the Department was pursuing a two-pronged approach – ensuring that existing facilities remained well equipped on the one hand, and establishing new libraries on the other. There was a long list of libraries being developed in all of the provinces.
Mr L Ramatlakane (COPE) said he was concerned at the extent of wrong allocations.
Ms Baduza replied that these were “teething problems” which were being addressed by the Department.
The Chairperson said the Department needed to put the right organisational structures in place to ensure proper accountability. The Committee would provide support, as it wanted the Department to succeed.
Department of Trade and Industry (DTI) submission
The Chairperson said the DTI played an important role in job creation, which was a government priority. It controlled a big budget of over R6 billion, so it would be regrettable if it shifted funds away from programmes which had an impact on job creation. He also expressed concern that the Department had spent only 36,8% of its budget in the first six months of the year.
Mr Tshediso Matona, DTI Director-General, said the Department’s mandate was to help job creation through programmes aimed at expanding the economy. Due to the extensive scope of its operations, it was organised in “clusters”. These clusters covered industrial development, trade, investment and exports, broadening participation, regulation, and administration and co-ordination, and where shifts and virements were necessary, these had mainly been kept within these clusters.
He pointed out that the Department had a good record of spending its budget over the past five years, with the amount unspent being only 3% in 2006-07 and 2007-08, 1% in 2008-09 and 2% last year. If more funds had been available, the DTI would have been able to achieve more.
A number of challenges had led to the current under-expenditure situation, among which were:
▪ The Automotive Investment Scheme (AIS). This was supposed to have been finalised last year, but the industry had requested further engagement, so that it had ultimately been launched only in May this year. The 39 applications for support would be adjudicated only in December.
▪ The Film Incentive Scheme had experienced a slow take-up of funds owing to lower production activities during the World Cup.
▪ The economic recession had impacted on the Support Programme for Industrial Innovation (SPii), the
▪ The Department had a 17,9% vacancy rate, which affected its employee compensation expenditure.
Savings had also been achieved by stipulating economy air travel locally, and cutting back on advertising and promotional material.
While expenditure against budget was only 45% at the end of October, the Department was confident it would meet the challenge of under-expenditure, with R547m due to be spent on the AIS and R632m on Coega, East London and Richards Bay infrastructure before the end of the financial year.
Mr J Gelderblom (ANC) queried the underspending in the communications and marketing budget, as he believed that when the market was down, it was essential to market one’s product.
Mr Matona said funds had been shifted from this budget to the trade and investment programme, where it had been used for the promotion of exports, as well as to boost the flagging “Proudly South African” campaign.
Mr Swart asked what the R414m earmarked for Coega would be spent on, as it appeared there was not much activity there at present.
Mr Matona replied that Coega, as well as the other Industrial Development Zones (IDZs), presented a particular challenge, as it was recognised that vast sums had been invested in these projects under assumptions which no longer pertained. At Coega, an aluminium smelter was supposed to have been the anchor tenant, but this had been abandoned owing to the electricity crisis. The viability of Coega now depended on attracting other investors, but these funds had been set aside to support investors who were already committed to the project, with the assurance that the required infrastructure would be installed.
Mr Ramatlakane asked whether the shifting around of large amounts of money was a management and planning issue, or due to environmental factors.
Mr Matona replied he could not deny there were planning issues, but felt that most of the challenges were related to the environment. Existing projects were easier to budget for, while in the current economic climate, new projects tended to start very slowly and then build up momentum, which was difficult to predetermine.
Ms Mashigo said that having staff vacancies was not a good way to save on the budget, as jobs needed to be done.
Mr Matona responded that there was no deliberate intention not to fill vacancies. The vacancy level had in fact been reduced from 25% to 18%, but the Department needed high level technical and professional people, such as economists and engineers, and these were not easy to attract.
Ms Mashigo asked what impact the film incentive scheme had on job creation.
Mr Matona said research had shown
Asked what DTI intended to do about increasing the uptake of its funds by its various entities, Mr Matona said the Department’s message to the business community was that it would be very short-sighted to allow the current economic situation to lead to lower investment. In the global context,
The Chairperson expressed satisfaction with the Department’s response to the Committee’s questions, but warned that savings in the budget should not come at the expense of service delivery.
The meeting was adjourned.
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