Western Cape Additional Adjustments Appropriation Bill & Appropriation Bill: Provincial Treasury; with Minister

Budget (WCPP)

06 March 2018
Chairperson: Mr D Joseph (DA)
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Meeting Summary

The Provincial Treasury (PT) said the 2018 budget was firmly positioned to promote service delivery in the Western Cape, while giving effect to national and provincial policy imperatives, as outlined in the 2014 - 2019 Provincial Strategic Plan (PSP). The fiscal approach was to maintain fiscal sustainability while managing key fiscal and service delivery risks, including the response to the drought and water needs. The 2018 budget placed people and creating public value at the centre of the budget policy, as well as the continued protection of frontline services -- education, health and social development. Effective delivery of government programmes was supported by integrated management and partnering, and good governance. Investment in public infrastructure still remained a priority, as this was critical for improving access to quality services and supporting economic growth. The focus was on youth and people with disability, while skills development also remained a priority.

Committee Members expressed concern at the high levels of poverty, the crime rate, and the lack of economic opportunities in Central Karoo, which seemed to be exacerbated by the low municipal budget allocation. The Committee asked for an updated gross domestic product (GDP) estimate in light of the figures published by Stats SA. There was concern about the interventions to deal with the severity of the drought, and also the impact of the cuts in budget allocations to the provinces from the National Treasury, as the Western Cape municipalities were already struggling due to the drought and water crisis.

Meeting report

Presentation by Provincial Treasury

Ms Marcia Korsten, Chief Director: Provincial Treasury (PT), said that the South African economy was expected to grow from 0.9% in 2017, to 1.4% in 2018 and 1.9% in 2019. However, per capita income was expected to remain stagnant due to the expected population growth rate, and the Western Cape growth rate would remain flat due to the drought and water crisis.

Low levels of growth, impacting on national revenue collection, had resulted in reduced transfers from national government on the Provincial Equitable Share (PES) and conditional grants. Key provincial risks included increased service load pressures, particularly in the social sector, due to the increasing population and heightened levels of poverty and unemployment, Risks to infrastructure delivery included reductions in funding, bulk infrastructure and maintenance backlogs, a shortage of professional staff, and damage and destruction of public and economic infrastructure. Other challenges included drought, the water crisis, disasters and other issues related to climate change -- particularly fire, water shortages, floods and waste management – and the impact of failure in public transport in the City of Cape Town, among others.

The fiscal response from the Western Cape Government was focused on giving effect to the Provincial Strategic Plan, underpinned by infrastructure-led growth, managing and responding to the drought and water crisis, making provision for service load pressure, particularly social sector services, and managing the risks related to wage negotiations. The 2017 adjusted estimates made provision for R165.331 million in 2017/18 and R157.031 million in 2018/19. By the end of December 2017, 2 653 farmers had been assisted with fodder relief, and drought-stricken municipalities assisted with disaster declarations and support in respect of drought mitigation and water augmentation

The Provincial Strategic Plan (PSP) 2014-2019 had been designed to:

  • Create opportunities for growth and jobs;
  • Improve education outcomes and opportunities for youth development;
  • Increase wellness, safety and tackle social ills;
  • Enable resilient, quality, sustainable and inclusive living environment and embed good governance and integrated service delivery.

The 2018 budget was firmly positioned to promote service delivery in the Western Cape while giving effect to national and provincial policy imperatives, as outlined in the 2014 - 2019 PSP.

The Fiscal approach was to maintain fiscal sustainability, while managing key fiscal and service delivery risks, including the drought and water response. Effective delivery of government programmes was supported by integrated management and partnering, and good governance. Investment in public infrastructure remained a priority, and critical for improving access to quality services and supporting economic growth. There was a focus on youth, people with disability and skills development.


Mr P Uys (ANC) asked why the economic growth estimates presented did not contain an estimate for the Western Cape, and sought clarity on the reserve figures in slide 14. He asked if the reserves had been allocated, or were waiting for the budget adjustment. Were the spending figures indicated on slide 15 indicative of the drought spending for the particular years assigned to them? He asked for clarity on the reserves figures on slide 21, and why the R300m was not allocated as anticipated, and the impact of this on human settlements.  He asked for the drought assistance to the various municipalities to be explained.

Mr R Mackenzie (DA) asked for the GDP figures to be updated, as Stats SA had just released recent figures.

Mr B Kivedo (DA) asked if the interventions were sufficient to alleviate the drought situation, depending on its severity. He asked for mitigating factors on the effects of crime, as it cut across all facets of society and had a tremendous impact on social and economic status.

Provincial Treasury response

Mr Zachary Housain, PT, said that measures to mitigate the risks had been initiated in a project that had been running for about a year, and it touched on the fiscal issues and sustainability as well. One of the measures they had taken was to introduce reserves in anticipation of the issues that would, or were expected to, materialise. The growth estimates for the Western Cape were included in the budget overview.

Mr Harry Malila, Deputy Director General (DDG): PT, said that the drought information complemented what the National Treasury had written in their overview with regard to the drought’s effects. The Department of Local Government had a proper breakdown of the details of the PES and grants, as they were the custodians. The adjustments proposed dealt with a drought element in all the municipalities. The reserves on page 57 of the budget expenditure were provided for in the budget, and had not been allocated to anybody but had been provisioned for. They had been transparent in their budget, and the budget approach was designed to absorb any fiscal instability. They would come back to the Committee when the need to use the reserves arose. 

Mr Mackenzie referred to slide 23 on the unallocated figures of special distribution, and asked for clarity.

Ms Analiese Pick, Director: Provincial Government Finance (PGF): PT, said that of the R100m, R57m was for planned projects and R43m was to purchase three pieces of land. R82.5m was related to the drought, as a substantial amount had been allocated in the November 2017 adjustments budget in the previous year for water augmentation. There were different projects in municipalities for water infrastructure, to avoid day zero and ensure minimal water usage. The Department of Local Government was managing the projects. On slide 15, the expenditure was from the November budget.

Mr Malila said that slide 21 provided allocations and slide 24 showed provisions -- not really actual allocations -- but they would come back to the Committee if there was a need to allocate the reserves. The R390m for human settlements was a combination of grants, and that this was one of the most protected departments in the social sector. The latest economic figures would be updated in their budget, and he gave an assurance that any unallocated funds would not be misused.

Ms Korsten said the drought would have a big impact on the agricultural sector. Other sectors were recovering, but economic growth in the Western Cape was still estimated to be flat.

The Chairperson said they would engage National Treasury to give them an update on the figures as well.


Ms T Dijana (ANC) asked about the Central Karoo allocation, as it was the poorest municipality and also had high crime, yet its allocation did not meet the needs for improving standards of living. Something had to be done.

Mr C Dugmore (ANC) asked about the growth rate in the gross domestic product (GDP), as the national forecast showed 1.3% and the Western Cape 0.7%. What was the reason for the difference? The book indicated growth would be -0.3%, and yet in the presentation they said it was flat, which was not accurate. He asked for clarity on the grants in slide 24, which showed percentage average changes in average shares relating to the reductions in slide 6, as this caused confusion on the analysis of the equitable share. He asked how the issue of public transport impacted on the economy, and its risks. He sought clarity on slide 14, bullet two, with regardd to the formula change that had led to increased revenue. He asked if there were other reserves, besides the ones indicated in the budget

Mr Malila said that every province was allocated the same amount, and the R150m initially was one of the fiscal measures to deal with anticipated problems. The national, provincial and local government equitable shares and conditional grants had been cut to fund the national budget from the deficit after the VAT increase. The formula adjustment affected all provinces equally, and the Western Cape (WC) had shown the deductions. The equitable share had had a net reduction in real terms, and they had to mitigate this. He said the equitable share and for the PT they used how it is allocated in the formula to mitigate this. The biggest cuts were in infrastructure. The 2018 growth figure was an estimate, and the budget indicated the current contribution by the agric sector. The special analysis was the total budget allocation that would go to particular locations. The social distribution had had a gradual shift of expenditure over the years in the region.

Mr N Hinana (DA) clarified a misprint in slide 16 of R157m, instead of R257m from the previous slide. He asked if the cuts were more than just nationwide, as they could also have been due to non delivery. 

Dr Ivan Meyer, Western Cape Provincial Minister of Finance, said that the National Treasury budget indicated the grants over the next four years for provinces, and the cuts as well. The conditional grants and local government allocations had been cut, but the equitable shares for local government had not been cut. The contraction in the WC was severe on the national budget, as the agricultural sector contributed significantly.

Ms N Nkondlo (ANC) referred to slide 6, and asked if they had data that quantified the risk, and what shortages were being referred to. She asked for clarity on issues of the wage bill. On slide 15, what had been the rationale for splitting the borehole allocation? What were the forecasts for employment opportunities and capabilities indicated in slide 22? To what extent would the Central Karoo allocation trigger economic activity and job creation?

Treasury’s response

Mr K Langenberem, Director: Infrastructure: PT, said that infrastructure backlogs were a moving target, and they would get back on latest numbers related to the roads. He said the numbers on job creation were provided by the construction leader’s development board, but there had been a significant number of jobs created.

Mr Malila said Central Karoo was a small area, and any investments there had a significant impact.

The Minister said that the wage bill was a significant part of expenditure. There was a huge shortfall in the national budget, and the cuts were trying to make up for it, but they posed serious risks as it was unsustainable. There would be nothing for projects eventually, and the National Treasury was yet to make provision. The office of the Unions was not affordable, and the fiscal conundrum was being navigated. The impact of the wage bill on provinces was huge, and expenditure on it had to be cut, but understanding was needed for salary increases to be regulated.

Consideration of Minutes

The minutes of the November 2017 meeting were adopted unanimously.

The meeting was adjourned.

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