Western Cape Provincial Treasury on Quarter 3 performance

Budget (WCPP)

01 March 2019
Chairperson: Mr D Joseph (DA)
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Meeting Summary

The Committee was briefed on the Third Quarter Performance of the Provincial Treasury for the current financial year. Spending in this period amounted to R 45.499 billion of the R63.212 billion adjusted budget. Performance in the 2018/19 period of the province included a net adjustment of R463.308 million made to the main budget in November 2018 in order to maintain fiscal stability and to respond to drought and fires as well as the promotion of safety in the Western Cape. At the end of December 2018, the province reflected a net projected over-spending of R16.302 million for the 2018/19 financial year.  At the end of 2018, provincial public entities projected a net under-spending of R3.562 million and it related mainly to the Western Cape Nature Conservation Board and Western Cape Tourism, Trade and Investment Promotion Agency. Provincial own revenue collected at the end of the third quarter amounted to R2.625 billion of the 2018/19 adjusted budget of R2.967 billion.

Western Cape Government Departments achieved 76% of the performance indicator targets. The departments within the Governance Cluster achieved 92 %, while those in the Social and Economic Clusters achieved 77 and 63% of performance targets, respectively.

Members asked why the performance was so low for the Departments of Community Safety, Transport and Public Works, Agriculture and Local Government in the third quarter; an explanation for the underspending of CapeNature; what the delays were associated with the fires at Kogelberg and in the Betty’s Bay area project; what was the status of expenditure in the Third Quarter; what was the overall under expenditure; why was there a sudden change of ownership of the land between the Department of Human Settlements and the Department of Transport and Public Works; why was the money coming to the Department of Human Settlements; How will this money be spent; why subsidies were returned from certain municipalities; and clarity on the under-performance of certain entities.

Member expressed concern about the following: under performance for Casidra, WCLC and SBIDZ-LC in terms of the actual amount of the budget spent as at 31 December 2018; under expenditure in most of the Departments and entities; about subsidies returned to the Provincial Treasury from municipalities; and the low performance of certain entities in terms of the achievement of targets.

Members were updated on the progress on the Ashton Bridge Project. It is one of the biggest projects in the Western Cape Province and most of the work takes place on the Montague side of the bridge. The Department of Transport and Public Works have given assurances about the progress and completion of the project. It is a project that involves highly specialised skills and cannot be left to contractors who do not have the wherewithal to finalise the project.


 

Meeting report

Briefing by the Provincial Treasury on the Third Quarter Performance of the Provincial Treasury
Ms Analiese Pick, Director, Provincial Government Finance:  Provincial Treasury, said the Third Quarter spending amounted to R45.499 billion (72%) of the R63.212 billion of the adjusted budget. The Third Quarter 2018/19 performance of the province include a net adjustment of R463.308 million made to the main budget in November 2018 in order to maintain fiscal stability and to respond to, amongst other things  risks such as drought and fires and the challenges relating to the promotion of safety in the Western Cape. At the end of December 2018, the province reflected a net projected over-expenditure of R16.302 million for the 2018/19 financial year. The departments largely contributing to the overall projected over-spending included the Department of Community Safety and Health as well as the Provincial Treasury. The projected underspending for the Provincial Treasury amounted to R2.502 million and related mostly to the Compensation of Employees due to additional graduate interns who deferred their obligations. The underspending also included the impact of internal promotions, resignations and late filling of vacant positions. The Department of Community Safety had a net under-spending of R1.187 million. The amount mainly related to the Compensation of Employees, which was attributed to the late filling of vacant positions and internal promotions. The Department of Health is managing the projected net over-spending amounting to R19.991 million. This mainly results from the payments of Capital Assets for addressing equipment backlogs within the Vote.  There is no risk of over-spending as this challenge will be addressed by the processing of final virements at the end of the financial year.

In terms of provincial public entities expenditure as at December 31 2018, Ms Pick said that the Third Quarter Performance reflected spending of R502.265 million, representing 70% of the R717.647 million of the adjusted budget. At the end of December 2018, provincial public entities projected a net under expenditure of R3.562 million which was mainly related to the Western Cape Nature Conservation Board, the Western Cape Tourism, Trade and Investment Promotion Agency (Wesgro). CapeNature projected underspending of R2.631 million, related to recent fires experienced in the Kogelberg and the Betty's Bay area which caused some delays in implementing the Kogelberg Nature Reserve infrastructure project. Further delays were experienced in procuring protective clothing for field workers. Western Cape Tourism, Trade and Investment projected underspending of R1.245 million which was related to savings from the late filling of vacant positions as well as the lower than anticipated IT fees which is inclusive of license fees paid to Microsoft. The actual infrastructure expenditure as at December 31 2018 was R5.722 million, which represents 66.8% of the adjusted budget of R8.564 million.

Provincial own revenue collected at the end of the third quarter amounted to R2.625 billion, which is 88.5% of the 2018/19 adjusted budget of R2.967 billion. Key revenue drivers include the Departments of Transport and Public Works, Health as well as the Provincial Treasury. The own revenue collection for the Department of Transport and Public Works amounted to R1.361 billion at the end of December 2018, compared to R1.283 billion collected up to the end of December 2017. The Department's own revenue was mainly derived from motor vehicle license (MVL) fees, which amounted to R1.261 billion. The Department of Health own revenue at the end of December 2018 amounted to R502.890 million, which is 89.3% of the R563.068 million adjusted budget. This is higher than R439.572 million collected up to the end of December 2017. The higher own revenue collections recorded at the end of the third quarter of 2018/19 were mainly due to higher hospital patient fees collected. The own revenue collected by the Department of Human Settlements at the end of December 2018/19 financial year amounted to R220.015 million. The revenue collected during the current financial year included R81 million received for the sale of land to the Airports Company South Africa (ACSA), and returned subsidies from the municipalities in relation to prior financial years. The own revenue collected by the Provincial Treasury by the end of the third quarter 2018/19 amounted to R469.092 million, which is 86.8% of the R540.353 million adjusted budget. The revenue at the end of December 2018 included casino taxes amounting to R409.946 million and horse racing taxes amounting to R50.903 million.

Ms Pick said that the Department of Human Settlements has additional funding for the current financial year.

Ms Z Ishmail, Chief Director Strategic Management Information, Department of the Premier presented non-financial preliminary performance information for the third quarter of the 2018/19 financial year for all departments and public entities. In terms of key observations from a provincial departmental perspective, the Western Cape Government's departments achieved 367 performance indicator targets, which is 76% of the 486 performance indicator targets. The Department of the Premier, DotP, achieved 87%, the Provincial Treasury 96%, the Department of Local Government 91%, the Western Cape Education Department 100%, the Department of Community Safety 98% and the Department of Economic Development and Tourism 88%. These performances are higher than the provincial average of 76%.

The departments that underperformed, in terms of the provincial average, include the Department of Health 73%, the Department of Social Development 68%, the Department of Human Settlements 43%, the Department of Cultural Affairs and Sport (CAS) 72%, the Department of Agriculture 66% and the Department of Transport and Public Works 38%. 76 targets, which represent 16% of the total targets, have been partially achieved. 43 targets (9%) have not been achieved. In terms of the provincial cluster perspective, the Governance Cluster achieved 92%, the Social Cluster 77% and the Economic cluster 63%. All the departments within the Governance Cluster achieved above the provincial average, while only two departments within the Social Cluster namely; Education and Community Safety performed above average. Only the Department of Economic Development and Tourism performed above average in the Economic cluster. Four departments within the Social Cluster namely; Health, Social Development, Human Settlements as well as Cultural Affairs and Sport, achieved less than the Provincial average. Three departments within the Economic cluster namely; Agriculture, Transport and Public Works as well as Environmental Affairs and Development Planning, achieved less than the provincial average. 

The analysis of the preliminary versus the validated non-financial performance reporting for the second quarter revealed that seven departments namely; the Department of Local Government, the Department of Cultural Affairs and Sport, the Department of Human Settlements, the Department of Community Safety, the Department of Social Development, the Department of Health and the Department of Environmental Affairs and Development Planning reported a lower validated performance achieved than their initial preliminary performance. The preliminary and validated performance of the Department of the Premier, the Provincial Treasury and the Western Cape Education Department remained the same. 
In terms of public entities, WCG (Western Cape Government) public entities achieved 73 (77%) of the total 95 performance indicator targets. Four public entities namely; the Western Cape Gambling and Racing Board (WCGRB) (92%), Western Cape Liquor Authority (WCLA)  (92%), Heritage Western Cape (HWC) (100%), and Saldanha Bay IDZ Licensing Company (SBIDZ-LC) (100%) achieved more than the provincial average of 77%.
However, five public entities including the Western Cape Language Commission (WCLC) (50%), the Western Cape  Cultural Commission (WCCC) (50%), Wesgro  (74%), Casidra  (58%) and CapeNature  (50%) had less than the provincial average of 77%. 16% of the targets have been achieved and 7% of the targets have not been achieved. The Governance Cluster, Social Cluster and Economic Cluster achieved 92, 88 and 65%, respectively. 
The WCGRB, within the Governance Cluster, achieved more than the provincial average of 77 %. Two of the four public entities, namely; WCLA and HWC, within the Social Cluster, achieved more than the provincial average. One of the four public entities in the Economic cluster, SBIDZ-LC, achieved more than the provincial average. However, two of the public entities in the Social Cluster, WCLC and WCCC, achieved below the provincial average. Also, Wesgro, Casidra and CapeNature, within the Economic cluster, achieved below the Provincial average. 

Four public entities, WCLA, Casidra, Government Motor Transport (GMT) and Wesgro reported a lower validated performance achieved than their initial preliminary performance. Meanwhile, the preliminary and validated performance of public entities including the WCGRB, HWC, WCCC, CapeNature and SBIDZ-LC, remained the same.

Discussion
Mr P Uys (ANC) asked the Treasury to explain why the performance was so low for the Departments of Community Safety, Transport and Public Works, Agriculture and Local Government in the third quarter. He also expressed concern about the under-performance for Casidra (61.3%), WCLC (52.8%) and SBIDZ-LC (42.4%) in terms of the actual amount of budget spent as at December 31, 2018. He sought explanation on the underspending of CapeNature. What were the delays associated with the fires at Kogelberg and the Betty’s Bay area’s project?

He noted that the actual amount spent as a percentage of the budget was 54.8% for the Department of Health, 60.0% for the Department of Transport and 32.6% for CapeNature. Why was the expenditure so low for these departments and the entity? He noted that the report considered infrastructure expenditure until the end of December 2018. What is the status of expenditure in the third quarter? What is the overall under expenditure?

He expressed concern about the actual collection as a percentage of the adjusted budget in relation to the Department of Health (56.4%), the Department of Community Safety (53.7%) and the Department of Human Settlements (366.7%). He noted that the land given to the Department of Human Settlements previously belonged to the Department of Transport and Public Works. Why was there the sudden change of ownership? Why is the money coming to the Department of Human Settlements?  How will it be spent? He requested the PT to give a breakdown of the adjusted budget of R60 million and actual collection at the end of December 31 2018 of R220 million in relation to the Department of Human Settlements. He sought clarity on why subsidies were returned from certain municipalities. He noted that such municipalities could use such funds for legal settlements or infrastructure development. He expressed concern that the departmental preliminary performance was low for the majority of the departments. In particular, the preliminary performance for the Departments of Human Settlements, Transport and Public Works were 43% and 38%, respectively. He also expressed concern about the percentage of targets achieved for Western Cape Language, Western Cape Cultural Commission and Western Cape Nature Conservation Board, which stands at 50%. Why were the performances that low?

The Chairperson agreed with Mr Uys' view. He said that four out six departments in the Social Cluster achieved below the provincial average. 

Mr R McKenzie (DA) sought clarity on the difference between own revenue collected by the Department of Transport and Public Works at the end of December 2017 (1. 283 billion), and at the end of December 2018 (1.361 billion). What is the source of the increase? Was there additional funding? He also questioned the R81 million received for the sale of land to the Airports Company South Africa. He sought explanation on why municipalities returned subsidies of the prior financial year. Did the municipalities lack the capacity to spend the fund? Did the municipalities receive appropriate support from the Department? He also sought clarity on the low performance experienced in some of the public entities. Does the Department have measures to deal with under-performance?

Mr S Tyatyam (ANC) also sought clarity on the under-performance experienced in some of the public entities. 

Mr H Malila, Deputy Director-General: Fiscal and Economic Services, Provincial Treasury, said that the increase in own revenue for some of the departments at the end of December 2018 was as a result of additional funding. He mentioned particularly the Departments of Community Safety as well as the Department of Transport and Public Works as recipients of additional funding. He said that most of the expenditure on infrastructure projects occurs in the summer. Therefore, there is a spike in expenditure in the months of September and October. During this period, enormous activities occur on the N1 and N2 roads. The Department has not received any information concerning the risk of underspending. The Department tightens control to ensure the appropriate use of funds. 

Mr McKenzie sought further clarity on why certain municipalities failed to use their funds. 

In response to the under spending in CapeNature, Ms J Gantana Chief Director, Public Finance: PT told the Committee that there was a fire incident occurrence when a new contractor took over the infrastructure project at Betty's Bay. The delays caused by the incident was responsible for the underspending recorded. She said that the incident also changed the completion date of the project from July 2019 to November 2019. She said steps are being taken to address the underspending in the Department of Health. 

Ms Pick said the Department of Community Safety spent 62.3% of the budget at the end of December 2018 but the spending increased to 72% at the end of January 2019. The underspending in the Department of Community Safety is as a result of unexecuted projects which will be executed later in the financial year. She told the Committee that the actual amounts of the budget for the Department of Agriculture spend was 59.3% at the end of December 2018, whereas the amount increased to 78% at the end of January, 2019. She said that the Department of Local Government received an additional R7 million. Spending was 58.4% at the end of December 2018 but an increase in spending was experienced at the end of January 2019. 

Mr Malila told the Committee that the increase in own revenue of the Department of Transport and Public Works from R1.283 billion at the end of December 2017 to R1.361 billion at the end of December 2018 was due to technical adjustments to account for inflation and population growth. 

Mr J Barnard, Director: Directorate Provincial Programme and Project Performance, Department of the Premier, said that the under-performance, 38%, in terms of the percentage of targets achieved for the Department of Transport and Public Works was caused by the lack of resources and certain changes to some projects. He noted that one of the performance indicators in the Western Cape Language Commission was shifted to the fourth quarter. Further, he said that under-performance in Casidra (SOC) Ltd, 58%, was due to delayed payment that affected the onset of the project and drought. He said steps are being taken to address the under-performance. He noted that the under-performance, 50%, in the Western Cape Nature Conservation Board was due to graduate interns who could not fulfil their obligations to the entity due to examinations. 

Mr Uys sought clarity about the Ashton bridge project. Are the contractors functional?

Mr Malila replied that the Ashton Bridge project is one of the biggest projects in the Western Cape Province and most of the work takes place on the Montague side of the bridge. He said the Department of Transport and Public Works gave assurances about the progress and completion of the project. It is a project that involves highly specialised skills and cannot be left to contractors who do not have the wherewithal to finalise the project.

The Chairperson thanked the Department of the Premier and Provincial Treasuryfor their presence in the meeting. 

The meeting was adjourned.

 

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