Provincial Treasury 2022/23 Quarter 4 Performance

Meeting report

The Chairperson indicated that the Committee would be briefed by the WC Provincial Treasury on the WC Government’s 2022/23 fourth quarter performance and pre-audited financial outcomes. Thereafter, Members would be afforded the opportunity to pose questions to the department. Towards the end of the meeting, the Committee would then consider its outstanding minutes and resolutions.

2022/23 fourth quarter performance and pre-audited financial outcomes

Ms Analiese Pick, Public Finance, WC PT, and Ms Naadia Ismail, Strategic and Operational Management Support, WC PT, briefed the Committee on the department’s 2022/23 fourth quarter performance and pre-audited financial outcomes.

Over of socio-economic and performance

Ms Pick began by informing the Committee that despite its GDP contracting by 2.4% during the fourth quarter of 2022, unemployment fell by 2% – bringing it down to 22.5%. In addition, the province experienced a decline in violent crime, especially homicides which went down by 11%.

Overview of financial year delivery trends for performance indicators

Overall, the province achieved an 84% performance (793 out of 947) for the 2022-23 financial year, with one of the thirteen departments meeting all of its targets. There was a difference in the performance of the departmental clusters, with the governance cluster achieving a 97% performance, the economic cluster 88%, and the social cluster 73%.

Overview of financial performance (pre-audited)

Ms Ismail was pleased to announce that the WC provincial government managed to spend 99.3% of its total R77.495 billion budget. Twelve of the thirteen departments spent between 96% and 99.8% of their budget, while the WC Department of Human Settlements (DoHS) incurred the lowest expenditure percentage, sitting at 91%.

The main cause for the WC DoHS 91% expenditure was the delay in the completion of infrastructure projects within the province – largely caused by community unrest. As such, the conditional grant funding allocated for the projects, amounting to R212 million, has been approved for rollover to the 2023-24 financial year.

There was an R83.5 million over-expenditure on the compensation of employees (COE) from R41.214 billion to R41.298 billion, and goods and services by R68.2 million, from 17.709 billion to 17.777 billion.

Discussion

Ms C Murray (DA) posed a few questions to the department. One, she asked what the key factors were for governance departments, such as the WC PT, that contributed to their high average annual performance, and if there were lessons learned that could be applied to other departments in the future.

Two, she asked for the department to explain how the additional authorised expenditure for WC DoBE occurred

Three, she asked what steps were being taken to assist the WC DoHS and Health in reducing their underspending.

Four, she asked what the WC PT’s strategic focus was on the number of employees it requires. Furthermore, she asked what positions were being prioritised.

Mr D America (DA) noted that 40 outcomes for jobs, safety, and well-being indicators were identified and measured, however, no percentages were provided. As such, he asked for a percentage breakdown of each.

Thereafter, he highlighted that the WC DoHS’ 91% expenditure of the budget did not match its performance outcomes. He asked why this was the case. Furthermore, he asked if the reduction in employees at the WC Department of Social Development (DoSD) was a result of natural attrition.

In his final question he asked if in the current financial year there would be a substantial increase in the number of employees at the WC DoBE; and if so, how it would impact the department’s budget, given that it has spent almost 100% of its budget.

The Chairperson said that the WC DoHS was a notable underspender, which was disappointing given that the WC DoI spent 99% of its budget for the past financial year. Moreover, all of the departments achieved between 96% and 99% expenditure. On this, she asked what conditions the WC PT will implement to ensure that the WC DoHS and WC Provincial Parliament (WCPP) improve on their expenditure and achieve 95%.

In addition, she asked if the R215 million sent back from municipalities to the WC DoHS in previous years was separate from the R212 million approved for rollover.

Mr David Savage, Head, WC PT, referring to the question on why there was a high performance in some of the administrative departments versus the frontline departments, explained that this was mainly due to the difference in non-financial indicators between each set of departments. For instance, the WC PT has standard administrative processes that occur on an annual cycle, which are measured in its annual performance plans. Whereas frontline departments such as the WC DoBE are exposed to several external factors that affect its indicators.

In response to the question of what steps were being taken to assist the WC DoHS in reducing its underspending, he reminded Members that the WC PT has briefed them before on the integrated supply chain management (SCM) strategy – which has certain aspects, such as digitisation, strengthening of governance measures, and capacity enhancing – it has provided to all the departments.

Strengthening expenditure on goods and services required departments to implement the correct governance frameworks; appoint skilled officials; and that the annual cycle around planning, including monitoring and evaluation are in place. However, some of the challenges faced at SCM are due to external factors.

Touching on the question related to whether the WC PT’s strategic focus was on the number of employees it requires, he indicated that the WC PT is focused on long-term fiscal sustainability, requiring that it does not commit to spending more than it can afford on COE and that it balances this with the sustainability of its services, particularly the frontline ones.

The strategy, he went on, also makes provision for each department to respond to the service delivery requirements through their own plans. In the long term the WC PT plans to assist the departments in identifying the effects of digitisation on service delivery, the effect it will have on the number of employees employed; and performance management and service delivery models.

Regarding the question of whether the reduction in employees at the WC DoSD was a result of natural attrition, he remarked that larger departments did encounter high nominal rates of attrition.

Significant funding has been provided to the WC DoBE and WC DoSD for both social worker and educator posts in the current medium-term expenditure framework. This was in response to the increase in service delivery demands. Although no increased funding has been provided to the DoH, due to certain delivery adjustments it has had to make post the Covid-19 lockdowns, he added.

On the question related to the difference in expenditure between departments, he cautioned the Committee not to draw conclusions from the differences. Thereafter, he explained that there are differences between financial and non-financial performance indicators, which include the type of measurable indicators selected relative to the expenditure.

Referring to the question on what conditions the WC PT will implement to ensure that the WC DoHS and WC PP improve on their expenditure and achieve 95%, he said that this required efficient planning. The WC PT can only work with the departments on their budget practices, their SCM planning practices, and their governance frameworks throughout the year.

Ms Pick, on the question related to the additional authorised expenditure incurred by the WC DoBE, answered that the WC DoBE overspent on its COE due to the increase in infrastructure, including schools, and an increased number of posts. The overspending was balanced out by the money that still remained on the department’s transfer payments at the end of the financial year, she outlined.  As such, she continued, no additional authorised funding had to be given to the department.

Regarding the question if the R215 million sent back from municipalities in previous years was separate from the R212 million of the grant that was underspent but approved for rollover, she confirmed that the R212 million unspent funds were rolled over. Then she explained that the R215 million was indeed separate from the underspent funds. She added that a full breakdown of the money sent back by the municipalities would be provided to the Committee at a later stage.

Mr Savage asked whether the 215 million was a separate amount from the R212 million rolled over.  

Ms Pick confirmed that this was the case. She explained that the R212 million rollover referred to money not spent in the previous financial year. Over and above that, the department has recovered R215 million from municipalities in the same period.

Ms Ismail highlighted that planned performance is different across departments. For instance, some departments may have nationally prescribed indicators while others are reliant on external stakeholders.

The Department of the Premier’s, she outlined, planned performance is reported on a monthly basis. Furthermore, it engages with all provincial departments on a quarterly basis on their performance.

In response to the question for the department to provide a percentage breakdown of the forty outcomes for jobs, safety, and well-being indicators that were identified and measured, she outlined that the WC PT is currently busy with its end-of-term review which, together with the annual fourth-quarter report, will illustrate the trends of each indicator over time.

Mr America congratulated the achievements of the WC departments. In addition, he was pleased by the announcement that the WC PT is currently finalising its end-of-term review. Once published, he continued, members of the public will be able to note if there has been improvement in areas like crime, education, and health.

Thereafter, he asked if the WC PT believed that interventions had to be made to assist the WC DoHS to complete outstanding housing projects and if so whether more funds will be allocated to do so.

Ms Murray posed three questions. One, she asked for the department to elaborate on the increased expenditure of cleaning services for the WC PT; a comparison of any period where there was an increased need for the services; what the contributing factors were; and if it was required.

Two, she asked what the contributing factors for the increased revenue collection for the WC DoH were and what lessons learned could be shared with the other departments.

Three, she asked to what extent the money allocated to Wesgro’s related to addressing the Auditor-General’s previous findings.

Mr G Brinkhuis (Al Jama-ah) asked if the WC PT could provide a forecast for the WC DoH’s budget in future financial years.

The Chairperson also congratulated the departments for their achievements in expenditure, particularly the 99.3% overall expenditure achieved by the WC government, which is one percent above the national target of 98%.

While she acknowledged the community unrest in various communities within the province which are affecting the progress of housing projects, she was unsure how the WC DoI and DoBE have been able to spend 100% of their budget while the WC DoHS has not been able to. She asked how the DoHS expenditure could be improved. Furthermore, she asked whether any lessons learned from the two mentioned departments could be applied in the DoHS, as both of them have been able to complete their infrastructure projects within the province for the 2022-23 financial year.

Mr Savage welcomed the suggestions made by the Committee.

Regarding the question of whether more funds will be provided to the WC DoHS to complete its outstanding infrastructure projects, he acknowledged that there are cost implications to the delays. Given the province’s fiscal situation, the WC PT will most likely not be able to allocate further money for the projects. Instead, the projects will continue to be implemented but past their deadlines.

In response to the question on Wesgro, he said that referred to Wesgro’s expenditure on its outputs. The governance support inputs to address Wesgros’ audit issues are not yet expenditure items.

Touching on the question related to the forecast for the health budget, he indicated that no budget increases will be made to the DoH’s budget for the 2023 MTEF. The department is aware that the budget limitations are negatively impacting the DoH’s ability to provide services, hence, it is engaged in discussions on the budget.

Referring to the questions on the WC DoHS spending, he suggested that the Committee refer its questions on the department to the relevant standing committee. After that, he confirmed that there are standardised processes and governance frameworks that have been adopted by other departments to improve project pipelines and portfolio management.

Ms Pick, regarding the question on cleaning services, clarified that the period was in comparison to the previous financial year – where there was a notable increase in the utilisation of cleaning services in the 2022-23 financial year compared to 2021-2022. One of the main reasons for this, she continued, is the increase in wages for cleaning staff.

Adding on to the answer on the forecast for the WC DoH’s budget, she indicated that the WC PT did not increase the WC DoH’s revenue budget for 2022-23 from 2021-2022. The WC DoH has worked to improve its health information system for payment and addressing late payments from the Road Accident Fund (RAF).

Regarding the question of whether more funds will be provided to the WC DoHS to complete its outstanding infrastructure projects, she informed Members that between forty-two and forty-five projects have been impacted by the underspending. To assist the WC DoHS with completing the projects, the WC PT granted approval for the rollover of the R212 million.

Furthermore, the WC PT’s infrastructure department, together with the National Treasury, has visited the various projects and will visit others at the end of August. The aim of the visits is to factor in the potential additional costs that may be required to complete projects into the appropriation budget, she told Members.

Mr America felt that the department did not provide a response to the question related to the underspending incurred by the WCPP.

Mr Savage explained that the WC PT is cautious not to encroach on the WCPP’s independence given the separation of powers.

Ms Pick highlighted that there has been underspending by the WCPP in relation to its contractors. The WC PT does not have oversight over the WCPP’s finances; it (the WCPP) was included in the presentation as part of the total amount spent by the WC government, she added. However, the WC PT is open to providing the WCPP advice on the best practice of expenditure.

The Chairperson suggested that the Committee request that the respective committees in the WCPP assist it with questioning the individual departments. Thereafter, she said the Committee would consider and adopt its outstanding minutes.

Consideration and adoption of 02 June 2023 meeting minutes

The Committee Secretary took the Committee through the minutes.

The Chairperson informed Members that she engaged the Deputy Speaker for assistance in organising a virtual meeting with the Estonia Consulate. All research documentation has been sent to the Deputy Speaker.

Following that, she requested a mover for the adoption of the minutes.

Mr America moved for the adoption of the minutes.

Ms Murray seconded the mover for the adoption of the minutes.

The minutes were duly adopted.

The Chairperson proposed that the Committee forward the WC PT’s presentation and documentation contained in the link, which refers to both the WCPP and the DoHS, to their respective committees.

Mr America agreed with the proposal.

The Chairperson advised that the Committee formally congratulate the WC government for its 99.3% expenditure for the 2022-23 financial year, which is 1.3% above the national requirement.

The meeting was adjourned.