National Treasury expressed dissatisfaction with four provinces for not using the additional money granted to them for the express purpose of eradicating learning under trees and unsafe classrooms. It intended withholding the entire infrastructure grant from those provinces that did not allocate the money for the purpose it was intended. As part of the discussions, officials from seven provincial treasuries and education departments were required to declare whether they had actually received the full additions and if they had utilised them for the intended purpose. An analysis of the figures showed there was under expenditure in the Eastern Cape, Northern Cape, Gauteng and Mpumalanga on the Infrastructure Delivery Improvement Programme. Most provinces indicated that they had received the monies but they were unable to spend it due to capacity challenges or spent it on other priorities such as the recruitment of sufficient teachers. Also, participants discussed the possibility of Treasury introducing limited decentralisation of infrastructure budgets and giving directly to schools.
It was decided the provinces would have to track the money and report back to the Committee in May on their findings of what had happened to these funds. If the results of this process proved unsuccessful, the Committee would endorse Treasury’s recommendation to withhold money from provinces that under spent.
Opening Remarks by Chairperson
Mr Ralane noted that the Committee, together with the Finance Portfolio Committee, would pass the Division of Revenue Bill the following day. However, the Committee believed that it could not proceed to do that without undertaking today’s discussion. The National Treasury had alerted the Committee to certain issues, which were fundamental and had to be resolved urgently. Finally, he mentioned that the Western Cape and KwaZulu-Natal (KZN) were not invited because they “appeared to have done the right things”.
Infrastructure Delivery Improvement Programme (IDIP) spending: progress report
Mr Lungisa Fuzile, Deputy Director-General: Intergovernmental Relations: National Treasury, reminded everybody that the President had made a firm commitment in 2002 to eradicate learning under trees within three years. At the time, resources were set aside to give expression to that commitment. Subsequent to that, the National Department of Education commissioned a study to investigate the infrastructure situation in the education sector, particularly in relation to schools. The findings confirmed that progress had managed to reduce the backlogs considerably. Simultaneously, the report showed that significant backlogs still existed. In the light of that report, discussions were held and it was decided that, notwithstanding the progress that had been made and the substantial budgets allocated for school infrastructure, additional money was required to eradicate the problem. Out of this process, R2, 7 billion was added to the infrastructure grant for provinces with the explicit understanding that this was earmarked for education.
Finally, Mr Fuzile mentioned that his colleague would illustrate how the allocation was divided between the provinces and how the additions impacted the infrastructure budgets of the provinces.
Mr Kenneth Brown, Chief Director: Intergovernmental Policy Planning: National Treasury, reiterated that despite the progress made in the rollout of school infrastructure, the backlogs remained quite high. Part of this was attributed to the low maintenance budget of schools and the existing unsafe structures. To address this, NT continued to allocate a substantial amount of money, particularly to historically disadvantaged provinces with high poverty levels, in the hope that these sorts of backlogs would be eventually eradicated. However, there was no tangible evidence that this money had been spent for the intended purpose. On the other hand, provinces that received lesser allocations complained that they continued to be punished even though they spend their allocations. In addition, Mr Brown indicated that low maintenance budgets persisted, despite the country’s large school property portfolio. As a way of resolving this, he stated that he supported a limited decentralization of infrastructure budgets to schools. He reasoned that it was impractical and unsustainable for one office to oversee so many schools in a province. He argued that money could be channelled to the maintenance budgets if departments did not execute their capital budgets. Limpopo was identified as not having any maintenance budget over the past three years.
Moreover, Mr Brown provided an analysis of the current spending pattern of provinces. As of the 31 January 2008, Mpumalanga had only managed to spend 41.4% of their budget, which amounted to an underspend of R113 million. A provincial breakdown of the infrastructure grant illustrated that KZN, with R590 million received the highest amount, followed by Eastern Cape (EC), which received R400 million. For the 2008/09 financial year, the capital budget in the EC was cut by R170 million. This cut was estimated to reach R1 billion by the end of the MTEF period. Notably, KZN and Western Cape had added substantial amounts, in a consistent way, to their budgets over the projected three-year MTEF period.
After taking all of this into consideration, NT recommended to the Presidential Coordinating Committee (PCC) that not only the R2, 7 billion but also the entire infrastructure grant should be withheld from provinces that did not allocate full additions to their budgets. In conclusion, he stated that there needed to be a frank discussion by all role-players about the capacity to deliver.
The Chairperson noted that money was provided for a particular purpose, yet it was not utilised appropriately. He recognised that there were capacity problems and sought to understand what was being done to address these challenges. He believed that it would be a “sombre” conclusion if the entire infrastructure grant was withheld from certain provinces. He asked each province to explain what has gone wrong and where the money had gone. The Committee wanted this money to be reflected in the budgets of the education departments. Basically, he wanted to ascertain whether the Provincial Education Departments (PEDs and DoE) received all the additional allocations outlined by NT.
Mr Qonda Kalimashe, Deputy Director-General: Treasury, Eastern Cape, admitted that it was a difficult question to respond to. He confirmed that all the changes were made in the structural grant to the PED, and was not sure how this money was then allocated. He surmised that the cost pressures that the PED faced in terms of non-capital expenses, notably the need to employ more teachers and the need to increase the budget for scholar transport could be factored in. Lastly, he stated that the baseline for the PED increased by R4 billion over the three years
Mr Johnny Makgato, MEC: Education, Eastern Cape, claimed that the Extended Public Works Programme (EPWP) did not assist in the delivery of schools which was problematic. People were given EPWP tenders to deliver several classrooms but not an entire school. Personally, he believed that such individuals should be “trusted” to build complete schools, and not be prevented from doing so because of the Construction Industry Development Board’s grading requirements. He commented that there was no PED that would be able to deliver schools because it was not their core business. He said that the Eastern Cape Education Department had received R100 million in the current financial year, out of the infrastructure grant.
Mr M Ramokefsi, HOD: Education, Free State, clarified that the additional allocation for the 2008/09 financial year totalled R180 million, which would address the Free State Education Department plans for that year. However, Provincial Treasury had explained that because this allocation would be funded from other provincial priorities, they would have to scale down Education Department’s infrastructure budget in the subsequent years.
Mr Malkele Petje, HOD: Education, Gauteng, confirmed that there had been an increase in the conditional grants allocated to capex but it was not linked to what was being discussed today. In terms of the normal capex, the Gauteng Education Department had not seen the increase in the current year of the MTEF or the next one but in the outer year of the MTEF. He concluded that this situation was problematic.
Mr Vuyisile Gumbu, Chief Director: Treasury, Northern Cape, indicated that there had been a reduction in the conditional grant allocated to the province. This implied that there was also a reduction in the original baseline, which had a negative effect in the first year of the MTEF period. Consequently, the Provincial Treasury could not allocate the necessary additions to the Northern Cape Education Department in the first year of the MTEF period.
Mr Sello Mokoko, HOD: Education, Northern Cape, emphasised that his department needed to correlate its figures with those of the National Treasury to establish the actual shortfall.
Ms N Nkamba, Chief Director: Treasury, Mpumalanga, did not dispute the information that National Treasury tabled to the Committee. He acknowledged that his department caused the problem itself because it had only focused on one year (2008/09) and not on the outer years. In order to rectify this, the Provincial Treasury had written a memorandum to the Mpumalanga Education Department, advising them that when they planned for the 2009/2010 and 2010/2011 financial years, they should include the amounts of R75, 439 million and R119, 906 million respectively.
Mr R Tshukudu, HOD: Education, Mpumalanga, disclosed that they were still waiting for the letter from the Provincial Treasury.
Mr H Nevhutelu, Senior Manager: Treasury, Limpopo, stated that the figures provided by National Treasury were “by and large correct”. He accepted that the Limpopo Education Department fell short in its budget allocations. On a positive note, he indicated that for the first time, the Department had set aside money for the maintenance of schools.
Mr S Cachalia, MEC: Education, Limpopo, agreed with the figures presented by National Treasury. He highlighted that the Limpopo Education Department had developed its own capacity, and would therefore be in a position to overspend on infrastructure projects.
An official from the North West Provincial Treasury stated that the province fell in the category of provinces that had allocated more money than what National Treasury stipulated for infrastructure.
Mr M Robertson (ANC, Eastern Cape) speculated whether the problems were related to a lack of capacity or bad management and planning.
Mr E Sogoni (ANC, Gauteng) observed that most provinces confirmed what National Treasury had presented. He expressed concern that provinces did not budget for the conditional grants even after they were informed to do so.
Mr Cachalia explained that that money could be earmarked for a particular purpose but could end up lost in the system because of all the political battles at provincial level.
Mr Petje contended that the general education allocations for the province were inadequate because it had to deal with issues of migration. He cautioned that the decentralisation of infrastructure budgets to schools would not be a good idea because in many instances the money would not be used for the purpose that it was intended for.
Mr Makgato maintained that it would be a drastic step to withhold money from provinces. He believed that it was still possible to adjust their figures and correct the situation.
Mr O Tselapedi, MEC: Education, North West, argued that provinces should abandon the word capacity, but agree that there was an abundance of incompetence. He agreed with the recommendation that money should be withheld from provinces that did not spend their allocations.
Mr Fuzile clarified that all PTs were represented on the Budget Council, which decided unanimously that school infrastructure should be attended to urgently. As a result, he directed his displeasure at the PTs, which did not indicate (at that time) that their education departments lacked the capacity to spend the money. In addition, he stressed that four provinces, namely Eastern Cape, Gauteng, Mpumalanga and Northern Cape had major issues that needed to be resolved, and that the recommendation was directed at them. Also, he clarified that he was “not naïve” to suggest decentralisation to schools, without insisting that accountability mechanisms were put in place.
Mr Cachalia expressed concern about the prospect of such decentralisation. He claimed that provinces were not ready for it and that it would create a disaster.
The Chairperson instructed the PTs and PEDs to discuss with each other whether to choose the decentralisation route. They were expected to return to Committee in May and indicate their individual position on the matter. Moreover, he stated that NT must assist the PEDs in tracing the monies and redirect it for the purpose that it was intended for. The Committee expected a consolidated report on this issue by the beginning of May. Finally, he accused the majority of provinces of violating the Division of Revenue Act, which bordered on financial mismanagement.
The Chairperson thanked all participants for availing themselves to discuss such an important issue.
The meeting was adjourned.
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