ATC111019: Report First Quarter Expenditure on the Provincial Roads Maintenance Grant (S’hamba Sonke) in the 2011/12 Financial Year, dated 19 October 2011

NCOP Appropriations

Report of the Select Committee on Appropriations on the First Quarter Expenditure on the Provincial Roads Maintenance Grant (S’hamba Sonke) in the 2011/12 Financial Year, dated 19 October 2011.

 

1. Introduction

The Select Committee on Appropriations (the Committee) conducted hearings on the spending levels on the Provincial Roads Maintenance Grant (S’hamba Sonke) in the 2011/12 financial year.

 

This emanated from the provincial expenditure report published by National Treasury on 16 August 2011.  The hearing took place on Wednesday, 7 September 2011, in Committee Room M46 at Parliament.

 

2. Terms of reference 

The hearing formed part of the Committee’s ongoing interaction with provinces to monitor their spending patterns on conditional grants. A framework for each grant sets out the purpose of the grant, measurable objectives, conditions, allocation criteria, and past performance, among other things.

 

The national Department of Transport was requested to make a presentation on the Grant and to take into consideration the following:

• Data trends in allocations, transfers and actual expenditure of the grant for the first quarter of the 2011/12 financial year;
• Assessment of the provinces’ monitoring capacity for the financial year, under-spending and what capacity constraints impacted on these outcomes;
• Whether monthly reports are received from receiving departments, and if not, what is the Department doing to ensure compliance with monthly reporting; and
• The provinces’ spending plan on the grant.

 

The Committee invited all the provincial MEC’s responsible for Transport, as well as the national Department of Transport. In addition, National Treasury was requested to make a presentation. The MEC from the Free State attended the hearing. The MEC’s from the Western Cape and the North WestProvince submitted apologies and sent officials to represent them. The Department of Transport did not attend.

 

3.  National Treasury (NT)

3.1 First Quarter spending

National Treasury presented expenditure on this Grant as at 30 June 2011 as follows: 

Province	Main budget:	Projected outcome:	Actual spending as at 30 June:	Spending as a Percentage of main budget:
	R’000	R’000	R’000	%
Eastern Cape	1 034 086	1 074 656	195 683	18.9
Free State	447 165	447 165	100 248	22.4
Gauteng	566 917	566 917	_____	0.0
KwaZulu-Natal	1 236 648	1 236 648	368 146	29.8
Limpopo	934 208	934 208	124 840	13.4
Mpumalanga	1 016 603	1 019 300	152 835	15.0
Northern Cape	308 760	308 760	105 754	34.3
North West	501 826	501 826	56 791	11.3
Western Cape	411 141	411 141	60 782	14.8

 

NT reported that Gauteng Province has reflected no expenditure in the first quarter, while the Northern Cape, at 34.3%, is moving to complete previous projects from the 2010/11 financial year. The Eastern Cape Province had projected to over-spend by R40.6 million for the 2011/12 year, but has since indicated that they now project to under-spend by R783.5 million. This is of serious concern to NT, as it means that the Province projects not to spend three quarters of its allocation for the 2011/12 financial year.

 

3.2 Issues related to first quarter

NT reported that there have been serious challenges with respect to compliance with the 2011 Division of Revenue Act. These include the following:

 

• No business plans for S’hamba Sonke have been submitted by the national Department of Transport (DoT) as yet.
• The DoT has yet to provide first quarter performance information, as required by legislation.
• Transfers are being made to provinces in the absence of the publication of project lists linked to the funding.
• Correspondence from the DoT to NT indicates that there are significant internal capacity challenges in the department, despite the fact that an additional R10.5 million has been made available to the DoT for monitoring purposes.

 

NT has written to the DoT and is planning a meeting with them in an attempt to address these issues.

 

4. North West Province

4.1 First Quarter expenditure

The North West Province indicated that R56.7 million was transferred for the first quarter, which was less than 25 per cent of the total allocation of R501.8 million. The Province spent 100 per cent of this and, in addition, received an advance of R110 million from their Provincial Treasury to make up for the shortfall.

 

4.2 Factors affecting spending

The Province indicated that the following factors affected their spending on the Grant:

 

4.2.1 A number or capital projects had to be suspended due to insufficient funds in the 2009/10 financial year; non-performance of contractors and consultants; and over-commitment of the budget. The need to complete these outstanding projects before starting any new work; places an extra burden on the Department. They are of the opinion that the current allocation to the Province is not sufficient to deal speedily with the backlogs.

4.2.2 The National Treasury Instruction Note affecting bids in excess of R10 million may lead to delays in spending the current budget. In addition, the unbundling of projects to allow maximum participation for emerging consultants and contractors may be construed as avoiding submission of bids over R10 million to Treasury.

4.2.3 There are a high number of engineering and technical staff vacancies – the approved structure has about 127 posts, of which only 47 are filled. They experience a high staff turnover, with some vacated funded posts not being filled since 2006. The Department makes use of the services of a Capex Programme Manager to complement the current staff shortage.

 

5.  Western Cape Province

5.1 First Quarter expenditure

During the first quarter the Western Cape Province spent R60.7 million, or 14.8 per cent of their total allocation of R411.1 million for the 2011/12 financial year. By the end of July, the spending was at 22.7 per cent of the total allocation.

 

5.2 Challenges

The Western Cape reported experiencing challenges in the following areas:

• The definition of “access” to schools and clinics needs to be resolved in that the Western Cape interprets access as “mobility” - a more holistic meaning and not only the direct access road.
• The interpretation of “safety” needs to be more uniform - hot spots vs. condition of road vs. driver behavior.
• Consideration needs to be given to Asset Management System funding.
• Project Management funding and data collection is costly.
• The definition/interpretation of rehabilitation projects as Maintenance or Construction expenditure needs to be resolved. The Western Capeinterprets “rehabilitation” as capital construction expenditure.
• FTE and Job Creation Targets as well as Expanded Public Works Programme (EPWP) up-scaling requirements need to be clarified.
• The balancing of the network approach to budget and project selection/prioritisation versus employment creation needs to be resolved. EPWP targets for maintenance grant and equitable share funding appear to be unobtainable without compromising on network condition and maintenance backlogs.
• R160.0 million of the R411.14 million grant is to fund a portion of the regional office spend, thus leaving only R251.10 million to address the pillars of the maintenance grant and employment creation. The regional offices employ 900 permanent workers, which do not contribute to the EPWP target for the Roads Branch.

 

6. Free State Province

The Free State did not make a presentation but the MEC and the Head of Department raised the following concerns:

 

6.1 The Province’s roads have suffered considerable damage as a result of mining activities. The Province requests that the Free State be given the same special consideration in this regard as Gauteng Province and Mpumalanga Province.

 

6.2 Some of the provincial roads have totally deteriorated because of the heavy vehicles using the roads during the three closures of the Van Rheenen pass due to snowfall during the past winter season.

 

6.3 Some rural roads have become unusable due to the unprecedented rainfall and floods during the last rainy season.

 

 

7. Conclusions

After interacting with the provincial departments responsible for transport from the North West, Western Cape and Free State Province and National Treasury, the Committee concluded the following:

 

7.1 The Eastern Cape Department of Roads and Public Works is not able to cost their activities properly;

 

7.2 The national Department of Transport is not complying with legislation with regard to the submission of reports and business plans to National Treasury. In addition, funds are being transferred to provinces in the absence of project lists linked to the funding;

 

7.3 The establishment of a Roads Asset Management System (RAMS) in all provinces is critical as it would provide an indication of where investment is required;

 

7.4 There is confusion around some of the definitions related to the Grant provided by the DoT; and

 

7.5 The non-attendance of some MECs responsible for Transport was of concern to the Committee and hampered the work of the Committee.

 

8. Recommendations

Having interacted with the provincial departments responsible for transport from the provinces of North West, Western Cape and Free State, and National Treasury on the spending patterns on the Provincial Roads Maintenance Grant in the first quarter of the 2011/12 financial year, the Select Committee on Appropriations recommends that the National Council of Provinces considers the following:

 

8.1 The Department of Transport should, as a matter of urgency, submit all provincial business plans for S’hamba Sonke as well as performance reports to National Treasury;

 

8.2 The Department of Transport should refrain from making transfers to provinces in the absence of the publication of project lists linked to the funding;

 

8.3 The national Department of Transport and National Treasury should intervene in the Eastern Cape in order to assist them with proper costing and budgeting; and

 

8.4 The Department of Transport should provide clarity around the definitions related to the Grant to all provinces in order to assist them with their business plans.

 

 

Report to be considered.