ATC131101: Report of the Standing Committee on Appropriations on the 2013 Division of Revenue Amendment Bill [B38 – 2013], dated 1 November 2013

Standing Committee on Auditor General

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE 2013 DIVISION OF REVENUE AMENDMENT BILL [B38 – 2013], DATED 1 NOVEMBER 2013

The Standing Committee on Appropriations having considered the 2013 Division of Revenue Amendment Bill [B38-2013], reports as follows:

1. Introduction

The Division of Revenue Amendment Bill (henceforth referred to as the Bill) was tabled in Parliament on 23 October 2013 by the Minister of Finance during the presentation of the 2013 Medium Term Budget Policy Statement (MTBPS).

This report focuses on amendments proposed in the Bill tabled by the Minister.

2. Equitable division of revenue raised nationally among the spheres of government

Table 1 hereunder outlines the equitable division of revenue raised nationally among the three spheres of government.

Table 1: Schedule 1

Spheres of Government

R’000

2013/14 Main Allocation

Adjustment

2013/14 Adjusted Allocation

National

676 920 412

(3 058 886)

673 861 526

Provincial

337 572 412

1 364 405

338 936 817

Local

40 581 787

13 223

40 595 010

TOTAL

1 055 074 611

(1 681 258)

1 053 393 353

The net effect of the 2013 adjustments is a reduction in the 2013/14 budget estimates of national expenditure from R 1.055 trillion to R1.053 trillion. The national allocation has been adjusted downwards by R3.059 billion from R676.920 billion to R673.862 billion. The provincial equitable share allocation has been adjusted upwards by R1.364 billion from R337.572 billion to R338.937 billion. The local government equitable share allocation has been adjusted upwards by R13.2 million from R40.582 billion to R40.595 billion.

3. Determination of each province’s equitable share of the provincial share of nationally raised revenue

Table 2 (hereunder) outlines each province’s equitable share of the provincial share of nationally raised revenue.

Table 2: Schedule 2

Province

2013/14 Main Allocation

Adjustment

2013/14 Adjusted Allocation

R’000

Eastern Cape

50 164 506

92 108

50 256 614

Free State

20 000 325

172 751

20 173 076

Gauteng

61 374 917

119 977

61 494 894

KwaZulu-Natal

73 509 972

416 615

73 926 587

Limpopo

41 361 830

124 678

41 486 508

Mpumalanga

27 210 543

149 996

27 360 539

Northern Cape

9 021 508

34 610

9 056 118

North West

22 754 264

156 101

22 910 365

Western Cape

32 174 547

97 569

32 272 116

Total

337 572 412

1 364 405

338 936 817

The provincial equitable share was adjusted upwards by R1.364 billion from R337.572 billion to R338.937 billion. The provincial equitable share adjustment of R1.364 billion comprises of the following:

  • R563.8 million to provide for the cost of wage increases in 2013/14 which were higher than the costs provided for in the 2013 Budget as a result of higher than anticipated inflation;
  • R690.8 million is to be added to the provincial equitable share to assist provinces with the cost of upgrading clerical positions as per the Department of Public Service and Administration’s 2012 circular providing for the re-grading of several clerical positions;
  • A roll-over of R109.3 million was approved on the provincial equitable share for funds allocated to the devolution of property rate funds grant that were allocated but not transferred to provinces in 2012/13;
  • An amount of R0.4 million is to be added to the provincial equitable share for the Free State and Mpumalanga provinces in order to reimburse the said provinces for funeral costs incurred for those killed in the tragedy at Marikana.

3.1.1. Allocations to provinces to supplement the funding of programmes or functions funded from provincial budgets

There were revisions in provincial allocations for the Provincial Roads Maintenance Grant which came about as a result of a new formula as well as provision for disasters that occurred between 2012 and 2013. The formula is based on provincial road networks, road traffic and weather conditions which are reflective of the different costs of maintaining road networks in each province. The introduction of this new formula led to large changes in the allocations to provinces. The revisions in the Bill allow for the slower phase-in of these changes and are as follows: Eastern Cape (R189.554 million), Free State (-R254.879 million), Gauteng (R222.200 million), KwaZulu-Natal (R155.392 million), Limpopo (R219.225 million), Mpumalanga (R1.671 million), Northern Cape (-R147.719 million), North West (R21.982 million) and Western Cape (-R55.077 million).

The Further Education and Training (FET) Colleges Grant was adjusted upwards by an amount of R11.5 million. The Department of Higher Education and Training has distributed the funds for the FET Colleges grant to the provinces in proportion to their share of personnel in FET colleges, as follows: Eastern Cape (R1.395 million), Free State (R0.814 million), Gauteng (R3.173 million), KwaZulu-Natal (R1.532 million), Limpopo (R1.769 million), Mpumalanga (R0.617 million), Northern Cape (R0.191 million), North West (R0.358 million) and Western Cape (R1.660 million).

There was an upward adjustment of R4.295 million for the Comprehensive Agricultural Support Programme Grant to provinces as follows: Limpopo (R2.475 million), Mpumalanga (R0.303 million and Northern Cape (R1.517 million). The Education Infrastructure Grant was adjusted upwards by R12.603 million for costs incurred in dealing with disasters that occurred between 2012 and 2013 and was effected in three provinces, KwaZulu-Natal (R7.574 million), Limpopo (R0.163 million) and Mpumalanga (R4.866 million)

3.1.2. Specific purpose allocations to provinces

Roll-overs for two Basic Education grants are made as a result of funds committed to projects in the 2012/13 financial year. The Dinaledi Schools Grant receives a roll-over of R4.067 million. The Technical Secondary Schools Recapitalisation Grant receives a roll-over of R10.680 million.

The Department of Economic Development in the Northern Cape receives R1 million through the Expanded Public Works Programme Integrated Grant for Provinces. These are funds that the province should have received 2012/13 based on its past performance on the programme.

The National Health Grant was created in the Division of Revenue Act of 2013 as an allocation in-kind, or indirect grant, through which the national department spends funds on behalf of provinces. Following the lack of spending within the Health Facility Revitalisation component, R200 million has been declared as savings. Within the remaining grant, R167 million is converted to a direct grant to KwaZulu-Natal (R110.0 million) and Northern Cape (R57 million) provinces and transferred as part of their Health Facility Revitalisation Grant allocations.

Following a number of disasters in 2012 and 2013 that damaged provincial infrastructure, an upward adjustment of R0.212 million is provided to the Mpumalanga province and R0.062 million is provided to KwaZulu-Natal through the Health Facility Revitalisation Grant for the repair or replacement of infrastructure. Furthermore, an upward adjustment of R44.454 million is provided through the Human Settlements Development Grant for the repair or replacement of damaged infrastructure to the following provinces, KwaZulu-Natal (R40.156 million), Limpopo (R1.368), Mpumalanga (R1.764 million) and Western Cape (R1.166 million).

3.1.3. Allocations-in-kind to provinces for designated special programmes

South Africa will host the 2014 African Nations Championship football tournament in January 2014. As such, R6 million was made available as an indirect grant to support host provinces to provide emergency medical services for the tournament during the announcement of the 2013 budget but remained unallocated. The 2014 African Nations Championship Health and Medical Services Grant allocates funding to the following host provinces: Free State (R1.687 million), Limpopo (R1.313 million) and Western Cape (R3.0 million). In addition, it is important to note that an amount of R120 million was made available to support host cities in the 2013 Division of Revenue Act for the 2014 African Nations Championship though at the time only Cape Town had confirmed as host city. Consequently the Bill gazettes funds for Mangaung and Polokwane.

As indicated in the previous section, the National Health Grant was created in the Division of Revenue Act of 2013 as an allocation in-kind or indirect grant, through which the national department spends funds on behalf of provinces. Following the lack of spending within the Health Facility Revitalisation component, R200 million has been declared as savings and R167 million was converted to a direct grant thus in total R367 million was the downward adjustment in the National Health Grant (Schedule 6A) effected as follows:  Eastern Cape

(-R72.70 million), Free State (-R54.20 million), Gauteng (-R56.495 million), Limpopo

(-R84.70 million), Mpumalanga (-R58.762 million), Northern Cape (-R8.40 million), North West (-R16.543 million) and Western Cape (-R15.20 million).

4. Adjustments for local government for the 2013/14 financial year

The local government equitable share allocation has been adjusted upwards by R13.2 million from R40.582 billion to R40.595 billion as follows:

·         Roll-overs of R11.3 million approved for the Bela-Bela Local Municipality. These funds were not transferred to the municipality during 2012/13 due to non-compliance with treasury norms and standards. Given the substantial progress made in complying with treasury norms and standards, the funds that the municipality would have received in 2012/13 have accordingly been rolled over.

·         National government undertook to reimburse municipalities for funeral costs incurred for those killed in the Marikana tragedy. As a result, an amount of R1.9 million will be added to the local government equitable share transfer to Bojanala District Municipality for the 2013/14 financial year.

Other adjustments to local government allocations are as follows:

·         Roll-overs of R2.471 million for the Municipal Infrastructure Grant have been approved for the Bela-Bela Local Municipality;

·         A roll-over of R58 million has been approved on the Regional Bulk Infrastructure Grant for projects in five municipalities where funds were committed but had not yet been paid at the end of the 2012/13 financial year. Most of these delays in spending were the result of delays in importing materials and equipment needed for projects;

·         A roll-over of R100.5 million has been approved on the Rural Households Infrastructure Grant. This grant funds the provision of on-site solutions for water and sanitation services for rural households where piped infrastructure is not feasible;

  • The Naledi Local Municipality in the Free State receives R0.60 million through the Expanded Public Works Programme Integrated Grant for Municipalities. These are funds that the municipality should have received 2012/13 based on its past performance on the programme.
  • A number of disasters have occurred in the Western Cape, Eastern Cape, Limpopo and KwaZulu-Natal that resulted in significant damage to municipal infrastructure. Funds amounting to R118.340 million for the repair and replacement of damaged municipal infrastructure are allocated through a new Municipal Disaster Recovery Grant transferred by the Department of Cooperative Governance.

5. Recommendation

The Standing Committee on Appropriations, having considered the Division of Revenue Amendment Bill [B38 – 2013] (National Assembly – section 76(1)) referred to it and classified by the Joint Tagging Mechanism (JTM) as a Section 76(1) bill, recommends that the Bill be adopted, without amendments.

Report to be considered.

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