ATC100907: Report 2009/10 Fourth Quarter Expenditure Report

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on the 2009/10 Fourth Quarter Expenditure Report, dated 07 September 2010


Having received a briefing from the National Treasury on the fourth quarter expenditure report for the financial year 2009/10 and engaged in public hearings with identified national departments, the Standing Committee on Appropriations reports as follows:


1.             Introduction


As required by the Money Bills Amendment Procedure and Related Matters Act, No.09 of 2009, National Treasury tabled the fourth quarter expenditure report before the Committee on 01 June for its consideration. This report provided preliminary expenditure trends for the end of the 2009/10 financial year. A number of issues emanate from this report that requires the attention of the Executive. These include a number of vacancies in government departments, unsatisfactory spending on conditional grants, slow spending on capital payments and the persistent culture of rolling over funds, shifting of funds and virements. While section 43 of the Public Finance Management Act (PFMA), allowed departments to do virements of up to 8 per cent of their budget, the Committee was concerned about the extent of this practice. In the Committee’s view, this might be an indication of a lack of proper budgeting and planning by departments as virements and shifting of funds were being effected as early as the first quarter of the financial year.


Furthermore, this report comes during a period when the country is faced with a number of challenges. These include an increase in unemployment rate, backlogs in the provision of services, challenges in the health care sector and landlessness. These require prudent spending and effective mechanisms to ensure that tangible outputs are achieved through proper implementation of budget. This report focuses on the spending trends by different departments and highlights in detail some challenges that still exist in the implementation of budget. The affected departments were invited to public hearings to account on their respective spending. These included the departments of Basic Education, Higher Education, Public Service and Administration, Energy, National Treasury, Health, Arts and Culture, Public Works, Agriculture, Forestry and Fisheries and Public Service Sector Education Training Authority.


2.             Expenditure Trends at the End of 2009/10


National departments were allocated an adjusted budget of R408.9 billion in the 2009/10 financial year. This included R118.7 billion (29.03per cent) for current payments, R282 billion (68.98 per cent) for transfers and subsidies, and R8.2 billion (1.99 per cent) for capital expenditure.The preliminary figures indicated that national departments had spent R403.8 billion of their overall budget at the end of the fourth quarter, an under-spending of R5.1 billion. Departments had under-spent in some economic classification but reported different levels of under-spending. The overall expenditure reflected R115.7 billion (97.49 per cent) on current payments, R279.8 billion (99.20 per cent) on transfers and subsidies and R8.3 billion on capital expenditure (101.78 per cent).


The year-on-year spending comparison for the departments reflected a declining trend. The national departments spent 98.75 per cent of their budgets in 2009/10 compared to the previous year’s expenditure of 99.05 per cent. Approximately 11 departments have spent within the range of 84.5 to 97.0 percent while 23 departments had spent within the range of 97.4 to 101 per cent. The Committee was particularly concerned about the under-spending of budgets since this has a potential to negatively impact on job creating and service delivery. Slow spending in some capital projects and conditional grants partly contributed to this trend. While the departments had requested rollovers of some of these funds, the lack of spending in these areas introduced a new risk of cost escalations for projects and this impacts negatively on government budgets.



3.             Spending trends for the Selected Departments


The departments reported different levels of spending on their budgets. The Department of Arts and Culture reported the lowest spending of 84.5 percent while the Department of Transport was the highest spending department at 101.1 percent. The following departments were selected after consideration of certain factors, namely, those that are central in the implementation of policy priorities and the spending pattern of different departments.


Table 1: Spending Trends per Department


2009/10 Budget Allocation

Under/ (Over) spending


Adjusted Budget

Actual Expenditure



Public Works

6 049 130

5 687 218

361 912


Arts & Culture

2 632 110

2 224 931

407 179



21 848 857

21 361 210

487 647



18 423 459

17 966 210

457 249



2 470 494

2 301 912

168 582


Rural Dev. & Land Reform

6 391 091

5 854 721

536 370


Minerals & Energy

4 683 004

4 538 797

144 207


Water Affairs

7 774 002

7 586 829

187 173



24 238 517

24 501 837

(263 320)


Source: National Treasury (2010)


3.1         Department of Public Works


The Department of Public Works was allocated R6 billion in the 2009/10 financial year. A substantial share of this budget amounting to R4.4 billion was allocated to the Provision for Land and Accommodation programme and R768.5 million to the National Public Works programme. Out of the budget allocation for the National Public Works programme, R201.7 million was for the Expanded Public Works Programme (EPWP) Incentive Grant for Municipalities while R151.4 million was for the EPWP incentive grant to Provinces.


The Department had spent R5.7 billion at the end of the fourth quarter which was an under-spending of R361.9 million. An under-spending of R220.2 million (5 per cent) was reported on Provision of Land and Accommodation Programme due to delays in registration and payment processes for properties that were being acquired or refurbished by the Department. Delays in spending were related to the acquisition of prestige accommodation as the suitability and availability of buildings remained a challenge. The processes of negotiating prices further contributed to the delayed spending. Furthermore, the negotiations for the acquisition of a property required for the construction of the Border Post precinct delayed the execution of the Land Ports of Entry project. The One Stop Boarder Post project initially planned for Lebombo was restructured into phases due to financial and legal implications associated with operations and construction required on foreign territory. Spending on the Re kgabisa Tshwane programme was delayed by late approval for additional work for the Government Garage programme and delays in the appointment of consultants. Other infrastructure projects including Dolomite and Accessibility were also delayed by procurement processes. The Department has indicated its intention to request a rollover in this regard.


The other area of slow spending in the departmental budget was EPWP incentive grant due to non-disbursement of grant funds to provinces and municipalities. The Department has under-spent by R101.3 million (50.19 percent) on EPWP incentive grant to municipalities as well as R35.2 million (23.25) on EPWP incentive grant to provinces. The following were among the challenges faced by the Department in the implementation of this grant:


·         Lack of communication between the Department of Public Works and provinces.

·         Lack of clear understanding of the purpose of this grant by provinces

·         Misalignment of financial years between provinces and municipalities.

·         Uncertainty about refunding as the grant compensate for past performance.

·         Capturing of data from provinces and municipalities.


The Department reported that it was developing a number of initiatives to overcome the challenges experienced in the implementation of this grant. These included the appointment of 90 data capturers to improve the credibility of database, and technical support to municipalities for improved data capturing and reporting. It added that provincial and municipal officials were trained on the EPWP incentive grant for better understanding.


The Committee noted that, as in previous hearings, concerns were raised by various departments about the lack of capacity within the NDPW to deliver on capital projects timeously.  The design of the EPWP Incentive grant and the fact that departments had to spend prior to accessing the grant was also a matter of concern, 


3.2         Department of Arts and Culture (DAC)


This Department was allocated an adjusted budget of R2.6 billion in 2009/10. A substantial share of R1.2 billion was allocated to Heritage Promotion Programme and R75 million was set aside for 2010 FIFA World Cup projects.


The Department was the lowest spending department with an expenditure of 84.5 percent at the end of the fourth quarter. It had under-spent by R407.2 million (15.47 per cent) mainly due to slow spending in most of its programmes. An expenditure of 71.3 per cent was reported on Heritage Promotion Programme due to low spending of capital works projects at public entities. The Department was allocated R601.4 million for Capital Works and had only spent R249.7 million of this budget at the end of the fourth quarter. It under-spent by R351.7 or 58.5 percent on Capital Works due to the following factors:


  • Cancellation of a contract to build new Archives building due to insufficient funding. An amount of R150 million was budgeted and allocated to this project based on the departmental projections when the budget was requested. The budget request was approved but this amount was proven to be lower when the Department of Public Works (NDPW) prepared its estimated costs for the project.
  • Delays in approving additional funding for existing projects.
  • Delays in approving sketch plan documents and tenders by the NDPW.
  • Cancellation of contracts due to underperformance.
  • Projects not implemented within agreed timeframes and specifications by NDPW.
  • Lack of monitoring of projects and inexperienced project managers in the NDPW.
  • Insufficient capacity in the Facilities Management Directorate with the DAC


In dealing with these challenges, the Department indicated that client forums among affected stakeholders including the DAC and NDPW were established to plan for projects and assess their implementation. The Capital Works Committee within the Department was formed to assist in managing and monitoring the capital works budget. Furthermore, assistance was requested from, and provided by the National Treasury’s Technical Assistance Unit to deal with Capital Works.


The Committee viewed the Capital Works projects as a catalyst of creating jobs and noted that proper planning for capital works was important for the success of the projects. It acknowledged the challenges to be late submission of needs for Capital Works to the NDPW and suggested that Capital Works plans and needs should be submitted to the NDPW at the beginning of a financial year.


The Department also reported an unsatisfactory spending pattern of 79.4 percent on the Cultural Development and International Cooperation Programme. This was due to a slow spending of 12.62 per cent on the Investing in Culture Programme as a result of a moratorium on payments from this Programme. The moratorium was placed by the Minister due to the suspension of the Deputy Director-General (DDG) and staff members from this Programme. It was reported that the Deputy Director-General was suspended for suspected fraud and that the moratorium was placed to allow a forensic audit to take place. The irregularities included money that was being spent for non-existing projects and the forgery of the Director-General’s signature. Subsequent to this audit, the DDG with 12 departmental officials were dismissed by the Department. This case was forwarded to the Special Investigations Unit (SIU) for further investigations with a view to recovering funds where financial losses were incurred. The Assets Forfeiture Unit was involved in efforts to recover funds from those found responsible for the losses. The moratorium resulted in R81.3 million of the R93.1 million allocated to this programme not being spent. The Department has requested a rollover of R18.6 million for the Investing in Culture Programme.


The Committee noted that the inadequate risk management strategy resulted in the embezzlement of funds, as payment was made to non-existing projects. It further required that a proper turnaround strategy be developed to counter the repeat of this phenomenon in future. It was indicated that some of the people who were fired were provincial coordinators responsible for monitoring and evaluation of capital projects. This was mainly a break of trust as the Department relied on these officials to monitor projects. During the hearings the Department reported that it had since developed a turnaround strategy which included:


·         Enhancement of Risk Management strategy and processes.

·         Strengthening of Audit Committees.

·         Improved coordination with provinces.


It further stated that the repayment of funds and/or attachment of properties of those found responsible had not started yet. The SIU was still busy with its investigations.


The Department was allocated R75 million for the 2010 FIFA World Cup projects and had spent R62.1 million of this budget at the end of the fourth quarter. This was an under-spending of R12.9 million on these projects, the majority (R6 million) of which was from the funds for Public Viewing Areas (PVAs). This delay in spending was mainly due to the fact that the event was held from June 2010. The Department reported that it had requested a rollover of these funds from National Treasury for the maintenance of infrastructure, particularly in PVAs. Other areas of concern in the spending of the Department were the Financial Assistance to Promote Language Development which had over-spent by 93.8 per cent and the programme for the Promotion of Arts and Culture Internationally which only spent 42.6 per cent of its budget. 



3.3          Department of Education


The Department of Education was among the departments that were allocated a substantial share of the budget. It was allocated R21.8 billion with 20.1 billion (92.15 per cent) going to transfers and subsidies. These included conditional grants and subsidies to institutions of higher learning.


The Department has spent R21.4 billion at the end of the fourth quarter. This represented an under-spending of R487.6 million compared to the budget. The General Education Programme which was responsible for developing and implementing national policy for general education and quality assurance spent 42.5 per cent of its budget. This programme included the budget for literacy and numeracy workbooks. The Department spent R352.6 million of the R829.9 million allocated to this Programme. Funds amounting to R524 million were allocated during 2009 budget adjustments for literacy and numeracy workbooks for Grades R to 6 learners. These funds were not spent due to the cancellation of a tender which was marred by irregularities. The Department used R48 million of these funds for Grade R resource kits and lesson plans for grade 1 to 6. It has requested a rollover of the remaining R476 million. The Department decided not to go out on tender process but to develop the workbooks internally. Experts for the development of workbooks were hired and the Department was in the process of selecting schools to pilot the delivery of the workbooks. The outcomes of this pilot would inform the rollout and the distribution of workbooks to schools. The Committee was concerned about the late delivery of these workbooks since education was among the priorities that were announced by the President during the 2009 State of the Nation Address. While it noted the initiative it was interested in determining the extent to which savings would be made as a result of this initiative. Both the National Treasury and the Department of Basic Education could not quantify the cost implications of the initiative by the Basic Education Department. The Committee remained concerned about delays in implementing the budget for the literacy and numeracy workbooks.


The implementation of the departmental budget was also affected by vacancies. The Department did not spend R4.4 million on System Planning and Monitoring programme due to the late filling of vacancies in the Integrated Quality Management System Unit as well as vacancies in the National Education Evaluation Development Units. These vacancies contributed to the slow spending on capital payments as furniture and equipment could not be purchased.


3.4         Department of Health


This Department was allocated R18.4 billion in 2009/10, with transfers and subsidies receiving R17.2 billion of this budget. An amount of R16.7 billion was allocated to conditional grants, including R3.4 billion for Hospital Revitalisation Grant.


The Department had spent R18 billion at the end of the fourth quarter, which was an under-spending of R457.2 million (2.48 percent). Both Health Services and Health Planning and Monitoring programmes reported an expenditure of 96 per cent and 97.4 per cent, respectively. International Relations, Health Trade and Health Product Regulation programmes spent 93.5 per cent of their budgets. This under-spending was largely due to the non-disbursement of R381.1 million for the Hospital Revitalisation Grant. The slow spending in three provinces, namely, Mpumalanga, KwaZulu-Natal and Free State resulted in the non-disbursement of funds from this Grant. The following are the reasons advanced for the slow spending in these provinces:


·         Mpumalanga: A rollover of R153.5 million was approved by the National Treasury on condition that an audit would be undertaken to show that the province would be able to spend rollover funds. The province was proven to have deficiencies in spending of these grants and could not meet the set conditions. The funds were withheld by the National Department of Health.

·         KwaZulu-Natal: The non-approval of critical posts, delays due to the tender processes not being followed by Independent Development Trust (IDT) and delays in road tenders.

·         Free State: Delays in advertising of the bids, underperformance by contractors and non-approval of the acquisition plans.


The Department seemed to be experiencing challenges in managing this grant. Funds amounting to R87.7 million were rolled over from 2005/06, R234 million from 2006/07, R132.1 million from 2007/08 and R183.9 million from 2008/09. The Department had requested a further rollover of R381 million for this grant in 2009/10. This grant aims to transform quality management and to improve the quality of health care. While the country had generally made significant strides in improving the health care system, the quality of health services in some public hospitals was deteriorating. The slow spending on the Hospital Revitalisation Programme was worrisome since improved quality and management of public hospitals was necessary in the implementation of the National Health Insurance system.


The Department indicated that it was closely monitoring capital projects to prevent wasteful expenditure. The Committee supported this plan but questioned its role in ensuring spending by provinces. The Committee viewed the role of the provincial departments to be that of policy implementation, while the national department monitors such implementation and give guidance where necessary. This principle seemed to be lacking and this was reflected by the under-spending. It also appeared that provincial departments were not submitting their plans and expenditure reports for this grant to the relevant provincial treasuries as timeously as required. The Department indicated that an engineer had been appointed to review all infrastructure projects and teams were formed to improve compliance with contractual and legal obligations. It added that some institutional arrangements had been put in place to monitor projects. The Development Bank of Southern Africa (DBSA) would also assist the Department to evaluate and enhance the capacity of hospitals’ Chief Executive Officers (CEOs). The Committee committed to monitoring these departmental initiatives and provide support where necessary.


3.5         Department of Communications


The Department of Communications was allocated R2.5 billion and this budget was dominated by transfers and subsidies, which were allocated R2 billion. The Department had spent R2.3 billion of its budget at the end of the fourth quarter. An amount of R168.6 million (6.82 per cent) remained unspent. It was indicated that this under-spending was due to, among other things, the R116 million savings on the contractual agreements for 2010 FIFA World Cup infrastructure related projects entered into by Sentec and Telkom. However, the Departmental spending was also affected by a number of other factors, including a high vacancy rate, non-disbursement of funds to receiving entities and delays in Public Private Partnership (PPP) processes.


The Programme Production was allocated R25 million and only R5 million (20 percent) was spent at the end of the fourth quarter. An amount of R20 million was not spent due to reprioritisation exercise that was done for Broadcasting Digital Migration awareness. The Department could not spend R15.5 million allocated to the ICT Infrastructure Development Programme due to delays in converting PPP process to national PPP. Furthermore R1.6 million was not spent on the Administration Programme and an amount of R5.7 million on Presidential National Commission was due to vacancies. Slow spending in Presidential National Commission was also attributed to the development of hospitals and municipality projects which were still in progress.


3.6         Rural Development and Land Reform


This Department received an adjusted budget of R6.4 million. During the 2009 Budget Adjustments, R250 million was added to the Land Reform programme for comprehensive rural development, R2 million to Spatial Planning and Information for salary increases and R13 million to Administration for salary increases. The Department has under-spent by R536.4 million (8.39 per cent) at the end of the fourth quarter. The Department reported that the major contributing factor to the under-spending was the change of departmental mandate which now included rural development, new programmes and a number of vacancies. The under-spending emanated from the Administration, Land Reform and Rural Development programmes.


An amount of R79 million was not spent on the Administration Programme due to the non-implementation of the new structure and the cancellation of recruitment tenders. The Department stopped using recruitment agencies and decided to build internal capacity for recruitment purposes. The vacancy rate in the Department further affected other areas of spending including travelling, stationary and communication. Furthermore, leave gratuity payouts to employees were less than anticipated.


The Committee was concerned about the number of critical posts that were not filled by the Department and enquired about the plans to overcome this challenge. The Department assured the Committee that it was busy with the filling of vacant posts. It however indicated that it was difficult to find other specialised skills such as land surveyors. The Department was embarking on a bursary scheme in trying to counter this challenge.


The Land Reform Programme has under-spent by R407.3 million mainly due to the non-disbursement of funds for the Land Reform Grant (Redistribution and Tenure projects). An application to shift R500 million (above 8 percent of the programme budget) from Land Reform to the Restitution programme was made to the National Treasury. The National Treasury only approved R100 million to be shifted in November 2009 and there was little time remaining to spend R400 million under the Land Reform programme.


It was also indicated that offers were made and accepted by land owners. These commitments were entered into by the junior staff of the Department that were delegated to do so. The Department has commitments of about R7.5 billion which had since increased to R12 billion as a result of the courts compelling the Department to pay. The Department was compelled to pay even where there was no signed agreement but only the offer and substitute. Following the precedence set by the courts through court decisions, more land owners are taking the Department to court. The Minister had instructed the Department to settle all court orders and it was reported that about R700 million had been paid on Court Orders. The outstanding ones were still with the Deeds Office and would be paid once registered. Land owners would be engaged because the court cases were expensive and an engagement strategy was being developed to set terms of engagement.


The Department reported that a further 4000 claims remained outstanding. These claims had not been researched and could thus not be quantified. The sitting costs for these claims were not known since the Department cannot quantify them in monetary terms. The evaluation of these claims has not been done yet since the research is still to be conducted to validate the claims. The Department committed that this process will be finalised at the end of the 2010/11 financial year.


The Committee expressed its displeasure about the spending of considerable sums of money on court cases and the unquantified costs that could put a future burden on the fiscus. It was of the view that these funds could have been used to settle claims. The Committee encouraged the Department to engage land owners for out of court settlements. The Department reported that it would request R12 billion during the adjustments to deal with the backlog. This included funds to buy the gazetted land, compensate beneficiaries and for developmental grant. The Committee contested the R12 billion figure and looks forward to obtaining more information and engaging the Department further during the adjustments period.    


The Cadastral Survey programme has also under-spent by R13.6 million (9.35 per cent) due to lengthy recruitment processes and the establishment of offices in the Eastern Cape and North West provinces. Furthermore, R22.2 million (34.62 per cent) of the Spatial Planning and Information Programme was not spent due to unfilled vacancies.


3.7         Department of Minerals and Energy


The Department of Minerals and Energy was allocated R4.7 billion in the 2009/10 financial year. It spent R4.5 billion at the end of the fourth quarter, which was an under-spending of R143.2 million (3 per cent). This was largely due to delays in the submission of invoices from beneficiaries of the mining subsidy.  This under-spending emanated from the under-spending on transfers and subsidies. The Department has spent R3.5 million (96.5 per cent) of the R3.6 million budget for Associated Services Programme. This included the Integrated National Electrification Programme (INEP) Grant. While a number of households, schools and clinics particularly in rural areas still lacked electricity, the Department under-spent in the INEP Grant. INEP Grant was allocated R932 million but R899 million (96.4 percent) was disbursed at the end of the fourth quarter. This was due to the late submissions of requests for funds by municipalities and delays in finalizing service level agreements between the Department and municipalities. The Department had also under-spent on the INEP (non-grid electrification service providers) which was allocated R84 million. It spent R1.2 million (1.5 per cent) of this budget.  This was attributed to the delays in appointing service providers and the signing of contract. The Assistance of Mines programme was allocated R43.1 million but only spent R31.1 million (72.1 percent), under-spending by R12 million.


The misalignment of national and local government financial year and plans impacted negatively on the INEP spending. Municipal tender processes only started after July once the budgets had been passed. In some cases, municipalities took some time to plan for the spending of budget. The slow spending in this programme was mainly as a result of lack of spending in some provinces. The provinces under-spent as follows:


  • Limpopo (R5.08 million):


Elais Motsoaledi municipality under-spent by R1.5 million due to the unavailability of network capacity to electrify 136 houses. It was reported that the area lacked the bulk infrastructure to facilitate connections.


An amount of R3.3 million was not spent on Mookgopong municipality due to the cancellation of a project. It transpired that this project had already formed part of an Eskom project. The Committee viewed this as an indication of lack of thorough planning and coordination on capital projects.


  • Gauteng (R6.8 million)


Nokeng tsa Taemane municipality could not spend R6.8 million. This was due to the fact that the municipality intended to refurbish old network with the INEP funding where there is no backlog.


  • North West (R6.2 million)


This was mainly due to the lack of spending by the Madibeng municipality. The under-spending was attributed to the lack of proper and sufficient planning as 2008/09 projects were not yet complete. This municipality was also marred by the illegal occupation of houses, a matter still to be resolved.


The Department has also reported a slow spending by R10.8 million (3.18 per cent) on the Electricity, Nuclear and Clean Energy programme due to the non-disbursement of R5.25 million for Renewable Energy and R5 million for Working for Energy. This was due to the delays in the finalisation of work plans of these programmes. The Committee viewed the Working for Energy programme as one of the initiatives developed to create jobs through the Expanded Public Works Programme. The lack of spending in this area limited the potential to create such jobs. An amount of R151 million was allocated for Mining Regulation but R147 million (97.6 per cent) was spent at the end of the financial year. This was due to delays in the signing of contracts with the appointed service providers and spending on projects aimed at rehabilitating un-owned Mines[1].


The Committee views the three year budgeting process (Medium Tern Expenditure Framework/ MTEF) as an important reform in the budget system. The excuse of misaligned budgets at national, provincial and local level could no longer be accepted because the long term planning approach of government acknowledged the misalignment.


3.8         Department of Water an Environmental Affairs


The Department of Water and Environmental Affairs was allocated R7.8 billion but had spent R7.6 billion (97.6 per cent) at end of the 2009/10 financial year. This translates to the under-spending of R187.1 million (2.4 per cent) largely on current payments as well as on transfers and subsidies. The Water Services programme was allocated R2.8 billion and R2.7 billion (93.6 per cent) of this budget was spent at the end of the fourth quarter. The under-spending was due to non-payment of certain invoices on goods and services as a result of delays in procurement processes on sanitation and water projects. This was also due to vacancies within this programme. The Water Resource Management programme was allocated R4.1billion but spent R4 billion (98.7 per cent). The under-spending of R52.9 million was due to transfers not being made to the Water Trading Entity and to poor farmers and dam safety projects. An amount of R13.6 million for the Water Services Operating Subsidy Grant for the refurbishment of water scheme was not transferred to municipalities due to a lack of accountability by municipalities. The Department had requested a rollover of R126.4 million from National Treasury.


The Department is very critical in ensuring access to basic water services. It was therefore concerning that certain households, schools and clinics were still without water in certain areas yet the Department under-spent in areas such as Water Services and Water Services Operating Subsidy Grant to municipalities. This resulted in a lack of access to clean and running water, which hampered government programmes of creating decent work and sustainable livelihood.


3.9         The Department of Transport


The Department of Transport was allocated R24.2 billion and spent R24.5 billion at the end of 2009/10 financial year. This was a R263.3 million (1.0 per cent) over-spending attributed to the high spending on the bus subsidy in the Public Transport programme. This programme was allocated R14.3 billion but the Department spent R14.7 billion (102 per cent). Despite the overspending, shifting of funds has been effected in this programme. It was noted that most of the funds were made from various programmes. This included R17.7 million which was shifted from other programmes to Transport Regulation and Accident programme. In the same programme a number of sub-programmes reported an expenditure of less than 100 per cent and funds were shifted to the Africa Civil Aviation Commission Programme. This Programme spent 131.8 per cent of the allocated budget.


The Infrastructure and Systems Grant was allocated R206.5 million but only R106 million (51.3 percent) was disbursed at the end of the fourth quarter. The Transport Logistics and Corridor Development Programme was allocated R31.8 million and only R13.6 million (42.96 per cent) was spent. An amount of R2.3 million of the Programme budget was shifted after the budget adjustments. The shifting of funds might is an indication of lack of proper planning by the Department. Appropriate measures are required to ensure accurate and proper financial and programme planning.


4               Further analysis of departments’ spending issues


·               The Department of Home Affairs has under-spent by R56.7 million on its budget mainly due to slow spending in Immigration Services.


·               Statistics South Africa has under-spent by R139.4 million (8.13 percent) on its budget. This was mainly due to vacancies and delays in some Census 2011 activities.


·               Due to the early realisation of high spending variance as a result of vacancies, the Department of Labour shifted R93 million from the compensation of employees under Service Delivery Programme. An amount of R16.3 million for Employment and Skills Development Services was not spent due to the shift of the skills development function to the Department of Higher Education. A rollover request was made to the National Treasury regarding these funds. Furthermore, R5.34 million for the Research Monitoring and Evaluation Agenda was not spent due to delays in tender processes. The Department had applied for the rollover of R4.6 million from these funds.

·               The Department of Human Settlements under-spent by R233.3 million on its budget. This was due to vacancies, consultants’ costs and acquisition of goods and services. This Department had reported spending of less that 75 per cent in most of its programmes. It reported an expenditure of 67.9 per cent on Administration, 66.5 per cent on Housing Policy, Research and Monitoring and 58.2 per cent on Housing Planning and Development Support.  The under-spending on the Administration programme amounted to R53.9 million (32.14 per cent) due to vacancies, slow spending on office furniture and equipment, slow spending on adverts for recruitment, and slow spending on transport as well as travel and subsistence. The slow spending on the Housing Policy Research and Monitoring resulted in an under-spending of R22.5 million (33.49 per cent). This was due to savings made on printing, travelling and consultants. The under-spending of R70.9 million (41.84per cent) on Housing Planning and Service Delivery  was due to the under-spending on Human Settlement planning for implementation of the Community Outreach Programme. This was intended to provide housing in Diepsloot.


·               The Department of Agriculture, Forestry and Fisheries was allocated R367 million for Micro-Agricultural Institutions of South Africa (MAFISA). At the end of the third quarter, the Department only transferred 39.8 per cent of the funds. This trend significantly improved during the fourth quarter with 100 per cent of these being reported as transferred to receiving entities. It is important to note that the transfer of funds by the transferring entity does not necessarily translate to the actual expenditure by the receiving entity.


The Committee noted that the Department had presented to Parliament its strategic plan on MAFISA outlining its expected expenditure for the financial year 2009/10. An amount of R420 million was approved for loans, however only R66.1 million was disbursed at the end of the fourth quarter 2009/10 financial year.  The Committee was informed that in some cases farmers were reluctant to take up the loans offered by the Department and were more interested in the grants.


The Department reported that it was reorganizing itself with the Land Bank to address challenges observed by the Committee. It noted that its report was on the situation at present but that improvements were expected in the near future.


It was reported that the Department received R146 million to address distressed farms. The term ‘distressed farmers’ referred to three distinct types of farmers:


1.             About 30 farmers who can pay but were not willing to re-pay an amount of R50  million

2.             Those farmers who were trying to ensure that their farms were productive. They would have to give over ownership of the farms to the Department and for five years would not be repaying the loan. After five years they would repay the loans and regain ownership of their farms

3.             deserted farms which the Land Bank would have to repossess


It was reported that these were farmers who had borrowed money from the Land Bank. After three months of not paying, the bank regards farmers to be on areas and the portfolio could be restructured after six months. The pre-legal process then takes place which normally takes about a year or two where the bank engages the farmer to look into the problem. As a final step, the bank either takes legal action and/or repossession is effected.


The Committee sought to establish whether the Department had any historical data in terms of programmes such as that of distressed farms. Such data would entail information about previously distressed farms and what interventions were undertaken and the subsequent results. The Department reported that CASP, Land Care, MAFISA, Agri-BEE and Ilima/Lestema were part of a turnaround strategy that it had put in place and would present to the Committee at the earliest opportunity. The Committee resolved to invite the Department again to present its turn around strategy.


Furthermore, funds amounting to R48.6 million were allocated to AgriBEE. No funds were transferred to the Land Bank for AgriBEE at the end of the third quarter. However, the fourth quarter expenditure report reflected a drastic improvement in this area with 100 per cent of these AgriBEE funds being transferred to the Land Bank. In ascertaining the reasons for the delayed transfers the Department reported that the funds were only transferred in the fourth quarter due to an investigation initiated by the Land Bank into the management of the AgriBEE fund. It added that no funds had been disbursed by the Land Bank to beneficiaries by the end of the fourth quarter. Funds would be disbursed during the course of 2010/11 after the signing of a “new” Memorandum of Agreement (MOA) between the Department of Agriculture, Forestry and Fisheries and the Land Bank.


·               The National Treasury’s under expenditure amounted to R176.8 million, which was 0.3 per cent of the total appropriated funds. The under-spending emanated from the Asset and Liability Management, Financial Management and Systems, Provincial and Local Government Transfers and Fiscal Transfers programmes.


         The Committee’s main focus was on the Neighbourhood Development Partnership Grant (NDPG) under Provincial and Local Government Transfers programmes. National Treasury reported that slow spending in this area was affected by the following:


-          A lack of spending by some municipalities resulting from lack of capacity.

-           Delays and irregularities in tender processes.

-          The need for intensive support and monitoring by a third of the recipient municipalities.

-          Low level of accuracy in cash-flow forecasting for large, multi-stakeholder programmes.

-          The need for municipalities to meet the conditions and objectives of the grant as per the Division of Revenue Act; and municipal capacity for budgeting. 

         Due to the lack of understanding by the municipalities of the Neighbourhood Development Partnership Grant, the National Treasury was providing technical assistance to municipalities in an effort to address this challenge. The Committee was of the view that this grant is complicated for municipalities and it needs simplification.


         Members of the Standing Committee on Appropriations and Portfolio Committee on Public Works both emphasised that National Treasury should set an example for other departments in its spending trends since it deal with budget allocations.


5         Findings


5.1               Out of the adjusted budget of R408.9 billion, national departments have spent R403.8 billion at the end of the fourth quarter. This was an under-spending of R5.1 billion (1.2 per cent). A year-on-year spending benchmark reflected a declining spending trend as compared to 99.81 per cent expenditure in the previous financial year.


5.2               Approximately ten departments have spent within the range of 13.9 to 72.7 per cent of capital budgets. These include the departments of Trade and industry (13.9 per cent), Human Settlements (37 per cent), Labour (44.1 per cent), Health (47.5 per cent) International Relations and Cooperation (60.4 per cent), CoGTA (61.7 per cent), Presidency (62.9 per cent), National Treasury (71.5 per cent) and Rural Development and Land Reform (72.7 per cent).


5.3               Some national departments did not transfer grant funds that amounted to R750.8 million to receiving entities. The table below indicates the grants and amounts that were not be transferred by different departments:

Table 2: Under-spending on conditional grants














5.4               While the country was facing increases in the unemployment rate, a number of departments reported slow spending due to vacancies. Approximately 16 departments have under-spent on their budgets due to vacancies. These included the departments of Justice and Constitutional Development, Communications, Human Settlements, Rural Development and Land Reform, Cooperative Governance and Traditional Affairs, Public Enterprises, Science and Technology, Trade and Industry, Social Development, Sports and Recreation, Statistics SA, Department of Public Service and Administration, Education, Labour, Independent Complaints Directorate and Water Affairs.


5.5               Notwithstanding section 43 of the PFMA and the Treasury Regulation 6, the level in which rollovers and shifting of funds were made by the departments had a potential to impact negatively in the delivery of services. The table below indicates nine departments which were expected to request rollovers of funds amounting to R1.5 billion during the budget adjustments period.


Table 3: Possible Requests for the Rollover of Funds












5.6               Irregularities in tender processes that result in tenders either being delayed or cancelled was becoming a serious threat in the implementation of budget and delivery of services.


5.7               The Department of transport had over-spent by R263.3 million due escalating expenditure relating to bus subsidies. Spending on the bus subsidy continues to pose a challenge for the Department of Transport. 


5.8               Despite the MTEF, planning and monitoring continue to pose challenges across sector departments.  


5.9               The Committee found that the Department of Rural Development had utilised an amount of approximately R700 million of its budget to settle court orders based on litigation awarded in favour of applicants.   


5.10            A further 4000 claims against the Department of Rural Development and Land Reform could not be quantified. This could put a further strain on the department’s budget.


5.11            The Department of Arts and Culture had not developed an adequate Risk Management Strategy to safeguard departmental assets.


5.12            Some departments still used the misalignment of financial years between the national, provincial and local governments as a reason for low spending. The Committee regarded this as an excuse for underperformance adding that the reforms in management of government finances including the MTEF specifically caters long term planning.  



6                     Recommendations


The Standing Committee on Appropriations, having heard evidence on and considered the spending trends of the above-mentioned government departments as at 31 March 2010, recommends the following:


6.1               National Treasury should prepare and submit a turnaround plan to address the approved rollover funds that result to costs escalation of some capital projects to Parliament within two months after the adoption of this report by the House.


6.2               All government departments should attend to filling of critical vacancies to improve service delivery.


6.3               The Department of Transport should submit a detailed report outlining its plans to address over-spending on the Bus Subsidies programme to Parliament within two month after the adoption of this report by the House.


6.4               The Department of Rural Development and Land reform should endeavour to settle disputes with land owners, rather than reverting to courts and legal actions.


6.5               The Department of Rural Development and Land Reform should:


6.5.1          Disclose the amount of money that was budgeted for the legal costs for the 2009/10 financial year, and


6.5.2          Submit a detailed report listing all litigation matters brought against it and attach costs of such matters to Parliament within three months after the adoption of this report by the House.




7               Conclusion


7.1               It is important to note that the figures used in this report had not been audited; they were reported figures as provided by departments and the National Treasury in line with section 32 of the Public Finance Management Act. Due to the recurring nature of the problems related to under and over spending, the Leader of Government Businesses will be engaged to ensure that the implementation of and accountability on the Committee’s recommendations are enhanced. All government departments should establish relevant systems with the view to ensuring report back mechanisms in relation to Committee recommendations in order to address the spending gaps identified during the scrutiny of the quarterly report.




Report to be considered



[1] National Treasury (2010)


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