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PRESENTATION TO THE STANDING COMMITTEE ON APPROPRIATIONS

Comments on the 2009 Medium Term Budget Policy Statement

Venue: GH46, Good Hope Building, Parliament

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Purpose of Presentation

To present to the committee the Department’sconsiderations on the Medium Term Budget Policy

Statement and the financial performance in the 2nd Quarter

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EXPENDITURE OUTCOMESsix months ending Sept 2009

04/19/23 4

1. Administration 184,325 85,097 99,228 46.2%2. Governance, Policy and Research 47,145 22,856 24,289 48.5%3. Urban and Renewal Development 9,534 5,937 3,597 62.3%4. Systems and Capacity Building 155,431 46,343 109,088 29.8%5. Free Basic Services and Infrastructure 39,719 19,805 19,914 49.9%6. Provincial and Local Government Transfers 35,988,996 15,073,794 20,915,202 41.9%7. Fiscal Transfers 101,983 55,596 46,387 54.5%Total 36,527,133 15,309,428 21,217,705 41.9%

Current expenditure 433,120 182,040 251,080 42%

Compensation of employees 174,109 80,894 93,215 46.5%Goods and Services 259,011 101,146 157,865 39.1%Transfers and subsidies 36,080,693 15,122,556 20,958,137 42%Provincial and Local Government transfers 35,989,096 15,073,799 20,915,297 41.9%South African Local Government Association 23,302 11,651 11,651 50.0%Municipal Demarcation Board 34,557 17,143 17,414 49.6%Non Profit Institutions 8,315 4,704 3,611 56.6%CRL Commission 20,250 10,672 9,578 52.7%Households 4,505 4,164 341 92.4%Other 668 423 245 63.3%Payments for capital assets 13,320 4,832 8,488 36.3%Total 36,527,133 15,309,428 21,217,705 41.9%

DeviationDPLG% Spent to Date

Available funds (R’000)

Total Expenditure

(R’000)

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Overall spending trends • Overall budget

R36.527 billion adjusted appropriation for 2009/10• Expenditure for April – Sept. 2009:

R15.309 billion or 41.9% of adjusted appropriation as against 34.6% of the 2008/09 adjusted appropriation.The main increase compared to previous year is related to increases in municipal costs and the replacement of the RSC levies with sharing of fuel levy by Metros.

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Overall spending trends

• Current paymentsAppropriation for full fiscal year: R433 million6 months spending: R182.million or 42%

Compensation of employees (46.5%)Goods and services (39.0%)

Year-on-year spending is similar for compensation (46.9% - 2008/09 and 46.5% - 2009/10) and goods and services (43.7% - 2008/09 and 39.% - 2009/10)

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• Transfers and subsidiesAppropriation for full fiscal year: R36.080 billion6 months spending: R15.122 billion or 41.9%

Provinces and municipalities (41.9%)Departmental agencies and accounts (50.5%)Public Corporations and private enterprises (80.8%)Non-profit institutions (56.6%)Households (92.4%)

Year-on-year spending is similar across most categories except to Non-profit institutions and Households.

Overall spending trends

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Overall spending trends

• Payments for capital assetsAppropriation for full fiscal year: R13.3 million6 months spending: R4.8 million or 36.3%

Machinery and equipment (36.3%)

Year on year spending shows decrease in capital spending capacity (53.% - 2008/09 and 36.3% - 2009/10) due to vacant posts not yet filled.

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REVISED ALLOCATIONS: MTBPS

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LG Transfers by CoGTA: Prior Adjustment

• Local Government Transfers 2009/10 2010/11 2011/12 2012/13

Adjusted Medium-term estimates

appro- MTEF Baseline

priation

Equitable Share (LGES) 24,355,502 29,267,706 31,889,901 33,484,396

Municipal Systems Improvement Grant (MSIG) 200,000 212,000 224,720 235,956

Municipal Infrastructure Grant (MIG) 11,433,494 12,528,884 15,068,551 15,821,979

Total 35,988,996 42,008,590 47,183,172 49,542,324

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Revision to Baseline 2009/10 - 2012/13 R12.4 billion is added to LG share Local Government

R Million 2009/10 2010/11 2011/12 2012/132010 MTEF

  Adjusted MTEF Total

LOCAL 835 1,600 3,000

7,800 12,400

Equitable Share 509

1,200

2,500

4,500

8,200

Conditional grants (direct transfers)

326

400

400

2,900

4,200

Municipal Infrastructure Grant 288 2,500 2,500

 

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Additional Funds: Equitable Share

• The Equitable Share increased by R8,2 billion over the MTEF

– For 2009/10 the increase is R509 million to compensate municipalities for the increased cost of providing free basic electricity to poor household

• Department currently working on the split through the formula (focus to be on household with services and without access to services)

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Additional Funds: MIG

• The MIG is revised upwards by R2,5 billion over the MTEF to augment municipal capital budgets

– For 2009/10 the increase is R288 million (part of the roll-over for funds stopped from underspending municipalities during 2008/09 financial year)

• Department currently working on the allocation for NT to gazette. In total, 50 municipalities will benefit from the R288 million.

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Conclusion

• The department acknowledges the revenue shrinkage due to the current economic conditions and appreciates the R2,5 billion made available for MIG and the R8,2 billion for Equitable Share over the MTEF

• The Municipal Systems Improvement Grant (MSIG) need to be increased over the MTEF in view of LG Turn Around Strategy , Operation Clean Audit. The grant indicates a

modest increase versus the Financial Management Grant (MSIG - R236 mil vs FMG – R404 mil)

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Thank You