Presentation to the Select Committee on Finance 17 June 2015 12/26/2017 Presentation to the Select Committee on Finance 17 June 2015

Outline Provincial Economic Outlook 12/26/2017 Outline Provincial Economic Outlook 2015 MTEF – Provincial Fiscal Sustainability 2015 MTEF – Fiscal Sustainability Risks 2015 / 16 Provincial Receipts 2015/16 Provincial Payments per Vote IYM: Expenditure Outcomes - 31 March 2015

Provincial Economic Outlook 12/26/2017 Provincial Economic Outlook Global recovery continues but is moderate and uneven Provincial forecast for 2015 and 2016 show a positive trend, this is mainly as a result of increased mining opportunities, SKA and investments in renewable energy projects. The province has recorded the third highest unemployment during the 4th quarter of 2014 i.e. 28.7%. Between 2003 and 2013 poverty levels in the province showed a slight decrease from 474 015 to 445 329 people .

Structure of the Northern Cape Economy 12/26/2017 Structure of the Northern Cape Economy Fastest growing sectors between 2003 and 2013 are mining, transport and storage, and agriculture

12/26/2017 Policy Imperatives The fiscal stance continues to be guided by the following overarching government policies: National Development Plan Medium Term Strategic Framework 2014-2019 (and the 14 government outcomes) Northern Cape Provincial Growth and Development Strategy National and Northern Cape Treasury’s Medium Term Budget Policy Statements The Northern Cape Provincial Spatial Development Framework.

2015 MTEF – Provincial Fiscal Sustainability The technical adjustments (impact of new data updates) of R77.483 million and R175.236 million in respect of the equitable share (PES Cuts) have resulted in a total reduction of R252.719 million over the 2015 MTEF. The Department of Education was reduced with a further amount of R141.336 million over the 2015 MTEF to provide for the Functions Shift in respect of the ABE&T and R4.913 million for the Port Health Services. These functions will move to the national Departments of Higher Education and Health respectively. National Treasury did not provide additional funds for the ICS shortfall in the 2014 adjustment budget, Provincial Treasury managed to reprioritize (once off) using own resources to cushion Health and Education only, however the carry through for the 2015 MTEF is still unfunded and remains a challenge. Despite the reductions in the Provincial Equitable Share amounting to R252.719 million over 2015 MTEF, Provincial Treasury has managed to cushion departments over the 2015 MTEF.

2015 MTEF – Provincial Fiscal Sustainability…. Consolidated reductions in the 2015/16 FY amount to R86.589 million off which R76.096 million is contained by Provincial Treasury and R10.493 million Is shared among other departments excluding the social sector. In the 2016/17 and 2017/18 financial years, the reduction in the equitable share amount to R154.636 million and R11.494 million respectively these reductions have been contained entirely by the fiscus and therefore all departments are protected by the adjustments. As indicated above, all the unallocated funds have been utilized to manage the impact of these reductions and Provincial Treasury will not be in a position to provide for the carry through of the unfunded shortfall of the ICS especially in Health and Education, National Treasury is urged to consider this shortfall. The budget surplus provide for the funds put aside for the purpose of the unauthorized expenditure and a small amount is for other earmarked priorities not yet allocated.

Fiscal Sustainability Risks Unfunded ICS The unfunded ICS remains a serious risk for the province, one that all provinces cannot manage or influence, the carry through of this shortfall amount to R221 million for the 2015/16 and 2016/17 financial years. The major risks is attributed to the departments of Education and Health. The recently concluded wage agreement will also have serious financial implications in the provincial fiscus, should National Treasury not entirely fund the shortfall. New Infrastructure Projects: Operational Costs National Government is investing in new infrastructure in the province without providing budget for operational costs. New Upington Hospital is not fully capacitated although Provincial Treasury has made additional funds available to assist in the operationalization of the hospital; De Aar Hospital is already in its final phase of completion, and is expected to be completed in December 2015 New Mental Hospital is expected to be completed in January 2016 Utilizing Municipalities to collect revenue on behalf of provincial government Motor Vehicle Licenses constitute 70 per cent of the total revenue budget of the Dept of Transport, Safety & Liaison, however Municipalities do not pay over to the province. Municipalities are using MVLs as a source of additional income and this poses serious challenges for the fiscal sustainability of the province.

Provincial Receipts – 2015/16 Transfers from National Government accounts for 98 per cent of the total provincial receipts in 2015/16. Conditional grants for the departments of Education, Health and Public works accounts for 77 per cent of the total provincial conditional grants receipts for 2015/16. Provincial Own Revenue is projected at R340 million for the 2015/16 financial year.

2015 Provincial Payments per Vote Departments of Education and Health accounts for 65 per cent of the total provincial payments for the 2015/16 financial year at 36 per cent and 29 per cent respectively.

2015/16 Estimates per economic classification

2015/16 Capital estimates per vote

2015/16 Capital estimates per category

Preliminary Expenditure Outcomes 31 March 2015

Own Revenue per department

Own Revenue per economic classification

Conditional Grants Expenditure as at end of March 2015

Conditional Grants Expenditure as at end of March 2015

Conditional Grants : Health Hospital Facility Revitalisation Grant Under spending is due to the delays in the delivery of infrastructure projects at De Aar Hospital including the procurement of medical equipment for the Curo-Med building (Kimberley Hospital) for the two additional theatre services to alleviate pressure on the current services discipline. The Mental Health Hospital remains a challenge because of slow delivery by the contractor. The department has requested a roll over of the unspent funds.

Conditional Grants : Health National Tertiary Services Grant The department recorded an under expenditure of R3.352 million for the period ended 31st March 2015. The reason for under spending is due to the delays in the delivery of medical equipment by the suppliers and upgrading of the High Care unit at KHC. The department has requested a roll over. National Health Insurance Grant The department recorded an under expenditure of R3.332 million for the period ended 31st March 2015. The under spending on the grant is mainly due to delays in the implementation of business plans and vacancy of the NHI Project Manager. An amount of R0.331 million was committed towards the procurement of goods and services at the end of the financial year. .

Conditional Grants : Education Dinaledi Schools Grant The under spending relate to the commitments of the training that was held on the 27th – 29th March 2015.

Conditional Grants : Transport, Safety and Liaison Public Transport Operations Grant Invoices on the Public Subsidised Transport are paid in the subsequent month after the services were rendered and hence the under spending amounting to R3. 664 million.

Conditional Grants : Roads and Public Works Integrated Expanded Public Works Programme Incentive Grant The under spending amounting to R1.768 million relates to delays in the procurement processes in some of the projects especially in the Phokwane municipality.

Conditional Grants : Sport, Arts and Culture Community Library Services Grant The under spending of R18.549 million as at 31 March 2015 is as a result of the delays in the tender processes for the construction of Libraries which resulted in contractors being appointed in November/December 2014.

Conditional Grants : Agriculture, Land Reform and Rural Development

Conditional Grants : Agriculture, Land Reform and Rural Development Disaster Management Grant( Drought Relief) The department was allocated R50 million to assist farmers with fodder for livestock as a result of drought that occurred in the first half of 2013. The cash was only transferred to the province on the 28th March 2014 and therefore funding was only appropriated in the 2014/15 financial year. The department underspent with R7.6 million at the end of the financial year. The under spending is mainly as a result of the late implementation due to service delivery protests in the John Taolo Gaetsewe district where roads were blockaded. When the department eventually gained entry and implemented the relief scheme, some farmers had already lost most of their livestock and some had seen great improvement in grazing land after much needed rainfall in 2014. The department subsequently requested permission to assist other farmers in other areas not declared disaster areas yet who required assistance, but the National Disaster Management Committee and Department of Agriculture, Forestry and Fisheries declined hence the funds were unspent and no roll over was requested by the department.

EPWP grants expenditure

Provincial expenditure per department

(Over)/ under expenditure per economic classification per department

Expenditure per economic classification

Capital expenditure up to end of March 2015

Explanatory Notes per Department

Social Sector per departments

Education: Expenditure Summary

Education: Economic Classification

Health: Expenditure Summary

Health: Economic Classification

Social Development: Expenditure Summary

Social Development: Economic Classification

Sport, Arts & Culture: Expenditure Summary

Sport, Arts & Culture : Economic Classification

Economic Sector: Per department

Agriculture, Land Reform & Rural Development: Expenditure Summary

Agriculture, Land Reform & Rural Development: Economic Classification

Roads and Public Works: Expenditure Summary

Roads and Public Works: Economic Classification

Economic Development and Tourism: Expenditure Summary

Economic Development and Tourism: Economic Classification

COGHSTA : Expenditure Summary

COGHSTA : Economic Classification

Environment and Nature Conservation: Expenditure Summary

Environment & Nature Conservation: Economic Classification

Governance and Administration Sector per department

Office of the Premier: Expenditure Summary

Office of the Premier: Economic Classification

Provincial Legislature: Expenditure Summary

Provincial Legislature: Economic Classification

Provincial Treasury: Expenditure Summary

Provincial Treasury: Economic Classification

Transport, Safety and Liaison: Expenditure Summary

Transport, Safety and Liaison: Economic Classification

The Select Committee on Finance is requested to note the following: The expenditure outcome is preliminary data as at end of March 2015. The total provincial own receipts collected up to end of March amounts to R296.985 million or 103 per cent of the adjusted budget of R287.679 million; Provincial Treasury has over collected with R36.041 million, however due to the under collection in the departments of Transport, Safety and Liaison, Health and Economic Development and Tourism, the net over collection is only R9.306 million; Actual expenditure on conditional grants as at end of March amounts to R3.411 billion or 97 per cent of the adjusted budget of R3.523 billion; The total provincial expenditure on the EPWP grants amounts to R35.606 million or 95 per cent of the adjusted budget of R37.395 million; The total preliminary expenditure for the province as at the end of March amounts to R13.390 billion or 99 per cent of the adjusted budget of R13.530 billion and the province has under spent with a net amount of R140.060 million. The overall fiscal risk of the province is generally under control.

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