Provincial Expenditure Report SELECT COMMITTEE ON FINANCE as at 31 march 2017 Presentation to the SELECT COMMITTEE ON FINANCE Date: 24 MAY 2017 Presentation by: Slide 1 Together moving Bokone Bophirima forward. PFMA

Presentation Outline Implementation of the provincial economic growth and development strategies Unauthorised, irregular and wasteful expenditure Provincial own revenue collection and challenges Aggregate provincial expenditure Economic Classification Infrastructure expenditure on economic and social infrastructure Fiscal Position Recommendations Slide 2 Together moving Bokone Bophirima forward. PFMA

Provincial Economic Growth and Development Strategies Slide 3 Together moving Bokone Bophirima forward. PFMA

Population Trends Population Size Youthful Population Population Size 1996 (2.9m) - 2016 (3.7m) – 2020 (4M) Fertility Rate 2001-2006 (3.11) – 2006-2011 (3.30) 2011-2016(2.90) Life Expectancy Male – 53.1; Female – 59.9 Slide 4 Together moving Bokone Bophirima forward. PFMA

HDI, GINI & Poverty – 2015 Data Slide 5 Together moving Bokone Bophirima forward. PFMA

Provincial Economic Trends SA & NW Average Annual Growth Rate North West economy grew by 1% during 2016. Slide 6 Together moving Bokone Bophirima forward. PFMA

Growth and Development Strategies Taking into account the rural dynamics of the Province, the following Five (5) concretes are being implemented in line with the NDP in order to achieve sustainable development: Agriculture , Culture and Tourism (ACT); Villages, Townships & Small Dorpies (VTSD); Reconciliation, Healing and Renewal (RHR); Setsokotsane (comprehensive & integrated service delivery campaign); and Saamwerk-Saamtrek (call for unity of purpose above race divisions). The first two of the five concretes are specifically designed to ensure improved economic growth. To ensure Comprehensive and Competitive Sound policies, the provincial government has completed the following two studies Potential role and contribution of ACT and VTSD in boosting provincial and local development; An integrated manufacturing strategy for the North West Province. To further ensure growth of SMMEs through participation in the mainstream economy, the province will amongst others in the current financial year host 4 BRICS Investment Makgotla’s across 4 districts of the province The Provincial Development Plan aligned to NDP anchored on the five concretes will be finalised by end of end of July 2017. Slide 7 Together moving Bokone Bophirima forward. PFMA

Growth and Development Strategies To Facilitate Growth and Development, The province has in the Previous Financial Year established: Local, District and Provincial Chambers of Commerce in the context of VTSD SMMEs ACT achievements: Number of tourists to the province improved from 5.1% to 9.4% between first quarter and third quarter of 2016/17; Artist development through VTSD recording studios (2 studios completed to date); The province identified four Agriparks, one in each municipality of which Springbokpan in the Ngaka Modiri Molema district is operational. . Slide 8 Together moving Bokone Bophirima forward. PFMA

Growth and Development Strategies VTSD Expenditure with VTSD Transfer Payments Slide 9 Together moving Bokone Bophirima forward. PFMA

Growth and Development Strategies 4 407 are owned by youth in the province Slide 10 Together moving Bokone Bophirima forward. PFMA

Unauthorised, Irregular and Wasteful Expenditure Slide 11 Together moving Bokone Bophirima forward. PFMA

CURRENT STATUS PER DEPT Slide 12 Together moving Bokone Bophirima forward. PFMA

CURRENT STATUS PER DEPT Slide 13 Together moving Bokone Bophirima forward. PFMA

STEPS TAKEN Finance bill for unauthorised expenditure for R285 million was tabled before Provincial Legislature during March 2017; Provincial Treasury has initiated various processes to assist departments in facilitating the clearance of irregular expenditure . During 2016 -17, Provincial Treasury provided departments and in particular chief financial officers of departments and public entities further training on the guideline issued by National Treasury on the various processes of dealing with clearing of irregular expenditure. The fifth administration mandated Provincial Treasury to establish a Committee (which includes Auditor General, Internal Audit, Office of the Premier and the Accountant General chaired by an Independent person) that will guide and advise Departments and Public Entities on how to deal with irregular expenditure incurred in prior years before being condoned by relevant authorities as indicated in the National Treasury guideline. Terms of reference (ToR) has been developed and approved for the Committee. The committee is called PACO (Provincial Advisory Committee) and was appointed for a period of 2 years and commenced its work in November 2016. Slide 14 Together moving Bokone Bophirima forward. PFMA

PROGRESS TO DATE The committee has held 3 sittings so far and three (3) Departments (Office of the Premier, Culture, Arts & Traditional Affairs, Social Development) have appeared before the committee; The rest of the Departments and Public entities are in the process of locating supporting documents from previous financial years and others cannot clearly indicate to the committee what investigations have been done and consequence measures taken; About 5% irregular expenditure has been recommended for condonement by relevant authorities; All departments and entities were instructed to investigate all outstanding matters relating to irregular and fruitless expenditure and take appropriate action. Office of the Premier through the Integrity Management Unit follow up on the implementation Consequence Management measures Slide 15 Together moving Bokone Bophirima forward. PFMA

UIF In addition, all departments have been directed by EXCO to implement the following punitive measures for the prevention and reduction of UIF expenditure: All accounting officers have been directed to implement the following serious consequence management actions: In instances where officials have committed fraud and corruption and have been found guilty, they will be dismissed with immediate effect; To recoup financial losses suffered by the state from pensions; Open criminal cases with the relevant law enforcement authorities; Blacklist affected officials to make it impossible for them to obtain jobs with National Departments or other Provincial Administrations and Municipalities; Slide 16 Together moving Bokone Bophirima forward. PFMA

Provincial Own Revenue Collection and Challenges Slide 17 Together moving Bokone Bophirima forward. PFMA

Actual Revenue Collection –31 march 2017 Collection has increased compared to the last financial Year (2015/2016) by 6.91 % with an estimation of over collection, only three departments still under collecting Slide 18 Together moving Bokone Bophirima forward. PFMA

Actual Revenue Collection – 31 march 2017 Slide 19 Together moving Bokone Bophirima forward. PFMA

Actual Revenue Collection – 31 march 2017 Slide 20 Together moving Bokone Bophirima forward. PFMA

Actual Revenue Collection – 31 march 2017 Provincial Revenue Policy Aim to: Increase contribution of provincial own revenue from 3.1% to 4.5% ; Annually review provincial revenue enhancement strategy in order to: Meet their revenue collection targets; Expand revenue base by identifying new sources of revenue; Minimise revenue collection costs through efficiency improvement; Facilitates the process of recovering outstanding debt. Slide 21 Together moving Bokone Bophirima forward. PFMA

Actual Revenue Collection – 31 march 2017 Main challenges include: Failure by municipalities to pay collected motor vehicle licence fees; Information system weaknesses failing to address abuses of public health services; Loss of departmental revenue as a result of introducing E-Tender system Protracted dispute between Tasima and E-Natis resulted in failure to adjust tariffs on time Slide 22 Together moving Bokone Bophirima forward. PFMA

Aggregate Provincial Expenditure Slide 23 Together moving Bokone Bophirima forward. PFMA

Expenditure as at – 31 march 2017 Slide 24 Together moving Bokone Bophirima forward. PFMA

Expenditure – as at 31 march 2017 economic classification Slide 25 Together moving Bokone Bophirima forward. PFMA

Expenditure – as at 31 march 2017 The Province registered an improved spending rate at 98.1% compared to the 97.6% of the previous financial year, with the Department of Health and the Provincial Legislature recording over spending of 0.9% and 0.2% respectively; Payments for capital assets improved from 92% in the previous financial year to 98% in 2016/17; Personnel spending shows a stabilisation; from a reduced adjusted budget of Compensation of employees, the Province recorded 98.6% expenditure; Slide 26 Together moving Bokone Bophirima forward. PFMA

NW Compensation of Employees Comparative Analysis NW Compensation of Employees And Goods & Services Slide 27 Together moving Bokone Bophirima forward. PFMA

CoE Expenditure – as at 31 march 2017 Slide 28 Together moving Bokone Bophirima forward. PFMA

COE Expenditure – as at 31 MARCH 2017 (Y-on-Y comparison) Slide 29 Together moving Bokone Bophirima forward. PFMA

COE Expenditure – as at 31 MARCH 2017 The Province implemented a flexible moratorium on filling of vacant position; Departments had to get approval from the Provincial Treasury and Office of the Premier before filling any vacant position; As a consequence of the implementation of the flexible moratorium, an amount of R502 million was shifted from compensation of employees; Savings realised from the CoE, have been directed towards project and programme implementation. Slide 30 Together moving Bokone Bophirima forward. PFMA

Goods & Services Expenditure – as at 31 march 2017 Slide 31 Together moving Bokone Bophirima forward. PFMA

Goods & Services (Core Items) Expenditure – as at 31 march 2017 Slide 32 Together moving Bokone Bophirima forward. PFMA

Expenditure as at – 31 march 2017 department of health Slide 33 Together moving Bokone Bophirima forward. PFMA

Expenditure as at – 31 march 2017 department of education and sports development Slide 34 Together moving Bokone Bophirima forward. PFMA

Conditional Grants Spending – as at 31 March 2017 Slide 35 Together moving Bokone Bophirima forward. PFMA

EPWP Conditional Grants Spending – as at 31 March 2017 Slide 36 Together moving Bokone Bophirima forward. PFMA

Infrastructure Expenditure on Economic and Social Infrastructure Slide 37 Together moving Bokone Bophirima forward. PFMA

Infrastructure Spending as at 31 March 2017(incl. Con Grants) Slide 38 Together moving Bokone Bophirima forward. PFMA

Infrastructure Spending as at 31 march 2017 (Excl. Con Grants) Slide 39 Together moving Bokone Bophirima forward. PFMA

Fiscal Position Slide 40 Together moving Bokone Bophirima forward. PFMA

PROVINCIAL CASH BALANCE AS AT 31 MARCH 2017 Table 1 Bank Accounts' Name Balance as at   31 March 2017 Intergovernmental CC R 5 467 014.62 North West Provincial Exchequer R 50 290 317.41 North West Call a/c R 1 000.00 Fixed deposit R 1 100 000 000.00 R 1 155 758 332.03 Table 2 Department Office of the Premier R 12 535 540.94 Provincial Legislature Health R 2 571 603.24 Culture, Arts and Traditional Affairs R 18 444 844.89 Community Safety & Transport Management R 46 179 567.59 Economy and Enterprise Development R 7 572 753.71 Finance R 11 918 967.10 Education and Sports Management R 50 257 823.04 Local Government and Traditional Affairs R 114 080 204.92 Tourism R 11 436 927.14 Public Works and Roads R 73 406 686.69 Social Development R 8 072 867.76 Rural, Environment and Agricultural R 1 027 292.43 Development Cash in PMG accounts of Departments R 357 505 079.45 Slide 41 Together moving Bokone Bophirima forward. PFMA

Accruals as at 31 MARCH 2017 Slide 42 Together moving Bokone Bophirima forward. PFMA

Accruals as at 31 MARCH 2017 The main contributor to the Provincial Accruals is the Department of Health; Through various interventions the accruals have been consistently reduced to almost half over a period of two years. Slide 43 Together moving Bokone Bophirima forward. PFMA

Recommendations It is recommended that the Select Committee on Finance note: The aggregate pre-audited provincial spending of R35.902 billion or 98.12 per cent of the adjusted allocation with a under spending of R686.334 million as at 31st of March 2017; The improved revenue collection of 105 per cent or R1.153 billion compared to the under collection of 98.07 per cent of last year; The Province has contained spending on compensation of employees and no overspending has been recorded in respect of this expenditure item The provincial spending on conditional grants of 94.5 per cent and the poor spending on infrastructure excluding conditional grants at 84 per cent; Provincial Treasury will sourcing departmental plans to pay accruals from 2016/17 financial year by May 2017 and also to pay within the 2017/18 allocation where roll overs are not approved; Slide 44 Together moving Bokone Bophirima forward. PFMA

Recommendations Interventions to improve provincial spending and delivery in 2017/18: All contracts for projects to be implemented in 2017/18 will be awarded before end of first quarter; Provincial Treasury engaged departments to assess readiness of project implementation and roll out plans; Focus will also be on infrastructure spending towards VTSD areas; Planning for the 2018/19 financial year will be finalised by November 2017. Infrastructure Delivery Management System (IDMS) to be strengthen and sustained within Provincial Departments; Standard for Infrastructure Procurement and Delivery Management (SIPDM) will be institutionalised for infrastructure procurement. Slide 45 Together moving Bokone Bophirima forward. PFMA

Thank you Slide 46 Together moving Bokone Bophirima forward. PFMA