GAUTENG PROVINCIAL GOVERNMENT 2017/18 PRELIMINARY BUDGET OUTCOMES Presentation to Select Committee on Finance

Outline of the presentation Principles of the Budget Revenue Expenditure Personnel Conditional grants Infrastructure Health intervention Off Budget Financing TER 30 Day payments Progress on Open Tender

Principles of the budget Reduce spending on non-core goods and services and decisively fight fraud and corruption; Increase our own revenue and alternate funding sources; Maintain spending on quality social services Increase spending on infrastructure to give expression to the TMR and create work.

REVENUE

Provincial Own Revenue Collection Performance - 2017/18 Source: March IYM (Final Submission)

Provincial Own Revenue Collection Performance - 2017/18 Achievements The Provincial revenue target of R5.4bn was adjusted upwards to R5.8bn Preliminary results reveal that own revenue collection stood at R6.1bn, representing 106% collection, against an adjusted target of R5.8bn The 6% over collection for the period under review is approximately R336m Main revenue contributing sources to this performance are motor vehicle licence fees, interest on short term investments and patient fees which exceeded the set targets; while casino licenses narrowly under-collected against set target

EXPENDITURE

2017/18 Aggregate Provincial Expenditure YTD, 98.6% of the 2017/18 GPG Adjusted Budget was spent as at the end of the year, as outlined below: 79% of total expenditure is by Health, Education and Social Development departments 57% of total expenditure to date was on CoE, again largely driven by Health, Education and Social Development 21% of total expenditure in 2017/18 was on ‘Goods and Services, for which Health accounts for 60 per cent of this amount Source: March IYM (Final Submission)

2017/18 Aggregate Provincial Expenditure - Health As at the end of Q4, GDoH had spent R41.9bn (99%)of the adjusted budget, with under-expenditure of R204m, as outlined below: 60% of total GDoH expenditure was incurred on ‘Compensation of Employees’ 32% of total 2017/18 expenditure was on ‘Goods and Services’ 5% of total expenditure in 2017/18 was under ‘Transfers and Subsidies’ Source: March IYM (Final Submission)

2017/18 Aggregate Provincial Expenditure - Education The GDE 2017/18 main appropriation of R40.8bn was adjusted to R41.7bn, of which Q4 expenditure stood at R41.4bn (99.4%) 76% of total expenditure was on ‘Compensation of Employees’ 10% of total expenditure to date was on ‘Goods and Services’ 10% of total expenditure in 2017/18 was ‘Transfers and Subsidies’ Source: March IYM (Final Submission)

Goods and Services Expenditure - Top 15 Line Items by Budget GPG Goods and Services by Department Overall expenditure on G&S amounted to R23bn or 94% of the adjusted budget of R24.5bn, driven by - GDoH and GDE, expenditure that together account for 77% of the entire G&S allocation Goods and Services Expenditure - Top 15 Line Items by Budget Source: March IYM (Final Submission)

COMPENSATION OF EMPLOYEES

GPG Compensation of Employees by Department YTD, GPG spent R63bn or 101.5% of the adjusted CoE budget of R63bn, driven by GDoH, GDE, and DSD which account for 93% of this expenditure outcome; over-expenditure of R942m concentrated mainly in GDE, and to a lesser extent, GDoH Source: March IYM (Final Submission)

CONDITIONAL GRANTS

YTD Conditional Grant Expenditure – March 31 2018 Preliminary final 2017/18 expenditure on Conditional Grant amounted to R19.8bn or 95.4% of the adjusted budget of R20.7bn 9 Source: March IYM (First Submission)

INFRASTRUCTURE

2017/18 Infrastructure Expenditure Summary Departments 2017/18 Financial Year Main Budget Adjusted Budget Expenditure % Expenditure Health 1,601,777 1,626,440 1,553,491 96% Education 1,745,366 2,012,675 1,961,365 97% Social Dev 79,967 207,055 204,952 99% Human Settlement 5,556,746 5,465,274 5,345,341 98% DRT 1,683,023 1,813,072 1,812,950 100% GDARD 12,993 17,805 11,863 67% SACR 153,125 183,733 84,134 46% DID 75,934 283,057 273,491 Total 10,908,931 11,609,111 11,247,587 The 2017/18 revised allocation for infrastructure was R11.6bn, representing 97% of the adjusted budget SACR under expenditure was due to delay in appointment of contractors. GDARD under expenditure was due to the delay in filling built environment professionals’ posts.

HEALTH INTERVENTION

Resolution of the Executive Council pertaining to Gauteng Health At a meeting held on 6-8 June 2017, the Executive Council resolved as follows: That a special Cabinet Committee be established to assist with the challenge on the Department’s financial position. The Cabinet Committee will be Led by the Member of the Executive Council for Finance, supported by the Member of the Executive Council for Health, Cooperative Governance and Traditional Affairs, Director General, Head of Department Provincial Treasury and acting Head of Department for Health. The Executive Council Sub Committee comprises of a: Executive Council Political Sub Committee, which meets on a monthly basis. Executive Council Technical Sub Committee, which meets on a bi-monthly basis.

Work Stream 1 The Executive Council Political Sub Committee agreed to establish the following six (6) Work Streams supported by the following preliminary action plan: Work Stream Action Plan FINANCIAL MANAGEMENT Effective Budget Management Management and Reduction of Accruals Revenue Management Management of Conditional Grants Monitoring of in year reporting Management of Expenditure Plans to address Wasteful, Fruitless, Irregular expenditure Supply Chain Management optimisation

Work Stream 2 & 3 Work Stream Action Plan HUMAN RESOURCES MANAGEMENT Compensation of Employees RWOPS Overtime Performance Management, Culture, Consequence Management HEALTH OPERATIONS MANAGEMENT Medical Supplies Depot Inventory Management Consignment Stock Stock levels Infrastructure Facilities and Delivery

Work Stream 4 & 5 Work Stream Action Plan INFORMATION MANAGEMENT Assessment of Management Information System E-Health MEDICO LEGAL Litigation Battle Plan Assessment of current cases including Rand value Assessment of cases lost vs settled vs won

Work Stream 6 Work Stream Action Plan CORPORATE GOVERNANCE Clinical Governance Assessment of Governance structures for optimal decision making Delegation of Authority

Principles guiding the payment of Health accruals All suppliers owed below R10.0 million will be settled immediately. Health has put in place a payment plan negotiated with all other suppliers.

OFF-BUDGET FINANCING

Summary of project status for off-budget financing 29 Summary of project status for off-budget financing PROJECT STATUS SUMMARY (R 72 bn) Initiation Stage Feasibility Stage Market Release Procurement Stage Commercial/Financial Close Disassembly Knock Down Sedibeng Precinct Solar Rooftop phase 2 Tshwane Bio-Energy Gauteng Planning House Merafong Solar Farm Cluster Sedibeng Agro-processing Hub Merafong Bio-energy Park ConHill Precinct West Rand Agro-processing Hub. PWV 15 Silverton Automotive Industrial Park Krugersdorp Game Reserve Theme Park COJ: AWTT* Ekurhuleni: AWTT Tshwane: AWTT Sedibeng/ West Rand Bio-gas Gauteng Schools Programme Vaal LH* *AWTT = Alternative Waste Treatment Technology *LH = Logistics Hub Kopanong Precinct Tshwane Agro-processing Hub Tshwane Innovation Hub: EB 2 TIH: EB 3 Tri-generation (CH-Baragwanath Hosp) Rooftop Solar Panels West Rand LH Jewellery Manufacturing Precinct Lindley Waste Water Treatment Plant

TOWNSHIP ECONOMY REVITALISATION

Procurement Spend Performance: 2017/18 2017/18 EXPENDITURE ON TER % SPENT Total Spend: 22 959 441 649 100 Departments 19 034 879 251 82,9 Entities & Agency 424 537 942 1,8 Municipalities 3 500 024 455 15,2 Township Spend 5 549 722 617 *24,2 4 920 892 752 25,9 70 165 970 16,5 558 663 896 16,0 * The preliminary township spend information still requires verification, especially with municipalities

30 DAY PAYMENTS

30 Day Payments – 31 March 2018 Department 2017/2018 Office of the Premier 100% Health 28% Education 85% Transport 98% Infrastructure Development 56% Safety 93% Agriculture Human Settlement Social Development Economic Development 99% E-Government Treasury SRAC 92% COGTA GPG Total 51% GPG Total (Excl. GDoH, GDE and DID) A total of 9 Departments achieved above 95% compliance for 30 day payments, whilst 6 departments achieved above 90% compliance for 15 day payments

OPEN TENDER

Open Tender Process (OTP) background and Targets Open Tender is an initiative of Gauteng Provincial Government to improve transparency in government procurement processes in order to build public confidence in the procurement system. It aims to: Restore public confidence in the public procurement process Promote transparency of the procurement process Ensure accountability in the spending of public money; and Ensure all departments adhere to SCM regulatory environment The key distinctive features of the open tender process are the following: Appointment of probity auditors to quality assure the procurement process Publication of tender information on each stage of the procurement process. Opening the Bid Adjudication Committee (BAC) process to public observation The target for the open tender process has been increased gradually as follows: 2016/17 FY (60% of new procurement processed through OTP) 2017/18 FY (80% of new procurement processed through OTP) 2018/19 FY (100% of new procurement above R2 million processed through OTP) Open Tender Process (OTP) background and Targets

Progress on Open Tender The provincial departments’ new procurement budget for 2017/2018 was R20,5 billion, with 80% of the allocation identified for open tender. Open tender has processed 66% of departmental spend which include projects adjudicated, projects at evaluation, advert, specification and cancelled projects. A total number of 26 projects have been cancelled during the year under review and these cancellations are mainly attributed to irregularities detected in the tender. As a result of the early detection (before the tender is awarded) this has saved the province a total of 1,2bn in irregular expenditure.

OPEN TENDER LEGISLATION Legislation Process Status/Timeframe Publish Draft Bill for public comment and stakeholder engagement Completed. Was published for public comment for 30 days, which concluded on 11 May 2018 Pre- Certification of the Draft Bill State Law Advisor analyses the draft Bill and prepares report for Legislature Technical Committee Submitted to State Law Advisor during mid May 2018 and currently consultations are ongoing. Review of the Draft Bill Review draft bill for constitutionality, consistency and quality of drafting June 2018 Final Certification of the Draft Bill July 2018 Approval of the Draft Bill EXCO approval for the introduction of the draft Bill August 2018 Subsequent to the above processes, the Bill is submitted to Legislature for processing as per the Path to Legislation.

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