2009/10: Third Quarter Performance of the EPWP Incentive Grant Select Committee on Appropriations 21 April 2010 1

Introduction and General Observation This submission is made in terms of Section 3(2)(b)(ii) of the Financial and Fiscal Commission Act 99 of 1997 as amended The Commission welcomes attempts aimed at addressing employment through Government expenditure programmes The Commission has in the past recommended that government should avoid using conditional grants to fund what can be funded through the equitable share Conditional grants come with either positive or negative incentives The negative incentives may discourage provinces and municipalities from funding job creation initiatives in the hope that these will be funded through the conditional grants (substitution effects) The Commission raised the need for an independent comprehensive review to evaluate the sustainability of jobs created through the EPWP since its inception The importance of such a review is to ascertain the sustainability of jobs created and realignment of grants to ensure that the stated objectives are actually met The management of the EPWP Incentive grant requires significant capacity of the DPW to monitor and evaluate the performance of the program There is a need for constant availability of data disaggregated at municipal level on the performance of this grant

Fiscal Incentives to Provinces and Municipalities Provinces and municipalities spend their budgets on EPWP projects, thereafter the grant is paid by DPW quarterly, after employment has been created There is no guarantee that provinces and municipalities will be reimbursed what they have spent as the formula to divide the grant is not specific and neither is it transparent Reference is made to allocation criteria but these are not specified to allow for independent assessment The Commission has in the past requested information on this matter (see FFC Submission on the 2009 DoR Bill) but this never materialised Expenditure on this grant has been haphazard across provinces as reported to the Budget Lekgotla of 2009 Expenditure reports on the grant performance at local government level could not be ascertained by the Commission on request Reports by both the National Treasury and DPW on EPWP achievability do not tally

EPWP Incentive Grant to Provinces as at 31 December 2009 (NT PFMA S EPWP Incentive Grant to Provinces as at 31 December 2009 (NT PFMA S.32 Report)

EPWP Milestones as at 31 December 2009 (DPW: EPWP Quarterly Report)

Challenges with the administration of the grant The challenge with this grant has been late disbursement of funds to provinces and municipalities outside the ambits of DoRA Actual allocations were not finalised when provincial and municipal budgets were appropriated in the legislatures and councils Planning and implementation of the grant seems not to be done consistently thus the inconsistencies in the data on budgets and outputs between National Treasury and Department of Public Works More clarity on service level requirements for the grant is required from DPW

Conclusion The grant should be streamlined to labour intensive infrastructure projects because the latter must be planned, costed and scheduled properly. This is necessary to estimate the cost of EPWP This type of a grant should be linked to service delivery performance by placing conditions on the results to be achieved while providing full flexibility in the design of programmes Converting this grant into a matching grant should be considered in taking the process forward as this would incentivise provinces and municipalities in a more direct and transparent manner The Department will be able to be specific on what is required in order to access the grant and hence improve transparency