1 2007/08 Preliminary Expenditure Outcomes Urban Development and Infrastructure Joint Budget Committee 30 May 2008 Mahesh Fakir

2 Scope Preliminary expenditure outcome summary per department General spending trends –Summary last quarter and March spending –Summary vacancy rates on critical posts –Summary virements Detail expenditure outcomes and major issues per department including details on major activities/projects, major current expenditure virements and major underspending /deviations –Department of Transport –Department of Housing –Department of Provincial and Local Government –Department Water Affairs and Forestry –Department of Minerals and Energy –Department of Communications

3 Preliminary expenditure outcomes AvailablePreliminary Deviation Actual 2007/08 Financial year FundsExpenditure(AvailableSpending OutcomeFunds lessas % of Spending)Available R '000 Funds Transport % Housing % Water Affairs and Forestry % Provincial and Local Government % Minerals and Energy % Communications %

4 Percentage Last Quarter and March Spending 4th QuarterMar-07 Transport Housing Provincial and Local Government Water Affairs and Forestry Minerals and Energy Communications

5 Summary of vacancy rates DepartmentNumber of PostsFilled PostsVacant PostsVacancy Rate (%) Transport Housing Provincial and Local Government Water Affairs and Forestry Professional = Minerals and Energy Communications

6 Summary of virements DepartmentVirement before & in the Adjustment Estimates R’000 Virement after Adjustment Estimates R’000 Total Virements R’000 % of Total Budget Transport Housing (per economic classification) DPLG DWAF Minerals and Energy Communication

7 Preliminary expenditure outcomes AvailablePreliminaryDeviationActual 2007/08 Financial yearFundsExpenditure(AvailableSpending OutcomeFunds lessas % of Spending)Available R '000 Funds 1. Administration % 2. Transport Policy, Research and Economic Analysis % 3. Transport Regulation and Accident and Incident Investigation % 4. Integrated Planning and Inter-sphere Co-ordination % 5. Freight Logistics and Corridor Development % 6. Public Transport % 7. Public Entity Oversight and Economic Regulation % Total % Transport

8 4 th Quarter SpendingTransport

9 Observations and analysis Spending Patterns Last quarter spending 29.7% of total expenditure, 53.3 % current transfers to households ( taxi recapitalisation) 76.2% of total goods and services budget spent in 2007/08 leaving R137 million unspent % of goods and services budget spent on consultants, contractors and special services of which 19.3% was spent in March 2008 Vacancy rates on critical posts Vacancy rate for senior management service is 44.8%, high vacancy rates in Freight Logistics ( 60.7%) and Public Entity Oversight and Economic Regulation (68.4%) have contributed to under-spending in these programmes Virements 9 requests for virements were received Transport

10 Observations and analysis Programmes contributing most to total under-spending is public transport (40.1%) and inter-sphere coordination (19.6%), however spending in both above 98% of total allocation Freight Logistics programme failed to spend 50% of the budget, clarification of role of provincial and local government in the provision of logistics infrastructure and services necessary Policy research and economic analysis spent only 60.6% of budget in 2007/08. Programme plagued by delays in bidding process Public Entity Oversight failed to spend R14 million made available in 2006 for the restructuring of the RAF, Ports Regulator has not been set up to allow funds to flow to the regulator Under-spending on capital assets due to lack of clarity on infrastructure priorities as proposed in the Roads Infrastructure Strategic Framework for South Africa approved by Cabinet in 2006: –R30 million on Sani Pass –R8 million on overload control –R30 million on rural transport strategy Transport

11 Expenditure SummaryHousing

12 Last Quarter ExpenditureHousing

13 Observations and analysis Expenditure in 2007/08 at 95.6% compared to 97.7% in 2006/07 and 99.5% in 2005/06 Programme 2: Housing Policy Research and Planning traditionally lowest spending performance with 56.7% of total spending in programme spent in Q4 Goods and services – March spike 22% in one month Under-expenditure (departmental + provincial (on grant)) –R193 million on Integrated Housing and Human Settlement Development Grant (funds withheld by the Housing dept. in terms of S26 of DoRA) –R180 million to the Social Housing Regulatory Authority (entity not established as Social Housing Bill, 2006 not promulgated) –R445 million on Integrated Housing and Human Settlement Grant transferred to provinces but not spent Western Cape: N2 Gateway – R73 million North West: Various projects – R89 million Free State: Various projects – R79 million Eastern Cape: Various Projects incl. Zanemvula – R161 million Virements- 8 requests for virements Vacancies – 24% overall, SMS: 6% Housing

14 Expenditure Summary DPLG Available funds (R’000) Total Expenditure (R’000)Deviation Prelim. Expenditure Outcome 1. Administration % 2. Governance, Policy and Research % 3. Urban and Renewal Development % 4. Systems and Capacity Building % 5. Free Basic Services and Infrastructure % 6. Provincial and Local Government Transfers % 7. Fiscal Transfers % Total % Current expenditure % Of which: Compensation of employees % Goods and Services % Transfers and subsidies (1)100.0% Of which: Provincial and Local Government transfers % South African Local Government Association % Municipal Demarcation Board % Commission for the Promotion and Protection of the Rights of Cultural, Religious and Linguistic Communities % National House of Traditional Leaders (975) 110.0% Payments for capital assets % Total % DPLG

15 Last Quarter Spending Trends Jan 08Feb 08March 08Total ExpAllocationExpenditure Programme 3 months R'000 % Prog 1: Administration Prog 2: Governance,Policyand Research Prog 3: Urban and Rural Development Prog 4: Systems and Capacity Building Prog 5: Free Basic Services and Infrastructure Prog 6: Provincial and Local Government Transfers Prog 7: Fiscal Transfers Total Economic Classification Current Payments Compensation of Employees Goods and Services Financial Transactions in assets & liabilities Transfer and subsidies to Current Transfers } Transfers and subsidies to Capital Transfers} Payments for capital assets Total Economic Classification Current Payments Transfers and Subsidies (Current & Capital) Payments for capital assets Total DPLG

16 Observations and Analysis Major Over/under spending and deviations  2007/08 spending pattern of 99.97% is higher when compared with the spending pattern for the previous two financial years (99.98% for 2005/06 and 96.8% for 2006/07). Under-spending for 2007/08 amounted R8.273 million  Out of the total allocation of R billion, R billion relates to transfers made by the Department to provinces and municipalities for equitable share and MIG Last Quarter Expenditure  The Department made unusually high transfers for equitable share (‘transfers and subsidies to current transfers’) and MIG (‘transfers and subsidies to capital transfers’) during the last quarter resulting in 38.8% expenditure during this period alone  As at the end of March 2008 (3 rd quarter for municipalities) an estimated 80% of MIG funds transferred by the dept had been spent by municipalities Virements  4 Virements were processed during 2007/08 Vacancy Rate  At the end of 2007/08 the department had a vacancy rate of 16% (84 posts)  Of this 16% overall vacancy rate, 40% (39 posts) comprises the “professionally qualified” and “senior management categories” DPLG

17 Expenditure Summary DWAF Available funds (R'000) Total Expenditure (R'000)Deviation 1. Administration (1 865)100.3% 2. Water Resources Management % 3. Water Services % 4. Forestry Total % Economic Classification: Current expenditure (24 822)100.9% Of which: Compensation of employees % Goods and Services % Transfers and subsidies % Of which: Water Services Operating Subsidy Grant (19 987) 103.2% Augmentation of Water Trading Account from main account % Other % Payments for capital assets % Total % DWAF

18 Last Quarter Spending Trends Jan 08Feb 08March 08Total ExpAllocationExpenditure R'000 % Prog 1: Administration Prog 2: Water Resources Management Prog 3: Water Services Prog 4: Forestry Total Economic Classification Current Payments Compensation of Employees Goods and Services Financial Transactions in assets & liabilities Other Transfer and subsidies to Current Transfers } Transfers and subsidies to Capital Transfers} Payments for capital assets Total Economic Classification Current Payments Transfers and Subsidies (Current & Capital) Payments for capital assets Total DWAF

19 Observations and Analysis Major Over/under spending and deviations  2007/08 spending pattern of 91.9% is lower when compared with the spending pattern for the previous two financial years (94.6% for 2005/06 and 92.4 % for 2006/07), primarily due to the delays experienced with the construction of the De Hoop dam Last Quarter Spending  Expenditure clearly increased progressively month-on-month during the last quarter  The largest area of expenditure related to the ‘schools and clinics’ grant and the ‘bulk infrastructure’ grant Virements  7 Virements were processed during 2007/08 Vacancy rates  At the end of 2007/08 the department had a vacancy rate of 19.8% (3 121 posts)  Of this 35% (899 posts) comprises the “highly skilled supervision” and “senior management categories” –Out of a total of 49 posts for the category engineers and related professionals there are 23 vacant posts –Out of a total of 273 posts for the category civil engineering technicians there are 132 vacant posts –Out of a total of 110 posts for the category geologists, geophysicists, hydrologists there are 53 vacant posts DWAF

20 Expenditure Summary DME

21 Last quarter spending DME

22 Observations and Analysis Preliminary Expenditure Outcome – The department spent R2.95 billion or 99.1 of its allocated budget – All programmes’ spending exceeded 92 per cent of their respective allocated funds, whilst programme 1 over spent – Savings arose from non-spending on compensation of employees and goods and services General Spending Trends – 78 per cent of the department’s budget is transfers and subsidies to entities including Eskom, Necsa, Council for Geosciences, Mintek, NNR, SADPR etc – Between 2005/06 and 2007/08, there has been an overall increase in departmental budget/expenditure at an average annual growth rate of 16.0 per cent from R2 billion to R3 billion. – Spending rate of 99.1 per cent is the highest over the past 3 financial years. – A spike in spending over the last quarter of the FY was in Programme 6, where spending rose by 89.2% from R2,69m in January to R24,83m in February – leading to an overall quarterly spend of 47.8% of the total allocation. Major Activities/ Projects – Integrated National Electrification Programme – Appointment of the Petroleum Controller- establishment of a dedicated Petroleum licensing function Overall under spending – Department under spent by R million, which is 0.9 per cent of the total allocated budget of R2.97 billion. Vacancy Rate % - Major vacancies exist in the Deputy Director and Junior Management categories – i.e. 26.7% and 19.5%, unfilled posts, respectively. DME

23 Expenditure Summary R’000Available fundsTotal ExpenditureDeviationExpenditure as a % of allocation 1.Administration Strategic Policy Co-ordination, Integration and International Affairs Policy Unit Finance and Shareholder Management Innovative Applications and Research Presidential National Commission Total % Economic Classification Current Expenditure Of which: Compensation of Employees Goods and Services Transfers and Subsidies Of which: Sentech SABC SAPO ICASA Payments for capital assets % Total Communications

24 Last quarter spending Communications

25 Vacancy rates Communications Management LevelPost CountHead Count Minister11 Deputy Minister11 Director General11 Deputy Director General85 Chief Director2520 Director6237 Deputy Director8353 Assistant Director10063 Junior Management13863 Low Level Supervision4947 Grand Total468291

26 Observations and analysis Preliminary Expenditure Outcome – Department spent R1.91 billion or 99.3 of its allocated budget – 5 out of 6 programmes’ spending exceeded 98 per cent of their respective allocated funds – Savings are mainly due to non-spending on compensation of employees and transfer payment not made to SABC Production Programme. General Spending Trends – 84 per cent of the department’s budget is transfers and subsidies to entities comprising Sentech, SABC, SAPO, ICASA, Nemisa, USAASA and USAF – Between 2005/06 and 2007/08, there has been an overall increase in departmental budget/expenditure at an average annual growth rate of 35.9 per cent from R1 billion to R1.9 billion. – Department has spent over 99 per cent of its funds in the past 3 financial years. – A spike in spending occurred in Programme 3, where spending rose by 95.05% in March from R1.54m in February 2008 to R31.14m in March, leading to an overall 61.8% spending on the programme. Programme 4 transferred R578.6m in February as compared to a January spend of R31.8m, this is equivalent to a February spend increasing by 94.5% due to special adjustment for Sentech Major Activities/ Projects – Digital Terrestrial Television migration - switch on 01/11/2008 – The ECA promulgation in 2006, led to ICASA engaging in the License Conversion Project to comply with section 93 of the Act. Overall under spending – Department under spent by R million, which is 0.66 per cent of the total allocated budget of R1.92 billion. Vacancy rate – 37.7% - Major vacancies exist in the Director and Junior management categories – viz % and 54.35% unfilled posts. Communications