1. KZN MEC for Finance and Economic Development
Presentation to the Select Committee on Finance
12 February 2007

2. Presentation outline
Analysis of 3rd Quarter Capital & Conditional Grant expenditure
Monitoring Mechanism within Provincial Treasury
Conclusion

3. Capital Expenditure

4. Capital expenditure

5. Analysis
Largest capex budget in Transport (41.2% of total provincial budget);
Total expenditure of R2,136 billion or 59.1 per cent of adjusted budget;
Projected end-of-year under expenditure of only R5,8 million;
Capital budget increased by R83 million in Adjustments Estimate;
Low spending in Education and Other;

6. Analysis – Economic classification
Spending on buildings and fixed structures (infrastructure) is at 62.5 %
Low spending on machinery & equipment of only 47.3 %
Mostly i.r.o. equipment ordered with delivery to take place during 4th Quarter
Category “Other” is mainly for software i.r.o the Analytical Intelligence system in the Office of the Premier.
Overall expenditure trend shows gradual increase in spending level to a peak in 4th Quarter as illustrated in following graph:
raises concern regarding ability to plan and implement projects at beginning of year.
Could lead to under-expenditure and subsequent roll-over

7. Actual & Projected Expenditure per Quarter

8. Education - Capex Adjustments Estimate
Amount of R100 million i.r.o infrastructure suspended due to departments low spending at mid-year; and
R47,6 million moved from machinery and equipment to deal with other spending pressures in department
Despite this decrease, department continuing to show low spending at 50.8 %
Dept of Education attributes this to:
Claims of R116 million from implementing agents not yet processed;
Including this, the percentage spend increases to 67.5 %.
Provincial Treasury is in discussion with department regarding the timeous processing of claims
Projections indicate an over-expenditure of R13,3 million.

9. Health - Capex
Main budget increased by R69,9 million, mainly i.r.o. revitalisation grant roll-over;
Spent 59.3 % as at December 06;
Low spending linked to the initial delays experienced in implementing revitalisation grant projects;
Optimistic projection for last quarter resulting in over-exp. of R17,8 million.

10. Transport - Capex
Additional funding given for infrastructure in Adj. Estimates;
Percentage spent of 65.9 % in line with past trends;
Projections show slight under expenditure of R32,3 million.

11. Other - Capex
The category “Other” is mainly i.r.o. capex requirements for Agriculture, Welfare & Population Dev. and Works
Low spending after 3rd Quarter of R140,8 million or 44.3 %
Departments anticipate completing projects during last quarter and hence significantly increased expenditure

12. Conditional Grants

13. Cond. Grant - Analysis
Provincial Infrastructure Grant not included since it forms part of Capex expenditure and i.t.o. DORA does not require separate reporting
Low spending recorded by Agriculture and some grants under Health and Education
Total spending at 66.5 %
Projected under expenditure in Agriculture and Health

14. Agriculture – Cond. Grant
Administers 3 grants:
Comprehensive Agricultural Support Programme
Spending low at 27.9 % due to the slow start
Conservative projections
Past trends have shown that expenditure increases in latter part of year, resulting in total allocation being spend.
Land Care Grant
Low spending at 32.5 %,
Slow implementation of projects
Dept. is reviewing the projected under expenditure of 4,5 million
Agriculture Disaster Management
Roll-over from previous year
Province in discussion with National Department to redirect funds to broader drought relief projects
No agreement reached, therefore no expenditure

15. KZN Education – Cond. Grants
Prov DoE receives three cond grants from the National DoE:
FET Recapitalisation Grant
The total allocation of R90 million has been transferred to the FET colleges
Prov. DoE has been requested to provide details on the progress of these projects at the FET’s.
HIV and AIDS
Spend 56.8 % at end of December 2006
Spending has increased significantly during third quarter
Spending in line with historic trends and the grant should be fully spend as projected.
National School Nutrition Grant
Expenditure is on track at 73.9 % after 3rd Quarter
Roll-over of funds eminent due to invoices relating to March only being received and processed during April

16. KZN Health - Cond. Grants
Dept. receives five cond. grants from National DoH:
Comprehensive HIV and AIDS
Spending of 69.7 % at end of December,
Indications that the department will spend entire allocation
Forensic Pathology Services
Very low spending of 15 % attributable to:
Late take-over of the service from SAPS,
Outstanding claims from National Department of Public Works i.r.o. upgrading of facilities; and
Various commitments made but payment will only be effected once delivery taken place .
Department projecting under expenditure of R27 million.

17. KZN Health – Cond. Grant (cont.)
Professional Training and Development Grant
The department has spent 69.7 % and should be in a position to spend the 2007/08 budget allocation
Hospital Revitalisation Grant
44.5% of annual budget spent.
Spending on this grant was started slowly due to:
Tender appeals delaying King George V project.
Delays in acquisition of land at Dr Pixley kaSeme Hospital.
Environmental Impact Assessment caused delays at JL Dube.
These problems have been overcome and spending has accelerated since 2nd quarter
Department anticipates expenditure to continue increasing at a faster rate during the last quarter

18. Housing – Cond. Grant
Bulk of the departmental budget relates to the Integrated Housing and Human Settlement Development Grant.
After low spending in first quarter, department has managed to increase spending level to 74.4% at end of 3rd Quarter
Projecting to fully spend allocation

19. Sport and Recreation – Cond. Grant
Mass Sport & Recreation
Initial problems with suppliers which has been resolved
Problems have resulted in relative low expenditure at 64.9 %
Expenditure has picked up during third quarter and it is projected that the allocation will be spent

20. Monitoring Mechanisms
KZN Treasury closely monitors and evaluates exp. of provincial departments through:-
Monthly IYM report; and
Quarterly meetings between Head of Treasury, Senior Provincial and National Treasury Officials and Departments (HOD, CFO and Senior Line function officials).
The main objectives of quarterly meetings is to:
Monitor performance;
Identify possible areas of risk.
Quarterly reports submitted to:-
KZN Portfolio Committee on Finance and Economic Development; and
National Treasury
One of many successes is the intervention leading to the redirection of infrastructure funds from Education to Transport.

21. Conclusion
There are a number of challenges ahead to ensure that Cond. Grant and Capex exp improves.
For example, depts must improve the planning and implementation of infrastructure projects, taking into account:-
The MTEF budget allocations, and
The infrastructure planning and delivery cycle.
This would eliminate the current hockey stick trend where exp. is slow at beginning of financial year and increasing towards the end of financial year.

22. THANK YOU!