KwaZulu-Natal Legislature: Friday 26th November 2021 – Pietermaritzburg Debate on the KZN 2021/2022 mid-year Budget Performance Report

Dec 1, 2021 | Provincial (KZN/Gauteng), Speeches

By – Hon MB Khawula (MPL – IFP)

Hon. Speaker,
Hon. Members,

As internationally acknowledged and observed, the present times are highly challenging to the economic situations of governments. KwaZulu-Natal, as a provincial government, is not removed from this situation. Hence, the repeated calls for spending with care and cutting each coat according to the size of the cloth. It is extremely important for each Portfolio Committee in our Legislature to ensure that we monitor spending of departmental budgets to be exactly in line with what was appropriated. Each incident of underspending is unacceptable. In the same vein, each incident of overspending is equally so.

On behalf of the IFP, I want to voice our appreciation for the Report that we have been given by Treasury, highlighting spending patterns of each Department. It helps us to focus on particular trends. I also wish to express gratitude to the Finance Portfolio Committee for their continued evaluation of the financial situation of each Department. But, like I stated earlier, we all have a duty to be the watchdogs of the finances of the Departments in our Portfolios. It is pleasing to note that even under these circumstances, Treasury reports a positive net monthly bank balance for the province.

The Mid-Year Budget Performance is an indication of where we are going, and where we are likely to end, and what problems lie ahead if the redirection does not happen, come financial year end. Government officials have become accustomed to the practice of wanting to balance books towards the end of the financial year, at the expense of services and fruitful spending. At the end of the last financial year, colleagues, we saw Departments handing over money to education, based on them declaring that there was going to be underspending. On the side of those Departments that made these declarations, this was as good as fiscal dumping. On the side of education, it was a gain well-deserved because of the financial pressures they were experiencing, though an unintended consequence from the original plan. Proper planning, proper budgeting and proper execution of the plan should eliminate these kinds of practices.

The IFP is extremely concerned with Departments that report underspending on compensation of employees, when so many thousands of our graduates remain unemployed. This is unethical, unnecessary and must be viewed as failure to deliver. In the same vein, underspending on goods and services robs the businesses of our province of the returns they may be earning in providing services to their government. When government fails to spend what Parliament has given to them in financial resources, the communities on the ground suffer the consequences, such as poor infrastructure, poor services, and poor social provision. This is what we are here to monitor. What is due to Caesar, must be given to Caesar.

The financial Mid-Year Performance Report of the province reflects a conglomeration of spending patterns. Some are under-collection and underspending mid-year reflections, others are over-collection and overspending mid-year reflections. When one talks to under-collection - and the reasons given are Covid-19 and lockdown-related reasons - one then asks oneself a question: those Departments that were able to over-collect under the very same circumstances given by others for under-collection, how did they do it? In one government, in the same provincial administration, such inconsistences should not be prevailing.

The Office of the Premier reflects a mid-year revenue under-collection of 22.3% but is very confident that it will show over-collection performance by the end of the year. At mid-year, the OTP has under-spent at a low of 54.4% but projects overspending by R9.3 million by the end of the financial year.
Provincial Legislature reflects an enormous mid-year over-collection with a projected end of year over collection of R3.8 million. Legislature mid-year budget performance is high, with an end of year performance projection that is balanced.

Agriculture and Rural Development reflects a higher than projected mid-year revenue collection, with a projected over-collection by year end. The Department’s mid-year budget performance is low, with a projected end of year budget over spending, attributed to the unbudgeted 2021 wage agreement.

EDTEA reflects a mid-year revenue under-collection, also with a projected under-collection by year-end. The mid-year budget performance of the Department is low at 92.2%, (by R139.4 million). This remains cause for concern, as this Department is about lifting and developing the economy of the province. However, the Department is projecting a balanced budget spending at year-end.

Whilst the mid-year budget performance figures of Education remain well within the projected figures, the Department projects end of year overspending of R3.8 billion. The Department anticipates that National Treasury will reduce its budget pressures by R2.191 billion for the 2021 wage agreement, which will reduce the projected overspending to R1.654 billion. The Department argues that its wage agreement relief injections from National Treasury do not equate to the employment figures of the Department. This is very serious. A question needs to be asked: why should National Treasury fund KZN Education if employment figures are not consistent with the actual employed warm bodies in the province? This is a matter that all our financial stakeholders in the province need to engage on and debate thoroughly with National Treasury. A rigorous calculation exercise of the actual employment cohort in Education, and other Departments, needs to be undertaken for National Treasury to correct their funding model of KZN Departments.

Another great concern is the Department of Health, with a mid-year under-collection of 35.2% and a mid-year budget underspending of R1.204 billion. Yet, the Department is projecting an end of year overspending by R3.202 billion. But the same Department ended the previous financial year with an underspending of roughly R1.913 billion. During the previous financial year, Health requested a roll-over that was not approved. Hence, they ended up surrendering R795.677 million to Education. The Health Department’s management remains a great cause for concern in this province, especially financially.

Transport is another great concern. Their mid-year revenue collection stands at 57.5%, thus already projecting end of year under-collection. According to the mid-year budget performance, Transport underspent by R455.891 million, indicating definite underspending again at the end of the year, as happened the previous year.

Arts and Culture, Hon. Members, requires scrutiny. Their mid-year expenditure stood at a low of 55%, underspent by R225.874 million. What is surprising is that the Department is projecting balanced spending at the end of the financial year. Even more concerning in the Department, is the Community Library Services Conditional Grant underspending at 40% of the mid-year and 19.5% of the annual budget. The province will be running the risk of forfeiting this Grant if this situation persists.

Slow progress in the rationalisation programme of provincial entities is hindering provision of services and impacting negatively upon some provincial operations. The IFP appeals to the provincial executive to speed up progress in finalising these processes. Due to the rationalisation programme, most posts were put on hold in all the entities. Staff in almost all of them are not certain about the future, thus frustrating performance. This situation has been going on for far too long. Finality must be reached.

The Chairperson of the Finance Portfolio Committee informed us that the Portfolio Committee issued a strong warning to Departments against underspending on conditional grants. This is because if a conditional grant has not been spent fully, with adherence to conditions at the end of the financial year, the province is likely to lose that funding for good. Conditional grants that reflect underspending expenditure at mid-year performances are:

  • Ilima/Letsema Projects for Agriculture, by 35.2% and 11.5% of the total budget. On aggregate, Agriculture conditional grants combined at mid-year stand at 47.8%;
  • MST Grant for Education at a mid-year low performance of 29%;
  • NHI Grant for Health at a low of 32.5% of the annual budget;
  • The Human Settlement Development Grant for the Human Settlements Department, also at a low for mid-year expenditure;
  • Provincial Emergency Housing Grant for the Human Settlements Department spending only R20.6 million of the projected R52.2 million;
  • Informal Settlements Upgrading Partnership Grant for Provinces at Human Settlements, at a mid-year low of 44.7%;
  • Mass Participation and Sport Development Grant for Sport and Recreation, at a mid-year low of 40% of the annual budget;
  • Provincial Roads Maintenance grant for Transport showing a low mid-year performance of 41.4% of the annual budget;
  • Public Transport Operations Grant for Transport showing a low mid-year performance of 42.6% of the annual budget.

Hon. Speaker, going forward, it remains one of the major responsibilities of Portfolio Committees to ensure that these spending patterns on grants improve for the sake of service delivery in our province.

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