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Q3 INFRASTRUCTURE AND CONDITIONAL GRANTS PRESENTATION

National Council of Provinces

4th February 2008

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PURPOSE

• To provide the National Council of Provinces (NCOP) with an overview of Conditional Grant and Capital Expenditure performance for Gauteng Province during the Third Quarter of 2007/08

• Snapshot of detailed Q3 financial and non-financial performance report

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CONSOLIDATED VIEW OF GPG INFRASTRUCTURE PAYMENTS

  1 2 3 4 = (3/1) 56 = 1-(3+5)

R '000

2007/08 Adjusted Budget

Projections to end of Q3

Actual Expenditure to end of Q3

Actual Expenditure as % of Budget

Q4 Projections

Projected Outcome

Vote 4 Health 1,156,383 948,940 918,532 79.4% 267,073

(29,222)

Vote 5 Education 769,023 732,294 632,913 82.3% 221,786

(85,676)

Vote 6 Social Development 94,931 32,473 19,144 20.2% 45,272

30,515

Vote 7 Housing 2,340,309 1,710,131 1,809,419 77.3% 481,282

49,608

Vote 9 Public Transport, Roads 959,538 555,453 508,591 53.0% 322,046

128,901

Vote 9 Public Works 332,671 92,552 134,368 40.4% 69,573

128,730

Vote 11 Agriculture Cons & Environment 6,640 1,991 1,290 19.4% 5,350

-

Vote 12 Sports Arts and Recreation 71,008 48,721 30,416 42.8% 40,592

-

TOTAL 5,730,503 4,122,555 4,054,673 70.8% 1,452,974

222,856

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CONSOLIDATED REVIEW OF GPG INFRASTRUCTURE

• The adjusted 2007/08 infrastructure appropriation for the Province is an amount of approximately R 5.7 billion which equates to approximately 13.8% of the total Provincial budget (R 41,4 billion). This amount excludes an appropriation for Gautrain of which R2,8 billion has been spent

• The infrastructure allocation is made up of capital and maintenance. Of the total R5.7 billion infrastructure appropriation, R4.98 billion, (87%) is allocated for capital projects and R752 million, (13%) is allocated towards maintenance projects

• As at the end of Quarter 3, R4,1 billion was expended on infrastructure projects in the Province by provincial departments. Of which R3,61 billion was spent on capital projects and R442 million was spent on maintenance projects.

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GPG INFRASTRUCTURE BUDGETS 2007/08

GPG Consolidated Infrastructure

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Total Budget 07/08 5,730,503 4,978,522 751,981

Actual Q3 Expenditure 4,054,673 3,612,625 442,048

Total Infrastructure Capital Maintenance

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INFRASTRUCTURE EXPENDITURE ANALYSIS: CAPITAL PROJECTS

  1 2 3 4 = (3/1) 5 6 = 1-(3+5)

R '000

2007/08 Adjusted Budget

Projections to end of

Q3

Actual Expenditure to end of Q3

Actual Expenditure

as % of Budget

Q4 Projections

Projected Outcome

Department            

Vote 4 Health 884,434 770,057 716,946 81.1% 196,198

(28,710)

Vote 5 Education 628,253 633,569 544,924 86.7% 195,271

(111,942)

Vote 6 Social Development 69,392 11,801 14,086 20.3% 37,888

17,418

Vote 7 Housing 2,329,272 1,699,170 1,792,893 77.0% 479,681

56,698

Vote 9 Public Transport, Roads 689,544 438,808 383,140 55.6% 254,417

51,987

Vote 9 Public Works 300,816 77,674 129,033 42.9% 54,577

117,206

Vote 11 Agriculture Cons & Environment 5,803 1,511 1,187 20.5% 4,616

-

Vote 12 Sports Arts and Recreation 71,008 48,721 30,416 42.8% 40,592

-

TOTAL 4,978,522 3,681,311 3,612,625 72.6% 1,263,240

102,657

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INFRASTRUCTURE EXPENDITURE ANALYSIS: CAPITAL PROJECTS

• As at the end of Q3, R3.61 billion (73%) has been expended by GPG Departments on Capital projects in line with the projections

• Of the R 752 million allocated to Maintenance projects by the end of Q3, an amount of R 422,05million (58.8%) was actually expended. The largest contributors to this under expenditure are Social Development and Public Works

• The Province projects to spend R1,453 billion in the remaining segment of the 2007/08 financial year, which if achieved will result in an under-expenditure of R223 million (3.9%) of the infrastructure budget

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CAPITAL PROJECTS• The highest expenditure in capital projects is reported

by Housing at R1,79 billion, and Health at R 716 million. Low rates of spending are reported by Agriculture, (R1,2 billion) and Social Development, (R 14,1 million)

• The under expenditure by Agriculture(20,5%) can be attributed to poor project planning. The budget has been reduced to R6,6 million during the adjustment process

• The depart of Social Development may under spend by R17,4 million. Low spending is also due to poor project planning which has resulted to surrender of funds

• Significant over-expenditure on capital projects is anticipated from the departs of Education and Health. This is due to the fact the department of Education has submitted incorrect projections. The over-expenditure for the DoH is owing to increased costs of the Department’s Revitalisation strategy being rolled out this year

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INFRASTRUCTURE EXPENDITURE ANALYSIS: MAINTENANCE PROJECTS

  1 2 3 4 = (3/1) 5 6 = 1-(3+5)

R '000

2007/08 Adjusted Budget

Projections to end

of Q3

Actual Expenditure to end of Q3

Actual Expenditure

as % of Budget

Q4 Projections

Projected Outcome

Vote 4 Health 271,949 178,883 201,586 74.1% 70,875

(512)

Vote 5 Education 140,770 98,725 87,989 62.5% 26,515

26,266

Vote 6 Social Development 25,539 20,672 5,058 19.8% 7,384

13,097

Vote 7 Housing 11,037 10,961 16,526 149.7% 1,601

(7,090)

Vote 9 Public Transport, Roads 269,994 116,645 125,451 46.5% 67,629

76,914

Vote 9 Public Works 31,855 14,878 5,335 16.7% 14,996

11,524

Vote 11 Agriculture Cons & Environment 837 480 103 12.3% 734

-

Vote 12 Sports Arts and Recreation   0 0   0

-

TOTAL 751,981 441,244 442,048 58.8% 189,734

120,199

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MAINTENANCE PROJECTS• Of the R441,24 million (58,7%) projected to be spent for

Q3, actual spending on maintenance projects undertaken in the Province is reported at R442,05 million (58,8%)

• The highest expenditure is reported by the Department of Health

• The Departments of Agriculture(12,3%), Public

Works(16,7%) and Social Development(19,8%) reported the low maintenance expenditure as at the end of Q3

• The projected spend for the rest of the year is 25.23% of the overall maintenance budget, which would result in an 16% under expenditure for the 2007/08 year on maintenance projects

• The Department of Health projects an over-expenditure of R512 million due to shortfalls in maintenance allocation, however the department has been advised to scale down in order to stay within budget

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SECTORAL INFRASTRUCTURE ANALYSIS Department of Health:

• A province wide programme of modernising, rationalising, and transforming health infrastructure and technology in line with national policy objectives is being rolled out by the depart of Health

• At least 15 capital projects new, and existing, have been completed up to the end of Q3, and 23 new projects that have commenced as part of the Revitalization strategy of the Department

• Numerous upgrading and rehabilitation projects are ongoing throughout the Province. However only statutory, day-to day maintenance is being undertaken as the need arises. This is due to only 23.3% of the DOH infrastructure budget being allocated to maintenance

• Large CAPEX projects completed are: – Ann Latsky Nursing College – New Admin and Student Facility– Bristlecone Clinic – New Facility– John Doe Clinic – New Facility

• The rollout of new projects in terms of the Revitalization strategy, could result in the Department reporting a year end over expenditure of at least R29,2 million

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SECTORAL INFRASTRUCTURE ANALYSIS Department of Education:

• In terms of the objectives of the Department of Education, the infrastructure delivery programme seeks to address the current backlogs and lack of basic learner facilities in the various under-serviced areas of the Province

• The amount of R628 million has predominantly been expended on rehabilitation and maintenance works for 152 schools, the construction of 162 new projects, including fencing projects for improving school security and to ensure maintenance works where necessary in existing educational facilities and institutions

Department of Public Transport, Roads and Works• The major portion of the amount expended by the Department has been

expended on projects that are geared towards the:– Tarring of existing gravel roads– Upgrading and maintenance of earmarked roads for improvement– Provision of lighting on certain routes– Operational and expansion works on the major routes, M1, R24, R21,

N12,N1 to ensure traffic efficiencies for the 2010 event– Project Managers have been appointed to fast track development and

construction on 20 Townships Roads projects• Overall challenges have been experienced in the overall maintenance

programme, resulting in the backlogs for routes in need of urgent maintenance

• Delayed procurement processes has slowed the construction of roads in the 20 townships and contracts were awarded late.

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SECTORAL INFRASTRUCTURE ANALYSIS

Department of Social Development • Department is in the process of completing construction of

a secure rehabilitation facility for delinquent youth at the Jabulani Place of Safety, scheduled for completion in 2008/09

• ECD Infrastructure – Delays experienced during the planning stages with the new implementing agents (municipalities)

Department of Agriculture, Conservation and Environment

• Department has been undertaking ongoing upgrading and maintenance works at existing facilities at provincial nature reserves

Department of Sport, Arts, Culture and Recreation• Phase 1 in four stadia has been completed• Department is currently involved in the second phase of

construction at two provincial stadia, HM Pitje and Sinaba• Completion is scheduled for the 2008/09 financial year

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KEY OBSERVATIONS• It is evident that that weaknesses in infrastructure delivery result

from misalignment between budget, planning and cash flow requirements for projects. Departments are struggling to undertake forward planning

• Departments delay to finalise lists of projects, some lists are changed during the year as new priorities are identified. Late awarding of contracts to contractors is among other reasons for projected high expenditure in Q4

• GT is currently rolling out the Infrastructure Delivery Improvement Programme (IDIP) to departs of SACR and Social Development. IDIP seeks to align the project delivery cycle with the budget cycle

• GT noted with concern that whilst some projects are moving at an acceptable pace, other large scale capex projects, are moving at a sluggish pace and are being plagued by operational, procurement and reporting difficulties

• GPG notes that well-maintained infrastructure underpins quality of life and economic development. If maintenance is inadequate, social and economic growth in Gauteng will be impeded

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KEY OBSERVATIONS• It is clear that there are numerous factors that impact on the

expenditure levels of departments during the final stages of the financial year. A pure data analysis on its own cannot identify specific factors influencing spending behaviour and a more detailed analysis of such factors are reviewed monthly at PW-GT-Client meetings

• It is instructive to note that an increase in spending during the final stages of the financial year can be expected because payment patterns for capital projects are generally high based on completion of project milestones. Departments would use the first few months of the financial year to initiate the project

• GPG departments continue to build and be supported in their efforts by Treasury to build infrastructure capacity to ensure improved monitoring and reporting as they are faced with capacity constraints

• Treasury continue its pursuit of ensuring that Departments meet their infrastructure goals and objectives, and assist strengthen thin structures and tighten budgetary leaks

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CONDITIONAL GRANTS ANALYSIS

Gauteng

Governm

Total Available 2007/08

Received by Province

(Reported by Provinces)

Provincial Actual

Spending (Reported by Provinces)

Actual as a % of total

available

Available budget less

Actual Spending

AGRICULTURE 22,921 18,341 17,767 5,154

CASP 19,651 15,725 15,467 79% 4,184

Land Care 3,270 2,616 2,300 70% 970

SACR 46,901 38,940 27,001 19,900

Library Services 18,810 14,109 13,266 71% 5,544Mass Sport and Recreation Participation Programme 28,091 24,831 13,735 49% 14,356

DPTRW 3,029,411 2,846,761 2,829,478 199,933

Gautrain Rapid Rail Link 3,029,411 2,846,761 2,829,478 93% 199,933

EDUCATION 298,555 264,308 222,626 75,929

FET 161,565 161,565 119,382 74% 42,183

HIV and AIDS 22,416 16,812 17,603 79% 4,813School Nutrition 114,574 85,931 85,641 75% 28,933

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CONDITIONAL GRANTS ANALYSISComprehensive HIV and AID

399,604 299,700 301,890 76%97,714

Forensic Pathology Services

92,428 62,812 55,476 60%36,952

Health Professions Training and Development

581,741 436,304 - 0%

Hospital Revitalisation

567,052 377,464 339,706 60%227,346

National Tertiary Services

1,959,399 1,469,547 - 0%

-

HOUSING 2,197,223 1,567,999 1,623,719 573,504

Integrated Housing and Human Settlement

2,197,223 1,567,999 1,623,719 74%

573,504

-

Infrastructure Grant to Provinces

524,238 393,180 - 0%

TOTAL 9,719,473 7,775,356 5,417,663 56% 3,777,572

Note: 81% spent against the budget (excluding schedule 4 grants)

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CONDITIONAL GRANTS ANALYSISDepartment Of Health• Comprehensive HIV/AIDS

– An amount of R301,890 million (75,5 per cent) was spent as at the end of Q3, as compared to total transfers of R299,700 million by National Treasury

• Forensic Pathology Grant– As at the end of December, R55,476 million (68 per cent) had been spent– 3 884 post-morterm operations carried out to the end of Q3– 257 576 km covered by the 73 FPS vehicles available for transporting bodies in

Gauteng– FPS operating with a 90 per cent staff complement (including Forensic

Pathologists and Medical Officers)• Hospital Revitalisation Grant

– Hospital Revitalisation had an allocation of R503,3 million for 2007/08, as well as R63,768 million rolled over from the 2006/07 fiscal year

– By the end of Q3, R339,706 million had been expended, representing 66,6 per cent of the total amount available

– This grant faces undue budgetary pressures, and besides requiring that expenditure be contained within acceptable limits

Department Of Sport, Arts, Culture and Recreation• Community Library Services

– The Community Library Services Grant had spent R13, 3 million (70.5%) of the allocated budget of R18,8 million by the end of the third quarter of 2007/08, with R5,5million expected to be spent during the fourth quarter.

– About 60 per cent of the unspent funds are committed, and 4 per cent to be left unspent at the end of Q4.

• Community Library Services– The MSPP Grant had spent R13, 7 million (49%) of the allocated budget of R28,809

million by the end of the third quarter of 2007/08, with R15, 5 million expected to be spent during the fourth quarter

– The committed amount to date is R14, 0 million and it is anticipated that 98 per cent of the budget will be spent and the 2 per cent will be unspent because of late payments

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CONDITIONAL GRANTS ANALYSISDepartment of Education• FET Recapitalisation Grant

– The FET Recapitalisation Grant for 2007/08 amounted to R140,5 million, and this was increased by rollovers from the 2006/07 financial year amounting to R21,056 million

– By the end of Q3, R119,382 million (73,9 per cent) had been expended out of total budget of R161,565 million

– While it is anticipated that the entire amount shall be spent by the end of the 2007/08 fiscal year, challenges faced include:

• Speeding up of the procurement processes and conversion of commitments to actual expenditure

• Increasing the frequency of monitoring per college especially those that are behind in their spending; and

• Implementation of monthly cash flow projections– GDE and GT undertake thorough scrutiny of College monthly reports

as well as quotations, invoices and financial statements and follow up visits to verify progress as indicated in monthly reports

• HIV/AIDS (Life Skill)– The HIV/AIDS Conditional Grant, amounting to R22,416 million for the

2007/08 fiscal year, had spent R17,603 million, against total transfers of R16,812 million, approximately 75 per cent of the total 2007/08 allocation

– GDE has indicated that measures were instituted to ensure that districts use 45 per cent of their budgets before the actual budget allocation

– The early start to the programme will also ensure minimal disruptions in delivering the programme

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CONDITIONAL GRANT ANALYSIS• National School Nutrition Programme

– With an allocation for 2007/08 of R114,574 million, NSNP had by December 31 spent R85,641 million, representing 75 per cent of the total 2007/08 allocation

– GDE anticipates that the full amount shall be spent– Presently 450 310 learners are beneficiaries of this scheme

• Department of Public Transport, Roads, & Works• Gautrain

– The actual expenditure on the Gautrain grant amounted to R2,829 billion against the budget of R3,029 billion

– The low expenditure is attributable to the R1,5 billion in foreign transfer payments that does not reflect in the December IYM ( due to strict reporting requirements for the Gautrain payments). Taking this payments into account the actual expenditure could have been at 83,7 per cent. These payments will be visible in the January 2008 expenditure and thus the expenditure is expected to be high during the remaining quarter

• DACE– The CASP program had spent R13,8 million (70,1%) of the allocated budget of

R19,7million by the end of the third quarter of 2007/08, with R5,9million expected to be spent during the fourth quarter;

– LandCare Programme spent R2,3 million during the first three quarters and projects to spend R3,3 million during the fourth quarter.

– The Land Care Program transferred R2,3 million towards the eradication of alien vegetation in Elandsfontein and Mogale City.

– The CASP program has so far cleared 6479 hectares of alien vegetation against the target of 20 000 ha, the progress has been affected by persistent rains

– 1,191 farmers were trained against an annual target of 2,150– 19 mentorship programs undertaken against the annual target of 25– Over 400 emerging farmers were given advisory support

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END OF PRESENTATION

Thank you!