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Limpopo Provincial Government Revenue and Expenditure Report - 2015/16

This report provides an overview of Limpopo's economic growth, revenue collection, spending performance, infrastructure spending, provincial bank balances, and debt. It also highlights unauthorized, irregular, and wasteful expenditure.

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Limpopo Provincial Government Revenue and Expenditure Report - 2015/16

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  1. LIMPOPO PROVINCIAL GOVERNMENT REVENUE AND EXPENDITURE REPORT FOR THIRD AND FOURTH QUARTER 2015/16 FINANCIAL YEAR Select Committee on Finance 18 May 2016

  2. Introduction Provincial growth Own Revenue collection performance Provincial spending performance Infrastructure spending Provincial bank balances Debt / overdraft Accruals, Unauthorized, irregular and wasteful expenditure Conclusion Table of contents

  3. The provincial economy is largely driven by primary and tertiary sector of the economy with minimal high value economic activities. Provincial growth is resilient but under pressure due to external shocks such as weak global economic growth, low commodity demand, drought conditions and weak investor confidence. According to credit rating agencies the assignment of a stable outlook reflects policymakers' commitment in managing government debt over the medium term and the broad political support for a macroeconomic strategy, including the National Development Plan (NDP). Given the low business expansions and new business ventures, government is under pressure to stimulate economic growth through the fiscal policy. Introduction

  4. Provincial Economic Growth Limpopo GVA Annual Average growth % • The Limpopo’s economy managed to maintain positive growth over the years with few exceptions. The local economy contracted significantly between 2006 and 2009, the down-turn was largely influenced by global economic developments. • The provincial economy suffered negative growth from 4.4 percent in 2006 to a low of -1.2 percent in 2009. Though the economy recovered from 2010, the growth was lacklustre as economic growth in 2014 was only 0.9 percent. Growth will remain sluggish into 2016 to 2017 due to the El Nino climate phenomenon and low aggregate demand for minerals globally.

  5. Limpopo GVA Average annual growth (Constant 2010 Prices) Source: Regional Explorer 2015

  6. Provincial Economic Growth cont. Limpopo GVA sector contribution % Limpopo’s economy is largely driven by Mining Sector, Community services and Trade sector which contribute 27, 24 and 16 percent respectively in 2014. The mining sector’s contribution to the local economy has been increasing over the years, as it increased from 15 percent in 1996 to 28 percent in 2014. The least contributing sectors are Agriculture, Manufacturing and Construction sectors which contribute 2.6, 2.6 and 3.5 percent respectively to the provincial GVA.

  7. The Province has to reform the provincial economy by shifting from a raw material extracting economy to an industrialised economy which has huge multiplier effects. The development of economic growth centres in the province will increase conglomeration of economies. SMMEs and Small Emerging Farmers (SEFs) needs both financial and non-financial assistance to remain profitable and preserve job cuts among the low skilled and income working group. Both provincial administration and local authorities need to assist the national government by maintaining prudent fiscal management, this will reduce pressure on national government by committing less on net government debt. Socio-political stability and growing national debt to GDP will risk the country by decreasing its credit worthiness. Provincial fiscal policy can be used to support economic growth, job creation and improve the living standards of the citizens by prudent expenditure plans. The province requires economic growth to be at least at 3 percent to create the much needed jobs and reducing the economic and income divide in the society. The LDP provides the policy fundamentals in taking the province’ economy on a rising growth and development trajectory. Provincial Economic Growth cont.

  8. Limpopo total population and population growth rate Source: StatsSa Population Estimates 2015

  9. Limpopo Gini Coefficient Source: Regional Explorer 2015 The Gini coefficient is a measure of in equality. A Gini score of 0 implies perfect equality (every individual receives the same income). A Gini score of 1 implies perfect inequality.

  10. Limpopo Human Development Index (HDI) • The Human Development Index measures a country’s average achievements in three basic aspects of human development; • Longevity, • Knowledge and • Decent standard of living Source: Regional Explorer 2015 • HDI is measured between 0 and 1. • Countries with and HDI score of • over 0.8 are considered to have high development, • between 0.5 and 0.8 to have medium human development, and • below 0.5 to have low human development.

  11. Limpopo People living below the lower poverty line (StatsSA defined) Source: Regional Explorer 2015

  12. Limpopo Unemployment rate, official definition (%) Source: Regional Explorer 2015

  13. Share of Limpopo households receiving basic services at Provincial and National level - 2014

  14. Provincial Own Revenue Performance

  15. Own Revenue Collection per Vote

  16. Own Revenue Collection per Vote • The original Appropriation for Provincial Own Revenue was R976.7 million which was adjusted to R1.2 billion. • As at 31 March 2016 an amount of R1.3 billion or 104.7 percent was collected compared to set target of R1.2 billion. • The overall over-collection of R56.4 million was primarily contributed by Provincial Treasury, Education and CoGHSTA through interest earned on favourable bank balances and recovery of previous financial years expenditure (Debts). • Economic Development, Health and Public Works are main contributors of provincial own revenue and have under collected their set targets due to late transfer of own revenue from Public Entities; Under collection on Patient Fees(Cash Flow Management challenges by Road Accident Fund); and Poor collection of property rentals.

  17. Own Revenue Collection per Economic Classification

  18. Own Revenue Collection per Economic Classification • Tax Receipts; Fines Penalties and forfeits; Interest, dividend & rent on land and Financial transaction in asset and liabilities over collected with the amount of R9.7 million, R6.3 million, R78.3 million and R11.4 million respectively. • Over collection was due to improved collection on gaming levies by Economic Development; Increased collection on vehicle impound fees and fines for contravention of National Environmental Management Act; Positive interest earned on favourable Provincial bank balances; and improved recovery of previous year debts and accumulated surpluses. • Sales of goods and services and Sales of capital assets under collected by R61.1 million and R3.9 million respectively. • Under performance is due to less collection on property rentals, patient fees, disposal of assets and less collection from public entities. • Collection of R15.7 million on Transfers received is as a result of recovery of previous years transfers from Polokwane Housing Association for housing project.

  19. Challenges Hampering Optimum Revenue Collection

  20. Provincial Expenditure Performance

  21. Overall Provincial Performance

  22. Compensation of Employees (CoE) spent R37.8 billion or 99.8 percent representing R85.5 million or 0.2 percent under-spending mainly due to delays in appointments of funded vacant posts and resignations. • Goods and Services spent R7.1 billion or 98.3 percent with underspending of R125.1 million or 1.7 percent of the adjusted budget. • Transfers and subsidies recorded an expenditure of R6.0 billion or 91.2 percent with the underspending of R580.7 million or 8.8 percent mainly due to delay in implementation of housing projects. • Payment for Capital Assets spent R2.0 billion or 92.8 percent representing an underspending of R155.4 million or 7.2 percent. • In overall, the Province underspent the 2015/16 budget by R921.8 million or 1.7 percent. Overall Provincial Performance

  23. Education

  24. The department of Education underspent its budget by R138.2 million or 0.5 percent. • CoEoverspent by R21.1 million or 0.1 percent due to filling of administrative clerk and support staff posts at public schools and public special schools as well as temporary educators who have moved back into the system. • Goods and Services underspent by R83.3 million or 4.2 percent due to delayed procurement of outdoor equipment for ECD Centers and reduced motor vehicles running costs due to write offs. • Transfers and Subsidies underspent by R90.0 million or 6.0 percent due amongst others leave gratuities and transfers to Education Development Trust and schools (non reporting compliance). • CAPEX spent R1.0 billion or 99.0 percent of R1.1 billion budget. The underspending of R10.5 million or 1.0 percent was on machinery and equipment due to delays in finalisation of bidding process for school furniture. Education cont.

  25. The main programme, Public Ordinary School Education spend 100 percent of its allocated budget of R21.5 billion. • The programme is responsible for all public ordinary schools which comprise 3910 schools within the province. • The allocated budget includes funds for payments of compensation of employees, expenditure on Learner Teacher Support Material (LTSM), scholar transport, school furniture and teacher development costs. • The allocated budget includes conditional grants such as National School Nutrition Programme (NSNP) and Maths, Science and Technology grants. • Transfers are also made to public ordinary schools for norms and standards to catered for school running costs. • Included in the budget are capital expenditure costs related to repairs and maintenance of buildings and general equipment. Education cont.

  26. Education cont.

  27. Health

  28. Overall the department spent R15.4 billion or 99.6 percent of the adjusted budget of R15.5 billion. The department underspent its budget by R68.4 million or 0.4 percent as follows: • CoE - R16.5 million or 0.1 percent due to delay in the implementation of housing allowance. • Goods and services - by R36.6 million or 1.2 percent mainly on HIV/AIDS and Tertiary Services conditional grants – (roll-over applications have been made). • CAPEX - R15.0 million or 3.2 percent due to late delivery of mobile clinics. Health cont.

  29. The main programmes in the Department are District Health Services, Provincial and Central Hospital services which accounts for 85.7 percent of the departmental budget. • District Heath Services includes 449 clinics, 28 health centers, 234 mobile clinics and 30 District hospitals • Provincial Hospital services includes 3 Psychiatric hospitals and 5 regional hospitals. • Central Hospital services comprise of 2 hospitals (Polokwane and Mankweng). • Services provided in these programmes includes provision for compensation of employees, medicine and medical suppliers, laboratory costs, security services, fuel, oil and gas, food supplies, medical waste and consumable supplies. • Included in the budget are capital expenditure costs related to repairs and maintenance of medical equipment, buildings and general equipment. • The allocated budget includes conditional grants such as Comprehensive HIV/AIDS grant, National Health Insurance (NHI) grant and National Tertiary Services grant. Health cont.

  30. Health cont.

  31. Social Development

  32. Overall the department spend R1.5 billion or 98.3 percent of the R1.6 billion budget which resulted in underspending of R26.6 million. • The underspending is mainly on Transfers and CAPEX due to:- • Transfers = R7.6 million or 1.5 percent not transferred to NPOs as a result of non compliance to timely payment requirements by NPOs. • Capex = Delay in delivery of office equipment and motor vehicles amounting to R19.7 million. Social Development cont.

  33. Public Works

  34. Overall the department spent R2.68 billion or 97.4 percent of the R2.7 billion budget. The department underspent by R71.6 million or 2.6 percent. • CoE underspent by R36.2 million or 3.8 percent as a result of prolonged process of filling the vacant posts and employees exiting the system through death, transfers and retirements. • Goods and services overspent by R2.4 million or 0.5 percent due the payment of contractual obligations. • Transfers and subsidies overspent by R19.4 million or 2.2 percent as a result of additional payment requirements for leave gratuities and municipal rates and taxes for government buildings. • CAPEX underspent by R57.5 million or 15.6 percent due to delays in refurbishing the Capricorn Offices, late appointment of contractors for Lebowakgomo, Mopani and Giyani Government complexes and late delivery of ordered water tankers. Public Works cont.

  35. Agriculture

  36. The department spent R1.6 billion or 98.3 percent of its R1.7 billion budget with underspending amounting to R27.9 million or 1.7 percent. • The department underspent:- • CoE - R15.9 million or 1.6 percent due to late approval of advertised posts (105 posts) as well as late conclusion of security clearance checks. • Transfers and subsidies - R2.2 million or 1.3 percent due to reprioritisation of funds under CASP for drought relief. • CAPEX - R25.0 million or 34.3 percentdue to delayed implementation of RESIS projects as a result of pending community disputes. • The department overspent:- • Goods and Services - R15.6 million or 4.1 percent percent due to procurement of fodder and drilling of boreholes for drought relief. Agriculture cont.

  37. Transport

  38. Overall the department spent R1.725 billion or 99.3 percent of the budget of R1.738 billion and underspending of R12.5 million or 0.7 percent. • The Department underspent:- • Goods and Services - R7.4 million or 3.6 percent because of delays in the purchase of road safety materials procured through Road Traffic Management Corporation funding. • Transfers and subsidies - R13.3 million or 1.8 percent due to savings generated on penalties for bus subsidies. • CAPEX - R9.3 million or 22.2 percent due to delay in the implementation of remedial construction of Thohoyandou Intermodal transport facilities. • CoE overspend by R17.4 million or 2.3 percent due to salary notch adjustments of traffic officers. Transport cont.

  39. CoGHSTA

  40. Overall the department spent R2.2 billion or 81.0 percent of its R2.7 billion budget recording underspending of R511.0 million or 19.0 percent. • The underspending is due to:- • CoE - R11.1 million or 1.3 percent due to the delay in filling funded vacant posts. • Goods and Services - R3.8 million or 2.4 percent due to delays in receipt of invoices for rendered services. • Transfers and subsidies - R493.1 million or 29.4 percent due to slow progress in housing projects (shortage of materials) under Human Settlements grant (rollover request has been made). • CAPEX - R2.9 million or 46.1 percent due to delays in delivery of departmental GG vehicles. CoGHSTA cont.

  41. Sport, Arts and Culture

  42. Overall the department spent R377.3 million or 95.1 percent of the budget of R396.6 million which resulted in underspending of R19.3 million. • The underspending is due to:- • CoE - R6.8 million or 4.5 percent due to the late filling of vacant posts mainly under Mass Sport and Recreation Programme. • Goods and Services - R1.9 million or 1.1 percent due to savings realised on procurement of goods and services. • Transfers and subsidies - R1.0 million or 9.4 percent due to over projected leave gratuities. • CAPEX - R9.4 million or 15.4 percent due to delayed delivery of modular libraries as a result of community protest - Community Library grant (rollover request has been made). Sport, Arts and Culture cont.

  43. Safety, Security and Liaison

  44. Overall the department spent R82.7 million or 93.3 percent of the budget of R88.7 million. • The department underspend by R5.9 million or 6.7 percent as follows: • CoE - R3.6 million or 5.9 percent due to filling of posts through promotions resulting in the underspending on COE. • Goods and services - R2.2 million or 8.4 percent due to delays in payment of contractor as result of disputes being lodged on the project. • CAPEX - R0.120 million or 14.8 percent due to the non delivery of Dot Matrix printer and installation of firewall. Safety, Security and Liaison cont.

  45. Office of the Premier

  46. Overall the department spent R339.3 million or 96.8 percent of the budget of R350.6 million. The department underspent by R11.2 million or 3.2 percent. • The underspending is as a result of: • CoE - R3.4 million or 1.4 percent due to the delays in filling of vacant funded positions. • Goods and Services - R7.6 million or 8.0 percent due to the delay in the finalisation of planned projects. • CAPEX - R0.233 million or 8.6 percentdue to misallocations of financial leases under Goods and Services, journals are being finalised. Office of the Premier cont.

  47. Provincial Legislature

  48. Overall the Legislature spent R297.3 million or 96.6 percent of the budget of R307.8 million. • The Legislature underspent its budget by R10.5 million or 3.4 percent on: • CoE - R3.9 million or 2.5 percent due to delays in filling of vacant funded positions • Goods and Services - R6.9 million or 12.5 percent due to delay in processing of invoices. • CAPEX - R1.9 million or 15.8 percent due to the delay in the procurement processes • The Legislature overspent its Transfer payments by R2.0 million or 2.4 percent due to the payment of previous financial years arrear political party staff’s performance bonus. Provincial Legislature cont.

  49. Provincial Treasury

  50. Overall the department spent R362.8 million or 96.9 percent of the budget of R374.3 million . • The department underspent its budget by R11.5 million or 3.1 percent. • CoE - R17.6 million or 7.0 percent due to delayed filling of funded vacant posts. • CAPEX - R0.586 million or 7.1 percent due to delays in the implementation of LOGIS and late appointment of service providers to install security-scanning machines. • The department overspent its budget on • Goods and services by R4.3 million or 4.1 percent due to the need to pay high court legal fees. • Transfers and subsidies by R2.1 million or 33.9 percent due to payment of unplanned for leave gratuities as a result of early retirements. Provincial Treasury cont.

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