South Africa

Analysis: Gauteng 2013/14 provincial budget

By Paul Berkowitz 6 March 2013

On Tuesday the Gauteng finance MEC, Mr Mandla Nkomfe, tabled the 2013/14 provincial budget. On paper, the province’s finances are looking better than most, but accountability at both the provincial and municipal level will be needed if the province wants to deliver on its ambitious goals. By PAUL BERKOWITZ.

There are some serious numbers in the Gauteng budget. National treasury will be handing over almost R77 billion to the province this year, rising to around R90 billion in the 2015/16 financial year. Over a third of this money will go to education and a similar amount will be spent on health services.

The MEC’s speech is a broad outline of provincial spending plans over the medium term (the next three fiscal years). It makes all the right noises in all the right areas; rehabilitation of old schools and hospitals, construction of new ones and the filling of vacant posts in the civil service. A number of new projects are mentioned, mostly small in scale.

On the surface, there’s not too much to provincial budgeting. National treasury provides the overwhelming portion of revenue (although Gauteng, which generated some 4.5% of its revenue internally in the 2012/13 year, is second only behind the Western Cape in self-sufficiency). Most of the money is spent on health and education services.

Gauteng is the richest province in the country with the greatest potential to generate its own revenue. Its challenges are different from most of the other provinces; it has the greatest stock of existing health and education infrastructure, both private and public, but it also faces the greatest in-migration of people, which places strain on this infrastructure.

The province’s challenge over the medium term will be to go beyond the paying of bills and provision of services, although it certainly needs to improve in the latter area. This year’s Budget has brought two big changes in the division of revenue by national treasury. One brings more money to the province, the other takes money away from its municipalities. Gauteng’s challenge will be to lead the inter-governmental process and map out a sustainable financial strategy for the future.

The release of the 2011 Census results has shown that Gauteng and the Western Cape experienced the greatest population growth of all the provinces over the last decade. As a result, the division of the provincial equitable share, which is largely determined by population numbers, has been in the two provinces’ favour.

The table below shows the total transfers from national to provincial government for the past fiscal year and over the medium-term. Total growth is projected to be 7% per year for the next three years, but it will increase by 9%, 7% and 9% for Gauteng respectively. There’s also a large unallocated fund of R9.9 billion next year and R11.7 billion in 2015/16 that could be used to top up Gauteng’s allocation.

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That is the good news. The province plans to use some of this money to add jobs in public education and health. While personnel costs already take well over half of the provincial pie in Gauteng, the province spends the smallest proportion on staff of all the provinces – only 52% of all money, compared to an average of over 60% (and over 71% in Limpopo).

These figures, and others, are given in last year’s provincial budgets (). Gauteng also spends more on healthcare and less on education than the other provinces as a proportion of its total budget.

The bad news is that the 2013/14 national Budget also brought a reconfiguration of the municipal equitable share formula. This is also a transfer from national treasury and it is also linked to the population size of a particular municipality. However, the new formula places much more weight on the incidence of poverty in a municipality and its ability to generate its own revenue.

The figure below is reproduced from Chapter 8 of the National Budget Review: Medium-term expenditure and division of revenue. (The original chapter is here and gives details of the provincial equitable share also)

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All of the municipalities in the province are classified as ‘metro’, ‘secondary city’ or ‘large town’ and all of them are set to receive less money per household in the future. Furthermore, most of these municipalities are struggling to collect all their budgeted basic service revenues. The latest summary of municipal finances, which paints a picture as at 31 December 2012, shows that the City of Johannesburg is responsible for almost a fifth of total municipal debt, and its book grew by some R2 billion since December 2011.

The screws are tighter on the municipalities than they were a year ago. There is pretty little fat that still remains in the fiscus and the effects of corruption and wastage will be more apparent if they are not curbed.

The province has been spared the worst of Gordhan’s red pen and has a good baseline of equitable share funds over the medium-term. It now needs to shift up a gear, beyond the filling of posts and fixing of supply chains, and onto the tough political work of helping to fix its municipalities. Money spent fixing water infrastructure in the municipalities is money saved on not having to treat cholera in the state hospitals. DM

Photo: Johannesburg (Greg Marinovich)


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