Public sector institutions' capex spending increases

Wednesday, July 26, 2017

While the South African economy is facing challenges, capex spending by public sector institutions has been growing steadily, Statistician General Pali Lehohla said on Wednesday.

“In terms of what the vision for South Africa is, we have the National Development Plan (NDP) and what we need to do is test our spending against the goals of the NDP. While the economy has not been doing terribly well and is in recession, the capex has been increasing steadily over a period of time,” Lehohla told a media briefing in Tshwane.

This as Statistics South Africa (Stats SA) released the findings of Capital Expenditure by the Public Sector 2016 report which showed that total capital expenditure by public sector institutions increased by R18 billion from R265 billion in 2015 to R284 billion in 2016.

The report showed that capex (capital expenditure) by public sector institutions has increased to R1.2 trillion in the last five years.

Capital expenditure refers to any expenditure incurred in or incidental to the acquisition or improvement of land, buildings, engineering structures and machinery and equipment. The expenditure normally confers a lasting benefit and results in the acquisition of or extends the life period of a fixed asset.

The 2016 report showed that the largest share of the R284 billion in capex expended by public sector institutions was spent by public corporations at R138 billion  (or 49%). According to the report, Eskom and Transnet were major contributors to public corporations capex in 2015 at R73 billion and R34 billion, respectively.

Eskom spent R70 billion on the power generation projects at Kusile, Medupi and Ingula power stations, while Transnet spent R11.1 billion capex on the expansion of infrastructure and equipment. Another R18.5 billion capex was spent on maintaining capacity in the rail and ports divisions.

The second largest share in capex expended by public institutions was municipalities at R66 billion (or 23%). Municipal capex when coming to new construction works was at R57 256 million.

For example the City of Johannesburg’s new construction projects included cycling lanes along Linden road and the Sandridge Bridge, while examples for the Ethekwini Municipality in KwaZulu-Natal included the construction of various reservoirs, the upgrading and rehabilitation of gravel and tar roads.

In the Ngaka Modiri Molema district municipality, located in North West, capex spending on new construction included the construction of gravel road and street infrastructure.

When coming to land and existing building capex spend by the City of Tshwane was spent on the renovation of the City Hall while in Polokwane, Limpopo, the main land and existing buildings capex was spent on upgrading of the laboratory and informal settlement as Disteneng.

Municipalities were followed by provincial governments at R36 billion, national government at R18 billion, and extra-budgetary accounts at R17 billion.

Higher education institutions had the smallest share of the total capex by public institutions at R7 billion (or 2%).

The University of Mpumalanga capex was spent on the completion of four new buildings as part of the phase 2 for the 2017 academic year, while there was also construction of five new buildings for the 2018 academic year.

Stellenbosch University among others spent its capex on the construction and renovation of non-residential buildings in the university campus.

The report found that between the 2015 and 2016 financial years, there were increases in capital expenditure on new construction works of R20.5 billion (from R174.4 billion in 2015 to R194.9 billion in 2016).

Capital expenditure on land and existing buildings increased by R2.9 billion from R14.3 billion in 2015 to R17.2 billion in 2016. -