Spending on non-essentials continues to improve

Wednesday, February 22, 2017

Cape Town - Provinces continue to make progress in implementing cost containment measures announced by government in 2013, with the spending on non-essential goods trend expected to continue.

In the 2017 Budget Review, National Treasury said spending on non-essential goods and services fell in real terms by 7.1% in 2014/15, 6.1% in 2015/16 and is anticipated to decline by 4.5% annually over the medium term.

Finance Minister Pravin Gordhan tabled this on Wednesday during the 2017 Budget in Parliament, in Cape Town.

Treasury said the savings realised from reduced spending on non-core items are redirected to frontline service delivery.

“However, the level of compliance with cost-containment measures varies across provinces and sectors, and requires continuous monitoring and enforcement,” noted the review.

In addition, provinces continue to make progress in containing personnel headcounts, which have declined by 2.8% since the beginning of 2016/17. The reduction was largely in non-frontline personnel.

The education headcount increased by 0.6%, while health personnel declined by 0.6% over this period.

“As a result, the proportion of provincial spending on personnel has declined slightly, from 60.4% in 2015/16 to 59.8% in 2016/17. Over the medium term, the headcount is expected to grow by about 1% as more teachers and healthcare professionals are hired.”

Aggregate provincial compensation budgets are projected to grow at about 1% above inflation over the MTEF.”

Treasury noted that a wage agreement that fails to take account of fiscal constraints would undercut progress in containing wage costs and freeing funds for other areas of service delivery.

Improved revenue collection

Meanwhile, the Budget noted that provinces raised about 3.5% of their own revenue in 2016/17. This was done mainly from motor vehicle and gambling licenses, and other service fees.

Provinces are implementing integrated support programmes to improve revenue collection. As a result, they are projected to collect R18.4 billion in own revenue compared with a budgeted R16 billion for 2016/17.

Successful initiatives include:

  • Moving motor vehicle license renewals from municipalities to the South African Post Office and/or provincial departments.
  • Ensuring that weigh bridges are fully functional.
  • Curbing illegal gambling by appointing inspectors.
  • Using positive bank balances invested at the Corporation for Public Deposits to generate interest.
  • Improving patient billing systems.
  • Improving the billing system for properties rented out by provincial public works departments.

Financial management in provinces

Financial management and reporting in provinces continues to improve with the number of qualified audits for provincial departments falling from 31 in 2010/11 to 20 in 2015/16.

The number of adverse or disclaimer opinions dropped from four to two over the same period.

However, the Auditor-General’s reports continue to identify significant problems with accruals, unauthorised and irregular expenditure.

Reviews of provincial entities

In 2016/17, provinces began reviewing their public entities, focusing on sustainability, governance and on resolving overlapping mandates with departments.

Treasury said most reviews are expected to be concluded by the end of 2016/17.  This as six of the nine provinces have started to either merge or incorporate some entities into provincial departments.

The planned merger of gambling and liquor boards in several provinces, resulting in one board and one senior management team rather than two, is expected to result in annual savings of about R3 million per merger.

“The National Treasury has also helped provinces complete a review of their development finance institutions and is consulting on the recommendations within government. The proposals flowing from these reviews are expected to cut administration costs, reduce reliance on transfers, and improve governance and cost effectiveness.” – SAnews.gov.za

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