Q3 INFRASTRUCTURE AND CONDITIONAL GRANTS PRESENTATION

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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


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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

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INFRASTRUCTURE EXPENDITURE ANALYSIS CAPITAL
PROJECTS

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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 Departments
  Revitalisation strategy being rolled out this
  year

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INFRASTRUCTURE EXPENDITURE ANALYSIS MAINTENANCE
PROJECTS

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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

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CONDITIONAL GRANTS ANALYSIS

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CONDITIONAL GRANTS ANALYSIS

• Department 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

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CONDITIONAL GRANTS ANALYSIS

• Department 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!