Intergovernmental

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Intergovernmental Fiscal Review 2001 Select
Committee on Finance NCOP 10 October 2001
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Purpose and evolution

• Review of intergovernmental trends to support
  budget and policy processes
• 1999 IGFR
• focused largely on provincial fiscal trends
• 2000 IGFR
• made first attempt to cover local government
• but data weak or non-existent
• 2001 IGFR
• extends coverage to include housing and roads
• sets out trends in non-financial indicators

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Objective

• Allows for comparisons and benchmarks
• Assists provincial legislatures in considering
  2000/01 annual reports
• Informs policy-making process
• Is Govt a learning organisation?
• Promotes co-operative governance over budgeting
• Aligning policy, budget, planning processes
• Tool for NCOP to strengthen oversight
• How is Constitution responding to delivery?

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Chapter 1 Introduction

• Intergovernmental system components
• Fiscal system
• Lessons learned
• Key pointers

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Chapters 2-7 Provincial

• 2. Trends in provincial budgets
• 3. Education
• 4. Health
• 5. Social development
• 6. Housing, roads, and transport
• 7. Cross-sectoral issues

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Chapters 8-11Local government

• 8. Transformation challenges
• 9. Overview of municipal budgets
• 10. Transfers to local government
• 11. Capital investment

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Annexures A-F

• A. Provincial Fiscal Framework
• B. Provincial tables
• C. Division of Revenue
• D. Local government tables
• E. Demographic information
• F. Other provincial functions
• (e.g. agriculture, tourism)

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Summary of chapters
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Introduction (1) Chapter 1

• Overview of intergovernmental system
• 3 distinct, but interdependent spheres
• national role largely policy formulation
  setting of norms and standards
• 54 for protection sector, 8 for higher
  education
• provinces local government mainly responsible
  for implementation
• System premised on cooperative governance

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Introduction (2) Chapter 1

• Intergovernmental fiscal system
• revenue-sharing model
• national raises disproportionately large revenue
  relative to spending on national functions
• opposite true for provinces (own revenue 4)
• local government has more fiscal capacity, but
  some municipalities have limited revenue bases
• Pointers for better functioning of system

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Division of national revenue

• Total allocated R188,9 billion in 2000/01
• National R 74,4 bn (39,4)
• Provincial R 108,7 bn (57,6)
• Local R 5,7 bn ( 3,0)
• (more details see Table1.1 p.4)
• New emphasis on non-financial information to
  assist decision makers

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Provincial trends (ch 2)

• Marked turnaround since 1998/99
• from deficit of R5,6bn to surplus of R0,6bn
• Improved financial management provide firm
  foundation for accelerated service delivery
• Provincial revenue kept pace with inflation
• National transfers grow strongly
• 7,8 a year from 1997/98 to 2000/01
• 7,6 nominal or 2,2 in real terms over MTEF

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Provincial trends (ch 2)

• National transfers (cntd)
• stronger growth in equitable share 7,7 pa over
  MTEF
• conditional grants grow 1 percentage point slower
  
• Provincial own revenue
• 4 of total provincial revenue, but still
  important
• Road traffic fees constituted 38,6
• Hospital patient fees improving, share reaching
  10
• WC and GT account for over 40 of provincial
  revenue

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Provincial trends (ch 2)

• Provincial expenditure
• did not keep pace with inflation up to 2000/01
• substantial funds allocated to debt repayment
• future looks good
• spending rises from R110bn in 2000/01 to R139 bn
  in 2003/04
• translating to an average annual growth rate of
  2,6 above inflation
• Social services share stabilises around 81
• Non-social services expenditure recovers
• share rises from 16,3 in 1999/00 to 19,3 in
  2003/04

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Provincial trends
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Education (ch 3)

• 39 of provincial spending
• varies from 36,4 (N Cape) to 44,2 (N P)
• 2,1 real spending growth 2000/01 to 2003/04,
  following 2,4 decline to 2000/01
• 55,5 of provincial staff
• Share of personnel spending declining
• Enrolment declining, after rising somewhat
• Improved educator-learner and learner-classroom
  ratios, and pass rates
• 25 000 new classrooms built

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Health (ch 4)

• 24 of provincial spending, 28,2 of provincial
  staff
• Varies between 15,9 (Mpum) to 32,7 (Gtg)
• 1,7 real spending growth 2000/01 to 2003/04
• Shift to primary health care
• Improved access but equity issues remain
• per capita spending varies widely
• hospital bed availability
• distribution of professional staff
• Urgent attention to training
• Challenge to improve hospital management
• HIV/AIDS will increase demand for services

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Social development (ch 5)

• 19 of provincial spending
• Varies from 14,6 (Gtg) to 25,1 (NC)
• 3 real spending growth 2000/01 to 2003/04
• 3,9 million beneficiaries
• 1,9 million old-age, 1,1 million child support
• 65 000 new child support beneficiaries monthly
• Rapid growth in foster care, special care
• Reassessment of the social safety net
• Inequities in per poor person spending between
  provinces

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Housing (ch 6)

• R16 bn transfers in housing subsidy since 1994
• Contributing to over 1,1 million houses
• Providing shelter to over 4,9m people
• 1 real spending growth 2000/01 to 2003/04
• Despite teething problems in early years,
  evidence of improvement abounds
• Sharp decline in rollovers from 71 in 1995/96 to
  15 in 2000/01
• Increase in share of population in formal
  dwellings with clean water and electricity
• Affordability of municipal services by households
• Transfer of current stock of houses

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Roads (ch 6 cont.)

• 223 000 km are provincial roads
• Roads spending accounts for 3 of budget
• Low spending in past led to deterioration and
  increase in rehabilitation, construction,
  maintenance backlogs
• Better prospects for the future
• 9 real spending growth 2001/02 to 2003/04
• Concerted effort to improve planning
• Emphasis on provincial-national-local
  coordination
• Improvements in motor license fee collections

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Personnel (ch 7)

• About 740 000 employees
• 8,5 decline in personnel 1997/98 to 2001/02
• Annual 0,2 personnel spending increase through
  2003/04
• Non-social sector personnel
• From 5,9 (Gtg) to 23,9 (NP)
• Provinces with former homelands
• Attracting retaining skilled professionals
• in public sector and in poor provinces
• Skilled personnel critical to success in all areas

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Provincial infrastructure (ch 7 cont)

• Infrastructure key to service delivery and
  economic growth
• Trends reflect decline and recovery
• 1997/98 2000/01 2003/04
• Spending 8,1 bn 7,6 bn 14,1 bn
• Provincial share 64 46
  52
• Major backlogs in
• schools
• hospitals/clinics
• roads
• R3,7bn grant to assist in this regard

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Local Government Transformation Challenges

• Reduction from 843 to 284 municipalities
• re-alignment and re-assignment of powers and
  functions (between spheres, within sphere)
• integrating over 200 000 staff without raising
  costs
• implementation of reforms ranging from systems,
  laws, planning and financial
• restructuring of service delivery and expansion
  of infrastructure to service all citizens
• introduction and implementation of new
  legislative environment (Structures Act, Systems
  Act, MFMB, Prop Rates)

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Restructuring/Amalgamation (ch 8)

• Restructuring through REDs and amalgamation
• Shifting of functions between District and Local
  municipalities
• Funds follow function changes, but bigger effect
  is shifting of personnel that this involves
• Different conditions of service
• Pension fund contributions (Table 8.3 on page
  126)
• What salary level for similar jobs?
• Impact on tariffs and incidence of taxes
• Tshwane case study on page 136 (Ch 8)

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Local Govt Budgets (ch 9)

• Budgets
• Backward looking, so no demarcation info except
  for a few sample municipalities
• Poor classification and Data limitations
• 2000/01 Budgets grow by 15,7 to R 61,8 bn
• rapid growth in personnel expenditure
• flatter trajectory on capital and infrastructure
  spending in order of R 13,7 bn
• Average own source revenue
• Metros 97
• Secondary munis gt R 300 m 92
• Smaller munis lt R 300m 65

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Local Govt Budgets (ch 9)

• Income source
• Property rates 21
• Utilities (electr, water) 32
• Intergov transfers 8
• RSC levies 7
• Expenditure
• Salaries 31
• Bulk (electr, water) 30
• Capital charges 13
• Repairs and Maint 8

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Metro budgets

• Sector / Functional spending
• Electricity 30
• Water Sanitation 19
• Administration 8,8
• Public safety 7,5
• Roads and Stormwater 6,3
• Refuse 5,1
• Pilots to develop and improve the reporting
  system to enable better management information

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Local Govt Transfers (ch 10)

• National Transfers
• Subsidy to poor households for basic services
• Expansion and rehabilitation of infrastructure
• Skills training and development to assist in
  implementation
• Proportion of allocation
• Equitable share 57
• Infrastructure 35
• Capacity 8

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Local Govt Transfers

• Average ES per household
• Smaller category B munis from 2001/02 to 2003/04
  - R 510 to R 611
• Metros category A munis from 2001/02 to
  2003/04 - R 151 to R 194
• Capital on infrastructure
• From 2001/02 to 2003/04 grow from R2,7 bn to
  R2,9 bn

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Local Govt Transfers

• Capital / Infrastructure
• ability to expand services to all citizens faster
  (basic services)
• improve standards and level of services
• provide economic and other infrastructure unlock
  and stimulate countrys growth potential
• upgrade and update infrastructure (township/R293
  areas)

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Local Govt Capital (ch 11)

• Grants, Borrowing or PPP
• Public Private Partnerships
• Examples Table 11.1
• Municipal borrowing
• leveraging of grants and revenue
• short term loans - expensive
• longer term loans - cheaper
• municipal bonds
• Stagnant borrowing at R20 bn
• Only INCA provides new lending in private sector,
  DBSA in public sector

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IGFR Parliamentary Debate

• Tabling in NCOP on 9 Oct 2001
• Presentation to Select Committee on Finance in
  NCOP on Wed 10 Oct at 1330
• Sectoral hearings
• Education and Welfare Friday 12 Oct (9am)
• Roads and Infrastructure Monday 15 Oct (9am)
• Health Tuesday 16 October (830am)
• Housing Wednesday 17 October (9am)
• Local Govt on Thursday, 18 Oct (9am)
• NCOP debate (23 and 24 Oct)
• IGFR on treasury website www.treasury.gov.za
• Also available from National Treasury

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SIYABONGA! RE A LEBOHA! THANK YOU! BAIE DANKIE!