2007%20Adjustments%20Appropriation%20%20Select%20Committee%20on%20Finance%20%2020%20November%202007

1
2007 Adjustments Appropriation Select Committee
on Finance 20 November 2007
2
Content

• Budget outcome for 2006/07 financial year
• Spending performance for 2007/08 (April
  September)
• Components of the Adjustments Budget
• Summary of adjustments
• Unforeseeable and unavoidable
• Amounts already announced in 2007 Budget
• Roll-overs
• Salary adjustment
• Self financing
• 2007/08 Adjusted Budget
• Conclusion

3
Context of presentation

• Presentation does not provide a comprehensive
  explanation of individual expenditure decisions
  details provided in Adjusted Estimates of
  National Expenditure 2007
• Presentation outlines the legal and procedural
  basis for expenditure included in Adjustments
  Budget

4
2006/07 Budget outcome

• R476.2 billion available for spending in 2006/07
• In total 1.3 or R6 billion not spent
• R1.5 billion not transferred to provinces due to
  capacity constraints or non-compliance with DoRA
• Excluding conditional grants The National
  Treasury, Correctional Services, Justice and
  Constitutional Development, Transport, Water
  Affairs and Forestry and Public Enterprises
  contributed R2.5 billion of the underspending.

R billions 2006/07 Under spending Under spending
Main Appropriation 260.0
Adjustments Appropriation 6.2
Total Appropriated Funds 266.2 5.6 2.1
Statutory payments 210.0 0.4 0.2
Total available expenditure 476.2 6.0 1.3
5
Spending for 2007/08

• Departments usually spend slightly less than half
  in the 1st 6 months
• Last year 45.2 of total budget had been spent at
  this point
• Too early to assess if March spike in
  expenditure will recur

R billions Adjusted Appropriation April Sept Spending
Central Government and Administration 42.5 15.8 37.2
Financial and Admin Services 21.9 9.8 44.8
Social Services 105.4 56.2 53.3
Justice and Protection Services 81.7 35.0 42.8
Economic Services 61.7 25.1 40.7
Total appropriation by vote 313.3 141.9 45.3
6
Components of the Adjustments Budget

• PFMA , section 30(2), states that adjustments
  budget may provide for
• Significant and unforeseeable economic and
  financial events affecting the fiscal targets
• Unforeseeable and unavoidable expenditure
  recommended by a committee of Cabinet
• Any expenditure in terms of section 16 of the
  PFMA
• Money to be appropriated for expenditure already
  announced by the Minister during tabling of
  annual budget
• The shifting of funds between and within votes
• f) Utilisation of savings under a main division
  to be used to defray over-expenditure on another
  main division
• g) Roll-over of unspent funds from preceding
  financial year

7
Unforeseeable and unavoidable expenditure

• Definition
• Expenditure that was not foreseen at the time of
  the tabling of the Budget and is now deemed to be
  unavoidable.
• The following cannot be considered as
  unforeseeable and unavoidable expenditure
  (Treasury Regulation 6.6.1)
• Expenditure that, although known when finalising
  the estimates of expenditure, could not be
  accommodated within allocations
• Tariff adjustments and price increases
• Extensions of existing services and the creation
  of new services that are not unforeseeable and
  unavoidable.

8
Unforeseeable and unavoidable expenditure

• Of the R3.8 billion recommended for unforeseeable
  and unavoidable expenditure, R754 million is
  related to natural disasters and animal disease.
• Transfers to municipalities
• Funding for damage related to storms and tidal
  surges in KwaZulu-Natal in March 2007 (R180.9
  million)
• In-year provision for costs of repairing flood
  damage occurring in June 2007 on the Cape West
  Coast
• (R6.9 million R4.7 million to the province)
• Emergency drought relief expenses
• (R100 million - R14.9 to national Department of
  Water Affairs and Forestry)
• Transfers to provincial agriculture departments
• Uninsurable agricultural losses amounting R300
  million as a result of drought, fire or flooding
• R100 million on the national Department of
  Agricultures vote for compensation to farmers
  for the culling of pigs to curb the spread of
  classic swine fewer
• R46 million of spending by the national
  Department of Water Affairs and Forestry for
  remedial work related to flood damage or drought.

9
Unforeseeable and unavoidable expenditure per
department
Rmillion
Provincial and Local Government National Disaster funding in respect of Kwa-Zulu Natal, West Coast District, as well as for eradication of the bucket system 387.8
National Treasury Budget pressures in North West province following boundary changes, for increased incidents of MDR and XDR TB and West Coast district flood damage 654.7
Public Service and Administration Communication during public sector strike 13.9
Education National education recovery plan 200.0
Health Comprehensive HIV Aids care 50.0
10
Unforeseeable and unavoidable expenditure per
department (continued)
Rmillion
Defence Support of health sector during the public service strike 45.7
Agriculture Uninsurable agricultural losses and compensation for culling in respect of classic swine fever 400.0
Housing Emergency housing in the North West province 105.0
Land Affairs Restitution in Richtersveld land settlement claim 250.0
11
Unforeseeable and unavoidable expenditure per
department (continued)
Rmillion
Public Enterprises South African Airways restructuring 744.4
Trade and Industry Coega IDZ infrastructure commitments and small medium enterprise incentives 524.7
Transport Bus subsidy shortfall 300.0
Water Affairs and Forestry Urgent flood related problems (secondary alien vegetation invasion, river and flow gauging works) and drought relief 161.9
Total 3 838.1
12
Amounts announced in 2007 Budget

• There are two items in this category included in
  the Adjustments Appropriation Bill
• R28 million for Alexkor, mainly for restructuring
  but also for VAT for the last transfer to Alexkor
  approved in the Special Adjustments Budget.
• R678.7 million for the Pebble Bed Modular Reactor
  project of which R307.7 million is for operation
  and contractual spending for the period January
  to March 2008 and R371 million is for VAT both
  for previous transfers in 2006 and 2007 and this
  current transfer.

13
Roll-Overs

• In terms of Treasury Regulation 6.4
• Funds appropriated but not spent in previous
  financial year rolled over to a subsequent year
  subject to relevant treasury approval
• Unspent funds on payments for capital assets
  may only be rolled over to finalise projects or
  assets acquisitions still in progress.
• Savings on transfer payments and subsidies may
  not be rolled over for purposes other than what
  was originally voted for.
• Savings on compensation of employees may not be
  rolled over. A maximum of five per cent of a
  departments payments for good and services
  (excluding compensation of employees) may be
  rolled over.
• Funds may not be rolled over for more than one
  financial year unless approved in advance by the
  National Treasury.

14
Roll-Overs per department

Funds rolled over from 2006/07 to 2007/08 Funds rolled over from 2006/07 to 2007/08   R'million
Presidency Presidency 17
Foreign Affairs Foreign Affairs 263
Home Affairs Home Affairs 206
Provincial and Local Government Provincial and Local Government 818
Public Works Public Works 67
Government Communication and Information System Government Communication and Information System 1
Public Service and Administration Public Service and Administration 13
Public Service Commission Public Service Commission 3
South African Management Development Institute South African Management Development Institute 60
Statistics South Africa Statistics South Africa 57
Education Education 196
       
15
Roll-Overs per department (continued)
 Funds rolled over from 2006/07 to 2007/08 continued   R'million
Health 385
Labour 5
Sport and Recreation South Africa 5
Correctional Services 513
Defence 83
Justice and Constitutional Development 262
Agriculture 89
Environmental Affairs and Tourism 200
Minerals and Energy 9
Trade and Industry 109
Transport 386
Water Affairs and Forestry 314
Total   4 060
16
Salary Adjustment
Vote Rmillion
Defence Provincial governments Government Communication and Information System Correctional Services Safety and Security Water Affairs and Forestry Public Office Bearers 109 1 185 2 128 469 21 3
Total 1 917
17
Self-financing Expenditure per Department
Rmillions Rmillions Rmillions
Government Communication and Information System   2
Public Service Administration   0.3
Correctional Services 1.1
Defence 132.2
Communications 1.2
Water Affairs and Forestry 45.1
Total   181.9
18
Adjusted National Budget 2007/08
19
Conclusion

• Total additional amounts added to the budget
  equal R16.7 billion
• The revised budget framework makes provision for
  about R5.2 billion in under spending at a
  national level, in addition to the R3 billion
  contingency reserve set aside in the budget
• The total estimated level of spending rises by
  R8.5 billion, from a budgeted R533.9 billion to a
  revised R542.4 billion
• The revised estimate of the budget surplus rises
  from R10.7 billion to R10.8 billion or 0.5 of
  GDP