Business

Here, take the cash we couldn't spend

Chantelle Benjamin

Unspent funds will be allocated elsewhere if projects aren't implemented, warns Gordhan.

Finance Minister Pravin Gordhan hopes public works will use allocated money. (Madelene Cronjé, M&G)

This year's budget has provided some roundly welcomed news about infrastructure roll-out and fund allocation, the least of which is more than R180-million, that has been set aside to upgrade mining town settlements as part of a human settlement revamp programme.

The government has reserved ­municipal funds for improvements to infrastructure and "social infrastructure" of health, ­education and community facilities.

Finance Minister Pravin Gordhan said in his budget speech: "Sustained improvements in competitiveness require further investment in infrastructure and a range of microeconomic reforms."

The state plans to spend more than R1-trillion over the next five years on infrastructure, specifically R847-billion over the next three years.

The concern, however, is whether this money can be spent by government.

As Gordhan pointed out: "In 2012-2013, national expenditure amounted to R965.5-billion (including transfers to provinces and municipalities) out of a total adjusted appropriation of R971.5-billion. This represents underspending of 0.6%, compared with a shortfall of 1.1% in 2011-2012.

Spending on general public ­services
"Spending on general public ­services was relatively low, mainly as a result of low capital spending by the department of public works.

"Poor performance in addressing school infrastructure backlogs resulted in significant under-spending on education, while institutional instability in the ­community work programme affected spending in employment and social security."

The minister said the government had reviewed this: in October 2013 it reallocated resources, which were not being spent, and was already seeing positive results. He said that reprioritisation, rather than new funds, would be the defining feature of budgeting over the medium-term expenditure framework period.

Allocation of funds was prioritised for infrastructure including improvements to the railway network, the municipal human settlement capacity grant, the regional bulk infrastructure grant and to repair infrastructure ­damaged by natural disasters.

He said the first phase of the Medupi power station was expected to come on line towards the end of the year.

More than R20-billion is to be invested in passenger rail infrastructure over the next three years, as will R3.6-billion on signalling and telecommunication infrastructure and systems.

Subsidising provincial bus lines
For commuters R15.2-billion has been set aside to subsidise provincial bus lines over three years.

Gordhan said programmes were being put in place to eradicate school infrastructure backlogs and to refurbish clinics and hospitals.

The minister said one of the measures intended to promote growth was the establishment of special economic zones, which have been allocated R3.6-billion to promote "value-added exports and generate jobs in economically disadvantaged parts of the country".

Money has also been set aside to rehabilitate 35 dams and work is in progress on five water-transfer schemes.

In delivering their infrastructure commitment, state-owned companies spent R109.9-billion of the targetted R137.6-billion.

Eskom's infrastructure figures were revised down owing to low projected revenue.

Big success story
The government's big success story has been the 47 renewable energy projects with the private sector. Plans were concluded in 2012 and 2013 and they are already under construction.

Gordhan said this would contribute 2 460 megawatts of power capacity and an investment of R70-billion.

He said a further R45-billion in investment will occur during this financial year. The minister made it clear that he had taken cognisance of community complaints.

Therefore development plans would "also focus on overcoming spatial fragmentation of South Africa's built environment" by improving public transport and accelerating investment in human settlements.

Over the past five years, spending on much-needed improvements on human settlement programmes is expected to amount to R70-billion.

Over the medium term R276-million has been reserved for human settlement upgrading support programmes, with a R300-million grant to help metros to manage human settlements.

Integrated city development grant
An integrated city development grant of R814-million over the medium term has been assigned to strengthen urban planning and encourage private investment in urban development.

Over the next three years R105-billion would be allocated to municipalities for free basic water, sanitation, electricity and refuse removal services.

Over the next two years R1.9-billion has been set aside from the human settlements development grant to provinces, to create an indirect grant to upgrade sanitation infrastructure.

Although concern has been expressed about the bulk of the infrastructure work in local or provincial government, in provincial public works departments there are concerns about corruption, abuse and charging inflated prices for infrastructure projects.

Gordhan said, to address this, the treasury may amend regulations to ensure that procurement plans are completed and submitted to national departments for assessment and approval before funds are made available, or an initiative may be launched by the chief procurement officer to help provinces review contracts and reduce manipulation of supply chain.

The minister believed that reallocation of funds would lead to improved delivery of basic infrastructure and services.

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