/ 6 September 2007

Manuel: State underspends by R5,3bn

Finance Minister Trevor Manuel told Parliament on Thursday that total spending by all three spheres of government in the financial year to March was R5,3-billion rand less than had been appropriated. Much of the underspending was blamed on lack of capacity.

“Approximately R1,2-billion of this amount can be attributed to conditional grants not being transferred due to capacity constraints or non-compliance with conditions stipulated in the Division of Revenue Act 2006,” the minister said in a written reply to a parliamentary question from Democratic Alliance MP Manie van Dyk.

“The underspending of R819-million by the Department of Provincial and Local Government was mainly due to lower transfers to municipalities for the Municipal Infrastructure Grants than originally budgeted for. The flow of funds was stopped by [the department] due to capacity constraints as reflected in their spending on previously allocated funds.”

Manuel said that some of the money taken from the municipalities was redirected to other local authorities that do have the capacity to complete projects.

In addition, the Treasury withheld funds from municipalities in certain instances because of slow spending on Provincial Infrastructure Grant projects and non-compliance with the Division of Revenue Act. The Department of Housing did not transfer all the funds allocated to provinces in 2006/07 also because of capacity and financial constraints of emerging contractors, leading to delays and material shortages.

“An amount of R490-million for 2006/07 was approved for additional disaster-relief projects in December 2006,” Manuel said. “However, these projects are multi-year projects and not all of the funds were spent in 2006/07”

The balance of R4,1-billion can mainly be attributed to the following departments: social development (R401-million), correctional services (R586-million), justice and constitutional Development (R478-million), National Treasury (R434-million), transport (R399-million), water affairs and forestry (R350-million) and public enterprises (R280-million).

Manuel blamed a number of factors, including: savings on various items related to vacancies within departments; the response to the social-grant indemnity process, which led to fewer beneficiaries; and the fact that the lower take-up rate of social grants has contributed to underspending on social services.

“Underspending relating to justice and protection services can mainly be attributed to the delay in initiating the construction project in respect of the Kimberly correctional facility as well as to delays in capital works projects which are now due to be completed in 2007/08,” he said.

Underspending related to economic services includes that of the Department of Public Enterprises related to Denel’s VAT allocation, which was no longer required.

In transport it was due to delays in the implementation of the taxi-recapitalisation project. There were other delays related to delays in the construction of the De Hoop Dam and on dam safety projects.

There was also, he noted, underspending on the Integrated Financial Management System project in the Treasury. — I-Net Bridge