Debate on SCOPA Resolutions (Unauthorised Expenditure)


By Dr LPHM Mtshali MPL

KwaZulu-Natal Legislature
Pietermaritzburg : 23 March 2010


Madam Speaker


My contribution to this debate will focus on two government departments – Education and Health - which were hit the hardest by the budget overruns for two successive financial years, namely 2007/2008 and 2008/2009. For the most part of the 2008/2009 financial year, the Provincial Revenue Fund was in overdraft as a result of the over-expenditure in 2007/2008 and the continued high spending in 2008/2009.


We take note of the decline of the provincial equitable share allocation over the 2009/2010 MTEF due to data changes in the equitable share formula for KwaZulu-Natal. The worldwide economic downturn led to the further reduction of the province’s equitable share.


The provincial fiscal framework has also been negatively affected by the inadequacy of resources in the national fiscus due to the under-collection of tax. Thus provinces had to shoulder the budget shortfall from own revenue and/or reprioritisation of areas of expenditure.


The expenditure earmarked for the Occupation Specific Dispensation, which was not fully funded by National, fell into the category of unfunded mandates. Although it remains an open question why the provincial departments did not estimate the extent of OSD expenditure more adequately and why national Treasury failed to verify the relevant figures, these unfunded mandates significantly distorted budgets in the Departments of Education and Health.


The carry-through effects should also be considered when considering over-expenditure. Another financial burden, which was imposed on provinces by forces out of their control, resulted from the 2008 public sector wage agreements. These were considerably higher than originally budgeted for.


The inflationary and higher than sustainable wage agreements remain the single most prominent challenge to healthy budgets, both at provincial and national level. The current budget, which aspires to achieve a surplus, cannot do so if further wage agreements of out step with the economic reality are imposed on this province by organised labour later this year.


Madam Speaker, provincial Treasury must be commended for the following financial interventions aimed at mitigating the current financial crisis:


•     the 7.5 percent mandatory budget cuts across all government departments; and

•     the multi-pronged Provincial Recovery Plan which focuses on logistical rather than policy objectives of government.


I should stress that these measures, as painful as they are to implement for all government departments affected, have so far not significantly compromised service delivery in the province even though some, such as the moratorium on the filling of non-critical posts, have been controversial. We in the IFP also welcome repeated commitment on the part of provincial Treasury to formalise many of the cost-cutting measures included in the Provincial Recovery Plan as standard practice past the current financial meltdown.


As far as the Department of Health is concerned, the spending pressures were further exacerbated by the high cost of medical equipment on the foreign markets due to exchange rate of the Euro/Rand. Under normal circumstances, the effects of exchange rate fluctuations would have been offset by measures such as budgeting for a surplus.


SCOPA duly took cognizance of the fact that the Department of Education shouldered the expenditure resulting from the implementation of the Further Education and Training (FET) Act, which had not been budgeted for. Thus the department could not avoid over-expenditure against Programme 5: Further Education and Training.


In conclusion, the IFP supports the authorisation of over-expenditure with the exception of instances where over-expenditure was deemed unforeseen or unjustified, as tabled by the Chairperson of SCOPA. We believe that this approach, as difficult as it is for all government departments included in the latter category, is absolutely critical for KwaZulu-Natal’s overall financial recovery. It also means nothing less than compliance with the provisions of the PFMA.  


I thank you.


Dr Lionel Mtshali
078 302 0929