A consumption budget: Eastern Cape is top spender on travel and accommodation

The following speech was delivered in the Eastern Cape Legislature today by the DA’s Shadow MEC for Finance, Bobby Stevenson MPL, during the budget vote debate of Provincial Planning and Treasury.

Speech highlights:

  • Eastern Cape top provincial spender on travel and accommodation at R429 million
  • Cost per kilometer of building a road in Eastern Cape at R11, 678 million per kilometer is the highest in the country
  • National department builds schools in the Eastern Cape at 60% less than the provincial department

This budget takes place against a bleak fiscal and economic outlook for the province and country.

The budget speech was made on the 6 March the projected growth for South Africa was 2.7 %. The projected growth rate for South Africa is now 1.7%.  We’ve just faced a 25 basis point interest rate hike with another interest rate hike predicted in November of this year. In contrast the projected growth rate for Sub-Saharan Africa is 6%.

As a result of the 2011 census the loss that this province will experience over the medium-term budget cycle is R6.6 billion. These indeed are sobering figures and they point to the failure of the government’s economic policies.

The Democratic Alliance believes that a key function of the annual budget is to lay the foundation for economic growth and job creation in the Eastern Cape. This means core business must be prioritised over consumption expenditure. Although steps have been taken to deal with the consumption side of our provincial budget, consumption spending is still far too high.

When it comes to expenditure on accommodation and travel the Eastern Cape has the highest expenditure of all the provinces in South Africa. A whopping R429, 561 million was spent by the Eastern Cape in the last financial year on accommodation and travel, out of a total of R1.687 billion for the entire country. This means the Eastern Cape spends 25% of all monies spent by provinces on accommodation and travel. Even KwaZulu Natal which is a bigger province than ours only spent R319 million compared to our R429 million. This contrasts with Gauteng which spent R60, 848 million and the Western Cape which spent R74, 239 million. It is obvious that the Eastern Cape is spending far too much on accommodation and travel and that National Treasury pronouncements in this regard are simply being ignored. The controls need to be tightened up and financial discipline enforced in the departments.

The consumptive side of the budget is also well illustrated by the amount of money that is being spent on the cost of employees. 65% of the total budget is being spent on the cost of employees. If one takes out conditional grants then the cost of employees in relation to equitable share is 77% (R40, 171 billion COE R52, 154 billion equitable share). This is after the base lines of the Cost of employees (COE) after departments were reduced by 2%. The norm for our province should be in the region of 58% when it comes to COE. However the main problem with the cost of COE is the fact that the ratio of core staff to support staff is totally out of sync. The norm for a province should be 60% on core staff and 40% on support staff. In our province the ratio is the other way around where 70% of the budget is spent on support staff and 30% on core staff. That means we are employing far too many administrative personnel and not enough doctors, nurses, teachers, extension officers and surveyors.

This impacts on our ability to effectively monitor the cost of infrastructural spending when we don’t have sufficient skills and expertise to determine whether or not a tender submitted is of fair value.

This province has made great strides when it comes to low cost high volume items. When it comes to high cost and low volume items we still have a long way to go. If one looks at the cost per kilometer of road infrastructure across the Eastern Cape on average R11, 678 million per km to build roads. This is the highest of all the provinces. By contrast it costs R1, 906 million to build a road in Gauteng and R2, 189 million to build a road in the Western Cape. Limpopo was the second highest after the Eastern Cape at a cost of R7, 025 million per km.

Likewise with the cost of school infrastructure the Eastern Cape was the third highest with an average of R32, 497 million to build a school. But the average cost for the 16 Accelerated Schools Infrastructure Delivery Initiative (ASDI) schools that are being built in the Eastern Cape is R20, 5 million – this is 60% less than the province’s cost. This province clearly does not have skilled personnel that can determine whether or not we are getting fair value for money we are being exploited.

The final point regarding the consumptive side of our budget it is the expenditure on the small non-essential items that add up. Let me illustrate this point the Department of Human Settlements in the Eastern Cape was advertising on radio even on election – day ending the advert with the ANC’s tagline about taking South Africa forward. In a department where there is a shortage of funding for housing and for the rectification of housing it is a disgrace that taxpayer’s money can be abused for electioneering advertising. In many countries around the world any advertising by state departments is prohibited before and in the period running up to an election in Australia it is prohibited 6 months before an election.  This is a clear example of how this government wastes money and prioritises party political expenditure over the delivery of services.

I wonder if anyone stood up to oppose this wasteful expenditure. Are there still brave men and women left in the civil service who will speak out against these kind of activities. Until we really prioritise core expenditure over consumptive expenditure this province is going to continue to limp along when it comes to service delivery.

The key responsibility of provincial treasury is to oversee the financial management of municipalities and monitor the financial state of municipalities this is done through the Municipal CFO Support Programme.

There are also a number of other agencies and departments that give direct support to municipalities this includes the Municipal Infrastructure Support Agency, operation clean audit of the Eastern Cape Department of Local Government and Traditional Affairs , The Municipal Finance Improvement Programme and National Treasury, The Auditor General of SA, the National department of Co-operative Governance and Traditional Affairs.

The question then needs to be asked: Why do our municipalities continue to get poor audit results?

In the last reported outcome for municipalities for the 2012/13 year reported outcome not one municipality in the EC received a financial clean audit 17 received adverse and disclaimer opinions this was the highest of any province. North West came second with 16, Limpopo 15, Free State 10, Northern Cape 9. In the Western Cape there were no municipalities with adverse opinions and disclaimers.

In comparison to the previous year the Eastern Cape regressed. Since solid financial management lies at the heart of good service delivery it’s time that action was taken to deal with poor financial management at municipal level.
The question we need to ask ourselves is do we have officials with the right competency involved in financial management at municipal level. If one looks at the financial levels it is clearly no.

It is time that the minimum competency levels for financial officials in local Government are enforced. In 2007 then Finance Minister Trevor Manuel promulgated minimum competency levels. At that time National Treasury knew that many National senior officials did not meet these requirements so the regulations were phased in. All municipalities were given 5 years to meet the required competency levels. The 5 year period of grace was scheduled to end in December 31st 2012. This has now been expended to 2015.

The question that needs to be asked is how seriously local government is taking these directives? Where in some municipalities CFO offices are run by interns and 20% of municipalities don’t have CFOs.

Our provincial Treasury needs to do a skills audit of every municipality to determine how many officials in financial management positions meet the competency levels as determined by National Treasury. People have been given warning since 2007 to up-skill themselves and opportunities have been provided for training.

I also wish to quote the Honorable Premier in his SOPA speech: “I wish to sound a warning that, in this administration, there is no space for non-performing public office bearers and government officials. Those placed in positions of responsibility have to get their act together and lead their departments or face the consequences”.

The time has come for strong action at local and provincial government level. The words of the Honorable Premier cannot just remain fine sounding but need to be implemented.