THE Eastern Cape’s rate of capital spending is the lowest in the country, causing a huge threat to growth and service delivery in the province.

The province’s poor performance has been slated by economists, with one saying underspending “can’t go on any longer”.

According to a National Treasury report this week, the province was overspending on salaries, but underspending significantly on infrastructure. Economists said the province – which has the third highest personnel budget – was “clearly” top heavy with administration staff.

The Eastern Cape is at the bottom of the list of provinces after spending only 32% of its R3.7-billion capital expenditure budget halfway through the financial year, which ends in March 2012.


Capital expenditure relates to building and upgrading schools, hospitals, roads, sewerage works, water works and the provincial power grid.

The midterm fiscal report – calculated from April 2011 to September 2011 – slams the Eastern Cape for “low rates” of overall capital spending. Last year it ranked third lowest in capital expenditure, also with a 32% midterm spend. Now it is last.

The country’s other eight provinces have shown a steady growth in capital spending.

The Eastern Cape is below the national average on at least four of the 10 expenditure budgets tabled in the report.

Economists warned the poor spending trend will have a negative effect on service delivery, while politicians predict people living in the rural areas will be the hardest hit.

The worst offender was the provincial department of education, which spent a meagre 21% of its R1.2bn capital expenditure budget. Education departments in other provinces managed to treble this figure, with the second lowest, the Free State, showing a 10% higher spending pattern than the Eastern Cape.

Investment Solutions economist Chris Hart said yesterday: “When capital expenditure is low it will have a negative effect on service delivery.”

Hart, who is based in Johannesburg, called the figures “worrying” and said it reflected poorly on the functionality of the departments’ finance units.

Economist Mike Schüssler, compiler of the Provincial Barometer, said: “I am absolutely flabbergasted … this is why the province has potholes, a lack of water and other shoddy services.”

The Provincial Barometer analyses economic activity in the Western Cape, Eastern Cape, Gauteng, Kwazulu-natal and Free State. Schüssler said the capital expenditure budget should actually peak at roughly 75% by the end of December.

“The province is not servicing the people. I can’t believe they don’t use the money when it is right there,” he said.

The Eastern Cape has a personnel expenditure budget of R32-billion, surpassed only by Kwazulu-natal and Gauteng, with respective budgets of R44-billion and R36-billion.

“This shows us that the province clearly has too many officials who are not performing,” Hart said.

If conditional grants are removed from the budget, personnel costs take up almost 80% of the overall provincial budget.

“Employing so many people [shows] that [most officials] are not carrying out their duties,” Hart said.

Schüssler added: “The province needs to urgently get in professionals to do a proper job … it can’t go on any longer.” The report also showed that:

The province had overspent on personnel by the sixth month by R889-million;

The province underspent against the budget by R1-billion on conditional grants; and

It was the lowest and slowest in spending the province’s human settlements development grant, using only 33.4% of its R2-billion grant.

Kwazulu-natal was only slightly higher with 35%, but the Free State – topping the list – managed to spend almost 77% of its housing grant.

ANC provincial spokesman and local government MEC Mlibo Qoboshiyane said Bhisho was “considering” the report but viewed the lack of conditional grant spending by the education and health departments as a “grave concern”.

He said slow spending was perpetuated by poor planning, a long procurement system, and late payments to contractors.

“The Eastern Cape government is cracking the whip on all officials who are not prioritising the spending of conditional grants, as it is an insult to a poor province,” he said.

DA MPL Bobby Stevenson said: “People are crying for houses. People are crying for decent schools. Yet the Eastern Cape continues to underspend [on] capital expenditure and conditional grants.”

He said the province should not be allowed to engage in “smoke and mirrors” accounting any more.

“What is truly alarming is that even though we spend more money on personnel, we continue to underspend on capital,” he added. —


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