AS AT THE END OF THE 2024/2025 FINANCIAL YEAR
Background
Over the past week, reports circulating in the media have communicated to the resident of the Gauteng Province that the provincial government has underspent by R1.8 billion, and that these underspent funds would be returned to the National Treasury.
While there is legitimacy in the information on the underspent figure, there is fundamental misunderstanding and misinterpretation in so far as the process that follows this underspending.
The concern that the underspent resources will no longer be available, or that they are lost by the Gauteng Provincial Government, is a misunderstanding that necessitates clarification.
The starting point for understanding the expenditure that we will be presenting today is to understand what the Provincial Revenue Fund is.
A Provincial Revenue Fund (PRF) is a financial account for each province in South Africa, where all revenue received by the provincial government is deposited, with some exceptions.
The Fund covers revenue from various sources, including taxes, fees, and transfers from the National Revenue Fund.
The Provincial Revenue Fund is managed by the provincial treasury, in this context, the GautengProvincial Treasury. The provincial treasury ensures compliance with regulations.
To this end, money can only be withdrawn from the Fund through specific appropriations or as direct charges, as outlined in the Constitution and provincial legislation.
Another important issue that needs explanation is conditional grants. Conditional grants from the National Treasury are specific allocations of funds from the national government to provinces and municipalities, with the condition that they are used for specific purposes aligned with national policy goals. These grants aim to ensure that provinces and municipalities adhere to national standards and priorities, and can be used for capital projects or operational expenses, depending on the grant’s specific conditions, which are outlined in the Division of Revenue Act, No. 24 of 2024 (DoRA).
Lastly, it is important to explain the Provincial Equitable Share (PES), a system where the national government distributes a portion of its revenue to the country’s nine provinces.
The national government collects revenue from various sources like taxes and levies, which are deposited into the National Revenue Fund. A portion of this revenue is then allocated to each province based on a formula.
The distribution formula aims to balance the needs of different provinces, taking into account population size, poverty levels, and other factors.
Theprovinces then use this funding to deliver essential services, primarily in areas like health,education, social development, and economic development.
The Provincial Equitable Share is a significant source of funding for provincial governments, covering core responsibilities.
Unlike Conditional Grants outlined above, the Provincial Equitable Share is unconditional, meaning that it is left to provinces to determine their spending priorities within their mandate.
Understanding this information is crucial for making sense of the information contained in this statement.
Expenditure by Gauteng Provincial Government departments.
The Gauteng Provincial Government entered into the 2024/2025 financial year with a main budget of R165.8 billion, which was later adjusted budget to R168.76 billion and adopted by the Gauteng Provincial Legislature. As at the end of the said financial year, the overall expenditure for the Gauteng Provincial Government stood at R166.97 billion, which represents 99 percent of the adjusted budget. The breakdown of expenditure by departments, with the expenditure percentages rounded off per accounting practice, is as follows:
• The Department of Infrastructure spent R3.4 billion, translating to 100 percent of its total adjusted budget, with a slight outcome of R1.2 million.
• The Gauteng Provincial Treasury spent R787.4 million against an adjusted budget of R811.7 million, representing expenditure of 97 percent of its total adjusted budget.
The department has an outcome of R24.3 million.
• The Department of e-Government spent R1.76 billion against an adjusted budget of R1.83 billion, representing 96 percent of its total budget. The department has an outcome of R70.1 million.
• The Department of Sports, Arts, Culture and Recreation spent R1 billion against an adjusted budget of R1.1 billion, representing expenditure of 95 percent of its total budget. This reflects an outcome of R59.5 million.
• The Department of Agriculture and Rural Development spent R1.05 billion of its allocated R1.1 billion, representing expenditure of 95 percent of its total adjusted budget.
The department has an outcome of R53.4 million.
• The Department of Community Safety spent R2.48 billion of its allocated R2.56 billion, representing expenditure of 97 percent of its total budget. The department has an outcome of R86.1 million.
• The Department of Roads and Transport spent R9.77 billion against an adjusted budget of R9.78 billion, representing 100 percent of expenditure.
The department had an outcome of R35.9 million.
• The Department of Human Settlement spent R5.47 billion against an adjusted budget of R5.64 billion, translating to expenditure of 97 percent of its allocation.
The department has an outcome of R168.7 million.
• The Department of Cooperative Governance and Traditional Affairs spent R953 million of its allocated adjusted budget of R1 billion, representing expenditure of 94 percent.
The department has an outcome of R63.7 million.
• The Department of Economic Development spent R1.75 billion against an
adjusted budget of R1.77 billion, representing 99 percent of expenditure.
The department has an outcome of R25.5 million.
• The Gauteng Provincial Legislature spent R833.7 million against an adjusted budget of R898.5 million, translating to 93 percent of expenditure of its total budget.
The department has an outcome of R64.8 million.
• The Office of the Premier spent R806.5 million of its adjusted budget of R807 million, reflecting expenditure of 100 percent of its total allocation.
The department has an outcome of R508 000.
• The Department of Social Development spent R5.70 billion of its adjusted budget of R5.81 billion, reflecting expenditure of 98 percent.
The department has an outcome of R102.9 million.
• The Department of Health spent R65.29 billion of its adjusted budget of R66.01 billion. This translates to expenditure of 99 percent of its total allocation.
The department has an outcome of R724.6 million.
• The Department of Education spent R65.82 billion of its adjusted budget of R66.14 billion, representing expenditure of 100 percent of its allocation.
The department has an outcome of R317.35 million.
The information above indicates that the Gauteng Provincial Government recorded a total outcome or underspending of R1.799 billion, with R1. R1.041 billion, or 58 percent, from the Departments of Health and Education, and the balance of R769 million or 42 percent cumulatively attributed to the rest of the departments. Of the R1.799 billion year-end financial outcome or underspending, a total of R381.510 million was under Conditional Grants and the balance of R1.418 billion was from Provincial Equitable Share funds.
What comes next?
The process following the close of the financial year is to assess the nature of
underspending, and the criteria for both Conditional Grant and Provincial Equitable Share requests include, inter alia:
• Quantification of total actual expenditure and the total amount of unspent funds for each source of funds as of 31 March 2025;
• Quantification of the unspent funds for each funding source committed to identifiable projects, and the amount of uncommitted funds;
• List of accruals, commitments and proof of commitments or invoices awaiting payment, information that must correspond to what has been submitted to Provincial
Accounting Services within the Gauteng Provincial Treasury;
• For infrastructure projects, proof of commitments, in accordance with Section 21 of the 2024 Division of Revenue Act No.24 of 2024 (DoRA), which requires the Gauteng Provincial Treasury to submit a list for each project for which rollovers are requested, clearly stipulating the tender details (pricing and numbers) related to each ongoing infrastructure project or invoices awaiting payment in respect of current expenditure.
Conditional Grants are subjected to a process where the Gauteng Provincial Government applies to the National Treasury to roll over unspent but committed funds, based on the above criteria, and with firm supporting evidence to motivate the rolling over of these funds.
In terms of Section 21 (1) of the DoRA, as amended, any conditional allocation that is unspent at the end of a financial year reverts to the National Revenue Fund, unless the relevant receiving officer can prove to the satisfaction of the National Treasury that the unspent allocation is committed to identifiable projects. Section 21 (2) further stipulates that the National Treasury may at the request of a transferring national officer, receiving officer or Provincial Treasury approve a roll-over from a conditional allocation to the next financial year.
Of the R381.510 million in Conditional Grant underspending, a total of R295.665 million was the subject of an application to the National Treasury, while the relevant departments could not motivate and provide evidence for the balance of R85.845 million, which will revert to the National Revenue Fund (NRF).
The R1.418 billion in Provincial Equitable Share funding will also be subject to an internal Gauteng Provincial Government process led by Gauteng Provincial Treasury, and subject to intense scrutiny, with all requests evaluated not just on financial aspects only, but also performance, to provide comfort that there are no underlying impediments to the absorption of funds rolled over. Above all else, this process aims to ensure that service delivery imperatives are realised.
Payment of service providers’ invoices
The Gauteng Provincial Government, like other South African provincial governments, is legally obligated to pay its creditors within 30 days of receiving an invoice, unless
otherwise agreed upon in a contract. This obligation stems from the Public Finance Management Act (PFMA) and Treasury Regulations 8.2.3. The provincial government is also expected to monitor its compliance with this regulation and report on its performance.
As at the end of Quarter 4 of the 2024/2025 financial year, nine of the fourteen provincial departments have achieved 100 percent compliance with the payment of service providers’ invoices.
These departments are: the Office of the Premier; the Department of Roads and Transport; the Department of Community Safety; the Department of Human Settlements; the Department of Economic Development; the Department of e-Government; the Department of Sports, Arts, Culture and Recreation; the Department of Cooperative Governance and Traditional Affairs; and the Gauteng Provincial Treasury.
The Department of Social Development was able to pay 98 percent of invoices within 30 days, while the number stands at 88 percent for the Department of Infrastructure Development, when client departments are excluded. The Department of Agriculture and Rural Development, and the Department of Education, paid 71 percent and 80 percent, respectively, of invoices, within 30 days. The Gauteng Department of Health paid only 21 percent of service providers’ invoices as at the end of Quarter 4 of the 2024/2025 financial year.
The Gauteng Provincial Government is committed to ensuring compliance with the legal obligation to ensure that payments due to creditors, including intergovernmental claims, are paid within 30 days. This is not only an expression of respect for the law, but also because we recognise that the timely payment of invoices is crucial for the health of the economy, especially for small, medium and micro-enterprises (SMMEs) who rely on government payments to sustain their businesses. Where compliance is not at 100 percent, the Gauteng Provincial Government will continue to develop, implement and monitor instruments to facilitate improvements.
Conclusion
It is important to state that whatever funds cannot be motivated will revert to the Provincial Revenue Fund (PRF). Instructively, these funds remain available for re-allocation to programmes and projects and are in no way lost by the Gauteng Provincial Government.
Service delivery is a top priority for the Gauteng Provincial Government. For this reason, we remain committed to ensuring that underspent funds are re-allocated to crucial programmes and projects in order to ensure that the residents of our province continue to receive the necessary public services needed to alleviate the triple challenges of poverty, unemployment and structural inequalities.
The Gauteng Provincial Treasury remains deeply committed to the principle of good governance, at the heart of which is accountability, transparency, and responsiveness. For this reason, we have, and will continue, to provide the residents of Gauteng with information pertaining to how money is being spent by departments and entities of the Gauteng
Provincial Governments. The Gauteng Provincial Treasury has an open-door policy, within the law, to provide information that may be required by all stakeholders, including the media, and particularly, residents of Gauteng to whom we are unwaveringly committed.
At the beginning of the term of the 7th administration, we promised to be a transparent, accountable and transformational treasury. It is a promise that we have every intention of keeping.
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