The National Treasury presented the 2020/21 3rd quarter expenditure before the Standing Committee on Appropriations to account for various departments’ and entities’ expenditure patterns in accordance with their deliverable objectives and expenditure patterns, as specified by the Minister of Finance during his tabling and subsequent readjustment of the national budget in 2020.
On the whole, the preliminary data for the third quarter of 2020/21 shows spending of R730.9 billion, which is lower by R767.1 million or 0.1 per cent against the projected expenditure of R731.6 billion.
The National Treasury’s Senior Economist Dr Mampho Modise said goods and services contributed to the largest proportion of the lower than projected underspending by R4.3 billion, compensation of employees by R2.0 billion, payment for capital assets by R1.9 billion. On the other hand, Dr Modise said the transfer and subsidies, payment for financial assets and interest and rent on land are higher than projected by R3.9 billion, R3.4 billion and R5.7 million, respectively. Dr Modise said Covid-19 expenditure amounted to R24.5 billion at the end of the third quarter.
Dr Modise further added that the National Treasury’s higher than projected spending was mainly attributed to the payment for financial assets for South Africa’s sixth capital contribution instalment to the New Development Bank due to exchange rate fluctuations.
In her reportage of the financial performance of public entities, she was at pains to point out the difficulty in verifying data from these entities, because some are not based on the basic accounting system (BAS) and cannot be verified. They do not have budget programme structures, as with departments that are approved by the relevant Treasury. Hence: “…their ‘programmes’ are not necessarily linked to deliverable objectives. Their spending is only in economic classification terms”.
Most members of the committee regretted the fact that the Passenger Rail Service of South Africa (Prasa) spent R700 million of its R4 billion allocation, particularly as the rail network is experiencing underinvestment and vandalism. The Chief Director of State-Owned Enterprises at National Treasury, Mr Ravesh Rajlal, replied: “Given the current magnitude of vandalism, it’s now no longer a maintenance issue, it’s now part of its capital expenditure.”
Treasury’s report also flagged Denel as an ongoing concern, especially in meeting its R1.2 billion debt. Mr Rajlal said, “The major concern is that Denel has liquidity problems. It has not progressed in the sale of its non-core assets and has not found equity partnerships to help turn the company around.”
Denel had a turnaround strategy that was approved in 2018 that was meant to turn it into a profitable company. “Why it has not yet been implemented?” asked Mr Xolisile Qayiso, another member of the committee.
“There will be further discussions with the shareholder in February and it will soon table its intent to dispose the non-core assets before the Cabinet. This would bring R3 billion to Denel coffers. Debate with our defence force and other strategic clients of Denel will resume to ensure Denel returns to its past glory and is financially viable,” replied Mr Rajlal.
Abel Mputing
17 February 2021
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