KZN Budget: Lack of a capable state, poor implementation set to threaten effectiveness of R140 billion 2022/23 budget

4 May 2022

(The following statement is based on the KZN General Budget Debate which took place in the provincial Legislature earlier today)

The lack of a capable state, along with provincial government’s poor track record when it comes to implementing funding, are set to threaten the effectiveness of KwaZulu-Natal’s (KZN) R140 billion 2022/23 budget, while also reducing the exercise to a mandatory legislative exercise.

At the heart of the problem lies the KZN ANC-run government’s continued focus on the symptom rather than the cause. Effective budgeting and oversight of expenditure mean little when Departments cannot or will not comply with PFMA and Treasury regulations.

A prime example of this is KZN’s disgraceful irregular expenditure bill as a result of non-compliant Departments – which currently stands at more than R48 billion for Departments and R400 million for entities. Of the R48 billion, only R13 billion has been submitted to Treasury for condonation and just over R4 million for entities. In real terms that is almost 30% of KZN’s annual budget.

The questions that must be asked are: Why are Departments unable to comply with simple accounting practises? And why are they unable to comply with Treasury regulations?

The Premier, Sihle Zikalala, issued a consequence management framework for implementation by all Departments. Yet nothing has changed. Why was the Premier’s instruction ignored? Is it pure obstinacy? It cannot be capacity as Treasury has rolled out numerous Departmental capacity programmes. This only leaves one option – a failed state.

In looking at the 2022/23 allocation, during the recent budget hearings three over-arching challenges were identified time and again;

-      The consistent failure by many Departments to spend their voted budgets in full, with most underspending found under Compensation of Employees (CoE). This is having a negative impact on governance and delivery of services

-      The slow pace of infrastructure development by KZN’s so-called implementing agent of choice, the Department of Public Works due to capacity issues and;

-      A notable trend of reduced Departmental Extended Public Works Programme (EPWP) Grant allocations departments. These Grants contribute to the creation of Finance Portfolio Committee 2022/2023 MTEF Budget Hearings 3 – which relate to employment opportunities within KZN.

Regrettably, these three key findings are nothing new – different year, same transgression. They signify the lack of a developmental and capable state and point directly to a province which is failing in its financial mandate.

Another finding is the failure by Departments to present monthly expenditure projections to portfolio committees to ensure swift intervention in the case of slow spending, which may result in underspending at year end.

This was introduced by the DA three years ago as a result of a transversal resolution by KZN’s Finance portfolio committee yet it has proved to be nothing more than another mandatory legislative exercise. The evidence supports this, with no consequences for this habitual failure.

Of further concern to the DA – and an issue which we highlighted during the budget presentation earlier this year – is that a comparative expenditure assessment from the last financial year to the current allocated budget, shows that several key Departments including Health, Education and Social Development have less money this financial year than what they spent last year. Spending pressures within these Departments will not reduce. If anything, they will increase. This will leave our province in an even more precarious financial position.

KZN has had to endure a lot over the past nine months, with the failed July 2021 insurrection – a man-made disaster – and the recent floods. As a result of these disasters, two startling and contrasting characteristics have emerged. The first is the absolute resilience of the people of our province. The second is that we are living in a weak and feeble failed state.

A capable state would have taken preventative steps to reduce the risks of flooding. It would have properly maintained infrastructure and it would have taken immediate and effective action to assist those in need. It is easy to see why everybody, including National Treasury, have lost faith in KZN. Even disaster relief funding and the expenditure thereof now has to be monitored both at a national level and by the Auditor-General.

The people of our province deserve to live in an environment where government puts their needs first. Sadly, this will take nothing less than a miracle. It is now imperative that portfolio committees play an active, ongoing oversight role in terms of budgets and expenditure – the state cannot or will not do it. Anything less will see KZN regress into the red which must be avoided at all cost.

Issued by Francois Rodgers, Leader of the DA in the KZN Legislature, 4 May 2022