13 February 1997
Honourable Speaker, in the Adjustments Appropriation Bill, Parliament is asked to consider requests for funds in addition to amounts already appropriated in the Main Estimate, which was tabled in Parliament in March 1996. For the convenience of members, an explanatory memorandum, which provides more detail about the figures to which I will refer, is also tabled as part of the Adjustments Estimate documents.
Let me deal first with the aggregate estimates of expenditure, revenue and the budget deficit.
Revised estimate of expenditure: 1996/97
In the Budget presented by my predecessor, a total expenditure level of R173,7 billion was estimated for the 1996/97 year. The revised estimate of expenditure for the year is R176.1 billion. This represents 31,4 % of the expected aggregate Gross Domestic Product of R560 billion for the 1996/97 year and is an increase of 15% over the 1995/96 expenditure level of R153 billion.
Revised budget deficit: 1996/97
Based on revenue receipts for the first nine months of the year, it is now estimated that revenue during 1996/97 will amount to R147,4 billion, which is an increase of R2,5 billion over the March 1996 estimate. The budget deficit is expected to amount to R28,7 billion, or 5,1 % of GDP, as planned.
The Adjustments Budget
I would like to come now to the tabled Adjustments Appropriation Bill. The March 1996 Printed Estimate of Expenditure, together with certain supplementary amounts announced in the budget, provided-for expenditure of R177,1 billion (RP2 & 4), including statutory obligations (mainly the cost of servicing state debt) of R34,7 billion.
Honourable members will note from the documentation tabled today that the Adjustments Estimate provides for appropriations amounting to R13,1 billion. This is made up as follows:
The main budget and the adjustments estimate provide for appropriations totalling just over R190 billion. However, expenditure of R4.1 billion on certain RDP projects is counted twice because the amounts appear on various departmental votes in addition to the global amount on the Finance budget. Where functions were shifted from one department to another, they also have to be voted twice, but members should be assured that the expenditure is only permitted once.
Expenditure already announced
An amount of R600 million was included in the expenditure level estimated at the time of the 1996/97 budget, comprising an additional R450 million for interdepartmental cross-cutting RDP projects and R150 million for the restructuring of the South African Revenue Service. In respect of the envisaged RDP projects, an amount of R55,7 million will be spent on the unblocking of the criminal justice system in the 1996/97 financial year and it is recommended that this amount only be made available to the spending agencies concerned. The amount of R150 for the restructuring of SARS is recommended for inclusion in the Adjustments Estimate for the introduction of an incentive bonus scheme.
Additional amounts with offsetting income flows
The Adjustments Estimate includes provision for the following amounts in respect of which offsetting income flows are identified.
a. Foreign grants for RDP projects: R138,7 million
At the time of the budget, details of donor assistance for RDP projects were not available. The Adjustments Bill provides for amounts on various spending agencies' votes in respect of receipts to the Exchequer amounting to R138,7 million from foreign donors.
b. Oil pollution cleaning operations: R10 million
The cost of containing oil pollution and cleaning-up operations as a result of an incident involving the vessel "Cordigliera" amounts to R10 million. This will be recovered from the owners of the vessel.
c. Improvements in conditions of service: R300 million
Part of the agreement reached in the Central Bargaining Chamber provides that the employer's contribution to the Pension Fund be reduced, in line with actuarial recommendations, against which an additional amount is allocated for improvements in conditions of service. For administrative reasons, the budgeted contributions to the Pension Fund have been made and an amount of R300 million will be recovered from the Pension Fund in a single transaction.
d. Outstanding debts of agricultural parastatals: R74,9 million.
An amount of R74,9 million is allocated to the Eastern Cape Province to cover the costs of rationalisation of certain agricultural corporations and irrigation schemes. These funds will go towards severance packages for redundant employees, prior to transfer of certain schemes to new entrepreneurs. These amounts will be made available from the Agricultural Credit Account which is managed by the National Department of Agriculture.
Function shifts between votes
Various shifts of function between votes or between national and provincial departments account for R220,0 million to be voted in the Adjustments Appropriation. In addition, R315,7 million, mainly comprising an amount to cover Post Office losses on the original Finance vote, is shifted to statutory appropriations. These do not represent additions to the expenditure level.
Unforeseen and unavoidable additional expenditure
a. Standing appropriations: R226 million
An amount of R69,0 was included in the March estimates to cover various standing appropriations. A further R226 million is now provided in order to meet unanticipated realisation of guarantee liabilities of the Department of Agriculture and the Department of Minerals and Energy.
b. Additional allocations to Departments: R2 924 million
As in the past, the Treasury Committee has evaluated requests for additional funds from government departments. The Adjustments Appropriation makes provision for additional allocations amounting to R2,9 billion, representing unforeseen and unavoidable additional expenditure. Details of these amounts will be debated by Parliament at a later stage. The main items are as follows.
Transfer to provinces (mainly for education and welfare purposes) R 1421 million S A Police Service (rationalisation cost and Polmed contributions) R 605 million Correctional Services (new posts and budget shortfalls) R 223 million Funds for the SABC, Channel Africa and Capital Radio R 211 million Olympic Bid1 R 125 million
Additional amount to meet losses of the Post Office R 213 million Water Affairs (shortfall in respect of functions transferred from provinces and flood damage) R 87 million Public Enterprises (restructuring of state owned enterprises and electricity supply) R 23 million Other services R 16 million
Roll-over of funds
As in the past, the Adjustments Estimate includes amounts rolled over from the previous financial year. The appropriation accounts for 1995/96 reflect unspent allocations to departmental votes amounting to some R12 billion, net of RDP double-counting.
After evaluation of applications from spending agencies, an amount of R8,9 billion is recommended to be rolled over, and is included in the Adjustments Estimate.
Projected expenditure
Savings amounting to R484,7 million have been identified from departmental votes appropriated in the original 1996/97 Estimate of Expenditure.
Taking into account these savings, the double-counting of RDP allocations, shifts of functions and the recovery of R300 million from the Pension Fund, the Adjustments Appropriation brings the total budgeted amount for 1996/97 to R185,1 billion.
It is, however, the actual outlays of government spending agencies that is relevant for macroeconomic purposes and which requires to be financed by the fiscus. Departmental and other expenditures, adjusted to reflect anticipated unspent balances, are at this stage expected to amount to R176.4 billion for the fiscal year, or R176.1 billion excluding the amount to be recovered from the pension fund.
Whereas R12 billion remained unspent at the end of 1995/96, it is projected that about R9 billion of the available 1996/97 budgeted amount will not be requested by departments or will be surrendered back to the exchequer. It should be noted in this regard that funds allocated to provinces which remain unspent at the end of the year, including rolled over amounts and shifts of functions, will not be surrendered to the National Exchequer but will be kept in the provincial Revenue Funds.
It is recognised that an amount of R9 billion, although significantly reduced from the unspent balance at the end of 1995/96, represents a large potential source of roll-overs to the 1997/98 year. Requests for rolling over these funds will be scrutinised thoroughly, with a view to bringing the gap between available budgeted amounts and actual spending outlays down to more acceptable limits.
Conclusion
Honourable members will note that although we anticipate an expenditure level which exceeds the March 1996 budget estimate by 1,3 %, this is offset by the improved revenue flow projected. The deficit for the 1996/97 year will be 5,1 % of GDP, as anticipated by my predecessor.
The achievement of our deficit target represents an important step in establishing the sound fiscal and financial framework within which our growth, employment and redistribution goals can be met. It would not have been possible without the strong support of the President, the Executive Deputy President, members of Cabinet and our provincial colleagues. I wish to express my appreciation that over-expenditure has been kept within limits, and my assurance that our vigilance in this regard will remain keen.
Honourable Speaker, I thank you.
1. An additional amount of R43,0 million for the Olympic Bid is included in the transfers to the provinces.
Issued by the Ministry of Finance, 13 February 1997