About

Spending Reviews bring to light the links between policy development and implementation, through providing a better understanding of the institutional landscape, policy, cost and budgetary implications. A better understanding of departments’ baselines assists in finding savings in existing expenditure, as well as proposing savings and efficiencies in medium term budgets. By analysing and understanding how money is spent in institutions or facilities, as well as on existing implementation programmes, a strong empirical base for clear recommendations to decision-makers is developed.

The resources listed below will assist you to quickly access examples of previous national and provincial spending reviews, as well as infographics summarising the review in one page.

ECONOMIC DEVELOPMENT

Technical Spending Reviews

A PER on public spending on research, development and innovation was conducted at the request of the DST. Data from a variety of sources were examined to try quantify the level of spending on R&D by government and its impact, but perhaps the most significant point to emerge is that exiting data — both on spending and output — are deficient, making it impossible to draw meaningful conclusions. Some recommendations are offered on how to improve this, but cautions are also offered about the extent to which the implementation of any such system would be worth the additional costs and potential conflict.
The IDZ model entailed large upfront government spending on infrastructure; they have sizeable landholdings and exceptionally high operating costs, including high salaries and large staff numbers. However, government investment has not been matched by private sector interest and the IDZs attract few new manufacturers or exporters (with the exception of the pre-existing Tata Steel in Richards Bay IDZ). The IDZ model is premised on a high-risk approach that depends on their ability to attract large anchor clients. They provide basic infrastructure and build factories, warehouses, call-centres and the like on risk, which results in very high co-funding ratios. However, given their track record, the realism of this approach needs to be questioned. While this study does not review the approach to industrial policy, it provides interesting markers on managing for greater efficiency. The new SEZ policy needs to manage costs and risks better, with a clearer value proposition. Any upfront infrastructure expenditure should be scaled to match business interest. In the new SEZs, operating entities will no longer be permanent and new operating entities will be appointed on a five-year contract. This would require the performance of the new entities to be monitored very closely, with even tighter oversight than for IDZs. In addition, the co-funding regime has been replaced by investment incentives; while this moves the costs off the dti budget, the tax implications would need to be closely monitored and transparently reported.
Together, the provincial management authorities are responsible for managing 322 protected areas totalling 3 million hectares, or 7.8% of South Africa’s total conservation estate. A PER of six provinces was commissioned but an absence of reserve-level data inhibited analysis. Of the six provinces, three manage their parks through provincial departments, while three use public entities to manage them. Abut R2.3billion was spend on the reserves in the six provinces in 2015/16, up from R1.9 billion in 2013/14, but there were significant declines in the resources allocated to PNRs in all provinces except Gauteng and Limpopo (where rapid growth in capital spending led to an overall rise in budgets). Reserves vary considerably in their size and nature, and costs per hectare and staffing per hectare vary considerably: from R374 per hectare in the Western Cape (with 1 staff member for every 3,350 hectares) to nearly R5 000 per hectare in Gauteng (with only 215 hectares per employee).
The review finds that as a group, the science councils are not effective in partnering with the private sector. Mintek is an important exception, as is the CSIR, to a lesser extent. For every R1 that government invests the science councils as a group, only R0.62 in private income is generated. (For Mintek, this ratio is 1:1.69 and for the CSIR, 1:1.04.) The international norm for this efficiency ratio is 1:1. While private income as defined in the study includes income from state-owned corporations, on aggregate this comprises less than 1% of total income of the councils. The analysis suggests that effective partnering between science councils and the private sector depends on two variables: i) the degree to which a council interprets sector partnerships as part of its mandate, and ii) the maturity and willingness of the relevant industry to partner with the council. This is determined in turn by the structure of the industry (e.g. mining vs pharmaceuticals) and the council’s efforts to maintain good partnerships. It is clear from the study that partnerships with the private sector have not been a sufficiently explicit policy objective. While this objective can fruitfully be pursued in a number of cases, government should note that it might not be an appropriate approach for all science councils.
Fundamentally, the Stp incubation programme is well conceived and addresses all aspects of global best practice for SMME development, technology adoption and long-term sustainability and growth. In particular, it includes market linkages, with access to inputs, potential partners and buyers. The costs per incubatee vary widely between the sectors, ranging from R800 000–R1 million in the chemical and metal industries to R25 000 per successful SMME in construction. Manufacturing is exceptionally expensive, with an average cost of R8 million per SMME. The costs directly associated with incubation comprise the majority of total expenditure by the incubators – this is positive, showing that funds at the incubator level achieve results. There is a significant drop-off from the number of incubatees entering the programme to the number of SMMEs graduating from the programme, and again to the number still in business three years later. The incubation programme and the individual incubators should attempt to reduce drop-off rates in each phase. In recent years, the focus on technology has been diluted from a performance targeting and monitoring perspective. The newly established Department of Small Businesses Development is likely to absorb existing agencies and functions of the dti. This analysis highlights the role of the institutional location of a programme in shaping its mandate; the change in departmental structure should not compromise the technology focus of the Stp.

Student Spending Reviews