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.
GENERAL PUBLIC SERVICES
Technical Spending Reviews
Collectively, provinces own 40,000 vehicles, and provinces manage their fleets in one of two ways: some have centralised fleet management through a dedicated trading entity while others have departments manage their own fleets. Differences in provinces’ size and their approach to delivering public services result in significant differences in the size of the vehicle fleet relative to the number of government employees and in comparison to the provinces’ populations: there are almost 33 government employees for every vehicle in Gauteng, but only 13.5 for every vehicle in the Northern Cape, but, while, there are about 360 people in Gauteng for every vehicle owned by the provincial government, the ratio of vehicles to population is less than a quarter of that in the Northern Cape. The provinces spent R2.8 billion on managing and operating their fleets in 2016/17, a figure that has risen by a little less than 6% a year over the previous two years. In that period the fleet has also grown by 3% a year. Overall, spending on fleets averaged at just less than R70 000 a vehicle. The biggest cost drivers are the composition of the fleet and the number of kilometres that are driven. Given the relatively large number of vehicles that are older than seven years, provinces could reduce their average costs per km by accelerating the replacement of older vehicles. One area in which potential savings were identified was in the centralised provinces, where the combination of daily tariffs and per kilometre charges exceeded vehicle running costs and the cost of accumulating funds to replace them. In these provinces, surpluses have accumulated in their respective trading entities, and it might be possible to reduce tariffs charged to departments and to run down those accumulated surpluses.
Over the past three years, the rate of growth in annual government expenditure at foreign missions has exceeded the rate of depreciation of the currency. This growth was driven largely by higher property costs, allowances for South African staff, and growth in the number of locally recruited personnel. The cost-of-living allowances (COLAs) for South African staff at missions are exceptionally generous, ranging from R600 000 to R1.3 million per year, and are paid on top of full salaries, free accommodation, and education and other allowances. South Africa’s COLAs are 60% higher than those paid to US staff and 40–50% for UN staff (who also have to pay their own accommodation, unlike South African staff). DIRCO also has a very large and generous back office corporate services component. In addition, when expenditure is analysed per mission, it is not immediately obvious how the cost of the missions are aligned with the country’s trade and other interests.
This spending review explores if the original model of having a centralised stated owned IT agency is working or not. There are concerns that, far from being a source of efficiency, SITA adds to the cost and reduces the efficiency of IT-spend in government. Additionally, the centralising of IT-functions also centralised the risk and increased the systemic costs of any failure by SITA to achieve the efficiencies that centralisation was supposed to deliver. SITA mandate requires that their service catalogue and pricing be reviewed regularly to support evolving trends and technology which is currently not happening resulting in the inconsistent pricing of services government consumers. Overall, there is a lack of alignment and planning of ICT projects and spending with programme objectives and engagement with SITA to enhance enterprise architecture objectives. Over the five-year period 2016/17 to 2021/22 expenditure on ICT across provincial and national government amounted to R97.5 billion and constituted 5% of government’s total procurement spending (Spending on Goods and Services and Capital payments). By centralising the procurement of Office software and Operating system software could result in savings of up to R73 million per year in the medium term. Savings on migrating all govt landlines to VoIP solutions could result in savings of up to R1.1 billion per annum over the medium term.
The School of Government proposal aims to create a training institute for civil servants, which would train all new recruits and existing civil servants, run an annual summer school for DGs and DDGs, and provide a year-long elite cadet training programme for 1% of new recruits. The initial proposal was to train all civil servants from all departments at a cost of R7.4 billion, using the 1% training levy of the government salary bill of R4.6 billion; however, this would still leave a shortfall of R2.8 billion. The study proposes that departments such as Basic Education, Health, Defence, SAPS, Correctional Services, DIRCO and Parliament be excluded from the training. Further cost savings could be achieved through i) a staggered approach of training 40% of civil servants per year instead of 60%, ii) a higher learner–instructor ratio, and iii) omitting the very expensive cadet-style training. The proposal contains two high-risk assumptions: i) existing civil servants would provide most of the training, free of charge but at an opportunity cost of about R600 million per year, and ii) the current funding of approximately R420 million for the various government-aligned SETAs would be shifted to the school. It is worth noting that the University of Cape Town’s total annual budget was R3.8 billion at the time of the study.
In 2016/17, Provincial Governments collectively leased 1.2 million m2 of office accommodation at an average cost of R 120 /m2 per month — at a total cost of R151 million month/R1.8 billion per year. Most of lease expenditure (85%) were in the major economic centres of the provinces, where average costs are R125/m2 for leases of offices that averaged 5,400m2 in size. Elsewhere, leases tend to be considerably smaller. Departments in Government’s social cluster accounts for more than 50% of the leased space. These leases tend to be larger offices- over 2,000m2 – and primarily in CBDs & Main Centres, at an average rental of R126/m2. Leases for departments in the Economic and Governance clusters are for between 1,500 – 1,600m2 at an average R120/m2. Just over 20% of the total rental expenditure is on leases that have expired and are running on a month-to-month.Based on market benchmarks, it is estimated that about a third of monthly expenditure is on leases the cost of which is above market norms. Most of the expenditure above market is in the CBD and Main Centres, and just under 90% of the expenditure above market was in 6 provinces. Just under 80% of these lease in the CBD & Main Centre that are above market. A lease maturity analysis was not conclusive in providing a correlation of mature leases and rentals above market.Potential savings were estimated to be in the range of R600 million to R1.2 billion over three years.
Government departments lease much of their office accommodation from private landlords, with national departments incurring around R3 billion a year in rental expenses. Owing to data limitations, the study had to use a sample of 1 000 leases that could be linked to floor size and costs. Its main finding is that about 60% of these leases were at above-market rents, with an average premium of 45%. The leases are also heavily concentrated: seven tenants hold more than 50% of leases (by value). Savings of between R20 million and R2.2 billion could be realised over the MTEF, depending on:
Whether existing rents could be renegotiated to market levels (or even lower)
Whether escalation caps could be set for the overall lease or for each element of lease costs
Whether the changes could be effected before the expiry of existing leases or would have to be postponed until the leases have expired.