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.


Technical Spending Reviews

Artisan training has been revived from a low of 4 500 artisans in 2005 to nearly 15 000 in 2013, at a cost to government of just over R4 billion a year. The National Development Plan sets a target of 30 000 artisans a year by 2030, and expenditure is set to increase to over R5 billion by 2016 and nearly R6 billion by 2018. The low throughput rate of 56% remains the biggest obstacle facing the artisan development system. Currently about 27 000 artisan learners enter the system each year, but fewer than 15 000 qualify. The system consists of multiple routes, many of which are complex and do not optimally integrate theoretical, practical and workplace knowledge and experience. Public TVET colleges face a number of challenges in providing artisan programmes, including significant capacity constraints, a curriculum that is not aligned with the outcomes of trades and local economic needs, uneven levels of trade expertise among teachers, and inadequate work experience and employment opportunities for students. Significant investment cannot be avoided; there is no cheap way of training artisans. However, much better value for money can be obtained. The key is to improve the quality and capacity of the programmes so that the private sector regains confidence in the quality of graduates from public TVET colleges. The throughput rates also need to be improved to at least 75%; this would require a much more efficient and centrally managed system. Savings could also be achieved if public TVET colleges conducted more artisan training as part of occupational training programmes. If throughput rates could be improved, unit costs would come down and the expansion required to achieve NDP targets would become more viable and sustainable.

At the core of the PSET system are 26 universities and 50 TVET colleges, spread over 260 campuses. Collectively, they enrolled about 1.6 million students in 2013/14. In addition, about 0.3 million are enrolled in community colleges, which provide adult education and training. The PSET sector has expanded rapidly in recent years. TVET enrolees increased by 70% between 2000 and 2013 (from 360 000 to 640 000), mainly in NATED courses in post-school engineering and business. The number of university students rose by nearly 80% (from 560 000 to 980 000) between 2000 and 2013. Both the NDP and the DHET White Paper on Post-School Education and Training envisage the continued rapid expansion of the sector. The NDP envisages university enrolment of 1.7 million in 2030, which requires enrolment to increase by 4% a year for the next 14 years, while the envisaged expansion of TVET enrolments to 2.5 million in 2030 implies an annual average expansion of 9%. Community college enrolments are envisaged to expand to 1 million in 2030 also at an annual growth rate of 9%. Such large numbers and rapid growth rates raise significant questions of affordability; the present staff and infrastructure capacity of these institutions would be unable to cope with these demands. In 2013/14, R66.9 billion was spent on the PSET system, of which R36 billion (54%) was appropriated through the budget. The remainder came from student fees, earmarked payroll taxes (which fund SETAs), and various sources of ‘third-stream’ income (donations, consulting work, rental income, etc.) for a handful of universities. The bulk of expenditure in the system is on universities (R47.6 billion or 71% in 2013/14), with the TVET sector accounting for 12%. Universities spent R53.3 billion in 2013, up 7% a year on the 2000 amount of R23.7 billion. In that time, their mix of funding changed, with much faster growth in fees than in budget allocations: in 2000, government grants accounted for nearly 50% of university income, but this dropped to 40% by 2013. At the same time, student fees rose from 24% of income to 33%. The increased reliance on student fees does not mean that the burden of funding the universities was passed onto households entirely. Instead, the NSFAS contribution grew rapidly, from around R510 million in 2000 to over R6.7 billion in 2013, at an average rate of 24% a year. NSFAS loans now account for between 10% and 56% of student fees (depending on the type of university), up from 6% in 2000.Under the NDP policy scenario, about R655 billion will be needed for the public PSET system in 2030 (or R253.1 billion in real 2014 prices), as against a total expenditure of R64 billion on public PSET in 2014. While enrolments are expected to increase by 168% over this period, the real expenditure needed to achieve the aims of the White Paper would have to increase by 242%. Thus expenditure on PSET would rise from 2% of GDP in 2014 to 4.4% by 2030; this would exceed the available funding should tax revenues grow in line with Treasury’s long-term fiscal projections. Under the full policy scenario, a nominal shortfall of R370 billion in 2030 is expected, or about 2.46% of GDP. Thus funding the PSET system to meet the policy targets would pose a major challenge for government.
The quality of teachers is seen as a key constraint in the education system, and in response, the national Department of Basic Education developed an extensive policy framework for the in-service training of teachers (INSET). This proposal imposes a large burden on provincial budgets: implementing the full proposal would require additional expenditure of R12.2 billion per year, as well as R6.6 billion for once-off infrastructure costs. Such massive reform processes can flounder if they lack detailed plans for implementation at subnational level. The study identified the need for a realistic roll-out plan, with an eight-year horizon. It also costed the expenditure at provincial and district level, and proposed potential savings of R10 billion through more targeted training approaches. These include training 30% of teachers annually and reaching 90% of all teachers over a three-year period, reducing the training by five days per year in a three-year cycle, and reducing the number of residential courses. In addition, it recommended that the proposed reimbursement for travel for professional development of teachers be scrapped.
The main finding of the study is that unclear mandates, framed in broad and open-ended language, contribute to poor operational focus among the three entities. Each entity undertakes activities for the ‘promotion and development of languages’, but since they do not consult each other in the planning phase, their activities overlap. Both PanSalb and the CRL have become inwardly focused, directing activities and expenditure towards corporate services rather than delivery on their core mandates. A disproportionate share (about 55%) of the funding allocated to language functions is spent on administration, and this inefficient use of resources hampers progress towards linguistic diversity. Despite generous growth in income, PanSalb has regularly overspent its budget. It devotes 75% (R42 million) of its budget to administration, and only 25% (R14 million) to core programmes. From this perspective, it exists almost entirely for the benefit of management and administrators, instead of delivering on its mandate. Insufficient attention has been paid to the considerable cost implications of the Use of Official Languages Act of 2012, which requires all national departments, public entities and enterprises to have language units. The cost of setting up and running such units could be as high as R592 million per year.
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.
Established in 2001, the National Skills Fund (NSF) receives 18.36% of the skills development levy (a 1% levy on all payrolls minus costs deducted by SARS). The NSF is meant to play a catalytic role in post-school education and training. However, the various national skills development strategies were too broad and generalised to give direction to such a catalytic role. In addition, for about ten years, the fund was plagued by weak financial management and underspending, and by 2013, it had accumulated reserves of R7.7 billion. This situation was addressed through better financial management in the last two years, and the NSF is now in danger of over committing its funds: its total current commitment is R11.4 billion. Of this amount, R6.1 billion in reserves have been committed to training and capacity building – R4 billion for the NSFAS and FET colleges, and R2.1 billion for FET infrastructure, the New Growth Path and rural development. The remaining R5.3 billion was ‘forward committed’, and is to be financed from R1.6 billion in reserves and R3.7 billion from projected future income.Thus the bulk of NSF funding covers budgetary shortfalls in FET colleges and the NSFAS. These stopgap measures limit its ability to catalyse new, industry-relevant training programmes. Should it continue funding these stopgap measures, its reserves would run out in the next three years; this would place additional pressure on the fiscus. Should it instead reduce its stopgap funding of the NSFAS and refocus on bridging programmes for young and unemployed people to enter the post-school education and training system, especially for industry-relevant technical and vocational programmes, it could train up to 500 000 learners over three years (about 170 000 per year).
In 2014, NSFAS managed the disbursement of R8.96 billion in loans (R4.1 billion), TVET grants (R1.9 billion) and bursaries (R2.8 billion). The NSFAS loans supported 123 531 undergraduate students, or 15% of total undergraduate enrolment. If the number of students with such loans were to increase to 25% of enrolment (i.e. 261 842) in 2030, the value of NSFAS loans disbursed would have to increase to R21.4 billion.Given the design of the NSFAS loan scheme, it will always depend on government grants to remain viable and to expand. For various reasons, NSFAS’s debt management capabilities are poor, and have been undermined by policy decisions that limit its scope for using normal debt management tools. This has led to a collapse in NSFAS debt recoveries, and cost NSFAS (and government) an estimated R3.7 billion between 2010 and 2014, which could have funded another 117 500 students.
As one of 21 SETAs, PSETA’s mandate is to develop the skills and competencies of people in the national and provincial public service. Unlike the other SETAs, PSETA’s employer base does not pay a skills development levy, as the relevant legislation recognised that government departments pay for their training directly. Instead, PSETA receives an annual allocation from National Treasury via the DPSA. In 2012/13 this allocation was R22.3 million (56% of PSETA’s R40 million income). An additional R15.6 million was sourced from the National Skills Fund for project funding. However, these projects reflect the National Skills Fund’s focus on the unemployed, rural youth and artisanships, not the core areas of PSETA’s focus. PSETA has a history of poor governance and financial mismanagement, and was placed under administration in 2010. It implemented a new governance framework in 2013, but it is not yet clear whether the organisation has been turned around. The study found that 50% of PSETA personnel have administrative roles; this proportion is excessive, but is typical of organisations that lack direction and are inwardly focused.In 2013, a DPSA circular sent to all government departments under PSETA required them to forward 0.5% of their training budgets to the organisation, which would have amounted to R100 million. However, these transfers have been held in abeyance on Treasury instruction. Treasury and PSETA agreed that the organisation has plans to spend only about R60 million; the matter had not been finalised at the time of the study.
From 2010 to 2014, enrolments in TVET colleges grew by 95% (from 358 393 to 702 383), faster than in any other sector of the post-school education and training system. Colleges receive over 85% of their funding from government, primarily from DHET (about 60%), bursary and loan funding from NSFAS (20%), and project-specific funding from the NSF (5%) and SETAs. During this period, state subsidies grew from R4 billion to R5.8 billion, whereas NSFAS funding increased from R300 million to R2 billion. However, as growth in enrolments outstripped growth in funding, government expenditure per student dropped sharply from R11 130 to R8 950 in real terms. In addition, throughput rates remain low. In 2013, the estimated throughput rate for the National Certificate Vocational (NCV) was just 10.6%; this means that for every ten students that enrol in an NCV course, only one completes the course after six years. This undermines the efficiency of the system and leads to excessive costs per graduate. Part of the reason for lower throughput rates lies in how NCV and NATED programmes are delivered in colleges. Although vocational and technical programmes with a large practical component should be relatively more expensive, the analysis shows that spending per full-time equivalent student does not differ substantially between different programmes at the same college. This implies that individual colleges spread their funding across more students to meet enrolment targets. This hampers their ability to equip their students with the right skills for the workplace, especially in technical and vocational disciplines such as engineering.

Student Spending Reviews