25 budget report reveals R1. 8 billion underspend, but what does this mean?
Understanding Gauteng's financial management: Insights from the 2024/2025 expenditure report
Image: Kamogelo Moichela/IOL
The Gauteng Provincial Government has released its 2024/2025 expenditure report, revealing that the province spent R166.97 billion of its adjusted budget of R168.76 billion. This results in an underspend of approximately R1.8 billion, or roughly 1% of the total budget.
While some media reports suggest these funds will be returned to the National Treasury, MEC for Finance Lebogang Maile clarified on Monday that this interpretation is misleading and overlooks the detailed processes involved in managing unspent funds.
Understanding the Financial Landscape
Speaking during a media briefing in Johannesburg, Maile emphasised the need for a clear understanding of South Africa's provincial financial framework.
'The Provincial Revenue Fund (PRF) is the backbone of our fiscal management. All revenue collected from taxes, levies, or intergovernmental transfers is deposited here.
'Money can only be spent through approved budgets or as per specific legislative provisions, ensuring transparency and accountability,' he explained.
He further highlighted the importance of Conditional Grants, which the National Treasury allocates for targeted projects aligned with national priorities, such as infrastructure and social development.
'These grants are governed by the Division of Revenue Act (DoRA), with strict conditions on their use. Conversely, the Provincial Equitable Share (PES), an unconditional transfer based on a formula considering population and socio-economic factors, provides provinces the flexibility to prioritise within their mandates, mainly health, education, social development, and economic growth.'
A Closer Look at Spending and Underspending
Initially set at R165.8 billion and adjusted to R168.76 billion, the provincial budget saw departments spending R166.97 billion by year's end, representing 99% of the adjusted budget.
Key departments like Health and Education led spending with near or full budget utilisation:
Health: R65.29 billion (99%)
Education: R65.82 billion (100%)
Roads and Transport: R9.77 billion (100%)
Social Development: R5.70 billion (98%)
Community Safety: R2.48 billion (97%)
According to Maile, other departments such as Infrastructure, e-Government, Agriculture, and Human Settlements also spent close to their allocated amounts, with expenditure rates ranging from 93% to 100%.
Deciphering the R1.8 Billion Underspend
The total underspend of R1.799 billion was primarily driven by the Departments of Health and Education, which accounted for 58%.
The remaining 42% was distributed among other sectors. Of this underspend, R381.51 million was from Conditional Grants, while R1.418 billion came from the Provincial Equitable Share.
Maile clarified, 'Understanding that these funds are not lost is crucial. They are managed within a rigorous process that allows for the rollover of unspent but committed funds, ensuring they continue to serve service delivery objectives rather than simply reverting to the National Revenue Fund.'
The Rollover and Performance Evaluation Process
He further explained that the R1.418 billion in provincial equitable share funds will undergo an internal evaluation led by the Gauteng Provincial Treasury.
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'Every request for rollover is carefully scrutinized, not only on financial grounds but also based on performance and progress in implementing projects,' Maile said.
"We aim to ensure these funds are effectively absorbed and contribute to tangible benefits. We want to avoid systemic delays and ensure that service delivery programs are prioritized,' he added.
Payment of Service Providers' Invoices
Maile also reaffirmed the government's legal obligation to pay its creditors within 30 days, as the Public Finance Management Act (PFMA) stipulated.
As of Quarter 4, nine departments had fully complied, paying 100% of invoices within the required timeframe. These include the Office of the Premier, Roads and Transport, and Community Safety.
However, Maile said some departments faced challenges—Health paid only 21% of invoices on time, and Education paid 80%.
'Timely payment is not just a legal requirement but a moral obligation. It supports our economy, especially small and medium enterprises that depend on government payments to sustain their businesses. We are committed to improving these figures.'
Looking Ahead: Reverting Funds and Ensuring Service Delivery
Maile stressed that funds that cannot be justified through proper processes will revert to the Provincial Revenue Fund.
'These funds are not lost; they are available for reallocation to vital programs that directly benefit our communities,' he said.
He also highlighted the government's ongoing commitment to transparency.
'Our provincial treasury maintains an open-door policy, providing stakeholders, including the media and residents, with detailed information on how public funds are spent. Accountability is at the core of our governance approach.'
Maile reaffirmed the government's unwavering dedication to responsible financial management and service delivery.
'Funds that remain unmotivated or unspent will revert to the Provincial Revenue Fund, but are not lost to us. We will reallocate these resources strategically to ensure continuous progress in addressing poverty, unemployment, and inequalities,' he stated.
'Our promise remains—to be a transparent, accountable, and transformational government that puts the needs of our residents first,' Maile emphasised.
As Gauteng moves forward into the next fiscal cycle, the MEC stressed that prudent management, rigorous oversight, and a firm focus on performance will continue to underpin the province's development agenda, ensuring that every rand spent translates into meaningful improvements for its people.
thabo.makwakwa@inl.co.za
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