On Friday, the DA in the Western Cape voted to not support the 2022/2023 Division of Revenue Bill.
The Bill allocates R72.383 billion to the Western Cape, up R3.919 billion from the previous financial year. This increase, however, does not take into account previous substantial budget cuts or cost-of-living increases. According to the Medium-Term Expenditure Framework, the Western Cape will also see almost no increase in funding over the medium term, with a decrease in funding of almost R1.6 billion expected in the next financial year.
The Provincial Equitable Share (PES) Formula is still based to a large degree on outdated data from the 2011 Census. The Western Cape has seen a massive relocation of persons to the Western Cape since then, and it is clear that the money is not following the people. The revised allocations for the health component of the PES have also seen the Western Cape lose around R500 million in healthcare funding over the medium term. Increases in allocations for Health and Education that have been included in the Bill are subject to prescriptions by National Government, characteristic of over-centralisation of authority by the ANC National Government.
Other factors are also currently not considered in the PES formula, including funding for Special Needs Education and dealing with Gender-Based Violence. As a result, the Western Cape Government has to find funding for these critical areas from other components within the budget, having a knock-on effect on other services.
Further, all but one provincial conditional grant allocations will either be decreasing in percentage terms or increasing less than inflation over the MTEF period. The decreasing conditional grant allocations received from national government decreasing in percentage terms over the MTEF period are the:
• Education Infrastructure: -0.1%
• Early Childhood Development Grant: -2.1%
• Learners with Profound Intellectual Disabilities Grant: -0.7%
• District Health Programmes Grant (Previously called the HIV, TB, Malaria and Community Outreach Grant): -2.8%.
The conditional grants increasing less than inflation over the MTEF period (with inflation currently at 5.7% year-on-year in February 2022 or 5.9% in March 2022) are:
• HIV and AID (Life Skills Education) Grant: 3.1%
• Maths, Science and Technology Grant: 2.1%
• National School Nutrition Grant: 4.0%
• National Tertiary Services Grant: 1.2%
• Health Facility Revitalisation Grant: 2.1%
• Human Resources and Training Grant: 0.2%
• National Health Insurance Grant: 0.8%
• Provincial Roads Maintenance Grant: 5.0%
• Public Transport Operations Grant: 4.4%
• Comprehensive Agricultural Support Programme Grant: 2.0%
• Ilima/Letsema Projects Grant: 3.1%
• Human Settlements Development Grant: 4.5%
• Informal Settlements Upgrading Partnership Grant: Provinces: 4.4%
• Community Library Services Grant: 2.9%
• Mass Participation and Sport Development Grant: 1.6%.
These below-inflation decreases, in real terms, result in budget cuts for these programmes over the medium-term and creates a risk for service delivery in key departments.
The complete lack of innovation from National Treasury relating to grants is also worrying. No new grants have been created to address the challenges provinces and municipalities face regarding energy, technology and jobs. Furthermore, the lack of transparency regarding the process through which conditional grants are allocated, creates another opportunity for corruption and inefficiency.
National Government is short-changing the people of the Western Cape, putting provincial and local governments in a position where even an outstanding level of efficiency is not enough to plaster over the cracks left by the lack of funding.