Report on Conditional Grants and Capital Expenditure 2 st Quarter 2007/2008 Financial Year

1. Report on Conditional Grants and Capital Expenditure 2st Quarter2007/2008 Financial Year NCOP PRESENTATION 07 NOVEMBER 2007

2. Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence 1. Presentation outline • Purpose of the Conditional Grant and Capital Expenditure managed by the department in terms of the DORA • Expenditure trends on Conditional Grants and Capital Expenditure for the MTEF period 2005/06 – 2007/08 • Explanation of expenditure variances. 4. Management & monitoring of Conditional Grants and Capital Expenditure • Social & EPWP indicators for new roads 2007/2008 • Results in 07/08 7. Challenges faced in management of grants and Capital Expenditure. 8 Future budget trends: MTEF Eastern Cape Department of Roads & Transport

3. EASTERN CAPE TRANSPORT LINKAGES IMPORTANT FOR 2010 National Roads/Routes Very Important Links Rail Network Other roads in the DRT 2010 plan Road being resealed Alternative & Strategic Links  N6 Tiffendell & Sterkspruit LEGEND Aliwal North N10 Mkambati / Mtentu Mbotyi  Port St Johns Queenstown Hluleka Nature Reserve Coffee Bay Hole-in-the-wall Dwesa / Cwebe • King Sabatha Dalindyebo • Municipality (KSD) • Potential non-hosting or base camps in the Province Mazepa Bay Hogsback  Qolora Alice  Fort Beaufort KWTown & Bhisho • Buffalo City Municipality (BCM) • Potential non-hosting or base camps in the Province Grahamstown N9   N2 • Nelson Mandela Bay Metropolitan Municipality (NMBMM) • One of the Host Cities in South Africa Eastern Cape Department of Roads & Transport

4. Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence 2. Purpose of this Conditional Grant and Capital Expenditure • To accelerate construction and rehabilitation of new and existing Eastern Cape Provincial road infrastructure and Transport Services. • Accelerate implementation of the Provincial Growth Development Plan. • The grant requires us to focus on the application of labour intensive methods in order to maximise job creation and skills development. • Enhance capacity to deliver Road Infrastructure and Transport facilities. • Create the necessary Transport Services facilities in Municipal Areas as supported by ITP and MTABs. Eastern Cape Department of Roads & Transport

5. 3. Expenditure Trends CG Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Provincial Infrastructure Grant Eastern Cape Department of Roads & Transport

6. 4. Explanation for expenditure variation • The variance (R18 501 000.00) or 2.2% over expenditure was due to: • The accelerated programme of the contractor on the Maclear to Mount Fletcher project which will be completed three months before scheduled completion time. • Early start on the Mthatha Quarry Road. • However, the programme is expected to break even, come the 31 March 07. Eastern Cape Department of Roads & Transport

7. 5. Expenditure Trends – PIG and (Total) Capital Expenditure Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Eastern Cape Department of Roads & Transport

8. 7. Non transfer/ Late transfer of Funds to Municipalities/DM • Municipalities have not as yet submitted ITP and Audited Statements. • Due to Non-compliance in terms of ITP under Public Transport and Traffic Management, transfers to Municipalities had been de-committed. • The funding to Municipalities will now be allocated to Capital Projects. • However, the Department has appointed consultants to assist Municipalities with their ITP’s. Eastern Cape Department of Roads & Transport

9. PROJECT BREAKDOWN Eastern Cape Department of Roads & Transport

10. 8. Expenditure Trends 2007/2008 SECOND Quarter Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Eastern Cape Department of Roads & Transport

11. 9. Management & Monitoring mechanism Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence • Departmental officials attend monthly site progress meetings • In addition the CFO and programme manager conduct random site visits on the progress of the contracts. • District Roads Engineers visit and inspect projects in their particular areas. • Professional Engineering Consultants on site monitor the projects. • The Department submits a detailed quarterly report to Provincial and National Treasuries, which captures the full details of the projects including the allocation for the year, the expenditure for the period in question and outputs achieved. • Specific reports are submitted on progress with respect to social indicators such as employment, BEE, local resources etc. • Monthly In-Year Monitoring reports are also submitted to the provincial treasury to monitor the expenditure. • SANRAL(SA National Roads Agency) implements 6 projects on behalf of the department in terms of a Service Level Agreement monitored by Departmental staff. Eastern Cape Department of Roads & Transport

12. Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence 10. EPWP SOCIAL INDICATORS Eastern Cape Department of Roads & Transport

13. 12. CHALLENGES Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence • Reduction of PIG allocation by R242 million from 1 April 07 and R918 million over the MTEF. • Acute shortage of road building materials . • Capex outweighs maintenance allocation. Currently Capex 56 % of total roads budget (R1,515 bill). • Lack of adequate funding for roads impacts negatively on delivery of a good Road Network and Transport Services. • Lack of Internal technical capacity due to scarce skills. Eastern Cape Department of Roads & Transport

14. CHALLENGES CONT • The departments budget increased by 11.71 % (R225m) from 06/07 (adjusted R2,0bn) to 07/08 (R2,2bn) in nominal terms. • The construction industry CPIX is however 24%. • Construction is the key cost driver in the department and therefore its budget has decreased in real terms as the increase of 11.71 % is below the industry CPIX of 24%. • The nominal increase should therefore have been R398m to compensate for the industry CPIX increase vs. the actual increase of R225m. • The department has therefore started the 2007/08 financial year with a deficit of R173m to fulfill its contractual obligations and has reduced the implementation of new projects. Eastern Cape Department of Roads & Transport

15. 13. Challenges (Cont) Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence • Long procurement cycle. • Many of the Access Roads are still impassable and inaccessible. • High Ratio of Gravel to Surfaced Roads (85:15). • Long Rainy Season. Eastern Cape Department of Roads & Transport

16. 14. Future budget trends: MTEF before reduction CG allocation Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Eastern Cape Department of Roads & Transport

17. 15. Future budget trends: MTEF before reduction CG allocation Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Eastern Cape Department of Roads & Transport

18. 16. Future budget trends:MTEF after reduction of CG allocation Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Eastern Cape Department of Roads & Transport

19. 17. Future budget trends: MTEF after reduction CG allocation Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence Eastern Cape Department of Roads & Transport

20. 18. BUDGET SUMMARY Eastern Cape Department of Roads & Transport

21. 19. Effect of PIG reduction Eastern Cape Department of Roads & Transport

22. 21. Impact of Infrastructure backlogs on MTEF Eastern Cape Department of Roads & Transport

23. 23. Estimated Cost of backlog Eastern Cape Department of Roads & Transport

24. Province of the EASTERN CAPE Department of Roads & Transport Quality service delivery through transportation excellence I thank you… “The Moving Link” Eastern Cape Department of Roads & Transport