Adjusted Estimates of National Expenditure 2004

1. Adjusted Estimates of National Expenditure 2004 Presentation to Select Committee on Finance (NCOP) 12 November 2004

2. Elements of the Adjustments Budget The Adjustments Budget allows for adjustments due to: • Significant economic and financial events affecting fiscal targets • Unforeseeable and unavoidable expenditure • Emergency Situations (in terms of PFMA section 16) • Expenditure already announced in the Budget Speech • Shifting of funds between and within votes (in terms of section 42) • Virement between main divisions within votes (in terms of section 43) • Roll-over of unspent funds from the preceding financial year

3. Revised National Budget

4. Revised National Budget (cont)

5. Criteria used when assessing Unforeseen and Unavoidable Expenditure • Expenditure not known at the time of budget preparation and that can’t be financed from savings or reprioritisation • This does not include: • Expenditure that although known when finalising the estimates of expenditure, could not be accommodated within allocations; • Tariff adjustments and price increases; and • Extensions of existing services and the creation of new services that are not unforeseeable and unavoidable

6. Unforseen and unavoidable items Adjustments Municipal services and rates backlog R 599m PBMR R 500m Land Restitution R 200m Correctional Services retention/rural allowances R 20m Integrity of Social Grants System R 40m Restructuring of State Forestry Assets R 40m ICASA VAT payment R 45m DPW Prestige Accommodation R 43m

7. Other Adjustments • 1. Emergency Drought Relief - expenditure already announced (section 30) • Agriculture R100 m • DPLG R280 m • DWAF R 50m • 2. Pan African Parliament, NEPAD Secretariat & new SADC HQ funded through foreign exchange savings (R91.6 m adjustment) as utilisation of savings (section 43) • 3. Black Economic Empowerment allocation of R150 m to the National Empowerment Fund subject to approval of plans by respective minister(s) – expenditure already announced (section 30)

8. 2004/05 Adjustments for Provinces • Provincial adjustments of R4.11 billion for unforeseen and unavoidable expenditure • R 3,27 billion for shortfalls in social grants ( mainly disability grant) • R 847 million for increased personnel costs

9. Self Financing Expenditure • Seven departments indicated a total amount of R165,4 million in self-financing expenditure: • Foreign Affairs R 0.34 m • Public Service Administration R 1.0 m • Education R 14.6 m • Correctional Services R 0.90m • Defence R143.6 m • Water Affairs and Forestry R 1.0 m • Arts and Culture R 4.0 m

10. Underspending and Declared Savings • Four departments declared savings (R’million): • Defence R1 000 m • National Treasury R 86.4 m • Statistics South Africa R 13.5 m • Housing R 28.8 m • Total declared savings R1 128.7 m • Projected underspending: R 277.5 m • Total underspending and savings R1 406.2 m

11. Conclusion • Adjustments budget makes revisions to budget framework for emergencies, expenditure announced in budget speech, rollovers etc. • Other adjustments include provincial equitable share, NEF, drought relief • Adjustments are offset against contingency reserve, declared savings and projected underspending • The adjustments contribute to a slightly higher deficit of 3.2 per cent up from 3.1 per cent expected in February