Billions of rand that could have been spent on service delivery has been surrendered by provinces to the National Treasury.
Finance minister Enoch Godongwana has disclosed that between 2020/21 and 2023/24, R22bn of the R480bn in conditional grants allocated to provinces was not spent.
Of this unspent amount, about R12bn was approved for rollover, while R10bn was surrendered to the National Revenue Fund (NRF).
Conditions are attached to the grants so that they are used to achieve specific policy objectives.
The largest surrenders were reported in Gauteng (R5.5bn), the Free State (R993m), Limpopo (R1.1bn) and the North West (R1bn). The health, roads and transport sectors accounted for more than half of the total amount, Godongwana said in a written reply to a parliamentary question by EFF leader Julius Malema.
“The surrenders would have affected a wide array of service delivery areas,” the minister said.
Health departments failed to spend R7.2bn over this period, with R3.4bn being surrendered and R3.8bn being approved for rollover, while the respective figures for roads and transport were R4.6bn, R2.4bn and R2.2bn, for education R3.7bn, R1.5bn and R2.2bn and human settlements R4.5bn, R1.7bn and R2.8bn.
The surrenders would have affected a wide array of service delivery areas.
— Finance minister Enoch Godongwana
In terms of the Division of Revenue Act, all unspent conditional grant funds at the end of a financial year must be surrendered to the NRF, unless the relevant provincial department can demonstrate that the unspent funds, or a portion thereof, are committed to identifiable projects. If the department cannot provide this proof, the funds must be returned to the NRF.
Godongwana noted that the surrenders in the agriculture sector would have negatively affected support to farmers and various projects such as irrigation systems, boreholes, poultry and piggery structures.
The surrenders of the early childhood development (ECD) and education infrastructure grants would have affected the maintenance of schools and ECD facilities.
“The surrenders on the HIV/Aids grant, health facility revitalisation grant and the national tertiary services grant were the largest surrenders over the period,” Godongwana said, adding that this would have affected the treatment of HIV/Aids patients with antiretrovirals, testing for HIV and tuberculosis, the maintenance, refurbishment and renovations of health facilities, and the acquisition of health technology.
Of the R3.3bn surrendered for health grants, 88% (R2.9bn) was attributable to Gauteng. It also returned R1.6bn of its road and transport grant.
Surrenders of human settlement grants would have negatively affected the delivery of service sites, the construction of housing units and the upgrading of informal settlements.
DA MP Wendy Alexander asked Godongwana in a separate question what the Treasury was doing to stop the “incompetence” involved in the surrender of conditional grants due to underspending and poor financial management, which she said held back the provision of essential services and economic growth.
Godongwana noted that over the past three years the amount surrendered had been decreasing, with R920m being surrendered by provinces in 2023/24, a marked improvement from the previous years. In 2020/21, R2.4bn was surrendered, followed by R3.3bn in 2021/22 and R3.4bn in 2022/23.
‘Persistent challenges’
“A dedicated review of conditional infrastructure grants is now under way to address persistent challenges in their design, implementation and performance. This review aims to streamline infrastructure grants, reduce duplication and ensure alignment with national priorities,” the minister said.
“It also seeks to embed infrastructure planning into the broader strategic and budgetary frameworks of provinces and municipalities, ensuring that grants are integrated into long-term development plans. The review focuses on improving the efficiency of grant spending by addressing issues such as poor planning, underspending, and misalignment with service delivery objectives.
“It also aims to strengthen monitoring and reporting mechanisms to ensure that infrastructure grants achieve intended outcomes.”
Godongwana said the Treasury closely monitored the spending of conditional grants and raised issues of non-performance with provinces and national departments.
“Provinces that are underperforming or not complying with the Division of Revenue Act provisions have had transfers of grants withheld in many instances. This incentivises provinces to improve on performance.
“In instances where there is no reasonable prospect of the province(s) improving, the National Treasury has stopped transfers to defaulting provinces and reallocated it to provinces that have proved sufficient capacity and plan to spend additional allocations. This ensures that the funds are not lost to the sector.”
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