THE Western Cape provincial treasury says it has enough money in its reserves and some cushioned into key departments’ budgets to deal with the cost of managing a Covid-19 second wave.
This was after concerns were raised by members of the provincial legislature budget committee on how much the provincial government was dipping into its revenue resources to offset the effects of budgets deficits.
Earlier in the week MEC for Finance and Economic Development David Maynier delivered the province’s medium term budget policy where he outlined how the province would streamline its resources to focus on key areas such as jobs, safety and wellbeing with R1.4 billion provided to drive this strategy.
Maynier said the province was expected to spend R71.3bn in the 2021/2022 financial year, R72.5bn in 2022/2023 and R73bn for 2023/2024. However, given budget cuts and allocations to the province from national government, the provincial government will be dipping into its reserve to make up the difference.
These drawdowns will see R1.089bn being allocated for the 2021/2022 financial year followed by R2.868bn in 2022/2023 and a further R3.762bn for 2023/2024.
“It’s only because the province was prudent in the past that we were able to lean in to support frontline departments in the fight against the pandemic, particularly education and health from immutable spending pressures,” said Maynier.
“The Western Cape government needs to respond to the resurgence of Covid-19. It is important to bear in mind that our first response will draw on existing resources which are ring-fenced in the budgets of frontline departments including health where R227 million is ring-fenced as a first response and R200m is ring-fenced for transport and public works. It is only if we exhaust those resources that we will consider dipping (further) into our provincial reserves.”
Head of Department for Treasury David Savage said another R800m is still available from the current financial year for use in case of additional financial strain from a second wave.
“We have built up a rainy day fund and right now it is not raining it is pouring so it would have been in vain if we had failed to deploy where it is most urgently needed,” he added.
“The positioning we have in place already in terms of a potential resurgence in this year is that there is already R427m in position and available on the votes of departments. We have the Brackengate field hospital that is operational and we have the resources to keep in operational. We already have our inventory around things like PPE, which we have built up aggressively and maintain things like gloves and masks that are required for our frontline workers.
“We have beyond that an additional R867m of reserves that we had for this year that we can still deploy. The question around whether this is sufficient for the second wave, in our discussion with the department of health we asked that question on more than one occasion and the answer we got was that it was sufficient for the projections.”
As the province is having to tighten its belt, revenue collected by different departments is expected to grow at an annual rate of 4.4% from R2.423bn in the 2020/2021 adjusted budget to R2.755bn in 2023/2024. This is money collected from motor vehicle licensing, hospital patient fees, casino and race horsing fees as well as liquor licensing fees.
And while the province’s municipalities have a consolidated budget that is larger than the provincial government with R66.9bn in operating expenditure and R12.9bn for capital expenditure, the impact of Covid-19 has placed their revenues under pressure.
This is more so for those municipalities whose financial health has taken a knock. According to the provincial treasury, seven out of the province’s 30 municipalities have shown financial distress and experienced liquidity and cash-flow challenges. And of these seven, three had failed to adopt funded budgets before the beginning of the current financial year.