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Trends in the Gauteng Provincial Government’s Budget Allocations for Funding NPOs

Authors: Conrad Barberton and Jonathan Carter
Date: 2005-06-16

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The 2005 budget of the Gauteng Provincial Government saw a cut of 30 per cent in allocations to NPOs. NPOs play a vital role in the provision of social services, and are heavily dependent on government funding to provide reliable services to those in need of social assistance, so a cut in allocations was devastating to all affected NPOs. Cornerstone Economic Research was commissioned by the Gauteng Welfare Forum for Social Services – set up to represent the interests of those NPOs affected by the cut - to investigate the Gauteng Provincial Governments budget and thereby gain a better understanding of what led to the cut This report takes an in-depth look at the 2005 decision, and argues against the cut.

NPOs play a vital role in the delivery of core essential services. As shown below, NPOs provide the majority of services, since it is more cost effective for them to provide the services than for government to first build the capacity and then provide the services. It is argued that the Bill of Rights, enshrined in our constitution, is reason enough to make a strong case for the unconstitutionality of reducing allocations to NPOs.

Role of NPOs in service delivery

An analysis of the revenue and expenditure of Gauteng Province for the 2005 year provides a deeper understanding of the budget priorities of the province. It is made clear that a stated priority that does not receive a budget to follow through on the commitment is likely only prioritised to placate a specific constituency. Actual allocations, and tracking the trends of movement of funds, remain the best indicators of priority. Analysis indicates that funds are been allocated away from social services to economic development, which leads to a discussion that contrasts the investment in the Gautrain with the provision of social services.

Further analyses are conducted on the budgets of the provincial Department of Social Development, and specifically the growth of departments at the expense of NPOs, the trends of nominal and real cuts in provision made for the subsidisation of NPOs, and the exacerbation of shortfalls due to increased demand for services.

A comparison of budget priorities between provinces shows that the rate at which the budget share apportioned to social services in Gauteng diminished was far greater than that of other provinces. In fact, most of the other provinces showed constant trends at around 81–82 per cent of total allocation. Although the Gauteng allocation was initially higher at 84 per cent, the proposed reductions brought this down to 81 per cent, with indications that it would drop further.

When the affected NPOs sere surveyed, it was clear that the geographical areas that would bear the brunt of the cuts were those where the most needy reside, but where costs are greater and the potential for revenue lower. Further, the programmes most likely to face termination due to budget constraints are the costly, but highly effective campaign-based activities, such as those educating about HIV/Aids, drug abuse, and sexual and child abuse; a great loss of reach and impact.

The report goes on to argue that the decision to cut allocation is essentially unconstitutional, for a number of reasons. These include the fact that substantial reductions in the equitable share in the previous years, where provision was made on a higher level, ruled out the argument of budget insufficiency; surpluses were expected, and the budget showed allocations for a number of Special Projects, such as the Gautrain.

The observation is made that budget gaming, wherein provinces purposefully under-budget for critical services in favour of special projects in order to increase their overall budgets through a bail-out from the National Department, is still prevalent in provincial budgeting. Even as public awareness of provincial responsibility in service delivery grows, and National Treasury has adopted a firmer stance on bail-outs, this may always be a tactic whereby the National Government is the last resort in a crisis.