Ron Watermeyer (Infrastructure Options)
Kevin Wall (CSIR)
Graham Pirie (Consulting Engineers South Africa)

Introduction
The inability of many South African municipalities and provincial governments to spend all of their capital budgets each year has for several years been a sore point with National Treasury. This under expenditure is especially disappointing in the face of estimated municipal investment requirement of the order of R 500 billion. The need is there, the money is available, and yet it is not spent.

National Treasury has stated that: “The reasons for municipal under spending on infrastructure are:
• unrealistic budget targets resulting in funding shortfalls, particularly due to low levels of funding from internally generated funds;
• inefficient supply-chain management;
• lack of capacity to plan and fulfil grant conditions.

The first and third of these reasons given by National Treasury are well-known enough. The authors of this paper investigated the second reason, “supply-chain management” (SCM). The investigation showed considerable variation from municipality to municipality in their ability to spend their capital budgets. Some departments managed in each recent financial year to spend of the order of 95%-plus of their budget. Others, each year, struggle to reach 50%.
This variation occurred in spite of the fact that all of the municipalities operate in terms of the same SCM regulations (National Treasury, 2005), issued in terms of the Municipal Finance Management Act. All have their share of contractors who fail to perform, and delay completion (and expenditure), and/or have to be replaced. Likewise, all have their share of projects that are reprioritised and budgets that are reallocated.The investigation revealed however that significant differences lie in the ways in which the SCM process is driven by the top managements of each municipality. A municipality’s programme for the expenditure of its capital budget can be significantly delayed if the SCM process is allowed to become too protracted. In the opinion of the authors, this, where it occurs, needs to be reined in. A strong case can be argued for the separation of the supply chain for the delivery and maintenance of infrastructure from the supply chain for all other kinds of goods and services.

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Technical Paper FULL