CAPE TOWN — The Treasury has withdrawn R2,5bn in infrastructure grants from eight provinces because of their inability to spend the money in the 2010-11 financial year.

The unspent funds were 22% of the total R11,3bn grant allocation to provinces for infrastructure. The Treasury has also halted the payment of R453m of the R4bn hospital revitalisation grant.

The fact that the Western Cape — governed by the Democratic Alliance (DA) — was the only province that spent its entire infrastructure grant of R795m added fire power to the party’s election campaign, which is based on its claim to be able to deliver services more effectively.

The grant is targeted at the construction, maintenance, upgrading and rehabilitation of new and existing infrastructure in education, health, roads and agriculture.

Failure to spend the grants deprived residents of the benefits that could be derived from doing so, as well of jobs related to the projects. DA federal chairman James Selfe said the R2,5bn could have built about 30000 RDP houses.

Treasury spokeswoman Lindani Mbunyuza said the R2,5bn unspent on infrastructure would be "held in abeyance" until progress on projects caught up with the cash flows.

She said the Treasury had warned all nine provinces in January about their underspending on infrastructure and withheld the last transfer for 30 days pending implementation of corrective measures.

Only the Western Cape had implemented these measures, so its transfer was released. The Treasury stopped the final portion of the infrastructure grant to the eight other provinces.

In terms of a Treasury notice in the Government Gazette this week, the Eastern Cape lost R503m (25%) of its R2bn allocation; the Free State R391m (45%) of R869m; Gauteng R286m (30%) of R953m; KwaZulu- Natal R120m (5%) of R2,4bn; Limpopo R262m (15%) of R1,7bn; Mpumalanga R439m (45%) of R976m; the Northern Cape R275m (46%) R599m; and North West R195m (20%) of R973m.

Financial and Fiscal Commission acting chairman and CEO Bongani Khumalo explained that "challenges for provincial infrastructure delivery had been in the system for quite some time and stemmed from planning, project appraisal, financing and lack of option analysis in the delivery of infrastructure, including the lack of capacity in the delivery departments such as provincial public works".

"Challenges in supply chain management and procurement, including corruption, also contribute to sluggish expenditure and by implication delivery of quality projects."

He said underspending would always be a concern to the commission as the money could have been spent on projects that were sacrificed due to lack of resources.

The Treasury also stopped R50m of the R513m allocation to five provinces under the community library services grant. KwaZulu- Natal lost R111m of its R501m hospital revitalisation grant and the Northern Cape R125m of R420m.

Mr Selfe said that in 2009-10, 272 municipalities were given R8,7bn in municipal infrastructure grants but only R6,6bn (75%) was spent.

ensorl@bdfm.co.za

Source: Business Day