This report provides a detailed analysis of eThekwini’s capital expenditure in 2023/24Q2, including mid-year performance comparisons, quarterly and year-on-year analyses. The final section focuses on the expected economic impact of mid-year capital expenditure on the city's economy.
The City’s capital expenditure increased by 84.5% in the second quarter compared to Q1 2023/24, up from about R598 million to R1.1 billion. The 2023/24 midyear capital expenditure performance showed a slight increase of 1.2%, from R1.6 billion to R1.7 billion. The year-on-year comparison of the past two years indicated a significant increase, from R3.7 billion to R5.3 billion. This is a positive indicator of the City’s response to service delivery, infrastructure maintenance, and a broader economic recovery plan for the city. However, the decline in business confidence in the city during the fourth quarter, as reported by the Durban Business Confidence Index in 2024, is attributed to issues with service delivery and the quality of infrastructure, especially concerning water and sanitation.
Figure 1: Quarterly Capital Expenditure
Source: EThekwini Municipality Expenditure Unit, 2023
The year-to-date capital expenditure is 20.7% of the capital budget allocated for this fiscal year. The top eight spenders of the capital budget in the past two quarters are ranked as follows: sanitation, health& social services, engineering, transport authority, water, electricity, economic development & planning, and housing. However, in the second quarter, the sanitation department led with quarter-on-quarter weighted capital expenditure growth of 47.6%. Its top projects included alternative sanitation technology, the Canelands 3 rising main river, trunk sewer to drain retail, and Umlazi Y Section Avenue East sewer. Health & social services, was the next biggest spender in the second quarter with growth of 26.9%, followed by the engineering department, with 19.8% growth in capital expenditure. Its top projects included stormwater, roads, and maintenance. Next was the transport authority with 18.7%growth (top protects included the construction of Corridor 1, and the construction of Corridor 3). The water department recorded capital expenditure growth of 11.5%. Its big projects in 2023/24Q2 included the Southern Aqueduct 1220mm,the upgrade to the Mkhizwana treatment works, a temporary supply to Maphephetheni, an inlet main to Adams Mission 6 and Hazelmere WWTW to Grange Reservoir.
Table 1: Capital Expenditure per Department (Green- Highest Spenders in Q2)
Source: EThekwini Municipality Expenditure Unit, 2023
This section analyses the impact of capital expenditure on the city’s economy. Government expenditure is a critical indicator used to calculate GDP, employing the expenditure or demand method (GDP =Gross Fixed Capital Formation (GFCF) + Personal Consumption Expenditure (PCE) + Government Consumption Expenditure (GCE) + Net export).To evaluate the economic impact of the City’s capital expenditure as a proxy for government expenditure, the midyear capital expenditure of R1.7billionwill be used as an economic shock through the Social Accounting Matrix (SAM)model to simulate economic changes in GDP, employment, and household income in Durban. It also allows us to assess service delivery and infrastructure investment. The SAM model helps us to picture the flows of economic transactions inside an economy and to understand the repercussions on economic activities of any economic changes. These repercussions may have a bearing on the quantity and location of economic activity. The SAM evaluates the direct, indirect, induced, and total impact of capital expenditure. The anticipated economic impact results are as follows:
The expenditure can have a material economic impact provided that:
o Capital budget spending is on impactful projects
o Local materials and machinery are bought
o Local people are employed
o No delays in the SCM processes
o No development distraction from business forums
o No economic crisis would lead to the repurposing of budgets
o No corruption
o Greater spending of the capital budget
The pace of capital expenditure began picking up in the second quarter of 2023/24. However, expenditure remains a relatively low 20.7% of the planned capital budget, bearing in mind that we are halfway through the current fiscal year. It is vital that departments and those who oversee the capital budget need to produce proper plans for capital projects, including spending plans. This will improve the monitoring of capital spending and ensure capital spending is more consistent.
1. EThekwini Municipality Expenditure Unit, 2023: Section 71 Budget statement report for the month- https://www.durban.gov.za/pages/government/documents
2. Easy Data by Quantec, 2024; Regional Service Standardised Regional Household Income & Expenditure- https://www.easydata.co.za/dataset/RIES/
3. Easy Data by Quantec, 2024; Regional Service Standardised Regional Output & GVA at basic prices- https://www.easydata.co.za/dataset/RIES/
4. Conningarth Economists & Development Bank of South Africa, 2009; Social Accounting Matrix (SAM) for eThekwini, Manual Second Draft Final Report
5. Durban Chamber of Commerce and Industry, UKZN, Macro Economic Research Unit, eThekwini Municipality, produced Durban Business Confidence Index (BCI), Fourth Quarter 2023 Report.
Produced by The Durban EDGE Team of the
Policy, Strategy Innovation, and Research Department of
The Economic Development Unit of eThekwini Municipality
For more information, contact edge@durban.gov.za
Ref: Siphesihle.Thusi@durban.gov.za
Economic Research Advisor
Economic Information and Research
