Provincial equitable share allocations in South Africa

Type Working Paper - Centre of Policy Studies Working Paper
Title Provincial equitable share allocations in South Africa
Issue G-298
Publication (Day/Month/Year) 2020
The main source of income to the nine provinces in South Africa are grant transfers from the national government. Over 97 per cent of provincial income is from these transfers. The provincial equitable share (PES) formula is used to distribute nationally raised government revenue over the nine provinces. The formula composes of six components from which a weighted average is calculated. This weighted average is used to distribute national raised government revenue to the nine provinces. The purpose of this paper is to present the underlying theory and data describing the determination of the equitable share for each province (hereafter PES module). The PES module is an independent module that can be linked to the existing TERM-GPT model. TERM-GPT is a dynamic regional CGE model of South Africa with fiscal detail on a regional and national level. The current version of the TERM-GPT model treats national transfers to the provinces as determined outside the model. The PES module proposes a framework where these transfers from national government to the provinces are determined within TERM-GPT. Thus, changes in the underlying drivers of the PES module are linked to changes in variables determined in TERM-GPT.

Related studies