Finance minister Trevor Manuel has been generous to the provinces, which have been given an extra R42,9bn over the next three years - on top of what was allocated to them in last year's budget.
This is the largest adjustment to the 2006 budget and means that provincial budgets will increase by a healthy 12% a year over the next three-year period.
In broad strokes, the division of revenue in the 2006 budget follows established patterns: provincial government, which has a low revenue-raising capacity of its own, gets 42,3% of the budget; and local government, which is expected to raise most of its own revenue, gets 6,3%.
More than half of the additional allocation to the provinces - R24bn - is destined for health and education in the provinces. In the case of health, the intention is to use the funds to recruit more health workers. In the education sphere, the additional allocation is targeted for the introduction of no-fee schools and for better, differential pay for maths and science teachers.
The revised provincial allocations also make allowances for "substantial growth in spending on rehabilitation and maintenance of roads, agricultural support for emerging farmers and bolstering provincial tourism", says the Budget review.
Though these are all standard areas of provincial spending, the 2006 budget has also introduced a new emphasis for provinces by vastly expanding what is described as "employment in community services" - with a separate budget allocation of R4bn. This is a variation of government's expanded public works programme and will provide payment to people who provide community services .
Provinces, despite lagging behind in capital spending over the past year - only 55% of capital budgets were spent by the end of the third quarter (see table) - have also been given additional resources for capital spending. An extra R3bn has been given for housing, for instance, and an additional R900m for hospital renovations.
This brings to R51,8bn the amount that provinces plan to spend on capital assets over the next three years. The Budget review points out that this is huge growth on trends of the early 2000s. Last year provinces spent 62,6% more on capital assets than they did in 2002/2003.
Local government also receives a sizeable additional allocation of R32,7bn over last year's three-year projected figures. However, much of this - R24bn - is a direct grant from national government in compensation for the scrapping of the RSC levy .
At local government there are two key spending priorities over the budget period: the first is services, especially the provision of free basic services; and the second is capacity building.
Of the additional funds that Manuel has sent the way of local government, R1,6bn is intended to "expedite the roll-out of free basic services". The remainder will be divided between infrastructure, public transport, electrification and water services projects.
The national treasury has also introduced a new grant for municipalities called the local neighbourhood development grant, which will target public-private partnerships to invest in infrastructure and community services in low-income residential areas. This could include relatively small projects such as bus shelters and could draw an increasing number of small and medium companies into such partnerships.
For bigger infrastructure projects at municipal level, the increases are modest. The municipal infrastructure grant (MIG), which is the main channel for infrastructure funds from national to local government, increases by only R800m over the next three years.
The modest increases are an indication that local government spending is running at full capacity and that the priority is to raise capacity levels before increasing spending much further.
The Budget review describes building local government administrative capacity as a "critical priority".
Local government will get several capacity-building grants - R749m this year - and there are plans for an extensive training drive as well as the recruitment of skilled expertise. Whether government grants and the provision of skilled managers will be sufficient to get the weakest municipalities on their feet remains an open question.
Manuel said the division of revenue, which gave local government only 6,3% of the budget, was based on the assumption that local government would always be in a strong position to raise its own revenue. However, the experience of raising revenue had been "patchy", he said. The fact that national government had decided to step in and fund metros after scrapping the RSC levy was an indication that the treasury was giving the problem of revenue-raising by municipalities some thought.
But Manuel said he was also reluctant to give municipalities an easy way out if they had not done all they could to collect the revenue due to them.
"We don't want to provide an easy cop-out so that municipalities don't have to distinguish between cases of genuine hardship and incompetence of their staff," he said.
