Division of Revenue Amendment Bill: SALGA and COSATU input

Meeting report

The Chairperson said the Committee would be meeting with the South African Local Government Association (SALGA) and the Congress of South African Trade Unions (COSATU) to deliberate on the Division of Revenue Amendment Bill.

The Committee was meeting SALGA at an opportune time, following the local government elections, and starting a new term. The engagement would ensure that money appropriated by Parliament would be effectively used for service delivery to the people, and avoid unnecessary leakages.

SALGA on Division of Revenue Amendment Bill

Mr Bongani Baloyi, SALGA National Executive Committee (NEC) member, said that although he was no longer a councillor, he was still representing SALGA because the constitution did not allow for a void in leadership in preparation for the incoming NEC and SALGA leadership appointments. SALGA was excited that municipalities had reconvened to carry out their work.

Mr Nceba Mqoqi, SALGA Chief Financial Officer (CFO), gave the presentation on SALGA’s response to the Mid-Term Budget Policy Statement (MTBPS) and the Division of Revenue Bill.

Organised local government welcomed the increase of R0.7 billion (0.2%), to R295.2 billion, in the allocation to the local sphere of government for the 2022/23 to 2023/24 medium term expenditure framework (MTEF) period. This was based on a comparison of the 2021 MTBPS with the budget in February 2021. There was an overall reduction in the local government allocation per the 2021 MTBPS versus the 2021budget, but despite the reductions, SALGA acknowledged the tough economic outlook and limited fiscal space that was exacerbated by the negative impact of Covid-19 on the economy.

The Infrastructure Fund was an important intervention towards the strategic goal of ensuring that total investment in public infrastructure was near 30% of gross fixed capital formulation by 2030, as envisioned in the National Development Plan (NDP). SALGA would work with the Infrastructure Fund to access funding. Project preparation remained a key impeding capability and a bottleneck to municipalities channelling more projects through the funding pipeline. National Treasury (NT) project preparation facility should ideally have been made available to more municipalities. SALGA planned to engage with the Development Bank of Southern Africa's (DBSA's) project preparation office to establish ways to support municipalities.

COVID-19 had exacerbated the South African economic crisis, particularly hitting social spending. This called for structural reforms on public finances by exercising restraint and prudent financial management. The South African economy grew faster than expected in the first half of 2021, but this momentum was expected to wane following the public violence in July, port and rail disruptions, and the third wave of COVID-19 infection. In line with government’s commitment to support vulnerable households, particularly given the impact of COVID-19, additional resources for social protection needed to be considered if the fiscal situation improves by February 2022.

In view of these factors, SALGA supported the Division of Revenue Bill.

Discussion

Mr O Mathafa (ANC) thanked Mr Baloyi for the role he had played in local government, and wished him well in the future. The presentation was empowering. The previous day, the Committee had had deliberations with other stakeholders on the same reports, and the main issues that came out were the lack of capacity in municipalities to execute their mandate to manage finances prudently, deliver quality service, enhance local economic development, and provide effective oversight. SALGA and National Treasury had joint programmes aimed at capacity building for local government.

Why was the problem of lack of capacity still persistent? One of the issues could be that the programmes are not fit for purpose or relevant to prevailing circumstances. The Committee expected to see improvements. Since SALGA was a composition of various municipalities, what was the consultative process to ensure that the programmes were received by all stakeholders and members of SALGA?

Another unfair development affecting voters who had expectations from local government was the lack of spending of grants. The grants were specific for particular programmes, which were core needs of communities. What efforts did SALGA make to ensure that their members spent accordingly and prudently?

On the internal operations of local government, there was a requirement for bulk suppliers to be paid on time, and for invoices -- especially of small, medium and micro enterprises (SMMEs) -- to be paid within 30 days. This was not happening. What was SALGA’s role in this? Were there programmes that could be employed for SALGA to intervene with their members?

The outcomes of the local government elections presented the challenge of many coalitions in the country. What was SALGA’s view on the likelihood of the coalitions persisting, and how would this impact service delivery? Coming from Tshwane, he no longer knew what service delivery meant, because for the past five years, the EFF and DA coalition kept collapsing at the drop of hat. There was now a similar situation which would affect municipalities nationally. How was SALGA readying itself to deal with the issues, given that the DA, which was leading party in many metros, did not recognise SALGA? How would the interface be done so that the coalitions were responsive to the interventions of SALGA?

Mr Z Mlenzana (ANC) wished Mr Baloyi well, as he had been a pillar of assistance to the Committee. Could SALGA talk on the repurposing of the Municipal Systems Improvement Grant (MSIG) to the District Development Model (DDM) programme? What was SALGA’s position on this proposition from National Treasury (NT)? How would this streamline and improve capacity building of the local government sector, considering the deteriorating audit outcomes? He was passionate about audit outcomes, and Mr Mathafa had talked about incapacity within municipalities, where they were unable to fulfil their financial responsibilities. From the Auditor-General's (AG’s) reports, most municipalities had overreliance on external financial consultants. How was SALGA mitigating this challenge? What specific actions was SALGA proposing to deal with the problem of incapacity in municipalities? Otherwise, the challenges would be perpetual.

Local businesses were threatening to relocate from some municipalities because of a lack of service delivery. How was SALGA engaging with the municipalities so that they support local economic development and avoid disinvestment which would result in job losses? How were municipalities capacitated to ensure that they created an environment conducive for investment, the creation of local industries, and support for job creation?

Ms N Hlonyana (EFF) said the EFF was never in a coalition with any party. The problems of the DA should not be blamed on EFF.

Mr Mlenzana responded that the EFF had marriages with the DA.

Ms Hlonyana asked the Chairperson to protection.

The Chairperson asked Ms Hlonyana to continue.

Ms Hlonyana asked about the projections presented for a fiscal surplus in 2024/25. Did SALGA think the projections were realistic, or was it just wishful thinking from the ANC government? Local government was the most important sphere of government, and the role of SALGA was to ensure that municipalities delivered to the poorest of the poor. What was SALGA doing to monitor? What interventions were in place to ensure that things happen? There were challenges of water supplies, and refuse not being collected. There had been a collapse. What would SALGA do to assist municipalities? SALGA was not created for ANC-led municipalities, and now that the ANC would be on the opposition benches of local governments, SALGA needed to understand the change and adapt. The training of councillors needed to be of high quality. One of the challenges was that councillors would be in office for five years without an understanding of how a council is run. Educational programmes needed to be designed effectively, not just for them to get a certificate at the end.

Mr X Qayiso (ANC) said he wanted to reflect on what had been said by SALGA during the 2020 Division of Revenue Act (DoRA). At the time, SALGA had raised the issue of technical capacity, and managerial and leadership challenges. Had this been addressed? The performance of many municipalities was poor and had resulted in collapse. The use of consultants in many municipalities proved that they had not reached the required level of technical and managerial leadership.

Lack of spending was perpetual. This was a major problem, and was worse in municipalities, and was the biggest enemy of the Committee. Lack of spending led to poor service delivery, and hence the protests and unnecessary inconvenience for the people who should have received services. To what extent was SALGA assisting in this matter? There was no consequence management for the lack of spending.

A turnaround strategy document was produced around 1998 by the former Minister, the late Sicelo Shiceka. That document was still being used as a model to fund local municipalities. Because of the lack of spending, there must be a new and revised strategy to look holistically at municipal funding, since there are different forms of revenue. The review should fitting, and be well integrated into the DDM.

Mr Mlenzana asked about the Infrastructure Fund. The understanding was that SALGA aimed to target the refurbishment of existing infrastructure through this fund. Should municipalities not fund the maintenance of their own infrastructure from their budgets, since they were able to raise their own revenue?

Mr Qayiso said Ms Hlonyana did not need to worry whether the ANC was in the opposition, because SALGA was the ANC’s baby. Ms Hlonyana knew what had been done in Metsimaholo (where the EFF had asked its mayor to step down) and QwaQwa. The ANC knew what to do.

The Chairperson asked Members to hold their fire, as there would be a debate on Tuesday where they could have an opportunity.

He thanked Mr Baloyi for the work done by SALGA in interacting with the Committee.

He asked what the oversight mechanism of SALGA as a primary responsibility was. If there had been proper oversight mechanism, there would have been recognition of primary services that were not being performed, even before the public complaints. The Committee was interested in ensuring that people in municipalities received services, since a majority were the poorest of the poor. When the Committee appropriated money to local government, there was no consideration of the political party which was in charge there, so Members were concerned at the lack of service delivery and wastage of money.

In the last financial year, about R1 billion was spent on consultants. It was worrying to hear SALGA say they had called for skills audit. A skills audit was not necessary, as it was obvious that there were no adequate financial skills. The consultants were engaged mainly to prepare annual financial statements. That meant the horse had already bolted. Financial skills were needed from the start of the financial year to ensure that there were proper plans, accountability, and ensuring that policies were followed from the beginning of the financial year. The audit was the after-effect. What was SALGA doing about this? There was no need to get a consultant to decide how to kill a snake. The snake must be killed. The problem was known. What was SALGA doing to ensure that there were skills?

Which grants were being perennially under-spent? What was the problem? What could be done to deal with that?

Members welcomed the progress in ensuring a security of energy supply. However, there were many other things to be considered by municipalities in order to retain businesses and attracting new investment. For the economy to grow, investments were necessary.

In the submission by the NT, Members noted the repurposing of the Municipal Systems Improvement Grant (MSIG) to the DDM. What was SALGA’s position on this?

Slide 18 referred to the commitment of SALGA to enhance accountability for the resources allocated to local government. What did SALGA mean by this?

A significant number of municipalities were being placed under SALGA administration. How was SALGA supporting municipalities to reform and acquire skills and human capital to ensure effective service delivery so that the local government sector continues to work towards the strategic development goals (SDGs)?

How was SALGA partnering with local corporate firms and interacting with the Presidential Youth Employment Initiative to create new jobs and stimulate economic activities in a well-defined economic zone.

The questions being raised by the Members were the Committee responding to some of the shortcomings identified.

SALGA had said they were committed to work with the Infrastructure Fund to support municipalities to develop feasible and bankable infrastructure plans to access funding. This was welcome. It was their previous the inaction that had led to municipalities like Msunduzi, Mbombela and Buffalo City to be suspended from the Integrated Public Transport Network (IPTN) grant. This grant had not been effectively used and was suspended. The obvious consequences were no investment, no growth of those economies, and a loss of jobs.

SALGA's response

Mr Baloyi thanked Members for the questions. He said there was a perception of linking SALGA directly to the executive in the relevant municipalities. There was a need to differentiate in order to have a solid understanding of what SALGA does -- who the relevant executives in local authorities were, and where accountability and monitoring rested. Part of the questions had the implication that SALGA had to physically do the work in municipalities by responding to all the challenges. However, the accountability ought to extend to the relevant executives. There was no part of the Municipal Finance Management Act (MFMA) which says a municipality must communicate to SALGA within 30 days after a quote, but it says something about the Ministry of Finance and Ministry of Cooperative Governance and Traditional Affairs (CoGTA). Some of the questions needed to be asked to those ministries and departments.

Referring to what SALGA was doing about the lack of capacity in municipal finance departments, he said SALGA had an annual performance plan that was approved, where there was a predetermined target for capacity building on skills shortages. There were also targets on strategic partnerships with institutions that could assist local government with some of the capacities. Often the challenge was that when capacity building was provided, there was an assumption that the officials in those positions met the necessary academic requirements and experience. There was often a lack of these in the municipalities. The question should be “Who was employing these people?”

He said he did not share the view that there was a shortage of financial skills, because this could not be proven. However, it was because people who were not suitably qualified were appointed, probably as a concerted approach to weaken the governance in an attempt to engage consultants. It was not a mistake that in that same year that R1 billion was spent on consultants, there was R1 billion as material misstatements at the same municipalities. Another important question to be asked was about the Municipal Manager, who must ensure that the relevant requirements for positions were met, and that there was no political interference. There was criminal behaviour, because people who were appointed were not doing what they should do. They then give the work to consultants, who also did not do a good job, since the work resulted in financial misstatements.

The question on SALGA enhancing accountability needed to be understood within a context. SALGA was an association of local governments. The member municipalities had their relevant executives who must provide strategic direction and oversight within the confines of the law. According to the MFMA, they must report directly to the Member of the Executive Council (MEC) on Cooperative Governance and the MEC on Finance, as well as the Minister. That was the correct accountability flow according to the legal framework. As such, SALGA was not mandated to monitor direct performance. SALGA was there to represent and lobby for the sector. SALGA represented the sector, but was not the relevant authority in those municipalities.

The response on why grants were under-spent required an understanding of the spending of a capital grant. A specification was supposed to be drafted by an official. At times the specification was not drafted correctly, or it could be drafted to favour a particular company. The draft specification was then taken to the internal committee for consideration to allow it to continue, or to be referred back. This happened after approval of a new budget, and the process took one to four weeks. Where the response from the internal committee was to proceed, it then went out for advertising, and this could take 30 days. After the closing of the advert, there was evaluation which took one to three weeks. Finally, there was the adjudication, also taking one to three weeks. This timeframe meant the first quarter was out. As such, the question of under-spending was complex, because it was related to the value chain. After adjudication and appointment of a successful service provider, there was then the initiation of the project in the community. There was also the local stage of the project, to identify who must be appointed and how. At times, this could get political and create community unrest, which could frustrate the process. SALGA assists in drafting the specifications and capacity to ensure that Municipalities understand what must happen.

There were competing requirements and priorities in the municipalities. These could be in infrastructure -- linked to water, sewerage or electricity. With the rate of growth of the population and what could be done with the funds available, it could be only one or two projects. It was not possible to fix the entire system, only a patch-up could be done. A grant was received from National Government to build infrastructure, but there were no subsequent grants for refurbishing. All services needed to be delivered within the affordability of the residents, which becomes a strain. The revenue sources and balance sheet of municipalities did not allow investment to ensure that there could be consistency and reliability of services so that local business communities could be assured to stay. This had led to the deterioration of services and infrastructure. Rural municipalities did not have a sufficient revenue base to be sustainable. They could not use their limited revenue to invest in their own infrastructure.

On the turnaround strategy, the presentation had referred to the White Paper on Local Government, the founding document for local government and its assumptions and funding. The document had not been reviewed for years, although it had been noted to have weaknesses. A process had started with Treasury and CoGTA to begin reviewing some of the items.

Did SALGA believe that there would be a fiscal surplus by 2024, as presented? This information had been taken from the Minister’s speech, and SALGA had no reason to doubt it, given what had been seen in the trends and performance in the economy. Although there could be challenges resulting from the winter protests, it would hopefully be achieved. There would probably be an acceleration of spending in the private sector on infrastructure.

Mr Baloyi responded on how SALGA monitored the performance of municipalities, and emphasised that some ministries and departments in municipalities got away with being complacent. The law stipulated what reports should be tabled, to whom, and by when. As such, if things were not happening through the monthly reports, they must respond with mechanisms put in place for mitigation.

SALGA was apolitical. For example in Gauteng, the Provincial Executive Council (PEC) and MEC included various political parties. It was a stable institution which had been at the forefront of speaking to various ministries, including CoGTA, with key engagements on what should be done should there be coalitions across the country. This had led to a guide document that SALGA had put out on how to navigate coalitions and agreements. SALGA would carry out further engagements with ministries and departments. This was its resolution to sensitise political parties on its work, and how they could derive value from SALGA. It believed that its mandate in advocacy for local government must not just stop at engaging with a particular portfolio committee, but must go to members in their political parties to better lobby for local government positions across the board.

On how SALGA would improve audit outcomes related to skills capacity, he said various municipalities had committees that did different things, including audit committees. It assisted with capacity for audit committees. Although SALGA could capacitate the leadership of municipalities, Members needed to appreciate that it was experiencing serious challenges with the leadership of some of them. SALGA did not elect of propose members to be Councillors. All this happened within political parties. There needed to be a conversation about the quality and standard of people put forward as candidates. Public representatives came from political parties, and it jeopardised the work if an individual did not have a level academic knowledge or work experience. An individual without financial knowledge could not be given oversight over a R1.3 billon institution and interrogate financial statements. That weakened the process and was ultimately the start of the rotting of the fish from the head, since the leadership could not deal with the complex environment and give strategic direction and raise other responsibilities according to the law. As such, institutions and governance were weakened, which was manifested in increased fruitless and wasteful expenditure, and the appointment of inappropriate people.

SALGA’s view on the stability of the coalitions was that it was happy that councils had been established, and that executive had been elected. It was hoped that coalitions would be stable to allow for service delivery to residents. SALGA had called on political parties to prioritise residents. As earlier noted, it had put together a guideline on coalitions and was in the process of lobbying relevant players to utilise them. The hope was that the MECs for Local Government and the Minister of Cooperative Governance would ensure that municipalities constituted their councils and were able to take decisions for the improvement of communities. This reality would have to be lived with for the next five years. As a maturing democracy, mechanisms needed to be found to ensure that while there may be political disagreements within the coalitions, the work of local government must continue without instability.

SALGA viewed invoices not paid on time as a grave challenge within municipalities. It had set up various revenue collection strategies focusing on mitigating electricity and water losses, as well as to ensure that collection was done as much as possible. However, the execution of these strategies was different. It ultimately affected their ability to pay for bulk services and suppliers.

The Chairperson said Mr Baloyi’s responses had clarified some concerns. SALGA had stated it lobbied for its members, but it needed to be in SALGA’s interest to ensure that the house of those being lobbied for was in order. Mr Baloyi had given an outline of the procurement process, particularly for infrastructure. However, that did not happen only at the local government level. All government spheres went through the same process. If SALGA’s explanation was to be accepted, it would mean accepting that under-spending would be perpetual in local government.

Mr Mqoqi responded to the question on economic development and attracting investment. SALGA’s National Working Group on Trade and Investment signed off municipal investment guidelines developed by SALGA which provided practical guidelines on how to develop an investment promotion strategy, with accompanying marketing material. This was to develop and implement investor targeting and policy advocacy programmes within a framework of effective investment facilitation. The guidelines provide a toolkit based on best practice, to enable municipalities to undertake investment promotion and facilitation effectively, to assist them to promote themselves as investment destinations, to provide strategies for them to retain businesses and a conducive environment for businesses to expand. The toolkit targets small and medium size municipalities and those with limited resources and expenditure. The guidelines were being piloted in 16 municipalities. This also responds to Mr Mlenzana’s question on relocation of business due to poor service delivery. With this effort, SALGA was engaging municipalities to avoid the flight of business. SALGA had also commissioned the Municipalities Competitiveness Index, which aims to identify investment push and pull factors in municipalities. They would be ranked according to strengths and weaknesses, with recommendations made to tackle the weaknesses.

SALGA’s Economic Development Unit was in discussion with the African Export-Import Bank (Afreximbank), based in Egypt, to host a municipal dialogue on the Africa Continental Free Trade Area in 2022. The aim was to expose Special Economic Zones (SEZs) and municipalities to export markets in Africa, where intra-trade was currently at 18%. Companies located in SEZs and municipalities would begin to get opportunities elsewhere in Africa, to increase production and employment. SALGA was working.

To ensure that there was economic employment, SALGA was interfacing with businesses and was in the process of concluding Memoranda of Understanding (MOUs) with the Small Business Institute (SBI), a non-profit organisation instituted to influence positive policy for SMMEs and promote the economy and business interests of its members. The SBI continually lobbied the government to consider and support the sustainability of SMMEs in legislation, regulations, procurement and other policies. South African SMMEs contribute approximately 30% to the country’s GDP, with the potential to absorb 70% to 80% of people into employment. The importance of SMMEs could not be overemphasised, considering the current economic challenges. Another MOU had been concluded with Consulting Engineers South Africa (CESA), with both parties recognising the challenges that needed to be addressed before the country could reach its infrastructure goals, stimulate economic growth, and promote employment.

SALGA had had to identify key institutional and environmental challenges that had led to poor infrastructure grant expenditure. Part of what had been identified was the inability to secure approval for applications, lack of planning, lack of suitability in project managers, procurement processes taking too long, contractors with cash flow problems, community protests, and incidences of gun violence resulting in site shutdowns, which resulted in slow progress. It was also found that spending patterns for capital projects did not adopt a linear approach, as was often expected.  It followed a "hockey stick" approach, starting low, with the bulk of the expenditure -- about two thirds -- rising in the last two quarters. SALGA had therefore developed a long-term plan to address infrastructure grant expenditure challenges. In the short-term, there was capacity building on developing project pipelines, establishing professional resource teams, and researching alternative capital expenditure monitoring approaches. In the medium-term, it was advocating for reforms in indicators of capital expenditure monitoring, since cash flow was not linear as indicated in the grant framework of 25%, 50%, 75% and 100% spread across the quarters. In the long-term, it was advocating for policy reforms on the adjustment budget process, supply chain management (SCM), and planning.

Ms Khomotso Letsatsi, Chief Officer: Municipal Finance, Fiscal Policy & Economic Growth, SALGA responded to the issue of the MSIG. The MTBPS was diverting grants targeted towards local government for capacity building, from Schedule 5 to Schedule 6, and to national government. SALGA had observed this with much concern and had raised it with NT and CoGTA on the practice, and it being set as a precedent.  However, the MTBPS had been adopted despite the concerns raised. SALGA was part of the process, beginning from the technical budget forum to the budget forum, engaging robustly around changes in conditional grants. Major risks in diverting funds from local government were also identified, hence SALGA’s position.

On project preparation, there was a facility at NT, and the George Municipality had benefited from this. The issues that came through regarding the selection process were about the quality of submissions. Some municipalities failed to gain approval because of poorly prepared applications. SALGA was therefore partnering with the Infrastructure Fund and the Department of Public Service and Administration (DPSA) to build project preparation capacity within local government. This was also a resolution of the Budget Forum.

On capacity influencing infrastructure performance, papers were developed with NT and CoGTA, where SALGA led on the infrastructure paper and asset management. Recommendations were adopted through the budget forum, with work streams to follow through on the recommendations. With the concern on repairs and maintenance, the infrastructure backlog and building capacity were addressed on providing support for municipalities and the coordination of programmes.

Mr Baloyi welcomed the input from Members on issues of accountability and transparency, to ensure the functioning of local government. These conversations needed to continue. He thanked the SALGA team and appreciated the relationship with the Committee. He appreciated the warm wishes and said until the new NEC was elected, he would still be available if called on by the Committee.

The Chairperson said he hoped local government would not lose some of the skills created, since it was an investment. In the next term, the Committee should have a way of interacting with the NEC to hear what oversight they play in relation to the issues raised on capacity.

COSATU briefing on MTBPS Division of Revenue Amendment Bill

Mr Matthew Parks, Parliamentary Coordinator: COSATU, presented COSATU’s submission on the MTBPS Division of Revenue Amendment Bill.

He said this was the deepest recession in a century and the economy was badly in need of stimuli. There was a 44% -- and rising -- level of unemployment, with millions dependent on state for relief and grants. The budget was silent on need for a mass stimulus plan. There was a focus on budget cuts through wage bill freeze and across the board departmental budget cuts. COSATU proposed a mass stimulus programme to kickstart the economy, particularly in key growth sectors, including funding from the development finance institutions (DFIs) and the private sector.

Regarding the public wage bill, COSATU proposed respect for the collective bargaining process, and engaging bargaining councils on matters like the wage bill and honouring agreements; the establishment of a single collective bargaining and wage regime for the entire state, including state-owned entities (SOEs); wage caps for senior managers in SOEs; and a 25% package and headcount cut for executive office bearers and senior management across the state.

COSATU welcomed the R11 billion for the Presidential Employment Stimulus Programme (PESP) creating over 550 000 jobs and providing young people with a salary and experience. It proposed that this be expanded further over the MTEF period.

On basic education, COSATU was concerned with the inability to allocate R149 million, when thousands of schools still lacked adequate sanitation.  It proposed that a clear and realistic plan be tabled by Department of Basic Education (DBE) in Parliament to ensure all schools had access to decent water and sanitation by the end of 2022.

On social development, COSATU worried about impact of cuts over the next three years to social security by 16.9%, with the potential ending of the Covid-19 social relief of distress (SRD) R350 grant. COSATU proposed reversing the cuts to the South African Social Security Agency (SASSA) that would end the Covid-19 SRD allocations to SASSA. This needed to be extended and increased to deal with food poverty line challenges.

On local government, COSATU was concerned about the Auditor General's (AG’s) reports on the dysfunctionality of countless municipalities, yet the MTBPS provided no hints on the Government’s plans to fix this. A rollover of R582 million by the eMfuleni Municipality for the Vaal River infrastructure programme was worrying, as it had been dragging on for years. COSATU proposed clear stabilisation, recovery and repositioning plans for embattled municipalities, and a road map to move towards the District Development Model.

To address corruption and wasteful expenditure, COSATU proposed an extension of the ban on Ministers doing business with the state to office bearers of ruling parties, as well as their spouses and children, and increased appropriations for tackling corruption for the National Prosecuting Authority (NPA), South African Police Service (SAPS) and the courts.

COSATU proposed an acceleration of measures to enable the stabilisation, recovery and repositioning of plans for embattled SOEs, including jobs plans for workers at risk.  and re-tabling The Road Accident Fund (RAF) and Road Accident Benefit Scheme (RABS) bills should be re-tabled in Parliament in 2022.

Workers and voters were losing faith in the government’s policies and commitments. ANC and the government needed to wake up fast, as they were running out of time

Discussion

Mr Mathafa said the COSATU presentation showed that they had taken the effort to scrutinise the reports from the executive. They had affirmed the Presidential Employment Initiative -- were they of the view that the current interventions were coordinated in a manner that drove the agenda in the same direction, and were they complementary? Lately, there had been many initiatives from the Presidency, including the employment initiatives and infrastructure development plan aimed at reviving the economy. Slide 9 referred to the provision of decent water and sanitation to schools in 2022. A challenge had been noted in several grants, especially the School Infrastructure Grant, which was established to eradicate service delivery challenges in schools in relation to infrastructure, the biggest challenge being water and sanitation, yet there had been under-spending of the grant. Was there any feedback on the bottlenecks from affiliate unions operating in that space? It was a concern to the Committee that money and resources were made available to improve infrastructure at schools, yet the funds ended up being under-spent, misspent, or returned to NT. How best could the grant be utilised? Where were the challenges?

Mr Qayiso said COSATU proposed bargaining as a way of addressing wage bill challenges. There were disparities in wages between SOEs and the rest of the public sector. There needed to be bargaining to narrow that gap. There were also high levels of corruption around issues involving SOEs.

The Committee had previously raised the issue of a R350 grant to mitigate poverty, and the government had implemented it. Despite the alarming unemployment at 44%, the grants had been helpful, since it was uncertain when the pandemic, and the growing unemployment, would end. There should be consideration to extend it beyond March 2022. It needed to be planned in advance, and not wait for a crisis to occur. Unemployment was doubling, and the macro-economic outlook was bleak. Something needed to be done to absorb the pressures faced by the poor. COSATU had said the MTBPS was contributing towards a collapse of municipal services. It may not be only the MTBPS, as there were a wide range of issues. Why had COSATU said that it was only the MTBPS that was responsible?

Ms Hlonyana thanked COSATU for the well-researched presentation. She agreed with Mr Parks on the need to reduce money spent on the executive. The Ministerial Handbook needed to be revised. The earnings and benefits of ministers were ridiculous, and made no sense since they already earned so much money. That money could be redirected to areas that were lacking. The Cabinet was bloated, and the EFF had been calling for the scraping of Deputy Ministers, since there were Directors- General (DGs) within departments.

There were a lot of leakages in public procurement, as procedures were not followed and money was lost.

The voter turnout should be a concern to all political parties and organisations, because it showed that the citizens were tired and no longer believed in the voting system. Many people had died to create the opportunity to vote, and a vote should be taken as seriously as religion. There needed to be consideration on what needed to be done to restore people’s confidence in the voting system.

On a lighter note, she said COSATU did not need to remain in an abusive relationship in the tripartite alliance. The governing party was not able to pay its own workers, so how could it pay workers representing COSATU.

The Chairperson said COSATU needed to be careful with the advice.

Mr Mlenzana said COSATU had a responsibility in the tripartite alliance to check if the national democratic revolution relating to the Presidential functions was still on track, while focusing on economic transformation. Was the budget looking into the developmental state? Was there still commitment to the advancement of social transformation?

What was COSATU’s view on rollovers, particularly the R582 million by eMfuleni Municipality for the Vaal River infrastructure programme?

While he wished to avoid making allegations, what was COSATU’s view about the performance of the Chief Procurement Officer regarding centralising the procurement of large-scale items?

Mr Qayiso asked what COSATU’s view was on under-spending. Under-spending disadvantaged service delivery, since some departments made requests for additional funds, but ended up returning the money. Had COSATU picked this up?

Mr Mlenzana asked COSATU’s view on the way money was spent, compared to the impact it achieved. There were departments and provinces in the Western Cape who would rather sacrifice the poor masses so that they were not seen to have under-spent. Was COSATU able to pick up such discrepancies?

The Chairperson said during the engagement with SALGA earlier in the meeting, matters were raised about the malfunctioning of local government. SALGA had said they were there to help, but the bulk of the challenge was with the officials and politicians at the municipalities, and NECs for local government in the different provinces. A lot had been raised, especially arising from the outcomes of the Auditor General’s report. Did COSATU interact with provincial legislators and the NECs responsible for local government. The Committee had decided to have sessions with MEC’s for Local Government as a way of improving oversight, but the primary oversight was with the provincial legislators.

Responses from COSATU

Mr Parks said the questions from Members were helpful, and showed that the Committee and COSATU were singing from one hymn book on the need to rebuild government and the economy, and save South Africa. Issues would be addressed better with a common understanding, irrespective of the colour of the T-shirts.

There had been good reviews from the unions on the Presidential Employment Initiative. However, at times there was no sense of coordination in government. The Minister of Finance’s speech referred to the need for releasing the digital spectrum. This was mentioned every year, yet it was not happening. There were engagements with the government about water licensing. The President would give a very good outline, but there was no sense of speed from the ministers, departments, premiers or mayors.

While there was an Economic Recovery and Reconstruction Plan (ERRP), there was slow action on implementation. Some of the delays were explicable, since officials and DGs were not held to account for failure. There was silence from the government on critical matters. The Passenger Rail Agency of South Africa (PRASA) was allowed to be destroyed in the last two years. An informal area was built at the Langa station in Cape Town, but nothing was done. That one station meant that trains could not get to other areas, which costs billions of rands. There was still some positive work being done by government, but at times that good news did not seem to give a sense of positive news to the public and investors. For instance, when the NT made a good announcement about designating cement for public infrastructure to be locally produced, no announcement was made by the Government. It was COSATU that applauded the plan in its effort to boost the local manufacturing industry. It was good for society to have some good news, as that would help in rebuilding society.

The School Infrastructure Grant issue had been raised by the South African Teachers Union (SATU), and it had been raised across party lines. However, it was unbelievable that the can had been kicked down the road since former President Thabo Mbeki’s time. There was a need to ensure that all schools had decent sanitation. It was inexplicable in a society where a world class soccer world cup was hosted in 2010, that simple toilets could not be delivered. It was to do with management failure, lack of capacity, and a lack of political will. The Minister, the DG and the provincial MECs needed to be held to account. There were worrying reports of corruptions in school projects, including a ghost school built in the Eastern Cape at some point. South Africa was a modern industrial economy, yet young girls were relieving themselves in the bush. 

COSATU had been raising the need for a single collective bargaining process for the state, as it would be a win-win situation to help protect workers from inflation. It would benefit the government, as it would reduce bloated management wage bills at SOEs and entities, and give more stability for the NT to plan budgets, as there would be one agreement for the entire state. The DPSA had drafted a bill to address the disparities that existed, and Treasury was in agreement with the idea. NT had also seen COSATU’s concerns about the proliferation of agencies created by departments, which often sought to circumvent the public service bargaining council processes. The DG would create an agency, knowing that there was no cap on what the CEO or commissioner would earn in such entities.

Mr Parks apologised for giving the impression that COSATU had said the MTBPS was the cause of the collapse of municipalities. Municipalities were collapsing because of corruption, wasteful expenditure, and incompetent managers or mayors. The 259 municipalities were failing to be sustained. It would be better to consolidate some of them into one well-capacitated municipality which would deliver quality services. Probably the voters would not care about having a mayor in Prince Albert, as opposed to having a responsive ward councillor. Municipal service sites in each town would then deal with issues of roads, water or electricity. Clearly, 259 municipalities were not affordable. COSATU supported the government’s call for moving towards the DDM, as the current system was broken.

COSATU was also disappointed in the bloated Cabinet. It was good that there had been a reduction from 34 to 28 ministers. Although more could be done, it was a step in the right direction. The 34 deputy ministers was disappointing, however. There was space to reduce the number of MECs. It did not make sense to increase the staff allocation to ministers and deputy ministers, yet the fiscus was bleeding. Deputy ministers would complain about the lack of clarity on their roles and responsibilities. Government needed to lead by example in cost saving. COSATU had been engaging with the Minister of Finance on the Public Procurement Bill, and was pleased with the commitment made in the budget speech to release it soon. It would be key in tackling wasteful expenditure and corruption, and supporting local procurement. Hopefully it would be in Parliament by Easter next year, as it was a critical tool for fixing the state.

The voter turnout had been worrisome. Examples of the public rejecting the political establishment across party lines had been seen in Tunisia and Egypt. A 44% unemployment rate was not affordable, and the public was losing interest in politics because of corruption. Voters wanted Eskom, PRASA and Transnet to be fixed, growth in the economy, and the creation of jobs. These were fundamental for voters to have confidence. 

Mr Parks said Ms Hlonyana had been right to refer to the Alliance like a marriage, and like all marriages, there were both good and bad parts. They would easily become propagandists for the ruling party. However, COSATU did benefit from the relationship at times. It had been able to pump out R63 billion for five million workers during the pandemic, and an agreement was made with the NT for relief packages, including the R350 grant.

On whether there was still a developmental state, the government was doing well on many fronts. The fact that 60% of the budget went towards the broader social wage was very progressive, as it benefited the poorest half of society. However, there was also a collapse of the state on many fronts, including SOEs and local government, which were threatening all the gains of 1994.

Rollovers and under-spending were worrying and showed a capacity, management and political failure in those departments. The issue of Vaal River had been outstanding for several years. The rollovers could not be explained. COSATU sympathised with the NT, as the rollovers in departments happened while there were other departments waiting for the same money. The money could have been given for social grants or industrial financing. It was selfish for departments to under-spend and do rollovers. There was also a trend of fiscal dumping, where departments rushed to spend money in the last quarter of the year. This was why COSATU had raised the issue of Cape Town failing to spend R1.3 billion on its MyCiTi bus service, yet Metro Rail had collapsed. There was a dysfunction.

The National Economic Development and Labour Council (Nedlac) had managed to save approximately R10 million in the past year, largely because of reduced travelling costs. If similar assessments were done across government spheres, a lot of money would be saved and reprioritised towards more important projects. COSATU had made a proposal for Nedlac to allocate the saving to the Commission for Conciliation, Mediation and Arbitration (CCMA), to help in filling some of their gaps.

It had been seen that government systems, like the Unemployment Insurance Fund (UIF) were not modernised and did not collaborate with each other, hence the problems highlighted by the AG. However, when the AG reprimands officials, they become paralysed by fear upon their return and are afraid of doing what needed to be done. The effect is that money does not get to workers, businesses, or the economy.

The malfunctioning of local government was perpetual, with no end in sight across provinces. It was the responsibility of MECs, mayors, managers and ministers to intervene. COSATU had not had sufficient engagement with the MECs for CoGTA. However, there was some engagement -- for instance, in the previous week there was the reinstatement of 500 workers who had been dismissed in Mpumalanga. There had been engagement with COSATU and the MEC, and the issue was resolved within two months. 

Since COSATU was in an alliance with the ANC, there was a need for COSATU to reflect on its engagement with municipalities where ANC was no longer ruling, or in coalition municipalities. There would be a conclusion of a Central Executive Council (CEC) meeting that day. It was a new experience that needed adjustment to ensure that the lives of municipal workers were improved and communities rebuilt, irrespective of the party. While COSATU supported the ANC and had called on members to vote for the ANC, there were members who had voted for other parties, as it was their right. The goal was to improve the lives of society, and this involved reaching out across party lines.

Closing Remarks

The Chairperson thanked COSATU for the good engagement, and said there would be further engagement on the Adjustment Appropriation Bill. There were many issues in the economic space that needed attention.

The meeting was adjourned.