ATC210601: Report of the Standing Committee on Appropriations on the Appropriation Bill [B4– 2021] (National Assembly – Section 77), Dated 1 June 2021

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on the Appropriation Bill [B4– 2021] (National Assembly – Section 77), Dated 1 June 2021

Having considered the Appropriation Bill [B4 – 2021], referred to in terms of section 10(1)(a) of the Money Bills Amendment Procedure and Related Matters Act No. 9 of 2009 (as amended by the Money Bills Amendments Procedure and Related Matters Amendment Act, No 13 of 2018), the Standing Committee on Appropriations reports as follows:

 

1. Introduction

Section 27(1) of the Public Finance Management Act No. 29 of 1999 (PFMA) requires that, the Minister of Finance (the Minister) tables the annual budget for a financial year in the National Assembly before the start of that financial year or, in exceptional circumstances, on a date as soon as possible after the start of the financial year, as the Minister may determine. Section 213(2) of the Constitution of the Republic of South Africa, provides that money may be withdrawn from the National Revenue Fund only in terms of an appropriation by an Act of Parliament. The Appropriation Bill proposes to appropriate money from the National Revenue Fund for the requirements of the State and to prescribe conditions for the spending of funds withdrawn. Section 26 of the PFMA requires that Parliament and each Provincial Legislature appropriate money for each financial year for the requirement of the State and the Province, respectively.

In executing this mandate, the Standing Committee on Appropriations, hereinafter referred to as the Committee, is established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act, 2009, and herein referred to as the Act. In line with section 10(1)(a) of the Act and after the adoption of the Fiscal Framework, the Act enjoins the Standing Committee on Appropriations with a responsibility to consider the Appropriation Bill, hereinafter referred to as the Bill, and report thereon to the National Assembly.  The national budget for the 2021/22 financial year was tabled on 24 February 2021 by the Minister of Finance together with the Bill and referred to the Committee for consideration and report on 10 March 2021. In processing the Bill, section 4(4)(c) of the Act also requires the Committees on Appropriations of both Houses to consult with the Financial and Fiscal Commission (FFC). In addition to the FFC commenting on the Bill, the Committee also invited the Parliamentary Budget Office for comments. Furthermore, the Department of Health, Department of Correctional Services, Department of Defence, Department of Agriculture, Land Reform and Rural Development, Department of Social Development, and the Department of Higher Education and Training were all invited to comment on the Bill as it affects each department. The Department of Police and Department of Justice and Constitutional Development were requested to provide their comments on the Bill in writing.

In terms of sections 10(5) and 10(6) of the Act, Parliamentary Committees may advise the Appropriations Committee on appropriations related matters. There were no formal submissions received from other Parliamentary Committees in terms of sections 10(5) and 10(6) of the Act.

Section 10(8) (a) and (b) of the Act also requires the Committees on Appropriations to hold public hearings on the Bill and proposed amendments; and for the Committee to report to the House on the comments on and amendments to the Bill. To this end, the Committee sent out invitations to interested parties and published advertisements in national and community newspapers from 30 April 2021 to 7 May 2021inviting themto provide their inputs/comments on the Bill. In response to the Committee’s advertisements, five submissions were received from the Children’s Institute and Centre for Child Law, Public Service Accountability Monitor, Organisation Undoing Tax Abuse, Congress of South African Trade Unions, and Equal Education.The Committee held public hearingson the Bill on 26 May 2021 via the Zoom virtual meeting platform.

 

1. Overview of the 2021 Appropriation Bill

The Bill provides for the appropriation of money by Parliament from the National Revenue Fund (NRF) in terms of section 213 of the Constitution of the Republic of South Africa and section 26 of the PFMA. Spending is subject to the PFMA and the provisions of the Appropriation Act. The Bill deals with proposed national appropriations. In order to effect spending on conditional allocations from national’s equitable share to provincial and local government, the Division of Revenue Act sets out specific provisions on spending conditions.

The 2021 budget is centred on two government’s medium term policy priorities of promoting economic recovery andreturning public finances to a sustainable path, as alluded to in the 2020 Medium Term Budget Policy Statement (MTBPS). Theseobjectives will be achieved through the stabilisation of the public debt-to-gross domestic product (GDP) ratio, reducing the budget deficit and, by moderating spending as a share of GDP and reducing the public sector wage bill as a share of overall spending.The Committee is considering the Bill at a time when the South African economy is showing some signs of recovery, albeit at a slower rate than the pre Covid-19 pandemic. The 2021 budget funds a massive and free Covid-19 vaccination programme. While the budget exercises continued restraint on spending growth, over the medium term, nearly R3 trillion, or 56.6 per cent of public funds are allocated to learning and culture, health and social development. Furthermore, the 2021 proposed allocations aims to shift the composition of spending from consumption to investments, whilst also withdrawing the tax increases which were previously announced, worth R40 billion in order to avoid the tax burdens to tax payers. The 2021 budget focuses on narrowing the budget deficit whilst stabilising the debt to GDP ratio.The 2021 budget proposes adjustment to government spending plans and these adjustments affect the expenditure ceiling as follow;

• Relative to the 2020 Budget, main budget non‐interest spending is reduced by R27.675 billion in 2021/22 R87.259 billion in 2022/23 and R149.978 billion in 2023/24 financial years respectively. The largest share of these reductions falls on compensation of employees. Other non‐interest spending items are also reduced, while funding for buildings and other fixed structures, provincial and local capital grants, and the Infrastructure Fund is protected.
• The 2021 budget proposes an additional R11 billion to the spending framework in 2021/22 for the public employment initiatives. This forms part of government efforts to promote economic recovery.
• An extension of the unemployment insurance benefit through the Unemployment Insurance Fund, increasing the Employer/Employee benefit to R73.6 billion.
• A recapitalisation of the Land Bank of R5 billion in 2021/22, R2 billion in 2022/23 and 2023/24 to be funded though reprioritisation.
• A total of R18.3 billion is added over the 2021 MTEF to manage further waves of Covid-19.
• A total of R11 billion over the MTEF is added for payments to the New Development Bank and public entities.

The Bill is processed in the second year of the 2019-2024 Medium Term Strategic Framework (MTSF).Departmental spending objectives must be aligned to the MTSF priorities, as these are short to medium-term government priorities intended to achieve the overall objectives as set out in the National Development Plan, Vision 2030 (NDP 2030) which was adopted by government in 2012. The MTSF is the implementation plan and monitoring framework for achieving the NDP 2030 priorities for the sixth administration of government. The NDP 2030 sets out the overall outcomes that the government wants to achieve by 2030 with associated impact of improving quality of life, by reducing unemployment, poverty and inequality. The MTSF aims to address the challenges of unemployment, inequality and poverty through three pillars, namely: achieving a more capable state, driving a strong and inclusive economy; and building and strengthening the capabilities of South Africans. The MTSF sets out the seven priorities of government with 81 intended outcomes to be achieved through 337 government-led interventions by achieving a set of 561 performance indicators. The three pillars set out in the MTSF underpin the seven priorities of the strategic framework (see table 1 below) and these priorities, which will be achieved through the joint efforts and collaborations between government, the private sector, labour and civil society, are as follows:

 

Table 1: 2019-2024 MTSF priorities, lead and contributing departments

Number	MTSF 2019-2024 Priorities1
Priority 1	A capable, ethical and developmental state
Priority 2	Economic transformation and job creation
Priority 3	Education, skills and health
Priority 4	Consolidating the social wage through reliable and quality basic services
Priority 5	Spatial integration, human settlements and local government
Priority 6	Social cohesion and safe communities
Priority 7	A better Africa and world

1. Details of lead and coordinating departments on the 2019-2024 MTSF priorities are provided in the MTSF document. 

 

While the MTSF outlines the plan and outcome-based monitoring framework for implementing the NDP during the country’s sixth democratic administration, italso outlines the implementation priorities across South Africa’s national development priorities. The MTSF focuses on implementation that requires all three spheres of government to work collaboratively. Therefore, the MTSF is both a five-year implementation plan and an integrated monitoring framework. The plan focuses on the seven priorities and related interventions of the sixth administration of government, and the integrated monitoring framework focuses on monitoring the outcomes, indicators and targets towards the achievement of these priorities. The district development model coordinates implementation at local level and this model bridges the gap between the three spheres of government to ensure better coordination, coherence and integration of government planning and interventions. The MTSF enables the sequencing and resourcing of priorities, taking into account the respective powers of each of the three government spheres. It is not the role of the MTSF to plan for each and every action, but to provide a clear, transformative framework within which national, provincial and local governments can plan for and drive service delivery.

While it is widely acknowledged that the MTSF had limited participation of the other social partners and was largely government led; on the contrary, the MTSF is a culmination of the steps government and non-government stakeholders have taken towards integrated national planning and monitoring. It serves as a five-year building block towards achieving Vision 2030.  All national sector plans, provincial growth and development strategies, municipal integrated development plans, departmental strategic plans and annual performance plans must be aligned to the MTSF.However, it must also be acknowledged that the Covid-19 pandemic has had negative impact on both government finances and the achievement of some of the targets as set out in the 2019-2024 MTSF priorities due to it associated lockdowns and limited economic activities.

Table 2 below provides an overview of the voted funds for each national department for the 2021/2022 financial year.

 

Table 2: Appropriated funds per vote-2021 Appropriation Bill

Vote	Department(s)		Main Division (R'000)
1	The Presidency		592 321
2	Parliament		2 144 148
3	Cooperative Governance		100 875 870
4	Government Communication and Information System		749 684
5	Home Affairs		8 690 450
6	International Relations and Cooperation		6 452 372
7	National School of Government		210 189
8	National Treasury		41 055 707
9	Planning, Monitoring and Evaluation		453 950
10	Public Enterprises		36 291 819
11	Public Service and Administration		526 192
12	Public Service Commission		282 405
13	Public Works and Infrastructure		8 343 204
14	Statistics South Africa		4 474 590
15	Traditional Affairs		171 392
16	Basic Education		27 018 078
17	Higher Education and Training		97 784 005
18	Health		62 543 271
19	Social Development		205 226 920
20	Women, Youth and Persons with Disabilities		763 539
21	Civilian Secretariat for the Police Service		148 961
22	Correctional Services		25 218 129
23	Defence		46 268 680
24	Independent Police Investigative Directorate		348 349
25	Justice and Constitutional Development		19 119 796
26	Military Veterans		654 367
27	Office of the Chief Justice		1 211 836
28	Police		96 355 531
29	Agriculture, Land Reform and Rural Development		16 920 399
30	Communications and Digital Technologies		3 692 881
31	Employment and Labour		3 505 713
32	Environment, Forestry and Fisheries		8 716 848
33	Human Settlements		31 657 958
34	Mineral Resources and Energy		9 180 764
35	Science and Innovation		8 933 315
36	Small Business Development		2 538 288
37	Sports, Arts and Culture		5 693 941
38	Tourism		2 429 627
39	Trade, Industry and Competition		9 736 573
40	Transport		66 691 766
41	Water and Sanitation		16 910 080
Total appropriation by vote excluding direct charges			980 583 908

Source: National Treasury (2021 Appropriation Bill)

The Bill also allocates funds in terms of economic classifications. It should be noted that even though the Bill allocates resources across the national sphere of government, 67.5 per cent of these allocations go into transfers and subsidies.These are transfers to provinces, municipalities, public corporations and other non-profit making entities. Current payments, payments for capital assets and payments for financial assets take up 25.9 per cent, 1.5 per cent, and 47. per cent respectively. It is worth noting that the economic classifications for Vote 2 (Parliament) are determined by Parliament in terms of the Financial Management of Parliament Act, 2009 as amended.Table 3 below provides an overview of the allocations in terms of economic classification.

Table 3: Allocation per economic classification-2021 Appropriation Bill

	Main Division	Current payments			Transfers and Subsidies	Payments for Capital Assets	Payments for Financial Assets
		Compensation of employees	Goods and Services	Interest and Rent on Land
	R'000	R'000	R'000	R'000	R'000	R'000	R'000
Total	980 583 908	170 307 224	83 838 610	196 911	662 354 064	14 991 532	46 751 419

Source: National Treasury (2021 Appropriation Bill)

1. Comments and hearings on 2021 Appropriation Bill with identified stakeholders

The sections below provide a summary of the comments that were made by the invited stakeholders on the Bill.

 

1. National Treasury 

National Treasury outlined the legislative process governing the processes that relates to the passing of the Appropriation Bill as outlined in Money Bills Amendment Procedure and Related Matters Act of 2009, as amended. Furthermore, National Treasury outlined the provisions made in section 29 of the PFMA, which makes provision for spending of government funds before the Appropriation Bill is passed. The Bill provides for the appropriation of money from the National Revenue Fund with spending subject to provisions contained in the PFMA (as amended). Furthermore, National Treasury presented an overview of the 2021 Appropriation Bill relative to the 2020 budget estimates:

 

Table 4: Baseline reduction and additions in the 2021 Appropriation Bill

Reductions or additions per department	R’ million
Planning, Monitoring and Evaluation- vacant positions.	-70.3
Public Service and Administration- vacant positions.	-80.4
Correctional Services- vacant positions, warder to inmate ratio to decline from 1:6 to 1:7, far from the norm of 1:5.	-3 347.5
Police- Vacant positions, Visible Policing and Detective Services affected, limited recruitment of young and physically active police officers	-11 853.3
Public Service Commission- vacant positions.	-33.9
Civilian Secretariat for the Police Service: Vacant positions, Intersectoral Coordination and Participation, Legislation and Policy Development, and Civilian, Oversight, Monitoring, and Evaluations.	-17.4
Home Affairs- vacant positions, and goods and services.	-969.5
Justice and Constitutional Development- vacant positions, Court Service and the NPS	-2 049
Office of the Chief Justice- Superior Court Services, leading to case backlogs.	-124.1
Employment and Labour- vacant positons, and transfer to the CCMA.	-351.4
Defence- Implementation of Defence Review 2015 and SANDF capacities, SA Navy and SA Air Force.	-4 583.8
The Presidency- project management office	-56.5
International Relations and Cooperation- vacant positions and annual increases in fees to international organisations	-586.2
Parliament- vacant positions and ICT infrastructure	-187.4
Military Veterans- delivery of benefits as mandated by the Military Veterans Act	-56.6
Independent Police Investigative Directorate- recruitment and appointment of investigators.	-29.4
Statistics South Africa- vacant positions, surveys, and coordination of surveys conducted by other departments.	-369.3
National School of Government- vacant positions.	-17.1
Traditional Affairs- overall operations	-13.3
Women, Youth and Persons with Disabilities- vacant positions.	-57.9
Environment, Forestry and Fisheries- vacant positions, EPWP and transfers to departmental agencies.	-571
Tourism- vacant positions, transfers to SA Tourism, EPWP, tourism incentive scheme, and tourism sector support programmes.	-156.6
Small Business Development- support to small business and economic growth contribution by small business.	-157.8
Communications and Digital Technologies- Operations of the department and transfer to entities as well as SA Connect and digital migration.	-225.7
Agriculture, Land Reform and Rural Development- Land reform and restitution, and conditional grants.	-1 026.5
Sports, Arts and Culture- community library services, transfers to public entities, heritage and performing arts institutions, and the Mass Sport participation Grant.	-341.6
Higher Education and Training- vacant positions, NSFAS, University and TVET Colleges Subsidies, and Infrastructure Grants.	-4 969
Science and Innovation- critical vacant positions, goods and services, and transfers to public entities.	-444.5
Public Works and Infrastructure- vacant positions and funding of infrastructure that was added to the portfolio.	-414.1
Minerals Resources and Energy- operations of the department and transfers to entities.	-389.2
Trade, Industry and Competition- vacant posts, goods and services, and manufacturing incentives.	-361.7
Transport- PRASA capex, PTNG, SANRAL, and department operations.	-2 342.8
Cooperative Governance- equitable share, community work and departmental operations.	-3 386.2
Social Development- social grants increases below inflation.	-6 584
Water and Sanitation- departmental operations and transfers to entities.	-360.3
Government Communications and Information System- communication on the vaccine, special projects and funding of community newspaper.	-13.5
Basic Education- vacant positions, goods and services, and Fundza Lushaka Bursary.	-314.9
Human Settlement- departmental operations and public entities.	-130.6
Health- Net increase due to allocated to Covid-19 vaccine programme. Reductions in other programmes and conditional grans of about R4 billion, with largest reduction of R1.7 billion in the HIV/AIDS grant component.	1 905
National Treasury- funding for the Land Bank.	5 233.2
Public Enterprises- Allocations to Eskom.	31 654.4
Total	-8 251.7
Gross reductions	-47 044.3
Gross additions	38 792.6

Source: National Treasury (2021)

 

1. Technical amendments to the names of certain votes in the Schedule to the Bill

National Treasury submitted that the President acting in terms of section 7(5)(a) of the Public Service Act, 1994, amended Schedule 1 to that Act with effect from 1 April 2021 by Government Notice No. 172 of 5 March 2021. The names of votes in the Bill were in accordance with the names of the departments as they existed when the Bill was introduced. Since it is envisaged that the Bill will be passed by Parliamentafter 1 April 2021, these amendments will be timeous and will accurately reflect the namesof votes to correspond with the names of the relevant departments in Schedule 1 to thePublic Service Act, as amended. National Treasury therefore requested the Committee to amend the Bill in terms of section 14 of the Money Billsand Related Matters Act, 2009, to align with Schedule 1 to the Public Service Act, by

amending the names of:

 

• Vote 32 in column 2 of the Schedule, by the substitution for the phrase “Environment,Forestry and Fisheries” of the phrase “Forestry, Fisheries and the Environment”; and
• Vote 37 in column 2 of the Schedule, by the substitution for the phrase “Sports, Artsand Culture” of the phrase “Sport, Arts and Culture”.

National Treasury submitted that the above proposed renaming of the vote names would only constitute technical corrections and will haveno funding implication to the proposed appropriations.

 

1. Financial and Fiscal Commission

The Financial and Fiscal Commission (FFC) submitted that 2021 Appropriation Bill is being considered at a time when the economy is starting to show slight signs of recovery albeit not on the scale of pre-Covid-19 growth rates. Notwithstanding the aforementioned, unemployment rate remains stubbornly high and poverty and inequalities have deepened. The FFC also highlighted the following key risks associated to the Bill:

• Covid-19 baseline reductions are likely to interrupt or reduce service delivery levels in votes such as Police and Social Development.
• Appropriations for compensation of employees are premised on the assumption that the wage freeze announced during the Budget will be effected. The outcome of the ongoing wage bargaining negotiations may necessitate adjustments to COE and appropriations across all votes.
• Votes which are crucial for economic recovery continue to receive a small proportion of the total appropriation, despite the priority placed on the economic reconstruction and economic recovery plan, for instance;

• The Departments of Industry, Trade and Competition and Small Business Development receive an appropriation of R9.7 billion and R2.5 billion respectively.
• Over 80 per cent of appropriations to these votes are comprised of transfers and subsidies.
• The FFC expressed a concern that the greater portion of the transfers finance compensation of employees, leaving little resources for economic recovery.

 

The FFC, notwithstanding the above risks, highlighted the following opportunities in the Bill:

 

• Cuts in baseline allocations to votes or appropriations provide departments with an opportunity to conduct self-initiatedexpenditure reviews, i.e. terminate ineffective programmes and consolidate duplicate programmes.
• Expenditure reviews must be linked to the broader ERRP and resources can be directed towards priority intervention areas or sectors.
• Parliament must scrutinise the expenditure plans of departments to ensure that the recovery plan finds expression in the allocations and delivery plans. To this end, clear and measurable performance indicators must be identified and monitored under an ‘umbrella’ theme through Parliament’s oversight mechanism.
• Government should appropriate allocations to SOEs through a Special Appropriation Bill in order for conditions accompanying the bail outs to be clearly articulated and made public.

With regard to infrastructure expenditure, the FFC submitted that both public and private sector infrastructure investment were important for economic growth. The FFC expressed a concern that percentage of public infrastructure investment allocated for infrastructure maintenance and to repair existing infrastructure assets decreased in the 2021/22 financial year to 1.4 per cent (down from 1.6 per cent in the previous financial year). This was particularly concerning as neglecting or not prioritizing maintenance of existing infrastructure could have a negative impact on the provision of basic services, foreign investment and future costs of replacement of infrastructure.

In terms of SOEs, FFC stated that the weak financial positions of most SOEs translated into serious liquidity shortfalls, triggering government bailouts and made reference to the recent allocations made to Eskom, SAA, Denel and the Land and Agricultural Bank of South Africa (Land Bank). The FFC said that the massive financial support to SOEs undermined the fiscal consolidation exercise and increased the debt burden. Eskom, in particular continued to be a significant strain to the South African fiscus. FCC submitted that according to the latest financial annual report, on average, Eskom will require Government financial support equalling about R1 billion per week in 2021 which was a serious cause for concern.

FFC asserted that government exposure to SOEs was high and represented a significant risk to debt sustainability and public finances thus warranting a framework for supporting SOEs that was conditional on improving governance and meeting clear quantitative operational and financial performance goals.  Furthermore, contingent liabilities related to SOEs were high and could translate into a credit rating downgrade for South Africa.

FFC further submitted that  SOE governance failure manifesting in inefficiency, corruption, and financial mismanagement, underscored the need for legislative and governance reforms for SOEs focusing on centralized oversight; appointment procedures for SOE board members; a performance management framework and procurement regulation

In conclusion, FFC reiterated to the Committee that whilst cognisant of the Covid-19 circumstances and the quickened fiscal deterioration, there remained concern around long standing issues of financial and performance dysfunctionality, i.e. fiscal leakages, wastage and inefficiencies. To this end, FFC suggested the following in order to address the aforementioned:

 

• Decisive and coherent strategy and political will;
• Implementation of the fiscal consolidation, targeting cuts at areas of underspending and questionable performance;
• Eradication of duplication of functions i.e. the merging or closing of departments and public entities;
• Investment in the use of technology and other areas of improving the capability of public sector personnel;
• Eradication of contract mismanagement and procurement irregularities;
• Zero Based Budgeting, based on expenditure reviews and mindful of the importance of pricing and costing public services; and
• Consequence management and accountability mechanisms must be effective

 

1. Parliamentary Budget Office

The Parliamentary Budget Office (PBO) submitted that notwithstanding the negative socio-economic impact of Covid-19, the 2021 budget continued to constrain government expenditure by curtailing non‐interest expenditure growth and providing only temporary support for social relief and public health services.

PBO further submitted that the credibility of government’s MTEF and budgetary goals were in question as government may be forced to compromise on reducing Compensation of Employees. It further submitted that reneging on the wage agreement could negatively affect labour relations as well as morale and productivity in the public sector as well as hampering initiatives to reduce corruption.

PBO suggested that government could be liable for contingent liabilities and guaranteed debt and also stated the following:

 

• The poor financial management of local governments and government entities may require more expenditure to maintain local government and for contingent liabilities.
• SOEs and government entities with guaranteed debt may continue to have governance problems, poor management that negatively affect performance.
• Fiscal consolidation and poor economic performance linked to the pandemic could continue to negatively impact the revenues of SOEs and their financial positions.
• Further declines in credit ratings could negatively affect national government finances directly and also the guaranteed debt of government entities and SOEs.

PBO also made reference to the report on 2019/20 financial management in SOEs and stated that the Petroleum Oil and Gas Corporation, South African Broadcasting Corporation, Denel and its three subsidiaries, Independent Development Trust, Land and Agricultural Bank of South Africa, Pelchem, South African Nuclear Energy Corporation, and Eskom all disclosed financial statements indicating future financial uncertainty.

 

1. Departmental oral and written submissions

The sections below provide an overview of the submissions that were made on the Bill by the invited departments.

 

4.1        Department of Social Development

The Department of Social Development (DSD) submitted that its entire portfolio (SASSA and NDA) has been historically under-funded relative to the demand for services and interventions to fight the persistent and rising challenges, of unemployment, poverty and inequality. DSD further submitted that these funding shortfalls have resulted in an increase in the unwarranted social ills, in particular Gender Based Violence and Femicide (GBVF), substance abuse, human trafficking as well as the abuse and neglect of children. DSD further stated to the Committee that the outbreak of Covid-19 and the subsequent restrictions since March 2020 further compounded these issues and placed the Social Development Portfolio at the heart of providing the response strategies and interventions for the country.Even though DSD acknowledged the current constrained fiscal constrains which have resulted in more budget cuts across government, it emphasised that this was likely to have unintended consequences. These included the possibility of reversing some of the gains recorded in the past 27 years of our democracy, in particular, in so far as the government’s efforts to tackling poverty and inequality.

DSD reported that in spite of these very difficult circumstances, the Social Development Portfolio had to dig deeper to move swiftly and came up with innovative strategies to cushion and reduce the impact to the poor and vulnerable, by amongst others:

 

• Provision of Psychosocial Support Services and Food Security;
• Provision of Social Grants, including providing Top-Up, the SRD R350 Special Grant from 01 May 2020 to 30 April 2021 at an amount of more than R22 billion;
• Introduction of the NDA Volunteer Programme that amongst others, played a significant role in creating awareness of Covid-19 in communities; and,
• Provision of shelter, and other welfare services to the millions of the homeless people.

On possible service delivery implications of the proposed allocation reduction, DSD reported that it will not be able to implement the two key provisions in the recently amended Social Assistance Amendment Act, which was signed into law in December 2020, as follows:

 

• Extended Child Support Grant policy, to top up the CSG grant for orphaned children to reduce the burden on the foster child system; and
• Establishment of the Inspectorate for Social Assistance, which is a government component with a mandate to promote the integrity of the social assistance system by conducting independent  investigations and audits of South African Social Security Agency (SASSA) operations to root out fraud and corruption and address complaints.

DSD stated that, from the welfare services perspective, the proposed allocation reductions will have a snowball effect on its ability to scale up interventions on HIV & AIDS, provision of universal access to Early Childhood Development (ECD), addressing issues of social crime prevention and victim empowerment will be compromised. In addition, these programmes will have to further reduce their prevention and support services as well as the number and size of campaigns.  Furthermore, the proposed allocation reductions will have a negative impact on the work of the DSD in ensuring that services are extended to the population and vulnerable groups as outlined in the example, the National Strategic Plan for HIV, TB and STIs. Furthermore, there will be a limit to the department’s ability to strengthen the child protection system and therefore will impact negatively on provision of quality child protection services

DSD asserted that it predicted that the real impact of Covid-19 was yet to be felt and realized, which suggests that the demand for its services will be on the increase especially as future waves are also anticipated. However, it submitted that in order to remain as an agile and responsive portfolio, it has taken a decision to “re-imagine” and “re-invent” itself, made some key bold strategic shifts so that it maximizes its efficiencies while remaining true to its mandate, which is to “Improve the quality of life of the poor and vulnerable.”Over the MTEF, with the current budget reductions and the possibility of future budget cuts, the department submitted that it will continue to revise its service delivery environment and reprioritise accordingly. The table below highlight a summary of the proposed R38.6 billion budget reduction of the 2021 MTEF.

 

Table 5: The proposed R38.6 billion budget reduction over the 2021 MTEF

 

Source: Social Development (2021)

 

4.2        Department of Agriculture, Land Reform and Rural Development

The Department of Agriculture, Land Reform and Rural Development (DALRRD) submitted to the Committeethe proposed R3.8 billion budget reduction over the 2021 MTEF and categorised the implications according to each financial year of the 2021 MTEF. Due to proposed budget reduction of R1 billion in 2021/22 financial year, the department has highlighted that it had to revise its annual performance targets as follows:

• Land Reform targets on acquisition of strategically located land remains, however, the focus will be on funding commitments made in previous financial year;
• More will be placed on providing support to existing farmersin order for them to become more productive instead of the acquisition of more farms;
• Settlement of Land Claims target had to be revised due to budget cuts in the Restitution Programme. The focus will be more on claims that have been researched and ready for settlement, and
• The DALRRD will continue with support to already planned infrastructure projects that are underway.

Due to proposed budget reduction of R1.3 billion in 2022/23 financial year, DALRRD has highlighted that it had to revise its annual performance targets and stated that all the projects that cannot be completed in the short term had a carry through effect over the medium-term period. Particularly the infrastructure projects and this will havean adverse impact on service delivery since the department will only focus on finalising existing projects/commitments and will not be able to implement any new projects.

Furthermore, it was reported that the R1.4 billion proposed allocation reduction in 2023/24 financial year, will create a backlog in service delivery in the long term to all departmental beneficiaries and overall delivery to rural communities. In addition, DALRRD reported that the implications of the proposed reduction of funds will likely be as follows:

• On food security, that there will be delays in the revitalization of irrigation schemes, no new applications from farmers will be approved in the 2022/23 financial year, the focus will be on completion of the infrastructure work started in 2019/20, revitalization of colleges of agriculture will be extended to 2022/23 financial year, and provision of resources such as ICT equipment, uniforms and training will not be implemented.
• On land acquisition, new projects will not be considered, no new valuations will be conducted on land for acquiring, funding will only cater for current commitments, and only current National Land Acquisition, Allocation Control Committee (NLAACC) approvals will be catered for.
• On the Commission on Restitution of Land Rights, there will be difficulty in organising meeting/consultations with claimants to conduct research, verification, accessing claimants' relevant documents, signing of settlement agreements and the conclusion of acceptance of offers.

 

4.3        Department of Defence

The Department of Defence (DOD) highlighted that, in order to efficiently and effectively respond to its mandate, the South African National Defence Force (SANDF) will have to be structured, equipped and trained in a manner that will satisfy its constitutional expectations. Furthermore, the department submitted to the Committee that the Defence Force is currently facing a strategic dilemma that has been well articulated in the National Defence Policy, the Defence Review 2015, that is, the decline in defence capabilities. The department submitted that, at present funding levels, this decline will severely compromise and further fragment South Africa’s defence capability. Furthermore, DOD submitted that as part of the defence dilemma, was the current state of decline in DENEL and other related local defence industries that are the original equipment manufacturers for the SANDF’s prime mission equipment. The department highlighted that, with the current state of decline, the industry was at risk of supply chain implosion and if this were to happen, South Africa will have to depend on foreign assistance if own industry is lost and RSA will be rendered import dependent. The department emphasised that the changing nature of conflict and the complexities that arise thereto no longer afford any country the luxury of long lead times to prepare for counter measures against the threats that could disrupt the nation state.

DOD submitted that its proposed allocation is reduced by R4.5 billion for the 2021/22 financial year, which is additional to the already R5 billion reduction on the Special Defence Account (SDA) as per National Treasury 2020/21 allocation letter dated 10 December 2020. The departmental budget will be further reduced by R10.8 billion in the last two years of the 2021 MTEF, bringing the total budget cut to R20.3 billion. The DOD emphasised that these budget reductions will have serious implications for both the medium and long-term as they may result in the SANDF being unable to execute its constitutional mandate if no intervention is made.

In relation to the proposed allocation reductions, DOD argued that thesewere serious and would result in maintenance backlogs, reduced stock levels, short-term maintenance contracts and inability for mid-life upgrades.DOD highlighted that from the 2008/09 financial year to 2022/23 financial year, its budget allocation would have been reduced by R32.7 billion.The DOD further reported that these proposed allocation reductions will affect the availability of prime mission equipment in the land, air- and maritime defence programs, resulting in all capabilities being systematicallyerodedif the downward spiral continues unabated. These military capabilities may therefore be limited or unavailable to support force training and force employment which are currently already maintained below critical mass.

DOD submitted that the major threat facing the SANDF is the loss of defence capabilities (some of which have already been lost) which will require much longer time to rebuild, and any requirement to rebuild such capabilities is likely to be longer than five years before such a capability is operational. Furthermore, due to the lifespan of some of these capabilities, the department also faces technology obsolescence and require systematic replacement. In addition, the SANDF system elements require rejuvenation and these include; personnel, sustainment, training, equipment, facilities (attention to the Armscor Dockyard), information and technology. The department also submitted that industry support will also be limited due to skill and competencies being lost affecting industry ability to deliver on time. 

 

4.4        Department of Correctional services

The Department of Correctional Services (DCS) submitted that the proposed allocation reductions were mainly on compensation of employees amounting to R11 billion over the 2021 MTEF period. The size of these cuts will inevitably reduce human resource capacity resulting in lack of capacity to render effective correctional services. However, notwithstanding the proposed allocation reduction over the MTEF and its impact on service delivery, the department reported to the Committee that it has developed plans and strategies to respond to the ‘new normal’ post Covid-19 pandemic.

On proposed budget allocation over the 2021 MTEF, overall departmental expenditure is expected to increase marginally from R25.2 billion in 2021/22 to R25.6 billion in 2023/24. The DCS submitted that an estimated 58.4 per cent (R44.7 billion) of the department’s spending over the MTEF period is in the Incarceration programme. Furthermore, an estimated 67.4 per cent (R51.5 billion) of the department’s expenditure over the MTEF period is earmarked for Compensation of Employees (COE). On allocation reduction, the department reported that cabinet approved reductions to the department’s baseline amounting to R11 billion over the medium term (R3.3 billion in 2021/22, R4.3 billion in 2022/23 and R3.4 billion in 2023/24), with the biggest budget cuts effected mainly on allocations for COE amounting to R11 billion over the medium term.

DCS reported that the above proposed reductions to COE will have a negative impact since 30 274 correctional services employees are divided into two, namely, divisions A and B in equal numbers of 15 137 officials. Each division offered custodial activities i.e. internal and external security to incarcerate a total of 140 907 inmates (when Division A is on duty Division B is off duty). This therefore translates into a staffing ratio of 1(Official): 9 (Inmates) per division. Furthermore, the department highlighted that this ratio has not taken into account the different shift systems worked per division, which further reduces the available resources. DCS submitted that, with the shortage of staff, the department will not be in position to implement three meals system. Furthermore, the shortage of staff may result in an increase of overtime payments, overworking of employees resulting in exhaustion and fatigue thus leading to absenteeism, whilst this also poses risk to the safety of officials, smuggling of contrabands and dangerous weapons, escapes, uprisings and gang activities.

Furthermore, DCS reported that the proposed reductions on COE will have dire consequences on the future of the department, in that the projected reductions were more than number of officials who ordinarily retire or resign from service in any particular financial year. The estimated number of posts to be abolished was 8 000, and the impact of this reduction on the COE baseline had a serious potential to affect the delivery of correctional services negatively and render it dysfunctional in the long-run. Furthermore, the department was faced with an unprecedented situation where it is unable to employ learners that were trained through its correctional services learnership programme. The department reported that it had a total of 3 708 vacancies as at the end of the 2020/21 financial year, and the majority thereof were meant to be filled by the 1 944 trained learners, an approach that would have drastically reduced our vacancy rate and ease staff shortages.

Regarding the proposed allocation reductions on infrastructure, DCS reported that during 2017, Cabinet took a decision to fund fee free higher education through reprioritization of budgets at various departments. With respect to the department, the reprioritization was effected by reducing the budget for accommodation charges payable to the Department of Public Works and Infrastructure (DPWI) as well as reducing the Administration Programme. However, DPWI continued to bill the department the original accommodation charges, of which it is unable to honour. As at end of March 2021, the DCS owed DPWI R664 million for accommodation charges relating to the previous financial year. DCS emphasised that additional funding in this regard was required to ensure that maintenance of facilities is not disrupted.

Whilst DCS acknowledged that the department will have to review its service delivery pipeline with a view to innovate more on cost saving and efficient methods. The department highlighted that its 2019 service delivery model focused the department on utilizing its national, regional and area footprint to provide more support and capacity to correctional centers.

4.5        Department of Higher Education and Training

The Department of Higher Education and Training (DHET) submitted that its allocation consisted mostly of transfer payments and compensation of employees, including the remuneration of examiners and moderators. Consequently, DHET submitted that these proposed allocation reductions will impact negatively on the department’s operations, funding of poor students through the National Student Financial Aid Scheme (NSFAS), monitoring and evaluation and filling of vacant positions which will eventually impact on the achievement of key delivery targets for the sector.

DHET submitted that in view of the deteriorating macroeconomic fiscal outlook caused by the Covid-19 pandemic, the budget vote for the department was reduced by R20.8 billion over the 2021 MTEF period. According to the department, the largest budget reductions were as follows:

• NSFAS: R6.884 billion which was unsustainable – The department had to reprioritise funds towards NSFAS to cover this cut as well as the budget shortfall due to deteriorating economic challenges.
• Universities: R7.701 billion, of which R5 billion was for university subsidies and R2.4 billion was for university infrastructure.
• Technical and Vocational Education and Training (TVET) colleges: R1.426 billion, of which R947 million is for TVET infrastructure and R400 million for TVET college subsidies.
• Compensation of Employees: R4.634 billion.

 

With regard to the impact of the said reductions on Compensation of Employees, DHET submitted that advertised critical vacant attrition positions to eliminate capacity constraints will be compromised and also possible retrenchments. The current available staff in the department was already carrying above normal workloads and this was causing staff burnouts, high stress levels and low staff morale. Furthermore, the proposed budget reductions in TVET colleges as well as possible reduction in staff will have a significant impact on operations in the Community Education and Training (CET) sector as budget cuts affect the implementation of standardised CET college structures and post provisioning norms. The DHET further cautioned against potential labour unrest due to lack of adequate funding to fully implement the standardisation of conditions of service for CET academic staff which included standardised salary scales and benefits. In addition, regional offices are responsible for monitoring and evaluating the TVET and CET sector and budget cuts will directly impact on the delivery of these services.

 

DHET reported that thereduced budget for TVET colleges over the MTEF will correlate into a TVET headcount reduction of approximately 139 000 enrolments over the MTEF. The budget reduction of R70 million relating to the operationalisation of new TVET campuses over the MTEF will  equate to 2 new TVET campuses that will not receive additional funding for enrolment and maintenance requirements and the existing intakes at current campuses will have to be reduced to cross-subsidise the new campuses from existing baselines. Furthermore, the budget reduction of R928 million relating to the TVET Capital Infrastructure and Efficiency Grant (CIEG) over the MTEF will have a negative impact on infrastructure maintenance at TVET colleges, which are in dire need of capital investment. The current CIEG reserves within the TVET System was sufficient to cover the maintenance requirements until 31 March 2022, however further budget cuts beyond this period will be detrimental for the TVET system.

 

DHET submitted the proposed allocation reduction to Universities over the MTEF wouldreverse the gains made in increased allocations to universities that followed the 2018 budget and the President’s December 2017 announcement of fee free higher education. To this end, Universities will resort to slower enrolment due to insufficient funding, thereby threatening the ability of the sector to meet the NDP enrolment and other goals, at a time when more young people were meeting the entry requirements for higher education and aspiration for university education was high.  Furthermore, infrastructure growth will be severely constrained, including addressing backlogs in maintenance of infrastructure as well as restricted growth in student housing and other important areas. The DHET also reported on the possible impact of the proposed allocation reductions on conditional grants and submitted that grant allocation reductions will negatively impact on research output as well key infrastructure projects from the capital funding for Mpumalanga and Sol Plaatje Universities for their infrastructure programmes.

 

4.6        Department of Health

 

The Department of Health submitted that the budgets of the Provincial Health Departments have grown in real terms by approximately 4 per cent over the past 4 years, however, uninsured (or dependent) population, has increased by 12.1 per cent nationally.  Whilst total staff numbers have also decreased from a high of 313,000 in 2012/13 to 302,000 in 2018/19, compensation of employees as a percentage of total expenditure was about 63.4 per cent (increased slightly from 62.8 per cent in 2015/16). The department submitted that compared to the private sector, the proportional spending on personnel was much smaller, however, for the public sector, the salary bill was starting to strain the budgets. The department submitted that accruals have reduced slightly from R14.7 billion in 2017/18 to R13 billion in the 2019/20 financial year, with a sharp (>500 per cent) increase nationally with respect to payments for medico legal claims. However, the department submitted and acknowledged that there has been evidence that for the amount of funds spent in the health sector, SA could be getting better outcomes when compared to other similar countries.

 

On the impact of the proposed allocation reduction on conditional grant for HIV, DOH submitted that South Africa has yet to meet the 90-90-90 target for HIV, with current data indicating 91-73-88 whilst only 73 per cent of those who know their status are on treatment.DOH reported that even though there has been improvement in some key health metrics, the health system was still faced financial strain due to accruals and medico-legal claims. DOH also submitted that years of life lost and neonatal mortality were evidence that the current health system was not producing optimal health outcomes for the population.

 

On the overall impact of the proposed allocation reduction on the health budget, DOH highlighted that over the MTEF, budget reductions will have a devastating impact on the ability of the health system to serve the population. Fewer health workers could be employed whilst the current workforce was overburdened and struggled with burnout and having to work overtime, whilst fewer clinics could be funded, scuppering the drive to improve primary healthcare. Furthermore, DOH submitted that reduced health expenditure impacted service delivery of the health system, while the lack of necessary equipment and medical consumables potentially compromised the quality of care and created an environment for medical mistakes. Furthermore, overburdened health-workers take further mental strain and this in turn affected their ability to care for patients and further exacerbates the risk of medical mistakes. Consequently, medical mistakes result in further medico-legal claims, and/or accruals increasing, which already impacted health financing and subsequently reducing the amount of money available for the provision of care and/or regressions in health outcomes of the nation and by implication low economic growth.

 

On the possible service delivery implications of the proposed R4.7 baseline reduction over the MTEF, DOH reported that it will have a negative impact, particularly on the following areas:

 

• None filling of critical clinical posts, as well as, critical support services posts;
• Negative impact on the expansion of School Health Teams, District-based Clinical Specialists Teams (DCST) and Ward-based Outreach Teams (WBOT);
• Failure to reach set targets in screening and testing on various programmes;
• Hamper on the maintenance and repairs at certain facilities including medical and laundry equipment;
• Failure to acquire some Non-Negotiables under Goods and Services as the budget funding is below the Medical Inflation and Building Cost Index;
• It will be difficult to fund Vaccines rollout associated costs in the current and ensuing financial year;
• Inadequate funding for recurring  costs for COVID-19 appointments and other related costs; and
• Failure to maintain and replace of EMS fleets and appointment of EMS personnel

 

4.7        Department of Police

 

The Department of Police (the Department) submitted that the R27.7 billion budget reduction over the 2021 MTEF, in relation to the 2020 budget estimates, comprised a reduction of R26.2 billion in Compensation of Employees (COE) and R1.5 billion reduction in Goods and Services. Of the R26.2 billion reduction on the COE, a reduction of approximately R18.8 billion was as a result of salary increases which have not been provided for, over the period. The Department reported that because of these reductions, apart from the salary adjustments, the department’s ability to sustain the intake of new recruits, as well as the capacitation of specialised units, will be severely affected.

 

In relation to the vacancy rate, the Department submitted that in order to continue to allow for the addressing of critical vacancies only and the augmenting of capacity at police stations, budget reprioritisation will remain a prominent feature over the medium-term. This will be achieved by reducing the actual number of personnel allocated to non-operational national and provincial competencies, in order to allow for the addressing of critical vacancies and the capacity at police stations and other key frontline capabilities, to ensure the sustainability of service delivery to communities. Furthermore, the reduction of the non-operational national and provincial competencies, may, however, compromise the various governance-related process that these capabilities are responsible for and which the operational environment relies on.

 

On the overall possible service delivery implications of the proposed allocation reduction of R14.4 billion in Visible Policing Programme over the 2021 MTEF, and in relation to the 2020 budget estimates, the Department reported a total of R13.6 billion reduction in COE and a R0,8 billion reduction in goods and services. The Department reported that approximately R9.8 billion of the R13.6 billion reduction in the COE, was as a result of salary increases, which were not being provided for over the MTEF. Furthermore, the Department submitted that in view of the decline in the COE budget allocation over the medium-term, alternatives such as technological enhancements and force-multipliers would be addressed, for instance, the recruitment of reservists has been identified as a mechanism that could compliment the South African Police Services’ personnel numbers over a medium-term to longer period.Furthermore, the Department reported that a departmental action plan has been developed that aimed to respond to crimes related to gender-based violence, vulnerable groups and sexual offences, as per the direction provided by the National Strategic Plan on Gender-based Violence and Femicide (NSP on GBVF).  In relation to the provisioning of the tools of trade and the procurement of capital assets for visible policing, expenditure was expected to increase at an average annual rate of 4.9 percent, from R1.2 billion, in 2020/2021 to R1.5 billion in 2023/2024.

 

The R5.4 billion proposed budget reduction in the Detective Services Programme over the 2021MTEF and in relation to the 2020 budget estimates, comprised of a R5.2 billion reduction in COE and R200 million reduction in goods and services. The department reported that approximately R4.1 billion of the R5.2 billion reduction in the compensation of employees, was as a result of salary increases not being provided over MTEF. The department submitted that general Crime Investigation included specialised units such as, inter alia, murder and robbery units, taxi violence units, vehicle investigation units and stock theft units, all of which were targeted for capacitation over the current medium-term funding envelope. However, due to the latest baseline reductions, this process would have to be prolonged and implementation timeframes extended. The prominence accorded to Family Violence, Child Protection, and Sexual Offenses (FCS) Units, would bemaintained, however, the filling of vacancies will be prioritised within an affordability framework.

 

On the overall possible service delivery implication, the Department submitted that the number of personnel fluctuated during the period 2010 to 2015 and has been decreasing since 2016 and is expected to reduce further over the MTEF. These reductions in the SAPS’ workforce have taken place against the backdrop of increases in the overall population of the country, which placed the SAPS under severe pressure to deliver on its Constitutional mandate.  TheDepartment submitted that a recent profiling of police station capacity levels, 433 police stations were identified for not rendering or of being at risk of not rendering an effective frontline service. This situation would worsen over the MTEF due to the significant proposed reductions to the COE budget.The Department reported that the potential impact of the reduced budget allocation would be migration from a fixed establishment of 182 126, in 2020/2021, to162 994, in 2023/2024, which implied a reduction of 19 182 members over the nextthree years. This will seriously compromise service delivery by the department.

 

1. Public submissions on the 2021 Appropriation Bill

 

The sections below provide an overview of the submissions that were made in response of the advertisement that was published in print media.

 

1. Children’s Institute (University of Cape Town) and Centre for Child Law (University of Pretoria)

 

The Children’s Institute (University of Cape Town) and Centre for Child Law (University of Pretoria) (CICCL) made a joint submission on the Bill and highlighted the pressing issues of child poverty and malnutrition and the negative long-term impact these have on the economy and the country as a whole. The CICCL urged Parliament to review the proposal by National Treasury to (i) limit the Child Support Grant (CSG) increase to just R10, with no further increase in the 2021/22 financial year, allowing it to fall behind food inflation and(ii) the reduced budget for the Foster Child Grant (FCG) while not budgeting for the parallel introduction of a CSG top-upfor orphans living with relatives, as planned in terms of the required comprehensive legal solution to the foster care crisis.

 

The CICCL viewed the aforementioned proposals as regressive and punitive to children as well as those who care for them. The CICCL recommended that the Committee ensure that the 2021 Medium Budget Policy Statement included adjustments to the CSG line item as follows:

 

• Provide for a further R10 increase to the CSG from 1 October 2021; and
• Allocate an additional R260 million to the CSG line item to enable the CSG top-up to be implemented from 1 October 2021 and onwards.

 

1. Public Service Accountability Monitor

 

The Public Service Accountability Monitor (PSAM) focussed on the budget process and the budget expenditure oversight work of Parliament and Provincial legislatures. It submitted that there was a growing call from civil society for improved oversight and consideration of inputs made by the public during the budget processes. PSAM submitted that supports these calls not only to increase the space for public input on fiscal policy and oversight but for the development of progressive mechanisms by which the public can contribute in advance of budget decisions being taken and receive timely feedback.

 

PSAM submitted that there were multiple ways in which Parliament itself could foster greater transparency in order to strengthen the developmental agenda, for instance through (i) sector budget transparency; (ii) provincial treasuries to ensure timely reporting of expenditure at the subnational level; (iii) and state-wide open data publication and reporting as well support for the development of open fiscal data.

 

PSAM recommended that the Committee engages Parliament’s Public Education Office (PEO) to develop concurrent public education and participation mechanisms specifically targeting greater public knowledge of and more informed engagement with the Appropriations and related Committees. This could be done by incorporating the following three processes:

 

• Improve Access to Information;
• Strengthen Public Education; and
• Participation mechanisms.

 

PSAM further submitted that the South African health and education systems in particular continued to reflect high levels of inequality. The least advantaged were heavily dependent on a strained public health and education sector while the wealthiest access private health and education services. To this end, PSAM recommended that the Committee requests National Treasury to do the following:

 

• Provide detailed, disaggregated information in the budget estimates within the administrative and functional classifications for health and education at the provincial levels.
• Improve the use by provinces of websites and portals such as www.vulekamali.gov.za  to share this information in machine-readable, open data formats that facilitate uptake and use by civil society.
• Ensure that disaggregated budget information indicates proposed, approved, and actual spending using consistent formats to allow the comparison of expenditures across the budget cycle – including transfers for sector spending through extrabudgetary funds.
• Explain the links between policies, budgets, and performance.
• Provide strong performance frameworks with indicators, targets, and outcomes, linked to public spending that allow the tracking of funds against performance targets.
• Include more comprehensive performance reporting frameworks in budget documents and provide clear explanations of the links between policies and budgets, between budgets and actual spending and, finally, between spending and results.

 

PSAM also made reference to the procurement challenges and the resultant impact of this on social services, especially related to the reported fraud and corruption in respect of personal protective equipment. It submitted that based on the importance of procurement practices in the provision of services to the public sector and the delivery of socio-economic rights, Parliament had an obligation to ensure that National Treasury and the Office of the Chief Procurement Officer (OCPO) made procurement and spending information publicly available. It further encouraged the Committee to urge National Treasury and the OCPO to provide progress reports on the processes of the draft Public Procurement Bill.

 

 

 

1. Organisation Undoing Tax Abuse

 

The Organisation Undoing Tax Abuse (OUTA) commented on the Bill and made the following recommendations:

 

• Government should improve allocative efficiency through the elimination of unnecessary activities within the delivery of services.
• Implement zero-based budgeting as soon as possible, with greater spending transparency to help with this.
• That the endless SOE bailouts be terminated and ensure that SAA staff receive their full severance packages, and that no further state funds will be used to prop up this airline.
• That the value of every SOE be assessed with a clear plan presented for those to be closed, sold or amalgamated, within six months. This assessment should include a list from the Special Investigating Unit (SIU) of those who face prosecution for corruption and maladministration.
• We support efforts to reduce the wage bill, and call for action against public servants implicated in wrongdoing such as fraudulent claiming of grants.
• That Cabinet be reduced by 20 per cent to address duplications in merged departments, and assess the form and functionality of departments and their agencies.
• That wasteful practices within Government such as photographs of political office bearers in all offices be terminated.
• Parliament should closely scrutinise the line items within the departments such as office rental: GCIS (Government Communication and Information System) pays more in office rental than the operating budgets of some Eastern Capehospitals.
• That the National Anti-Corruption Strategy (now six years in the making) be rolled out, with an emphasis on best practice methodologies to tackle corruption.
• That the budgets of the South African Revenue Service (SARS), the National Prosecuting Authority of South Africa (NPA) and the Special Investigative Unit (SIU)be increased in order to pursue the corrupt.
• That Parliament ensures that the financial records of all constituency offices be made public for the purposes of transparency and accountability.Parliament should establish a platform for public commitments so that Members of Parliament can be held accountable to their constituencies.
• That the financial challenges plaguing local government be addressed expeditiously as the collapse of this sphere of government should be regarded as a serious threat to South Africa. The Department of Cooperative Governance and Traditional Affairs (CoGTA) has spent R627 billion over the last nine years to improve municipalities whilst many of these were still struggling.
• That the Covid-19 vaccine rollout be closely monitored in order to ensure the available funding is spent effectively, efficiently and economically and that deadlines are met.
• That performance indicators match the essential outcomes required: for example, assess the indicators of the Department of Communications and Digital Technologies(DCDT).
• Ensure that departments are provided with clear, hard deadlines on key deliverables (such as digital migration).
• That the Department of Mineral Resources and Energy (DMRE) should be stopped from sacrificing service delivery in favour of funding a badly regulated nuclear sector which has conflicting policy.
• Ensure clarity on capital spending in the Department of Water and Sanitation (DWS), and provide greater transparency in tracking the spending and progress of projects.

 

4.4        Congress of South African Trade Unions

 

The Congress of South African Trade Unions (COSATU) submitted that it expected a 2021/22 budget that was going to focus on speeding up economic development in order to create jobs, focus on supporting rural and township economy, ensure people in all parts of the country have access to services, and then intensify the rural development and urban renewal programmes. COSATU was of the view that this budget and the Bill do not just fail in addressing the most pressing concerns facing South Africa, it also did nothing to fix the broken systems inside the state.

 

COSATU viewed the 2021/22 budget as being pro-business that was divorced from the realities of ordinary South Africans and it made the below comments and proposals with regard to the Bill.

Appropriations	Parliament must exercise its legislative powers and reverse the cuts to the CCMA and DTIC as well as the Departments of Health, Basic Education, SAPS and NSFAS. Parliament exercises its legislative power and remove vanity spending from the Budget e.g. the DIRCO embassy upgrading expenditure of R900 million.
Taxes	A review of the tax regime needs to be undertaken for the 2022 budget. It should look at how the tax burden upon working and middle income earners can be eased and to ensure that the wealthy pay their fair share. This should include increases in income tax, inheritance and estate duties and levies on luxury imports. SARS needs to be further reinforced e.g. additional financing to: Modernise its IT systems; Fill more than 800 critical  vacancies;  Increase customs inspections from the current 5 per cent rate and to prioritise illegal imports in the clothing, tobacco and other manufacturing sectors; and Crack down on tax evasion, in particular by the wealthy, the tobacco and the informal sectors.
Covid-19	A ramped up vaccine plan needs to be urgently developed to ensure more than 40 million persons receive their vaccines within 2021. Further reinforcements of the health care infrastructure, including the filling of vacancies needs to happen before the expected third wave in June 2021. Preparations for the National Health Insurance need to be accelerated and this requires increasing healthcare expenditure not decreasing it.
Economic and Social Relief	Extend the R350 Covid-19 Grant for the duration of the 2021/22 fiscal year. Extend the UIF Covid-19 TERS for restricted workers and businesses for as long as they remain under disaster management restrictions that prevent them from working. Treasury, the Reserve Bank and the commercial banks to present proposals on a revamping of the Loan Guarantee Scheme and take it to Nedlac for engagement with organised labour and business. A revamp should look at lower interest rates, easier payment terms, the usage of DFIs and the Post Bank to disperse loans and grants to incentivise job retention and creation. The tabling of the agreed amendment bill to allow workers who have experienced financial losses or distress limited access to their pension funds. This must be tabled to Parliament.
Corruption	A revamped single online and transparent public procurement system covering and binding upon all departments, municipalities, entities and State Owned Enterprises. This must be provided for in the Public Procurement Bill which needs to be fast tracked and tabled in Parliament by the end of 2021 not 2022. Centralised public procurement of key goods in bulk, e.g. text books, medical supplies etc. This can ensure cost efficiency and reduce the opportunities for corruption or the supply of sub-standard goods. The extension of the ban on public servants and members of the executives from doing business with the state to: National and provincial leaders of political parties holding seats in national cabinet and provincial and mayoral executive committees and their spouses and children. The spouses and children of members of national cabinet and provincial and mayoral executive committees. The urgent capacitation of commercial crimes courts and their prioritisation of corruption cases. This must include corruption in both the public and private sectors. Parliament holding the leadership of the National Prosecuting Authority, SA Police Service and Judiciary to account for their dismal records in the prosecution of corruption cases. Parliament holding the government to account for their failure to exercise its powers in the Auditing Amendment Act that empowers the state to seize the pensions and assets of politicians and managers found guilty of corruption and wasteful expenditure. Parliament to require Cabinet, Provincial and Municipal Executive Committees and senior managers in the public service, entities, SOEs and municipalities to undergo life-style audits annually. These should be conducted by SARS or another appropriate authority.
Public Service	Government must commit to respecting collective bargaining and the 2018 wage agreement. Government must engage with unions at the PSCBC on the wage bill and the next wage agreement. Government must reduce the packages of political office bearers and senior management in the public service, entities, SOEs and municipalities by 25 per cent. The President must reduce the number of Deputy Ministers from 33 to 10. A single wage bill structure must be put in place for the entire state, including departments, entities, SOEs and municipalities, and to extend the salary caps of senior managers from the public service to entities, SOEs and municipalities. The Public Investment Corporation, which invests public servants’ pension funds must demand companies where it invests draft plans on how they will reduce their wage gaps and ensure that management does not earn exorbitant packages.
Economic Recovery and Reconstruction Plan	The urgent effecting of the proposed amendment of Regulation 28 to allow for pension funds to invest in infrastructure. Clear oversight mechanisms to prevent corruption in the infrastructure programme. Fast tracking of the SOE Shareholder Management Bill. Prioritisation of investments in ports. Clear road maps for embattled SOEs that are not based upon throwing workers into the unemployment queue and where job losses may be unavoidable, that a just transition jobs plan be put in place to transition those affected workers to new jobs.

 

4.5        Equal Education

 

Equal Education (EE) submitted that EE is concerned that the Bill failed to meet the needs of the basic education sector, further jeopardising learners' right to basic education, freedom, dignity and equality. According to EE, these funding decisions were impacted by government's commitment to austerity budgeting. EE submitted that it was important for the Committee to note that the decision to fund Covid-19 mitigation and adaptation in the basic education sector from within existing baselines, will have a direct impact on service delivery.

 

EE further alluded to Section 195 of the Constitution which states that public administration must be governed by South Africa’s democratic values and constitutional principles. These include the progressive realisation of socio-economic rights and the immediate realisation of the right to basic education, the maintenance of high ethical standards and the efficient and effective use of public resources. Against the backdrop of these rights and values. EE made the following recommendations to the Committee:

 

• Advocate for basic education funding that maintains positive growth and keeps in line with inflation specific to the sector, as per the Basic Education Price Index.
• Advocate for the basic education sector to receive additional funds to support and enable its Covid-19 response.
• Demand that minimum per learner funding thresholds are met. EE further requested that theCommittees prioritise this issue and provide increased oversight of provincial educationdepartments.
• Consider the need to provide additional funding to the National School Nutrition Programme to cover Covid-19related sanitising and safety needs as well as the likely increased need resulting from thesocio-economic challenges brought about by the Covid-19 pandemic.
• Advocate against the reprioritisation of school infrastructure allocations. In particular, EE request that the Committee ensure that sufficient funding is provided to the School Infrastructure Backlog Grant and the Education Infrastructure Grant for long terminfrastructure projects, especially as the DBE has proposed that all learners in primary schoolreturn as of the end of May 2021.
• Support advocacy calling for improved transparency of budgetary decisions early in the budgetdecision-making process, so that trade-offs which affect rights fulfilment are adequately and meaningfully participative.

 

1. Committee Findings and Observations

 

Having deliberated and considered all the submissions made by the above stakeholders on 2021 Appropriation Bill (B4-2021), the Standing Committee on Appropriations makes the following findings and observations:

 

1. The Committee notes government’s medium term policy objectives of prioritising economic recovery and consistent fiscal consolidation initiatives.  The Committee has always held a view that inclusive economic growth is the driving force that can solve the triple challenges of unemployment, poverty and inequality facing South Africa, which has been made worse by the Covid-19 pandemic. Furthermore, the Committee is of the view that if government focuses more on inclusive economic growth initiatives, in the long run, this will solve the public finance challenges facing the country due to the increased tax revenue.

 

1. The Committee notes that relative to the 2020 Budget, main budget non‐interest spending is reduced by R27.675 billion in 2021/22 largely due to the proposed allocation reduction on compensation of employees. However, the Committee would again like to express its reservations on the reduction compensation of employees budget. The Committee is still of the view that until the wage negotiations processes are concluded, it is premature to accept the compensation of employees budget reductions with absolute certainty.The Committee notes the submission by the FFC that the appropriations for compensation of employees are premised on the assumption that the wage freeze announced during the Budget will be effected. The outcome of the ongoing wage bargaining negotiations may necessitate adjustments to COE and appropriations across all votes, if it does not lead to an agreement with labour.

 

1. The Committee notes the proposed technical amendments to the names of certain votes in the Schedule to the Bill for Vote 32 in column 2 of the Schedule, by the substitution for the phrase “Environment, Forestry and Fisheries” by the phrase “Forestry, Fisheries and the Environment”; and for Vote 37 in column 2 of the Schedule, by the substitution for the phrase “Sports, Arts and Culture” by the phrase “Sport, Arts and Culture.” The Committee further notes that there will no funding implications for these proposed changes.

 

1. The Committee notes and welcomes the proposed additional allocation of R11 billion to the spending framework of 2021/22 for the public employment initiatives. Given the adverse impact that Covid-19 is having on the livelihoods of South Africans, the Committee views this allocation as continued commitment by government on its central objectives of job creation, unemployment reduction and subsequently reducing the overall inequality levels. This is now more important in light of the high unemployment rate that has become a permanent feature on the daily lives of many South Africans, made worse by the Covid-19 pandemic and its associated lockdowns.

 

1. The Committee notes and welcomes the R15.3 billion proposed allocation to manage further waves of the Covid-19 pandemic. The Committee is encouraged by overall government’s response to the pandemic and in full support of government initiatives that prioritizes the health and lives of the South African population.

 

1. The Committee notes and welcomesthe proposed allocation of R5 billion in 2021/22, to be funded through reprioritisation, and another R2 billion in 2022/23 and 2023/24 for the recapitalisation of the Land and Agricultural Bank of South Africa (Land Bank). The Committee notes that this proposed allocation over the medium term is justified on the basis of putting the Land Banks into stable and sustainable development path. Even though the Committee acknowledges the importance and the strategic nature of the Land Bank, it cautions that it will not continue to recommend the appropriation of money to government entities when there is no evidence of returning these entities to self-sufficiency and a sustainable path. The Covid-19 pandemic has demonstrated the need for government to obtain value for money with deteriorating public finances, and always increasing government priorities. The Committee wants to emphasise that progress must be visible and measurable with clear governance structures whilst meeting clear quantitative and qualitative operational and financial performance goalsto justify future allocations to State Owned Entities.

 

1. The Committee notes and welcomes the submission by the FFC that government should appropriate allocations to SOEs through a Special Appropriation Bill in order for conditions accompanying these bailouts to be clearly articulated and made public. The Committee supports this proposal because over time, bailing out SOEs without putting stringent conditions has proved to be unsuccessful. Furthermore, the Committee notes and welcomes the submission by FFC that the massive financial support to SOEs undermined the fiscal consolidation exercise and increased the debt burden.

 

1. The Committee notes with concern the submission by the FFC that votes which are crucial for economic recovery continue to receive a small proportion of the total appropriation, despite the priority placed on the economic reconstruction and economic recovery plan (Departments of  Industry, Trade and Competition and Small Business Development receive an appropriation of R9.7 billion and R2.5 billion respectively).

 

1. The Committee notes with concern the submission by the Department of Social Development that the proposed allocation reduction of R6.6 billion in 2021/22 (38.6 billion over the MTEF) will compromise the Department’s ability to scale up interventions such as on HIV & AIDS, provision of universal access to ECD, addressing issues of social crime prevention and victim empowerment will be compromised. The Committee views these programmes as very important because they are directed to victims of social crime and early childhood development. The HIV and AIDS pandemic has been one of big challenges facing South Africa and the rest of the world, particularly developing nations before the emergence of the Covid-19 pandemic, reducing allocations intended to fight this pandemic is problematic to the Committee.

 

1. The Committee notes with concern the submission by the Department of Defence that its overall allocation reduction over the 2021 MTEF  will have serious implications for both the medium and long-term as it may result in the SANDF being unable to execute its constitutional mandate. In addition, the Committee is concerned of the implications of these allocation reduction in relation to maintenance backlogs, reduced stock levels, short term maintenance contracts and inability for mid-life upgrades. The potential inability of the Defence to execute its constitutional mandate is very scary and problematic to the Committee.The Committee views it in a serious light that these proposed allocation reductions may affect the availability of prime mission equipment in the land, air- and maritime defence programs, resulting in all capabilities being systematically eroded. 

 

1. The Committee notes with concern the submission by the Department of Correctional Services that the proposed allocation reduction of R3.3 billion in 2021 (R11 billion over the 2021 MTEF) might result in the department being unable to render effective correctional services. What is more concerning to the Committee about these proposed allocation reductions is the existence of a possibility that the department might be unable to fulfil section 8(5) of the Correctional Services Act on the 3 meal intervals, which might further bring about litigations against the state. The Committee is also concerned about the overall safety of prison warders due to the reported ever-decreasing ratio of on correctional official to inmates, currently standing at 1:9.

 

1. The Committee notes with concern the reported accommodation debt (R664 million as at the end of March 2021) payable to the Department of Public Works and Infrastructure (DPWI) which are increasing despite a reported agreement to charge lower rental fees to the department in order to ease its financial strains. The Committee is of the view that government departments should be able to resolve interdepartmental issues without any delays that might have unintended consequences.

 

1. The Committee notes with concern the proposed allocation reduction of R6.9 billion to the National Student Financial Aid Scheme and R2.4 billion for University Infrastructure over the 2021 MTEF. Given the already known funding challenges facing the majority of students, coupled with the Fee Free Higher Education Policy, the Committee is of the view that further reduction of NSFAS funding will bring instability to the entire education sector, as evidenced by what is happening in every begin of academic year in higher education institutions.

 

1. The Committee notes the submission by the Children’s Institute and Centre for Child Law which urged Parliament to review the Bill proposal to limit the Child Support Grant increase by R10, the reduction of the Foster Child Grant while no funding is made available for the parallel introduction of a CSG top-upfor orphans living with relatives. The Committee appreciates the needs to support children, particularly orphans and will have engagements with National Treasury in order to find lasting solution around the funding of children, and orphans in particular.

 

1. The Committee notes the submission by the Public Service Accountability Monitor who suggests the need for improved budget expenditure oversight by Parliament and Provincial legislatures. The Committee also welcomes the call to improve oversight and consideration of inputs made by the public during the budget processes. To that end, the Committee is committed to continuously review its public involvement process during the processing of the budget, in line with Parliament process. However, the Committee will continuously engage with National Treasury to ensure that its budget processes are in line with the requirement of the constitution regarding public involvement.

 

1. The Committee notes and welcomes the submission by OUTA that the budgets of the South African Revenue Service, the National Prosecuting Authority of South Africa and the Special Investigative Unit should be increased in order to prevent financial leakages and pursue the corrupt. The Committee has always been of the view that eradicating corruption will lead to improved service delivery and improve the quality of life for every South African.

 

1. The Committee notes the submission by COSATU that Parliament should exercise its legislative powers and reverse the cuts to the CCMA and the Department of Trade, Industry and Competition as well as the Departments of Health and Basic Education, South African Police Service and NSFAS.

 

1. The Committee notes the submission by COSATU that National Treasury, the South African Reserve Bank and the commercial banks should present proposals on revamping of the Loan Guarantee Scheme and take it to Nedlac for engagement with organised labour and business. The Committee has always viewed the Government Loan Guarantee Scheme as an important lever to rescue business and protect jobs. The slow uptake or slow provision of these government guaranteed loans has been a huge disappointment to the Committee considering the number of small business who were shut down and job lost due to the Covid-19 pandemic and its associated lockdowns.

 

1. Recommendations

 

The Standing Committee on Appropriations, having considered the above submissions and inputs on the Appropriation Bill [B4-2021], recommends as follows:

 

1. That the Minister of Finance ensures that National Treasury provide a comprehensive report on the possible impact and risks associated with the proposed allocation reduction to the Department of Defence. Furthermore, the Minister of Finance must ensure that National Treasury consider reversing the proposed allocation reduction to the Department of Defence during the 2021 MTBPS. This should be considered in light of the submission by the Department of Defence to the Committee that given these continued allocation reductions, it might be unable to fulfil its constitutional mandate. Using the same reprioritisation methods that are used by National Treasury to fund other SOE’s, National treasury is encouraged to use similar methods to make funding available to the Department of Defence during the tabling of the 2021 MTBPS.

 

1. The Ministers of Finance, Defence and Public Works and Infrastructure should consider allowing South African National Defence Force to maintain its infrastructure and other security cluster infrastructure.

 

1. The Minister of Finance ensures that National Treasury considers reprioritising fund to the Department of Correctional Services to allow it carry its mandate in a manner that is safe to correctional services employees and in a manner that will not compromise the rights of prisoners. National Treasury must report to the Committee before the tabling of the 2021 MTBPS.

 

1. The Minister of Finance ensures that National Treasury considers reallocating funds to the Department of Police during the 2021 MTBPS to ensure that the Department continues to deliver on its mandate. National Treasury must report to the Committee before the tabling of the 2021 MTBPS.

 

1. The Committee stresses the need for speedy implementation of Economic Recovery and Reconstruction Plan (ERRP). Each department should report to their respective portfolio committee and SCOA on how they are implementing the ERRP, especially localisation and economic transformation before the tabling of the 2021 MTBPS.

 

1. The Minister of Public Works and Infrastructure ensures that the Department provide a comprehensive report on rental accommodation Bill owed by the Department of Correctional Services and its implications thereof. Furthermore, the Minister must ensure that the Department provides a comprehensive report on total rental accommodation bill owed by national government departments and their entities. The department must provide this report before the tabling of the 2021MTBPS.

 

1. Committee recommendationson the Bill

 

The Standing Committee on Appropriations, having considered the Appropriation Bill[B4–2021] (National Assembly: Section 77) referred to it and classified by the Joint Tagging Mechanism; recommends that the Bill be adopted withthe following amendments:

 

1. On page 26, in column 2 of the Schedule, amend the name of Vote 32 by replacing “Environment, Forestry and Fisheries” with “Forestry, Fisheries and the Environment”.

 

1. On page 32, in column 2 of the Schedule, amend the name of Vote 37 by replacing “Sports, Arts and Culture” with “Sport, Arts and Culture”.

 

1. Conclusion

The Committee appreciates the valuable contributions and advices made by the public and different organisations when processing the Bill. Ideally, the Committee would have loved to take every recommendation made, however, the realities brought by Covid-19 and limited government resources means that competing priorities have to be accommodated within the available fiscal envelope. The Committee also notes the proposed allocation reduction in the Bill, however it is  concerned about the “one size fits all” approach that is used to effect these budget reductions.The Committee is of the view that each department should be treated according to its strategic nature to the country. This will allow departments to be treated on their merits or demerits. The Committee further emphasises the need for government departments to always ensure efficient, economic and effective use of appropriated funds in line with the principles set out in Section 195 of the Constitution and other relevant legislations governing the use of public funds, and applicable to the Republic of South Africa.

 

Report to be considered.