ATC221129: Report of the Standing Committee on Appropriations on the Adjustments Appropriation Bill [B23 – 2022], Dated 29 November 2022

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on the Adjustments Appropriation Bill [B23 – 2022], Dated 29 November 2022

The Standing Committee on Appropriations having considered the Adjustments Appropriation Bill [B23-2022] (National Assembly – section 77), referred to in terms of section 12 (15) of the Money Bills and Related Matters Act, 2009 (Act No. 9 of 2009) (as amended), reports as follows:

Introduction

The Minister of Finance tabled the 2022 Adjustments Appropriations Bill (henceforth referred to as the Bill) in Parliament on 26 October 2022 during the presentation of the 2022 Medium Term Budget Policy Statement (MTBPS). The Bill was tabled in Parliament in terms of section 12(1) and (2) of the Money Bills and Related Matters Act as amended by the Money Bills Amendment Procedure and Related Matters Amendment Act, 2018 (Act No. 13 of 2018). Section 12(1) of the Money Bills and Related Matters Act requires the Minister of Finance to table a national adjustments budget as envisaged in section 30 of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (hereafter referred as the PFMA). Section 12(2) of the Money Bills and Related Matters Act requires that “an adjustments appropriation Bill must be tabled with a national adjustments budget”. The Bill was referred to the Committee on 9 November 2022 for consideration and report in terms of section 12(15) of the Money Bills and Related Matters Act.

In addition to National Treasury briefing the Committee on the Bill in its entirety, the Financial and Fiscal Commission and Parliamentary Budget Office were also invited to comment on the Bill. Furthermore, to deliberate and understand the possible service delivery implications of the budget adjustments, the Committee invited national government departments who were affected by the budget adjustments to make oral and written submissions on the overall impact of these budget adjustments on their respective legislative mandate. The Department of Social Development as well as the South African Social Security Agency (SASSA), briefed the Committee on 18 November 2022. In addition, the Department of Cooperative Governance and Traditional Affairs as well as the National Disaster Management Centre (NDMC) were invited to brief the Committee on 22 November 2022.

To facilitate public participation and involvement, an advertisement was published in national and community newspapers from 27 to 30 October 2022 inviting general public and all interested stakeholders to make written submissions and comments on the Bill. The Congress of South African Trade Unions, Public Service Accountability Monitor, Organisation Undoing Tax Abuse, and Equal Education made comments on the Bill in response to the aforementioned advertisement. A public hearing on the Bill was held on 25 November 2022 via the Zoom virtual meeting platform.

Section 43 (1) of the Public Finance Management Act of 1999 (PFMA) allows Accounting Officers to utilise savings in the amount appropriated under a main division (programme) within a vote to defray excess expenditure under another main division within the same vote, unless the relevant treasury directs otherwise. However, section 43 (2) states that the amount of savings under a main division of a vote that may be utilised in terms of subsection (1) may not exceed 8 per cent of the amount appropriated under that main division. To this end, the Committee identified departments that have exceeded the 8 per cent requirement of the PFMA and National Treasury supplied the reasons for these virements and supported these virements. These departments were National Treasury, Higher Education and Training, Health, Social Development, Independent Police Investigative Directorate, Communication and Digital Technologies, Employment and Labour, Forestry, Fisheries and the Environment, Science and Innovation, and Trade, Industry and Competition. Furthermore, section 43 (4) does not authorise (a) the utilisation of savings on an amount specifically and exclusively appropriated for purpose mentioned under a main division within a vote, (b) the utilisation of savings on an amount appropriated for transfer to another institution, and (c) utilisation of savings on an amount appropriated for capital expenditure in order to defray current expenditure.

This report focuses on the proposed adjustments to the Appropriations Act (Act No. 7 of 2022) as tabled by the Minister of Finance and the matters raised during the engagements with the invited stakeholders and the organisations that made submissions in response to the Committee advertisements.

Overview of the 2022 Adjustments Appropriation Bill

Total in-year spending adjustments amounts to R13 billion, inclusive of the total adjusted appropriations per vote and adjusted estimates of direct charges against the National Revenue Fund (NRF). The Adjustments Appropriation Bill provides for increases to allocations set out in the main Appropriation Act of 2022. The in-year spending adjustments is as follows:

In total, the net effect of the Adjustments Appropriation is an increase to vote appropriations by R7.453 billion as follows:

Unforeseeable and unavoidable expenditure amounting to R6.3 billion, prompted largely by the flood damages in KwaZulu-Natal and Eastern Cape provinces.
Expenditure earmarked in the 2022 Budget Speech for future allocation totalling R500 million towards the Presidential Employment Initiative (PEI), with the main focus being the digitisation programme for the Department of Home Affairs.
Rollovers totalling R990 million. The bulk of the rollovers emanate from two votes (Agriculture, Land Reform and Rural Development vote and Communications and Digital Technologies vote) for the roll-out of Phase 2 of the PEI.
Total declared unspent funds amount to R1.96 billion and is largely driven by the Social Development Vote where R1.8 billion was unspent due to lower than anticipated uptake of the Social Relief of Distress (SRD) grant.

Of the total in-year adjustments of R13 billion, R7.24 billion is with respect to direct charges against the NRF as follows:

A proposed additional allocation of R5.93 billion towards Debt service costs.
A proposed additional allocation of R48.5 million as unforeseeable and unavoidable expenditure through the Provincial Equitable Share for provincial Social Development departments for the continuation of care and protection of flood victims who were placed in shelters in KwaZulu-Natal.
A proposed additional allocation of R306.26 million for State Owned Companies (SOEs): Denel R204.7 million and Land and Agricultural Development Bank R101.56 million.
A proposed additional allocation of R618.82 million for the skills levy and sector education and training authorities (SETAs).

Table 1: Unforeseeable and unavoidable expenditure

Vote and description of expenditure		R thousand
National government		6,346,941
2	Parliament	118,000
	Initial costs to rehabilitate the Parliamentary building damaged by fire and additional accommodation for Parliament members
3	Cooperative Governance	3,637,219
	R3 292.719 million for the municipal disaster recovery grant for the reconstruction and rehabilitation of municipal infrastructure damaged by floods in the KwaZulu-Natal, Western Cape, and Eastern Cape, R247.614 million to replenish the municipal disaster response grant; and R96.886 million for the provincial disaster response grant
16	Basic Education	116,766
	Reconstruction and rehabilitation of schools damaged by floods in KwaZulu-Natal and Eastern Cape
23	Defence	193,450
	Operation CHARIOT: Deployment of forces to flood affected areas of Kwazulu-Natal
33	Human Settlements	442,106
	R350 million top-up funding for the provincial emergency housing grant and R92.106 million for the informal settlements upgrading partnership grant
40	Transport	1,839,400
	R1 020.4 million for the provincial roads maintenance grant: Disaster relief component; R454 million for the South African National Roads Agency: Non-toll network (Capital); and R365 million for the South African National Roads Agency: Damage to toll roads from floods in KwaZulu-Natal
Provincial government		48,500
8	National Treasury
	Provincial equitable share	48,500
	Provincial Department of Social Development for the continued care and protection of flood victims who were placed in shelters in KwaZulu-Natal
Total		6,395,441

Source: National Treasury (2022) Adjustments Appropriation Bill

Table 2: Expenditure earmarked in the 2022 Budget speech for future allocation

Vote and description of expenditure		R thousand
5	Home Affairs	500,000
	Presidential employment initiative: Home Affairs digitisation programme

Total		500,000

Source: National Treasury (2022) Adjustments Appropriation Bill

Table 3: Roll-overs

Vote and description of expenditure		R thousand
3	Cooperative Governance	12,835
	Ex-gratia payment for ex-councillors
6	International Relations and Cooperation	102,000
	R78 million for the procurement of server and storage to refresh infrastructure, laptops and desktops; and R24 million for the repatriation of South African citizens due to COVID-19 travel restrictions
14	Statistics South Africa	193,972
	Remuneration Census 2022 field staff
27	Office of the Chief Justice	26,522
	Purchase of server, storage, and virtualisation to refresh infrastructure
29	Agriculture, Land Reform and Rural Development	231,000
	Payment to subsistence producers selected in phase 2 of the presidential employment initiative
30	Communications and Digital Technologies	200,000
	Broadband Access Fund: Phase 2 of the presidential employment initiative
31	Employment and Labour	108,175
	R3.849 million for the construction of the Taung labour centre, R32.326 million for the completion of an ICT maintenance and support project for enterprise resource planning, R20 million for the presidential employment initiative for recruiting intern psychologists, and R52 million for the Government Technical and Advisory Centre to appoint an ecosystem manager
34	Mineral Resources and Energy	72,865
	R1 million for the integrated national electrification programme grant, R28.045 million for the payment of integrated national electrification programme: Non-grid electrification service providers, and R43.82 million for the solar water heater programme
40	Transport	27,775
	R7.08 million for new ICT equipment and R20.695 million for the resettlement of 3 858 households on Passenger Rail Agency of South Africa reserves
41	Water and Sanitation	15,341
	R15.341 million for the regional bulk infrastructure indirect grant for operational expenditure for the Emfuleni local municipality's water infrastructure (Vaal River System)
Total		990,485

Source: National Treasury (2022) Adjustments Appropriation Bill

Table 4: Shifting of funds between votes

Vote and description of expenditure		R thousand
10	Public Enterprises	2,937,000
	Funds shifted from the Social Development for Transnet to repair flood-damaged infrastructure
13	Public Works and Infrastructure	( 388,910 )
	Declared unspent funds of R388.91 million shifted to Transport to construct 24 bridges in Eastern Cape and Limpopo
19	Social Development	( 3,692,303 )
	Declared unspent funds of R755.303 million shifted to Defence and R2.937 billion shifted to Public Enterprises
23	Defence	755,303
	Funds shifted from Social Development to cover a budget shortfall due to the extended deployment of the South African National Defence Force as part of Operation VIKELA in Mozambique
25	Justice and Constitutional Development	89,603
	Funds shifted from Agriculture, Land Reform and Rural Development to provide for the legal representation function performed by Legal Aid South Africa
29	Agriculture, Land Reform and Rural Development	( 89,603 )
	Funds shifted to Justice and Constitutional Development to provide for the legal representation function being performed by Legal Aid South Africa
31	Employment and Labour
	Funds shifted from Forestry Fisheries and the Environment for the secretariat of the presidential climate commission and its associated responsibilities	9,995
32	Forestry Fisheries and the Environment
	Funds shifted to Employment and Labour for the secretariat of the presidential climate commission and its associated responsibilities	( 9,995 )
40	Transport	388,910
	Funds shifted from Public Works and Infrastructure to the provincial roads maintenance grant to construct 24 bridges as part of the Welisizwe rural bridges programme
Total		–

Source: National Treasury (2022) Adjustments Appropriation Bill

Table 5: Self-financing expenditure

Vote and description of expenditure		R thousand
4	Government Communication and Information System	1,000
	Expenditure to produce Vuk'uzenzele newspaper, which is funded from revenue generated through advertising in the newspaper
5	Home Affairs	798,000
	Expenditure incurred issuing official documents, which is defrayed by revenue generated from issuing the documents
22	Correctional Services	896
	Expenditure for offender gratuities, which is funded from revenue generated from the hiring out of offender labour
23	Defence	760,185
	Expenditure for defence activities, which is defrayed from reimbursements from the United Nations for South Africa’s contribution towards peace support operations, and the sale of equipment and spares procured through the special defence account
39	Trade Industry and Competition	19,871
	R9.246 million for unitary payment in respect of the public-private partnership for shared campus accommodation, which is funded from unitary payments received from public entities and R10.625 million for expenditure towards the Industrial Development Corporation: Tirisano Construction Fund for projects that form part of the annual plan under the voluntary rebuild programme settlement agreement
Total		1,579,952

Source: National Treasury (2022) Adjustments Appropriation Bill

Table 6: Declared unspent funds and projected underspending

Vote and description of expenditure		R thousand
8	National Treasury	101,557
	On payments for financial assets
10	Public Enterprises	3,800
	Compensation of employees
13	Public Works and Infrastructure	21,548
	Transfers and subsidies
19	Social Development	1,769,697
	R350 social relief of distress grant
28	Police	31,806
	Payments for capital assets
36	Small Business Development	35,000
	Compensation of employees
Total declared unspent funds		1,963,408
National government projected underspending		3,917,343
Local government repayment to the National Revenue Fund		2,000,000
Total		7,880,751

Source: National Treasury (2022) Adjustments Appropriation Bill

The National Treasury has reported the following proposed virements that needs to be approved by Parliament:

National Treasury (Vote 8): a proposed total of R13 million is shifted from the Public Finance and Budget Management programme (Development Bank of Southern Africa) to the International Finance Relations programme (Financial intermediary Fund). In addition, a proposed total of R86.2 million is shifted from the Financial Accounting and Supply Chain Management (SCM) systems programme (Integrated financial management project) to the International Financial Relations programme for the compensation to the Common Monetary.

Department of Higher Education and Training (Vote 17): a proposed total of R54 million is shifted from the Technical and Vocational Education and Training programme (compensation of employees) to the University Education programme to fund the upgrading of the National Student Financial Aid Scheme ICT. Furthermore, a proposed total of R260 million is shifted within the Technical and Vocational Education and Training programme for the payments of employee remunerations where post-provisioning norms have not been implemented.

Department of Health (Vote 18): a proposed total of R1.1 million is shifted from the Communicable and Non-Communicable Diseases programme (business and advisory services) to the Health System Governance and Human Resources Programme as a transfer to the South African Medical Research Council for the Global Adult Tobacco Survey.

Department of Social Development (Vote 19): a proposed total of R538 million is shifted within the Social Assistance programme due to lower than anticipated uptake in social grants from Households to Payments for financial assets (social assistance debt write-off).

Independent Police Investigative Directorate (Vote 24): a proposed total of R1.9 million, R989 000 and R5.4 million are shifted from the Investigation and Information Management programme (vacant posts) to the Administration programme for the procurement of business and advisory services, computer services, and minor assets as well as ICT equipment. A proposed total of R1 million is shifted from the Legal and Advisory Services programme to the Administration programme for the procurement of ICT equipment. Furthermore, a proposed total of R2 million is shifted within the Administration programme (vacant posts) for the procurement of computer services.

Department of Communications and Digital Technologies (Vote: 30): a proposed total of R 500 000 is shifted from the ICT Policy Development and Research programme (travel and subsistence) to the ICT Information Society and Capacity Development programme for the establishments of the artificial intelligence hubs. Furthermore, a proposed total of R5.5 million is shifted from the ICT Policy Development and Research programme (business and advisory services, consultants) to the ICT Information Society and Capacity Development for the establishments of the artificial intelligence hubs.

Department of Employment and Labour (Vote 31): a proposed total of R12 million is shifted within the Administration programme (vacant posts) for the construction of Standerton and Taung labour centres; repair and renovation of Upington and Ulundi labour centres. Furthermore, a proposed total of R55 million is shifted from the Inspection and Enforcement Services programme (vacant posts) various programmes. These programmes include a proposed total of R10 million is shifted to the Administration programme for the construction of Standerton and Taung labour centres; repair and renovation of Upington and Ulundi labour centres, while R45 million is shifted to the Labour Policy and Industrial Relations programme for the hosting of the fifth global conference on the elimination of child labour.

Department of Forestry, Fisheries and the Environment (Vote 32): a proposed total of R987 000 is shifted from the Oceans and Coasts programme (operating payments to the Climate Change, Air Quality and Sustainable Development programme to fund the South African Whether Services.

Department of Science and Innovation (Vote 35): a proposal to shift funds from the Research, Development and Support programme (research and development infrastructure) to the Technology Innovation programme (departmental agencies and accounts) is as follows:

A proposed total of R18.7 million is shifted to the Deep Space Ground Station facility;
A proposed total of R2.8 million is shifted to the South African National Space Agency: Space Weather Centre.
A proposed total of R7 million is shifted to the Bio African Convention 2022.
A proposed total of R10 million is shifted to the data analysis and research work-stream for the energy national joint operation and intelligence structures.
A proposed total of R40 million is shifted to various non-profit organisations for vaccine innovation development and manufacturing strategy.
A proposed total of R50 million is shifted to various non-profit organisations for the hydrogen society roadmap catalyst project.

In addition, a proposal to shift funds from the Research, Development and Support programme (strategic science platforms, science awareness, human resources development, and cyber infrastructure) is as follows:

A proposed total of R144 million is shifted from the strategic science platforms to the National Research Foundation: square Kilometre Array.
A proposed total of R13.3 million is shifted from the science awareness programme to the National Research Foundation: square Kilometre Array.
A proposed total of R1.2 million is shifted from the human resource development programme to the National Research Foundation: square Kilometre Array.
A proposed total of R70.3 million is shifted from the cyber infrastructure programme to the National Research Foundation: square Kilometre Array.

A proposed total of R2.8 million is shifted from the Socio-economic Innovation Partnership programme to the Research, Development and Support programme for the National Research Foundation: square Kilometre Array.

Department of Trade, Industry and Competition (Vote 39): a proposal to shift funds within the programmes of the department is as follows:

A proposed total of R11.2 million is shifted from the Administration programme (catering, communication, contractors, entertainment, fleet services, operating leases, travel and subsistence, venues and facilities) to the Industrial Financing programme for manufacturing development incentives.
A proposed total of R6 million is shifted from the Trade Policy programme (contractors, travel and subsistence, venues and facilities) to the Industrial Financing programme for manufacturing development incentives.
A proposed total of R7.5 million is shifted within the Industrial Policy Programme (CSIR) to various non-profit organisation for trade and industrial policy strategies.
A proposed total of R1.5 million is shifted from the Industrial Policy programme (travel and subsistence) to the Industrial Financing programme (public corporations and private enterprises) for manufacturing development incentives.
A proposed total of R3.5 million is shifted from the Industrial Policy programme (operating payments, travel and subsistence) to the Industrial Financing programme (public corporations and private enterprises) for manufacturing development incentives.
A proposed total of R1 million is shifted from the Industrial Policy programme (machinery and equipment) to the Industrial Financing programme (public corporations and private enterprises) for services sector development incentives on the film and television production.
A proposed total of R72.8 million is million is shifted from the Industrial Policy programme (National Metrology Institute of South Africa) to the Industrial Financing programme (public corporations and private enterprises) for services sector development incentives on the film and television production.

A proposal to shift funds from various sub-programmes of the Consumer and Corporate Regulation programme to other programmes of the department is as follows:

A proposed total of R2.8 million is shifted within the sub-programme from consultant’s services to the International Financial Reporting Standards Foundation.
A proposed total of R296 000 is shifted from consultants’ services to the Industrial Financing programme for manufacturing development incentives.
A proposed total of R2 million is shifted from the catering, operating payments, travel and subsistence to the Industrial Financing Programme for manufacturing development incentives.
A proposed total of R3.3 million is shifted from advertising, travel and subsistence to the Industrial Financing Programme for manufacturing development incentives.

A proposal to shift fund within various sub-programmes of the Industrial Financing programme is a follows:

A proposed total of R3.4 million is shifted from travel and subsistence to manufacturing development incentives.
A proposed total of R6.2 million is shifted from catering, consultants, operating leases, operating payments, travel and subsistence, venues and facilities to the manufacturing development incentives.
A proposed total of R2.4 million is shifted from computers and hard drives to the services sector development incentives for film and television production.

In addition, a proposal to shift funds from the Competition Policy programme to the Industrial Financing programme is as follows:

A proposed total of R641 000 is shifted from travel and subsistence to the manufacturing development incentives.
A proposed total of R1.5 million is shifted from travel and subsistence to the services sector development incentives for film and television production.
A proposed total of R5.7 million is shifted from catering, consultants, travel and subsistence to the services sector development incentives for film and television production.

Adjustments per identified department

The section below outlines the adjustments on budget allocations for the departments, which were identified by the Committee for briefings and written submissions on the Bill.

Department of Social Development

The Department of Social Development’s (DSD) 2022/23 main appropriation of R257.001 billion was adjusted downwards by R5.462 to R251.539 billion. Total expenditure as at the end of the second quarter of the 2022/23 financial year was R111.081 billion or 44.78 per cent of the adjusted appropriation. In terms of non-financial performance, as at the end of the second quarter of the 2022/23 financial year, the Department reported that it achieved only 48 or 74 per cent of its total 65 targets, leaving a variance of 17 targets.

With regard to the SRD grant, SASSA reported that an amount of R44 billion was allocated for the grant to target approximately 10 million individuals for the 2022/23 financial year. Since the period April to October 2022, SASSA has committed R16 billion to provide for those who have been approved. SASSA reported that at the current uptake trend, if no further changes were made to the regulations, it was likely to spend between R31 to R32 billion and reach just over 8 million clients by the end of the financial year (excluding appeals by individuals who were not approved). Furthermore, approximately 3 per cent of all appeals were upheld and was therefore not likely to impact the budget allocation. To this end, SASSA declared a saving totalling R6 billion in respect of the SRD grant. As at 8 November 2022, SASSA reported that a total of twelve million nine hundred and thirty thousand six hundred and thirteen (12 930 613) applications for the SRD grant were received from South Africans and 8 106 applications from non-South Africans.

SASSA reported that the SRD-R350 appeals website, hosted by DSD, was activated on 27 June 2022. The appeals process for the new iteration of the Covid-19 SRD-R350 was integrated with the electronic and automated platform used for the lodging, verification and processing of the SRD-R350 by SASSA. The said integrating lessened the burden on declined applicants as their personal information was preloaded on the system and the lodging of appeals was accordingly quick and easy. SASSA reported that as of 12 October 2022 a total number of five million two hundred and thirty thousand two hundred and fifty-six (5 233 256) appeals were received via the SRD-R350 DSD appeals website (as from June 2022). The processes governing the consideration of appeals for the SRD-R350 is that the Independent Tribunal would during considering of appeals, reassess the declined decision of SASSA against the relevant updated information at its disposal and the prescribed qualifying criteria. The Independent Tribunal finalized all appeals related to June 2022 (excluding care givers which are to be reprocessed by SASSA).

Department of Cooperative Governance and Traditional Affairs

The Department of Cooperative Governance and Traditional Affairs’ (Cogta) 2022/23 main appropriation of R111.364 billion was adjusted upwards by R3.650 billion to R115.014 billion. The Department spent R42.180 billion to date or 36.7 per cent of the adjusted budget. Cogta provided an overview of the financial performance in terms of the Municipal Infrastructure Grant (MIG) and reported that R4.962 billion has been transferred to the 218 municipalities from which R2.397 billion or 48.3 per cent has been spent as at the end of the second quarter of the 2022/23 financial year. Cogta reported that from the transferred funds to the municipalities, 88 have spent less than 10 per cent of the transferred allocations and 22 municipalities have spent zero percent.

The reasons for the poor expenditure in respect of the MIG put forward by Cogta included SCM delays, late registration of projects, poor performance of contractors, local business forum interferences impacting on project progress, community protests resulting in stopping of projects, changing of project implementation priorities, limited/lack of technical capacity within municipalities, and vacant positions in municipalities. Cogta also reported that the following corrective measures have been put in place to address the aforementioned challenges:

With regard to SCM delays, municipalities were requested to develop and share SCM plans, with a view of accelerating the appointment processes;
Cogta MIG provincial teams have coordinated municipal interventions with the participation of provincial departments, Municipal Infrastructure Support Agent (MISA) and sector departments;
The interventions are informed by specific challenges from each of the affected municipalities;
Municipalities presented their improvement plans, and were interrogated by the team to ensure their relevance in addressing the identified challenges;
With regard to planning challenges, MISA has been able to support municipalities where they have a footprint; and
MISA has committed to support municipalities with technical capacity challenges which include visiting projects with implementation challenges, and agreeing on actions to improve performance/implementation.

Cogta reported that the high estimated costs to repair damaged infrastructure in ten identified municipalities in KwaZulu-Natal amounted to R6.575 billion. Cogta also provided an overview of the disaster response grant funding and submitted that 16 municipalities received grant funding in KwaZulu-Natal and Eastern Cape. To date, a total of R516.748 million has been disbursed to the 16 municipalities from which only R58.100 million or 11 per cent has been spent as at 15 November 2022. The table below highlights the challenges as well as mitigating actions implemented as reported by Cogta.

Areas of concern

Actions taken to prevent possible under/over expenditure and under performance

Disaster Response Grants are disbursed to various organs of state for disaster interventions, however, there are key areas of concern requiring attention. The following are key identified challenges:

Delays for implementation to start, and then slow implementation pace.
Requests by municipalities for the amendment of approved projects and/or the project scope.
Non-invoking of emergency procurement system resulting in delays in implementation of projects and in expenditure.
Delays in the submission and non-submission of performance and financial reports in accordance with the Disaster Management Act, 2002 and DORA.
Inaccurate/ unverified reports.
Capacity and capability constraints within the disaster management fraternity across the three spheres unavailability of some of provinces for onsite visits.
Limitations in the escalation of challenges for strategic interventions by the provincial executives

Activation of project steering teams constituted by relevant stakeholders for monitoring, reporting and interventions e.g., MISA, COGTA infrastructure units, Offices of the Premier, Municipal PMUs, Provincial Treasuries, DWS, DPWI, DFFE, etc.).
Scheduled onsite visits through provincial project steering committees for monitoring and support in the implementation of projects. NDMC continues to undertake onsite visits in provinces.
Escalations of matters - Engagements of accounting officers and CFOs in addressing encountered challenges.
Tabling and escalation of progress reports as an item in the agenda of high-level structures across the three spheres.
Focus on realisation of desired impacts within communities from project implementation – sustainability of projects and building back better.

Comments and hearings on the Bill with identified stakeholders

The section below provides an overview of the comments that were made on the Bill by the invited stakeholders.

Financial and Fiscal Commission

The FFC submitted that in total, the 2022 in-year spending adjustments amounted to R13 billion. Of this R13 billion, R7.45 billion was in respect of adjustments to vote appropriations - the bulk of which (R6.3 billion) related to unforeseeable and unavoidable expenditure prompted by flood damages. The FFC highlighted the proposed roll-overs which amounted to R990 million, the bulk of which emanated from two votes relating to Phase 2 of the Presidential Employment Initiative (PEI) roll-out. In the first instance, a rollover, amounting to R231 million, stems from the Agriculture, Land Reform and Rural Development vote and relates to the payment of subsistence producers selected in Phase 2 of the PEI. The FFC raised concerns regarding the poor spending in respect of the PEI implemented in this department when assessing roll-overs relating to Phase 1 of the initiative. The second largest rollover amounting to R200 million was recorded for the Communications and Digital Technologies vote, and again, this related to Phase 2 of the PEI.

The FFC noted that an additional allocation of R48.5 million was proposed for PES received to assist provincial departments of social development to continue caring for flood victims placed in shelters as a result of the April 2022 floods in Kwa-Zulu Natal. The aforementioned was classified as unforeseeable and unavoidable expenditure. The FFC emphasized that whilst it welcomed assistance to households affected by the floods, it suggested that government should initiate a more permanent solution insofar as relocating the flood victims was concerned. To this end, a timeline and milestones should be shared with Parliament so that oversight could be exercised in this regard.

The FFC noted that a proposed R618.8 million was added to the skills levy for SETAs. The FFC stated that whereas additional funding in support of skills development was essential, the effective and efficient utilization of funding was equally important. The FFC referred to a recent presentation by the Auditor-General South Africa (AGSA) to the Portfolio Committee on Higher Education and Training where some of the challenges characterizing SETAs were highlighted. The FFC was of the view that it is therefore pertinent to ensure that additional funding was coupled with strong oversight by Parliament and other role-players in respect of the use of the resources to avoid further maladministration.

In conclusion, the FFC welcomed the in-year adjustments relating to the provision of funding to repair flood-related damages to assist in rebuilding damaged infrastructure and support provided to affected households. However, it remarked that it was important to ensure that there were minimal delays in implementation and quality insofar as repairing and rebuilding damaged infrastructure. The FFC emphasized that Parliament should receive regular updates on progress in this regard.

Parliamentary Budget Office

The Parliamentary Budget Office (PBO) gave an overview of the Bill as well as the expenditure by vote which stood at 47.4 per cent of the adjusted appropriation of R1.094 trillion as at the end of September 2022. The PBO highlighted that the SRD grant, a total of R44 billion was allocated in the 2022/23 financial year to serve 10.5 million people. It submitted that DSD published amended regulations for the SRD grant on 16 August 2022 which resulted in the means test threshold being increased from R350 to R624. It noted that the Department of Social Development reported in August 2022 that only 7.5 million people were receiving the benefit on a monthly basis. This will result in significant projected underspending as at the end of the 2022/23 financial year.

The PBO also highlighted why the SRD grant was important in South Africa and further noted that it was scheduled to be terminated in March 2024. The PBO emphasised the need for the discussions around social security grants to continue and made reference to the household survey conducted by Statistics South Africa in 2021, as well as the recent findings made by the Household Affordability Index. The PBO also submitted that the cost of living crisis has plunged more people into destitution and that this came on top of the shock caused by the COVID-19 pandemic. In conclusion, the PBO asked whether government could afford not to spend more in order to address the ongoing risks to the livelihoods of South African citizens and economy at large.

Public submissions on the Bill

The section below provides summaries of the inputs made by organisations and individuals in response to the advertisement calling for submissions from the public on the Bill.

Congress of South African Trade Unions

In its submission, the Congress of South African Trade Union (COSATU) indicated its displeasure on the 2022 MTBPS and related bills for not responding adequately to areas of critical need. This MTBPS was tabled in the face of an ailing economy that has had a protracted period of economic stagnation. COSATU submitted that government fell short of curbing the inflation that has had a negative bearing on the workers and also, lacked the practical strategies to stimulate the economy. Despite the shortcomings, COSATU lauded the fact that there were at least, positive interventions in the policy statement by the Minister of Finance. However, it conveyed its wish for a more pointed and decisive 2023 national budget.

COSATU made the following comments and proposals with regard to the Bill:

Departmental Allocations	The projected below inflation increases in expenditure to key frontline service departments, in particular Basic Education, Health, SAPS, Justice, Agriculture, and Employment and Labour; framework was alarming and would continue to cripple government’s ability to provide quality public services that workers and the economy depend upon. Most worrying indicators that some state of departments were struggling to meet their targets halfway through the financial year include: Basic Education, Higher Education and Training, NPA, CCMA, Human Settlements, Mineral Resources and Energy, Small Business Development, Transport, and Water and Sanitation.
Presidential Stimulus Package	COSATU raised two major setbacks leading to the failure of this initiative and they are: Failure to increase funding for this project. As a result, many young people did not benefit from it. Failure of the National Treasury to intervene with the banks to resolve the hurdles that led to the two percent of the Bounce-Back Scheme funds that were allocated to the Small Medium Enterprises. COSATU recommends that the government should act to absorb unemployed young people by exerting pressure on departments and state owned entities.
Public Sector Wage Bill	COSATU emphasised that government must make efforts to find amicable solution to the workers` salaries and avert the possible disruptions by workers’ strike. The decline in public service headcount was concerning with the nurses and teachers mostly affected. It was, according to COSATU, disheartening that there was a notable decline of the South African Police Service which reduced from 208 000 to 172 000 in 2022. Commitment by government to employ 12 000 new recruits was too little considering the resignations, retirements and death of police officers.
Infrastructure	COSATU submitted that the investment on infrastructure is still below par. This is despite the expected infrastructure investment totalling R112 billion plus the allocation of R33 billion for transport and water.
Pension Relief for Financially Struggling Workers	The federation submitted that relevant processes must be expedited to ensure that the Bill that is before Parliament enables indebted employees to access their pensions at least by October 2023.
Revenue	COSATU welcomed the successful generation of additional revenue of R83 billion by South African Revenue Services (SARS). In view of the commendable functionality of SARS, the federation called on for availing more resources to SARS by government.
Social Relief of Distressed grant	The extension of the SRD grant beyond 2023 was welcomed. Concerns were expressed at the failure of the National Treasury to address the administrative challenges around the disbursements of the grants.

Public Service Accountability Monitor

The Public Service Accountability Monitor (PSAM) submitted that the continued under-spending by key service delivery departments and local government needed to be addressed as a matter of urgency, as the reasons most frequently cited for shifts/virements and under-spending were not satisfactory explanations in the current context. PSAM indicated that fruitless and wasteful expenditure further undermined service delivery.

PSAM further pointed to systemic deficiencies, contributing to weak governance and poor service delivery, at the provincial and municipal levels of government; despite government having spent R9.1 billion across 40 state agencies to support the proper functioning of municipalities. PSAM submitted that adequate and effective use of resources (financial and non-financial) were central to addressing these challenges and underscored the implications of weak or unwilling political motivation to ensure compliance with legislated public finance management prescripts. PSAM expressed serious concern over the R2 billion that had been returned to the NRF owing to local government under-spending. PSAM was further concerned that the budgets for the Department of Cooperative Governance and Traditional Affairs’ Institutional Development Programme and Anti-corruption sub-programme had been reduced by R3.56 million and R500 000 respectively, given its key role in fostering sound financial management in municipalities and in ensuring that they perform their basic functions of delivering quality municipal services and promoting transparency and accountability.

With regard to infrastructure projects, PSAM pointed to backlogs occurring mainly in the Departments of Health, Basic Education and Human Settlements which impacted on services. Management of procurement, contracts and expenditure needed to be improved to ensure value for money, and that transparency and accountability requirements were adhered to. PSAM was encouraged by government’s stated commitment to scaling up efforts to improve the project pipeline and the provision of additional resources for project preparation, but remained concerned about measures to safeguard funds and manage contracts and expenditure throughout the project duration.

With regard to funding for institutions fighting crime and corruption, PSAM indicated that budget and other resource constraints continued to undermine the capacity of the National Prosecuting Authority (NPA). While the recent increases to the NPA’s budget were positive, limited year-on-year growth was a risk to its ability to continue to compensate recently recruited staff. The Special Investigations Unit (SIU) has received no additional funding in both the 2021 and 2022 MTBPS, despite the entity’s important role in providing forensic investigation and civil litigation services to combat corruption, serious malpractices and maladministration. In addition, the budget for the function under which the SIU budget was allocated, was set to decrease by 0.5 percent in the 2023/24 financial year. PSAM was concerned that, overall, the Peace and Security function budget was declining on average by 2 percent in real terms over the MTEF.

PSAM expressed further concern over whether the institutions supporting democracy, such as the Public Protector and the South African Human Rights Commission, would be able to perform their duties, with allocations to them declining in real terms over the MTEF; and encouraged the Committees to ensure these institutions were adequately resourced.

PSAM welcomed the introduction of a pilot mechanism to garner public input on fiscal policy - the Fiscal Openness Accelerator (FOA) project, as it had the potential to deepen meaningful public participation and increase the transparency and efficacy of fiscal policy decisions. It encouraged National Treasury to consider ways to continue to partner with civil society beyond the conclusion of the FOA pilot in September 2022.

The PSAM made the following recommendations:

The Committees should request further information from under-spending departments to determine the challenges; what was being done to resolve them and to insist on corrective measures to prevent persistence of these trends.
The Committees should ensure that the notices for material irregularities issued by AGSA to national government departments are acted upon, and that those who continue to mismanage funds are held accountable.
The Committees should further play a role in strengthening internal controls and accountability mechanisms to improve the performance of departments.
There should be greater transparency of spending data and information to enable the public to monitor performance and demand justifications from departments on their spending and planning decisions.
The committees of Appropriations, Finance, Public Accounts and Cooperative Governance and Traditional Affairs should exercise their powers to call for political support for technical interventions aimed at bolstering capacity and compliance.
The Committee should consider requesting a comprehensive report from the National Treasury detailing all interventions to improve municipal functioning through capacity-building, technical support and resourcing over the past decade, and their impact.
The Committees should insist on open and transparent contracting processes to enable public oversight for all major public infrastructure projects, in order to ensure that these projects had the intended developmental impact.
The Committees should consider a pilot of social audits in areas where local government was failing to deliver services. In addition to improving participation in the budget process, this could improve spending outcomes and provide opportunities for skills development and income support for communities facing high levels of poverty and unemployment.
Parliament should allow any member of the public or any civil society organisation to testify during its hearings on the budget proposal prior to its approval. Additionally, allowing members of the public or civil society organisations to testify during hearings on the Audit Report would contribute to improving budget efficacy and citizens trust. The role of the parliamentary constituency offices should be considered in this regard.

Organisation Undoing Tax Abuse

The Organisation Undoing Tax Abuse (OUTA) in its submission on the Bill called for government to procure locally manufactured vehicles. It submitted that the silence on this initiative indicated government’s reluctance to adopt robust economic measures to improve the economy. OUTA further called on government to reduce the vehicle allowances for politicians at all levels of government.

OUTA made reference to budget Vote 34, Mineral Resources and Energy, and noted the proposed roll overs with regard to programme 5: Mineral and Energy Resources Programmes and Projects. It noted that R28.045 million was rolled over to finalise non‐grid projects through the Integrated National Electrification Programme. Furthermore, R43.82 million was rolled over to finalise payments to service providers for the solar water heater programme, and R1 million was rolled over to finalise 50 electrification connections for households in the Dikgatlong municipality. OUTA submitted that because of the current load shedding by Eskom, it expected the Department of Mineral Resources and Energy (DMRE) to expedite non-grid electrification to ensure that households had access to energy. OUTA expressed concern that the allocated funding has not been spent. It also submitted that the solar water heating programme has been dogged by problems over the last few years, as the DMRE incurred storage costs which were then flagged by the Auditor-General South Africa as wasteful and fruitless expenditure.

OUTA noted the promise of additional resources in 2023 to the country’s security forces to take the fight against those who threaten South Africa’s peace, with a promise of 15 000 additional constables over the next three years. OUTA welcomes this and stated that it hoped that the budget will also include sufficient resources for the police to operate. However, it noted that the Police budget vote was reduced for the year, and particularly it raised concerns about the removal of R326 million for construction and upgrading of police stations and R32 million from detective services.

OUTA noted Cooperative Governance and Traditional Affairs’ proposed additional allocation of R3.6 billion for the reconstruction and rehabilitation of damaged municipal infrastructure as a result of natural disasters in Kwa-Zulu Natal and the Eastern Cape. OUTA called for stringent oversight of the said funds to ensure effective and efficient spending. It also noted the promise of additional funds in 2023/24 for the delivery of free basic services to poor households to counter rising costs of free basic services and rising bulk electricity and water costs. OUTA welcomes the principle of this support, but expressed concerns that much of this funding would go to the municipalities where it is diverted to other spending and not used for subsidising these services.

Reference was made to the current situation where 43 municipalities are in crisis and the government was talking of intervention plans which include prioritising, revenue management, audit outcomes, supply chain management and the Municipal Standard Chart of Accounts. Importantly, strengthening monitoring and enforcement of financial recovery plans was highlighted. OUTA noted that government spends significant resources through Cogta on support for municipalities. However, given the state of the municipalities, OUTA questioned how this will be resourced and implemented. OUTA proposed that National Treasury should introduce mechanisms to halt the allocation of grants to municipalities that continue to misallocate or misspend. It also noted the R13 million in once-off gratuities for non-returning Councillors and submitted that this needed to be reviewed and be either significantly reduced or removed.

With regard to Higher Education and Training, OUTA welcomed the R1.4 billion additional allocation to the National Student Financial Aid Scheme (NSFAS). It further submitted that the current funding model for NSFAS within the current fiscal constraints was unsustainable and recommended that government prioritise the urgent finalisation of a new funding framework for the sector. OUTA also noted the R618.8 million additional allocation to the skills levy and SETAs, taking the funding to R21 billion. OUTA supported skills development and was of the view that it was essential to improving the economy and individuals’ lives, however it emphasised that these funds should be used efficiently and effectively. OUTA made reference to the AGSA’s presentation to the Portfolio Committee on Higher Education, Science and Innovation where it highlighted significant challenges in the SETAs, including irregular expenditure of R3.5 billion. Furthermore, OUTA mentioned that it has previously reported on corruption in the Services SETA and therefore felt it was necessary to ensure that the addition of funding was coupled with strong oversight of the use of the resources.

OUTA welcomed the extension of the SRD grant for another year but expressed concerns that the policy statement was silent on how the government will address the plight of the citizens as they battle to survive the relentlessly upward-spiralling cost of living and high levels of unemployment. OUTA was disappointed that the SRD has not been adjusted for Consumer Price Index (CPI) inflation and that there was still no clear pathway on how permanent social support will be introduced following its termination. It also expressed concerns that the SRD grant was not being accessed by all the people who need it and are entitled to it, mainly due to a more stringent qualifying criteria. It continued that the shift of R2.937 billion from the SRD grant to the Department of Public Enterprises was an example of how social spending was cut to fund other essentials. OUTA believed strongly that the reductions in social spending was linked to the depletion of state resources due to years of state capture, corruption and mismanagement.

With regard to Water and Sanitation, OUTA expressed concerns at the continuous roll overs on the Regional Bulk Infrastructure grant for the Vaal River Pollution Remediation project. It submitted that about 15 million people were dependent on the Vaal River in some way or another, therefore it was imperative that the Vaal River Pollution Remediation Project should be given urgent and immediate attention.

Equal Education

Equal Education’s submission focused on the Medium Term Expenditure Framework therefore its summary forms part of the Committee’s report on the 2022 Medium Term Budget Policy Statement.

Committee findings and observations

Having deliberated and considered all the submissions made by the above stakeholders on the Adjustments Appropriation Bill [B23–2022], the Standing Committee on Appropriations makes the following findings and observations:

The Committee notes and supports governments proposed R3.6 billion in unforeseeable and unavoidable expenditure toward the Cooperative Governance and Traditional Affairs budget vote, prompted largely by the flood damages in KZN, Eastern Cape and Western Cape provinces. The Committee welcomes these government interventions that will ensure quick responses to the rehabilitation and reconstruction of infrastructure in the affected areas. Furthermore, the Committee would like to implore on government to ensure speedy distribution of these fund to the affected areas in order to ensure that intended beneficiaries receive the required assistance timeously.

The Committee notes and welcomes the government’s proposed R118 million as initial costs towards the rehabilitation of the Parliamentary building that was damaged by fire. The Committee views this allocation as an important step towards the restoration of the Parliamentary precinct due to its significance, which cannot be over emphasised.

The Committee notes and supports the proposed R1.8 billion as unforeseen and unavoidable expenditure for the rehabilitation of both the toll and non-toll road network of the South African National Road Agency SOC Limited (Sanral). The Committee has always emphasised the importance of a good road network. The Committee views roads as crucial infrastructure and key driver of economic growth and seamless movement of goods and people. The Committee supports the reconstruction and rehabilitation of all public roads because of the long term benefits to the economy and livelihood of people.

The Committee notes and welcomes the proposed rollover of R990 million towards the votes of Agriculture, Land Reform and Rural Development and Communications and Digital Technologies for the roll-out of Phase 2 of the Presidential Employment Initiative. However, the Committee would like to re-emphasise on the need for a framework or standard guideline on the types of jobs to be created with a benchmark remuneration standard for each job category to avoid inconsistences and potential abuse of these funds. Given the recent experience on the distribution of food parcels, the Committee would like to reemphasise that National Treasury and the Presidency should have a well-defined approach to the implementation of this scheme, to ensure uniformity across all departments.

The Committee notes with concerns the proposed shifting of R3.6 billion from the Department of Social Development to fund the extended deployment of Defence personnel in Mozambique (R755 million) and R2.9 billion for the repairs and replacement of Transnet infrastructure that was damaged by the April 2022 floods. Given the mandate of the Department of Social Development and its entire portfolio, the Committee is concerned about the shifting of these funds. The Committee is of the view that the Department of Social Development should put systems in place and do more in reaching out to potential beneficiaries than underspending on social assistance, when the country has high levels of unemployment, poverty and inequality.

The Committee notes with concerns the total of R1.96 billion in declared and unspent funds. The Committee is concerned about government departments’ inability to spend appropriated funds based on the requests from the same departments. The Committee holds the view that underspending on appropriated funds does not only undermine service delivery but also raises questions about Parliament’s ability to appropriate funds to areas where they are most needed.

The Committee notes with concerns on total of R3.92 billion national government’s projected underspending for the 2022/23 financial year. In the same light as declared underspending, the Committee views this lack of spending on Parliament’s appropriated funds as serious problem that requires urgent attention of the all the affected government departments. The Committee would like government institutions to view this in light of the triple challenges of unemployment, poverty and inequality facing South Africans.

The Committee notes with serious concern the report from Cogta that of the R4.962 billion of MIG funding transferred to 218 municipalities, only R2.397 billion or 48.3 per cent has been spent as at the end of the second quarter of the 2022/23 financial year. Of particular concern is the report that from the transferred funds to the 218 municipalities, 88 municipalities have spent less than 10 per cent of the transferred allocations while 22 municipalities have spent zero percent.

The Committee notes and welcomes the proposal by PSAM that Parliament should allow more member of the public or civil society organisation to present during its hearings on the budget proposal prior to its approval in order to contribute towards improving budget efficacy and citizens trust. Even though the Committee is of the view that Parliament does provide the platforms for citizens and other organisation to participate in its budget process, the Committee acknowledges that there is always room for improvement and making public participation better.

The Committee notes and welcomes support of OUTA on the proposed additional allocation of R3.6 billion for the reconstruction and rehabilitation of damaged municipal infrastructure as a result of natural disasters in Kwa-Zulu Natal and the Eastern Cape. The Committee also notes and is in support of the call by OUTA for stringent oversight mechanisms of these proposed allocations to ensure effective and efficient spending.

Recommendations

The Standing Committee on Appropriations, having considered submissions from various stakeholders on the Adjustments Appropriation Bill [B23–2022], recommends as follows:

That the Minister of Finance and the Presidential Management Office ensure that the funds allocated towards the Presidential Employment Initiatives are spent within the required guidelines and frameworks in order to avoid potential abuse and corruption.

The Minister of Finance, working with all affected stakeholders, ensures that National Treasury speedily releases disaster relief funding in order to minimise the social and economic impact of affected communities.

The Minister of Cooperative Governance and Traditional Affairs ensures that disaster Management Centre closely monitor funding allocated for disaster relief and ensures that these relief packages are clearly communicated to affected communities. Furthermore, the Minister must ensure that the Department puts in place stringent oversight mechanisms of this proposed allocation to ensure effective and efficient spending, and eliminate the possibility of corruption at the expense of the victims of these disasters.

Committee Recommendation on the Bill

The Standing Committee on Appropriations, having considered the Adjustments Appropriation Bill [B23 – 2022], referred to it and classified by the Joint Tagging Mechanism (JTM) as a Section 77 Bill, recommends that the Bill be adopted, without amendments.

Conclusion

The relevant Executive Authorities must send the responses to the recommendations as set out in section 7 above to Parliament within 60 days of the adoption of this report by the National Assembly.

Report to be considered.

Documents