ATC110504: Report Appropriation Bill [B3-2011]

Standing Committee on Appropriations

Report of the Standing Committee on Appropriations on the Appropriation Bill [B3-2011] (National Assembly – Section 77), dated 14 June 2011

 

Having considered the Appropriation Bill [B3 – 2011], referred to in terms of Section 10(a) of the Money Bills Amendment Procedure and Related Matters Act No.09 of 2009, 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 26 of the PFMA requires Parliament and each provincial legislature to appropriate money for each financial year for the requirement of the State and the province, respectively.  In executing this mandate, the Standing Committee on Appropriation was established in terms of section 4(3) of the Money Bills Amendment Procedures and Related Matters Act No.9 of 2009 (hereon referred to as the Act). In line with section 10(1)(a) of the Act and after the adoption of the Fiscal Framework, the Standing Committee on Appropriations has a responsibility to consider the Appropriations Bill and report on the Bill to the National Assembly.  

 

In the process of dealing with the Appropriations Bill, section 9(7) (a) of the Act requires the Committees on Appropriations of both Houses to consult with the Financial and Fiscal Commission (FFC). On 15 and 17 April 2011, the advertisement was placed for the general public inputs and no inputs were received from the general public. Therefore, the only stakeholders that made submissions to the Committee (through an invitation) were as follows:

 

·         Financial and Fiscal Commission (FFC);

·         Public Service Commission (PSC); and

·         Human Science Research Council (HSRC)

 

2.       The Review of the Overall allocations for 2011/12 financial year

 

The 2011/12 budget was tabled by the Minister of Finance in the National Assembly with the Appropriations Bill (the Bill) on 23 February 2011. The Bill was referred to the Standing Committee on Appropriations on 9 February 2011 for consideration and reporting to the House. The Bill was tabled together with the Division of Revenue Bill, Estimates of National Expenditure (ENE), Budget Review and the Budget Speech. Given the fact that Committees on Finance and Appropriations have different mandates derived from the Act, the Appropriations Bill was therefore referred to the Standing Committee on Appropriations.

 

The national budget for the 2011/12 financial year has allocated R499,4 billion to national departments of government. This allocation excluded the direct charge of R385,3 billion. The direct charges were not part of the Appropriations Bill hence are directly charged from the National Revenue Fund (NRF). The direct charge included the following items of the budget, namely President and Deputy President’s salaries; remuneration for Members of Parliament; State Debt Cost, Provincial Equitable Share (PES); General fuel levy sharing with metropolitan municipalities; Skills levy and Sector Education and Training Authorities (Setas); and Judges’ and Magistrates’ salaries. The appropriation also excluded an amount of R4 billion which was put aside for contingency reserves in 2011/12 budget. In the 2011/12 financial year, the total budget has increased when it is compared to the 2010/11 financial year. In the 2010/11 financial year , R441.5 billion was appropriated before adjustments. This showed an increase of R57.9 billion or 13 per cent of the initial budget. Of note, the budget increase was driven by the large increase on transfers to municipalities, provinces, universities, technikons, public corporations, private enterprise, and non-governmental agencies.

 

3.       Economic Classifications Allocations for the 2011/12 budget

 

Table 1 (below) shows that the economic classifications were divided into three parts, namely, current payments (compensation of employees and goods and services), transfers and subsidies, payment of capital assets and payments for financial assets. In the economic classification funds have been appropriated as follows:

 

Table 3.1: Economic Classification Budget Allocations for 2011/12 Financial Year

	Budget Allocations 2011/12
Economic Classifications	2010.11	2011.12	Amount increase	% Increase/ Decrease
Current Payments	128. 693611	145.328795	16.6	12.9
Transfers and Subsidies	302. 645250	342.195169	39.5	13.0
Capital payments	9290470	11.206872	1.9	20.6
Payments for Financial Assets	888.601	750.100	-1300	-15.6
TOTAL	441517932	499480936	57.9	13.1

Source: National Treasury (2011)

 

In the 2011/12 budget, an amount of R145.3 billion or 29.0 per cent was allocated for current payments in the budget. This has increased by R16.6 billion or 12.9 per cent when compared to the 2010/11 financial year’s budget. Part of the current payments budget included allocations in the following areas:

 

·         An amount of R92.3 billion or 18.4 per cent was allocated for compensation of employees; and

·         An amount of R52.9 billion or 10.5 per cent was allocated for goods and services.

 

An amount of R342.1 billion or 68.5 per cent was allocated for transfers and subsidies. This reported an increase of R39.5 billion or 13.0 per cent when compared to the 2010/11 allocation. Transfers and subsidies included items such as money transferred to municipalities, provinces, government agencies, non-governmental agencies, universities and technikons. An amount of R11.2 billion or 2.2 per cent was allocated for payments for capital payments. The payments for capital assets have reported an increase of R1.9 billion or 20.6 per cent when compared to the 2010/11 budget.

 

4.         The Five Priorities of Government

 

The Standing Committee on Appropriations (the Committee) has adopted a tradition of inviting National Treasury together with other identified departments. This exercise intended to foster transparency, deepening democracy and ensuring good public participation. This consultative approach provided the Committee with an opportunity to engage with the departments on their plans to spend the allocated resources for the 2011/12 financial year. The hearings were more focused on the government policy priorities. Five departments were identified for the hearings on the Appropriations Bill for 2011/12. These included the Departments of Education, Health, Cooperative Governance and Traditional Affairs (CoGTA), Public Works and, Rural Development and Land Reform. The departments briefed the Committee on their annual performance plans (APPs) and budget allocations for the 2011/12 financial year. The allocations for policy priorities would be discussed in the next section. 

 

The Appropriation Bill mainly supported the five policy priorities of government. These included:

 

• Job creation and infrastructure;
• Education and skills development;
• Improving health care and services;
• Rural development and land reform; and
• Justice, crime prevention and policing.

 

The above-mentioned priorities were reflected in the 12 national outcomes adopted by Cabinet. These outcomes were high-quality basic education; improved health and life expectancy; greater public protection and safety; more rapid employment creation and inclusive growth; a skilled and capable workforce; efficient economic infrastructure networks; vibrant rural communities and food security; sustainable human settlements and improved quality of household life; responsive and accountable local government; protection of environmental assets and natural resources; international cooperation for a better and safer world; and a development-oriented public service and inclusive citizenship.

 

4.1   Allocations for Job Creation

 

In line with the 5 million jobs which need to be created through the implementation of New Growth Path (NGP) in the following ten years, an amount of R48.8 billion was added to the baseline for job creation at the national governmental level. According to programs, R10 billion was set aside for job creation and would be spent on the Industrial Policy Plan, small enterprise development, and youth development, and R10.4 billion was set aside for public transport, roads and rail infrastructure. The Committee was of the view that the role of government in the real economy was also to create a conducive environment for jobs to be created by other role players, including the private sector. Government was not the only role player in creating jobs but other social partners also had a role to play as well as government agencies. The National Treasury indicated that the Job Fund of R9 billion would be administered by the Development Bank of Southern Africa (DBSA), with a view to creating more jobs.

 

The Committee welcomed additional allocations to support industrial and economic development in order to create more jobs, which included R600 million for enterprise investment; R750 million for the Competition Commission and other economic regulatory agencies; R250 million for the Industrial Development Corporations (IDC); R120 million for National Tooling Initiative, R282 million for Micro-finance Apex Fund; and R55 million for Khula Enterprises to pilot a new approach to small business lending. Even though the Committee welcomed the R2.8 billion for rural development, the programs meant for developing and upgrading rural infrastructure, especially rural roads, would be monitored. An amount of R9.5 billion was added for Further Education and Training (FET) to promote skills development. It was the view of the Committee that the area of skills development was an important aspect in relation to job creation and economic development, both in the short- and long-run. The Committee noted that, once these people were trained, they would be in a position to be self-employed and create opportunities for others.

 

4.2   Department of Basic Education

 

The Department of Basic Education: Vote 15 was allocated a total budget of R13,8 billion for the 2011/12 financial year. The budget comprised of five programmes, i.e. Administration (R301 million), Curriculum Policy, Support and Monitoring (R1,8 billion), Teachers, Education Human Resources and Institutional Development (R521 million), Planning, Information and Assessment (R6,3 billion), and Educational Enrichment Services (R4,8 billion).

 

In the 2011 State-of-the-Nation Address, the President of the Republic of South Africa, Mr Jacob Zuma, announced a ‘Triple T’ concept for basic education. The three Ts represented Teachers, Textbooks and Time. According to the President “Teachers must be in class, on time, teaching for at least seven hours a day”.

 

The Committee has noted that three conditional grants would continue from the 2010/11 financial year, namely, National Schools Nutrition Programme (NSPN), HIV and AIDS life skills programme and Technical Secondary Schools Recapitalization Grant. In addition, there were three new conditional grants that have been introduced in the 2011/12 financial year, namely: the Dinaledi Schools Grant, Education Infrastructure Grant and the Schools Infrastructure Backlog Grant. The Committee noted that the Accelerated School Infrastructure Delivery Initiative (ASIDI) grant which was mainly for infrastructure would be instrumental in ensuring that schools operated within the basic requirements of safety that included, amongst others, provision of water, sanitation and electricity.

 

With regard to vacancies in the Department of Education (DoBE), concern was expressed and it was reported that the situation was exacerbated when the former Department of Education was split into two departments, namely, the Department of Basic and the Department of Higher Education and Training, in 2010. The Public Service Commission has however reported that various government departments cited the lack of capacity as an excuse for their inability to meet spending targets and yet the same departments reported higher rates of funded vacant posts. The Committee expressed concern at the delivery of the School Infrastructure Programme and questioned the capacity of the DoBE to fast track the replacement of the 395 mud schools. The DoBE has however committed itself to replace 50 mud schools during the 2011/12 financial year. It was not clear whether the Heads of Departments in various provinces were placed under any form of monitoring with regards to budgets allocated to their departments, and what measures were in place to ensure that they were held accountable for the expenditure thereof.

 

The DoBE reported that savings were made through the internal development and publishing of workbooks contrary to the initial plan to outsource the service provider. Although the Committee was concerned about the delays and sustainability of this process in the long run, the DoBE indicated that funds to sustain the process would be sourced from provinces.

 

The Human Science Research Council (HSRC) reported that research studies have found that 10 to 12 percent of teachers were 20 to 24 days absent from work per year, due to official duties. It was also found that three quarters of leave taken were for one- or two-day sick leave which did not require a medical certificate. This and the number of leave days taken for official duties impacted on the quality of basic education produced and needed to be addressed by the Department of Basic Education.

 

 

 

4.3   The Department of Co-operative Governance and Traditional Affairs

 

The Department of Cooperative Governance and Traditional Affairs: Vote 3 was allocated a total budget of R47,9 billion for the 2011/12 financial year. The budget comprised of seven programmes, i.e. Administration (R212,5 million), Policy, Research and Knowledge Management (R46 million), Governance and Inter-governmental Relations (R34,2 billion), Disaster Response Management (R821 million), Provincial and Municipal Government Systems (R248 million), Infrastructure and Economic Development (R12,3 billion), and Traditional Affairs (R83 million).

 

In the 2010/11 financial year, the Department of Co-operative Governance and Traditional Affairs (CoGTA) incurred an under expenditure that amounted to R115,2 million. This was incurred under the Compensation of Employees, Payments for Capital Assets and, Goods and Services and Transfers. It was reported that the aforementioned under expenditure was due to vacant posts not being filled on time and delays in the procurement and delivery of furniture, and projects being implemented late including projects not being completed in respect of the Community Works Programme (CWP). Although there was an undertaking by the CoGTA to fill vacant posts by end of June 2011, the progress reports approach, as a measure in monitoring projects within the CoGTA, needed to be closely monitored to ascertain the extent to which it would be effective.

 

The CWP, which was allocated R243 million, needed to be monitored more closely since it would be instrumental in creating work opportunities for historically marginalized communities. This was in line with the priorities of Government in respect of job creation. However, the Committee expressed concern at the capacity of the CoGTA to improve in the 2011/12 financial year given its record of under expenditure during the 2010/11 financial year. It was reported that the Special Purpose Vehicle (SPV) initiative, which would be finalized in June 2011, has been allocated R192 million. This initiative was aimed at supporting municipalities with low capacity, and infrastructural delivery challenges. It concerned the Committee that a substantial amount of funding had been allocated for capital projects despite a considerable under expenditure on capital assets in the 2010/11 financial year. Part of the concerns raised by the Committee was the spending of 15 per cent component for sport facilities under the Municipal Infrastructure Grant (MIG) programme. The Department of Cooperative Governance and Traditional Affairs, and the National Treasury indicated that it was a municipal discretion on how to spend this allocation.  It was the view of the Committee that funding provisions for sports facilities needed to be solely for the purposes of sports and should not be discretionary.

 

It appeared that there seemed not to be proper communication between CoGTA, provincial and local government in terms of service delivery issues. The Committee called for a thorough needs assessment on service delivery.  It was of serious concern to the Committee that policies on traditional cultural practices such as initiation and ‘ukuthwala’ were not finalized as yet. This was despite a number of deaths that were reported from the initiation schools. The CoGTA was encouraged to expedite the finalisation of these policy issues and to provide a progress report thereon to the Committee. A number of municipalities still struggled with managing their budgets and complying with the National Treasury’s regulations, it was thus imperative for the CoGTA to assist municipalities in order to ensure sound administration.  

 

4.4   Department of Health

 

The Department of Health: Vote 16 was allocated a total budget of R25,7 billion for the 2011/12 financial year. The budget comprised six programmes, i.e. Administration (R326 million), Health Planning and Systems Enablement (R160 million), HIV and Aids, Tuberculosis and Maternal, Child and Women’s Health (R8 billion), Primary Health Care Services (R730 million), Hospitals, tertiary Services and Workforce Development (R15 billion), and Health Regulation and Compliance Management (R525 million).

 

The Department of Health (DoH) reported under expenditure in all programmes for the 2010/11 financial year, this amounted to R742.933 million. This was due to among others, banking details of suppliers not verified before the end of the financial year, and that the Information Technology (IT) equipment was not processed as the Bid Adjudication Committee for the procurement of the server only granted approval in the first week of March 2011. The Committee felt that banking details would have been verified if proper planning was in place.

 

The Committee noted an under spending on transfers which amounted to R509,3 million which was mainly due to the transfers for the Hospital Revitalisation Grant of R452 million which had been stopped. The Committee was concerned about funds of some of the non-governmental organizations that were not transferred, such as Lovelife (R38 million), Zivikele NGO (R600 000) and the National Health Laboratory Service (NHLS) - Cancer Register (R415 000).

 

The Committee was further concerned that facilities worth millions of rands were deteriorating across the country. This was a clear indication that infrastructure planning, support and maintenance needed to be given attention as a matter of urgency. However, there were plans in place to establish a project support office within the DoH, which would be dispatched across the country to assist provinces with infrastructure backlogs. The Love Life had under spent by R38 million, and the Committee was concerned if the programme needed those funds from the DoH. It was a serious concern that hospitals and clinics were not completed on time due to lack of capacity and, as a result, this led to under expenditure. The above-mentioned under expenditures had a negative impact on job creation and service delivery, which raised concern about the DoH’s ability to spend its 2011/12 budgetary allocation.

 

The Committee was concerned that lack of planning led to the DoH paying interests of R254 million for late payments under the Zola Hospital Project. The DoH was requested to prioritise support for hospitals and clinics in provinces that were in dire need such as in the Eastern Cape. Also, the DoH was requested to address the challenges relating to transfers of subsidies. It was noted that out of the total under expenditure of R743 million, only R285 million had been requested for roll-overs.

 

 

4.5   The Department of Rural Development and Land Reform

 

The Department of Rural Development and Land Reform: Vote 33 was allocated a total budget of R8,1 billion for the 2011/12 financial year. The budget comprised of five programmes, i.e. Administration (R606 million), Geospatial and Cadastral Services (R388 million), Rural Development (R441 million), Restitution (R2 billion), and Land Reform (R4 billion).

 

The Committee welcomed the risk management strategic element under the Administration programme, which aimed to ensure that there existed effective and efficient financial management that would result in a reduction on irregular, fruitless and wasteful expenditure, and losses through criminal conduct.

 

In respect of Geo-spatial and Cadastral Services, the Committee noted that the reported turnaround times for examination of cadastral documents and registering of title deeds was commendable. The 23 per cent increase in the budget allocation for rural development was encouraging. The Committee was concerned about the future of land restitution because its budget had decreased for the 2011/12 financial year; this was despite outstanding commitments amounting to R12 billion that have already been made. As a result of the decline, the annual performance plan for the restitution showed that the Commission on Restitution of Land Rights would only implement 360 backlog projects. With respect to land reform, the Committee noted an increase from R2.1 billion in the 2010/11 financial year to R4.2 billion in the 2011/12 financial year, reflecting an increase of 100 per cent.

 

The Committee was concerned at the fact that the Department of  Rural Development and Land Reform (DoRDLR) has not yet quantified the number of outstanding court cases in respect of land restitution and land reform. The Committee was informed that there were about 346 outstanding court cases against the DoRDLR and that the number could increase. 

 

The Committee noted that approximately R13 billion had been allocated to the Departments of Agriculture, Forestry and Fisheries and Rural Development and Land Reform in the 2011/12 financial year and this was set to reach R14 billion in the 2013-14 financial year. However, as a share of overall budget spending, this amounted to less than 2 per cent of the country’s overall budget of R890 billion and was inadequate to address rural development and land reform as one of top 5 priorities of government. The recession had led to a high number of jobs being lost in the agriculture sector; however, there were a number of countries in Africa like Malawi from which South Africa could learn from for best practices. It was reported that South Africa was not in line with the 2003 Maputu Declaration, as adopted by Southern African Development Community (SADC), which required that 10 per cent of the total budget for the country be allocated towards agriculture.

 

4.6   Department of Public Works

 

The Department of Public Works: Vote 7 was allocated a total budget of R7 billion for the 2011/12 financial year. The budget comprised of five programmes, i.e. Administration (R751 million), Immovable Asset Management (R5 billion), Expanded Public Works Programme (R1, 5 billion), Property and Construction Industry Policy Regulations (R34 million), and Auxiliary and Associated Services (R33 million).

 

The Department of Public Works (DoPW) reported that the Expanded Public Works Programme (EPWP) was in support of the New Growth Path and would use labour intensive methods to create jobs, deliver services, and build decent communities. Provinces and municipalities would be supported by the DoPW in respect of investing in job creation in return for cash incentives for further job creation opportunities. Through the delivery of public and community services, the target was to create 4,5 million short and ongoing work opportunities with an average of 100 days for poor and unemployed people so as to contribute to halving unemployment by 2014,. The Committee noted that the EPWP allocation has increased in the 2011/12 budget, therefore, it was resolved that a workshop with the DoPW and the National Treasury be held in order to address the expenditure challenges relating to the programme. 

 

The DoPW reported that it had a vacancy rate of approximately 1300 posts, from which only 645 were funded. Five-hundred-and-eighty-three (583) of the 645 funded posts have been advertised and were in the process of being filled. With regard to the asset register, it was reported that the DoPW was working in conjunction with the Department of Rural Development and Land Reform, the Surveyor General’s, Auditor General’s and the Accountant General’s Offices in order to complete it.

 

The Committee expressed concern at the fact that the DoPW’s asset register had not been finalised. With regard to Energy Efficiency project, which had a total budget of R70 million (reduced from R120 million due to slow expenditure) for the 2011/12 financial year, concern was expressed at the performance of this project since it could also be utilised as a mechanism for job creation.

 

In respect of the contents of Programme 1 (Administration) of the budgets of all departments, it was stated that there were disparities irrespective of the guidelines issued by the National Treasury on an annual basis.

 

5. Committee Findings

 

The Standing Committee on Apprpriations made the following findings:

 

5.1        The intervention of teacher training Programme through the Funza Lushaka bursary scheme was positive towards teacher development.

 

5.2        The number of leave days taken by teachers in the Department of Basic Education for either personal reasons or official duties was very high, which negatively impacted on the quality of basic education.

 

5.3        The Committee noted that the spending of 15 per cent for sports facilities under the Municipal Infrastructure Grant funding was discretional to municipalities on how they spend it. 

 

5.4        The Committee welcomed the undertaking by CoGTA to fill vacant posts by end of June 2011. However, the Committee would monitor the progress thereon.

 

5.5        There was an under expenditure in the  Department of Health of R509,3 million, which was mainly due to transfer payments not being made to the Hospital Revitalisation Programme (R 452 million), Love Life (R38 million), Zivikele NGO (R600 000), and the National Health Laboratory Service (NHLS) - Cancer register (R415 000).

 

5.6        There were 346 outstanding court cases against the Department of Rural Development and Land Reform that have not been quantified and needed to be pursued since it had budgetary implications

 

5.7        The Committee noted the undertaking by the Department of Public Works to finalise the asset register.

 

5.8        The Energy Efficiency Projects’ budget in the Department of Public Works had been reduced from R120 million to R70 million due to slow expenditure during the 2010/11 financial year. This was concerning since that project could be utilised as a job creation tool. .

 

5.9        There were disparities in respect of the contents of Programme 1      (Administration) of the budgets of national departments, despite the guidelines that were issued on an annual basis by the National Treasury.

 

 

6. Recommendations

 

The Standing Committee on Appropriations recommends as follows:

 

• That the 15 per cent under the P-component of the Municipal Infrastructure Grant for sports facilities in the Division of Revenue Bill be ring-fenced.

 

• That while the Committee noted the report by the Department of Basic Education on the savings through internal development of workbooks, the Department of Basic Education needed to improve the process of distributing workbooks to avoid delays in the near future. 

 

• That the Department of Basic Education strengthens its measures to ensure that the rolling out of the Funza Lushaka bursary does not distract the teaching programme, and

 

• That the Department of Health assists receiving entities, especially the Hospital Revitalisation Programme, Love Life and Zivikele NGO, to come up with credible plans in order for it to transfer the allocated funds to the latter.

 

 

Notwithstanding the above recommendations and due to the fact that no amendments were proposed, the Standing Committee on Appropriations further recommends that the National Assembly adopts the 2011 Appropriations Bill (without amendments).

 

 

Report to be considered.