Financial & Fiscal Commission: Responses: Departments of Water, Energy & Health

Standing Committee on Appropriations

18 August 2009
Chairperson: Mr C De Beer (ANC) & Mr E Sogoni (ANC)
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Meeting Summary

The Departments of Water and Environmental Affairs and the Department of Health presented their responses to the recommendations of the Financial and Fiscal Commission (FFC).

The Department of Water and Environmental Affairs agreed with the FFC about the need for basic services infrastructure programmes, and that government had to develop funding mechanisms. It also agreed that sanitation strategies had to take behavioural change into account. The issue of an independent water regulator was under debate. In principle the Department agreed that the regulatory function had to be separated from the policy function.

Members’ discussion centered around building and maintaining infrastructure, and a perceived lack of cooperation. At least one member referred explicitly to a perceived decline in infrastructure. The huge gap between projected funding needs and what was actually available caused concern among members. In addition the Department was taken to task for agreeing with all recommendations, but too easily shifting blame to lack of capacity and managerial ability at the municipal level. Members asked what the Department could and was doing to enhance cooperation between National, provinces and local government. They also asked specifically what was being done about the water regulator, the Department stated that it would incubate the function within the Department, and move it out at a later stage.

The Committee received the presentation briefing by the Department of Energy, but noted that the documentation merely summarised the FFC recommendations, without providing a significant response. This Department was instructed to return with a proper response at a later date.

The Department of Health provided responses to recommendations concerning inter-provincial equity; the mobilisation of additional resources through borrowing by provinces, and the special conditional grant to academic hospitals. With regard to recommendations about the performance of public hospitals, the DOH referred to the institution of a Masters degree in Hospital management. Its other responses were related to issues raised on the National Health Insurance scheme; standards, establishments of norms and guidelines, and whether these should remain in this form or be formalized further, and underspending in the provinces.

Members raised the issue of health accessibility in discussion. They also wondered if funds earmarked for Health could undermine the Integrated Development Planning process, and whether provinces being able to generate their own funding could lead to inequalities between them. The Department agreed that this was possible and explained that international donors consistently favoured Gauteng and the Western Cape. The Committee also raised issues of poor transport planning, citing instances where patients had to sleep on the floor, the inadequate facilities at some hospitals, what was the definition of clinics, and what were the special considerations around psychiatric hospitals. They further questioned the management and training development programmes, the hospital revitalization, when the plans for the National Health Insurance, and a budget, were likely to be presented, and commented that standards needed to be upgraded. They expressed their appreciation for the full response by this Department.

Meeting report

Department of Water and Environmental Affairs (DWEA) responses to Financial and Fiscal Commission (FFC) recommendations
Mr Trevor Balzer, Acting Deputy Director General, Department of Water and Environmental Affairs, noted that emphasis would fall on Chapters 2, 7 and 8 of the FFC recommendations.

He noted that the Department agreed that increased funding be directed towards infrastructure programmes linked to basic services including water. The specific comment on that was that the present request for bulk infrastructure funding was R60 billion, whereas less than R1.5 billion per annum was available for outer years.

It was agreed that the government should implement a fully comprehensive national infrastructure maintenance strategy. The comment on that was that serious challenges were being experienced due to project failures and comebacks.

It was agreed that Government had to develop appropriate funding mechanisms to facilitate infrastructure planning and delivery. The Department suggested that municipalities with high capacity and ability to attract investment in infrastructure, be given the opportunity to receive funds directly, with minimal support from sector departments. Those were defined as mainly being metros in urban areas.

It was agreed that in order to improve sanitary outcomes, the sanitation strategy should also target behavioural change, and that consideration had to be given to affordability constraints and sustainability.

It was supported, in principle, that there had to be a separation of policy function from the regulatory function within the water services sector. The Department commented that the concept of an independent regulator was under debate. As a progressive action the Department was considering the establishment of a special Regulatory Unit within the Department.

Mr B Mashile (ANC) asked about capacity. Funds intended for poverty relief had been rolled out year after year, without much apparent effect. He therefore asked what had happened to spending. In regard to funds transferred to larger municipalities, he noted that there were peripheral settlements attached to any city, and he asked how the Department could ensure that services were also provided to those. He asked whether there would be a funding model for informal settlements. He pointed out that there were municipalities that were accredited water authorities, yet lacked the capacity to fulfill that function.

Mr M Swart (DA) referred to the discrepancy between the projected R60 billion needed for water services, and the R1,5 billion actually available.

Mr G Mokgoro (ANC) related that he had attended a rural development summit in Limpopo some days before, and had expected a cluster of departments to participate, including the Department of Water and Environmental Affairs, but had been disappointed by the fact that they had not. He questioned that surely the Department had a role to play in rural development, since the water need in some rural areas was serious.

Mr Mokgoro then drew attention to the Spitskop dam near Kimberley. This was a massive dam that supplied water to large commercial farmers. However, rural villages adjacent to it had no access and were dependent on boreholes. He asked whether the Department was aware of that.

Mr T Harris (DA) noted that there had been a decline in infrastructure. He asked the reasons why there appeared to be a shortfall of R60 billion. He asked also how this decline could be arrested, and how would things differ in the future. He ventured that there were problems around finance and general management. He thought that a water regulator should ideally be external, and not situated in the Department.

An ANC Member referred to a recent event where a community had taken a municipality to court about water maintenance. He asked how it was possible to obtain a court order against a municipality.

Mr J Maake (ANC) asked how the Department prioritised spending. He pointed to the challenge of project failure. There had to be a briefing on what projects failed, and who had been responsible.

Mr Gelderbloem noted that there seemed to be a lack of cooperation and capacity in municipalities. Municipalities apparently lacked plans. He asked whether there was cooperation between them.

Dr P Rabie (DA) noted that water was needed for economic development. Local authorities, water boards and the DWEA had to cooperate.

Mr Mashile noted that Bushbuckridge had never received infrastructure funding. Some Water Boards seemed to receive funding, others did not. He asked whether the Department was withholding funding.

Co- Chairperson Sogoni remarked that the DWEA had supported every FFC recommendation, but yet often shifted blame to municipalities. He questioned what the Department was actually doing. Section 41 required that all organs of government to cooperate, assist and support one another. The Constitution took into account that municipalities lacked capacity, and that national government and provinces had to support them. The Municipal Finance Management Act (MFMA) could assist municipalities in meeting capacity, but the question was what the Department had to do.

He noted that the Department had to tell the Committee how it proposed to support municipalities. He wanted to hear what was the contribution of the Department to the Municipal Infrastructure Grant (MIG). The Department failed to comment on its own budget. Ways had to be found to promote capacity. The FFC had alluded to the capacity of finance management for municipalities. There was no sense in blaming local government, but instead everyone had to define their roles.

Co-Chairperson de Beer remarked that he was from Namaqua, a region plagued by water scarcity. The DWEA had been invited to visit the region. He urged that the Department come up with future plans. He felt that a futuristic agenda was needed.

Co-Chairperson Sogoni said that the rollout of rural water had proved to be unsustainable, and that infrastructures had not been maintained. He asked what were the plans of the Department.

Mr Balzer responded that there was a lack of time in which to respond fully, and that the Department would undertake to respond in writing, where necessary.

Mr Balzer noted that a progress report on refurbishment had been submitted to National Treasury. It was impossible to deal with infrastructure requirements in one year, as it had to be a long term commitment. He said that Spitskop dam was in fact not the only dam that only supplied commercial farmers. The Taung dam in the North Cape did likewise. The Department was aware of that. The issue of under-utilised dams had been included in budget plans.

Dr Helgard Muller, Chief Director: Water Affairs, DWEA, said, in regard to the gaps posed around informal settlements, that the DWEA had run out of capacity to use MIG for bulk services. To support municipalities, an additional grant had been negotiated.

Dr Muller noted that the Department had chosen to prioritise drinking water. There was an ongoing debate about that.

Dr Muller also commented on the Mazibuku court case, and said that there had been many issues and separate briefings, as well as different court rulings. The court had tested DWEA policy and found it in order, but there were problems of implementation.

Ms Tammie Mpotulu, Chief Director: Water Affairs, referred to funding utilised to mobilise engineers for bucket eradication programmes. In wastewater projects, there had been all-round involvement, and operators had been trained.

Mr Balzer noted that in terms of the reprioritisation of the budget, R500 million had been set aside for water and sanitation, and R100 million for municipal funding. Wastewater treatment plant failings were addressed.

Ms Nobulele Ngele, Acting Director General, DWEA, said that capacity for local government was a priority. The Department supported Integrated Development Plans for municipalities. Water summits were being held to promote cooperation between municipalities, provinces and the Department. Regarding regulation, she noted that the Department would incubate the regulatory function internally, and later move it out. The Departmental strategic plan prioritised support for local government.

Mr Mashile urged that the Department formulate the intended support for local government, in writing. Expected outcomes also had to be included.

Ms Wendy Fanoe, Acting Chief Director: Intergovernmental Policy and Planning, National Treasury, said that innovative funding mechanisms were needed, and that the private sector could be involved. National Treasury could only allocate money if there was capacity to spend it. MIG money in rural areas had not been spent. The question was how alternative technologies could be secured.

Co-Chairperson Sogoni  requested that the Department include issues of sanitation in the written report. He noted that although it was not always possible to help the poor with money, their dignity could be borne in mind and respected at all times.

Ms Ngele noted finally that there had indeed been senior DWEA officials at the rural development summit in Limpopo.

Department of Health (DOH) comments on FFC recommendations
Mr Thami Mseleku, Director General, Department of Health, noted that the FFC had placed emphasis on how the Health budget was determined, and how inter-provincial equity could be achieved.

Dr Kamy Chetty, Deputy Director General, Department of Health, noted that two key chapters relating to Health, were Chapter 1: Review of the Provincial Equitable Share (PES) formula; and Chapter 4: Performance of Public Hospitals.

He summarised the items highlighted.

A key FFC proposal concerning the review of the Provincial PES formula, had been that PES had to be equalised on the basis of expenditure needs. The DOH agreed that the equalisation of PES was welcome, as it allowed for proper consideration of need disparities across provinces.

The FFC had recommended that provinces be encouraged to mobilise additional resources through borrowing and exercise of revenue generating powers. The Department responded that some provinces could better generate additional funding, and if allowed to retain this money at the provincial level, it would create an inequitable financing stream. Poorer provinces would not be compensated for their low levels of economic activity and high levels of need.

The FFC had recommended that academic hospitals be allocated a specific conditional grant, since they performed a national function. The Department agreed that it fitted with current DOH priorities. However, it commented that provision was made in 2004 for the central hospitals to perform that function. Furthermore, the Department wondered why this proposal had specifically related to academic hospitals only, and not central hospitals.

The DOH supported that better performance indicators be used, explicitly linked to reporting and monitoring systems. Its comment was that enhanced national capacity was required to set standards and norms. Performance management had to be strengthened.

In response to the FFC proposals regarding the performance of public hospitals, Dr Chetty pointed out that the DOH would engage with the Universities of Kwazulu Natal and Wits, and their French counterparts, for establishment of a Masters degree in Hospital Management. Standards, norms and guidelines for use in health facilities had to be developed further.

Dr Chetty continued that there was a need for increased hospital autonomy. National oversight and local flexibility had to be balanced, especially in the case of academic hospitals.

Dr Chetty set out the DOH’s responses regarding the development of a National Health Insurance Scheme. This included the treatment as a nationally delegated responsibility to the provinces, and the linking of the equalisation grant to expenditure needs.

Mr Mseleku added that the FFC had recommended the reconfiguration of the health system. Sets of institutions had to be governed and norms had to be established, not necessarily at the provincial level. Norms were required for the provision of human resources. He cautioned that an established norm could come to be perceived as a right. Rights were a serious issue in health. If it were to be legislated that there had to be X amount of doctors per head of population, the system would be expected to consistently deliver on that. Similarly, if it was said that a certain disorder had to be treated, the capacity to do so had to be available at all times. Some norms should be legislated, but others had to remain guidelines.

Regarding spending, he urged that provinces be held accountable more rigorously. There were budgets that remained unspent. He agreed that the whole health sector had to synchronise its efforts, in order to account more fully for the bulk of the budget.

Mr Swart asked about costing models for a National Health Insurance scheme. He also asked on what basis was the equitable share between provinces determined.

Mr Mashile referred to the current confusion around central and academic hospitals. Regarding health accessibility, he enquired what the Department was doing about municipal clinics, hospital improvement, and refurbishment of infrastructure. He referred to people that he had seen sleeping on the floors of a local hospital, waiting for transport to Pretoria, and said that reasonable waiting rooms or better transport were required.

Mr Mashile also questioned whether funds earmarked for health, could in fact undermine the IDP process.

Co-Chairperson de Beer urged members to relate their questions to the FFC recommendations.

Mr Harris asked about the possibility that if provinces could generate their own funds, it could threaten other provinces.

Mr J Gelderblom  (ANC) asked if academic hospitals received grants for research.

Mr S Montshitsi (ANC) noted that the FFC recommendations did not include the National Health Insurance scheme.

Ms R Mashigo (ANC) enquired if the Department was able to delegate authority to hospitals. She asked whether hospital managers were capable. She also enquired into the norms for subsidising psychiatric and chronic hospitals.

A Member asked if the beneficiaries of the Master's programme would be retained. He also enquired whether the Department was only improving hospitals in the centre.

Co-Chairperson Sogoni  remarked that there was currently no national legislation that would allow provinces to raise loans.

Mr Mseleku replied that a costing model for the National Health Insurance (NHI) scheme had not yet been presented to Cabinet. For this reason, it would be unduly confusing to try to address costing issues now. He noted that the Cabinet could be expected to approve the NHI framework within the following three to four weeks. Details would be presented to the Executive. There would be a Green Paper or a draft White Paper on the subject.

Mr Mseleku explained that all provinces were funded at a minimum level. Funding was not equal for all provinces, but was based on needs. Some provinces received more. Needs assessment determined the equalisation grant. Bottom line funding for all was supplemented with the equalisation grant.

In regard to the clinics under municipalities, Mr Mseleku remarked that there were a range of initiatives. Some clinics had been taken over by provinces. South African Local Government Association (SALGA), the Department of Health and the provinces had engaged over the matter during the preceding two years. The SALGA position was that services in the municipalities were collapsing, and that clinics could not be accommodated by municipalities.

Mr Mseleku turned to the question of whether funds earmarked for health, could undermine the IDP. Certain funds for national priorities had been ring fenced. The problem was that stated objectives could become norms. If the target for immunisation was set at 90%, the process had to be funded at national level. District funding could not be relied upon. Where national goals were at stake, there had to be national funding. Yet the IDP had to speak to national issues.

Mr Mseleku noted that a complete programme was needed for hospital revitalization. For larger issues, there had to be a referral system. This remained a challenge.

The quality of clinics was unsatisfactory. There were deadlocks in hospitals. Sometimes this was a systems issue, and at other times a transport issue. Not all hospitals were in need of revitalisation. Some had problems around personnel and equipment, but these were not problems around systems issues.

He conceded that fund raising by provinces through borrowing could create inequality, if simply allowed to run its course. It could create situations where people could move away from a province having a perceived inadequacy of medical services (such as Eastern Cape), to the Western Cape. International donors were inclined to favour Gauteng and the Western Cape. The Department intervened in this process, by providing information on where the needs were.

National responsibility was delegated to the provinces. For certain functions like clinics, services were run on behalf of provinces.

Regarding hospital autonomy, he noted that hospitals could be compared to universities. Those were government institutions, but were allowed to run their own affairs. The budget was transferred to them, and they ran with ministerial oversight.

Mr Mseleku noted that as part of the NHI system, it would be useful if autonomous hospitals were service providers. The managerial capacities of hospitals had to be enhanced. This process could commence with central hospitals.

In regard to the norms and standards for psychiatric hospitals, he said that financing was not done by way of norms.  Budgets were provincial, and there were no national norms. There were similarly guidelines, but not national legislation, as to which hospitals could harbour mental patients, for instance.

Continuing on the issue, he said that there were norms regarding the quality of care. A range of matters could be set in advance. The emphasis could fall on standard of care, or on inputs, so that a certain amount of nurses had to be available for every operating theatre, for instance. There had to be public engagement about what would be included in such norms. However, once again he said that caution had to be exercised in the process, because this process could establish what were perceived to be inalienable rights. Outcomes were highly important, but incomes still determined budgets. Strong norms were the kind that were backed by legislation, whereas others were more in the nature of guidelines.

Dr Chetty distinguished between hospitals that provided primary care at district level, and those that provided a national service through referral. There had to be highly specialised hospitals that could perform operations like organ transplants.

Academic hospitals, in contrast to central hospitals, took responsibility for teaching and training. An effort was made to supply complete training to doctors, not only in tertiary medicine. The concept of academic complexes referred to training at all levels, provided by academic hospitals.

Regarding hospital revitalisation, she said that this was not restricted to infrastructure development. There had to be organic development. Modernisation of emergency medical services was a priority. Hospital revitalisation was not restricted to certain areas. It was being extended to areas like the Northern Cape and Limpopo, for instance.

Mr Mseleku added that hospital revitalisation had started with infrastructure needs. The Department of Health had told the National Treasury that with current levels of investment, it would take 25 years to achieve the standard desired. Fast tracking mechanisms were needed.

Dr Chetty noted that different transport systems were being developed. She asked Committee members to inform the Department about places where patients had to sleep on floors, waiting for transport.

Dr Chetty emphasised that the Department was developing management training programmes and a retention plan. Retention was a problem, which the Occupation Specific Dispensation (OSD) attempted to address. Hospital managers were sought after by the private sector. Poaching by the private sector continued, and was hard to prevent.

Mr Maake ventured that in his constituency, there were clinics that lacked water and electricity. No norm appeared to be operative there.

Mr Mseleku replied that there were definitions of what constituted a clinic. There were indeed norms and standards. A stronger sense of norms and standards could develop in future, through the institution of the NHI scheme.

Ms Wendy Fanoe stated that the Constitution was clear on the fact that national and provincial government had a shared responsibility. There was a responsibility on the part of provinces to approach the National Treasury, which then had to respond.

Provincial borrowing, she noted, was supported by the Constitution. Borrowing for infrastructure had to proceed through the Loans Coordinating Committee. This amounted to a loan from National to provincial departments.

Department of Energy responses to FFC recommendations
The Committee decided that the presentation by the Department of Energy merely summarised the FFC recommendations, without providing a significant response. The Department was instructed to return with a proper response at a later date.

The meeting was adjourned.


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