Committee's draft Report on First Quarter Expenditure Reports & Hearings: deliberations

Standing Committee on Appropriations

22 October 2009
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee met to consider its draft Report on the public hearings on first quarter expenditure for 2009. This draft Report detailed the responses of departments who had been called to the Committee, being the  Departments of Rural Development and Land Affairs, Communications, Basic Education, Agriculture, Forestry and Fisheries, Co-operative Governance and Traditional Reform, Trade and Industry, Public Works, Home Affairs, Correctional Services and Water and Environmental Affairs. The Report raised the timeliness of reporting on quarterly expenditure figures as a major area of concern. The slowness of spending (spending below the accepted spending benchmarks) in the capital budget was of particular concern, as the Committee believed that this could play a meaningful role in economic upliftment and efforts towards job creation. Members discussed the wording of particular sections of the report, including whether the Minister’s statements during the hearing with the Department of Rural Development and Land Reform, around the issue of the willing buyer, willing seller model, should be quoted in inverted commas, or stated more generally. Members agreed to consider wording put forward by the members and indicated that in any event many of the matters would be debated in the House. The Committee had inserted specific comments on the work of this Department in the report. Similarly, comments were made in respect of the Department of Water’s responsibilities. The Committee asked for the inclusion of the Committee's view that in -year transfers, virements and other forms of shifting funds was not a desirable practice. The possible exclusion of the Department of Co-operative Governance and Traditional Affairs was also discussed, as the department was found not to have underspent, but it was noted that the draft Report should reflect that this department had been called before the Committee but had produced a satisfactory explanation.

Members debated the draft only up to page 7, and the Chairperson asked that Members consider the remainder of the report and try to meet on 11 November to discuss the remainder.

Meeting report

First Quarter Expenditure: Committee’s draft report
The Chairperson apologised for the late start. He had to attend a Chairperson's meeting with the National Assembly House Chairperson, Mr Obed Bapela, on the programme of implementation for the Money Bills Amendment Procedure and Related Matters Act.

The Chairperson noted that the Committee would, in this meeting, review what had arisen from the hearings on the First Quarter Expenditure, but would not try to finalise the report. The draft report aimed to encapsulate the responses from the departments. Members were reminded of Lock-Up Session for the release on the Medium Term Budget Policy Statement (MTBPS) of Tuesday 27 October 2009, and the Chairperson appealed to members to keep the rules of the Lock-Up Session in mind.

Ms B Ngcobo (ANC) asked the researchers to note the departments' names in full.

The Chairperson responded that this was important.

Mr D Mavundla (ANC) asked for clarification on the rules of the Lock-Up Session.

Mr M Swart (DA) explained that at the Lock-Up Session members would be required to surrender their cellphones and electronic communication devices. Members were expected to sign the attendance register and a form stating that they would not divulge the information they received. They would then be issued with the Medium Term Budget Policy Statement and accompanying documentation. Members were allowed to read through the documents thoroughly and would then proceed to the House. This session would last from 10 am to 2pm.

The Chairperson asked members to return to the business of the day.

Mr Sizwe Nyenyiso, Parliamentary Researcher for Standing Committee on Appropriations, presented the draft Consolidated Report of the Departments' responses. Public hearings on first quarter expenditure were held in respect of the Departments of Rural Development and Land Affairs, Communications, Basic Education, Agriculture, Forestry and Fisheries, Co-operative Governance and Traditional Affairs, Trade and Industry, Public Works, Home Affairs, Correctional Services and Water and Environmental Affairs.

Mr Swart asked whether the last paragraph should not be included in the section on Recommendations and Findings. It would then be possible to highlight all the other important points raised in the report.

Mr G Snell (ANC) felt that the statement about the timeliness of reports was broad, and conveyed an ambiguous view of the timing stipulated in the Public Finance Management Act (PFMA) and its accompanying regulations. He asked if this could not be picked up in more detail so as not to lose sight of the timeliness issue.

Ms Ngcobo asked if the paragraph should not rather be left in the introduction. She also agreed with Mr Swart that if the Committee were to include the capital spending issue, all the other pertinent issues should be included as well.

Ms R Mashigo (ANC) asked whether the paragraph could be rephrased to include all the other areas of concern, such as those departments where slow spending was indicated.

Mr Mavundla felt that the point was fair. The introduction should highlight the points contained in the rest of the report. He asked for more detail on the economic classifications later in the report.

Mr L Ramatlakane (COPE) stated that the paragraph currently pointed to a particular concern around slow capital spending. He suggested that “inter alia” be inserted at the end of the paragraph, as that would address the other areas of concern.

The Chairperson responded that the paragraph indicated the Committee's strong feelings on the matter. It was a strong statement and highlighted capital expenditure as the main policy concern. The timeliness of reporting was also a major issue.

Mr Swart replied that he did not think this was a logical layout and that it was wrong to only mention one issue. However, he would not vote against the report based on this issue, if the other Members were happy with it.

Ms M Tlake (ANC) asked what was meant by “slow spending”.

Mr Nyenyiso replied that this was a standard government classification and the lowest level of spending was classified as “slow spending”.

Mr Nyenyiso read the Review of the Total Expenditure, covering the total allocation to national departments for the 2009/10 financial year (R399,6 billion) as well as how this amount was allocated to current payments, transfers and subsidies and capital expenditure.

He noted that the section entitled Spending Trends by the Departments during the First Quarter of the 2009/10 Financial Year provided a synopsis of the government departments that had fundamentally deviated from the general spending benchmark: namely, the Departments of Sport and Recreation, Education, Rural Development and Land Reform. The departments that had exhibited slow spending were the Departments of Water and Environmental Affairs, Communications, International Relations and Co-operation and Co-operative Governance and Traditional Affairs.

Ms Mashigo referred to the inclusion of the Department of Co-operative Governance and Traditional Affairs. At the hearings, the Committee realised that the Department had not underspent. Transfers to local government, whose term started in July, explained the apparent underspending figure. She suggested that the reference to the Department be removed, as it was open to challenge.

Mr Nyenyiso replied that the analysis of the Department of Co-operative Governance and Traditional Affairs’ explanation for the underspending was provided in detail under the Economic Classification section of the report. All the explanations provided by the departments were presented in this section.

Mr Mavundla asked for an explanation of the following: "The year-to-year spending pattern reflects 1,9% increase compared to the previous year's expenditure of 23%."

Mr Nyenyiso replied that this was comparative information. The previous financial year's expenditure was 23%. The current financial year's expenditure was 24.9%, meaning that, comparatively speaking, there was a 1,9% increase in expenditure.

Mr Snell asked the researchers to include a full table, covering the overall expenditure of all the departments - so that it was easy to see the overall spending at a glance. He felt a sentence could then be included to refer to the table that highlighted the particular departments selected to account for their spending trends.

Mr Mavundla stated that there was a sentence already in the Report that qualified the table reflected in the Report.

Mr Ramatlakane replied that, for the purposes of information, the Report should give information on all departments' spending patterns.

Mr Swart stated that the Committee only called departments that deviated from the benchmarks. This was the function and the purpose of the Committee. The Committee did not deal with all the other departments who fell within the benchmark.

The Chairperson agreed that the report should retain the single table, highlighting only those departments that had deviated from the benchmark. This was the spirit in which the Committee approached the process.

Mr Swart referred to the paragraph on the Department of Rural Development and Land Reform that contained a sentence reading "As the Minister suggested, in order to move forward decisively with the land redistribution programme, significant changes will have to be made to the willing buyer, willing seller model". The DA agreed that land restitution was important but there was no way the DA would ever support the abolition of the willing buyer, willing seller principle. He elaborated that if the Department was paying three to four times more than it should for land, then it was not using the willing buyer, willing seller principle based on market value, and someone was making money on the side. He stated that he could point out the instances where the department displayed terrible performance in purchasing land. Since the programme was driven by the ANC, he could not stop it, but the DA could not support the abolition of the willing buyer, willing seller principle because it was also enshrined in the Constitution.

Mr Mavundla suggested that the section stating that "Even though progress has been made in providing clean water to the citizens, there are still areas without access to water services" needed to be clarified, so that it explained that clean water was not extended to all citizens, particularly those citizens in rural areas.

Mr Ramatlakane felt that the statement was sufficiently made on the matter of lack of water provision to rural communities.

Mr Swart felt that the issue of not providing water to rural communities was a serious indictment against the Department of Water and Environmental Affairs. It was imperative to provide the citizens with clean water. This should not be negotiable. He worried that the point was raised in this section and that it was not reflected in the section containing the findings and recommendations.

The Chairperson asked Members to consider the issue Mr Swart had raised on the Minister's statement on the land redistribution programme. He stressed that this was what the Minister had said at the hearings. He agreed that this was a policy measure and understood that the Mr Swart did not necessarily agree with it. However, the Minister had commented on the matter and had expressed his opinion.

Mr Ramatlakane replied that as presently worded, this read as a statement of fact, not as an opinion expressed by the Minister. He suggested that the statement be rephrased to clearly reflect it as a quotation, and to ensure that it was clearly shown that not everybody agreed with the statement.

Mr J Gelderblom (ANC) replied that this accurately recorded what the Minister had said. He added that the parties would have the opportunity to debate matters of policy in Parliament when the document was discussed. He felt that the statement should be left as worded.

Dr P Rabie (DA) suggested that it be rephrased as follows: "the possibility of significant change will have to be investigated." He stated that the deviation from willing buyer, willing seller principle was a loaded concept and this change could cover all concerns.

Ms Ngcobo replied that if the Minister's statement was in the context of the use of funds, it could remain in the unchanged in the draft report. If this was purely an expression of what the Minister was thinking, it could be left out, because the Committee was not reflecting what the Minister thought, but the Department's budget.

Mr Snell remarked that price quoted as the average land price (R12 949) could be misleading. Different kinds of agricultural land had different values. A hectare of orchard was valued higher, per hectare, than land in the Karoo. He felt that people buying land on behalf of the Department were hoodwinking government. The Committee needed to know what kind of land the department targeted when it budgeted, so that the Committee could better monitor its performance.

The Chairperson replied that the message conveyed in the draft Report was that the Department had made several statements on land prices. The Department stated that when land was priced at twice or three times its value, the willing buyer, willing seller approach did not assist government.

Mr Mavundla stated that the issue arose because people often would try to sell their land to government at triple the market value, whilst continuing to sell land to private purchasers at market value. This was what caused the Department's concern.

Ms Mashigo recalled what the Minister of Public Works had said about expropriation, and this was perhaps not the best option. The Minister of Public Works stated that the Department of Public Works and the Department of Rural Development and Land Reform would discuss the issue and look at cheaper options.

The Chairperson stated that the Minister's opinion on the willing buyer, willing seller principle was reflected in the draft Report. He suggested that a rephrasing to read  "The Minister was of the view that the willing buyer, willing seller principle must be reviewed" would accommodate everyone’s concerns.

Mr Nyenyiso clarified that the R12 949 was still relevant to the overall spending of the Department of Rural Development and Land Reform. The explanations given by departments at the public hearings were reflected in the Report under Economic Classifications. He would be guided by the Committee, as to whether or not the Minister's quotation should be removed.

Mr Snell stated that he agreed with the general discussion, in principle. He added that he was disinclined to believe what officials said, unless this was done under oath. In future, government entities would request amendments to their budgets from Parliament, according to the Money Bills Amendment Procedure and Related Matters Act. If these entities could present the committees with the kind of detail he outlined, the committees could build up their own idea of the complexities of the expenditure issues.

The Chairperson replied that this was a historical report on what had happened in the meetings. He felt that the Committee was being governed by opinions and these opinions would distort what was actually said in the hearings. This was perhaps not the time to express their views. The researchers were trying to reflect what had happened and what the Department said during the hearings.

Mr Swart proposed alternative wording for the paragraph that included the statement by the Minister of Rural Development and Land Reform, as follows: "There is likely to be a funding shortfall at the end of the financial year, as funding will be insufficient to cover the programme's expenses and support its development initiatives. More funds are used to buy less hectares of land, which is a huge inhibiting factor, affecting the ability to acquire more land. The envisaged shortfall will put more burden on the government's target of transferring 20% of land to the people by 2014. Investigations for less costly methods of land acquisition will be undertaken." He agreed to submit this wording to the members in writing.

Mr Gelderblom agreed that this was a record of what the department had said in the hearings. The parties could debate their views in Parliament. These matters could be included in the findings and recommendations.

Mr Ramatlakane suggested that the draft Report should state the fluctuation in market prices to get around the concerns of stating a figure as the average land price. With regard to the Minister's statement on the willing buyer, willing seller model, he felt that the draft Report should state the fact that the current policy was under review. He said that Mr Swart's suggestion was heavily rephrased and felt that his suggestion accommodated the concerns.

The Chairperson asked why the statement was not put in quotation marks to reflect that it was an opinion expressed by the Minister.

Mr Swart undertook to distribute his version to members. If members did not agree, the paragraph could be retained in its current form.

Ms Mashigo asked whether the Department of Co-operative Governance and Traditional Affairs should be included in the Report or not. She felt this Department should not be included.

The Chairperson asked if the draft Report should not include a comment in brackets that clarified the point that the Department had not underspent.

Mr Ramatlakane suggested that the Committee should simply qualify what was already in the Report by adding that the Committee had met with the Department and the Department provided an explanation.

Mr Swart suggested that the words "The Department was, therefore, not in default" be added at the end of the paragraph.

Mr Nyenyiso then outlined the section on Economic Classification. He briefed the Committee on the Current Expenditure and Comparisons of the Lowest Expenditure in Current Payments between the 2009/10 and 2008/9 financial years.

Mr Swart expressed concern about the section dealing with lack of explanation regarding underspending, which read:  "No further elaboration was provided by the Department with regard to the first quarter underspending on current payments" in respect of a few departments. He was worried that this was seemed to be an indictment against the Committee. He queried whether other Members felt that this paragraph should be removed or replaced with a statement that the Committee was investigating the reasons for the underspending.

Ms Ngcobo responded that the Committee was, in fact, still awaiting responses from the Department of Rural Development and Land Reform, so that this was not yet a closed issue.

The Chairperson replied that the Department of Rural Development and Land Reform had now responded. This, as well as the other responses the Committee had received, would be distributed to the Members. There were still some other responses outstanding. Broadly, he agreed with Mr Swart. He felt that the sentence highlighted by Mr Swart should be omitted.

Mr Ramatlakane remarked that the shifting of monies through transfers was a point that the Chairperson and Committee had emphasised. No statement to this effect was included in the draft Report, but should be because it went to the issue of whether the budget process was working, and whether departments planned adequately.

The Chairperson responded that this was a very important point and should be reflected in the Report. He asked if this point appeared in the section on Findings.

Mr Nyenyiso replied that it was reflected in the Findings section, but could be highlighted in this section as well. The Research Unit awaited information on the timing of the transfers from the relevant departments. He would make that information available to members at the next meeting.

The Chairperson reiterated that the draft Report must reflect the Committee's concern on the issue of transfers. The fact that this was happening in the First Quarter was a serious indictment against the departments’ planning abilities. It seemed to be a total abuse. Virements could not be done in the First Quarter.

Mr Swart responded that perhaps this issue would be better placed in the sections on Recommendations and Findings. He agreed with the sentiments expressed by the Chairperson, and added that according to the Money Bills Amendment Procedure and Related Matters Act, the Committee would have a say in controlling this once the Parliamentary Budget Office was set up.

The Chairperson agreed.

Ms Mashigo pointed to possible redundancy in the paragraph, beginning: “The slow spending by both the departments of Education and Health…” She also asked why the acronym “SMS” - Senior Management Staff - was not fully explained.

The Chairperson agreed that all the acronyms had to be explained in full when they were first used.

Mr Nyenyiso replied that the concern around the paragraph was that there was a need to name all the departments, after singling out the departments of Education and Health. He suggested that it might be better to remove this sentence, but would be guided by the Committee.

 Mr Ramatlakane did not think this was a major point, as it was an introduction to the table detailing the comparisons of the lowest expenditure in current payments between the 2009/10 and 2008/9 financial years. The paragraph was cited as a preface to later explanations in the draft Report and thus he did not think it was contentious.

The Chairperson suggested that Members adjourn at this point. He asked Members to take all the documents with them to examine the report and consider content, layout and grammar. He tentatively suggested that the Committee should come back to consider, and possibly finalise, the remainder of the draft Report on 11 November 2009.

The meeting was adjourned.


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