Medium Term Budget Policy Statement 2009: Consideration and Adoption of Committee Report

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Finance Standing Committee

09 November 2009
Chairperson: Mr T Mufamadi (ANC), Mr C De Beer (ANC; Northern Cape)
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Meeting Summary

The Chairperson, in his opening remarks, noted that the Money Bills Amendment Procedure and Related Matters Act was beginning to impose certain limitations on the Committee and Parliament as a whole. The Committee was constrained by insufficient time to engage on the matters before it and this was particularly pertinent to the limited time available for public participation. The tight time frames had also put constraints on the organisations submitting to Parliament. He suggested that the Task Team on the Implementation of the Money Bills Amendment Procedure and Related Matters Act address these challenges.

Members then proceeded to make comments on each section of the Draft Committee Report, and the changes and proposals made are highlighted in the full Minute.

In respect of the findings set out in the Report, Members proposed that the section in the Report dealing with findings should include specific proposals. Firstly, it should be pointed out that, since the Parliamentary Budget Office was not yet in place, the Committees were not fully able to explore the assumptions on which the fiscal framework was calculated. It was a matter of concern that the fiscal framework excluded the State Owned Enterprises and Local Government. The Report should clarify the first bullet on the establishment of the Parliamentary Budget Office by setting up a timeframe. It was suggested that the Director of the Budget Office should have been appointed by January 2010 to begin setting up the Budget Office and assist in the consideration of the 2010/11 Budget.

The Committee should also reiterate the importance of and its commitment to broader public participation - possibly going outside Parliament.  Another point should also be made about capacitation of the Committees’ staff members, who were not quite on the level that they should be, and capacitation of Committee Members themselves.  It was noted that expediting the review of the revenue formula by the South African Revenue Services was crucial, especially regarding the changes to the country's customs revenue. The Committee noted that an engagement with Statistics South Africa was also crucial, as the figures they produced formed the basis of the equitable share. Debt was important, as it was on the rise. Parliament should monitor this and take appropriate measures going forward.

The IFP Member asked that his statements must be included as minority views in the Report. He pointed out that the IFP did not agree with the MTBPS forecasts and the second was an issue of missed opportunities. The second issue related to what, in his view, the MTBPS failed to do, which was that it failed to bring about structural change in the economy. Generally, he noted that more positive indicators were favoured over the negative indicators and that the IFP would have preferred a more pessimistic view. Members felt that the Report should be reflecting Committee views, and questioned whether these views were more correctly recorded in this Report, or should rather be included in the Minutes of the meeting. It was agreed that they be included as the Minutes, and that a statement be made on the Report.

The Committee then adopted the draft Committee Report, as amended.

Meeting report

Committee Report on the Medium Term Budget Policy Statement (MTBPS)
Mr T Mufamadi, Co-Chairperson, commented on the limited time the Committee had to consider the Medium Term Budget Policy Statement (MTBPS). He remarked that the Money Bills Amendment Procedure and Related Matters Act was beginning to impose certain limitations on the Committee and Parliament as a whole.

The Committees on Finance and Appropriations had to develop proposals on how to deal with the challenges. There was the danger of Parliament not being taken seriously, as these committees would continually have insufficient time to engage on the matters before them, and this was particularly pertinent to the limited time available for public participation. The tight time frames had also put constraints on the organisations submitting to Parliament.

He suggested that the Task Team on the Implementation of the Money Bills Amendment Procedure and Related Matters Act should work on a mechanism to make it possible to effectively deal with the upcoming Budget process in February 2010.

Mr Mufamadi proposed a page-by-page consideration of the Report.

Members agreed to this.

Mr M Oriani-Ambrosini (IFP) acknowledged that he had not been present at the hearings. He stated that while the report was an accurate reflection of proceedings, he had a problem with certain sections of the report. The issues pertinent to the political parties' views were not recorded. He asked how he would register his party's concerns about the MTBPS. Perhaps this would be best addressed in Section 9: Conclusions.

Mr Mufamadi responded that this was a Committee of Parliament, to whom the MTBPS had been referred. The Committee had interacted with the MTBPS through public participation. Members had to decide whether or not the report was accurate and complete. Thereafter the individual parties were free to raise their concerns in the House.

Mr Oriani-Ambrosini replied that the report had two parts. The first part referred to what the Committee was told and the second part was supposed to be about what happened when the Committee deliberated. However, the Committee deliberations were being captured in one sentence and this implied that the Committee simply accepted what it had been told by the submissions. The IFP had problems with certain aspects of the submissions. For this reason, he asked that minority party views had to be recorded in the Committee Report.

The Chairperson replied that he though the best way forward was to consider the Report, page-by page, and for Members to raise their concerns at the appropriate page.

Mr Oriani-Ambrosini had correctly stated that he had not been part of the deliberations and the Committee did not want to rehash their previous discussions.

Section 1: Introduction and Background
Members did not propose any amendments

Section 2: The 2009 Medium Term Budget Policy Statement
Mr Oriani-Ambrosini thought the record should reflect that the MTBPS "intends to" do the things noted in the paragraph. He pointed out that these were the MTBPS proposals but these aims had not been achieved yet.

Ms Z Dlamini-Dubazana (ANC) did not agree and thought the statements were correct.

Dr D George (DA) agreed with Ms Dlamini-Dubazana

Dr George referred to line 8, in paragraph 1,which read: " The second is to create a culture of responsible stewardship and reform the public service". He stated that his understanding was that this was aimed at improving the public service.

Mr Z Luyenge (ANC) replied that the introduction indicated that the MTBPS sought to do things differently, and this included the reformation of the public service. As such he felt that the original wording should remain unchanged.

Dr George agreed with the comment but added that it was insufficient only to state that a reform must take place. The purpose of the reform was to improve its efficiency. He asked whether " to improve its efficiency" could be added after "service"

The Committee agreed.

The Chairperson referred to the reference to the Minister's two key policy challenges. He pointed out that the first challenge was to "enable a massive expansion of employment". His understanding of the submissions was that employment projections indicated steady growth. As such, he proposed that "massive" be replaced by "steady".

Ms Sibhidla replied that this referred to the Minister's proposal and it was correctly stated that the Minister had proposed massive employment. The Minister of Finance was talking about the large number of workers to be absorbed into the economy.

The Committee agreed that there would be no amendment.

Section 3: Economic Outlook and Policy
Mr R Lees (DA, Kwazulu-Natal) was perturbed by the first line of Section 3, which stated that "the tabling of the MTBPS came amidst the slow and uneven recovery of South Africa from its first recession in 17 years." He referred specifically to the statement that South Africa faced a slow and uneven recovery. He asked whether this was correct.

Ms Dlamini-Dubazana responded that this was an accurate reflection of the view that had been expressed by the Minister.

Mr Lees accepted this explanation.

Mr Oriani-Ambrosini replied that Mr Lees' question highlighted his difficulty. Again, this referred to what the Committee was told, rather than what the Committee's opinion was on the issue. He too had a problem with the substance of the Statement on the MTBPS and did not agree to certain aspects of the Statement. He pointed out that there was no indication that the Committee had accepted this point of view during deliberations.

Mr Z Luyenge (ANC) responded that the Committee was not an intellectual body and therefore relied on the stakeholders from scientific and intellectual bodies to present submissions. This Report was a reference to what the Committee was told, and as such it was an accurate reflection of proceedings.

Mr D Van Rooyen (ANC) replied that all the indicators pointed in the same direction, showing that economic recovery in South Africa would be slow, especially in the performance of foreign reserves and South African companies. He added that Mr Oriani-Ambrosini's views must be recorded as part of these proceedings. Members must not feel restricted from differing, provided there was adequate information to support their views.

The Chairperson called a point of order. He stated that there seemed to be an assumption that the Committee had not applied its mind and had merely regurgitated what it was told. This was not correct. The Committee had engaged robustly on the issues. Mr Oriani-Ambrosini had missed the opportunity to engage with the experts. After these engagements, the Committee had accepted the observations of those making submissions on economic performance and recovery.

Ms Dlamini-Dubazana stated that when Members did not attend meetings, they delayed the proceedings because they did not have the same understanding as the rest of the Committee.

Mr Oriani-Ambrosini stated that he took exception to this unwarranted attack on him. The points he raised were not a consequence of his not attending the meeting. They were raised because he did not believed that the document correctly recorded the Committee's deliberations. He stated at the beginning that he did not object to the Report, in general, but had some points that he would like to be recorded in the Report. He had asked for the Committee's guidance on where these additions would be most appropriate.

The Chairperson responded that the Member could raise the points when the Committee considered the conclusions. He then referred to the second sentence under Section 3. he suggested that "indicated" be replaced by "accompanied"

The members agreed.

The Chairperson referred to Table 1: Economic Indicators and stated that all the acronyms used should be written out fully. This also applied to the rest of the Report. It could not be assumed that all readers of the Report would understand the acronyms.

Mr T Harris, (DA; Western Cape) referred to the third paragraph of Section 3 and stated that it was rather poorly written. He proposed four changes, to correct grammar and remove redundancies. After the changes, the paragraph would read: “Implications of the Table 1 and Table 2 are that, since the tabling of the 2009 Budget in February, South Africa's economic environment has worsened considerably. Even more worrying is that some macro-economic variables of 2009 compare poorly to similar 1992 numbers. In the beginning of the 2009/10 financial year, the economic recession was not as severe and the impact of the global financial crisis was modest. Nevertheless, National Treasury is under the opinion that because of early decisions on fiscal policy, inflation targeting, the gradual approach to exchange control liberalisation, banking regulation and public spending choices, South Africa was able to minimise the negative impact of the global financial crisis.”

The Committee agreed to the changes.

Section 4: Fiscal Trends and Policy
Mr Lees referred to the second sentence of paragraph 7 and the reference to "high commodity prices". He asked whether the experts really expected high commodity prices. He asked if it was not more correct to say "higher" commodity prices.

The Committee agreed.

Dr George referred to the last sentence of paragraph 8. He had understood that Mr Woody Aroun was speaking on behalf of the Congress of South African Trade Unions (COSATU) and did not speak for all organised labour. Therefore the reference to "organised labour" should be changed to refer to “COSATU”, specifically to reflect that Mr Aroun argued that COSATU did not support inflation.

The Committee agreed.

Mr Oriani-Ambrosini asked if the figures in Table 4: Fiscal Framework (2006/7 - 2012/13) could also be represented as a percentage of the State budget to show the State's indebtedness. This was an interesting figure as it would be higher than the ratio measure against Gross Domestic Product (GDP).

The Chairperson asked for clarification of this point.

Mr Oriani-Ambrosini replied that this table was looking at the total income of the country (GDP), and relating it to the borrowing of the State. However, it did not make sense to compare the State’s borrowing to the State’s earnings. It was rather the standard practice to note the borrowing as a percentage of GDP, and he would accept the use of this ratio. He was more interested in how the State's borrowing compared to the amount of money it earned. If the information was not readily available, that was fine; but this struck him as a more useful comparison.

Ms Sibhidla responded that this was covered in Section 6: Government Debt. She asked if the Member could reserve the question until the Committee considered Section 6.

Dr George questioned the rigour or accuracy of the assumptions around possible increases in taxation. He had asked the Minister about this and the Minister responded that the question would be answered in the Budget 2010/11. He asked where the DA could record its view that the assumptions may well be off the mark. If this was the case, the resultant changes would have ramifications. He noted that the Committee could not evaluate the assumptions because the Parliamentary Budget Office was not in place yet. If these points could be included, then the DA did not have a problem with the assumptions recorded in the report.

Dr George referred to the fourth sentence of paragraph 3, which read that: "Economic growth will also be supported by the South African Reserve Bank's decision to reduce interest rates." He was not sure if this was the presenter's view or the Committee's. If this was meant to be the Committee's opinion, then he did not necessarily agree. He asked that, firstly, there should be a note to clarify whose opinion this expressed. If it was supposed to be the Committee’s opinion, then he wanted to change it.

Mr Mthethwa Mkhize, Committee Content Advisor, replied that the sentence aimed to translate the collective view of government, that fiscal policy and monetary policy would work hand-in-hand in improving the economy and that government collectively subscribed to inflation targeting.

The Chairperson thought it best to keep the Reserve Bank out of the equation, since the Reserve Bank was independent and might decide to independently increase interest rates in future. He asked the Content Advisor to rephrase the paragraph accordingly.

The Committee agreed.

Dr George proposed the addition of the words : "provided appropriate steps are taken to improve efficiency of resources" to the end of the first sentence of paragraph 4.

Mr Harris proposed the addition of  "Based on the Treasury forecasts" to the beginning of the same sentence.

Mr Van Rooyen replied that these points were addressed in the third bullet of paragraph 4. He asked if this would lead to the points on moderation in the growth of government spending and smart spending being stated twice.

Mr Harris did not agree that the point would be stated twice, but did not think they were the same things.

The Chairperson agreed, adding that the bulleted point would then be a marked as a point of emphasis.

The Committee agreed.

Mr Oriani-Ambrosini replied that the preceding comments highlighted his difficulty with the forecasts, both in terms of economic growth and, consequently, revenue generation. Dr George had suggested amending paragraph 4 to register the view that the assumptions could not be properly tested because there was no Budget Office as yet. He stated that perhaps the Report could also register the view that certain positive indications in the MTBPS were reported, perhaps under-emphasising the negative indicators, so as to create an optimistic scenario upon which the MTBPS was based, and that the Committee thought that this was not entirely prudent. He added that this was the IFP's main concern.

The Chairperson responded that some of the proposals were not necessarily relevant to Section 5. He felt the comments would be better placed under the section on Key Issues. He noted that Dr Oriani-Ambrosini had raised important points but that the record of proceedings and the Committee's views should not be conflated.

Dr George referred to the second sentence of paragraph 5 and proposed that "a" be omitted from "provides an employee with (a) job security"

The Committee agreed.

Section 5: Tax Revenue and Policy
Members did not propose any amendments

Section 6: Government Debt
Mr Oriani-Ambrosini reiterated that he simply requested the figures to be expressed as a percentage of the government budget, as any company would do.

Ms Sibhidla proposed that if the Committee agreed on this inclusion, the drafters of the Report could add the required information.

The Committee agreed.

Section 7: Fiscal Sustainability for Continued Development
Mr Harris had a problem with the section's “rose-coloured” view of sustainability. It was fine to reflect that, historically , sustainability was intact. He referred to the MTBPS' wonderful forecasts on sustainability and added that there was no certainty on those issues as yet. He proposed the insertion  of the word "had" in the first sentence of paragraph 1 and "had historically promoted" in the fifth sentence of paragraph 2.

The Committee agreed

Section 8: Key Issues
Dr
George referred to the second bullet point and proposed that the phrase "save some money" should be replaced by "reduce inappropriate spending and reduce corruption".

Dr George proposed an additional bullet point, which should read: "Given that the Parliamentary Budget Office is not yet in place, the Commitees were not fully able to explore the assumptions on which the fiscal framework is calculated. The assumptions may well be overly optimistic and require further analysis."

Another bullet point could read: "It is also of concern that the fiscal framework excludes the State Owned Enterprises and Local Government."

Mr Oriani-Ambrosini noted there were three possible views the Committee could take. The first was that the Committee agreed fully, the second that the Committee did not know whether it should agree or disagree because it was unable to test the assumptions in the absence of a Budget Office, and the third was that the Committee did not agree at all. He stated that the Committee had the option of reflecting all three views. He added that the IFP's position was that the MTBPS was too optimistic. Recording all three positions was consistent with the Rules that required all Reports to record minority views.

Ms Dlamini-Dubazana did not agree with the use of the phrase "overly optimistic" but she did agree with Dr George's proposal regarding the Budget Office and the Committees uncertainty about the outcomes of National Treasury's forecasts.

Mr Van Rooyen replied that Dr George's amendment, that had proposed using "reduce corruption" was not appropriate. He proposed the use of "elimination" or "eradication" as government had committed to root corruption out altogether.

Mr Luyenge agreed.

The Chairperson referred to Mr Oriani-Ambrosini's point. He remarked that this was a Joint Committee and the members of the Select Committee on Finance and Appropriations were primarily here to represent provincial issues, rather than party issues. He stated that the Committee should also record these views. These issues should be recorded as new bullet points under key issues.

Mr Oriani-Ambrosini stated that the IFP had two issues - the first was that it did not agree with the forecasts and the second was an issue of missed opportunities. The second issue related to what, in his view, the MTBPS failed to do.

Referring to the forecasts he was willing to live with a moderate position on whether or not the Committee Report agreed with the MTBPS.

However, he stressed that a Committee Report needed to list minority views as they were expressed. Therefore, if this was a Joint report, the Rules applied equally to the views expressed by the Select Committee (NCOP) Members, on behalf of the province or party - whatever the case may be.

The Chairperson thought that these points were best placed at the very end of the Report, as they were entirely new topics for discussion.

Mr Oriani-Ambrosini replied that he had no view on where the points should be placed, but only wanted the points he had raised, to be part of the official record.

Dr George stated that he had proposed the inclusion of a factual statement and an opinion. He offered to withdraw the opinion portion - " The assumptions may well be overly optimistic and require further analysis."

The Committee agreed.

Mr L Mashile (ANC) stated that the Money Bills Amendment Procedure and Related Matters Act should be written out in full and should not be noted, merely as "Money Bills Act".

Mr Mashile referred to the last key issue, concerning the partnership between the Ministry of Co-operative Governance and Traditional Affairs and their counterparts at the Ministry for Performance Monitoring and Evaluation on the Operation Clean Audit Campaign. He asked if such partnership was possible.

Ms Sibhidla replied that the statement emphasised that the Ministries would work together in accordance with their individual mandates.

Section 9: Conclusions

The Chairperson asked for specific recommendations.

Ms Sibhidla proposed that the Committee should clarify the first bullet on the establishment of the Parliamentary Budget Office by setting up a timeframe. She suggested that the Director of the Budget Office should have been appointed by January 2010 to begin setting up the Budget Office and assist in the consideration of the 2010/11 Budget.

The Committee should also reiterate the importance of, and its commitment to broader public participation, possibly going outside Parliament. She felt that one of the points should also concern the capacitation of the Standing Committees on Finance. This related to all the Committee support staff, as they were not really at the level where they were supposed to be.

Mr Van Rooyen responded that the last point also had to mention the capacitation of members.

Mr Van Rooyen stated that the process of SARS reviewing the revenue formula was crucial, especially regarding the changes to the customs formula. This contributed greatly to the country's revenue and expediting the process was crucial.

Mr Oriani-Ambrosini suggested that the removal of the second “and” in the first paragraph would separate the two distinct topics of the fact that the Committee conducted public hearings, and what the Committee recommended based on the hearings.

Mr Luyenge proposed that Statistics South Africa be included under the second bullet point. This bullet point concerned co-operation between the Ministry of the Co-operative Governance and Traditional Affairs and the Ministry for Performance Monitoring. This was important as the Committee needed to understand the figures that formed the basis for the fiscal framework.

Mr Lees referred to the second bullet point and pointed out that the current wording did not specify who would co-ordinate the working relationship between the Ministry of Co-operative Governance and Traditional Affairs and the Ministry for Performance Monitoring.

Mr Mashile noted that the use of “establishment” implied that a working relationship did not already exist.

Mr Mkhize suggested that “establishment” could be replaced by strengthening the working relationship.

Mr Luyenge pointed out that the Committee had not included its findings to form the basis of clear recommendations.

The Chairperson asked the Committee to formulate four or five findings.

Ms Sibhidla thought these points should include: the non-existence of the Parliamentary Budget Office, the Committee's lack of capacity to engage with technical issues, and the time constraints to public participations

Ms Dlamini-Dubazana thought that an engagement with Statistics South Africa was crucial, as the figures they produced formed the basis of the equitable share.

Dr George suggested that there should be inclusion of wording to note that the fundamental assumption on the fiscal framework would only be true if there was economic growth. Debt was important, as it was on the rise. Parliament should monitor this and take appropriate measures as it went along.

Mr Oriani-Ambrosini proposed a finding that the MTBPS was inadequate, in respect of what it did not do. The MTBPS failed to bring about structural change in the economy. It was based on “the big if” of economic growth. He wondered what would happen if the economy did not recover. He reiterated that the IFP would have preferred a more pessimistic approach to the MTBPS.

The Chairperson responded that the Committee Report must report on this point on the pessimistic view, in the context that South Africa was part of the world economy. Not everything depended on South Africa.

Mr Luyenge objected and stated that the Report had to be the Report of the Committee, not to reflect individual political parties. He did not think this was proper.

The Chairperson responded that the views of members could be raised in the Committee.

Mr Oriani-Ambrosini reiterated that the Rules provided for the report of the Committee to reflect minority views. He accepted that the view he had had expressed on behalf of the IFP was not the Committee's view. However, it should be recorded.

Ms Sibhidla proposed that the view be recorded and the Committee would report to the House accordingly.

Mr Lees replied that he accepted that proposal but felt that Mr Oriani-Ambrosini's views should be recorded in the Minutes and not in the Report.

The Chairperson agreed.

The Chairperson called for Committee to adopt the Report.

Ms Sibhidla moved for adoption and was seconded by Mr Mashile.

Mr Oriani-Ambrosini asked for the quorum to be verified.

The Chairperson replied that the quorum had been verified before the adoption commenced. 

The Committee Report was adopted, with amendments.

The meeting was adjourned. 


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