Committee Draft Report on Budget of National Treasury: Adoption

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Finance Standing Committee

20 April 2010
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The Committee debated and subsequently adopted, as amended, its draft report on National Treasury’s Budget Vote 9 report. Members raised certain issues that were not presented specifically enough and recommended some changes. They then proceeded to detail the matters that they felt had not been addressed sufficiently by National Treasury or the South African  Revenue Services during those entities’ meetings with the Committee. Among the issues were the SARS exit strategy, National Treasury’s failure to address earlier recommendations of the Committee around the disposal of illicit goods and reformulation of a policy to deal with these issues. There was also lack of sufficient policy in place to deal with concerns around the Southern African Customs Union (SACU) and SARS state of readiness to deal with issues. Other matters that the Members thought required an urgent briefing and explanation from National Treasury included the lack of financial management skills at municipal level and what was being done to address it, the lack of clarity around disposal of State Owned Properties owned by various departments, and the processes to be put in place, as well as legislation, to avert tender fraud and tax evasion, as there was a mismatch between income and expenditure of certain entities. A strategy of consolidation was recommended which would ensure open communication with various affected stakeholders. In order to deal with the information gap between the Committee, National Treasury, SARS, Public Works, and other Ministries and departments, Members recommended that information sessions be held to provide a complete and overall picture on areas critical to oversight work, including the work around the 2010 event. Other issues that the Committee needed to address included retirement law reform and procurement issues. The Committee also noted that it would need to give specific directions on focused research by the Research Unit in order to equip the Committee to make critical interventions through proactive analysis and specific thematic research.

The Committee adopted the report, with amendments.

Meeting report

Committee draft report on National Treasury Budget Vote 9
The Chairperson tabled the Committee’s draft Report on the National Treasury (NT) Budget Vote 9 (the report) and asked Members to comment.

Dr D George (DA) noted missing words under Section 2.1 and asked that the word “to” be inserted before “the aim” in the first sentence of the first paragraph on page 1.

Dr George referred to the Committee to page 2, Section 2.3, and proposed that the report should refer to the “public sector wage pressures” than merely to “wage pressures”. He also proposed that in the last sentence of the section the word “eroding” should replace the word “eating”.
Mr N Koornhof (COPE) indicated that the exit strategy to which the report referred, in item 2.4, had not been formally presented to the Committee.

Ms N Sibhidla (ANC) agreed with Mr Koornhof but suggested that this point be placed under the recommendations section of the report.

The Chairperson agreed with this suggestion.

Dr George asked that the words “be consulted” should be added to bullet point 4, of section 4, on page 12 of the report.

Ms Sibhidla reminded Members that the bullet point 8, which dealt with disposal of illicit goods, had arisen in consequence of enquiries made by the Committee, which was unhappy with the National Treasury response. The Committee had made recommendations to review that policy, and NT agreed.  When NT appeared in front of the Committee again this year, it seemed to have forgotten about the promises made. The policy in place did not respond to the issues raised by the Committee around disposal of illicit goods, nor to the Committee’s feeling that the policy should be reviewed.

Ms Sibhidla also asked about the benefits to countries that were members of the South African Customs Union from the agreements. South Africa had not signed as yet. She asked about the process of reviewing this policy.

Ms Z Dlamini-Dubazana (ANC) enquired about the State Owned Properties that belonged to the Department of Public Works, and which it intended to dispose of. She also asked about the relationship and collaboration between the Committee and National Treasury on fiscal arrangements relating to the intended disposal of State Owned Properties.

Ms Sibhidla suggested that this point be shelved for the moment, and discussed on another day with National Treasury, to clarify the relationship between its asset units and those of other departments. She was under the impression that NT and other entities had different systems for managing State properties and each unit had its own policies for disposing of its properties.

The Chairperson agreed, but suggested that alternatively he and Ms Sibhidla could formulate a direct question to the Minister on this point.

Dr George raised the issue mentioned by the Director General in regard to the budget reduction, when it was noted that this should not be of concern to the Committee as provision had been made with Eskom. He did felt that the issue must be raised as a concern of the Committee, since NT was not receiving any revenue from Eskom.

The Committee Secretary brought to the attention of the Chairperson that it was set out on page 7, under Table 1, that the decline in the budget allocation was due to the payment of R20 billion to Eskom.

Mr Koornhof  asked whether it was appropriate for the report to refer to the exit strategy, without the Committee having been consulted.

The Chairperson suggested that the sentence should be phrased to reflect that the Committee wanted to be engaged on that exit strategy.

Dr George acknowledged the existence of mechanisms to deal with effective financial management at municipal level. He said that certain items should be included in the report as recommendations. Firstly, it should be recommended that National Treasury should develop a strategy that would strongly focus on the financial management and control specifically within municipalities, since National Treasury had been bemoaning inadequate measures. He also recommended that the tendering process should be put under a register and that tightened legislation should be put in place to ensure that there was not tender fraud. He also suggested that SARS should make a presentation to the Committee on the consolidation strategy to show how this would take place, where it would be put into effect and which communities were to be affected by the consolidation process. He also recommended that National Treasury should indicate how they intended to engage with affected communities before the event, so that the communication was open.

Dr George also recommended that because of the mismatch between declared income and actual income, National Treasury needed to develop a programme as a mechanism that would deal with some sectors of the economy that not were not paying taxes; this should not be seen as targeting certain individuals but was an important aspect.

The Chairperson asked whether the Committee agreed with the proposals and recommendations made by Dr George and whether they should form the part of the Committee’s recommendations to Parliament.

Mr D Van Rooyen (ANC) agreed with Dr George that more needed to be done on issues of financial management, and asked the Committee to consider means of enforcing tax collection. He agreed with Dr George about systems in place and recommended that the Committee should consider identifying areas where the government implementation or policies presently fell short. That would avoid the possibility of the Committee having to make similar submissions the following year. He felt that the committee, in taking that approach, would be adding value to Parliament.

Ms Sibhidla said that Dr George had raised important issues around financial management, and asked whether the concerns about financial management were not to be dealt with in the Moneys Bills Amendment Procedure and Related Matters Act (the Money Bills Act). She also pointed out that the review of tender processes was subject to Broad Based Black Economic Empowerment (BBBEE) requirements.

Ms Dlamini-Dubazana agreed with the input from Members and suggested that the National Treasury’s Financial Management Unit should give a presentation to the Committee on the strategy and deal with the shortcomings or gaps in the system. She said that the Committee might provide relevant solutions to the problems and provide timeframes for implementation by relevant institutions.

Mr Van Rooyen raised another concern around the time frame, saying that the Committee should analyse NT’s input, and be very specific and detailed about what it wanted to review so that the Committee could manage to carry out its objectives in its term. The Committee, as part of its oversight responsibility, was to guide and assist National Treasury in implementation.

Dr George agreed with both Ms Dlamini-Dubazana and Mr Van Rooyen and stated that the Committee knew that things were not going well as it would like, within the system of the financial management, and for this reason agreed that National Treasury be called to explain the processes of the system, what were the gaps, and how to deal with them. He felt that National Treasury did not have full control over financial matters at municipal level, nor over what was going wrong, and although National Treasury was working on matters, the Committee would like to see them tightened more. The Committee did not know at the moment exactly what needed to be tightened up. He said that the Committee must demonstrate to the public that it was aware that public funds were not properly managed in those municipalities, but must find where the leakages were and how to prevent them. Municipal matters were a priority over other issues.

Dr George thought that the Money Bills Act would not affect the tendering process, as this Act did not actually relate to management of money. The tendering process and how it could be tightened was another area where a discussion was needed with National Treasury. National Treasury should make sure that those who were breaking the law were caught quickly and dealt with accordingly.

The Chairperson said that it would not help to be generic when dealing with issues of financial mismanagement. There was a need for empirical data and the ability of the Committee to conduct its own research. If the Committee received data from other departments it would mean that it was merely a recipient of information, as opposed to undertaking its own research on content. The Committee should isolate issues that its own researchers should be doing, which would better guide the Committee’s direction when interacting with NT.

The Chairperson commented that, in relation to procurement, the Minister had alluded to the centralisation of procurement processes to avoid a free-for-all. The unit dealing with centralisation of procurement must be asked to present to the Committee on what it was doing and how far the process had gone, to enable the Committee to deal with BBEEE issues, and to fully understand Preferential Procurement Act in order to make appropriate recommendations. He noted that a briefing on the new thinking on tender processes, which has shifted away from using the provincial tender boards towards establishing a more centralised unit, should be given very soon after the Committee’s return from the recess. Any recommendations must be based on what was in place.

The Chairperson then commented that in relation to the exit report, the consolidation request and the SARS strategy, the Committee must apply its mind to ensure that the oversight responsibility was giving sufficient “teeth” to institutions of government.

Ms Sibhidla proposed that the SARS Customs Unit be invited to present on its state of readiness for the World Cup and subsequently. She also felt that it would be important for the Southern African Customs Union (SACU) to brief the Committee to ensure that the Committee was informed of processes and reforms proposed around integration of the regional economy.

Mr van Rooyen recalled that during the oversight visit, certain matters relating to the policy for disposal of illicit goods were picked up. He recommended the Committee must state clearly what the gaps were perceived to be, and what needed to be reviewed.

Ms Dlamini-Dubazana agreed with Mr Rooyen and stated that the review should relate to why countries from the South and not the North were allowed to buy goods. She noted that the oversight visit also raised question of representivity; only one truck with isiZulu writing was seen and there was a question about all the other participants in the small, medium and micro enterprises who were supposed to be involved. She thought that this point should be raised by the Committee.

The Chairperson reminded the Committee that it had adopted a report on customs matters, but he did not recall anyone raising, at the time, the concerns now raised. The report was tabled in Parliament. Because it had not covered these aspects, then they should now be raised formally with National Treasury.

Ms Dlamini-Dubazana pointed out that matters raised by Mr van Rooyen were already covered with South African Revenue Services (SARS) and the recommendations would be found in the records. SARS had agreed with the Committee on recommendations and suggested a review itself after certain issues had been addressed. In relation to the SACU, the Committee had met SARS a week ago after the report was adopted and was pointed out that certain issues were not dealt with. There was no disjuncture between these processes. Members would be able to connect the issues if they read both reports.

Dr George pointed out that some discussion about retirement law reform had been going on for several years and no report had been done on it. The Committee would have to make a follow up about processes.

Chairperson agreed that the Committee must call SARS to report on the state of readiness around 2010. 2010 matters involved Departments of Home Affairs, Police and SARS. An inter-ministerial and interdepartmental meeting would be critical, and all should brief all the Members. The meeting would have to be coordinated at the level of the Committee Chairpersons and the Chief Whip, in order to have an integrated picture, rather than focusing only on what was happening at customs.

Mr E Mthethwa (ANC) recommended that the Committee must also request the SARS officials who had promised a report back on current policy around sale of goods to report back within a week. The committee recommended that the policy be restructured, and a promise was made. He added that those importing goods without proper documentation, and re-selling through the same channels, was viewed as tantamount to fraud; goods would be left for a three month period and then re-claimed. This too should be covered by policy.

The Chairperson said that this input by Members reiterated the need to meet with SARS and deal with outstanding issues.
Mr van Rooyen noted that it would be important for this Committee to expedite the process with SARS, as other Committees were also calling for 2010 updates.

Ms Dlamini-Dubazana said that the Committee also needed to engage with other entities, such as Government Employees Pension Fund to get clarity.

The Chairperson agreed that this entity also should be invited soon to brief the Committee. More information was needed to prepare Members to meet with SARS.

Dr George said that the Committee must also familiarise itself with what was going on at the Department of Public Enterprises.

The Chairperson indicated that the recommendations made by the Committee would form part of the Committee’s report on National Treasury.

The Chairperson commented that this Committee had a great deal that it must address, and should be very focused, should be specific in tasking researchers to undertake their work, so that the Committee’s reports were in-depth and informed.

The Committee Secretary indicated that the debate on the report would now only take place on 11 May 2010.

The Committee adopted its draft report, with amendments.

The meeting was adjourned


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