Appropriation Bill [B3-2010]: Treasury briefing, FFC & Department submissions

Meeting report

National Treasury briefing
Ms Kay Brown, Chief Director: Expenditure Planning, noted that the 2010 Appropriation Bill was tabled in Parliament at the time of the budget. The Bill was divided by vote and according to each vote’s programmes. The fiscal framework had made R86.7 billion available over the Medium Term Expenditure Framework (MTEF). The Bill expressed the priorities of government. Outcomes would be targeted in terms of 12 measurable outcomes. Ms Brown discussed allocations per cluster, for Central Government Administration and Financial Services; Social Services; Justice, Crime Prevention and Security, and Economic Services and Infrastructure. She then looked at the outcome targets and spending plans specifically for Education, Health, Crime, Rural Communities, Job Creation, Infrastructure, the Economy, and Human Settlements.

Financial and Fiscal Commission (FFC) briefing
Mr Conrad van Gass, FFC Programme Manager: Provincial Budget Analysis, said that the Commission’s position on the Appropriation Bill was similar to the position adopted with the Division of Revenue Bill and the Fiscal Framework in terms of the Money Bills Amendment Act. He looked at how the budget division practically reflected Government’s top five policy priorities for the 2010/11 financial year and the MTEF: Job creation and Infrastructure; Education and Skills Development; Health Care; Rural Development, and Justice, Crime Prevention and Policing as well as the Budget Review 2010’s budget priorities of Human Settlement conditional grants, the Local Equitable Share and social grants.

Mr van Gass looked at the relative growth rates for each of these priorities for each year of the Medium Term Expenditure Framework and overall in real terms (that is, stripped of inflation). The budget priority that grows the fastest over both short-term and medium term are Human Settlements and Local Government which programmes were not included as government’s top priorities. The second fastest priority is Job creation and Infrastructure which were funded through conditional grants and public utility subsidies. The clothing and textile and automotive industries would be subsidised to preserve jobs. Over the medium-term there was slow or below average growth for Health Care, Rural development, and Justice, Crime Prevention and Policing but the FFC concluded that the appropriations for 2010/11 did address government’s top priorities.

Discussion
Mr A Lees (DA, KZN) referred to slide 6 of the FFC presentation. Subsidies were in place for the automotive industry for 20 years. He asked if there were additional subsidies. Concerning allocation to priorities, he asked how the proportion of contribution to each department had been arrived at. He asked about political support for the Appropriations Bill, and what it meant exactly to state that the Bill was in line with government objectives.

Mr van Gass replied that there was a new subsidy for automotive production and clothing and textiles. Proportions for contribution had been arrived at by examining expenditure reviews. The basis for support was founded on new policy priorities and budget priorities. Figures were looked at to see if they reflected government priorities.

Mr Neels van Rooyen (ANC, Free State) asked for a definition of what the Treasury meant by savings. Private companies had savings as dividends. He asked if government saving could affect service delivery. He commended the FFC for setting out the priorities in real terms, but rural development was not getting its fair share.

Ms Brown responded that there were efficiency savings where departments had to find cheaper ways of doing things. There was also saving in the sense of cost reduction. Non-core goods and services were reduced. There was rescheduling of expenditure, and cancellation of contracts. An effort was made to curb overseas expenditure such as travel, in departments. The saving mechanisms, referred to on page 6 of the presentation, had been discussed in terms of not affecting the core service delivery functions. There had been a Ministerial Commission on cost cutting, and comprehensive expenditure reviews.

Mr C de Beer (ANC, Northern Cape) remarked that the rural debate could go on long. Service delivery was expensive in the Northern Cape. Services had to be taken to people on gravel roads in bad repair. The maintenance of police vehicles and ambulances burdened the budgets of the Police and the Department of Health. The Western part of South Africa lacked development compared to the East and Southwest. He asked how priorities would be implemented to correct the imbalance.

Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, for the National Treasury, replied that the Provincial Equitable Share aligned outcomes to provincial expenditure in the various departments like Health or Education. The poverty component was definitely looked at.

Ms Fanoe continued that rural development was indeed a priority but rural funding had not increased as expected. Much depended on the ability of a department or sector to spend money. If it could not, money would revert back to the fiscus. The figures for Agriculture for 2009 indicated that only 84% of the allocation had been spent. The question was how capacity for spending could be built.

Mr Lees agreed with the Treasury about a lack of ability to spend. The sustainability of projects was an important factor in this regard.

Mr van Rooyen remarked that it was ANC policy to prioritise rural development, but resources allocated did not reflect that. 1,6% of the budget allocation for rural development, showed disregard for ANC policy. The R48 million allocated to the Free State, was wholly inadequate.

Mr de Beer added that the budget procedure had set a process in motion. The Committee could recommend that the matter of rural development be taken to the Budget Council.

Mr van Gass responded that rural development was a new policy priority. The Treasury had noted that there was a new department and new programmes. Rural development would be restricted to that Department itself. There was a need to co-ordinate the work of the defunct Department of Agriculture with that of Rural Development at an institutional level. Policy and budget priorities tended to run ahead in terms of adjustment. Rural development was now a top priority, but the budget would take longer to adjust to that, than policy directives. If government decided that certain priorities could not wait, it could make use of conditional grants.

National Department of Health briefing
Ms Valerie Rennie, Acting CFO for National Health, noted that the final appropriation for Health for the year 2009/10 was R18 billion. Of that, R16,7 billion had been a provision for Conditional Grants. Actual total expenditure amounted to R17,9 billion. Under expenditure amounted to R457 million, which was 2% of the total appropriated. Ms Rennie pointed out reasons for under-spending per programme. A rollover of R414 million had been requested. The challenge faced was that the Department lacked capacity to spend money.

Basic Education briefing
Ms Ntsetsa Molalekau, Acting CFO, said that the aim of Basic Education was to provide quality teaching and learning. Curriculum improvement would receive attention, as would learner assessment. Allocation to the Department would be according to programmes. There were Conditional Grant allocations for school nutrition, among others. Budget constraints were anticipated, but the Department would pursue a new approach to delivery. There would be reprioritisation within the Department. Working with and through provinces would help deliver results.

Higher Education briefing
Professor Mary Metcalfe, Director General, said that the Department was committed to quality post-school education. There was a cordial relationship with Basic Education, in which the functions of each department was defined. Relations with the provinces were handled by the Council of Education Ministers (MINMEC). Most money would go to institutions that delivered on the mandate. There were ongoing negotiations with the Treasury. Once the Strategic Plan had been adopted, there would be development.

Mr Theuns Tredoux, Chief Financial Officer, added that the baseline had been based on splits, but also on what had been received from the Department of Labour. There would be a shift from the provinces for Further Education and Training (FET). Most of the budget would go to universities, skills grants, and salaries. Money would be shifted and the filling of critical posts seen to. University education would constitute Programme 3. There would be transfers and subsidies to universities.

Prof Metcalfe continued that time would be taken to establish the Department. There was a conditional grant to monitor the relationship between the National Department and the provinces. There were systems for FET and post literacy adult education. The Minister of Finance had advised concerning Conditional Grants, that there be a funding shift from provincial to national. There were protocols entered into between the DDG and heads of provinces. MINMEC had requested a review of the Equity Act. Sector Education and Training Authorities (SETAs) had to be coordinated. Performance measurement and skills development would be promoted.

Discussion
Mr Mnguni asked about the increase in allocation of 3% for Health, and how that measured up to international standards. He remarked that there were still school children who had to do their learning under trees, for lack of facilities. He asked about basic education as a priority, and why so little was allocated to it. Concerning Higher Education, he said that the Sector Education and Training Authorities (SETAs) were failing, and asked why they were still needed.

Ms Molalekau replied that there was a draft plan to accelerate development of infrastructure. The development was still with stakeholders. Once the plan had been approved, it would be presented to the Committee.

Prof Metcalfe responded that perceptions of the SETAs had been clouded by poor performance. The Minister would support the development of skills plans for sectors. The 1997 legislation provided for the planning of skills development with relevant stakeholders. There was a highly credible sectoral skills plan.

Mr van Rooyen said that a breakdown on under-spending per province was called for. There had been under-spending on hospital revitalisation. He asked for figures to be provided on that, and information on the surrender of R140 million related to the Mitchells Plain Project.

Ms Rennie responded that funds not spent from the hospital revitalisation grant, would be rolled over. KZN under-spent by R225 million. R153 million would be rolled over for Mpumalanga, on condition that an audit of capacity to spend take place. Under-spending had been low in the Free State. The North West province had performed well. The Department was aware of the challenges. There were tender problems, unreliable contractors, and moratoriums on appointments. R140 million had been provided for revitalisation in Mitchells Plain. There had been a request for a rollover. There had been an agreement with the Treasury that the money not be rolled over to the previous year, but to the current year. National did not have enough staff to implement oversight for the provinces. Auditors said that proper oversight of Conditional Grants was lacking.

Mr van Rooyen asked for an explanation of baseline efficiency saving in Basic Education. Further Education and Training (FET) had received a conditional grant, a protocol had been signed between MECs, but who were currently the delivery agents?

Prof Metcalfe replied that the FET protocol had been based on three meetings of the Council of Educational Ministers (MINMEC). All provinces present had supported the legal process. The Western Cape had signed first. Concerning the protocol, she said that the provinces had requested changes to the Further Education and Training Act. The protocol consolidated good working relations. The Western Cape had good FET colleges that worked well with the college sector.

Mr Lees commented that with regard to Basic Education, it was not so much a problem of lack of money, but of how money was spent. Among poor schools, there were some that were dysfunctional. But there were poor schools that were functioning well, even if without electricity, in deep rural areas. He was convinced that any allocation to improve the management skills of people such as headmasters, would be beneficial. In Northern KZN there was money for education, but it seemed to be wasted.

Mr Lees remarked with regard to Higher Education, that his party valued research. Top technological research had been downgraded at universities. There was no research emphasis in the budget. The creation of a new Department of Higher Education had added overhead costs. He asked if there would be benefits.

Mr Lees asked about enrollment planning. Was that a euphemism for control vested in universities over whom they wished to enroll? He commended the new emphasis on apprenticeships and learnerships. The question remained what was intended, and where money would go. The apprenticeship system had been discontinued 20 years previously.

Prof Metcalfe responded that universities were an area with many budget and policy implications. Research allocations to universities were tuned to research output. The Department of Science and Technology made the allocations. Research incentives were provided to universities. The creation of the two new educational departments had not required extra money. Existing money had been redistributed. There was planning between universities and the Department, and negotiated agreements. Universities had autonomy to admit students of their choosing. The only general requirement was that universities could not admit learners without matriculation exemption. Enrollment planning was based on three-year cycles, linked to money available. A university was allowed to register courses that it was capable of offering. Funding and allocation of resources for different subjects were according to international classification. The Minister had set up two task teams to look at money on budget for universities. Those consisted of the Vice-Chancellors of universities. The aim was to develop high quality institutions with a strong research focus. The intention was to bid for additional money from the MTEF bid process.

Prof Metcalfe continued that the apprenticeship system had not been completely discarded 20 years previously. The system was not being brought back, so much as enhanced and accelerated, as the Minister had stressed.

Mr Lees told the Committee that a friend of his had recently died during an hour and a half wait for an ambulance. He asked if the National Health Department intended to provide special grants for ambulances.

Mr De Beer said that he agreed with the Minister of Finance, that money had to be spent wisely. With regard to ambulances, he noted that an area like the West Coast had very few tarred roads. Appropriate vehicles for such terrain had to be procured. He asked that the budget pressures referred to, be named.

Mr Yogan Pillay, Acting Director General, expressed his sympathy about the friend of Mr Lees who had died. Ambulances were an area of concern to Health. The benchmark of a 30 minute response time for urban areas, and 35 for rural areas, had not been reached. There had been a study three years previously, on how many ambulances were needed. R1 billion in all was needed. The Department wanted a conditional grant. In one province alone, 500 ambulances, 2 helicopters and a plane was required. For 2010, 38 ambulances with personnel were acquired, but it remained a challenge. In the Eastern Cape, 4 x 4 vehicles were needed. A Conditional Grant would be welcomed. A primary cause of mortality was the late delivery to hospitals of women in labour. The infrastructure created for 2010 would be used as a legacy.

Mr De Beer opined that the role of circuit managers in Basic Education had to be reviewed. Circuit managers were the first contact between schools and the Department. Roads to schools, and school buildings had to get attention.

Mr De Beer asked if there was to be a rollout of universities in Mpumalanga. Provincial legislators had to monitor the spending of conditional grants. There were also conditional grants to municipalities.

Mr Mafemane Makhubela (COPE) commented that curriculum development was a key objective of basic education. There was a need for a deep review of the curriculum. People bewailed the lack of progress of Bafana Bafana, and yet did not question the fact that the country still has no sports academy to develop talent. Expertise was needed for that. The President had stated that education had to proceed from grassroots level. Children could be taught about preservation by learning to plant trees in schools, for instance. There had to be a sports academy. Arts and culture had to be emphasised. There had to be the opportunity for children to draw and be creative.

Ms Molalekau, Acting CFO: Basic Education, responded that a Ministerial Committee had been formed to review curriculum development. A variety of stakeholders would be involved. Workbooks for numeracy skills for all grades had been developed.

Prince M Zulu (IFP, KZN) remarked that there was a lack of professionally qualified people as lecturers at FET colleges. There was money for workshops, but the quality of lecturers was wanting.

Prof Metcalfe replied that the problem with FET colleges were due to changes in the legislation. The employer had changed, and many college lecturers had left in order to remain with the state. FET had been drained.

Mr Lees said that he had visited schools where pupils who had done matric the previous year, were employed as teachers. He asked what was the Department’s intention with teacher training colleges. Quality teachers did not want to work in rural schools.

Prof Metcalfe responded that the Department could return with a presentation on teacher training colleges.

The meeting was adjourned.