2011/12 Division of Revenue Bill briefing & Financial and Fiscal Commission submission

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Finance Standing Committee

23 February 2011
Chairperson: Mr E Sogoni (ANC) and Mr T Chaane (ANC) North West
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Meeting Summary

The Appropriations Standing and Select Committees were briefed by National Treasury on the Division of Revenue Bill. Members concerns included the need to finance the newly proposed metros of Mangaung and the Buffalo City; road repairs and rural provinces getting less funding. The Committees asked about the fate of the employees of the dissolved Electricity Distribution Industry (EDI) Holdings, the unavailability of scholar transport to move children to their schools, the reasons for withholding 5% of the funds when provinces under spent, the escalating personnel bill for health workers and the drop in the expenditure. Financial and Fiscal Commission gave a brief summary of its recommendations for the 2011/12 Division of Revenue Bill.


Meeting report

2011 Division and Revenue Bill briefing
Mr Kenneth Brown, Deputy Director General: Intergovernmental Relations, National Treasury touched on the legal basis of the Division of Revenue Bill. He went through the previous recommendations of the two Committees as they related to the 2011 Division of Revenue Bill and responded to each. These recommendations covered diverse aspects such as Assessment of Conditional Grants to a Review of Scholar Transport Policy. He then explained the layout of the 2011 Division of Revenue Bill and the changes to the 2010 Division of Revenue Act, explaining the significant amendments such as improving national oversight of conditional grants and the new process for disaster funding.

Mr Brown then talked about the Financial and the Fiscal Commission (FFC) proposals for 2011 and the Government’s draft response to each of these. He then looked at the Fiscal framework for the 2011 MTEF and the provincial and the local government frameworks for the 2011 MTEF (see document).

Discussion
Ms R Mashigo (ANC) enquired about the delay in the review of scholar transport policy to address the challenge of learners walking long distances to schools. She asked for the reason that the infrastructure grant should be limited to the forty to twenty formula. She said that she did not understand why it would take four years to eradicate mud schools. The briefing was silent about the maintenance and upgrading of rural roads.

Mr Brown explained that there were programmes planned for scholar transport. The Department of Basic Education should set up a transport plan and establish exactly the number of children who needed it and the distances from home to schools. R2.7 billion was allocated to rebuild mud schools, and the Eastern Cape got the largest chunk. He suggested the use of the term “unsafe structures” because some schools were under trees while others were breaking down even though they were concrete structures. There was also another R16 billion Provincial Baseline funds for unsafe structures 

Mr M Swart (ANC) asked for clarity on what would happen to the employees of the Electricity Distribution Industry (EDI) Holdings.

Mr Brown replied that the EDI personnel would be absorbed by the Department of Energy; the rest would be redeployed.

Mr Matomela (ANC; Eastern Cape) enquired about the reasons for withholding 5% of the funds when provinces under spent. He asked whether the Occupation Specific Dispensation (OSP) for health workers had been planned for.

Mr Brown replied that some provinces spent money faster than others. Cities should be self sufficient, “We should not undermine them by giving them too many grants”. Their billing systems would collapse when they were suffocated with too many grants. When the cities know that “Big Brother would rescue them” then they would not pull up their socks. He added that cities should have a twenty to twenty five year plan like the Shanghai’s and the New York’s of this world. They should look at economic development in the long term. Climate change was going to affect our cities. Shanghai of thirty years ago was totally different to the present Shanghai. They built nine hundred kilometres of an underground railway line within five years. An elaborate transport plan influenced population spatial management.

Dr Z Luyenge (ANC) mentioned that there were mud schools that were in much better condition than other structures used for teaching and learning. He asked whether there was an allocation for the proposed two new Metro Municipalities of Mangaung in Bloemfontein and Buffalo City in the East London area.

Mr Brown explained that the two proposed metros were lucky because the Municipal Infrastructure Grant would cater for them, and then there was the R2,4 billion and the human settlement grants for the building of housing.

Mr L Ramatlakane (COPE) enquired about the tools used for calculating the kilometres of the roads that had to be repaired. He wanted to know whether transport provisions were made for the new metros.

Mr Brown mentioned that the Municipal Infrastructure Grant assisted rural municipalities.

Mr Brown said that National Treasury needed full costing for the amount needed and that was already happening.

Mr Brown noted that National Treasury had a road rehabilitation plan in conjunction with the National Department of Transport. Different provinces differed when it comes to costing the rehabilitation of roads. The costing was also affected by real estate prices. The same amount of kilometres cost differently from one province to another.

Mr S Montshitsi (ANC; Gauteng) raised his concern about the drop in the expenditure share of the conditional grant, from 51% to 48%.

Mr Brown replied that municipalities were not getting a lesser share; the education budget was increasing steadily. He added that 24 municipalities would be accredited soon so that they could access the housing funds. The power to accredit municipalities was with the MEC for the Department of Cooperative Governance and Traditional Affairs (COGTA).

Ms Wendy Fanoe, Chief Director:
Intergovernmental Policy and Planning at Treasury, explained that COGTA had specific guidelines for provinces but certain provinces were not cooperative. They would either submit business plans late or not at all while others did not spend the money appropriately.

Mr C De Beer (ANC) (Northern Cape) said that school books should be delivered in December, long before schools were opened. The problem was that circuit managers in the Northern Cape did not want to travel on gravel roads. Committees should conduct oversight visits to these areas and make sure that books were delivered on time.

Co-Chairperson Sogoni enquired about the progress with the accreditation process of municipalities to administer national housing programmes. He was concerned about the ballooning size of the budget in the health sector due to OSD. The majority of disadvantaged residential areas did not have sports facilities. He asked whether the Municipal Infrastructure Grant had any sports component. If yes, what was the percentage allocated. Schools in those areas did not have sports facilities, even the newly built schools. He asked how far the departments had got in registering new grants.

Mr Brown replied that it was up to the Department of Basic Education with the Department of Sports and Recreation to strategise on how to build sports facilities. It was up to the Provincial Education Departments to decide how they spent their allocation. The accreditation process was the responsibility of the COGTA MEC.

Ms Fanoe replied that the OSD personnel expenditure was escalating out of proportion and the Minister of Finance Mr Pravin Gordhan had highlighted that point. About 200 000 health workers were hired and it had pushed up the personnel expenditure.

Mr N Makhubela (COPE) (North West) mentioned that in Mdantsane motorists were driving on dongas that had developed on what used to be roads built by the former Bantustan of Ciskei.

Mr Brown replied that the rural provinces were getting less funding; the Gautrain cost billions of rands but it would only serve one province.

Financial and Fiscal Commission (FFC) submission on 2011 Division of Revenue Bill
Mr Bongani Khumalo, Chairperson of the Financial and Fiscal Commission, briefly touched on the matters outlined in the FFC presentation document:
▪ strategic issues around the Division of Revenue Bill for the Government’s consideration.
▪ Provincial and local government sectoral challenges
▪ Provincial and Local Equitable Share.
▪ Comment on the Government’s response to the FCC recommendations.

Discussion
The Chairperson said that there was not enough time for discussion because there was no pre-arrangement for transport for committee members. He said that the FCC would interact with the Committee at a later stage.

The meeting was adjourned


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