Division of Revenue Bill: hearings with Departments of Health, Human Settlements, Public Works

Meeting report

Introduction
The Chairperson welcomed Members and observers. The Departments of Health, Human Settlements, and Public Works arrived so late that the Chairperson was about to close the meeting. The Department of Basic Education, although invited, did not attend. The Chairperson admonished the delegations, since they were all required to be present from the beginning of the meeting, notwithstanding the times allocated to them in the agenda. Exceptions were made only for ministers and deputy ministers. He noted an apology was received from the Department of Rural Development and Land Reform for its absence from the meeting of 22 March.

Public Submissions on Division of Revenue Bill
The Chairperson read a submission from the General Council of the Bar of South Africa, which made only two comments. With reference to Clause 11(2)(a)(1) it was not clear what was meant in the context by the words,“exclusively appropriate”. The Chairperson read the Clause and hoped that the National Treasury would reflect on it. The Bar Council's other point related to Clause 25(1)(a). The Chairperson read the Clause. The Bar Council suggested that the words “negatively affected” could be seen as unacceptably vague.

The Chairperson thought that the first comment was the clearer of the two.

Advocate Monqana Tau, Researcher, said that the second comment sought to clarify “negatively affected”. However, if one read it in the context of the budget allocation, “negatively” would mean “let the municipality not suffer”.

Mr B Mashile (Mpumalanga, ANC) wanted to discard the Bar Council's' second comment, as the way Clause 25(1)(a) was drafted was 100% correct.

Ms Wendy Fanoe, Chief Director: Intergovernmental Relations, National Treasury, explained that “exclusively appropriated” could mean only one thing in legislation: it meant that the money appropriated could not be used for anything else.

Members were satisfied.

The Chairperson referred to Mr Paul Theron's submission of 22 March 2011. He asked if Ms Fanoe had a view on this submission.

Ms Fanoe explained the relation between the Expanded Public Works Programme (EWPW) grant and the infrastructure grant. The EPWP grant worked in this way: if one succeeded in creating a number of job opportunities and exceeded the given bench mark, one qualified for an incentive. So it was all linked to the creation of jobs, which was measured through the infrastructure grant and infrastructure spending. So National Treasury could consider Mr Theron's proposal but it would add no value, as it was already provided for in the EPWP that actually measured how the infrastructure programmes were rolled out.

The Chairperson thanked Ms Fanoe for that clarification.

Mr C de Beer (Northern Cape, ANC) advised the Chairperson to let the Committee Secretary telephone the various delegations, as Members had other work to do.

Mr Mashile drew attention to the times in the agenda. He agreed with Mr De Beer.

Mr Mashile said that despite all the rhetoric in the National Council of Provinces (NCOP) from the ministers, the reality was that they did not communicate that sense of urgency to their departments. When the directors-general, deputy directors-general, and directors addressed the select committees of the NCOP they spoke without vigour.

The Chairperson said that the Committee would ask these Departments to make written submissions.

Ms T Memela (KZN, ANC) proposed writing to them that the NCOP should not be treated as second hand goods. It was crucial that these departments honoured their invitations. They must explain themselves in writing within three days.

Mr Mashile added that, in terms of the Money Bills Amendment Procedure and Related Matters Act, 2009 (Act No. 9, 2009) (MBAPRMA) the Select Committee did not have the luxury of time therefore it could not pursue their input. They were invited but had other priorities and the Select Committee must take it for granted that they disadvantaged themselves by not coming to the meeting.

The Chairperson said that he would draft those letters.

The Chairperson said that on 30 March 2011, the Select Committee would deal with the mandates from the provinces and on 06 April 2011, during the recess, on the final mandate on the report, in readiness for tabling in the NCOP on 13 April 2011.

The Chairperson asked Members if there should be a statement in the NCOP from the Select Committee or a debate.

Mr Mashile advised that, since it was a provincial mandate, a debate would be appropriate and the Select Committee could call colleagues from the provinces.

Mr De Beer supported Mr Mashile's proposal.

The delegation from the Department of Health arrived at last.

The Chairperson said that he would advise the Office of the Chief Whip that the Select Committee requested a debate on the NCOP on 13 April 2011.

Mr De Beer queried the date. He thought that it was to be on 12 April 2011.

Department of Health submission
Ms Malebona Matsoso, Director General, Department of Health, introduced her presentation by explaining that, during the Medium Term Framework ( MTEF) budget process, the Health Department requested additional funding for both National and Provincial departments for the amount of R19.9 billion for the three year MTEF period.

Cabinet and National Treasury approved an amount of R18 billion made up of R3.4billion for National Health and R14.6 billion for the provincial health departments for earmarked funds additional to the equitable share baseline.

Expenditure trends
The Department’s expenditure grew from R13.6 billion in 2007/08 to R23.1 billion in 2010/11 at an average annual rate of 19.4%.

Over the Medium Term period, expenditure was expected to grow to R30.1 billion, at an average annual rate of 9.2%.

The increase in both periods was driven largely by transfers to provinces for the conditional grants, with the main increase being on the HIV and AIDS and the Revitalization of Hospitals grants, while the National Tertiary Services grant (NTSG) increased significantly in the MTEF period.

The Forensic Pathology Services grant would be phased out in the 2012/13 financial year and had therefore been included in the provincial equitable share allocations.

Medium Term Allocation for 2011/12 – 2013/14
The Budget included new allocations of R442 million for 2011/12, R692 million for 2012/13 and R2.2 billion for 2013/14.

The table Programme Allocations for 2011/12-2013/14 indicated the allocations for the programmes of Administration, Health Planning and Systems Enablement, HIV/AIDS, Tuberculosis (TB) and Maternal, Child, and Women's Health, Primary Health Care Services, Hospital Tertiary Services and Workforce Development, and Regulations and Compliance Management (slide 5).

The table Economic Classifications Allocations for 2012/13 to 2013/14 indicated allocations for compensation of employees, goods and services, total transfers and subsidies, payment of capital assets, and payment of financial assets (slide 6).

The purposes of conditional grants for 2011/12
Ms Matsoso explained the purposes of conditional grants for 2011/12. The Department of Health had responsibility for administration of the following grants. The Comprehensive HIV and Aids Grant was to enable the health sector to develop an effective response to HIV and Aids including universal access to HIV Counselling and Testing (HCT), to support the implementation of the National Operational Plan for comprehensive HIV and Aids treatment and care, and to subsidise in-part funding for the antiretroviral treatment programme.

The Forensic Pathology Services Grant was to enable the continuation of the development and provision of adequate forensic pathology services in all provinces.

The Health Infrastructure Grant was to supplement the provincial funding of health infrastructure to accelerate the provision of health facilities and ensure proper maintenance of provincial health infrastructure.

The Health Professions Training and Development Grant was to support provinces to fund service costs associated with training of health professionals, to assist the development and recruitment of medical specialists in under-served provinces (Eastern Cape, Limpopo, Mpumalanga, Northern Cape and North West), and to support and strengthen undergraduate and postgraduate training processes in health facilities.

The Hospital Revitalisation Grant was to provide funding to enable provinces to plan, manage, modernise, rationalise and transform health infrastructure, health technology, monitoring and evaluation of the health facilities in line with national policy objectives, and to supplement expenditure on health infrastructure delivered through public-private partnerships.

The National Tertiary Services Grant was to compensate tertiary facilities for the additional costs associated with spill over effects, and ensure adequate provision of tertiary health services for all South African citizens.

Conditional Grants Allocations
The table Conditional Grants Allocations 2011/12-2013/14 indicated allocations to the above six grants (slide 9).

Tables indicated the allocations to the provinces for each of the six grants (slides 10-15).

Ms Matsoso explained the Schedule 4 grants specifying allocations to provinces to supplement the funding of programmes or functions funded from provincial budgets. Transfer payments could not be withheld based on non-performance or compliance; however, the new Division of Revenue Grant allowed a 5% withholding while interventions were put in place. Grants included were National Tertiary Services, Health Professions Training and Development, and Forensic Pathology Services.

Ms Matsoso explained the Schedule 5 grants specifying specific-purpose allocations to provinces. Grants included were the HIV and AIDS grant and the Revitalization of Hospitals grant. Schedule 5 grants might be withheld for non-performance and or compliance. Interventions were also being put in place for compliance.

 The table Additional Priority focus areas (Earmarked Funds) Allocated directly to Provinces indicated allocations to health technology, the upgrading and maintenance of nursing colleges, Occupation Specific Dispensation (OSD) doctor Annexure A top-up, OSD therapeutic top-up, maternal and child health, personnel and goods stabilisation, HIV: ARV 350 threshold, registrars especially those in paediatrics, obstetrics and in critical posts, family health team pilots/models, public hospital norms and standards, policy priorities subtotal, improvements in conditions of service, and forensic pathology shift into the provincial equitable share (PES) for 2011/12, 2012/13, and 2013/14. (slides 18-19).

Discussion
Mr De Beer asked the Department of Health to embark on a recruitment drive to encourage students to study for the health professions. The monitoring and oversight role of the Department must be scrutinised and strengthened. He referred to the deployment of Members of Parliament to participate in recruitment for the health professions as part of the election campaigns. Such had been discussed last year. One could cover the entire country in 14 days.

Mr De Beer asked about the Nurses Summit, 05 to 07 April 2011.

Mr De Beer asked about the OSD funds earmarked through the equitable share. What were the Department's needs?

Mr Mashile supported Mr De Beer's plea on recruitment, especially since health staff were being recruited from outside the country. We must provide our own human resources.

 Ms Matsoso replied that the policy of recruitment was in the mandate of higher education and institutions of higher education would specify the numbers that they could take since they could only accommodate so many in view of the close supervision needed of medical and health sciences students. This applied even to the students of laboratory sciences. The Minister would make an announcement soon. The Department had a recruitment plan but it had to work with Higher Education and the Minister had signed a service agreement with the Minister of Higher Education and Training.

Mr Mashile asked about the allocation for compensation of employees. Time and time again municipalities complained about unfunded mandates and that the Department of Health was not compensating them.

Mr Mashile asked about the Health Infrastructure Grant, and what informed the allocations, which appeared to be decreasing. He would have expected more resources to have been made available to a rural province such as Mpumalanga.

Mr Mashile asked about the Comprehensive HIV and Aids Grant. He understood the Department's reasons, but not the manner in which they were allocated.

Mr Mashile wished to discourage the migration of patients from one area to another, for example, movement from the Northern Cape to Gauteng to obtain services.

 Ms Matsoso replied the Department had a problem with Gauteng. The Department had carried out an analysis of cross-border movement. There were many patients who came from the Free State to Gauteng for treatment there. There were also many patients who came from Mpumalanga for tertiary services in Gauteng. There were some tertiary services which did not exist in Mpumalanga or Limpopo or North West. However, for those patients it would be difficult for Gauteng to send claims to Mpumalanga , Limpopo or North West for reimbursement. It was therefore necessary to develop a proper referral model. Cross-border patient movements consumed resources and created a burden for Gauteng and also KwaZulu-Natal.

 Ms Matsoso added that the Department had a report on modernisation of tertiary services. The Department would share it with the Select Committee. This was related to the grants for training and also for tertiary services, since an integrated approach was needed in that regard. The Department knew the total number of patients resulting from cross-border movements. It was of paramount importance to address the needs of people who did not have access to tertiary services in their own provinces. It was important to enable the movement of funds to the extent that they allowed people to access facilities. The Department's study included roads and their viability for ambulances, and the time taken for ambulances to reach facilities. The Department could share this information with the Select Committee.

Mr Mashile asked about the Forensic Pathology Services Grant. He knew that it was intended to discontinue this particular grant but it had to be asked if we had achieved what we wanted to achieve with this grant. He proposed a detailed report on this particular grant, and suggested that it was no longer necessary to ring fence those funds.

 Ms Matsoso replied that the Department could provide a report on the Forensic Pathology Services Grant with an analysis by provinces to distinguish those which had made progress and those which were lagging behind. The Department had a detailed report on the building of mortuaries and would forward it in due course.

Mr Mashile asked about the Hospital Revitalisation Grant. Were the requisite funds for the maintenance of those buildings that had been refurbished three years ago available? There was an indication that revitalisation was needed again. He urged the provision of funds for maintenance. The need for costly revitalisation should be avoided. Instead funds should be provided for regular maintenance. Moreover, it was important to ensure that regular maintenance took place.

Mr M Makhubela (Limpopo, COPE) asked about a hospital which had to carry out operations at another hospital because of problems with the operating theatre. This had to be investigated.

Ms Matsoso replied that the Department had a comprehensive report: on a quarterly basis it prepared an overview of how the grants were performing in the problem areas. The third quarter performance grant could be supplied to the Select Committee. This would be done as a matter of routine.

Ms Matsoso added that since 1994 the Department had 4 333 facilities. Of these, 41% were built after 1994. It was most important that the performance of the grant should also be the revitalization of what already existed. For want of proper planning, there were facilities in Mpumalanga that were 50% underutilized on account of not being properly equipped or adequately staffed. It was also important to improve access. So instead of moving to build more facilities, it was important to encourage the provinces to equip those facilities.

Ms Matsoso said that the Department was very concerned about the exorbitant cost of repairing or replacing equipment. It was necessary to train clinical engineers and technicians to carry out such repairs with the help and agreement of the universities of technology. She observed that the people who bought the equipment lacked the appropriate knowledge to make wise choices.

Mr Mashile did not understand the 5% withholding on the transfer payments. Moreover, he did not support the withholding of funds. There was a three year cycle of budgeting in South Africa. Why could not the challenges that could induce the withholding of funds be dealt with upfront? One knew that one was going to transfer funds to these particular departments and that they had a need for them in the next three years. There was no convincing reason that suddenly funds should be withheld. If one reached that particular point that meant that whoever was monitoring the transfer of funds had not played his or her part to ensure that the funds would be directed to service delivery. No funds meant for service delivery should be withheld.

Ms Valerie Rennie, Acting Deputy Director-General (DDG): Corporate services and Acting Chief Financial Officer (CFO), Department of Health, replied that the Department fully appreciated the Select Committee's concerns raised last year. The Division of Revenue Act (DoRA) was not proposing that the Department withheld 100% of the money that was due to be transferred. Moreover, the withholding was with conditions attached. Whilst there was withholding, the Department still had to assist the province concerned and make interventions. Eventually the money would be released. Should the interventions not happen within one year, the national Department would request a roll-over in favour of that province based on concrete plans and commitments where there was evidence of capacity of the province to spend the money. As the Director-General had already indicated, the national Department had already assumed the responsibility to support the provinces to ensure that the approved projects moved within the intended time-frame. So the withholding was just a management tool that the Department was implementing.

Mr Mashile also asked about the expectations of the Nurses Summit, 05 to 07 April 2011. All nurses would say that there was a shortage of staff, there was overloading, and that there was a shortage of equipment. Moreover, nurses would say that there was a shortage of doctors. Was there anything new that one would learn from the nurses at this Summit.

Mr Makhubela asked if the Department was going to implement country wide the project for residences for the nursing colleges or if it would prioritise certain areas. He asked this question because he wanted to know if the Department would start with a particular province and then move on to another province.

 Ms Matsoso replied that the Department had a report on the nursing colleges with an analysis of their status. There were those which needed minor refurbishment, and some which needed a complete overhaul. Part of the reason was that there had always been argument on the need to reopen nursing colleges. There had been a misunderstanding that the consolidation of the many nursing colleges of the apartheid times represented closures. However, there had been a problem with consolidation in so far as nursing training must be in-service. Also some of the education colleges, which were far from the service-providing settings, had been taken over. This forced nurses to travel many kilometres to their training points. The Department was correcting that. However, the Department was not just considering the physical structures, but the trainers themselves. The Department sought to promote nursing as a career of choice.

 Ms Matsoso replied more specifically on the issues raised on the compensation of employees with specific reference to municipalities. There was a Government policy about provincialisation. It was, however, a policy that was very difficult to implement, largely because there had been many legal challenges, such as another court battle in the Eastern Cape. South Africa was unique in having primary health care rendered in two different settings. This was very difficult since primary health care was supposed to provide for the promotion of health and prevention of disease. For this you needed an integrated team of personnel for health promotion, including nurses and doctors. The Department was doing its best to see how it could integrate those services. It was not possible to have municipalities running services this way and others running services in another way. The fragmentation of apartheid days persisted. Any attempt to provincialise health services had been subjected to legal challenges.

 Ms Matsoso replied on the Health Infrastructure Grant in Limpopo and Mpumalanga. The National Treasury had asked the national Department to assist with what used to be provincial grants in order to help speed up implementation and provide better oversight. The Department had a separate presentation on the issue of specific grants.

The Chairperson thanked the Department.

Mr Bongani Khumalo, Acting Chairperson, Financial and Fiscal Commission, commented that he would discuss a concern on the OSD with the local department of health concerned.

Ms Fanoe also had a concern with the OSD for health and the new equitable share formula with the health component but indicated that the matter could be dealt with later.

Department of Human Settlements submission
Mr Nyameko Mbengo, Acting Chief Financial Officer, Department of Human Settlements, apologised for the Director-General and the Minister not being able to attend. He outlined the contents of the presentation, the various programmes of the Department, the allocations, details of transfers and grants, the main grant – the Human Settlements Development Grant and the allocations in that grant to various provinces, and the principles applied in the application of the Human Settlements Development Grant. The Department also reviewed the Urban Settlements Development Grant, which was the new grant, and the allocations and the overview of that grant.

Programme Three was where all the grants were housed. The Human Settlements Development Grant was the biggest grant that the Department was managing and the main business of the Department. Mr Mbengo explained the allocations to provinces. Gauteng received a bigger portion of the allocation because of the housing needs of that province which were increased by migration and the search for job opportunities.

Programme Four was where the funding was budgeted.

Mr Mbengo indicated the allocations to the Department. The biggest allocation went to Programme Four – Housing Development Finance.

Mr Mbengo indicated allocations for the Housing Disaster Relief Grant, which was introduced by National Treasury two years previously in respect of KwaZulu-Natal. It was for only two years. The current financial year was its last year. Moving forward into the Medium Term Expenditure Framework (MTEF) there was no allocation for that grant. It was intended to address disasters in that province two years previously.

The remainder were transfers to various public entities under the Department, including the Social Housing Foundation, which was being wound down; hence it had its last allocation in 2011/12. There was also an allocation to the Social Housing Regulatory Authority, the Rural Housing Loan Fund, the Housing Development Agency, and the National Urban Reconstruction and Housing Agency.

Mr Mbengo explained the second biggest grant, the Urban Settlements Development Grant, a new grant that the Department would be managing from the next financial year.

Mr Mbengo explained the Rural Household Infrastructure Grant.

Mr Mbengo said that to ensure national development priority programmes were funded sufficiently, the Human Settlements Development Grant was split into two portions according to a decision by Ministers and Members of Executive Council (MINMEC). The intention was to ensure the targeting of areas of great need and that all the national priorities were adequately addressed and funded. Housing need across the country was considered according to a formula and Stats SA figures.

(For further details, please refer to the presentation document.)

Discussion
The Chairperson asked the purpose and logic of the Urban Settlement Development Grant when there was a thrust to develop the rural areas.

Mr Mbengo replied that, within the housing code of the Department, there was a programme to fund housing development in the rural areas. The provinces were using this programme, funded by the Human Settlements Development Grant to fund housing development in the rural areas. This other grant was specifically for the urban areas to target the emerging housing need, in particular around infrastructure development. In these areas the infrastructure was of critical importance, especially bulk infrastructure. However, this did not mean that the Department was ignoring the rural areas.

Mr De Beer asked how old the statistics from Statistics South Africa (Stats SA) were (page 5, at the bottom).

The Department said that the figures that it had used in the allocation formula were the 2009 figures, the latest that it had received, via its unit that liaised with Stats SA.

Mr Mashile asked how the Department would respond now that he Housing Disaster Relief Grant for KwaZulu-Natal had been discontinued. How would the Department respond to disasters in other parts of the country?

Mr Mbengo replied that there was a programme within the Human Settlements Development Grant to assist in areas of emergency. However, it provided only for temporary shelter.

Mr Mashile asked about the Human Settlement Development Grant to provinces. He asked for reassurance that there would be no withholding of funds unless there were other arrangements.

Mr Mbengo replied that the Department made sure that it obtained the business plans from the provinces before the beginning of the financial year. The challenge was for provinces to submit their business plans on time. The Department had written letters to the provinces to encourage them to make every possible effort, so that the Department could be ready in April. The Department needed Treasury to assist.

Mr Mbengo agreed that withholding of funds created a dilemma for the provinces, since there were contracts in place.

The Department said that it had a project management unit in the Director-General's Office to examine the business plan issues and the challenges which the provinces had indicated in their reports. The idea was to have a dedicated team to follow-up on those issues. The Department would thus give its focus directly to provinces in order to avoid issues of stopping funds and reallocating them at the end of the period. The Department found itself compelled to reallocate money to those provinces which were in dire need of funds. The Select Committee would understand that sometimes at the end of the period, a request for a roll-over was not granted.

The Chairperson did not agree with the notion that because a province could not spend money it did not need it. Some provinces lacked capacity and that issue had to be addressed. Research needed to be done. People were now attracted to the large cities by the availability of housing and money. Rural development was necessary to attract investment and movement of commodities, and to solve the problem of migration. There, perhaps, needed to be a debate with the relevant departments and with National Treasury.

Mr Khumalo responded on the issue of the withholding. The Division of Revenue Bill was an allocation mechanism, but now the Department was focusing more on the outcomes. This put more responsibilities on the transferring departments to ensure that the spending did take place. Therefore the capacity-building issue had to be addressed by the national department itself. So some portion of the grants had to be allocated to capacity-building in the provinces. This issue should, with sufficient capacity-building, be an exception, not a trend. With regard to urban development versus rural development, the context must be understood in terms of the grant. How to strike a balance was an important discussion.

Ms Fanoe responded on disaster management. There were various grant flows for disaster management, including the flows immediately after a disaster. But disaster relief in the longer term was just part of the normal budget process. There was a National Disaster Management Unit in the Department of Cooperative Governance. Disaster management was being reviewed to make it more streamlined. There should be a focus on capacity-building in provinces. A differentiated approach was needed to address development needs. An urban formula would not work with rural development needs. Development in the one should not be to the detriment of the other. For example, in the rural areas, one needed access to markets, while there was a need for much denser public transport in urban areas. The spending on some rural programmes was very low. While this was the case, adding more money would not really add value if the money already in the system was not being spent.

Department of Public Works Conditional Grants (Division of Revenue Act) presentation
Ms Lydia Bici, Acting Chief Operations Officer (COO), Department of Public Works, introduced Ms Cathy Motsisi, Chief Financial Officer, Department of Public Works, who explained the Devolution of Property Rates Fund to Provinces Grant in 2010/11. The table Devolution of property rates fund to provinces grant – February 2011 indicated, by province, the budget allocated, the amount transferred, actual payments to municipalities, the balance, the percentage spent, and the budget 2011/12 (slide 3). This reflected expenditure of 70% at the end of February. The Department had noted significant improvement in spending since 2008/09 when devolution of property rates began. KwaZulu-Natal reflected an expenditure of 45%. As of last week, that province reported increased spending of almost 70%, but the Department could not change the figure since it had sent the presentation to the Select Committee earlier. Of great concern was the looming over-expenditure in Western Cape, Mpumalanga, Eastern Cape, and Free State. The Department had requested those provinces to be extra vigilant to avoid unauthorised expenditure. On the same slide, the budget for 2011/12 was included. Given the rate of expenditure reflected here, it was apparent that the grants might not be adequate.

The chart Budget & Expenditure Growth over a Six Year Period compared budget with expenditure from 2008/09 to 2010/11 and budget for 2011/12, 2012/13 and 2013/14 (slide 4).

The Department had transferred all funds allocated for the devolution of property rates fund to the provinces grant as per schedule.

The budget allocation for 2011/12 which showed a 3.3% increase from the current allocation was inadequate as demonstrated by the increased spending as at the end of February.

Provinces like Free State and Limpopo had already indicated a shortfall of approximately R50 million for the current payments.

The shortfalls were inevitable because as the municipalities improved their administration and discovered properties that were previously not billed, they implemented retrospective billing, and in some instances they also charged interest.

This exercise, although helpful in ensuring that the municipalities increased their revenue, did not take into consideration the availability of funds from the national and provincial departments of Public Works (slide 5).

The table Budget Growth over a Six Year Period indicated, by province, the growth in budget from 2008/09 to 2013/14 (slide 6).

The table Expenditure Growth over a Three Year Period indicated, by province, the percentage spent as on 31 March 2009, 2010 and 2011 (slide 7).

Ms Motsisi explained the Expanded Public Works Programme (EPWP) incentives to provinces and municipalities in 2010/11. Provincial departments in seven out of the nine provinces had been able to access the EPWP infrastructure sector incentive. R185.9 million would be paid out of the R330 million available for the 2010/11 financial year for the third quarter reporting. This represented 56% of the provincial allocation. Only the Northern Cape and North West provinces had not accessed their incentive allocation for the 2010/11 financial year.

For municipalities, R 273.306 million of the R 622.996 million would be paid considering third quarter reporting. This represented 44% of the municipal allocation for the 2010/11 financial year.

Considering the overall infrastructure incentive allocation, R459 million of the R954 million or 48% had been accessed (slide 9).

The table EPWP Incentives to Provinces– 2010/11 indicated, by province, infrastructure incentive allocation, third quarter incentive payment, total incentive disbursed, and percentage of the 2010/11 incentive disbursed in the 2010/11 financial year (slide 10).

Ms Motsisi commented that overall this showed a disbursement of about 56%.

The table EPWP Incentives to Municipalities– 2010/11 indicated, by province, the infrastructure incentive allocation, third quarter incentive payment, total incentive disbursed, and percentage of the 2010/11 incentive disbursed in the 2010/11 financial year (slide 11).

Ms Motsisi commented that the Department had disbursed almost R273 million representing 44% of the disbursements that had been made to date.

The Department had noted the slow spending on the incentives, as evidenced by the 56% and the 44%. The Department had put in place measures to enable municipalities and provinces to access their grants faster than previously.

Such measures put in place to improve performance EPWP incentives to provinces and municipalities in 2010/11 were the following. Public bodies (provincial departments and municipalities) were being provided with support to report on the EPWP, as demonstrated by the 90 data capturers employed who were helping in this regard. A partnership with the Development Bank of Southern Africa (DBSA) through the Siyenza Manje programme had been put in place to support municipalities jointly. Training of officials in municipalities in labour-intensive methods of construction with the Local Government Sector Education and Training Authority (LG-SETA) was currently being rolled out. Training on reporting was also being given to public body officials to enable them to report better on the EPWP. Technical support was being provided to public bodies to implement their projects more labour-intensively so as to create more work opportunities and full-time equivalents that would increase the incentive drawn down (slide 12).

Ms Motsisi said that the Department had noted the slowness which was attributable to lack of capacity, and was considering nationally different models of intervention to assist, by capacitating them, the municipalities which were not performing as expected.

Ms Motsisi explained the Expanded Public Works Programme Incentive grant to provinces for social sector in January 2011. The budget allocation for EPWP incentives grant to the provinces for the social sector for the 2010/11 financial year was R 56.6 million and the total allocation had been fully transferred to provinces in line with the payment schedule. The transfer payment was scheduled as a once off payment and was transferred on 31 August 2010. The Treasury expenditure report for EPWP incentives grant to the provinces for the social sector showed that R 26.2 million was paid to provinces with Eastern Cape, Free State and Western Cape not having spent the allocation. The table EPWP incentives grant to Provinces for Social Sector – January 2011 showed the budget and expenditure per province (slides 14-15).

Ms Motsisi explained the Conditional grant allocations – 2011/12 to 2013/14. The table EPWP incentives grant to Provinces – 2011/12 to 2013/14, indicated, by province, amounts for 2011/12, and the total amounts for 2012/13 and 2013/14 (amounts for individual provinces not available) (slide 17). The table EPWP incentive grant to provinces for Social Sector – 2011/12 to 2013/14 indicated, by province, amounts for 2011/12, and the total amounts for 2012/13 and 2013/14 (amounts for individual provinces not available) (slide 18). The budget for EPWP incentives for 2012/13 and 2013/14 would only be allocated per provinces towards the end of the financial year as the allocation was performance based (slide 19).

Discussion
The Chairperson asked Members if they had any questions.

Mr De Beer said that it was quite disturbing that the Northern Cape had not accessed its incentive allocation. (slide 5, at the top). He would telephone the Member of the Executive Council (MEC) after the meeting. What was going on here? It was one of the priorities of Government. Did the Department follow this up?

Mr Stanley Henderson, Deputy Director-General, Expanded Public Works Programme, Department of Public Works, explained that the EPWP grant was a performance-based grant. Based on the reports received, funds would be released. The Department had found a lack of capacity to implement projects and it assisted with technical support.

Mr De Beer asked if the Department's intervention took place.

Mr Henderson replied that the Department employed data capturers and conducted workshops on labour-intensive projects. The interventions had taken place.

Mr Henderson said that the Department had engaged with the Directors-General of the relevant departments on the social sector incentives and home community-based care programme to ensure that proper implementation would take place.


Mr Makhubela asked why KwaZulu-Natal was now at 70% up from 45% (slide 2). Why such a big jump in such a short time.

Ms Motsisi replied that this was because of the slow submission of invoices by the municipalities.

Mr Makhubela asked why the figures for Limpopo had fluctuated (slide 3).

Ms Motsisi replied that this was initially because Limpopo was not performing at all. There was non-payment of property rates. There were serious challenges with the municipalities which did not have billing systems or evaluation rolls. With its improvement in administration, Limpopo was now beginning to show a substantial improvement.

The Chairperson said that the Select Committee had serious concerns with the Department of Public Works on performance. It had even received complaints from other departments about Public Works and things that it was supposed to do for them. Moreover, the Department of Public Works had been reluctant to attend meetings. The Select Committee would write directly to the Minister.

Mr Khumalo said that the FFC had an engagement with the Department of Public Works through the Standing Committee on Appropriations (National Assembly) but wanted to be part of the Select Committee's own forthcoming engagement, when it hoped that the National Treasury would be present, since the design of these grants was problematic.

Ms Fanoe agreed that there was need to learn from past lessons. With regard to the Property Rates Devolution Grant, there were capacity constraints in municipalities as to billing. Some billed monthly. Others billed half-yearly. Others billed annually. It was hard to achieve standardisation. Decisions needed to be informed by the past history of expenditure trends. It was agreed that in order to determine the full amount needed, it was necessary that all municipalities issued bills and one knew when they would bill. This was the specific reason for establishing the conditional grant. One needed an expenditure trend of past history. This was why the conditional grant was established. That conditional grant would only be incorporated into the equitable share when one knew the full expenditure responsibilities in this regard.

The Chairperson thanked Ms Fanoe and adjourned the meeting.