Meeting with Vietnamese Delegation

Standing Committee on Appropriations

23 August 2011
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee met with the Vietnamese delegation to learn about South African experiences in strengthening the role of Parliament in fiscal policy, budget planning and the oversight of budget execution, at national and decentralised government levels; (b) learn about the Committee organisation of the South African National Assembly with respect to committee involvement in budgetary decisions; (c) to learn of recent developments in budget planning, the medium term expenditure framework; and (d) to learn about the format of the presentation of the budget and the challenges of budget transparency.
The learning outcomes of the tour would be incorporated in proposals to strengthen the National Assembly of Vietnam in its oversight role, and in its contribution to the reform processes.
The Committee also considered and adopted outstanding minutes.


Meeting report

Welcoming
The Chairperson welcomed and introduced himself to the delegation from the Republic of Vietnam. Thereafter, he asked Members of the Committee to introduce themselves and vice versa.

 

The Chairperson explained that the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009 provided for a procedure to amend money bills before parliament. The act also provided for norms and standards for the amendment of such bills before the provincial legislatures. In the National Assembly there were two Committees that dealt with the issues of budget. The first Committee was known as the “Standing Committee on Finance- it dealt with the fiscal framework of the budget. The other Committee was the Standing Committee on Appropriations and, the two Committees were established in terms of that Act. The Appropriations Committee was established in terms of section 4.4 of the Money Bills Act and the rules provided in the Act dealt with issues of (a) spending, (b) amendment at the beginning of the Revenue Bill, (c) the Appropriation Bill, (d) Supplementary Appropriation Bill, and (e) the Adjustment Appropriation Bill. The Committee also dealt with the recommendations of the Financial and Fiscal Commission including those referred by the Intergovernmental Fiscal Relations Act, reported on actual expenditure published by National Treasury. The National Treasury produced monthly, quarterly and annual reports and any other related matters as prescribed in the Act. The Committees of Parliament were not directly involved in the planning of budget but got involved with the process when the budget came to Parliament.

The Chairperson explained that the way the budget worked was that it started in October of each year with the Medium Term Budget Policy Statement (MTBPS) which gave the indicative allocation for the following year. The MTBPS was not a money bill but it indicated how the budget allocation of each department would look like for the next three years. Just before the MTBPS was tabled and in terms of clause 5.3 of the Act which stated that the Budgetary Review and Recommendations Report should be compiled by the Committees in order to indicate the work each Committee had done, and the Committees had the right to recommend what should come through the budget. But if those recommendations had financial implications they would be referred to the Appropriations Committee for recommendation to the House and, then the MTBPS would be introduced. Therefore, both committees could amend the MTBPS.

Then next step in the budget process would be the introduction of the actual budget in February of each year. When the actual budget was being introduced there were three documents that were produced at that time. The first document produced by the Minister of Finance was called “The Budget Review” and it contained the fiscal framework. In terms of the Act the procedure was that Parliament should first pass the fiscal framework. The fiscal framework would contain the total amount to be allocated to Government Departments, Provinces, and Municipalities. If there was any Committee that wanted to amend the fiscal framework they should do it at that time but it should be noted that such an amendment had not yet happened. The second document that was produced was the Division of Revenue Bill. The Division of Revenue Bill as the name suggested indicated that the division would be between the three spheres of Government and it should be passed. The difference between the fiscal framework that had been passed and Division of the Revenue Bill meant that if the Committee wanted to amend the amount allocated to different spheres it could but within the fiscal framework that had been passed and, again the amendment had not taken place yet.

The third document the Minister presented to the National Assembly was the Estimates of National Expenditure (ENE) which contained the details of allocation for each National Department. It also included the allocations to Provinces and Municipalities each one had its own budget and, each Province would do its Provincial allocation. The Municipalities would receive its own allocation but they had to raise the bulk of the revenue. Once the Minister had tabled all three documents the process would be called the “Appropriation Bill” which would be passed by the end of June of each year. The Portfolio Committees could not propose more money for each department but they could propose changes to different programmes.

The Chairperson concluded that when the MTBPS was introduced in October adjustments were made in different departments. In terms of the Constitution, the Financial and Fiscal Commission (FFC) was supposed to make recommendations and submissions 10 months prior to the adoption of the budget. The submission of the FFC was made through the Appropriations Committee. Clause 15 of the Money Bills Act required Parliament to establish a Budget Office but it had not yet been established. Parliament was in the process of establishing such an office.

 

Discussion

The Chairperson asked Members if they had anything to add.

 

Mr M Swart (DA) pointed out that in terms of the MTBPS the Committee when it did its reports it did it in terms of the strategic plans of department and, measure so as to see they’ve performed in terms of the strategic plan of the department.

 

Ms R Mashigo (ANC) commented that the Committee was responsible for looking at the spending of all national departments and to do oversight visits to ensure the money had been used correctly in terms of the Public Finance Management Act (PFMA).

Mr Swart noted that when the Committee received reports from Treasury about how departments performed against their budgets, it called the relevant departments that had problems and interviewed them as to why they had not spend as per budget requirements.

The Chairperson asked the Delegation’s Leader and Chairman of the Committee for Financial and Budgetary Affairs of the Communist Party of Vietnam to engage the Committee in terms of the information they had received.

Dr Phung Quoc Hein, Chairman of the Committee for Financial and Budgetary Affairs (CFBA) asked if in terms of the MTBPS where there any expenditure failings at all. He also asked if during the MTBPS there was a disruption of the budget or changes in budget because of financial shortcomings and a department wanted an increase in its budget should the Government approve such increase during the MTBPS. Lastly, he asked when Parliament passed expenditure laws in South Africa did it passed them as a package or item by item.

Prof Dihn Van Nha, Vice Chairman of the Committee for Financial and Budgetary Affairs asked if in terms of the Appropriations Bill what criteria did the Committee used when it passed the Bill that ensured equality amongst Government Ministries.

Mr Dinh Trinh Hai, Vice Chairman of the Committee for Financial and Budgetary Affairs asked if the Committee received monthly or quarterly reports from the National Treasury and if so how it dealt with the expenditure of Government Ministries. He also asked when the Committee saw reports on the under or wasteful expenditure and who did it call to answer for such expenditure, the Minister or the officials of the department. He asked if whether the under expenditure that occurred in a particular department in terms of the money that was not spent could it be carried to the next term and, share some statistics of that.

Mr Swart responded in terms of the question on how the amount was made up in the budget that each department was allocated a budget each year the budget was approved but the Government had certain priorities which were made in the budget speech of the Minister and the Cabinet notified everybody what those priorities were on education, health, and so on and, the budget was allocated according to those priorities.

Ms Mashigo responded that the Committee did received monthly and quarterly reports but because of the number of departments they’ve agreed with Treasury to receive the reports quarterly including monthly reports so as to give the Committee sufficient time to interrogate expenditure and look at the trend of that expenditure in that quarter and how they could solve the problem. In relation to the question who was called by the Committee to account she responded that the Constitution stated that they should first call the Minister but what they did they called the Director-General of the Department first as the one that was responsible for that department and, call the Minister after.

Mr Swart added that the Committee first calls the DG and if they were not satisfied with the responses they called the Minister or if not calling the Minister they send a delegation of the Committee for an oversight visit to look at the problems that existed.

Mr G Snell (ANC) responded to the question of whether a rollover in terms of under expenditure was approved or not. He noted that at the current moment the issue was being debated by the Committee as to who should approve rollovers. It was currently Treasury that approved rollovers and the Committee believed it should be involved in approving rollovers. The rollovers that were approved by Treasury were for larger projects that extended for a number of years but there wouldn’t be rollovers approved for salaries or administrative costs. The PFMA allowed departments to shift up to 8% of a programme budget within the department.

Dr P Rabie (DA) noted that for the purposes of the Committee they were in the process of establishing the Budget Office because their duty was to monitor the over and under expenditure of departments and, they believed if they’ve got a Budget Office they would do their work effectively.

The Chairperson added that the rollover was allowed if the particular department had committed the money and once Treasury approved the rollover it send it to Parliament for final approval. The adjustment book would show what had been rolled over and how much money had been rolled over from each department and, the statistics would be there in the adjustment book.

The MTBPS was about indicative allocation and there would be estimates of amounts that would be allocated the following year and the two outer years. But indicative allocation could be changed when one reach the final budget. The feeling was given by the fiscal framework and once they’ve passed the fiscal framework they could not go beyond that amount.

In terms of the changes in the financial markets he noted that in 2008 just before the recession there was a surplus of about R2bn in the budget of 2008/09 which was not allocated but put on a suspense account until the next budget and that was the only time he could remember about the changes in the economy or collection from the revenue services.

Mr Swart added that the Minister of Finance called on all departments during the recession to cut on spending.

In relation to the question of how the budget was passed Mr Swart responded that the budget was passed department by department and every departmental budget was debated in Parliament between May and June of each year.

The Chairperson added that it was passed department by department but also it was passed overall.

Prof Hein thanked the Committee for the information they’ve shared with them which was valuable and useful. They would take the information and the experienced they’ve learned in South Africa back to their country. He gave the Chairperson a gift.

The Chairperson thanked the Vietnamese Delegation for their interests in South Africa’s Budget process. He informed them that because of time constraints they were not able to continue with the meeting but they were also interested to learn from their counterparts about their experiences in budget processes and what procedures they followed in their country and the Committee would arrange with the House Chair for a study tour to Vietnam.

Adoption of Committee Minutes
The Chairperson tabled several outstanding minutes for consideration. These were dated Minutes of 24 February 2011, Minutes of 15, 22, 23, 29, and 30 of March 2011, Minutes of 19 April 2011, Minutes of 25 May 2011, Minutes of 2, 7, 15, 22, and 29 June 2011, which were all adopted by the Committee.

The Minutes of 13 April 2011, Minutes of 24 May 2011, Minutes of 1, 8 and 28 June 2011 the Committee adopted all minutes with amendments.

The meeting was adjourned.

 

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