Committees' Report on the Revised Fiscal Framework; Finance Budgetary Review and Recommendation Report

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Finance Standing Committee

02 November 2011
Chairperson: Mr M Mufamadi (ANC) & Mr C De Beer (ANC, Northern Cape)
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Meeting Summary

The Standing Committee on Finance and the Select Committee on Finance held a joint meeting to deliberate on the draft Report on the Revised Fiscal Framework.  The report needed to be finalised as a matter of urgency as the report had to be tabled in Parliament on Tuesday, 8 November 2011.

Members pointed out a number of technical corrections that needed to be made.  Members felt that the report omitted certain pertinent comments made by the Minister of Finance in the Medium Term Budget Policy Statement on 25 October 2011.  Members were not satisfied that the report included all the observations of the Committee.  The report had omitted mention of the submissions received during the public hearings on the Medium Term Budget Policy Statement.  Members complained that insufficient time was allowed to adequately peruse the draft report and to compile comments.

The Committees agreed to allow Members time to submit written comment before close of business on 3 November 2011.  The revised draft report would be considered and adopted at a joint meeting scheduled for the following day, 4 November 2011.

The Standing Committee on Finance adopted the Budgetary Review and Recommendation Report, subject to amendments.

Meeting report

Mr Mufamadi advised that the Whip of the Standing Committee on Finance Ms N Sibhidla (ANC) had been transferred to the KwaZulu Natal Provincial Legislature.  The Chairpersons of both Committees and fellow Members thanked Ms Sibhidla for her past contribution to the work of the Committee and wished her well in her future role.

Consideration of the Report of the Standing and Select Committees on the 2011 Revised Fiscal Framework
Mr Mufamadi requested that the Members of both Committees on Finance commented on the draft report on the 2011 Revised Fiscal Framework.

Mr TE Chaane (ANC, North West) suggested that a list of the entities that had appeared before the Committees during the public hearings on the Medium Term Budget Policy Statement (MTBPS) was included in the introduction to the report.

Mr D van Rooyen (ANC) asked for the word “higher” to be inserted after “…R814.2 billion, which is 7.4 per cent” under paragraph 2.1 (Expenditure) on page 1 of the report.

Mr B Mashile (ANC, Mpumalanga) asked that the words “conditions” and “downwards” to be corrected under paragraph 2.2 (Revenue) on page 2 of the report.

Mr S Swart (ACDP) suggested that the last sentence of the second paragraph under paragraph 2.3 (Debt Financing) was amended to read “Furthermore, state debt costs are currently the fastest growing expenditure component in government, followed by infrastructure” [costs].  The word “currently” replaced “normally” and the word “any” was to be omitted.

Mr S Marais (DA) recalled that the Minister of Finance had warned against the use of the bond market to finance government debt.  The report made no mention of the Minister’s comments concerning direct and foreign investment.

Mr N Koornhof (COPE) said that the Minister had been bullish on the matter of foreign investments.

Mr Mashile suggested that, in the interest of consistency, the phrase “company’s tax” was replaced with “CIT” in the second paragraph of Paragraph 2.2 (Revenue).  The words “had increased” to be inserted after “…total budget revenue amount” in the same paragraph.

Mr Van Rooyen suggested that it was made clear if the type of revenue referred to in paragraph 2.2 was projected revenue or realised revenue.  Likewise, the type of revenue referred to under the section of the report dealing with the Committees’ observations on page 3 of the report should not be generalised. 

Mr E Mthethwa (ANC) understood that paragraphs 2.1, 2.2 and 2.3 dealt with projected revenue.

Mr R Lees (DA, KwaZulu Natal) said that not all the observations of the Committee had been recorded under the section of the report dealing with the Committees’ Observations.  The observations had been reported selectively.  The report should include either all the observations of the Committee or none at all.  It was not accurate to state that “The Committees noted …” and he suggested that the report was amended to state that “The Committees were informed of …”. 

Mr Chaane said that it was better that observations were added rather than removed from the report.  He suggested that Members specified what should be added to the report so that the Committees could deliberate on the inclusion of the item.

Mr Mafumadi asked that Members made clear suggestions that would assist the writer of the report.

Mr Lees called a point of order.  He had only received the draft report at 9.15 a.m. that morning and had not been allowed sufficient time to study the report and compile a comprehensive list of comments before the meeting to deliberate on the report was held.

Mr Mafumadi noted Mr Lees’ objection.

Mr Van Rooyen had participated in the process of compiling the report and disagreed that insufficient time had been allowed.  The Committees agreed that South Africa was entering a period of austerity that demanded a different approach from government.  More care needed to be taken on how funding from the fiscus was spent and the Finance Committees needed to exercise more effective oversight over government expenditure.

Mr Koornhof said that Members had not had sufficient time to consider and debate the issues after the public hearings.  He suggested that the report reflected the key points made in the various submissions that were made.  It was difficult to report on the recommendations of the Committees as there had been no opportunity to deliberate on the outcome of the public hearings.

Mr Marais said that more information should be included in the report.  The Committees were not in a position to foresee what would happen in the future and use of the word “will” should be avoided.  The word “moderate” was open to interpretation and the relevant observation should be qualified in real terms.

Mr Swart suggested that the word “will” was replaced with “aimed to”.  The first sentence under the Committees’ observations to read “…sets out a fiscal framework that aimed to narrow the gap …”.  The word “forecast” to be inserted after “… GDP growth is lower than the Budget” in the second paragraph.  The word “economic” to be inserted before “…outlook is uncertain” in the third paragraph.  The word “to” to be replaced with “at” in the fourth paragraph.  The phrase “Noting an increase in government revenue” to be deleted from the fifth paragraph.  The word “is” to be replaced with “are” in the fifth paragraph.  The phrase “talk to” to be replaced with “address” in the eighth paragraph.  The word “hampered” to be replaced with “affected” in the eighth paragraph.

Dr Z Luyenge (ANC) said that government priorities dictated the course of action of companies.  Paragraph seven should be re-phrased to make it clear that government required the business community to address the issue of the high salaries and bonuses paid to senior private sector employees.

Mr Mashile conceded that there had been time constraints on the Members, as pointed out by Mr Lees.  He suggested that Members were allowed the opportunity to make additional submissions before the Committee meeting on the following day.  The Chairpersons of the two Committees could consider the additional submissions, as was done in 2010.

Mr Mthethwa disagreed that the percentage increase in the State’s wage bill was included in paragraph five.

Mr De Beer agreed that the report was incomplete as not all the Committees’ observations were included.  The fiscal framework was amended to align it with the new growth path criteria.  The Minister had stated that it was undesirable to use the bond market as a source of financing for government debt.  The Minister’s comments concerning imported goods had been omitted.  The report should be a fair reflection and could be improved.  It was preferable to delay adoption of the report rather than adopting a report that was incomplete.

Mr Koornhof asked what the deadline was for the finalisation of the report.

Mr Mafumadi urged both Committees to work together on finalising the report.  Members were encouraged to reflect on the report, which should be an accurate reflection of the Minister’s speech.  He was not assured that the current draft report adequately assisted Members in the process.  In prior years, the structure of the report reflected the public hearings.  The report tabled in the House had to include the Committees’ recommendations.  The sections of the fiscal framework should be considered during deliberations on the report.  The corrections requested by the Members would be included in the revised draft report.  The report to include a list of the parties that had made submissions during the public hearings and the key issues that had been raised.  The final report would be tabled in the House on Tuesday, 8 November 2011.  The deadline for the finalisation of the report was Thursday, 3 November 2011.  Members had been in possession of the fiscal framework documentation for some time and he was confident that the process would be completed on time.

Mr Koornhof suggested that the Committees finalised the adoption of the report during the meeting scheduled for the following morning.

Mr Mafimadi agreed to Mr Koornhof’s suggestion and asked Members to submit their comments to the Committee Secretary before the close of business.

Mr Lees asked if the Committee Secretary would include the corrections discussed during the proceedings.

Mr Mafumadi replied that the Committee Secretary would capture the spirit of the discussion in the revised draft report, which would be considered by the members.

Mr Swart pointed out that the correct percentage of the projected budget deficit was 5.5% and not 20.2% as indicated in paragraph 2.1.

Mr Marais commented that the Minister had emphasised the critical importance of government implementing cost saving measures and the dire consequences of the failure to do so.  The Minister’s comment should be included in the report.

Mr Mafumadi said that pages 1 and 2 of the report captured stated facts.  He asked what Members suggested concerning the section in the report dealing with the Committees’ observations.

Members agreed that the report would be finalised during the meeting scheduled for 4 November 2011.

Mr Lees asked if the deadline for tabling in the House applied to the reports of both Committees.  Members of the Select Committee on Finance had to attend a plenary session, which was unlikely to end before close of business.  Members of that Committee would not have enough time to submit written comments on the draft report before the end of the day.

Mr De Beer confirmed that both Committees were subject to the same deadline.  There would a joint sitting of the Committees on 4 November 2011.  The Meeting would commence at 8.30 and Members were urged to be punctual.

Members of the Select Committee on Finance were excused from the remainder of the proceedings.

Consideration of and Adoption of the Budgetary Review and Recommendation Report (BRRR) of the Standing Committee on Finance
Mr Swart observed that the Committee’s BRR report comprised 50 pages.  He had glanced through the report, which appeared to be in order but would require more time to study the document in more depth.

Mr Mafumadi advised that the Committee could not postpone the adoption of the report.  Members were allowed the opportunity to submit written comments after the report was adopted.

Mr Mthethwa moved for the Committee’s Budgetary Review and Recommendation Report to be adopted.

Mr Swart seconded the motion, with the proviso that the adopted report was subject to amendment.

The meeting was adjourned.


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