Division of Revenue Bill: Departments of Basic Education and Cooperative Governance comments; Additional Adjustments Appropriation Bill [2011/12 financial year] and Finance Bill [B5-2012]: National Treasury briefings

Committee: Standing Committee on Appropriations

Chairperson: Mr E Sogoni (ANC)

Date of Meeting: 29 Feb 2012

Summary

The Committee’s priority was the Division of Revenue, but it was necessary to consider the Finance Bill [B5-2012] now since payments needed to be effected before April and deducted from the national revenue. If Parliament did not approve, the amount would become an additional charge against the funds allocated to the relevant vote. The Standing Committee on Appropriations would then have to call departments to account for failure to stick to budgets while the fault was on the Committee’s side if it delayed the Bill.

Firstly, however, the Department of Basic Education presented on the Division of Revenue Bill. The Committee heard that the total value of all its grants was over R13.5 billion. The Department had established a dedicated Conditional Grants Management office in trying to mitigate challenges. The unit would advise senior management on utilisation of the 5% meant for administration and appointment of personnel to monitor progress on each of the Department's grants. The School Infrastructure Backlogs grant was in its second year and was meant for eradication of school infrastructure backlogs, as well as provide basic services like water electricity and sanitation. The bulk of the grant would go to the Eastern Cape because it was where the backlogs were. Of the 496 inappropriately built schools, 428 were in the Eastern Cape.
In 2011/12 financial year 50 schools were allocated to the Development Bank of Southern Africa as an implementing agent.

Members wanted to know about monitoring structures and capacity when it came to expenditure. They voiced concern over the focus on urban provinces of the Dinaledi and ASIDI grants. Members also complained that presentation did not contain the details that the Committee expected. They also complained at the absence of the third quarter report.

Secondly, National Treasury presented on the Additional Adjustments Appropriation Bill 2012 to approve the special appropriation of R5.8 billion now proposed to be included in 2011/12 expenditure as a contribution by Government to the Gauteng Freeway Improvement Programme. The Bill was urgent because Cabinet had taken decisions around freeway schemes and tolling. Decisions around the tolling system were taken very late in the budget process. To accommodate that payment in the budget so late would have meant that payments on roads allocations and for Prasa’s (Passenger Rail Agency of South Africa) provision of new rolling stock would have had to be decreased significantly. The R5.8 billion amount was modelled to contain the South African National Road Agency debt at a manageable level. There had been complaints from all sectors that the tolls would have a negative impact on the users.

Members supported a proposal that the Ministers of Finance and Transport meet the Committee and that a memorandum be provided.

Thirdly the National Treasury presented on the Finance Bill [B5-2012] which provided for the authorisation of an authorised expenditure so that it might become a charge against the national revenue fund. National Treasury was looking at funds surrendered to the revenue fund in the previous years. The Standing Committee on Public Accounts had made certain recommendations in respect of unauthorised expenditure at both the Departments of Defence and Military Veterans and Correctional Services. There were suggestions at the Committee on Public Accounts that if the Bill could be passed in this financial year, some of the savings could be released to departments to cover their expenditure.

Members asked why it took Treasury so long to produce the Bill as some transgressions that were being corrected occurred in as far back as 1998/99, but recommended that the Bill should be adopted.

Fourthly, the Department of Cooperative Governance and Traditional Affairs presented on the 2012/13 Division of Revenue Bill. The Department proposed that 33% of the 15% of the P-component of the Municipal Infrastructure Grant formula be used for municipal sports and recreation facilities.  There was a need to rethink the 15% ring-fencing on this grant. The ring-fencing had a potential to create the basis for allowing  different sectors to call for the grant to be ring-fenced for sectoral interests. This would defeat the rationale for creating the grant. The Department’s view was that maintenance of sport facilities should not be done at the expense of other municipal facilities.

Member expressed discomfort with the Department's proposal, as the decision to ring-fence the 15% of the Municipal Infrastructure Grant was not lightly taken. Ring-fencing 15% of the grant was a product of long discussions to ensure availability of facilities in poor communities.


Minutes

Opening discussion
The Chairperson welcomed Members of the Basic Education Portfolio Committee. He explained that the Standing Committee’s priority was the Division of Revenue. Also the Committee required the third-quarter report but had been told that it would only be submitted in March. The Public Finance Management Act (No. 1 of 1999) was clear on when the third-quarter report should be submitted. Parliament had not been informed or provided with reasons why it would receive the report late. The Committee needed to know so it could devise means of conducting business in the absence of the report.

Ms Jeannine Bednar-Giyose, Director: Legislation, National Treasury, replied that the National Treasury had originally intended to table the Finance Bill with the adjustment budgets last year, but due to the timing of the National Assembly's approval of some of the relevant reports of the Standing Committee on Public Accounts, it was not possible to table the Bill last year. To ensure that the authorisation of expenditure took place promptly it was necessary to table the Bill, which had financial implications. There were also implications for the concerned departments’ ability to clear outstanding expenditure.

Urgency of tabling the Bill questioned
The Chairperson asked if tabling had implications on the Appropriations.

Ms Bednar-Giyose replied that the National Treasury had tabled the Appropriations Bill, Division of Revenue Bill, and the Finance Bill on the budget day. She was not sure how the process of submitting bills for Committee’s consideration worked. There were financial implications if the Bill was delayed.

The Chairperson said that the Committee had been told that the Bill was urgent – hence the Bill was not included in the agenda. He asked why was it so urgent.

Ms Bednar-Giyose replied that because additional funding had to be provided and expenditure regularised it was important that the Bill was attended to urgently. Departments could then finalise accounts timeously with that information reflected in financial statements contained in the annual reports.

Mr L Ramatlakane (COPE) asked the Chairperson clarify the meeting's direction because Members wanted to participate. In terms of the agenda the discussion was misplaced.

The Chairperson explained that the Committee had been informed of a Finance Bill that had to be tabled. He was trying to understand the reasons why the urgency. It could have waited for when the Committee dealt with Appropriations. With the Division of Revenue the Committee’s schedule was tight.

Mr Ramatlakane also did not understand the urgency. The unauthorised expenditure that the Bill sought to address had already taken place.

Ms J Mashigo (ANC) explained that payments needed to be effected before April and were deducted from the national revenue. She said if Parliament did not approve, the amount would become an additional charge. The additional amount would become a charge against the funds allocated to the relevant vote. This would have implications on the Appropriations Committee, as it would have to call departments to account for failure to stick to budgets while the fault was on the Committee’s side.
Sticking to the programme
Ms L Yengeni (ANC) suggested that the Committee stick to what the agenda stipulated while clarity was sought on the urgency of the Bill.

The Chairperson requested that the Bill be dealt with urgently. He said he understood that Treasury was faced with a deadline of 31 March, whilst Appropriations would only happen in the next four months.

Ms Yengeni requested that the Committee stick to the agenda and reschedule the Treasury briefing. There was no way a department could come a day before a Committee’s meeting and expect to be accommodated. She said this would not be allowed if other departments had followed this route. This was not fair to DBE and other departments.

Mr K Mubu (DA) agreed and said the Committee was too accommodating. He said the Committee had a punishing schedule, and Members continually missed House sittings.

The Chairperson said that National Treasury's omission from the agenda was a scheduling fault as the Committee had been alerted that National Treasury would be presenting. He proposed that DBE and the Department of Cooperative Governance (DoCG) present and then National Treasury.

Ms H Malgas (ANC), Chair of the Portfolio Committee on Basic Education, concurred and suggested that the position be accepted as a compromise. She understood the pressures of time that Treasury was faced with in processing funds for Department. It would be fruitless expenditure to invite Treasury and send the delegates back on account of a programming error.

Department of Basic Education Division of Revenue Bill Presentation
Mr Bobby Soobrayan, Director-General (DG), Department of Basic Education (DBE), said that the Department’s comment on the division of revenue would lean towards conditional grants. This was a grant used as a mechanism to provide funding to provinces. The grant was introduced to create space for the Department to address the priorities in the basic education sector and was done in line with Action Plan 2014. There was much consultation across departments in provinces and with Treasury.

In some instances grants were revised and adjusted accordingly. Grants were categorized into schedules 4 or 5. Schedule 4 grants were used to supplement provincial programmes that were considered to be national priorities, whilst schedule 5 was meant to address specific priorities in the sector.

In 2012, DBE had been allocated five conditional grants. These grants were Education Infrastructure Grant (EIG); Dinaledi Schools, HIV and Aids (life skills); the National Schools Nutrition Programme and the Technical Secondary Schools Recapitalisation. There was also a schedule 7 grant, meant for School Infrastructure Backlogs. This grant was sometime referred to as ASIDI (Accelerated Schools Infrastructure Development Initiative). He said DBE would report a lot on this grant. (See slide 3)

The total value of all grants was over R13.5 billion. The total value of the Education Infrastructure grant was R5.8 billion, and the purposes of the grant were to accelerate construction, maintenance and upgrading the education infrastructure; enhance capacity to deliver infrastructure; and address damage to schools. The main reason the grant was introduced was to protect and increase capital expenditure across provinces. The expectation was that provinces would not make allocations from money they got from the equitable share.
Part of what was monitored was whether indeed provinces maintained their allocation for infrastructure, and if the EIG was used. He said the EIG was driven by infrastructure needs not by the equitable formula. Limpopo, KwaZulu-Natal (KZN) and the Eastern Cape (EC) accounted for the largest share of the grant. (See slide 6)

The Dinaledi Schools Grant was put together to address Maths and Science teaching and identify schools across the country that would promote excellence. The total value of the grant was R99 million, and the purpose was to promote Mathematics and Physical Science teaching and learning. He said it was also meant to improve learner performance and teacher’s content knowledge of the subjects. The amount allocated per province was meant to supplement what had already been allocated. (See slides 7-8).

The HIV and Aids grant was meant to support SA’s HIV prevention strategy by increasing sexual and reproductive health knowledge. It was also meant to mitigate the impact of HIV by providing a caring and supportive environment for learners and educators. And also ensure an environment that was free of discrimination and stigma. The grant was worth over R208 million. High prevalence of HIV was aggravated by poverty, which was then manifested in healthcare. Very often at poor schools one could not make a clear distinction between HIV and Life Skills programme. One had to deal with health issues at a broader scale at these schools. (See slides 9-10)

The National School Nutrition Grant was meant to provide nutritious meals to targeted learners. The total value of the grant was just under R5 billion. He said the Department had taken a decision to provide meals to all learners, and the programme had been growing over the years. Problems had occurred but the programme was successful in that millions of learners had access to a nutritious meal a day. (See slides 11-12).

The Technical Secondary Schools Recapitalisation Grant total was R209 million. It was meant to recapitalize about 200 technical schools to improve their capacity to contribute to skills development and training.
He said DBE had established a dedicated Conditional Grants Management office in trying to mitigate challenges. The unit would advise senior management on utilization of the 5% meant for administration and appointment of personnel to monitor progress on each of the grants. He said Treasury approved this as it sought to ensure effective implementation of the grant. This had not been done in the past, but was another way to strengthen capacity. (See slides 13-14)

Mr Soobrayan pointed out that in respect of the nutrition programme, DBE had identified lack of cooking equipment at some sites. Other challenges were non-compliance with the menu; lack of involvement of educators in the feeding of children; and no allowance for subsistence and travelling. These were some of the things that the Department had to mitigate.

Provinces were allowed annual allowances to purchase cooking equipment. He said provinces had to report on this and provide evidence of procurement. It was pointless to provide a grant to schools to cook, and yet they did not have equipment to do that. He said meal-planning workshops had been held with School Governing Bodies (SGBs) and educators to advocate for more involvement.

The School Infrastructure Backlogs grant was in its second year and was meant for eradication of school infrastructure backlogs, as well as provide basic services like water electricity and sanitation. The bulk of the grant would go to the EC because it was where the backlogs were. This grant allocation was driven by need and data in relation to backlog, and did not follow the equitable share formula. He said of the 496 inappropriately built schools, 428 were in the EC.

The budget allocation for the ASIDI programme over the Medium-Term Expenditure Framework period was R8.2 billion, and by 2013/14 all the structures would have been complete.

The conditions for the Division of Revenue Act (DoRA) with regards to the ASIDI grant included being administered by DBE. The Department had to submit programme management plans to Treasury before requesting the first drawings on the grant. Provinces had to appoint programme planning and monitoring teams. DBE should submit monthly project cash flow reports to Treasury. And that, provincial departments should report on progress in their annual reports, and describe how the schools had been considered in their future planning.

In 2011/12 financial year 50 schools were allocated to the Development Bank of Southern Africa (DBSA) as an implementing agent. The outputs of various implementing agents had not been logically related to an overall ASIDI programme plan. DBE was attending to this matter. In instances where programme implementation plans had been submitted they were not adequate to determine if the targeted number of projects would be completed within time and budget parameters.

Implementing agents were caught off guard by the level of monitoring and thus had difficulty in meeting requirements. The Department had tightened its monitoring structures. The cost of school infrastructure was exorbitant, hence DBE was insisting on renegotiating the price.

Implementing measures to be carried out in 2013 included work packages as mechanisms to manage the work breakdown structure. The project cycle turnaround could be reduced to accelerate the programme and minimize bottlenecks and expanding the resource pool. He said the Department was looking at pre-qualification and framework agreements.

The normal lag in terms of procurement was within the supply management prescript, but the unnecessary delays had been reduced. In addition to traditional procurement, it was proposed that DBE enter into relationships with provincial education departments who already had established own resource panels.
DBE had initiated a process to implement a framework agreement procurement model. It had also entered into negotiations with other departments whose work was largely constituted of the relevant skills in the built environment. Implementing agents, professional service providers and contractors were now pre-qualified. Services could be secured through inclusion in a pre-approved panel. The Department had been liaising with Treasury on all of these processes and their input was welcomed.

The project cycle was linear, and each step was dependent on the other. If one step was compromised along the delivery cycle that impacted on the delivery time of projects. That was why DBE sought to move away from that linear approach. The shorter cycle included undertaking of assessment, scoping and briefing and design steps independent of procurement, construction and close out. Scoping had been done for all the schools to be built in 2012. Scoping for all the mud-schools would be finished very early.

The key thing was that one could not operate in the market on assumption that the market had capacity to efficiently absorb all that Government was saying. Too much money and little capacity could result in huge inflation of prices. He said the linear approach would make this problem worse.

The current capacity within DBE and the
Programme Support Unit (PSU) had been tailored on assumption that the programme would be managed through strategic relationships with implementing agents. It had been assumed that DBE would focus efforts on the portfolio level relying on the programme and project management capability of its implementing agents. DBE would have to be hands-on and have control at project level.

The Department was using an approach of 20 teams implementing 10 projects each. These teams would be fully capacitated and this was the easier way to do this work. It was imperative to increase the number of active projects at any one time and the 20 teams could oversee up to 200 projects. Project duration could be delayed as a result of the Environmental Impact Assessment process, land availability, and geotechnical conditions.

Each project team would be made up of a Project Manager; a Quantity Surveyor, an Architect; and an Engineer. Depending on the need, the capacity of the teams could be expanded. There would be supplementary staff like the supervision team; contract administration, procurement capacity and monitoring and reporting.

The allocation for this year was R700 million; but it soon became clear that for DBE to meet the targets the budget was be inadequate. He said the shortfall amounted up to R447 million. This amount was carried to the next financial year. For the budget to meet the targets, there was a projection of R1.8 billion in the next three financial years.

Mr Soobrayan said that lessons learnt pointed to new risks that DBE had not anticipated. Current programme management and delivery experience were limited. The Mvula Trust was receptive but needed support and assistance in developing systems. Also there had not been agreements with the Independent Development Trust (IDT). Eskom as with other implementing agents was not used to being held accountable. There were no alternatives available for electrification especially with regard to securing network points of connection.

Provincial departments were normally stretched in the provision of water and sanitation. Institutional capacity for traditional procurement time-frames was inadequate. Another major risk was the capacity of smaller and lower Construction Industry Development Board (CIDB) grade contractors to complete projects. Government departments were caught in a difficult situation of having to promote small enterprises in an attempt to drive employment up, and delivering on services. Accounting officers had to reconcile these two objectives even on instances where they were not easily reconcilable.

Discussion
Mr M Swart (DA) said he was pleased with the presentation especially its emphasis on monitoring. He wanted to know how the Technical Schools programme was doing in light of the skills development drive. He said the maintenance aspect on the Schools Infrastructure Backlogs grant was concerning, as there were challenges in the EC. What was the Department doing to ensure that whatever it built was looked after? He asked about the working relationship between DBE and the Department of Public Works (DPW). He said a builder in the EC had abandoned a site because no payments were made for six months. How would the Department, and DPW, ensure smooth operations on projects?

Mr J Gelderblom (ANC) asked the building cost per square meters of building schools compared to last year. He said he understood prices were increasing. He asked how much spending was directed at mud schools in the EC. He wanted to know about the timeframes. He asked the total cost of the 20 Project teams, and if they were deployed nationally.

Mr Mubu wanted to know if the largest allocation on HIV and Aids grant in KZN was as a result of the high prevalence of HIV in the province. He also wanted to know under which department was scholar transport administered as a project. He asked what was the situation in rural provinces regarding scholar transport.

Mr Ramatlakane said he wanted to know if DBE had capacity to meet the timeframes. He asked if also the service providers and province were capacitated to deliver on time and a quality product. Could provinces manage the grant and meet the targets set out every year?

Mr Ramatlakane enquired about the cost drivers that would lead to the R1.8 billion deficit projections in 2015. He said the make up of the project teams looked like turning the Department into a construction company. He wanted to know if the appointment of Quantity surveyors and Architects in the project teams led to ballooning costs. It was likely that more and more people with technical expertise would keep coming because they had employment in the department. He wanted to know if the Department anticipated cost over-runs in the current project of building 50 schools. He asked if DBE had any plans to counter under-expenditure in this project this year and, if so, what were those plans.

Mr Ramatlakane challenged the impression created by the presentation that there would be fewer capacity challenges in the second and third years of implementation of projects. He was not convinced. He asked if the Department had done proper analysis and projection on the eradication of mud schools. He said he would have preferred a Schools Infrastructure grant report that looked at longer-term projections. The infrastructure that was put in place needed to be in tandem with the development because populations grew, and also urbanization took place. He said he was not sure if the infrastructure would be able over time to accommodate large numbers of students or whether it would be part of the department’s amalgamation plan.

Ms Mashigo wanted to know how far the maths and science programme had gone and the impact it had on the ground. She asked if there was planning in conjunction with the Department of Health as it ran a lot of HIV programmes that were budgeted for. She asked when was the Conditional Grants Management Office established, and if this was in reaction to challenges that were there. She asked the criteria used to select the monitoring teams. She wanted to know how was it possible that there were no cooking equipment to schools if there was an allocation for this purpose in the budget. She asked about the PSU as there was a lot of money spent on it.

Ms N Gina (ANC) said the Schools Infrastructure grant needed not be the focus as a portion of the equitable share was allocated for this purpose. She said an impression was given that ASIDI was where Government began building schools. Members did not mention the monitoring of provinces with regard to infrastructure outside what was catered for in the grant. She said the Committee needed to strategise on how to hold provinces accountable on the infrastructure allocation in equitable share. There was a lot of money given to the provinces. There had to be progress at provinces as well; she asked if the DG could also indicate the distance travelled by provinces in backlogs.

Ms Gina queried the Dinaledi Schools grant allocation that prioritized Gauteng ahead of the EC. She said the EC was highly rural and needed more money especially in the area of maths and science teaching. What was taken into consideration when this allocation was made? She asked if DBE prescribed numbers of Technical Schools, or was it for provinces to decide. She asked for the breakdown of the money. She asked if kitchens were a priority in the nutrition programme, especially since food was prepared in unhygienic places. She said the infrastructure grant needed to accommodate a decent kitchen per school.

Ms Malgas asked for a specific definition of inappropriate structures. She said prefabs needed to be considered as inappropriate as well, because they had a life span. She said she would prefer concrete structures. There was a tendency in the country to erect prefabs which became permanent later. She agreed that information be availed on the amounts that were allocated for infrastructure on the equitable share, and on the intervention of the ASIDI grant.

The Chairperson said that South Africa was leading the continent in terms of possessing resources, but it lagged behind on results and quality. The Dinaledi schools were too few. He asked if there were plans to expand the programme. The Department had a role to play on the allocation of the infrastructure grant. More education infrastructure grants were given and yet provinces were unable to spend. The EC sat at 28% expenditure by the end of the third quarter. He said there were challenges; the Committee was not sure if DBE had authority to intervene.

The Chairperson asked if the Department was not setting itself up to under-spend, and if it looked to only appoint contractors in June. He said, as things were, everything pointed to under-expenditure for the coming financial year. He wanted to know if there were other service providers, other than the DBSA, that the Department looked to use. This would comfort that the 2.8 billion for schools infrastructure would be spent this year. The ASIDI programme was very good but the accuracy of the information on the presentation was worrying. He also asked if the targets as they appeared on the presentation were achievable. The Department needed not to impress the Committee with high expectations; it needed to be realistic.

Third quarter report required
Ms Yengeni said the reason there were so many questions was because Members did not get the third quarter report from Treasury. She cited an example of the Dinaledi grant, that had used up to 49%. She said the Committee was not privy to the details of which schools got and spent what. The Committee could not get assistance from Treasury. The question was whether the Department had submitted a progress report to Treasury. If the Committee had that report, it would not be asking questions. She said the discussion sounded like a broken record, and she personally found it difficult to follow. Treasury had failed dismally; Members could not interact with the presentation because they did not have information.

The Chairperson said he appreciated the comments and the matter of the third quarter report was raised with relevant stakeholders.

Ms Yengeni requested that the Department answer if it had submitted the required report to Treasury, before answering the questions. She said the Director-General was not forthcoming with details of expenditure, something that the third quarter report could have easily stated. She said her question sought to find the person at fault.

After advice from the Chairperson, Ms Yengeni withdrew her question, but it needed to be answered and Treasury like all other departments should account.

Mr Ramatlakane said the question was easy because departments submitted progress reports to Treasury. This Department was also in the chain of events. It would have been an easy exercise if the Director-General could have said DBE had done its part and submitted.

Response
Mr Soobrayan said DBE intended to ensure monitoring was improved. He said maintenance was a major issue. Sometimes the investment that was required was higher because of poor maintenance. There was a team working on tightening guidelines and ensuring that provinces catered for maintenance. He said the maintenance budget was seen as a soft target, but was now part of the infrastructure guidelines.
The issue with a builder leaving a site in the EC had a lot to do with the Department not doing enough monitoring beyond ASIDI. He said monitoring conditional grants was slightly easy, but virtually impossible with provincial funds. There were three sources of funding for the infrastructure grant – provincial budget; ASIDI; and EID. On each of these the capacity to monitor varied. He said DBE was creating capacity for improved monitoring structures.

DBE was not structured in a way that it could monitor concurrent projects. He said when the bureaucracy of monitoring teams started; it was assumed that very active monitoring would work. He said all departments were creating capacity to improve monitoring. He said the amount of consultants was minuscule in terms of the overall investment. Money spent on consultancy was not the major cost driver, but bricks and water were.

The progress on the replacement of 50 mud schools was 38 schools under construction, 29 of which were going as per scheduled. He said nine were delayed, but would be brought up to speed with active monitoring. And then 11 were scheduled to start later in the year. He said notices had been served, on contractors who were slow, to indicate that punitive measures would be preferred.

Discussion
50 Schools Report needed
Mr M Mbili (ANC) asked that a detailed report be provided to the Committee on these statistics about the 50 Schools Project.

Mr Ramatlakane asked what was meant by behind scheduled and not scheduled in respect of the 50 schools.

Mr Soobrayan concurred and suggested that a detailed written progress report be forwarded to Parliament. He said 'scheduled' meant construction was where it was supposed to be; 'behind schedule', meant missing deadlines but construction was happening; and 'not scheduled to begin', meant not started with the actual construction but given dates to begin construction.

Ms Yengeni said the Committee could not just pass on the issue of the 50 schools progress report, as it would result in rollovers. She agreed with the Members that a detailed report be provided in a week’s time.

The Chairperson sad a lot of money was used on the programme and the Committee would want to ensure there was no under-expenditure. He ruled that the proposal was accepted and a progress report would be expected in Parliament in a week’s time.

Response continued
Mr Soobrayan said for the 2012/13 financial year site inspections would be complete in May, and this was not the case with the current financial year. He said the deadline was tight and needed active monitoring. He said the cost of consultancy was within the norms and was monitored by Treasury as well.

All the work relating to HIV by both DBE and the Department of Health was coordinated in the Presidency. This was the area that DBE had done fairly well.

Mr Soobrayan said there were challenges that could have been resolved quickly with scholar transport.The issue of which department administered the programme depended on provinces. The service was with transport department in some provinces and education in others. Where the authority lay was not a problem but proper communication and proper management. The only thing that was needed was capacity to deal with the programme effectively. The Minister had indicated that she was not going to interfere with where a province wanted to reside the function. She only insisted on provinces to meet certain standards of delivery. There were major challenges with the programme; there were major over-runs. In most instances when DBE intervened it was a little late. It needed to sharpen its monitoring tools around capacity and staff.

Mr Soobrayan said there were huge challenges with scholar transport procurement, especially in rural areas. The policy was clear and stated that only learners who live five kilometres or more away from school qualified for scholar transport. Scholar transport should not be provided for those students who opted to attend schools that were far from where they lived.  Capacity was a big issue and needed to be addressed. At what cost this was done was not an issue in terms of the overall proportion.

Mr Soobrayen said DBE depended a lot on provincial information when it came to figures of mud schools. He said the figures the Department was quoting were obtained from provinces, and signed off by provinces.
Demographic shifts were a huge problem. Provinces like Gauteng, Western Cape and KZN gained numbers, while the EC and Limpopo were loosing learners. He said there could never be a perfect model to address this as it happened over Christmas. The Department needed to deal with the accuracy of reporting learner numbers urgently. This was a huge problem. He said Treasury made big decisions based on learner numbers. Some principals were over reporting because of salary benefits and school classification. This had implications for teachers, school nutrition and funding norms.

The Minister had identified this as the big issue on which she worked with Treasury. DBE wanted to set a few examples with those principals who lied about learner numbers. The Department was looking at auditing a large sample of the schools and those found to have inflated learner numbers would be dealt with. If there were ghost learners, it was likely that there were ghost teachers. The other factor in South Africa was that the fertility rate had been declining, but this was not showing in the schooling system. The lies about learner numbers impacted on the ability of the Department to plan.

Dinaledi schools were those that had potential and promise. The impact in Dinaledi was generally better than in other schools. This was a project to create a cream of 500 schools, but the lessons from Dinaledi must go through the entire system. The Dinaledi grant allocation and the Dinaledi schools were being reviewed completely. The Members of the Executive Councils (MECs) were not happy with the performance of these grants.

Mr Soobrayan said clear guidelines and norms had been drawn for cooking sites, equipment and utensils. These were monitored very strongly; DBE released the money and procured for the right things. He said the Department wanted to avoid the scenario where classrooms were used as kitchens, as that compromised safety of the children.

ASIDI was critical, but was allocated lesser amount compared to the other grants. The Department was aware of that. He said monitoring would be strengthened; and detailed information would be availed to the Committee on the outstanding questions.

Ms Tsholofelo Diale, ASIDI Programme Project Manager, said the cost per square meter was R9500, and for single units the cost was R14 000. This was compared with provinces and it was within the market prices. She promised to provide a breakdown on this as well. She said the 50-mud schools figure for the coming financial year was correct.

Discussion
Mr Mbili asked about the intervention of DBE in the EC and what it had done to manage the programmes as they were massive. He said he was confused with the amount to be spent in 2012/13 in the Schools Infrastructure grant for only the EC. He asked if the EC complied with the DoRA conditions.

Ms Yengeni applauded the Director-General for honesty and said the presentation correlated with the DoRA. She said it was the Director-General’s responsibility to ensure that provinces provided accurate information. There had to be mechanisms to ensure accurate reporting from provinces. DBE would have to account for the problems and deal with them now. The report was not assisting.

Mr Ramatlakane sought further clarity on the capacity questions and transferring money to provinces for grant purposes. He said replies could be provided in writing.

Mr Soobrayan said the amount for the EC was also meant for the provision of water and sanitation.

The Chairperson thanked the Department.

Additional Adjustments Appropriation Bill [2011/12 financial year] National Treasury briefing
Ms Bednar-Giyose said that National Treasury appreciated the volume of work done by Committee at this time of the year. National Treasury would give a short briefing on the Additional Adjustments Appropriation Bill [2011/12 financial year]. She would explain the importance and urgency of that Bill and also there would be a presentation on the Finance Bill [B5-2012].

Ms Marissa Moore, Director: Transport and Housing, Urban Development and Infrastructure, National Treasury, said that the Additional Adjusted Appropriation Bill 2012 spoke to the special appropriation of R5.8 billion now proposed to be included in 2011/12 expenditure as a contribution by Government to the Gauteng Freeway Improvement Programme. The money, if approved by Parliament, would be allocated through Vote 37, which was the Transport vote.

The urgency of passing the Bill was because Cabinet had taken decisions around freeway schemes and the tolling last year. The Minister of Transport had instructed the board early this year that he wanted to review the scheme and how it was going to deal with the tolls. Decisions around the tolling system were taken very late in the budget process. To accommodate that payment in the budget so late would have meant that payments on roads allocations and for Prasa’s (Passenger Rail Agency of South Africa) provision of new rolling stock would have had to be decreased significantly.

National Treasury had decided that this was not going to be viable. The alternative was to bring in the adjustment for the 2012/13 financial year. The project had been implemented and the money had already been borrowed. It was noticeable that the lack of finality had led to uncertainty amongst investors. It also impacted on the upper tight full bonds in Eskom and Transnet. It was important that the mater was dealt with now - hence a decision was taken to request that there be an adjusted appropriation in 2012.

The R5.8 billion amount was modelled to contain the South African National Road Agency (SANRAL) debt at a manageable level. The willingness to pay that was assumed in 2007 when the project was approved was no longer there. There had been complaints from all sectors that the tolls would have a negative impact on the users.

Discussion
The Chairperson said that when the Minister of Finance tabled the budget, he made mention of the R5.8 billion bail out. The Committee would have preferred a written presentation even if it were only a page. That would have been very useful.

Mr Ramatlakane wondered why was there no memorandum attached to the presentation. The format was a complete deviation from the customary manner of presenting a bill.

Ms Bednar-Giyose replied with that there was no need for memoranda with adjustments appropriation bills. Treasury would prepare the details for the Committee. She apologised that the information was not brought along with the Bill.

Mr Ramatlakane said Members easily forgot issues and had there been a memorandum it would be different. He said he had forgotten everything that Ms Moore was saying and therefore he could not apply his mind to the discussion.

Mr Ramatlakane wanted to know if the R5.8 billion was a once-off bailout or if there was another payment contemplated. He wanted to know Treasury regulations that governed bailouts. SANRAL was a national body and did not ask Government to approve funding for projects. It just went in and implemented in the hope that it would pay later, and suddenly the public had to cover the costs of this independent institution. There was a discussion in the Western Cape about the tolling that was going to happen. The Minister was merely providing a political intervention. This was some kind of a precedent. He also said he wanted to raise an objection to the manner in which the Bill was presented, but at the same time wanted the Committee to endorse the Bill.

The Chairperson requested that the Bill be approved, but in the interim he would ask Treasury to prepare a written document.

Responses
Ms Moore apologised for not providing a memorandum with the Bill and promised it would be provided in a week’s time.

Ms Moore was hesitant to refer to the payment as a bailout. This was not a national Agency unable to pay its debt; rather an agency that was stopped from implementing a plan due to political considerations. SANRAL would have preferred not to be bailed out, but rather service its debt through the payment on the tolls.

The National Roads Regulations Act allowed SANRAL to borrow money, and with the Minister’s approval to declare toll roads and raise a tariff. It was explicit that the tariff needed to cover the upgrade and the maintenance of the toll roads. The bailout was a case of a government becoming attentive to people’s cry. It was a once off, and was not setting a precedent. There were a lot of lessons to be learnt. She said the user-pay system was key to continue service delivery, and was not something to be dealt with carelessly. Government was sensitive to concerns raised by those living in areas that were to be tolled.

Benefits from the upgrades differed from person to person and that mostly influenced one’s view to the tolls. She said the Department needed to understand lessons in the context of planned tolls in the Western Cape, the Wild Coast, Eastern Cape and other upgrades in Gauteng. This needed a rethink and might have future implications for the fiscus.

Discussion
The Chairperson said the questions were valid but were not asked to the right people. He said the Committee needed to invite both Ministers of Finance and Transport. He requested that the Committee not pursue the matter further, especially in light of the Transport Minister's saying he was reviewing all the tolling systems.

Mr Ramatlakane was interested in the regulation not the politics of the decision to fund SANRAL. He asked what provisions there were for Treasury with respect to the payment. He asked if the payment could serve as a foundation in relation to the expenditure, if it was not accommodated in the regulations. His focus was on conditions that governed an expenditure of this nature.

Ms Moore replied that the regulations were observed in Section 30 of the PFMA, in which the national adjustment budget might provide adjustments due to significant and unforeseeable, economic and financial events that affected the fiscus targets set by the annual budget.

The Chairperson asked that Ms Moore not respond to the question as she was exposing herself. He said she should worry about forwarding the memorandum to Parliament.

Mr N Singh (IFP) asked if Treasury had been able to look at the details of the contracts of the e-tolling.

The Chairperson said the question had been raised, but the panel was not capacitated to deal with the issues. He said Members had agreed that the Ministers be invited to the Committee as the decision was taken at a political level.

Ms Yengeni agreed to wait for the memorandum and then meet with the Minister. The Committee needed time to clear some questions.

The Chairperson asked the implications of not adopting the Bill, especially that it had to go through all the necessary channels before 30 March.

Ms Yengeni complained that the Chairperson was pushing the Bill. The Committee needed time to apply its mind to this; why the rush? Members of different political parties needed to discuss the Bill amongst themselves and apply their minds.

Ms Moore said that SANRAL would not meet its obligations by May if it was not supported financially. It had not generated any revenue due to the delay on the implementation of the toll. Treasury was concerned that it might have to pay the full amount of R30 billion as a once-off. That had a potential to make Government balances unstable.

Mr Singh said it was not too late to adopt the Bill.  He understood the situation was extraordinary, but it would be a bad reflection on the Committee, which monitored Government expenditure, to adopt a bill without a memorandum. There was no objection to the money being appropriated but all the information was needed. He supported the proposal that the Ministers be called, and a memorandum provided.

Finance Bill [B5-2012] National Treasury presentation
Ms Bednar-Giyose said the Finance Bill [B5-2012] provided for the authorisation of an authorised expenditure so that it might become a charge against the national revenue fund (See slide 3, first paragraph). Section 34 (1) (a) of the Public Finance Management Act (No. 1 of 1999) (PFMA) dealt with unauthorised expenditure and whether there was an overspending on a vote. Section 34 (1) (b) dealt with expenditure that was unauthorised for another reason and Parliament authorised the expenditure as a direct charge against the relevant Revenue Fund. (See slide 2)

National Treasury was looking at funds surrendered to the revenue fund in the previous years. If the funds were now authorised there would be a refund of those funds as a charge against the national revenue fund.

In terms of Section 34 (2) of the PFMA if Parliament did not approve, an additional amount for overspending would become a charge against the vote in future allocations. In the Finance Bill there was an expenditure that fell in each of the three categories. The Standing Committee on Public Accounts (Scopa) had made certain recommendations in respect of unauthorised expenditure at both the Departments of Defence and Military Veterans and Correctional Services. (See slides 2-7)

Scopa followed certain criteria in examining over-expenditure in those Departments. Those included asking if there were disciplinary steps taken against officials who permitted unauthorised expenditure; whether expenditure related to the function of the Department or to essential services; whether remedial steps were taken; and whether there were fraudulent activities present in permitting expenditure. If there were no fraudulent activities that would count in favour of the authorising official. (See slide 4)

There were suggestions at Scopa that if the Bill could be passed in this financial year, some of the savings could be released to departments to cover their expenditure. She said the total amount, according to the Bill, that was being authorised came to R544 739 251. (See slide 8)

Discussion
Mr Singh said he could not  object to the Bill and its aim had already been approved at Scopa.

Mr Ramatlakane asked why did it take Treasury so long to come up with the Bill as some transgressions that were being corrected occurred in 1998/99, 2004 and 2008.

Ms Bednar-Giyose said the time periods were a matter of concern as it was a little while back. Treasury was working to ensure a speedy redress and processing of unauthorized accounts. Scopa and departments had raised the issue as well.

Mr Ramatlakane recommended that the Bill should be adopted.

2012/13 Division of Revenue Bill: Department of Cooperative Governance presentation
Ms Tumi Mketi, Acting Director-General, Department of Cooperative Governance and Traditional Affairs (CoGTA) said the presentation would cover two main issues: the correction of allocations to the OR Tambo and Alfred Nzo District Municipalities and the Municipal Infrastructure Grant (MIG) especially the P-component of the formula.

Mr Mizilikazi Manyike, Executive Director for Operation Clean Audit: CoGTA, clarified the issue of corrections related to OR Tambo and Mbizana; the demarcation process affected upon allocations for the sanitation programmes.

A further aspect was policy issues pertaining to the P-component of MIG. Most of the concerned stakeholders in the P-component had made their views known except for CoGTA. Planning at municipal level was achieved through the Integrated Development Plan (IDP) that took into account the priorities of the municipal constituency. CoGTA believed the funding instruments needed to give practical implementation to the IDP.

The MIG was an amalgamation of grants administered by different departments and was meant to empower municipalities. The view was that communities would play a bigger role in deciding infrastructure provision in their locations. Reforms impacting on funding should protect the rights of communities to express their priorities and for municipalities to fulfil these. If this was not the case communities would regard municipalities as insensitive to their needs.

The P-component constituted 15% of the total MIG allocation, and was meant to address infrastructure as sports facilities, community halls, Thusong centres, taxi ranks and cemeteries. The P-component was just a municipal formula used to decide allocation; there were other funding formulas like the B, M, and A-components. This was in the Division of Revenue Act (DoRA).

Before the 2011/12 financial year, the P-component did not provide for any ring-fencing thus affording municipalities flexibility. For the first time in 2011/12 financial year, the entire MIG P-component was ring-fenced for municipal sports facilities. This phrasing excluded parks and other recreation facilities.

The ring-fencing of MIG had a potential to create grounds that would allow different sectors to call for MIG to be ring-fenced for sectoral interests. This would defeat the rationale for creating MIG.

The Department acknowledged that sports facilities needed to be given attention, but that needed not be to the detriment of other public facilities that were needed for conducive human settlements. He said the upkeep of other recreational facilities, like halls and taxi ranks in communities, was also in the public’s interest.

The Department proposed that 33% of the 15% of the P-component of the MIG formula be used for municipal sports and recreation facilities. The Department’s view was that maintenance of sport facilities should not be at the expense of other municipal facilities.

The Department's view was not the 'correct' one but at least it was happy to be afforded an opportunity to present to Parliament. Hopefully the  input would assist Parliament arrive at a decision that would be in the public’s interest. The Department would implement whatever decision Parliament arrived at.

Ms Mketi said focus needed to be given to service delivery, not sports, as it was more of a recreational issue.

Discussion
Mr Swart wanted to know the total value of the P-component. He said he understood that municipalities should be free to spend anywhere they wanted and not do any ring-fencing.

The Chairperson clarified that CoGTA was saying it was opposed to the 15% arrangement, but in case Parliament refused to agree, then the 33% of the P-component would be a compromise position. He said he expected Members to remind CoGTA how the 15% was agreed to.

Ms Mashigo said there was much debate when the 15% was decided upon. She disagreed with CoGTA’s proposal.

Mr Gelderblom said it was a good presentation and he supported CoGTA’s proposal. At the end of the day the proposal was meant to benefit the communities at large.

Mr Mubu said he endorsed the proposal.

Mr Singh wanted to know if there had been consultation with the Department of Sports and Recreation (SRSA). He wanted to know how provincial projects matched municipal projects. There was a lot of emphasis on community participation and IDP. He asked if CoGTA could say with certainty that municipalities were following the IDP plans in the allocation of funds. Where he came from the IDP had become a matter of course. There was a disjuncture between what the communities wanted and the municipal spend. What reliance was there on IDP? And what connections were there between IDP plans and the municipal spend? He expected CoGTA to say something on the allocations, and how it monitored them.

The Chairperson was worried like Ms Mketi. There were discussions with all the relevant stakeholders. The proposal was made was that there were no sporting facilities in the disadvantaged communities. After engaging the departments it was agreed that sporting facilities be built in black communities. Treasury issued a confirmation that this component would be ring-fenced. For him the proposal by CoGTA came as a surprise. The ring-fencing of the 15% was a product of long discussions to ensure availability of facilities in poor communities. The Department of Sport and Recreation was not responsible for this but committees of Parliament were. CoGTA was taking the Committee back. Last year’s MIG had a huge under-spending; the Committee was not told what were the amounts. CoGTA chose to address the Committee on soft issues. The Committee should be hearing what was being done on monitoring challenges that existed. It was not possible that the Department could not find money outside of the 15% ring-fenced for sports facilities. He said there were no facilities in rural areas. The Committee needed to be told how poor communities could have sport facilities. It would only be then that he would support CoGTA’s proposal. He felt bad about the proposal.

Mr Mbili said society was not static and yesterday's decision might not always be relevant. CoGTA’s proposal was calling for flexibility. Not all municipalities were the same. This was where flexibility came in, because some other municipalities might have these facilities. And yet they were expected to ring-fence. He did not want to re-invent the wheel, but his community would always prefer a community hall ahead of a sport field. There needed to be a rethink of this.

Mr Swart said the decision was taken when there was a realisation that the MIG allocation for sport was never used for that purpose. The only mistake the Committee did was not to think about the other amenities like the taxi ranks, community halls and cemeteries. He would gladly support the proposal by CoGTA.

Ms Yengeni said the P-component approach was a problem. The Committee was not told of how the MIG had performed in different provinces. To select the P-component without the background of the performance of the grant was problematic. She said if the Committee was to take a decision it had to hear all the concerned departments. It was not a waste of time to invest in sport as that would help in combating crime, given the high rate of unemployment. She wanted to hear the analysis of the money, by province and specific issues addressed.

Mr Ramatlakane wanted to know if there was capacity at the Department to help municipalities in terms of spending the grant. If not, what plans were there to help local municipalities, who were unable to spend, to develop internal capacity and not use consultants.

Responses
Ms Mketi said the Department had under-estimated the interest of Members in the MIG. She asked if the Committee could allow the Department at some other time to come back and present details on the MIG. Treasury had been engaged on the proposal, and was aware that the decision was taken when CoGTA was very weak in terms of political leadership. This was during the time when the former Minister was sick.
The Minister of Sport and Recreation could well have been better organised than CoGTA at the meeting where the 15% ring-fencing for sport facilities was arrived at. The Department had formally written to Treasury informing it about the proposal. In trying to build capacity at municipalities, CoGTA had been working with the Development Bank of Southern Africa (DBSA) which had seconded 88 people with technical skills like engineers, surveyors and people with technical skills to various municipalities. The team of 88 would be transferred to the Department in the next financial year. This would ensure permanency in skills availability at municipalities.

Mr Muthotho Sigidi, Deputy Director-General: Governance, CoGTA, said the MIG framework provided for the responsibilities of the national departments. After every local election there were governance and institutional issues that arose.  Nevertheless the Department monitored the expenditure of municipalities. The Department also looked at the information provided by the Provincial Monitoring Units especially with regards to challenges that existed.
CoGTA was working together with Treasury in terms of seconding people to municipalities, especially those with skills. Treasury was deploying people with financial experts to municipalities. This might not necessarily yield results because institutionally at municipal level a person could not transfer any particular skills.  Treasury had even insisted that the deployed people would be absorbed within the municipalities. CoGTA had engaged the Department of Sport and Recreation as early as May last year. He informed one Committee meeting last year that ring-fencing 15% of MIG for purposes of sports was negating other social infrastructure. When one built a sporting facility, a municipality needed to put money aside for operation and maintenance. There were issues of norms and standards in sports. The provincial sport departments used a different kind of norms and standards. Because the sports facilities were built in municipal space, they needed to find expression in the IDP. The MIG would be R14.5 billion this year and R2.8 billion would go to sporting facilities. All other sectors needed to assist in monitoring whether the facilities were delivered as per the norms and standards. The expenditure patterns as at the end of January would not be dealt with, but were available.

Discussion
Ms Yengeni queried the remark about the Minister of Sport and Recreation. If the remark was not challenged it would be open many different interpretation.

Ms Mketi meant simply that CoGTA’s political head, whose presence might have carried weight, was not present. The Department did not get the necessary support when going into the meeting. The comment was not meant to be defamatory.

The Chairperson asked Treasury if the Department of Sport and Recreation was responsible for building sports infrastructure.

Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, replied that the purpose of the provincial grant was for the promotion of sports and not to build facilities. There was no duplication between the two grants. Treasury acted on a recommendation that 15% of the MIG be used for building sport facilities. The proposal of CoGTA was one that needed to be addressed collectively.

Mr Singh wanted to know the kind of linkage that was there between the funds that were appropriated from national level to the municipalities. He asked who was responsible for monitoring the funds. He suggested for all departments to be called back to Parliament.

Mr Gelderblom said MIG did not work, and the money did not go where it was meant to be. Treasury had already met with the concerned departments. He did not have a problem with the proposal. The Department should be allowed to come back with the information it promised the Committee.

Ms Mashigo said CoGTA was aware of what the Committee wanted, but chose to present on MIG only. The Department had deliberately avoided the under-expenditure. The Committee was not happy with the Department choosing what to present and not sticking to what the Committee wanted.

The Chairperson agreed with other Members that the Department was very selective on what it wanted to present. CoGTA had to come back, but there were time constraints. The Department would have to present on the expenditure of all the other grants that it administered. The Committee had been informed that the Siyenza Manje programme had been dissolved.

The meeting was adjourned.