Financial and Fiscal Commission (FFC) on their Annual Strategic Plan

This premium content has been made freely available

Finance Standing Committee

16 April 2012
Chairperson: Mr D van Rooyen (ANC) (Acting)
Share this page:

Meeting Summary

The Financial and Fiscal Commission (FFC) responded to issues raised previously by the Committee and briefed Members on its Strategic Plan 2012 highlighting key Commission focus areas and challenges for 2011/12 financial year. The Commission gave further detail, under the headings of corporate strategy; strategic goals: 2011-2014; 2011/12 achievements; enhanced developmental impact of public resources through the financial and fiscal system in South Africa; progress on deliverables, in particular tabling of the 2012/2013 submission for the Division of Revenue with briefings to Parliament, Provincial Legislatures (except the Western Cape Provincial Legislature), the South African Local Government Association and Government; also submission and briefing Parliament on the 2012/13 Fiscal Framework and Revenue Proposals and 2012 Appropriations Bill; and 2011/12 research with the overall theme of intergovernmental financing innovation for moving people out of poverty and sub-themes of supporting inclusive growth: jobs, knowledge and regional development, climate change and environmental sustainability, and institutional development for inclusive growth and innovation.

The Commission then gave further detail under the headings of strategic objectives and annual performance plan of strategic objectives 2011/14; stakeholder engagement; and strategic objectives and key performance indicators 2011/12 – 2013/14. These included the objectives of ensuring the generation of quality, innovative, pioneering research that informed key intergovernmental fiscal relations strategic debates and choices, and ensuring the progressive and innovative management of human resources to attract, develop and retain key talent and leverage external expertise. The Commission also noted its 2009-2014 research strategy whose components and programmes included equitable growth paths and distribution of public resources, sustainable development with particular reference to infrastructure, services, social welfare (impact on vulnerable groups), environmental economics including green economy, and the knowledge economy.

The Commission noted its 2012/2013 research projects
– Analysing Child Support Grants using Economy-wide Models
– Framework and Tools for Understanding Green Job Creation in South Africa
– Budget Consolidation in South Africa: A Disaggregated Approach
– The Effects of Social Spending on Economic Activity in South Africa
– Short-term Forecasting Model for South Africa
– Dynamics and Implications of Provincial Personnel Expenditure on Service Delivery
– Harnessing Informality into the Main Stream of Humans Settlements Delivery in South Africa
– Evaluation of Public Transport Operating Subsidies in South Africa
– Devolution and Delivery of Transport Infrastructure: Intergovernmental Implications for Municipalities
– An Integrated Planning Approach to Delivery of School Infrastructure
– Intergovernmental Dynamics of Sub-national Government Budget Gaps & Implications for SA Fiscal Health
– An Outcomes Based Approach to Service Delivery in a Decentralized System of Government
– Conditional Grant Performance Assessment
– Incentives For Rewarding Performance in the Public Sector
– Challenges, Constraints & Best Practices in Rehabilitating Water and Electricity Distribution Infrastructure
– Understanding Dynamics of Tax Bases of Rural Municipalities & Constraints in Raising Revenue
– Determinants of Performance of Municipalities in South Africa: A Cross Sectional Analysis
– Budget Reforms of Health Conditional Grants and Strengthening of Health Performance
– Impact of No Fee Schools Policy on Equity, Funding and Learner Performance
– Identifying Gaps and Progress Made with Government Outcomes: A Spatial Approach
– Fiscal Rules and Long Term Modelling
– Role of Provincial Governments in Meeting National Priorities
– Revision of the Division of Revenue Bill
– Impact of Unfunded Mandates
– Role of Intergovernmental Fiscal Relations (IGFR) in Innovation Financing in South Africa
– Analysing Public Economics of Corruption
– Fiscal Distress Indices
– Public Hearings: Local Government Fiscal Framework and Housing Financing

The Commission related expenditure to strategic objectives, gave details of funding, and offered analytical information.

The Commission noted that it had engaged the National Treasury and Parliament in the 2011/12 financial year in order to stabilize its liquidity. As a result grant funding grew by 12% in 2012/13 financial year. The overall baseline allocation grew by R7 million over the Medium Term Expenditure Framework period to address the accumulated deficit. The Commission would seek to source additional funding through partnerships with donor organisations in 2012/13. Memoranda of understanding had been concluded with the Human Sciences Research Council. The 18th Anniversary Intergovernmental Fiscal Relations Conference was scheduled to take place this year.

The Commission concluded with remarks on budgets. In order to restore a good financial position the FFC was freezing new recruitment, phasing in projects, continuing austerity measures, and finalising the lease with the Department of Public Works to complete the reduction in the Commission's office space.

Members asked who was taking the next step to ensure that vacancies were filled, why there had been double-digit increases in staff costs in three of the past five years while the number of staff had been stable, why professional service fees had gone out of control from R300 000 in 2006 to R6.5 million this year, why the Western Cape Provincial Legislature was omitted from the FFC briefings, why the percentage of females was so low in senior management, why the Commission was intent on appointing a new service provider, and why the Commission wanted to reduce its office space - this indicated a lack of planning beforehand. Members also asked how much this Committee had contributed to assisting the Commission to operate efficiently and effectively, and noted that FFC vacancies seriously impeded its execution of its task with the result that it had shifted from its mandate as an independent and impartial institution. Most surprisingly, the FFC was now contemplating forming partnerships with the institutions that it was supposed to advise. How could it do that? Parliament should appoint the Chairperson of the Commission. A Member said that the Commission was like a Spaza shop that was about to close, yet it had a vital role. Another Member welcomed the presentation, felt the frustration of the Commission, and wanted the Committee to recommend solutions.

Meeting report

 

Election of Acting Chairperson
Apologies were received from the Chairperson, Mr T Mufamadi (ANC), who was in Ghana. Mr D van Rooyen (ANC) was elected Acting Chairperson.

Acting Chairperson's introduction
The Acting Chairperson reminded Members that the Financial and Fiscal Commission (FFC) remained the same institution as had appeared before the Committee the previous year and continued to suffer from 'the Hollywood Syndrome' of key positions held in an acting capacity. It was the same institution on which the Auditor-General had raised concerns as to capability of the accounting officer on financial practices and concerns on irregular expenditure. However, it remained an institution of critical importance in providing information and advice on financial issues.

Financial and Fiscal Commission (FFC) responses to Committee's previously noted concerns
Insufficient attendance of Commissioners at briefings to the Committee
Mr Bongani Khumalo, FFC Acting Chairperson and Chief Executive Officer, responded that the Commission had, as requested, provided written explanations for the absence of Commissioners. It had also made a proposal that, because of the structure of the Commission and the Commissioners' engagements, and because of the work plan of Parliament, it was difficult to bring all Commissioners together at the same time. Hence the Committee was requested to be flexible. Unfortunately, three Commissioners were unavailable for the present meeting but apologies had been submitted in writing.

The FFC's projected budget deficit and accumulated budget deficit
The Commission had subsequently presented an analytical explanation of the deficit and had indicated remedial measures when it presented its Annual Report. The Commission had engaged extensively with National Treasury and had obtained an adjustment to its 2012/13 budget of R7 million to address the deficit and the audit fees. However, the Commission had expected more, but it had put in place cost containment measures, and hoped to wipe out the deficit even if no more additional funding was obtained.

The FFC's vacancies
The Commission had indicated that there was nothing it could do about vacancies for Commissioners. It had explained the situation to this Committee and to the Standing Committee on Appropriations, and also to the Select Committees on Finance and Appropriations. Mr Khumalo had also discussed the matter with the Office of Institutions Supporting Democracy. He had also discussed with and made submissions to the Minister and Deputy Minister of Finance. He had also discussed the matter with the Director-General in the Presidency and the Director-General, National Treasury. He had also discussed it with the Executive Committee of SALGA. He had been requested by National Treasury to submit curricula vitae (CV s) of potential candidates of appointment as Commissioners, but he had explained that this was not legally his responsibility. He could only assist on written request from the Minister. However, the vacancies had significant impact on the work of the Commission. Moreover, the Commission was supposed to have a full-time Chairperson as well as a separate full-time Chief Executive Officer. Mr Khumalo had been filling both posts single-handedly since 2010, but had had significant support from colleagues in the Commission.

Remuneration of Commissioners
It remained of concern that remuneration of part-time Commissioners was still unreviewed and remained essentially at the 1996 level.

Auditor-General's observations on irregular expenditure
This had been incurred because a service provider did not have a valid tax clearance certificate. It was not possible to terminate the contract immediately because the State Information Technology Agency (SITA) had advised the Commission of the sensitive nature of the data handled by the service provider. However, the contract had since been terminated.

Auditor-General's observations on fruitless and wasteful expenditure
The Commission had contested this issue with the South African Revenue Service (SARS), which had subsequently reversed the charges, but after the Auditor-General had completed his audit report.

Auditor-General's observations on Going Concern
This was linked to the budget deficit and accumulated deficit dealt with above.

Auditor-General's observations on performance information
The Commission had engaged in a workshop with the Auditor-General on how such information was to be presented. This was not expected to be an issue again.

Financial and Fiscal Commission (FFC) Strategic Plan 2012: briefing
Mr Bongani Khumalo, FFC Acting Chairperson and Chief Executive Officer, briefed Members on its Strategic Plan 2012 highlighting key Commission focus areas and challenges for 2011/12 financial year which informed the Strategic Plan going forward.

Key Commission Focus Areas for 2011/12 Financial Year
These included providing evidenced-based policy advice on intergovernmental financing innovation for moving people out of poverty under the following sub-themes:
– supporting inclusive growth: jobs, knowledge and regional development
– climate change and environmental sustainability: opportunities and risks for inclusive growth and innovation
– institutional development for inclusive growth and innovation.

 The Commission would table recommendations in May 2012 as part of its 2013/14 Submission for the Division of Revenue.

Mr Khumalo noted that the Commission had made a submission on its role in supporting the Standing Committee on Finance and the implications of the imminent establishment of the Parliamentary Budget Office for the continued relevance of the Commission. It had not yet received responses.

Focus areas further included responding to outcomes of the Stakeholder Perception Survey and Impact Assessment.

The public hearings on local government fiscal framework and housing financing in October 2011 were based on a draft problem statement tabled by Commission on the less capacitated municipalities and whether the current fiscal framework for local government was conducive to addressing some of the problems that the municipalities were facing. There would be a second set of public hearings in the current financial year to present options. (Slide 2).

Key Commission Challenges for 2011/12 Financial Year
These included the three vacant Commissioner posts, some since June 2008, and the restricted levels of depth and breath in expertise, strategic approach, research as well as oversight because of vacancies. There was also uncertainty due to absence of a full-time Chairperson of the Commission. Commissioner Tania Ajam had played a supportive role. Mr Khumalo noted that according to legislation, Commissioner vacancies had to be filled within ninety days.

There was an absence of engagement protocols to guide the interaction between Parliament and the FFC.

There were resource implications since the implementation of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009). (Slide 3)

Part 1: Financial and Fiscal Commission Corporate Strategy
Mr Khumalo did not discuss mandate, enabling legislation, composition; vision; and mission (slides 4-8) except to mention an Amendment to the Municipal Systems Act (No. 32 of 2000) that had created a new area of work for the Commission regarding consultations between SALGA and the Commission. Mr Khumalo noted problems arising from the Financial and Fiscal Commission Act (No. 99 of 1997). One of the challenges was the Chairperson's being the Chief Executive Officer and accounting officer of the Commission. The Commission had requested the Minister of Finance for an amendment. The draft bill was still at a technical stage but it was hoped to complete it by the end of the financial year.

Strategic Goals: 2011/12 – 2013/2014
The following were the major strategic goals or key focus areas of the Commission:
1. A stable inter-governmental fiscal relations (IGFR) system: The system of IGFR) was to be sustainable and equitable.
2. Strategic foresight.
3. Sound and informed policy advice: Effective policies that were evidence-based resulting from comprehensive and value-added engagement. The Commission, however, faced a budgetary challenge in attracting the best skills.
4. Knowledge management: Relevant knowledge that enhanced developmental impact was to be
created and mobilised through the balance of internal and external specialist talent commensurate with the needs of the Commission. Mr Khumalo noted that this was not just a matter of publications, but also holding workshops, for example, with Parliament.
5. “Success” culture: A dynamic, productive organisational culture was to be created and nurtured.
6. Balance: The balancing of present and future demands, leading to effective performance
within the constraints of available resources. (Slide 9)

2011/12 Achievements
Mr Mashumi Mzaidume, FFC Secretary, continued the presentation. He noted that the FFC had participated in the strategic planning processes of Parliament, in particular the Standing Committee on Appropriations. It had also conducted oversight with the Standing Committee on Finance and other committees.

The Commission was part of the institutions at the forefront of research into issues of innovation, climate change and the green economy; it monitored the impact of fiscal consolidation and financial management concerns at provincial (i.e. interventions) and local level (sustainability). The Commission was also participating in the long term fiscal sustainability studies that Government was currently carrying out.

The Commission had released the technical report that supported the FFC 2012/13 Submission for the Division of Revenue.

The Commission had developed unique models such as the land use cost model, econometric models on the national and provincial economy, and energy focused macro-model.

It had disseminated its work through workshop to parliamentary committees, public hearings and media reports. It had published in accredited international and national journals, and produced book chapters, technical reports, occasional papers, conference papers and working papers.

Expenditures were within variance limits prescribed by Auditor General. There was a balance of in-house and outsourced capacity (Slides 10-12).

Ms Tania Ajam, FFC Commissioner, continued the presentation.

Enhanced developmental impact of public resources through the financial and fiscal system in South Africa
(Chart, slide 13)
Ms Ajam pointed out that the Commission sought to ensure that its policy advice actually made an impact on the inter-governmental system. To ensure this evidence-based research was conducted in order to form a basis for policy advice. To support this activity an effective secretariat was required. Further details could be found in the Annual Performance Plan.

Mr Mzaidume continued the presentation.

Progress ('How are we doing')
Deliverables
Mr Mzaidume did not go through the list of deliverables that the Commission was by law required to present but instead referred Members to the presentation document. He noted, however, the following:

– Submission on Siyenza Manje Project for Select Committee on Finance
– Submission on Green Paper on Cooperative Governance for the Department of Cooperative Governance
– Submission on Fuel Levy Allocations for the Department of Energy and National Treasury
– Submission on MISA Strategy for the Department of Cooperative Governance
– Submission on the Spatial Planning and Land Use Management Bill for the Department of Rural Development and Land Reform
– Submission on the 2011 Amendment to the Municipal Systems Act for the Department of Cooperative Governance
– Submission on the 2011 Municipal Property Rates Amendment Bill for National Treasury
– Conducted Analysis of Local Government Revenue and Expenditure: The Case of Free State Municipalities for Free State Provincial Legislature
– Submission on eThekwini Metropolitan Municipality Application for Local Business Tax for National Treasury. (Slides 14-16)

2011/2012 Research
 Mr Mzaidume noted that this research would be tabled in the Division of Revenue submission. The overall theme was intergovernmental financing innovation for moving people out of poverty. (See slides 17-18)

Part II : Strategic Objectives and Annual Performance Plan
Strategic Objectives 2011/2014
These were summarised under the headings of stakeholder; internal business processes; learning and innovation; and financial (table, slide 20).

Stakeholder Engagement Strategic Objectives and Key Performance Indicators 2011/2012 – 2013 /2014
1. To profile the Commission with a special focus on the Commission’s mandate, vision, mission and role, the Commission’s short- and long-term strategy, the Commission’s position on specific issues, the Commission’s challenges and achievements. Indicators were: dissemination and clarification of outputs to a wider audience; stakeholder instruction on IGFR and IGFR issues; and relationship building and consultation; and collaboration and partnership. Achievements included upgrading the Commission's website, and obtaining a presence in the social media. Stakeholder workshops had been held. A memorandum of understanding had been concluded with the Human Sciences Research Council. (Slides 21-23)

2. To ensure that Commission research was converted to policy advice and recommendations written in language that policymakers could understand. The indicator was: Clear language and edited submissions, reports and policy briefs. Mr Mzaidume noted achievements.

3. To ensure that policy advice and recommendations responded to the needs of stakeholders.
The indicator was: Attendance at stakeholder forums (Representation and participation where applicable at
State of the Nation Address; Budget Speech; Budget Lekgotla, Council and Forum; MinMecs; Technical
Committees on Finance; Parliamentary, Provincial Legislature and Local Government
House and Committee Hearings, Workshops and Planning Sessions. Mr Mzaidume noted achievements
(Slide 24).

4. To ensure the generation of quality, innovative, pioneering research that informed key IGFR strategic debates and choices. Indicators: Peer-reviewed publications in an accredited journals; recognised book chapters or working papers or technical reports published; number of book chapters, technical reports, occasional papers, conference papers and working papers with Commission researchers; and number of Commission research datasets/model codes/syntax archived for future use. Mr Mzaidume noted achievements (slide 25).

Mr Mzaidume also noted indicators and achievements for the following strategic objectives (see presentation document for details):

6. To ensure the progressive and innovative management of human resources that attracted, developed and retained key talent, and leveraged external expertise.

 Mr Mzaidume noted that a gender disparity still remained at senior management service level with 60 male: 40 female, whereas at middle management service level the ratio was 60 male/40 female. Mr Mzaidume noted that the type of skills that the Commission sought were scarce and it had been difficult to attract women. (Slides 26-28)

7. To ensure the coordinated, coherent, high-quality, innovative and cost-effective approach to information and communications technology (ICT) that met the needs of the Commission, the Commission Secretariat and stakeholders. Mr Mzaidume noted the retirement of pre-2007 infrastructure had been partially achieved. A second server and copier replacement had been finalised. Backups were in place. Less than eight hours downtime had been achieved. (Slides 28-30)

8. To ensure the coordinated, cost-effective and innovative management of Commission assets in support of delivery on the Commission’s mandate. Mr Mzaidume noted that an asset management plan had been prepared and was awaiting approval by the Commission. Office space in Midrand was shortly to be reduced by 42% and in Cape Town by 50%. (Slides 28-31)

9. To ensure compliance with legislation and adherence to relevant corporate governance best practice.

10. To ensure effective and responsible leadership with specific focus on integrity, transparency and accountability, as well as on the development a positive organisational culture.

'10.' To ensure the creation of new knowledge, the institutionalisation of such knowledge and its transfer to other role players within the intergovernmental fiscal relations system. Mr Mzaidume noted that the Commission had implemented its performance management system.

11. To ensure the coordinated, cost-effective and innovative acquisition and management of Commission data, information and knowledge resources in support of delivery on the Commission’s mandate. Mr Mzaidume noted that the Commission was partnering with other institutions to obtain materials on loan rather than buying them outright. It had managed to obtain a donation of some 80 reference books, and hoped to obtain in the new financial year four reference books for use by researchers.

12. To ensure prudent and transparent management of the financial resources of the Commission. Mr Mzaidume noted that the Commission sought a clean audit opinion, but would know only in July 2012.

13. To ensure access to alternative sources of funding of at least 5% of budget allocation. Mr Mzaidume noted that the Commission was trying to obtain donations.
(Slides 32-35)

Mr Mzaidume outlined 2009/2014 Research Strategy: Components and Programmes
Equitable Growth Paths and Distribution of Public Resources
– Macroeconomic analysis
– Growth, Poverty and Inequality
– Revenue sharing among and within Government spheres – vertical and horizontal
divisions
– Progressive Realisation

Sustainable Development
– Infrastructure, services, social welfare (impact on vulnerable groups)
– Environmental economics, including green economy
– Knowledge Economy

Accountable Institutions (at the different spheres and layers of Government)
– Taxation and other revenue sustainability options
– Expenditure diversification
– Institutions running these and fiscal accountability

Stakeholder Requests (flexible/ad hoc)
– Legislation proposals with a financial and fiscal impact
– Other unforeseeable referrals
(See Slides 36-37)

2012/2013 Thematic Focus
– “Levers to Unlock Value for Decadal Development: People, Places,
Institutions and the Economy”

2012/2013 Research Projects
– Analysing Child Support Grants using Economy-wide Models
– Framework and Tools for Understanding Green Job Creation in South Africa
– Budget Consolidation in South Africa: A Disaggregated Approach
– Effects of Social Spending on Economic Activity in South Africa
– Short-term Forecasting Model for South Africa
– Dynamics and Implications of Provincial Personnel Expenditure on Service Delivery
– Harnessing Informality into the Main Stream of Humans Settlements Delivery in South  Africa
– Evaluation of Public Transport Operating Subsidies in South Africa
– Devolution and Delivery of Transport Infrastructure: Intergovernmental Implications for Municipalities
– Integrated Planning Approach to Delivery of School Infrastructure
– Intergovernmental Dynamics of Sub-national Government Budget Gaps & Implications for SA Fiscal Health
– Outcomes Based Approach to Service Delivery in a Decentralized System of Government
– Conditional Grant Performance Assessment
– Incentives For Rewarding Performance in the Public Sector
– Challenges, Constraints & Best Practices in Rehabilitating Water and Electricity Distribution Infrastructure
– Understanding Dynamics of Tax Bases of Rural Municipalities & Constraints in Raising Revenue
– Determinants of Performance of Municipalities in South Africa: A Cross Sectional Analysis
– Budget Reforms of the Health Conditional Grants and Strengthening of Health Performance
– Impact of No Fee Schools Policy on Equity, Funding and Learner Performance
– Identifying Gaps and Progress Made with Government Outcomes: A Spatial Approach
– Fiscal Rules and Long Term Modelling
– Role of Provincial Governments in Meeting National Priorities
– Revision of the Division of Revenue Bill
– Impact of Unfunded Mandates
– Role of Intergovernmental Fiscal Relations (IGFR) in Innovation Financing in South Africa
– Analysing Public Economics of Corruption
– Fiscal Distress Indices
– Public Hearings: Local Government Fiscal Framework and Housing Financing
(Slides 36-40 )

Mr Mavuso Vokwana, Chief Financial Officer, FFC, summarised Relating Expenditure to Strategic Objectives
(Table, slides 41-42) and Funding (Table, slide 43)

Analytical information
This provided the history of the funding and financial performance of the Commission. It was evident that there had been a growth in the business of the Commission. The Commission had engaged the National Treasury and Parliament in 2011/12 financial year in order to stabilise its liquidity. As a result grant funding grew by 12% (R3 million) in the 2012/13 financial year out of those engagements. The overall baseline allocation grew by R7 Million over the MTEF period to address the accumulated deficit. The Commission would seek to source additional funding through partnerships with donor organisations in 2012/13 to deal with mutually beneficial initiatives that the Commission was unable to carry out on its current budget, including training of its research staff.
 
Joint initiatives were piloted with the Limpopo Provincial Treasury, Ekurhuleni Metro and the Free

State Finance Committee where the Commission partnered with these organs of state to carry out its
work and in the process managed to save costs. Such initiatives would be pursued even more going forward.

Memoranda of understanding had been concluded with the Human Sciences Research Council
(work was on-going funded by the United Nations Children's Fund (UNICEF) on a project), Food and Agricultural Policy Research Network and the Municipal Demarcation Board to share capacity on joint projects of mutual interest The 18th Anniversary IGFR Conference was scheduled to take place this year.

Mr Vokwana highlighted that the FFC's major cost driver was personnel costs followed by professional fees, including audit fees. (Slide 44 )

Remarks on budgets
In order to restore a good financial position without changing the base line allocations the followings expenditure items were still being maintained:
- Research should be the major beneficiary
- Freeze on new recruitments
- Phasing in of projects
- Continuation with reducing administrative costs
- Reprioritisation the Implementation of the FFC’s Strategy
- Compliance with allocations
- Austerity measures still continue in order to reduce deficit
- Reducing number researchers travelling per trip
- Travelling on economy class
- Car rental reduced to a lower grade
- Office space: finalising the lease with the Department of Public Works (DPW) (Slide 45).

Mr Khumalo noted that the above strategy was for three years, but the FFC also had a five year research strategy that it was still implementing. The FFC's core business was research.

Discussion
Mr T Harris (DA) observed that the importance of the FFC was underlined by the fact that it was written into the Constitution. So this was clearly one of the Committee's more important oversight meetings. Moreover, the Commission's vacancies were a huge problem. The Chairperson's position was clearly a presidential appointment. The Committee needed to establish whether this was something that the Presidency was actioning, and who was taking the next step to ensure that these vacancies were filled.

Mr Khumalo replied that the Commission did not have any mandate to appoint Commissioners, but only to appoint staff at the Commission. All the Commissioners were appointed by the President. Organised local government through SALGA nominated individuals and these names were forwarded to the Presidency. Provincial nominees were nominated by the premiers and submitted to the President. At a national level it was the Minister of Finance who made nominations. The Chairperson and Deputy Chairperson were chosen by the President.

Mr Harris asked why there had been double-digit increases in staff costs in three of the past five years while the number of staff had been stable.

Mr Khumalo replied that there had been a review of the salary packages to make them competitive and reduce staff turnover. Salaries had been aligned with Department of Public Service and Administration (DPSA) norms.

Mr Harris said that the professional service fees had gone out of control, from R300 000 in 2006 to R6.5 million this year. What proportion of professional fees were audit fees? From where were the huge increases in other fees coming?

Mr Vokwana replied that last year the Commission had tabled an analysis of its audit fees.

Mr Harris asked how the requirement for governmental departments to consult the FFC in cases such as the Department of Transport where a shift in mandate was contemplated.

Mr Khumalo replied that there appeared to be a lack of understanding by some departments of the FFC Act and how the Commission did its work. In terms of a proposed Amendment, the Commission would be allowed to gazette some protocols to be followed, as other Chapter 9 institutions were empowered to do.

Ms P Adams (ANC) asked why the Western Cape Provincial Legislature was omitted from the Commission's briefings.

Mr D Ross (DA) asked if the FFC had briefed the Western Cape.

Mr Khumalo replied that the Western Cape had not responded to the Commission's request for an appointment for a briefing.

Ms Adams asked for an explanation of gender disparities in the Commission. Why was the percentage of females so low in the senior management service (SMS).

Ms J Tshabalala (ANC) also asked about gender disparity.

Mr Khumalo acknowledged that the figures were 'pathetic'. The Commission's longer term aim was 50:50. In the meantime it had set a more realistic target. At the level of the Commissioners, the ratio was 50:50.

Ms Adams asked why the Commission was intent on appointing a new service provider.

Mr Khumalo replied that the former ICT provider had lacked a tax clearance certificate. This had violated SCM regulations.

Ms Adams asked why the Commission wanted to reduce its office space. This indicated a lack of planning beforehand.

Mr Khumalo now sought partnerships in order to achieve a leaner operating model. Hence the existing excess space was the result of earlier, more hopeful expectations that had not been fulfilled rather than poor planning.

Ms Z Dlamini-Dubazana (ANC) asked how much this Committee had contributed to assisting the Commission to operate efficiently and effectively. The Commission's vacancies seriously impeded its execution of its task. As a result, the Commission had shifted from its mandate as an independent and impartial institution. The Commission was supposed to formulate policies that could assist it to provide advice to the three spheres of Government. Most surprisingly, the Commission was now contemplating forming partnerships with the institutions that it was supposed to advise. How could it do that? Parliament should appoint the Chairperson of the Commission.

Mr Khumalo agreed and acknowledged the potential threat to the Commission's mandate. The Commission could do little, as it was in the FFC Act that the FFC's budget came from the Ministry of Finance. There was need for careful management of interactions or partnerships to avoid conflicts of interest.

Mr David Savage, Commissioner, FFC, added that the Commission was constantly interrogating how it should pursue its mandate more effectively. He did not think there had been any change in its mandate. However, there was a new delivery model for the Commission, where, for a number of reasons, the attempt to build up a university-like structure had proved non-viable. The Commission now sought to leverage in knowledge resources and to network. However, one had to guard against compromising one's integrity. Moreover, research was not sufficient. There had to be dialogue as well. In this regard networks were important. Also the Commission had accepted that there were some constraints that it could not change, and that it was more important to invest in people and networks than in, for example, more comfortable office space.

Dr Z Luyenge (ANC) noted no improvement. The FFC was like a Spaza shop that was about to close, yet it had a vital role. The Committee should produce a clear recommendation on its future. FFC could not be left lying [on the ground] like this.

Mr Khumalo was taken aback that Dr Luyenge was not present to hear the response to his question. The Commission was not dysfunctional. Similar sentiments had been expressed by the Committee, but the Commission had sought to respond to them, and had explained how it had taken measures to move forward.

Ms Tshabalala welcomed the presentation, and felt the frustration of the Commission. The Committee needed to recommend solutions.

Ms Tshabalala asked how the Committee should use the Commission's recommendations effectively.

Ms Tshabalala asked how the Commission could freeze recruitment when it had serious capacity challenges.

Mr Khumalo replied that the Commission wanted to eliminate its accumulated budget deficit. Only core staff who left would be replaced. If any extra resources were received, the focus would be on addressing ITC deficiencies, since researchers became frustrated by computer failures.

Mr Ross noted that the FFC had a vital role in achieving excellent in government through the FFC's research contributions. There was need for discussion on administrative policies, and he noted the FFC's report on electricity pricing. He was concerned that there was no representation on the Commission from the Department of Cooperative Governance and Traditional Affairs (COGTA). He thought that the FFC could contribute by means of a research paper on the funding of infrastructure which was so critical for South Africa.

Mr Khumalo replied that Mr Ross had raised the issue of administrative prices when the Commission had presented to the Committee in February 2012 on the fiscal framework. The Commission was reviewing the local government fiscal framework. Review of the equitable share formula did not change the resources available to local government. It was just a technical matter.

Mr E Mthethwa (ANC) sought a summary of the FFC's budget document and its main request to the Committee. He also asked how the FFC was currently dealing with its budget deficit. The Commission had indicated that it would be very happy to brief the Committee on this issue.

Ms Ajam replied that, in summary, the FFC was not a Spaza shop about to close. It faced difficulties but tried to manage them. It was dealing with its deficit. In spite of these difficulties it would continue to meet stakeholder expectations and would continue to be one of the foremost research organisations. The FFC's role in providing independent specialist advice would be critical in the medium term.

The Acting Chairperson found the FFC's method of reporting targets in the Annual Performance Plan confusing. He asked what informed the purchase of four reference books in the new financial year. Why four? He asked if the Commission had resolved all its issues with the Auditor-General.

Mr Khumalo was confident that the measures taken were such that the deficit would be eliminated and hence the going concern issue would be eliminated. The Commission had received assistance from the Auditor-General in presenting performance information.

Mr Vokwana added that at one time the Commission was the only constitutional institution to have a clean audit report.

The meeting was adjourned.

Share this page: