Appropriations Standing Committee Briefing of German Budget Committee Delegation

Standing Committee on Appropriations

16 May 2012
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee met a German delegation comprising members of the Budget Committee, which was specifically responsible for infrastructure development and city planning. The two committees exchanged information on how they functioned, citing similarities and unique features. Members’ concerns included the need to know what happened to money that was not spent by departments, and roll-overs.

The delegation wanted to know the role of the Committee in monitoring the spending of the R300 billion infrastructure grant. They were told that the Appropriations Committee was hampered by capacity problems which could only be eliminated through the establishment of a Parliamentary Budget Office.

A unique difference was that the German budget committee had powers to change or block the Budget when they deemed it necessary, while in South Africa it was only the National Treasury which could change, increase or reduce the Budget.

Meeting report

The Chairperson said he was pleased with the delegation visit, because he had not expected that a developed country like Germany could learn from a developing country like South Africa. He apologised on behalf of the smaller parties that could not participate in the meeting, owing to other commitments.

Mr Roland Claus, head of the German delegation, mentioned that his committee was responsible for infrastructure and city development, but they formed part of a bigger budget committee. They were here to learn, and every year his committee undertook a study tour to a different region on the world.

The Chairperson mentioned that he had visited Germany last December with some Committee Members. He then said that the Committee was in the process of establishing a Parliamentary Budget Office, as seen in countries like Sweden, Germany and Kenya, which already had such offices.

Committee Presentation
The Chairperson mentioned that the role of the Standing Committee on Public Accounts (Scopa) was to scrutinise the spending patterns of the government departments and to look at macro economic issues after annual reports had been submitted by the departments. He said his Committee scrutinised the budgets, using the Money Bills Act and the Division of Revenue Bill. The Division of Revenue Bill was passed every year with the Budget.

South Africa had three spheres of government -- national, provincial and local -- and the Division of Revenue Bill distributed the money according to the three spheres. The Committee considered Departmental Quarterly Reports according to the stipulations of Section 32 of the Public Finance Management Act (PFMA). He said that one of the responsibilities of the Committee was to consider the reports of the Finance and Fiscal Commission. The Money Bills Act sought to strengthen Parliament's fiscal oversight role and its contribution to policy implementation by facilitating budget prioritisation.

Functions of the Standing Committee on Appropriations
The Committee’s first role was to consider and report on spending issues. It was then expected to consider and report on amendments to the Division of Revenue Bill, and also to consider and report on amendments to the Supplementary Appropriations Bills and the Appropriations Bill. The Chairperson said that the Committee had to consider and report on recommendations of the Finance and Fiscal Commission (FFC). Its other role was to consider reports on actual expenditure, as published by the National Treasury (NT).

Measures used for Budget Oversight and Scrutiny
The Budgetary oversight role of the Committee was further strengthened through a strong collaboration with a wide array of stakeholders, from the Executive, civil society organisations, independent research bodies and constitutional bodies such as the National Treasury, Auditor-General, FFC, the Public Service Commission, and the South African Local Government Commission

Main Budgetary Oversight and Scrutiny Activities
The Chairperson mentioned that in October of every financial year, the Committee took part in the Medium Term Budget Policy Statement (MTBPS) process along with the Adjustments Budget process, which authorised changes to the original Budget. Key to the Committee was its responsibility to consider and pass the Adjusted Appropriations Bill into law, authorising amendments to the original Budget appropriated at the beginning of the year. The Committee and the Select Committee on Appropriations deliberated and passed the Amended Division of Revenue Bill, which basically effected changes to the original framework across all three spheres of government. The Committee also wanted to know how money was allocated to provinces.

Annual National Budget
The Chairperson said that the annual national Budget was tabled in February each year and the financial year started in April 1 and ended on the March 31 the following year. In considering the Appropriation Bill and the Division of Revenue Bill, the Committee facilitated public participation as required by the Money Bills Act. The committee could then recommend the passing of both Bills with or without amendments.

Budget Monitoring
Monitoring of budgetary performance began immediately after the Budget had been passed, usually in February of each year. This allowed the Committee to instil a culture of operational efficiency through ensuring that the budget allocated to each department was spent efficiently. The Chairperson added that the activities of the Committee extended to the implementation of government programmes and the achievement of policy priorities. The Committee activities included quarterly expenditure reports from the National Treasury, public hearings and deliberations on key issues, and written questions requesting written responses on key issues. On-site visits to monitor were undertaken to deliberate on progress and challenges in the implementation of projects and programmes.

Challenges and Prospects
The National Treasury, as the custodian of public finances, made available comprehensive budgetary information, covering both performance and non performance. The 2010 Open Budget Index survey rated South Africa No. 1 in the world in terms of transparency and openness. That in turn sharpened Parliamentary oversight of the Executive, and in many respects improved government performance and service delivery. One of the challenges was the tight time constraints affecting the ability to deal with its complex and demanding mandate. The Committee was also awaiting the analytical and research support of the Parliamentary Budget Office, which had not yet been established. The work of the Committee was further strengthened as citizens became more educated about budgetary issues.

German Delegation Briefing
Mr Claus mentioned that in Germany the Budget Committee was always headed by the opposition party. He said that the Budget Committee had 41 members and met every Wednesday. It could have up to 41 items on its agenda at a given time. He said that the Budget Committee was already working on the 2013 Budget for the following year, and as 2013 was an election year in Germany, that would mean a break for Parliamentary committees. Mr Claus also said that the Budget Committee was responsible for monitoring the spending of budget. The Budget Committee had the power to block the budget when they felt that money was not spent for what it was intended. The other role of the Budget Committee was to stabilise the Euro and the Deutsche Bank due to the economic meltdown of 2009 and the current economic climate gripping the Eurozone countries.

Dr Claudia Winterstein of the German committee, said that her Committee had to make sure that funds were spent very wisely and that sometimes the Committee had to make unpopular decisions. She then asked about the percentage allocated to investment and what happened in cases where the Committee had to take decisions that were unpopular to the populace or senior bureaucrats.

The Chairperson explained that his Committee was not responsible for investment and that investments were the responsibility of departments such as Trade and Industry and Public Enterprises.

Dr Winterstein cited an example where the German Department of Housing could make a decision regarding the number and types of houses to be built.

Chairperson replied that committees aligned to departments exercised oversight and guided those departments on how money was to be spent.  The Appropriations Committee was hampered by capacity problems which could only be eliminated through the establishment of a Parliamentary Budget Office.

Mr Jonah Kars of the German committee, mentioned that the Budget Committee had the power to change the Budget both before and after it had been approved.

Ms J Mashigo (ANC) explained that in 2009 the Committee had visited Sweden, Germany and Kenya to study how Bills were used for budget scrutiny. It had dawned on the Committee that Parliament needed a Budget Office to enable it to carry out its mandate.

The Chairperson admitted that his Committee did not yet have powers to block the Budget. However the National Treasury could block or even refuse to allocate funds to any Department when they felt that it was not justified.

Mr M Swart (DA) asked what was done when departments had not spent all their budget allocation.

The Chairperson replied that the National Treasury had the power to authorise what funds could be rolled over and spent the following financial year, once all the problems which had caused the roll-over had been sorted out. All roll-overs had to be approved by Parliament.

Mr Barthomolaus Kaib, German member, said that they had heard a lot about the huge amounts of money that would be spent on infrastructure. He then asked how the Committee envisaged co-operation between the private and the public sector to monitor how that money would be spent.

The Chairperson explained that an amount of R300 billion would be spent over a three-year period. Public entities like Eskom, the power supplier, and Transnet would be involved “hands on.” Provincial departments, like Transport, would be responsible for issuing tenders to the private sector to build provincial infrastructure. He said that R300 billion was not a lot of money by European standards, but in South Africa it was a huge public investment.

Mr Claus asked how money was allocated to the provinces.

Mr G Snell (ANC) explained that the provinces negotiated with the national departments around budget priorities.

The Chairperson replied that money was allocated in two ways. The first was to give money to provincial departments, and the second was to allocate money through special grants, such as grant funding for building schools.

Mr Eckhardt Rehberg, German Member, asked why there was a yearly budget while there was a three-year budget cycle, and what happened to money that was not spent.

Mr Swart replied that funds that were not spent were sent back to the National Treasury.

The Chairperson explained that the Medium Term Expenditure Framework (MTEF) drew a framework of how money would be spent by the provinces each year, but there was room for negotiation regarding the amounts. He added that budgets were incremental most of the time, and only on very rare occasions were some budgets reduced, in most cases as a result of under-spending.

Mr Claus thanked the Committee for its informative presentation session. He presented the Committee with a medal depicting the German Parliament, known as the Bundestag. He said that the present might be small in size but it was worthwhile, and was typical of the Budget Committee because of monetary constraints. He was impressed by the R300 billion infrastructure budget, saying it would go a long way towards improving the South African economy.

The Chairperson thanked the German delegation for sharing information and said he regretted the limited time allocated for the interaction. He said that the German democracy was at an advanced stage compared to South Africa, citing the powers to block or change the budget.

The meeting was adjourned.


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