The Senior Parliamentary Legal Adviser briefed Members on challenges in the implementation of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009), in particular, time frames and sequencing associated with different financial instruments and Bills. Colleagues in provincial legislatures as well as in Parliament had experienced problems and raised certain questions. The Act provided for time frames and sequencing regarding the Budgetary Review and Recommendation Reports (BRRRs), the Medium Term Budget Policy Statement (MTBPS), the Fiscal Framework, the Division of Revenue Bill (DORB) and the Appropriations Bill. This sequencing ensured a logical outcome so that no changes would be made to an Appropriations Bill or a Tax Laws Amendment Bill at a point that would influence the Fiscal Framework which had already been adopted. If the Standing Committee on Finance as well as the Select Committee should have insight into these BRRRs, these reports should be submitted prior to the reporting – prior to the tabling, even, of the MTBPS - so that the Finance Committees could make an informed decision. Section 6 should be amended to allow Parliament to report on the MTBPS within 30 days of its tabling. The 16 days to report on the Fiscal Framework was unrealistic. There was no reason why Parliament could not refer the Division of Revenue Bill and the Appropriations Bill to the Committees, even while they were considering the fiscal framework, so that the Committees could plan. What was important was to adopt these in the correct sequence and without contradiction in the process. The Act was quite prescriptive in terms of certain time frames in which a minister could respond and did allow for a minister's travelling or other obligations. Procedures to be developed in the rules, the functions and management of the Parliamentary Budget Office (PBO), and how the PBO could be aligned to the Financial Management of Parliament Act (No. 10 of 2009) (FMPA) were explained. The language used in the Act could be improved to be consistent with language used in parliamentary processes (e.g. definitions). Certain areas of the Act required further consideration. Norms and standards for provincial legislatures needed to be reconsidered. Section 16 of the Act must be consistent with the Constitution. Certain areas in the schedule infringed on the constitutional authority of the provincial legislatures. A way forward was proposed: a workshop on the review mandate and to report with a draft amendment Bill after public hearings.
The Procedural Adviser, Parliament, commented that the Act tried to balance between the powers and functions of the Legislature vis-à-vis the Executive. It also sought to balance the powers of the Standing Committees on Appropriations and Finance vis-à-vis the other committees. This Act tried to answer a critical political question – what was Parliament's power over the budget? There were some parts of the Act that were not very clear and did not take account of the exact mandate of the National Council of Provinces.
An ACDP Member asked if the draft bill would be a committee bill, not a bill introduced by the Executive. The Acting Chairperson confirmed that this was so.
A DA Member broadly supported the way forward. In many meetings Members had found themselves constrained by the fact that they had already signed off the fiscal framework. The Committee had to balance its freedom to amend budgets with the practicalities of sequencing. He would appreciate a summary table of the issues around the sequencing and time frames and highlighting where there was simply not enough time. Why had it not been possible to implement the Parliamentary Budget Office in line with the existing structure of Section 15? What were the actual constraints? Dealing with the rules would follow logically from the legislative amendments. The relatively simple amendments, perhaps even some amendments to Section 15, could be drafted for the suggested workshop in order to expedite the whole process. A second DA Member suggested the Parliamentary Budget Office should be completely independent. How could one strengthen the reporting ability of the provinces?
An ANC Member proposed that the next sitting include all the financial committees since the Act included all of them. If the focus would be on the recommendations it would be better if solutions could be indicated. Much as there were weaknesses in respect of time frames, she could not see how days could be added. Was one to reduce the time for reporting by the Executive? The rules for the Finance Committees did say that the Committees must consult with other committees. That time must be used to resolve those disputes. If the Committees must develop the rules, it had to be asked how this differed from what the Act said already. A second ANC Member did not see fundamental problems and thought mainly administrative work remained to be done. This Parliamentary Budget Office was needed, and was long overdue. Probably one could have been more empowered if informed of the current process. It would be good to have the workshop, but the Committee should proceed to public hearings and return with a draft amendment bill. A third ANC Member asked for a comparative model.
Mr D van Rooyen (ANC), the Committee's Whip, was Acting Chairperson.
Adv S Swart (ACDP) asked if the draft bill to amend the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) would be a committee bill, not a bill introduced by the Executive.
The Acting Chairperson confirmed that this was so.
Review of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009)
Adv Frank Jenkins, Senior Parliamentary Legal Adviser, explained:
The Act came into operation on 16 April 2009.
National Assembly passed a resolution to review Act on 24 May 2012, citing technical challenges that had became apparent during the implementation of the Act, including:
• time frames and sequencing associated with different financial instruments and Bills;
• procedures to be developed in the rules; and
• functions and management of the PBO (Parliamentary Budget Office) (Slide 2)
Adv Jenkins agreed that the envisaged outcome would be the introduction of a committee bill – an amendment bill. He noted that colleagues in provincial legislatures as well as in Parliament had experienced problems and raised certain questions.
Time frames and sequencing
Time frames and sequencing were clearly provided for in the Act in respect of the following:
• Budgetary Review and Recommendation Report (BRRR)
• Medium Term Budget Policy Statement (MTBPS)
• Fiscal Framework, Division of Revenue Bill (DORB) & Appropriation Bill
Were these requirements reasonable and practical? (Slide 3)
Adv Jenkins commented that the Act had a certain sequencing that it set out in terms of how to amend a Money Bill – budget bill introduced by the Minister of Finance. This was first to adopt the fiscal framework, which set out the broad parameters between revenue and expenditure, and how much the country either needed to borrow or how much would be in the surplus. Once that total amount was approved, Parliament could consider the Division of Revenue Bill, which would split the expenditure between the different arms of Government, and especially between the three spheres of Government – national, provincial, and local. Thereafter, Parliament could consider the Appropriations Bill, which was concerned with expenditure just at national level, but which included certain transfers. This sequencing ensured a logical outcome so that no changes would be mace to an Appropriations Bill or a Tax Laws Amendment Bill at a point that would influence the fiscal framework that had already been adopted, which was more of a policy document.
Parliament had 16 days in which to approve the fiscal framework, and 35 days to approve the Division of Revenue Bill after adopting the fiscal framework. The process began with the Budgetary Review and Recommendation Report (BRRR). These were the reports that each portfolio committee must submit to the House prior to the adoption of the Medium Term Budget Policy Statement (MTBPS). These BRRRs were intended to be a performance assessment of the department concerned in terms of service delivery. A response would be expected from the minister concerned on those issues. Should the response be unsatisfactory, that would give reason for Parliament to amend the budget, on the basis of its oversight function. The challenge faced with the BRRRs was that the Act required them to be submitted prior to the adoption of the MTBPS. There was a sense or an opinion that the Standing Committee on Finance as well as the Select Committee on Finance, which considered the fiscal framework and policy issues around it, should have insight into these BRRRs. If that was the case, then there was a suggestion that the BRRRs should be submitted prior to the reporting – prior to the tabling, even, of the MTBPS, so that the finance committees could make an informed decision.
A further challenge was in Subsections 6, 5 and 10 of Section 6, which required that Parliament must report on the MTBPS 30 days after the tabling of the MTBPS. It had to be asked if this meant that Parliament must wait 30 days to report. His opinion at that time was that, read in context, the Act could be interpreted as allowing Parliament, if ready, to report within 30 days, as long as its constitutional obligations in terms of public participation had been fulfilled. He still held this opinion, and maintained that it was a textual problem in the Act. If one retained the literal meaning, it would mean that Parliament would routinely sit into December to wait until the 30 days had elapsed before reporting on the MTBPS. If one wanted to prescribe a time frame, the phrase 'within 30 days' should be used.
Parliament had only 16 days to report on the fiscal framework. This included the committee process, public participation, notice to the Minister, reporting by the Committee, and adoption by the Houses. This 16 days time frame was unrealistic and did not allow flexibility in the Parliamentary programme.
It was only after the fiscal framework had been adopted that the House could refer the Division of Revenue Bill and the Appropriation Bill to the relevant Committees. This gave Parliament a 30 days period in which to consider the Division of Revenue Bill, with the effect that Parliament passed it only after 01 April. This had caused certain concerns for National Treasury. There were provisions in the Division of Revenue Bill which allowed for the use of funds before the new Bill became an act. However, it did create a certain tension every year around April.
There was no reason, he suggested, why Parliament could not refer those specific pieces of legislation to the Committees, even while they were considering the fiscal framework, so that the Committees could plan. What would be important was that when adopting these three instruments, Parliament should adopt them in the correct sequence, and that there was no contradiction within that process. In other words – adopt the fiscal framework first, then the Division of Revenue Bill, and then the Appropriation Bill.
The Act was quite prescriptive in terms of certain time frames in which a minister could respond. Whilst one appreciated that this gave certainty, it did not take account of the fact that a minister might be travelling or have other obligations. There was a suggestion that the phrase 'a reasonable period' should be used. Many of these challenges had been identified during the World Cup, when the programme of Government shifted.
Procedures to be developed in the rules
The Act requires co-ordination between committees in fulfilling their mandates during the budget process in respect of: BRRR Section 4(5), Appropriations Bill Section 10(8), Adjustments budget Section 12(16)
How can this process envisaged in the Act be regulated practically in the rules? (Slide 4)
Adv Jenkins commented that the Act required that the Standing Rules of Parliament actually provide for mechanisms on how portfolio and select committees could consult with the Finance and Appropriation Committees of both Houses. These consultations would be specifically around the recommended changes to the budget. The Act envisaged that that report of the committee would go first to the Standing Committee on Appropriations if it concerned the Appropriations Bill. If there was a difference of opinion between the Standing Committee on Appropriations and the portfolio committee that there was a resolution mechanism built into the rules. Another resolution mechanism envisaged was in case there were two portfolio committees that had conflicting rules on a budget item. He suggested that the Committee might want to follow up the matter with the Sub-Committee on the Review of the Rules.
Functions and management of the Parliamentary Budget Office (PBO)
Section 15 of the Act establishes the PBO and sets out the following:
• Functions (section 15(2));
• Appointment and removal of director (Sections 15(5) & ((8));
• Budget as a transfer (Section 15(10)); and
• Management of PBO (sections 15(12)-15)).
How can the PBO be aligned to the Financial Management of Parliament Act (FMPA)? (Slide 5)
Adv Jenkins commented that the PBO as established in terms of Section 15 gave certain functions to the Standing Committees on Finance and Appropriations as well as to the Select Committees to make recommendations on the appointment of a director, determine remuneration, and how to remove the director; a consultation process was envisaged between the four Committees and the director to establish the structure and functions of the PBO. The next piece of legislation after the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) was the Financial Management of Parliament Act (No. 10 of 2009) (FMPA) which set out quite detailed obligations for Parliament to comply with in terms of its financial management in ways very similar to the Public Finance Management Act (No. 1 of 1999). The issue which had arisen now was how this Parliamentary Budget Office, specifically in terms of the use of its budget, would fit into the administration of Parliament, how it would report on its obligations, and to whom it would report in terms of its functional operations. To achieve alignment between the Money Bills Amendment Procedure and Related Matters Act 2009 and the Financial Management of Parliament Act (FMPA), certain amendments to Section 15 of the Money Bills Amendment Procedure and Related Matters Act 2009 would be necessary. At the moment Section 15 merely stated that the director must report straight to the Houses annually on its budget by way of its annual report. The other way of looking at it would be to say that the PBO was part of Parliament, and its expenditure was part of Parliament's budget, with the accounting officer of Parliament responsible for the administration of that budget. In terms of the Financial Management of Parliament Act 2009 the executive authority was finally accountable to the Houses for the financial management of Parliament. So on that point there was a role for the presiding officers. It had been suggested that there should be a performance agreement between the director and the presiding officers. That alignment would be necessary to ensure that the financial management around the PBO was in line with the Financial Management of Parliament Act 2009.
Further concerns around the post of director concerned the very prescriptive view of his or her remuneration. There was a suggestion that while the PBO was being developed, the director should be remunerated according to a normal job grading and according to his or her specific qualifications and the functions performed.
Other textual amendments
• The language used in the Act could be improved to be consistent with language used in parliamentary processes (e.g. definitions).
• Certain areas of the Act required further consideration (e.g. Whether Section 3 was necessary? Whether the review of actual spending Section 6(2)(f) should be referred in terms of the Act? Correction of Section 11(4)(c), which incorrectly referred to Subsection (7) instead of (6)). (Slide 6)
Adv Jenkins commented that perhaps it should be made clear to which committees the review of actual spending should be referred.
Norms and standards for provincial legislatures
• Section 16, read with the Schedule to the Act provides for norms and standards for provincial legislatures.
• Section 120(3) of the Constitution provided that provincial legislatures must pass provincial legislation to set out a procedure to amend provincial money Bills.
• Section 116 (1) of the Constitution provided that a provincial legislature might control and determine its internal arrangements, proceedings and procedures.
Section 16 of the Act must be consistent with the Constitution. (Slide 7)
Adv Jenkins commented that certain norms and standards had been set out, simply to have a coherent budget process as envisaged by the Constitution. Parliament went ahead and set out certain norms and standards for provincial legislatures. However, in his opinion, Parliament had gone to far in that it required a certain formal of reporting from the provincial legislatures. Section 123 of the Constitution gave the authority to a provincial legislature to pass a provincial act to amend a provincial budget and there were not really any restrictions placed on it. The restrictions on the norms and standards, one can argue, were read into the Constitution, which was explicit when it said that the budgeting function was a national function. So clearly when one wanted to amend a provincial budget, which would flow out of the Division of Revenue Act (DoRA), there must be a coherence between the provincial budget, where it could be amended, the Division of Revenue Bill, and the fiscal framework. Some of those norms and standards were well placed. However, some of them were not so. Certain areas in the schedule infringed on the constitutional authority of the provincial legislatures.
• Workshop the review mandate?
• Present process under Dr Mohammed Jahed, PBO Coordinator?
• Report with an draft amendment Bill after public hearings? (Slide 8)
Adv Jenkins commented that there had been a media release that Prof Mohammed Jahed, from the Development Bank of Southern Africa (DBSA), had been leading a process of assisting to implement the PBO provision. Eventually an amendment bill was envisaged. The process of an amendment bill was that once it had been adopted by the National Assembly committee concerned, one reported that bill straight to the House, which would then adopt it and send it to the National Council of Provinces (NCOP). Somewhere in the process it was necessary to give effect to the obligation to allow public participation.
Mr Perran Hahndiek, Procedural Adviser: National Assembly Table, commented that the Money Bills Amendment Procedure and Related Matters Act 2009 was a balancing act, which tried to balance between the powers and functions of the Legislature vis-à-vis the Executive. It also sought to balance the powers of the Standing Committees on Appropriations and Finance vis-à-vis the other committees. This Act tried to answer a critical political question – what was Parliament's power over the budget? The time frames were exactly that. They were the mechanism of trying to balance the different forces involved. It was necessary to remember what the functions of those different organisms were. This was very important when talking of Parliament's role in the fiscal framework, which was a critical policy question. If Parliament had only 16 days, it had to be asked what kind of engagement that allowed for and what should be Parliament's role in respect of making inputs in terms of Government policy. The role of the NCOP should also be considered. There were some parts of the Act that were not very clear and did not take account of that the exact mandate of the NCOP was, since the NCOP had its own procedures which should be accounted for. The Sub-Committee on the Review of the Rules in the National Assembly was also acutely aware of some of these challenges in the Act. There were now rules that governed the functioning of the Standing Committees on Finance and Appropriations. However, in respect of procedures, there was a view that the Sub-Committee should in fact wait for the outcome of these discussions.
The Acting Chairperson welcomed Prof Jahed. He noted that there was a proposed way forward tabled to the Committee. This simply said that one needed a workshop session in which all these areas would be accommodated. Of course, this was where a thorough and robust interrogation of the suggested areas of amendment would be conducted. So he did not favour interrogating the submission now, one would have to consider the relevance of the workshop. Adv Jenkins had made it clear that this workshop could be structured according to how the Committee determined, more especially through the office of the Chairperson, to say who would be part of the workshop and ensure that there was a more enriched exercise. 21 August was allocated for public hearings. He invited questions of clarity.
Mr T Harris (DA) broadly supported the way forward. He could not count the number of committee meetings in which he had sat in which Members had intended to review what actually needed to be changed in budgets only to find themselves constrained by the fact that they had already signed off the fiscal framework. Recently this Committee had considered the Rates and Monetary Amounts and there were proposals from the floor to review amounts, but obviously and clearly, and indeed appropriately, constrained by the fiscal framework. Whichever way forward the Committee took, it had to balance the Committee's freedom to amend budgets with the practicalities of sequencing, as indicated by Adv Jenkins. So the review was a welcome development. He noted that the first thing that the Speaker had said when announcing the appointment of Prof Jahed was that Prof Jahed would be engaging with the Finance Standing Committee. He was looking forward beginning that engagement.
He would appreciate if Adv Jenkins could develop a summary table of the issues around the sequencing and time frames and highlight where there was simply not enough time.
Adv Jenkins thought this a good suggestion.
He asked why it had not been possible yet to implement the Parliamentary Budget Office in line with the existing structure of Section 15. What were the actual constraints?
Adv Jenkins was not in a position to answer this question.
He supported the workshop provided that time frames and scheduling would be mapped out.
Dealing with the rules would follow logically from the legislative amendments. The relatively simple amendments, such as the corrections that Adv Jenkins had mentioned, perhaps even some amendments to Section 15, could be drafted for that workshop so that they could be discussed there in order to expedite the whole process.
Mr D Ross (DA) commented on 'reasonable period'. This was an important issue to remember.
He thought that the Parliamentary Budget Office should be completely independent, and sought recommendations to ensure that independence. It needed to be part of Parliament because it was part of the Executive Authority, but it needed to be aligned with the FMPA. He asked for recommendations.
Adv Jenkins replied that the independence of the Parliamentary Budget Office had been the subject of intense debate in one or two parliamentary workshops. The outcome of those workshops was that the Parliamentary Budget Office was not an independent entity away from Parliament. Section 15 said that the budget of the Office must be a transfer. However, when one spoke of transfers, in terms of the Financial Management of Parliament Act 2009 on the one hand and more specifically the Public Finance Management Act 1999, it was when one had established a separate entity which was independent from the department that one had an accounting officer for and within the entity who would appear before the Standing Committee on Public Accounts (Scopa) if necessary. This was not what one was creating with the Parliamentary Budget Office. To create a separate entity there was a process that one had to follow. This process was underpinned by certain regulations in the Public Finance Management Act 1999. Parliament on the other hand wanted to have a PBO at arms length to give objective and independent advice, as required by the Act. But it was never intended to be independent. So the budget issue became central. Section 195 of the Constitution should guide all public servants. Section 195(1)(c) said that the public administration must be development-orientated. The objectivity of the advice was essential. Moreover, the Parliamentary Budget Office must not be a political instrument. It should be underpinned by that constitutionally mandated development orientation. What one needed to discuss was how this Parliamentary Budget Office should be administered.
Mr Ross said that the Constitution, he was sure, covered a good deal of ground on prescriptions in regard to conflict of interest affecting provincial legislatures. That provinces required a particular format of reporting was very important. How could we strengthen that? The Constitution certainly made provisions at local government level. How could we strengthen that reporting ability.
Adv Jenkins replied that the issue now was that there were provincial legislatures which might determine their own internal arrangements, proceedings and procedures. Therefore for a national act to say that a provincial legislature must report in a certain way was questionable. He quoted the Act. The national budget was that of a unitary state, not a federation. He felt that the schedule went too far. However, the principles one could determine – one could not allow a provincial legislature to change its budget in conflict with the DORB.
Ms Z Dlamini-Dubazana (ANC) proposed that the next sitting on this subject include all the financial committees since the Act included all of them.
She asked as to the way forward whether the Committee would focus on the Act itself or on the recommendations. If the focus would be on the recommendations it would be better if solutions could be indicated.
Much as there were weaknesses in respect of time frames, she could not see how days could be added. Was one to reduce the time for reporting by the Executive? The Act was not clear that both the Appropriations and the Finance Committees must complete their work within the 16 days. The Act must be clear in case any organisation took Parliament to court. To which committees exactly did the Act refer?
Adv Jenkins replied that the Act was quite clear on certain of those issues. The Act wanted to say that one should focus only on the Fiscal Framework, for which it allowed 16 days. Once that was done, then one could take that legislation that the Minister of Finance had tabled in the House and refer to the Committees to consider. This did not allow flexibility. When looking at the Fiscal Framework for the outer years, he suggested bringing on board many stakeholders, for example, the provincial legislatures, since this was their only opportunity to make input into the fiscal framework. He suggested that Parliament have greater freedom to determine its own time frames, so long as it adhered to the correct sequence.
The rules for the Finance Committees did say that the Committees must consult with other committees. That time must be used to resolve those disputes. So if Adv Jenkins said that the Committees must develop the rules, it had to be asked how this differed from what the Act said already.
Adv Jenkins agreed that the rules said that one must consult.
She quoted Section 9 of the Act, that the Division of Revenue Bill must be referred to the National Assembly's Standing Committee on Appropriations for consideration and report, but it was not clear when that must be done. Must one do that within the 16 days? Maybe the schedule would actually help us.
Ms J Tshabalala (ANC) appreciated Adv Jenkins' recommendation. She did not think that there was much work to be done. Much has been done already. This Parliamentary Budget Office was needed, and was long overdue. Every time there were public hearings, it was apparent that the Office was needed. At last one was seeing evidence of its coming into existence. The Way Forward said that at present one had process under Prof Jahed. She would like to know the recommendations, and did not see fundamental problems. It seemed to be more an administrative matter. One was not necessarily affecting changes to the Act, as if one was saying there were fundamental problems in it. This was not so. There might be constraints in administration and there might be linguistic concerns, but the Office could be achieved. Probably one could have been more empowered if informed of the current process. It would be well and good to have the workshop, but she did not see any fundamental problems that needed to be addressed. The Committee should agree and allow this process to unfold. The Committee should proceed to public hearings and return with a draft amendment bill.
The Acting Chairperson asked if 21 September was a realistic target.
Adv Jenkins replied that it was a tight target, but a least one could report progress. He would agree with Ms Tshabalala that it was not a monumental exercise, but there were some fundamental policy issues, especially around Section 15 and the Parliamentary Budget Office that might take longer.
Mr Harris asked if Adv Jenkins would do a summary of the time frames.
Mr E Mthethwa (ANC) did not want the workshop to be a presentation-based event. He asked Adv Jenkins to provide a model of other countries which had a similar office illustrating comparatively the advantages and the challenges so that Members could align themselves to the Parliament of South Africa's own situation.
The Acting Chairperson thanked Members who were engaged in a protracted process. He lacked information on what might have caused the delay on realising the Parliamentary Budget Office but the Speaker had announced the establishment of a team which had undertaken an oversight visit and information existed as a result on what was happening in other countries. He called upon Members to appreciate that this process was now on course and look forward to robust engagement with the established team. In due course this team would inform the Committee when it would brief Members on its work.
The Acting Chairperson said that it was clear that there must be public hearings before producing a draft amendment bill. There was also agreement on the holding of a workshop, but the Committee required a complete and detailed package comprising the workshop document that would give specific suggestions areas that the Committee must examine. After the workshop the Parliamentary Budget Office team would come in specifically on this aspect. This was to ensure that the Committee would be fully ready for the public hearings. After the public hearings the Committee would follow due process in finalising the draft that it would table to the National Assembly.
Mr Ross was tempted to ask, on the basis of press releases from the Minister of Finance, that the Minister could address the Committee on the establishment of a procurement office within National Treasury. There were very limited time lines in that regard. There were questions on this from all levels of local government, since this had a constitutional bearing as did the norms and standards for provincial legislatures. As a direct intervention in other spheres of Government, it needed to be debated
The Acting Chairperson said that nothing stopped Members from putting such matters in writing so that they could be properly scheduled.
The meeting was adjourned.
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