National Treasury & Statistics South Africa Budgetary Review and Recommendation Reports 2012

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Finance Standing Committee

23 October 2012
Chairperson: Mr T Mufamadi (ANC)
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Meeting Summary

The B versions of the Credit Rating Services Bill [B8B-2012] and Financial Markets Bill [B12B-2012] as adopted by the Committee were noted.

The Committee discussed the draft National Treasury Budgetary Review and Recommendation Report (BRRR). A DA Member preferred the Committee to 'accelerate' rather than 'combat' South Africa's low levels of growth. The Chairperson thought, perhaps, that the intended meaning was that the Committee was ever 'combat-ready' to engage with the economy. The Chairperson preferred to craft wording to capture the spirit of what had been said rather than to report verbatim. Members discussed recommendations, in particular a DA proposal that there should be an analytical briefing on the proposed future spending on completing the energy portion of the New Build Programme. An ANC Member agreed fully but wanted a comprehensive briefing on the funding model of the infrastructure commitments. Members agreed on a recommendation that National Treasury must report in detail on its responses to the Auditor-General's audit report recommendations. Members agreed on a recommendation that the Minister must give the Committee a progress report on interventions within 90 days of the National Assembly's adoption of the Committee's BRRR. The Committee adopted the Report with amendments.

In correcting the Statistics South Africa (Stats SA) BRRR, the Chairperson said that reports would become public documents when tabled. Therefore there was need to ensure a polished final product. Members recommended that the causes of Stats SA's audit qualification must be avoided in future. The organisational structure must be improved and there must be compliance in financial management. The importance of coordination must be emphasised. The late allocation from National Treasury needed to be addressed. Stats SA had not adequately planned for the challenges to be expected in a census year. It should learn from its experience. The Committee should include a recommendation on employees with conflicts of interest. In inducting new employees there must be compliance with internal controls. The Committee should recommend that Stats SA report back to the Committee on progress in processing invoices within 30 days as required by the Public Finance Management Act. A DA Member suggested that perhaps the census results should be released before the Medium Term Budget Policy Statement (MTBPS) and insisted that there could be no compromise on transparency. A second DA Member recommended releasing the results to a sitting of Parliament. An ANC Member preferred to be cautious and focus on the process of releasing the results. Rather than tie the results to the MTBPS, the Chairperson proposed that the Committee recommend that Stats SA maintain the established practice of openness and transparency in releasing the results and that the results should preferably be announced by tabling in Parliament. Members adopted the Stats SA BRRR with amendments.

Meeting report

Introduction
The Chairperson greeted Members, in Afrikaans, English, and Venda. The Committee was meeting on the eve of the Medium Term Budget Policy Statement (MTBPS) and was looking forward to engaging with the fiscal framework. The Chairperson indicated to Members that the Committee now had the finished printed products in the form of the Credit Rating Services Bill [B8-2012] and Financial Markets Bill [B12-2012]. The Committee had already deliberated on and adopted the two Bills.

National Treasury Budgetary Review and Recommendation Report (BRRR) 2012
The Chairperson noted that Members had received the draft Report on 19 October. He assumed that Members had had the opportunity to study the Report.

Mr T Harris (DA) apologised that he had not had the chance to study it and asked for 10 minutes to peruse it. In response, the Chairperson was lenient; he gave Members the opportunity - five minutes for the National Treasury BRRR and five for the Stats SA BRRR – as he acknowledged that Mr Harris had been devoting his time to preparing for the MTBPS.

The first page of the Report was the standard explanation of the Committee’s mandate and methodology of how it dealt with the Report.

Members were content.

Adv Jenkins corrected the title of the Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) [not 'Matters Related'] in paragraph 2, page 2.

The Chairperson observed that this long title sought to give Parliament a real power of oversight. There could be no doubt as to what the Act intended.

Ms Z Dlamini-Dubazana (ANC) queried paragraph 3, page 3.

The Chairperson replied that the reference to credit rating agencies was not the Minister's response, but how the credit rating agencies had reacted to the factors mentioned – concerns relating to the sustainability of the growth trajectory due to the slow pace of policy implementation and growing income inequalities.

Members were satisfied with pages 4, 5, 6, 7, 8, 9, and 10, as drafted.

Mr Harris pointed out the incorrect use of the plural verb 'were' instead of the singular 'was' under the second bullet point on page 11, where the Committee asked if there was follow-up training.

There was a brief, informal discussion on language. The Chairperson suggested that Mr Harris should learn Venda, the Chairperson's first language, as a second language. Ms Dlamini-Dubazana suggested that Mr Harris must learn Zulu, as he was from Durban.

Mr Harris was very interested to read the fifth bullet point on page 12: ‘The Committee noted that South Africa is only growing at 2% and wanted to know what measures were in place to combat this growth'. He noted that nobody in the Committee would want to combat the very low levels of growth that South Africa had. Surely 'accelerate' should replace 'combat'.

The Chairperson agreed, but thought, perhaps, that the Committee Secretary had been trying to convey the meaning that the Committee was ever 'combat-ready' to engage with the economy.

Mr Harris referred to bullet point 7 on page 12. He thought that he had got it wrong in the Committee. 'Of concern, however, was that National Treasury was in error by R2.5 billion.' The number was actually R1.7 billion. The sentence should read 'National Treasury under spent by R1.7 billion.' He would further delete the words 'in its forecast'. Perhaps one could add 'on this item'.

The Chairperson thought that Mr Harris was probably right, but did not fully understand how the writer had constructed this sentence. He asked the Committee Secretary to check. He then agreed with Mr Harris. The figure of R1.7 billion was the correct one.

Ms Dlamini-Dubazana made a correction to page 13.

Mr D van Rooyen (ANC) asked what the source of this R1.7 billion was.

The Chairperson replied that it was in the National Treasury's Annual Report 2011/12.

Mr Harris referred to the third bottom bullet point [the tenth] on page 14, on credit ratings. It was clumsily written. 'South Africa did not borrow extra because it wanted to.' It should be changed to, for example, 'In terms of credit ratings, South Africa did not extend borrowing frivolously.'

The Chairperson observed that 'South Africa did not borrow extra because it wanted to' had been captured verbatim. However, these words should be paraphrased.

Ms Dlamini-Dubazana said that it was a verbatim response from the Minister himself, but on the borrowing to cushion the effects of the recession.

The Chairperson advised that it was not appropriate to report verbatim; instead it was preferable to craft a paragraph to capture the spirit of what had been said. 'Part of it has already been done. I think let's leave it at that.'

Mr Van Rooyen suggested substituting 'was' for 'were' to be clear that Eskom was singular not plural, in the last sentence in bullet point 4: 'In the event that Eskom were liquidated'.

The Chairperson agreed.

Dr Z Luyenge (ANC) referred to the second sentence in bullet point 3: ‘The loan was been drawn.' This should be changed to ‘The loan was drawn down in three stages'.

The Chairperson asked the Committee Secretary to note the correction.

National Treasury BRRR recommendations
The Chairperson noted that the Committee was reviewing National Treasury's budget in terms of its programmes and needed to make those recommendations.

Ms P Adams (ANC) said that the Auditor-General's report cited that there was no human resources plan. It should be a recommendation that the human resources plan should be in place as required by the Public Service Regulations. She also observed that time frames were not set as required.

The Chairperson agreed.

The Chairperson said that the issue of vacancies of senior executives was mentioned more in the Auditor-General's report than in the Annual Report. Had National Treasury reflected on that? The human resources plan would touch on that issue.

Ms Dlamini-Dubazana said that the National Treasury had said that its Strategic Plan must cover a period of three years and must be consistent with the medium term expenditure estimates. However, National Treasury had not incorporated into the Strategic Plan all inputs by the respective programmes.

She recommended that the Committee should pay more attention to the targets before approving National Treasury's budget, and follow the Auditor-General's advice to use the Specific, Measurable, Attainable, Relevant and Time-based (SMART) goal setting criteria principles.

As much as Mr Lungisa Fuzile, National Treasury Director-General, had said that sometimes it was really difficult to set time frames and say how much would be spent at any particular point in time, it was an unfruitful debate, since a Strategic Plan must be measurable. The objectives must be measurable, as must the expected outcomes, programmes and outputs. The Committee could not allow the National Treasury to escape from setting measurable objectives and outcomes.

Mr Harris said that the Auditor-General had highlighted six major issues. The Committee had discussed these with National Treasury and then the following day heard more detail from the Auditor-General. At the end of the meeting with National Treasury, the Chairperson had requested that the National Treasury must report back on interventions to fix the main errors highlighted by the Auditor-General. Perhaps in the recommendations, the Committee should echo this request, and specify the main errors, including, as Ms Adams had pointed out, the human resources plan and that 42% of the targets were not time-bound, and adding the concern that employees were performing outside work without written permission. The Recommendations should also reflect the insufficient evidence that bids were used for tenders over half a million, non-compliance with Public Finance Management Act (No. 1 of 1999) (PFMA) and Treasury Regulations, and that the financial statements had material misstatements that could have been avoided if there were an effective review mechanism in place.

The Chairperson agreed that Mr Harris' proposal was almost in line with how the Committee had concluded its discussions that day.

Mr E Mthethwa added that National Treasury must report back on the filling of vacancies in the senior positions. However, he did not favour the use of bullet points as these might discourage National Treasury from giving detail and might otherwise limit its response.

Dr Luyenge said that the Committee could also attach a time frame for receiving responses.

He suggested refining the wording of 'the greater part of the under spending related to what was a small project.'

Mr N Koornhof (COPE) asked, tongue-in-cheek, who read these documents. He had found them valuable this time, because he had been unable to attend some of the Committee’s meetings recently.

He asked the Committee to include a recommendation that there must be a quarterly report, either from National Treasury, or jointly with the Presidency: Department of Performance Monitoring and Evaluation, telling the Committee if there was progress.

He was astonished at the last bullet point of paragraph 11. 'The National Treasury indicated that it would be useful for the Committee to receive a briefing on the matrices and methodologies of the credit rating agencies.' The Committee had just agreed to the Credit Rating Services Bill [B8-2012] and now wanted to tell Members how credit rating agencies worked. All along he had asked for such a briefing as he had tried to grasp the purpose of the legislation. Nevertheless, the Committee must recommend that it receive such a briefing as soon as possible.

Mr Van Rooyen concurred but wanted to draw a line between what the Committee had done and what it was still trying to achieve.

Mr Ross based his recommendation on the clarity of funding. Perhaps it linked to the third bullet, which referred to the huge transfers to the New Build Programme. The proposal for a quarterly report, a mentioned by Mr Koornhof, was a step in the right direction.

However, Mr Ross's recommendation linked specifically to the fourth bullet, on Eskom. 'National Treasury indicated that the R20 billion allocated was part of the R60 billion allocation.' It was clearly indicated by National Treasury that this was a subordinate loan. However, in terms of the bigger picture, and the misunderstandings in the discussion with the Minister when the Committee thought Eskom to be 'a bottomless pit', Mr Ross's recommendation was to obtain clarity on the funding to the huge portions allocated to completing Medupi and Kusile power stations with reference to the Government guarantee to the New Build Programme. This Committee should recommend that there should be clarity, including an analytical briefing by Eskom, on the proposed future spending on completing the energy portion of the New Build Programme.

Mr Van Rooyen concurred fully. However, it might be helpful not to confine the recommendation only to energy projects. He sought a comprehensive briefing on the funding model of the infrastructure commitments.

Mr Harris had, independently, thought of a similar recommendation, which encompassed both Mr Ross' and Mr Van Rooyen's views. National Treasury should report to the Committee on a list of funding items – loans, contingent liabilities, callable capital, promissory notes, and other forms of assistance extended to the parastatals, and the effect on state debt if these were called in.

Mr Van Rooyen said that in the end the Committee would receive those details. The Committee wanted to understand firstly the funding model for infrastructure.

The Chairperson said that, basically, these were recommendations that National Treasury must respond on a number of issues. He asked Members to submit in writing to the Committee Secretary by 15h00 that day their specific recommendations in their particular areas of expertise to assist in capturing the exact wording that Members wanted. The Committee Secretary would then circulate the recommendations to Members after compiling and editing them.

Members agreed.

Mr Van Rooyen had noted that the Minister gave an undertaking that he would report to the Committee together with the Select Committee on Finance on the Limpopo intervention. He asked for a specific recommendation that there must be a time frame for that report.

The Chairperson thought that there had been a number of interventions. The Minister's report should include more than Limpopo.

Mr Harris agreed with Mr Van Rooyen, but asked what a reasonable time frame should be.

The Chairperson replied that normally such a report should be submitted within 90 days of the National Assembly's adoption of the Committee's BRRR.

Members agreed.

The Committee adopted the BRRR with amendments.

Statistics South Africa Budgetary Review and Recommendations Report (BRRR) 2012
The Committee read through pages 1 to 14 and made the following comments:

BRRR recommendations
Mr Mthethwa wished to flag many gaps in human resources, in particular, PERSAL figures, and management.

Mr Ross added his concern on Stats SA's administration and financial management. There should be strong wording. Everyone was concerned at Stats SA's audit qualification. It was a huge setback to building credibility in Stats SA results. The Committee's recommendation should be that the causes of this qualification must be avoided in future. The organisational structure must be improved and there must be compliance in financial management, which had been poor. The integrated financial management system (IFMS) was not yet implemented. The importance of coordination must be emphasised. The late allocation from National Treasury needed to be addressed. He would send a preliminary draft recommendation to the Committee Secretary.

The Chairperson thought that Stats SA had not adequately planned for the challenges to be expected in a census year. It should learn from its experience.

Mr Koornhof said that the Statistician-General (SG) had warned the Committee that these challenges would be its particular problem in the audit for the census year. However, Mr Koornhof agreed with the Chairperson that this was not good enough, given that it was not the first time that Stats SA had conducted a census.

Ms Dlamini-Dubazana said that the Committee should include a recommendation on employees with conflicts of interest. In inducting new employees there must be compliance with internal controls.

Mr Harris said that the Committee should recommend that Stats SA report back to the Committee on a plan to process invoices within 30 days as required by the PFMA.

Mr Ross, who sought complete transparency in the release of census results, thanked the Chairperson for facilitating an interview with the Minister. Perhaps the census results should be released before the MTBPS. The Committee should make a recommendation on the time frames of the release.

The Chairperson thanked Mr Ross for his understanding on how the Committee should manage this process. He commended Stats SA on the acceleration of its processing of the census results from two years to 12 months. The Committee should commend Stats SA for its diligent work, but recommend that Stats SA should maintain the integrity of the census results by releasing them in an open and transparent manner, without going into the details of the previous discussion with Stats SA.

Mr Harris agreed with the Minister's formulation, except at the very end. He recommended releasing the results to a sitting of Parliament.

Mr Van Rooyen pointed out that the Committee had not yet engaged with Stats SA in discussing the results, although it would have the opportunity to do so after release, and did not want to send any confusing signal in the recommendations. He preferred to be cautious and focus on the process of releasing the results.

Mr Ross thought that there was broader consensus on what the Committee wanted to achieve, but wanted the Committee to agree especially on transparency. On this there could be no compromise. However, he agreed with Mr Van Rooyen on the need to study the process. He looked forward to the discussion with the Minister.

The Chairperson did not want to deal with this issue as if it was a secret. Stats SA had officially informed the Committee that it would release the results at the end of October. Rather than tie the results to the MTBPS, he proposed that, within the context of congratulating Stats SA and congratulating it for the work well done, the Committee recommended that it was important for Stats SA to maintain the established practice of openness and transparency in terms of how the information was released and that the results should preferably be announced by tabling in Parliament.

Mr Ross agreed.

The Chairperson again asked Members to submit in writing to the Committee Secretary by 15h00 that day their specific recommendations as already discussed to assist in capturing the exact wording.

Members adopted the Committee’s Statistics South Africa Budgetary Review and Recommendations Report (BRRR) with amendments.

The meeting was adjourned.

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