Committee Report on the Division of Revenue Bill [B2-2013]: adoption

Meeting report

Introduction
The Chairperson observed that Dr S van Dyk (DA) was absent.

Mr M Swart (DA) said that his colleague was observing preparations for the referendum in Zimbabwe.

The Chairperson noted that the Committee had discussed the draft report the previous day and Members were going to read through it in preparation for today.

The Chairperson said that there were certain grammatical corrections that should be made. However, he wanted to start with the findings.

Draft report on the Division of Revenue Bill
Findings and observations, 5.1 to 5.5, page 13
Mr Swart was happy with the findings and observations, except -

5.3 The Committee supported the aims and objectives of the new Municipal Water Infrastructure Grant as a policy instrument in accelerating access to water in the 24 impoverished district municipalities. The Committee was concerned at the costs that accrued to implementing agents and how these could be minimised.

Mr Swart said that the Committee must decide whether or not to add that the Committee also expressed its concern that the Grant was made available only to district municipalities and not other municipalities.

The Chairperson was not unwilling to make that change but had assumed that the Grant was intended for those particular district municipalities that lacked the necessary capacity to accelerate access to water. He noted that the Committee did not even have the list of 24 impoverished district municipalities. He wanted to obtain the list first before expressing a firm opinion.

Mr Swart said that the South African Local Government Association (SALGA) was against the introduction of the new Municipal Water Infrastructure Grant, specifically because it was only for the district municipalities and no other municipalities. 

The Chairperson said that the Committee must take SALGA's observation into account and incorporate it in the Committee's recommendations.

He had thought that SALGA was complaining that it had not been consulted.

Mr Swart had happened to read SALGA's report again that morning. SALGA specifically stated that it was unhappy about the introduction of this Grant because the other municipalities were not covered by it. 

Ms R Mashigo (ANC) said that there had been some arguments and disagreements there because the department concerned had said that the mayors present had agreed. The mayors were part of SALGA.  

The Chairperson thought that SALGA's observation about communication was valid. Maybe SALGA had a list of those municipalities. Among other things, the Department of Water Affairs (DWA)'s report said that in some cases there were water service authorities (WSAs); in some cases there were no such authorities, and therefore the Department would engage the services of other providers. However, the Committee had expressed its concern about the Water Users Association and others.  

Mr Tshepo Masoeu, Content Advisor, said that the Committee had felt that in the rollout of the water infrastructure projects not only should SALGA and the WSAs be involved but also local municipalities. He read finding and observations, 5.2, that the Committee noted the imperative for involving all stakeholders in the implementation of water infrastructure projects. The Committee welcomed the readiness of SALGA to forge closer working relations with the DWA in rolling out water infrastructure. The Committee could add that, in addition, the Committee's view was that local municipalities should also be given an explicit role in the rollout of the municipal water infrastructure projects.     

The Chairperson confirmed that this was what the Committee had said. Not all the WSAs were functional and the local municipalities preferred to do this work themselves. They had the capacity to do so.

He asked Members for any other observations on findings.   

The Chairperson noted that Members were satisfied with the findings and observations on page 13, namely, 5.1 to 5.5.

Findings and observations, 5.6 to 5.8 on page 14
There was no discussion on findings and observations 5.6 to 5.8 on page 14.

Finding and observation 5.9 on page 14
The national Department of Health stated that the Free State Provincial Treasury declared a moratorium on payments for health infrastructure projects, which contributed to conditional grant under expenditure.

The Chairperson noted that this finding and observation was proving difficult to word.

Mr Swart suggested changing the order of the last few words to read 'under-expenditure on the conditional grant'.

The Chairperson agreed and asked if Members were happy.

Mr G Snell (ANC) wanted to refer to the corresponding recommendation, 6.4, on page 15. It was fine to put a moratorium on monies that a legislature had appropriated to a provincial treasury. However, to put a moratorium on a conditional grant was not acceptable. He wanted to factor this into the recommendation.

The Chairperson noted Mr Snell's point. He would deal with it when Members dealt with the recommendations, as 6.4, below, was not very clear.   

Finding and observation 5.10 on page 14
The Committee welcomes the use of spatial mapping data informing planning framework for the Department of Health. The Committee supports the incorporation of spatial data in conditional grant business plans and resource allocation.   

The Chairperson asked if Members were happy with this recommendation. 

Members indicated agreement.

Finding and observation 5.11 on page 14
The Committee supports the merger of the three health grants (Health Infrastructure Grant, Hospital Revitalisation Grant, and Nursing Colleges and Schools Grant) to form the new Health Facilities Revitalisation Grant. The Committee envisages that the flexibility afforded in this regard will lead to improved expenditure performance and service delivery performance.

The Chairperson asked if Members were happy with this recommendation.

Members indicated agreement.

Finding and observation 5.12 on page 14
The Committee welcomes the new planning requirements for education and health infrastructure funds. The Committee’s main concern was that provinces where there are existing capacity challenges should not be unfairly disadvantaged in future allocations in the education and health sectors.

The Chairperson asked if Members were happy with this recommendation.

Members indicated agreement.

The Chairperson asked if this observation was related to the incentives. There was no apparent mention of the incentives.

Mr Masoeu said that it was linked to the two-year planning requirements.

The Chairperson noted this.

Finding and observation 5.13 on page 14
The Committee remained seriously concerned (underlined) at the persistent poor expenditure and service delivery performance of the Rural Household Infrastructure Grant (RHIG). The Committee was concerned that the rescheduling of the RHIG from a schedule 6B to a schedule 5B may not result in improvement in the service delivery performance conditional grant (sentence underlined).

The Chairperson noted that the Committee all along had been concerned, but this time it was seriously concerned.

Mr Swart suggested putting the word 'performance' last.

Finding and observation 5.14 on page 14
The Committee notes the lack of thorough involvement of all stakeholders in the budget allocation process. In particular, the Committee was concerned at the lack of a transparent consultation process between the National Treasury, the Department of Human Settlements and municipalities in the formation and revision of the Rural Household Infrastructure Grant Framework.

The Chairperson thought that this observation was rather too general. Specific people had raised the concern that the Committee was not really sure if the observation was accurate, because one did know that there were budget processes in National Treasury, and that there was a committee of Cabinet involved. So he would want the Committee to make a finding and observation that it could defend.

Mr Swart said that Members might recall Ms Marisa Moore, National Treasury Chief Director: Urban Development and Infrastructure, who had said that it was for the Committee to make changes if it felt necessary. It was only a recommendation, she had said.

The Chairperson said that the Committee had not reached that point yet. He pointed out to Mr Swart that the Committee was now considering specifically 5.14.

Mr Swart apologised.

Mr Snell agreed with the Chairperson that the observation was far too general and suggested removing the first sentence and making the finding and observation specific to that particular grant.

Mr L Ramatlakane (COPE) recommended deleting this paragraph. It was not the concern of the Committee.

Ms A Mfulo (ANC) thought that the Committee should mention its concern that there was no thorough consultation among the departments, without naming anyone. 

The Chairperson proposed that, if the Committee retained the finding and observation, it should put it as an allegation, because the Committee knew that what the Department of Human Settlements had said was not very accurate. That Department had alleged that National Treasury had decided itself on the allocation. The Committee knew that this was not true. He had observed that Ms Moore, as a very junior person, had not wanted to confront the Department's Director-General. However, Ms Moore knew that the Committee understood the processes and looked to the Committee for protection.  

Mr Swart suggested saying that the Committee noted that there might be a lack of thorough involvement of all stakeholders in the budget allocation process. 

Mr Ramatlakane said that Members themselves were making an allegation with that statement. The Committee's job was to consider what was put before it. What was before it was the Division of Revenue Bill [B2-2013] and departments came to the Committee to explain how they would use the money that was appropriated for them. Why, out of 38 departments, was the Department of Human Settlements alleging that it was not adequately consulted in the same process? Moreover, the Department had a Minister who fought for it in the Cabinet Lekgotla at which priorities were decided. If the Committee were to include this observation and finding, Mr Ramatlakane would like to see the evidence.     

Mr Swart agreed with the deletion of paragraph 5.14.

The Chairperson wanted the Committee, in its findings and observations, to reflect what it knew to be true, not something that somebody else wished to defend. It could not happen that National Treasury alone decided on the Department of Human Settlements appropriation. 

Ms L Yengeni (ANC) agreed with Mr Swart. The Committee's concern was the service delivery. She stated that she did not want to see a department that was ‘more honest than the other one’ and warned that if the Committee did not want to say anything, they should not continue with this part of the discussion. She did not want to enter into a discussion on the wording.

The Chairperson agreed with Ms Yengeni that the Committee should not sound judgmental. She was correct. The Committee did not have all the facts. He preferred to remove paragraph 5.14. 

Mr Snell said that the Committee had instructed National Treasury and the Department of Human Settlements to meet to resolve the issue. The Committee could make a finding and observation that although it had instructed National Treasury and the Department to meet, they had not done so. Then the Committee could make a recommendation around this.   

The Chairperson was confident that all Members agreed with Mr Snell's suggestion.

The Chairperson proceeded to recommendations.

Recommendation 6.1 on pages 14-15
The Department of Water Affairs put in place measures to ensure the participation of SALGA, the Financial and Fiscal Commission (FFC) and all affected district and local municipalities in the planning and implementation of the Municipal Water Infrastructure Grant.

Members agreed.

Recommendation 6.2 on page 15
National Treasury and the Department Of Human Settlements submit a joint report on the measures undertaken to improve the expenditure and service delivery performance of the Rural Household Infrastructure Grant within 60 days after the adoption of this report.

Mr Swart preferred to delete this recommendation as 6.5 duplicated it, but to retain 6.5 (see below).

Recommendation 6.3 on page 15
National Treasury to put in place measures to ensure that rollovers are finalised and approved by the first quarter of the financial year.

There was no discussion. The recommendation was subsequently renumbered 6.2.

Recommendation 6.4 on page 15 (subsequently renumbered 6.3)
National Treasury to submit a report on strategies and measures in place to insure that provinces are able to meet the new infrastructure planning criteria requiring provinces to submit their plans for education and health infrastructure funds two years in advance within 90 days after the adoption of the report by the House.

Ms Mashigo recalled Dr Precious Matsoso, the Department of Health (DoH) Director-General’s statement in a previous meeting that the provinces must submit to the Department business plans for their projects two years in advance so that the Department could also submit to National Treasury. The Department was in the process of examining the provincial infrastructure projects to ensure that the projects were correct and submitted to National Treasury.    

Mr Ramatlakane confirmed that the Committee was now on the newly renumbered recommendation 6.3. His reading of the 90 days was that it was within 90 days that the National Treasury must report to the Committee. Was he reading this recommendation incorrectly?

Mr Swart confirmed that the Committee was asking National Treasury to submit a report to this Committee to advise whether the Department of Health and other departments would be ready and able to receive the reports on the plans.

The Chairperson said that this recommendation was based on what the Division of Revenue Act (DoRA) prescribed. Provinces that wanted to begin an infrastructure project had to submit it two years in advance. 

Mr Ramatlakane said that in order for National Treasury to give its report in 90 days, the Committee would have to engage with the Department of Health and with the Department of Basic Education based on their plans and submissions. There was no need for any other time frame except 90 days.

Mr Swart disagreed. The Committee needed to know the plans of the department concerned earlier than 90 days.

The Chairperson's worry about this recommendation was that firstly it would become a requirement of the law. Secondly, National Treasury had certain dates. He was not sure if the period of 90 days would work in terms of what the Committee wanted to achieve.
 
Mr Tshepo Masoeu, Content Advisor, commented that the budget process began for the provinces in June, and then the planning and the compilation of the documents began. The Committee was requesting that in June the National Treasury should come to the Committee and report on whether everything was ready for the process to continue and for provinces to qualify for allocations in 2016. Hence the 90 days.   

Mr Swart thought that this was 'a new twist'. The Committee, in his understanding, had been asking itself if it could happen like that.

The Chairperson said that this recommendation came about as a result of the Committee's insistence on proper planning. Previously National Treasury had asked for one year. Now it wanted two years.  

Ms Yengeni hoped that those responsible for drafting the Committee programme were listening, as the Committee must ensure that National Treasury and the departments concerned came before the Committee. The Committee must create time in advance, and it could not wait 90 days, otherwise National Treasury and the departments might say, on the 90^th day, that they had a problem. The Committee had to monitor that these departments adhered to the processes that were enshrined in law, so that the Committee was not surprised at the end when they came and said that they were still waiting. She did not usually agree with her colleague, Mr Swart, but she thought that he was right - that the Committee must meet in advance before the deadline, so that it could see the state of progress for the state of readiness. The Committee had to know if the Departments were ready. This way, the Committee would also be putting pressure on them and those reporting to them to perform.       

Mr Swart reminded the Committee that the 90 days period was written into the law.

The Chairperson deleted the words 'in place'. 

Mr Snell asked the researchers to find out, if the Committee was adopting this new two year system, what would happen to the next year's conditional grants for health and education.

The Chairperson's understanding was that now there were new conditions with which the provinces wanting to build infrastructure must comply. However, the new conditions did not take away the existing short-term plans. It meant that from now on, to improve planning, one must know how things were to be done.

Mr Swart asked, if one were submitting for two years hence, what would happen for the intermediate financial year 2014/15. National Treasury was speaking basically of 2015/16.

The Chairperson thought that there had not been this condition of a requirement to submit two years in advance. If one wanted to submit for an infrastructure project for the next year, one had to submit plans by August of the present year. He assumed that plans for 2014/15 were already submitted.  

Mr Ramatlakane asked why the Committee had to deal with hypothetical questions. What might happen in 2015/16 was a new issue.

Recommendation 6.5 on page 15 (subsequently renumbered 6.4)
National Treasury to submit a report on how the rescheduling of the Rural Household Infrastructure Grant from an allocation-in-kind to municipalities (schedule 6B) to a specific purpose conditional grant (schedule 5B) gives effect to improvements in expenditure and service delivery performance to the National Assembly within 60 days after the adoption of this report.

The Chairperson agreed with Mr Swart (see above, 6.2) that the recommendations 6.2 and 6.5 were almost the same.

Ms Mashigo thought that 6.5 was more powerful than 6.2 and covered the Committee's concerns after its extensive discussions with Adv Frank Jenkins, Senior Parliamentary Legal Adviser.  6.5 addressed the Bill itself, with regard to which the Committee had not been aware that National Treasury had rescheduled the Grant. 

The Chairperson pointed out to Ms Mashigo that he understood that 6.2 said that the joint report must be submitted within 60 days after the adoption of this report. He suggested moving away from the Schedules. The Committee's focus of energy should be to ensure that there should be improvement in the expenditure of this Grant. 

Ms Yengeni said that the sooner the Parliamentary Budget Office was fully established, the better. She complained that National Treasury, knowing that the Committee would not wish to see a rescheduling of the Grant, had stayed away from the Committee for a long time. The National Treasury was aware of this. She felt that the National Treasury was undermining the Committee. 

The Chairperson said that the National Treasury was supposed to report to the Committee this year.

Mr Snell agreed with Ms Yengeni that the Committee was being disadvantaged with the Budget Office's not being in place. The Committee should request the time frame for implementation of the Budget Office. The Division of Revenue Act (DoRA) assigned specific responsibilities to the Department and to the municipalities. The Committee needed a monthly report from the Department or even from National Treasury to let the Committee know what the Department was doing according to those conditions and what the municipalities were doing, so that the Committee could better monitor the implementation of that Grant throughout the year in accordance with the legislation. National Treasury in consultation with the Department and SALGA should submit a report on the rescheduling of that Grant would give effect to improvements. The recommendation would repeat the Committee's previous instruction.         

The Chairperson noted Mr Snell's suggestion. He asked if the new wording fully conveyed the message that the Committee wanted an improvement in the expenditure of the Grant with a plan for support to municipalities.

Mr Ramatlakane thought that recommendation 6.2 was completely superfluous in view of that amendment to recommendation 6.5.  Secondly, however, he pointed out that the Department of Human Settlements no longer had authority over the Grant. The authority had now shifted to the municipalities, which were now going to report jointly in consultation with National Treasury around how that gave effect to the improvement in expenditure and service delivery performance.

The Chairperson agreed.

Mr Snell said that National Treasury must report on why it had shifted the authority, and secondly on what benefit the shift had to service delivery. The other point was for National Treasury to be able to track the expenditure on a monthly basis and ensure meeting the conditions of the Grant.  

Mr Phelelani Dlomo, Parliamentary Researcher, reminded the Committee of some of the responsibilities of the national Department of Human Settlements as well as the responsibilities that lay with the municipalities with regard to the Grant.  These responsibilities were linked to the Committee's oversight of the national Department.

Mr Dlomo said that the responsibility of the national Department of Human Settlements was to approve the business plans submitted by local municipalities. Secondly, the national Department must continuously monitor implementation and provide support to municipalities. Thirdly, the Department must submit monthly financial reports and quarterly financial reports to National Treasury. Lastly, the Department must submit an annual evaluation report to National Treasury after the end of the financial year.

He clarified that municipalities were responsible for selection of the project areas within the available funds. Municipalities were responsible for maintaining the installed infrastructure, and should submit monthly and quarterly reports. They had to ensure effective and efficient use of resources, they would choose the appropriate technology to be implemented, and they had to ensure that ground water protocols were conducted to manage ground water contamination from the on-site sanitation facilities.   
  
He thought that the Committee should interact more with the national Department of Human Settlements and with the National Treasury, and hold the Department of Human Settlements responsible for its responsibilities.

Mr Snell said that the Department of Human Settlements was responsible to report to National Treasury monthly on expenditure and quarterly basis on non-financial performance progress. Those reports must come to the Committee too in order that the Committee could conduct continuous oversight of the implementation of the Grant.   

Ms Mfulo said that it should be clear that the reports should be monthly.

Mr Ramatlakane thought that there had been agreement to delete recommendation 6.2. All that Mr Snell and Mr Dlomo had said was contained in the Act. All that the Committee needed to do was oversight and to make sure that National Treasury was called before the Committee.

Ms Yengeni partially agreed that these things were stated in the Act, but asked if they had happened. As a result of the National Treasury and the Department of Human Settlements not working together, people had gone without service delivery. What was the Committee's role? Its role was to ensure value for money, and ensure that National Treasury and the Department of Human Settlements adhered to what was in the law. National Treasury and the Department of Human Settlements must appear before the Committee, so that it knew that these processes were being carried out. If those processes were carried out, people would obtain service delivery. It was not sufficient to depend on the law.    
 
The Chairperson fully agreed with Ms Yengeni but preferred to stick to the requirement for a quarterly report.

Ms Yengeni argued that a recommendation was not enough. The Committee must summon the National Treasury and the Department of Human Settlements. The Committee's programme must reflect this.

The Chairperson agreed, but wanted to go further to link this recommendation with 6.1 above. It was necessary that before implementation there was a plan to support municipalities. In 60 days from now – around May or June – the National Treasury and the Department of Human Settlements must come to the Committee to respond. He agreed with Ms Yengeni that this should be in the Committee's programme.  

Ms Yengeni said this emphasis showed that the Committee knew the law, and as a result of these two departments not following the law, the Committee was reporting to Parliament that it was taking an extra measure. It must be part of the report.

Mr Snell said that National Treasury must submit monthly expenditure as well as quarterly non-financial performance reports in accordance with the Act.  

The Chairperson thought that the Committee had agreed on a strengthened 6.5, which would subsume 6.2. 

Mr Ramatlakane thought that the Committee had agreed to delete 6.2.  Therefore recommendation 6.5 would now become recommendation 6.4. Now Mr Snell was saying that the Committee should insert additional wording to explain the responsibility of the Department of Human Settlements with respect to the Act as well as the National Treasury's responsibilities.

Ms Mashigo said that she was not going to differ at all. Maybe after the Committee had agreed to delete 6.2, it should have moved the numbers upward.

Mr Swart suggested adding to the new 6.4 'within 60 days after the adoption of the report as well as the monthly expenditure and quarterly non-financial performance reports in terms of the Act'. He then suggested the words 'Delivery performance to the National Assembly within 60 days of the adoption of this report as well as the quarterly expenditure reports as per the Act'.

The Chairperson agreed with Mr Swart, but pointed out that the Committee would obtain the quarterly reports in any case.

Mr Snell said that these were two fundamentally separate issues. Firstly the Committee wanted an analysis of why National Treasury had decided to make a change. Secondly, the recommendation, originally numbered 6.5, referred to a Committee oversight function.  The one was rationale; the other was function.

The Chairperson confirmed that in May or June the Committee required a report from National Treasury and Human Settlements on the state of readiness of the municipalities to perform their function. 

The Chairperson asked if the Committee could really handle the monthly reports.

Ms Yengeni said that, if by May, those processes were not established, then the Committee should worry. While receiving the quarterly reports, the Committee would obtain the information pertaining to the monthly reports. The meeting should be in May. 

Mr J Gelderblom (ANC) pointed out that municipal budgets were from 01 July to 30 June.

The Chairperson said that the meeting of May or June was to confirm the state of readiness of those municipalities. Expenditure would not be discussed at that time. This state of readiness applied both to water and to Human Settlements. Those responsible for the programme would determine if a one-day or two-day meeting would be required.

Draft Committee Report on the Division of Revenue Bill [B2-2013] adoption
Mr Ramatlakane moved for the adoption of the Committee's report, as amended, for tabling in the House and that a debate could ensue thereafter.  

The Chairperson noted that the adoption of the Committee's report, as amended, had been moved, and seconded.

The Committee thus resolved to adopt the draft report as amended.
 
The Chairperson thanked Members for ensuring that the report was adopted that day. The Committee needed to support amendments of the Act because the hearings that the Committee held were informal and were only formalised after the passing of the fiscal framework. The National Assembly had adopted the fiscal framework the previous day. However, if the Committee had delayed the hearings until after the passing of the fiscal framework, it would not have been able to adopt its report that day, for it to be tabled in the National Assembly the next day.

Mr Swart said that if there had been any amendment to the fiscal framework the previous day, the Committee would have been in big trouble, because it would have had to start all over again. The Committee had worked on the assumption that the National Assembly would agree the fiscal framework. It could approve the Division of Revenue only after the fiscal framework had been accepted.

Mr Ramatlakane noted that. Perhaps sometime in the future the Committee should discuss this situation. There should be a clearer legislative process. What the Committee had done was informal. In adopting its report, it was formalising it. It would now be in the hands of the Chairperson to interact with the National Council of Provinces (NCOP) and advise the NCOP on the Committee's process and that the Committee no longer wished to refer a matter to the NCOP but preferred to remain with the status quo.  

The Chairperson adjourned the meeting.