Division of Revenue Amendment Bill [B38-2013]: Negotiating Mandates

Meeting report

Division of Revenue Amendment Bill [B38-2013]: Negotiating Mandates
Eastern Cape Provincial Legislature
Mr C De Beer (ANC; Northern Cape) read the Negotiating Mandate and stated that the Eastern Cape Legislature supported the Bill and mandated the Eastern Cape delegate to negotiate in support of the Bill. 

Free State Provincial Legislature
Mr R Lees (DA; Kwazulu-Natal) stated that the Western Cape was of the view that a mandate had to be a legislature mandate and not a portfolio mandate. The mandates in his possession were portfolio mandates and asked the Chairperson to provide clarity on this matter. 

The Chairperson replied that a negotiating mandate came from the provincial legislature, signed by the Chairperson of the Committee and the final mandate should be signed by the speakers of the legislature. Final mandates would not be accepted if it was signed off by the Chairperson.  

Mr Lees read the Negotiating Mandate and informed the Committee that the Free State Provincial Legislature voted in support of the Bill.

Gauteng Provincial Legislature
Mr B Mashile (Mpumalanga, ANC) read the Negotiating Mandate and informed the Committee that the Gauteng Provincial Legislature voted in support of the Bill.

Kwazulu-Natal Provincial Legislature
Mr Lees read the Negotiating Mandate and informed the Committee that the Kwazulu-Natal Provincial Legislature voted in support of the Bill and mandated the Kwazulu-Natal delegate to negotiate in support of the Bill.  

Mpumalanga Provincial Legislature
Mr Mashile read the Negotiating Mandate and informed the Committee that the Mpumalanga Provincial Legislature voted in support of the Bill and mandated the Mpumalanga delegate to negotiate in support of the Bill.

Northern Cape Provincial Legislature
Mr De Beer read the Negotiating Mandate and informed the Committee that the Northern Cape Provincial Legislature voted in support of the Bill. However, the Provinces had made the following recommendations:

● The Eskom levy charged for maintenance of roads in provinces such as Mpumalanga should be extended so it can benefit provinces such as the Northern Cape, which had similar conditions such as Mpumalanga in mining activities and high usage of roads by trucks.

● The release of funds should be fast tracked to enable provinces to spend funds before the end of financial year, especially in disaster stricken areas.

There was an issue with disaster funds that was unused by the provincial Department of Agriculture.

The Chairperson replied that the concerns were noted and would be deliberated on.   

North West Provincial Legislature
Ms M Boroto (Mpumalanga, ANC) read the Negotiating Mandate and informed the Committee that the National Treasury should analyse and revise its preparations to the Department of Finance regarding the Wage Bill of employees of the North West Provincial government. The Portfolio Committee on Provincial Affairs supported the Bill and mandated the North West delegate to negotiate in support of the Bill.

Discussion

Mr D Joseph (Western Cape, DA) stated that the Western Cape had not submitted a Negotiating Mandate; as it was unable to get a quorum. The final mandate of the Western Cape would be submitted on 8 November 2013.

The Chairperson stated that all provinces that had submitted Negotiating Mandates voted in support of the Bill. There were two concerns, regarding the Eskom levy and the issue of the employee salaries in the North West. Those two issues were to be addressed by National Treasury.

Mr Mashile asked the Chairperson if any Negotiating Mandate was received from Limpopo.

The Chairperson replied that no Negotiating Mandate was received from Limpopo.

Mr Mashile stated that there was a need to flag Limpopo, as people had been sent to improve and turnaround matters in that province. He added that there could not be issues of an inability by members to meet and agree on an agenda.

The Chairperson stated that the Committee in Limpopo could not form a quorum, but there was a need to ensure that Limpopo submitted its final mandate ahead of 8 November 2013, when all provinces were to submit their final mandates.

Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, stated that there were a few concerns highlighted by provinces with respect to the Division of Revenue Amendment Bill. The Northern Cape had expressed concerns regarding the Eskom levy and where it should be extended and which roads it should cover specifically. The Eskom levy was one mechanism used to fund roads. Some issues discussed which formed part of the Division of Revenue Amendment Bill was the amendment of the Provincial Road Maintenance Grant Formula. The Formula was amended so that it could be linked to the strategic nature of the road, its quality and length, to better fund roads in provinces. When reviewing funding for provinces the amendment of roads should be taken into consideration. The other issue was the fast tracking of the release of funds. National Treasury could only release funds once the Division of Revenue Amendment Bill was signed into law. The funds would then reach the provinces in December. The Provincial Equitable Share was released to the Provincial Treasuries and the Conditional Grant was released to the concerning national departments and from there funds were released to provincial departments. Regarding the issue highlighted by the Northern Cape and the matter of the disaster release funds, the national department responsible for the Conditional Grants would be urged to improve its monitoring, making sure that funds were being spent before end of financial year. National Treasury would follow up on these issues communicated.

Ms Fanoe confirmed that the Occupation Specific Dispensation (OSD) was included in the adjustment. Another issue involved how the amounts were determined. Three changes were made through the Adjustments Budget: 1) for the higher rate projected inflation cost, 2) upgrading of clerks, 3) related to inflation adjustment, with particular reference to FET colleges. All three conditions were determined in different ways. Adjustment for inflation was based on personal numbers for all provinces as at 31 March 2013, before the start of the financial year. This adjustment enabled provinces to cover their costs. For the Clerk adjustment, all staff employee numbers (of both national government and provinces) were taken and clerk numbers were extracted, first for specific provinces and then the same criteria and methodology was applied to both national and provinces to determine what amounts they needed to receive.

The FET colleges took into consideration the number of employees in FET colleges, to ensure that a fair basis was determined. North West had stated that funds directed to it needed to be reconsidered. Funds were allocated on a fair basis, and if adjustments were made for one province then this would not be equitable. All provinces needed to be treated equally (related to personal cost). Some provincial departments spend their funds wisely when appointing staff in accordance with their budget. If funds were not used in a proper manner then provincial departments would experience a financial drain. National Treasury was working alongside Provincial Treasury to ensure that personal budgets were effectively controlled. 

Ms Malijeng Ngqaleni, Acting Deputy Director-General: Intergovernmental Relations, National Treasury stated that a major challenge involved the readiness of departments to receive the funds allocated to them and for National Treasury to ensure that this was the result. 

Mr Mashile asked what happened when a province was not ready to receive funds. What role did National Treasury play to assist struggling departments to deliver services? If funds were not effectively used then a service was not provided to those who needed it. The provision of a Conditional Grant to provincial departments by national departments should be provided in a consistent manner, based on the business plan of the provincial departments. It needed to be clearly shown how a Conditional Grant would be used. The Conditional Grant ensured that a particular service was provided, and no conditions should exist to prevent the Committee from holding provincial departments accountable.   

Mr Joseph reflected on funded and unfunded post and stated that people should not fill in positions that were not part of the organisational design or plan of the province, and where the cost of the position was not covered by the design. A clear organisational design should become a standard principle to ensure better governance. All national departments should have disaster management plans. National Treasury should clearly specify if it was arguing that some provinces did not have a strategic disaster plan in place, which prevented them from accessing funds when a disaster occurred.  

Mr De Beer stated that the Northern Cape had disaster management programmes for veld fires and flooding rivers but no plans in place for sea disaster on coast areas. This was admitted by the MEC for Finance. The Northern Cape would report on this issue in January-February 2014. The Select Committee on Appropriations previously proposed that a head-count regarding personal should be practiced as in the case of Limpopo with success to the eight provinces, which facilitated to decrease expenditure in the budget. Treasury was asked whether the proposed head-count was rolled out to other provinces.

Mr Mashile asked Treasury if there was any debate about supporting Limpopo now that it was turning around, as in the past this province underperformed and as a result funding was withheld.

The Chairperson said that more pressure should be directed at provinces to have the necessary capacity and have a plan to receive funding; as the National Treasury was limited in its ability to provide assistance to provinces. Government employees received their salaries on time even if they lacked the capacity, whereas when it came to services and provinces lacked capacity, then funding was withheld. Paying of salaries and rolling out of services should be of equal importance. When an individual received a salary it was assumed that a service was provided. If a province received funding during a disaster but lacked the capacity, once those funds were then spent it was regarded as wasteful and irregular expenditure.   

Ms Ngqaleni said that provinces needed to be willing to get people with the right skills. National Treasury had in place capacity frameworks for the provinces, showing what kind of capacity/professionals were needed in provinces. National Treasury was involved in spreading capacity frameworks to the provinces. Some provinces were making progress while others were hiring people who lacked the necessary skills. Incentives were also offered to provinces to encourage performance. The system then encouraged underperformance which was highly problematic. There was a need to arrive at a point where people had to perform. The Housing Grant was of particular concern and national departments should effectively monitor and ensure that the provinces spend the funds in accordance with the payment schedule. The head-count proposal was being rolled out in the provinces and National Treasury would report on its progress to the Committee at a later stage.  National Treasury was on-board to ensure sustainability in Limpopo and through its Framework of Capacity Building the right capacity, procurement and systems were being implemented. A visible turnaround in terms of performance should be seen in Limpopo.

Ms Fanoe addressed the question on disaster management. The disaster request dealt with specific projects, and the disaster plan made provision in the event when a disaster occurred and required a special plan on how to target specific areas. To ensure that disaster funds were effectively spent the National Disaster Management Centre (NDMC) had been developed. Once a disaster occurred a municipality should submit an application for funding to the NDMC through the Provincial Disaster Management Centre. 

Ms Boroto noted, with reference to disaster funds, that in 2012 in a Committee meeting in the Eastern Cape an individual promised that National Treasury would train and offer the province support so it could use the allocated funds. However, in the Eastern Cape where disasters had happened the affected people have still not been helped.

The Chairperson requested that the National Treasury should do a follow up on the comment made by Ms Boroto, to enquire whether disaster challenges were still present in the Eastern Cape. 

The Chairperson indicated that the Committee would convene on 8 November 2013 to review the final mandates.

The meeting was adjourned.