The provincial treasuries for the Mpumalanga and Western Cape provinces made presentations to the Select Committee on their third quarter provincial budget expenditure. The National Treasury also made a presentation in the third quarter provincial expenditure outcomes.
The National Treasury reported on the aggregate expenditure outcomes for the provinces. The National Treasury reported that the majority of provinces are projected to over spend on their budgets, which would lead to an aggregate over expenditure. However, the National Treasury’s assessment was that these projections were not reliable. It was further noted that the cash position of provinces was positive, and that the National Treasury was developing cash management guidelines which would be circulated to provinces.
The National Treasury reported that the Mpumalanga Province had spent 75.1% of its adjusted budget. It noted that the province had projected to over spend on core items such as medical supplies. It noted a continued problem of poor planning within its department of Agriculture and Rural Development department. National Treasury also reported that the Western Cape would have some under spending, and also noted a concern in the goods and services budget in health where there exists a lack of transparency and accurate projections. The Western Cape was also requested to address its issues within the area of social development.
In the discussions that followed the presentations, Members questioned the Mpumalanga Province on its expenditure in terms of Agriculture and Rural Development. The province responded by noting that the increase in expenditure was value for money and that the department had taken steps towards identifying the areas which required attention, and added that they would be addressed.
The Western Cape was asked what the province was doing on the issue of the eradication of slums. The Province responded by noting that it had embarked on certain housing projects in the effort of eradicating informal settlements within 26 years. The province added that it had identified the areas where slow expenditure was taking place. The Province noted that its expenditure would be improved upon.
The Chairperson opened the meeting by noting that it was a continuation of the Select Committee’s engagements with provincial Members of the Executive Council (MEC) for finance, provincial treasuries, the National Treasury, and the Financial and Fiscal Commission (FFC) on provincial expenditure for the third quarter of the 2013/14 financial year. The Chairperson added that the meeting would be the last engagement which the Western Cape and Mpumalanga treasuries would have with the Select Committee before the coming of the fifth Parliament which would take over the responsibilities of the Committee.
Briefing by National Treasury
Mr Edgar Sishi, National Treasury Chief Director of Provincial Budget Analysis made a presentation to the committee on the third quarter provincial expenditure outcomes. Mr Sishi highlighted what the aggregate expenditure outcomes were with provinces. He reported that the majority of provinces are projected to over spend on their budgets, which would lead to an aggregate over expenditure. However, National Treasury’s (NT) assessment was that these projections were not reliable as previous years have indicated that provincial projection ended up being very different from what had actually transpired. Mr Sishi said the cash position of provinces was positive and that the NT was developing cash management guidelines which would be circulated to provinces.
Mr Sishi said with regard to the provincial expenditure on the compensation of employees, the NT had shown overall control of its personnel, particularly in the Eastern Cape, Kwa-Zulu Natal, and Limpopo provinces. The Mpumalanga Province was reported to be holding the line in terms of personnel control. It was also noted that NT was aware of the Western Cape’s plans in increasing its staff numbers.
The NT’s assessment of likely provincial outcomes included a number of interventions which NT had been working together with the provincial treasuries to entrench. This included the implementation of cost containment measures, headcount verifications and biometric controls, and the consolidation of supply chain management reforms.
Mr Sishi reported that the Mpumalanga Province had spent 75.1% of its adjusted budget. He noted that the province had projected to over spend on core items such as medical supplies. However, the province had noted under spending on the compensation of employees. The Provincial Department of Agriculture and Rural Development had only spent 3% of its budget, which could lead to the funds being surrendered back to national government. He noted a continued problem of poor planning within that department.
Mr Sishi reported that the Western Cape would have some under spending. NT noted that a well-developed personnel management strategy would enable the province to accurately budget for the compensation of employees. Mr Sishi noted a concern in the goods and services budget in health where there exists a lack of transparency and accurate projections. This concern had been communicated to the province for them to resolve. The NT noted concerns over social development as to whether the current allocations are sufficient to address the various social ills within the province such as gangsterism and drug abuse. The province had indicated that management and co-ordination issues will be addressed first before finalising the social development funding issues.
Briefing by Mpumalanga Provincial Treasury
Mr Madala Masuku, MEC of Finance for the Department of Finance in Mpumalanga provided the background to the presentation by noting that the department had taken a decision to resolve the issues it had had for the past 20 years. He noted that after a process of budget alignment that the department of Human Settlements had resolved its issue. However, issues had been identified in the province’s health, safety and security, and agriculture departments. In health, the Provincial Treasury recognised issued in employee compensation, and medicine acquisition. The safety and security department had had issues in the management of contracts as well. However, Mr Masuku reported that the intervention by the Provincial Treasury had led to a positively changed work ethic within the department. Furthermore, the issues in the province’s department of agriculture included issues on the raised compensation for employees, and the poor management of projects. Mr Masuku noted that the Provincial Treasury had requested the intensification of controls within the department, and had also almost taken over the department in an effort to work with the department in resolving its issues.
Mr Masuku agreed that the issues in education need to be resolved. He also added that the department was still grappling with the issues of under spending with regard to goods and services. However, a plan had been put in place to deal with these issues, and this programme was yielding positive results.
Ms Gladys Milazi, the Senior Manager for Municipal Fiscal Discipline at the Mpumalanga Department of Finance noted that the department had a concern regarding the projected over spending within the department of health at 31 December 2014. This department had become the primary concern of the Provincial Treasury. At 31 January 2014 the department of health continued to project over expenditure figures, mostly on goods and services. Ms Milazi reported that the goods and services issue had been dealt with, and the challenge faced there was in terms of medicine. This challenge was due to surprise invoices which were unpaid, and were not planned to be paid. These invoices placed pressure on the medicine account, as was reflected in terms of the department’s spending in January. The Provincial Treasury noted that the over spending could be cushioned by the provincial department of health not over spending on employee compensation. Ms Milazi reported, however, that the department was confident that on the employee compensation that the provincial department of health would be able manage.
Ms Milazi reported gross under expenditure of the conditional grants for the Department of Agriculture within the province. The department had since submitted a new spending plan for the conditional grant, and had started implementing the spending plan. Spending had increased from three per cent to 43 per cent. Measures were also in place to rectify the projected over expenditure of employee compensation within the department of agriculture.
Ms Milazi said the Department of Community Safety, Security and Liaison had projected gross over expenditure. She said since measures in the Public Finance Management Act (PFMA) had been implemented that the department had put the projected over expenditure under control.
The Department of Human Settlements had been reported to have struggled in spending its grant funds. The spending had not been stable as department had revised its business plan on 6 January 2014 after adjustment budgets had been tabled. In relation to expenditure on infrastructure Ms Milazi expressed the intention of the department in maintaining the infrastructure it already had.
Briefing by the Western Cape Provincial Treasury
Mr Alan Winde, MEC for Finance, Economic Development & Tourism for the Western Cape Government, presented on behalf of the Western Cape. The presentation by the Provincial Treasury identified areas of concern with the projected under spending in the provincial departments of health, public works and transport. It was reported that under spending by the department of health was as a result of infrastructure challenges. Under spending within the departments of public works and transport was reported to relate mainly to the slow-filling of personnel posts. Under spending by the department of public works was further reported as a result of weather conditions, and labour challenges within the construction environment. Mr Winde then went on to present on the provinces departmental infrastructure payments as at 31 December 2013 for education, health and public works and transport.
Mr Winde reported on the own revenue produced by the province, and the projected R 164 million over collection of revenue. Mr Winde added that the majority of the province’s own revenue was derived from motor vehicle licence fees. He noted the own revenue collected by the provincial Department of Health, and added that the steady decline in the generation of revenue the department was a result of the decentralisation of Road Accident Fund Payments.
Mr B Mashile (ANC, Mpumalanga) requested clarity from Mr Sishi on what was meant by the investment column on the cash position of provinces, where this money came from, and how they relate to service delivery.
Mr Sishi replied that the investment column referred to the money placed in a bank account with a commercial bank by the provinces for the purposes of earning a return on that investment. The investment was not geared towards any service delivery purpose, but only to earn and interest for the purpose of spending in the future.
Mr D Joseph (DA, Western Cape) requested a breakdown of employees compensation for all provinces so as to compare that information with that provided by Statistics South Africa. Mr Joseph asked whether provincial MEC’s were aware that the Chief Financial Officers (CFO) made the expenditure projections. He also wished to know whether headcount verifications and biometric controls for the Western Cape, or Mpumalanga had begun yet. He further commented on the under spending on Agriculture and Rural Development within Mpumalanga, and suggested that the Committee should visit the department and offer assistance. Finally, Mr Joseph asked whether the Western Cape MEC looked into those under spending departments and rectified the problem.
Mr Sishi replied that the information on the breakdown of employee compensation was available. It was an oversight not to include the information into the presentation. He noted that the information would be made available to the committee. Mr Sishi said the MECs themselves would be able to indicate how aware they are of the CFO’s making predictions. However, the information which was presented to the Select Committee would also have reflected in the information for the Budget Council, which comprises of the provincial MEC’s for finance. Mr Sishi also noted that the Western Cape and Mpumalanga would be more equipped to deal with the question on headcounts.
Mr Sishi said the issue of Mpumalanga Province’s under spending on agriculture and rural development was an indication of a problem which the provincial department is having with its management. On the issue of the under spending of the Western Cape, Mr Sishi noted that the province had issues around moving its capital budget. He added that the money had started moving but that the catch-up period was a difficultly. This movement would depend upon the quality of the plan to get the money moving, and how quickly supply chain processes could take effect.
The Chairperson requested clarity on the Mpumalanga expenditure in agriculture going from 3% to 43%. He made the example of how, nearing the end of a financial year how provinces would push funding into municipalities. On the issue of the department having employed 92 officials who were not budgeted for, the Chairperson inquired as to what happened to those officials.
The Chairperson noted the tendency of lower spending by provinces on agriculture, including the Western Cape. The Chairperson also noted the Western Cape’s low spending on libraries, provincial road maintenance, and the expanded public works programme. The Chairperson requested of Mpumalanga province would submit all documentation it had on the presentation so that the secretariat would be able to make a proper report on the meeting.
Mr M Makhubela (COPE, Limpopo) asked what the status quo was on the Mpumalanga Province’s supply chain management officials. He further asked what the provincial treasury was doing to ensure the effective spending of the provincial budget. Furthermore, Mr Makhubela noted that there had been previous evidence of under spending in the province’s Human Settlements Department. He noted that the reason therefore was usually due to capacity constraints. He asked what had been done to improve capacity in the Human Settlements Department, and others.
Mr Makhubela noted that most of the departments reported lower spending for three quarters of the financial year. He asked what contributed to the under spending of the departments, and what had been done to ensure the efficient and effective budget spending.
Mr S Montsitsi (ANC, Gauteng) commented on the under spending of the Western Cape. He expressed concern on the slow expenditure of the departments of health, education and community safety. Mr Montsitsi made particular reference to the education department in light of the Western Cape wanting to close schools down. Mr Montsitsi also noted the under spending of the Western Cape in the department of community safety when the province had issues of gangsterism and drug abuse. He asked what the plans of the Western Cape were in spending the remainder of its budget. He noted that the spending of the province was not exemplary, and did not set a good example for other departments.
Mr Joseph asked where the majority of the funding for the department of transport and public works in the Western Cape was being spent. Mr Joseph also commented on the change in management in the department of Human Settlements in Mpumalanga Province, and the projects which were started by the previous Minister of Human Settlements which were not completed. He asked what National Treasury would do about those incomplete projects, and what the National Human Settlements department would do to assist the province to complete those projects. Mr Joseph also asked whether there were any legal issues in the replacement of the 92 officials in the Mpumalanga Province, and what the costs were in that regard.
Mr Mashile stated that his observation of the rise in the balances of the Investment, PMG and CPD accounts regarding the NT’s expenditure was an indication of non-delivery of service. He asked NT to indicate what a healthy balance would be for these accounts so as to allow the Committee to discern whether fiscal dumping had taken place.
Mr Mashile appreciated the report by the Mpumalanga Province as it was an indication that the Provincial Treasury had engaged in robust debate with other departments. He stated that it sent the message that the Mpumalanga Provincial Treasury would not accept mediocrity from other departments. Mr Mashile added that he expected the provincial treasury to assist the Committee in the oversight of the departments.
Mr Mashile commented on the issue of the department of agriculture, and rural development in Mpumalanga Province by stating that Mpumalanga was a rural area. He noted the necessity of getting the issues within the department resolved due to proper expenditure in this department potentially generating employment opportunities within the province. Mr Mashile also expressed his understanding that the province had plans in place to increase, and rectify expenditure within the department. However, he required clarity on whether the plans were to just spent the funds, or spend the funds in the delivery of services.
Mr Mashile appreciated the detailed reporting of the Western Cape. He noted that the reasons offered for the under spending within the province were the weather conditions experienced. He added that proper planning by the department should have incorporated all factors which would have affected the plan. The excuse of bad weather conditions would not be accepted.
Mr Mashile also noted that on the 89% spending of the conditional grant by the Western Cape that the presentation would have included a brief on whether the province had surpassed the issues it had had within all of its departments. He then noted that the Western Cape and Gauteng Provinces were known to transfer funds to its agents, such as the city council, and record it as money spent. The Western Cape was commissioned to follow up on whether the money spent translated into the delivery of services.
Ms T Memela (ANC, Kwa-Zulu Natal) congratulated the work done by Mpumalanga. She also noted that the Western Cape had planned the building of new schools and requested to know where and when they would be built. Ms Memela also asked what happened to the schools which were to be closed down. On the topic of human settlements Ms Memela commented that nothing had been done on the eradication of slums. She noted that slum areas like Cross Roads and Khayelisha had not been changed in years. She noted that the congestion within those areas posed a fire risk, and a threat to the lives of the people. It was suggested that the province’s cut back on the use of consultants would result in funding which could be used for the welfare of the people.
Ms Memela expressed great concern on what the Western Cape’s programmes were for looking after its destitute elderly citizens, child-headed households, and farmers. The Western Cape was commissioned to rethink its strategies in those instances, and to do thorough investigations before developing relevant programmes. She added that such strategising would ensure that moneys would not be banked to accumulate interest for no apparent reason.
Mr T Chaane (ANC, North West) welcomed the presentations by the two provinces. On the matter of the budget projection processes of provinces being unreliable, Mr Chaane stated that no province had been able to explain why their budget projects were unreliable. Further, no solution had been proposed to fix the problem. Mr Chaane noted that the matter needed serious consideration by provinces and NT, and that a solution to the problem would have to be found so as to minimise the amount of money which would remain unspent at the end of the financial year, reflecting badly on the government.
Mr Chaane understood that the National Treasury asserted itself as being equal to all other departments. However, Mr Chaane noted that the PMFA afforded treasuries certain powers to ensure that other departments toed the line. He noted that it was a matter which needed to be engaged on so as to gain one common understanding on the functions of the treasury.
The Chairperson noted that the statement made by Mr Chaane linked with a prior discussion had with the Auditor General and the Select Committee where the interrogation of quarterly reports was emphasised. The Chairperson noted this as the comparison of the money spent with the performance of the relevant department. He added that the information derived from this type of interrogation would be able to be used in advocating for the intensification of the implementation of certain programmes within a department. The Chairperson emphasised that such interrogation would assist Parliament in having a grip on departments.
Mr Montsitsi added that the figures put forth that the Western Cape indicated that the province had many resources, including an investment account from which it could obtain interest. He asked why a portion of the resources the Western Cape had would not be used to build proper toilets for the people.
Mr A Lees (DA, Kwa-Zulu Natal) said the presentation by Mpumalanga Province was difficult to read. He noted that the province had many plans in place but provided no indication as to how the changes would take place, especially with regard to their department of agriculture. Furthermore, Mr Lees noted that there was no indication as to how the province would achieve its goals.
A Member of the Portfolio Committee of Finance welcomed the presentation by the National Treasury. He noted that the issue of balancing figures was to be reconciled with balancing the improvement f the lives of the people on the ground. He added that the Portfolio Committee of Finance had also identified the problems in the department of agriculture, and agreed with NT that a serious intervention at a national level was necessary. He continued to state that the issue of scholar transport was unacceptable. People are to be taken to task regarding them doing their duty on reporting on scholar transport. The Member noted that there had been interventions into issues of human settlements because of the various challenged faced in the past. He added that the role played by provincial treasuries were to be appreciated. However, he noted that the treasury was not to usurp the powers of other departments.
The Member added that on the other identified issues that the provinces and the National Council of Provinces (NCOP) would have to find ways of sharing responsibility in working on those tasks, so as to avoid a duplication of action.
Mr Masuku responded to the questions by first appreciating the vigorous engagement from the Committee. On the issue of leakages he referred to how he had previously noted that the Mpumalanga Province had sought to resolve the various challenges it had faced over the past twenty years. In terms of the province’s supply chain management issues in its human resource department, Mr Masuku noted how there had been interventions into the issue. It was reported that those interventions had assisted in the identification of problems which were to be addressed. He reported that the province had gone so far as to consider the redeployment of workers within problematic departments.
Mr Masuku added that the province had picked up on the areas within the departments of security, scholar transport, Learner Teacher Support Materials (LTSM), medicine, and infrastructure. It was reported that those issues were to be followed up on. Mr Masuku also noted that the provincial department of agriculture was an area of concern for the province. He noted that this had led to the placing of a committee within the department with the responsibility of giving final approval on matters, detecting, and investigating irregularities.
On the matter of the 92 officials appointed to the department of agriculture outside of the parameters of its budget, Mr Masuku added that the provincial treasury would monitor any further over spending by the department. He added that funding for the officials was being sourced from other departments.
Mr Masuku assured the Committee that the increase in spending within the province’s agriculture department, from 3% to 46%, was value for money expenditure. He added the Provincial Treasury was satisfied that the department would be able to carry out its expenditure plans. He further noted that the reason for the irregular expenditure was due to certain disputes had with certain agencies on the implementation of their programmes. He noted that instead of focusing on the dispute that the department stopped all activity, and/or allowed the agencies to implement their plans.
On the issue regarding the vetting of officials, Mr Masuku noted that vetting was being done. However, the agency used in the vetting process had been overwhelmed and took long to report back to a particular department. He added that officials were now also required to declare their interests.
Mr Masuku agreed that the reliability of budget projection information was a challenge and that the province was working on the matter. He added that the province had also put price standardisation and contract management standards in place. Mr Masuku also noted that the request by National Treasury for the province to project its infrastructure plans to years in advance had exposed weaknesses in systems regarding planning. These weaknesses were to be worked on in future.
Mr Winde responded to the issue on the Western Cape Province’s expenditure on agriculture by noting that he was not very concerned about the department, and that he was certain that spending would take place. He noted that the department had previously won the national award for the best run department within the country. He also expressed his confidence that money would be spent on libraries as the last financial year noted more than 99 per cent expenditure in that regard. He further agreed with the Chairperson that the provincial expenditure reports were to be read in conjunction with the APP.
On the matter of the Western Cape Provincial Treasury’s slow spending, Mr Winde noted that the nature of the treasury was different in that the majority of its spending would take place would take place within the final quarter of the financial year. Transfers would take place during this period and would be geared towards bolstering local government. He also noted that slow spending may also be as a result of many departments being on leave at present.
Mr Winde noted that the over spending on financial assets was only a projected over spending. He added that the spending went to leases such as Photostat machine leases which provincial government would enter into. Debt to be written off would also fall within that category. He noted that a further breakdown on that expenditure could be supplied to the Committee.
Mr Winde responded to the questions around expenditure on health and education by noting that the provincial expenditure in that regard would pick up. He added that the province would receive more money which would have to be spent to put extra teachers and mechanisms in place.
On the issue of community safety expenditure Mr Winde responded by stating that he reason for the slow expenditure within that department was due to the delay in the budget for the Khayelisha Commission, and the hold back in legal processes. He noted that the money was now able to be spent.
On the question regarding the Department of Transport and Public Works, Mr Winde stated that R1 million of the projected expenditure would be transferred to the Golden Arrow Bus Service (GABS) for the funeral arrangements for the late, former president of the country, Mr Nelson Mandela. The remainder of the funds would rest with the department of Public Works.
Mr Winde addressed the questions regarding the amount of money in the Western Cape’s investment account. He noted that the province does not allow money to stay in its departments, or entities. He added that the money within the investment account changed on a daily basis. He noted that an excess of money in the system would be transferred to the investment account so that as much interest could be generated on that money.
On the topic of planning for the rainy season, Mr Winde noted the increase in rainfall within the present financial year was more than was anticipated by the province. There were also reports of severe flooding within the Province. He added that the funds for infrastructure would had have been realigned, and that an excess of cash would have remained in reserve. He further noted that if, at the beginning of the financial year, a provincial department would not have an up to date cash flow and business plan for a specific project that the funding for hat project would have been retained to be spent according to a plan. This would be done to ensure that money would not be spent other projects, or wasted. The funding would be released when a plan was made available.
Mr Winde added that 275 health projects ad been budgeted for, such as the Khayelisha hospital, the upgrading of clinics, and the building of 74 schools. He noted that delays in these projects resulted in funding being held back. He added that of the approximate 1000 schools within the province, 400 had been on private property, and 26 were set for closure. These schools set for closure would have multiple grades within one classroom. Such a classroom would in some instances consist of only 5 pupils. Mr Winde suggested that the provincial education department be called to make a presentation on the matter.
Mr Winde responded to the issue regarding the eradication of slums b y noting that though the Cape Town Metropolitan Municipality had the lowest gini co-efficient within the country that human settlements was still a problem which the province was working on. He reported on the Province’s twin River Urban Park project which planned to convert hectares of land in the city into housing. He noted that the project sought to build ‘live, work, play’ environments and dignity. Mr Winde stated that this plan was an application of the National Development Plan and the Province’s One Cape 2040 plan where the province planned to eradicate informal settlements within 26 years. He noted that this would require the building of 1 million houses within 26 years. He noted that in order for the province to deliver on that plan that something drastic would have to be done. He concluded by stating that the Committee should request a presentation on the Twin River’s Urban Park Project.
Mr Winde noted that fires within informal settlements were a major concern. He noted that those fires could destroy lives. He added that projects had been set in motion to ensure fire trucks and emergency vehicles had access to those areas. On the issue regarding the province’s use of consultants, as was highlighted within the Auditor General’s report, Mr Winde noted that the provincial treasury was taking the matter seriously. He also noted that the report was considered in depth. He noted that the reason for consultants being used in nursing staff, outside of the consultancies that provided for those jobs, was as a result of the 30 per cent in vacancies in nursing staff at one point in time. However, he added that nursing only had a four per cent vacancy rate.
On the issue of the disabled people within the province, Mr Winde noted that the Province had budgeted for the disabled. He further sympathised with Ms Memela regarding the amount of disabled people who were at a disadvantage, or were ‘left out of the loop’. He noted it as a matter of great concern.
Mr Winde responded to the aversion that provincial budgets lacked credibility, and were unreliable by stating that he did not accept that point and was willing to stand by the budget of the Western Cape. He noted it as being reliable and credible, and availed himself for interrogation on the budget. He suggested that the Committee should interrogate the adjustment times in money transfers with regard to whether the budget of the province was reliable and credible.
Ms Memela noted that the answer provided by Mr Winde did not address her question on the eradication of slums. She stated that with regard to the indigenous people that no work had been done to improve on human settlements. She added that the province could build its expensive houses, but if the people at the bottom still cried out for help then ‘how do you have a peaceful sleep’. She made reference to children who would fall into toilets, and those children who are abducted because of their environments. She suggested that Mr Winde would observe the eradication of the Catomana squatter area, and use it as a case study of how the issue of mixed housing actually worked. She also noted that there were people within squatter areas who were working and could be housed. She also suggested the conversion of ‘green areas’ into areas for housing.
Mr Winde stated that he would look into the case of Catomana, and he apologised for projecting the wrong answer to her question. He noted that the plan was to have persons who could afford a gap house, and a person receiving a full subsidy located within the same area. He noted that this should be a new way of delivering houses instead of separating people.
Mr Montsitsi wanted to know if the Province’s investment account had generated enough interest to close its open toilets.
Mr Winde responded to the question on unenclosed toilets. He stated firstly that specific budget processes dictated the spending of money. He added that the money from the investment account would reside within the accounts of the individual departments, and not within an additional savings account. Furthermore, he added that all of the toilets which Mr Montsitsi had referred to were already enclosed.
The Chairperson suggested that the Committee do an oversight visit to the areas where the toilets were enclosed.
Mr Sishi responded to the question asked by Mr Mashile by noting that NT was working on the cost management guidelines. He noted that the guidelines would be out soon, despite complications. Mr Sishi also noted that it was NT who raised the concern on the budgetary projections. He assured the Committee that the NT would fix the problem with provincial treasuries.
The Chairperson thanked Members and the officials for their participation.
The meeting was adjourned.
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