Division of Revenue Bill [B5-2014]: discussion on Committee Report

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the Members and said that the meeting was for the consideration of the first draft report on the Division of Revenue bill.  The Fiscal Framework would be adopted this afternoon and the Division of Revenue later. For this reason, the Committee could not adopt the Division of Revenue bill report before the Fiscal Framework was passed.

First Draft Report on the 2014 Division of Revenue Bill
The Chairperson said the Committee had to make as much progress as it could.  Members agreed that in discussing the draft report, it was better that they focus more on the findings, observations and recommendations. However, the report had minor technical wordings that needed to be corrected, so they decided that they would do the corrections as they moved along.

The Chairperson read section 2.5 of the report, which had to do with the main changes to the 2014 Division of Revenue Bill.  He explained the section by saying that institutionalising better planning in provincial infrastructure programmes meant that provinces had to plan two years in advance.  The National Treasury had given a further explanation on the issue.  The growing role of indirect grants in a differentiated system was self-explanatory.

The Chairperson said that mining city grants were not included in the new Bill, and suggested that the Committee should add that they were dedicated to supporting local governments in the recommendations.

Section 3.2
The Chairperson said that “municipal” was missing, and that the paragraph had to read as follows:  With regard to the main changes in the 2014 Division of Revenue, SALGA was supportive of a number of adjustments in the Divisions of Revenue including the new Local Government Equitable Share formula’s additional allocations to rural municipalities, the new Municipal Human Settlements Capacity grant and the introduction of incentives for the development of more integrated cities through instruments such as the Integrated City Development Grant.

The Committee Members agreed that at the end of this section, another paragraph should be added, which would read: There are still significant challenges posed by unfunded mandates, which SALGA indicated can be minimized through strengthened norms and standards. Other costs that local government budgets may face emanate from the merger of municipalities in Gauteng and KwaZulu Natal.

Section 4.1
With regard to the last paragraph, the Committee agreed to make changes and the paragraph would read as follows: The Committee had, in discussions with stakeholders, including the FFC and SALGA, raised concerns with the efficacy of the intergovernmental relation framework in ensuring effective service delivery. The Department of Health reported that it had encountered challenges specifically at ensuring national imperatives are realized in multi sphere funding allocations. For example, in many instances the procurement of goods and services and the associated budgets are not always aligned to national policy priorities. However, a notable success had been the realization of the most affordable ARV`s globally through centralized procurement following the co-operation of the other spheres of government.

Ms Wendy Fanoe, Chief Director, Intergovernmental Policy and Planning, National Treasury added that they had picked up on this issue when the Department of Human Settlements had made their presentation. This needed to be corrected through the Government Gazette. She added that Treasury needed the blessing of the Committee

Section 5: Findings and Observations
The committee agreed that finding 5:1 reads as the main budget for the 2014 financial year will remain within the bounds set out in the 2013 Medium Term Budget Framework.  The composition of spending improves over the medium term, with capital being the fastest growing item in non-interest expenditure, while spending on travel, catering and other administrative costs declines in real terms.

5.2
Ms Fanoe said that it should read as follows: The committee notes that in 2013, higher than expected inflation will add to upward pressure on the public sector wage bill in the medium term, and also notes government’s intention to maintain employee numbers at a constant level for the next three years.

5.3
Mr M Swart (DA) suggested that this paragraph read as follows: There is a significant increase in indirect grants, from R5.8 billion in 2012/13, to R13.1 billion in 2014/15. The increase in funding for indirect grants is to allow national government to spend on behalf of other spheres of government and ensure service delivery takes place whilst it develops more institutional capacity. National Treasury indicated that as provinces and municipalities improve capacity, the indirect grants will be converted back into direct grants.

5.6
Mr Swart had suggested that they should use the Spatial Planning Land Use Management Act (SPLUMA) as an example.

Ms R Mashigo (ANC) said that the Committee had to move along, as they did not all seem to understand if SPLUMA was an unfunded mandate.

The Committee then agreed to add a new paragraph, as they had deleted the old one. The new one reads as follows: The Committee notes the South African Local Government Association’s submission regarding the challenges faced by local government emanating from unfunded mandates such as health, housing and community libraries.

5.7
The Committee agreed that the paragraph reads as follows: The Committee notes the South African Local Government Association’s submissions highlighting the recent substantial increase in the housing subsidy amount, which may put considerable pressure on the Human Settlement Development Grant and limit the sector’s ability to meet targets for delivery of top structures and serviced sites. Furthermore, the Department of Human Settlements indicated that emphasis will now be placed on quality human settlements, rather than the number of units completed.

5.9
Ms Mashigo said that the word “pilot” was missing, and Mr G Snell (ANC) said that the words “research and associated strategies” should be added to the paragraph.  Therefore, the paragraph had to read as follows:  The Committee acknowledges the work undertaken and research by the Department of Health in ensuring that the correct strategies and associated programmes are put in place for the implementation of the National Health Insurance (NHI) pilot districts. The Department of Health reported that there were 872 health facilities in the 11 NHI districts which required a variety of upgrading and refurbishments so as to meet the required quality standards prescribed by the National Health Insurance programme.

5.10
The Committee members agreed that the paragraph read as follows: The committee welcomes the Department of Health`s Accelerated Health Infrastructure Service Delivery Programme.   However, it remains concerned at the availability of appropriate technical skills required to ensure the programme succeeds.

5.12
Mr Swart suggested that the whole paragraph be deleted.

Ms A Mfulo (ANC) asked if the paragraph was meant for only the Departments of Health and Human Settlements.

The Committee then came to an agreement that the paragraph read as follows: The committee notes that the spending performance in the health and human settlements sector is often hampered by delays in the procurement processes of goods and services. It is critical to note that other departments also experience similar problems.

5.13
The Committee agreed that the paragraph read as follows:  In order to improve spending performance, the Department of Human Settlements has established a Professional Resource Team (PRT) that is to be deployed to provinces and municipalities, to identify service delivery challenges and propose solutions, in order to improve the rate of delivery of housing and sanitation.

Members were concerned whether the two words were “Professional Resource” or “Response Team.”

Mr Tshepo Masoeu, Content Advisor, Parliamentary Support Staff, responded by saying that “Response” was used verbally, and that “Resource” was the one used in the report.

5.14
The word “Municipal” was missing, so the Committee agreed that the paragraph read as follows: The Committee welcomes the R900 million allocated for the three years to the new municipal Human Settlements Capacity Grant, which funds capacity development for the successful devolution of the human settlements function to the six metropolitan municipalities.

Recommendations
6.1.2
The Chairperson said that the reports were submitted to Parliament. The paragraph reads as follows: The National Treasury, with the assistance of the Department of Public Service and Administration and Department of Performance Monitoring and Evaluation, to consider incorporating the reports on the monitoring of personnel numbers in government and on cost containment measures as part of the quarterly reports submitted to Parliament.

6.1.5
The Chairperson said that this paragraph had to read as follows: That National Treasury ensures that the correct allocations per province are gazetted for the indirect Human Settlements Development Grant with regard to the Northern Cape and North West provinces.

The Chairperson said that the Committee researchers would need time to make the changes, so the report would be adopted tomorrow morning. He also urged members to read the legacy report, and said that tomorrow the Members would be adopting minutes.

Meeting adjourned.