Processing of budget votes, Committee Mandate: briefings by Researcher and Content Advisor

Standing Committee on Appropriations

01 July 2014
Chairperson: Mr S Mashatile (ANC)
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Meeting Summary

The Committee Secretaries, Committee Content Advisor and Committee Researcher presented the Committee with an overview of the budgetary process and elaboration on the mandate of the Committee. The Budget was overarching and cut across all departments. The Committee could accept, reject or amend budgets. The main focus areas for the Committee were on budget approval and budget execution. The focal areas on budget day were the Fiscal Framework, the Division of Revenue Bill and the Appropriations Bill. The Committee would sit jointly with the Portfolio Committee on Finance to discuss the Fiscal Framework. The Division of Revenue Bill took into account how funds were divided amongst the three spheres of government. The Appropriations Bill was however more the Committee’s focus area Some common trends identified and highlighted were fiscal dumping, inadequate planning and a disconnect between reported performance and actual delivery.

Practical constraints experienced by the Committee were late receipt of information from departments, difficulties in collaboration and misalignment of financial years amongst the three spheres of government. The Budget Cycle was touched on and an explanation of the Budget Process was given. Global and local SA budgetary themes were briefly highlighted. For example despite significant increases in the budget allocated to human settlements and the delivery of over three million houses, housing backlogs remained at levels similar to those in 1994.

Members raised concerns about what assurances were there that revenue was equally being distributed. The issue of under spending at local government level and the real reasons behind it was also questioned. It was agreed that recurring problems like fiscal dumping and non compliance needed action. The huge backlog in the provision of housing was concerning but it was evident that there were many factors that compounded the problem.
 

Meeting report

The Chairperson at the outset of the meeting noted that Tuesdays and Wednesdays would be the working days of the Committee. Fridays was also available for meetings if need be. He however suggested that the Committee use Wednesday as its main working day.

Mr A Shaik Emam (NFP) pointed out that the Standing Committee on Public Accounts (SCOPA) sat on Wednesdays. Given that the work of the Committee was interlinked with SCOPA he suggested that Tuesdays be allocated as the Committee’s main working day.

The Chairperson explained that Wednesdays had been chosen to make it easier for members to work out their travelling arrangements from around the country. He understood Mr Shaik Emam’s dilemma about a possible clash on Wednesdays but the Committee would try to accommodate him. However if the workload of the Committee was huge it might have to meet on both Tuesdays and Wednesdays.

Dr C Madlopha (ANC) suggested that where members were unable to attend meetings, alternate members could be used.

Overview and Mandate of the Standing Committee on Appropriations
The Committee Secretaries, Ms Zandi Hulley and Mr Darrin Arends together with Committee Content Advisor Mr Tshepo Masoeu and Committee Researcher Mr Musa Zamisa presented the Committee with an overview of the budgetary process and elaboration on the mandate of the Committee.
Mr Zamisa noted that the most important policy instrument was the Budget. The Budget was overarching and cut across all departments. The Committee could accept, reject or amend budgets. The main focus areas for the Committee were on budget approval and budget execution.

The focus areas on Budget Day were the Fiscal Framework, the Division of Revenue Bill and the Appropriations Bill. The Committee would sit jointly with the Portfolio Committee on Finance to discuss the Fiscal Framework. The Division of Revenue Bill took into account how funds were divided amongst the three spheres of government. The Appropriations Bill was however more the Committee’s focus area. National Treasury usually briefed the Committee on the Appropriations Bill.  Some of the focus areas in the Division of Revenue Bill were whether the revenue was divided equitably, did past performance justify an allocation or whether there were major changes in grants. On budget execution the idea was to track expenditure performance and to track service delivery performance.

Some common trends identified and highlighted were fiscal dumping, inadequate planning and disconnect between reported performance and actual delivery.

Practical constraints experienced by the Committee were late receipt of information from departments, difficulties in collaboration and misalignment of financial years between the three spheres of government.
Positives for the Committee were that it no longer had a dual mandate, the establishment of the Parliamentary Budget Office was a also benefit and the availability of evaluation reports from the Department of Performance Monitoring and Evaluation was a further plus.

Ms Hulley touched on the Budget Cycle and spoke more to the Budget Process. The process started with the tabling of the National Budget. Thereafter the Fiscal Framework and Revenue Proposals were referred to the Standing Committee on Finance and the Select Committee on Finance, to be processed within 16 days after the tabling of the National Budget. The next step was that the Division of Revenue Bill was referred to the Standing Committee on Appropriations and the Select Committee on Appropriations, to be processed within 35 days after the adoption of Fiscal Framework. The final part of the process was when the Appropriations Act was referred to the Standing Committee on Appropriations and the Select Committee on Appropriations, to be processed within 4 months after the start of the financial year.

Mr Masoeu very briefly elaborated upon global themes in budgeting.  Fiscal vulnerabilities were rising in developing economies. There was also an increase in fiscal spending since the 1990s as a result of the need to expand public services and public investment. The three main areas critical for efficient, effective and sustainable government expenditure were to ensure sustainability in the largest spending items which were the public wage bill and social expenditure; attaining spending efficiencies whilst maintaining an effective service delivery programme and lastly enhancing the institutional capacity of those state bodies tasked with maintaining spending controls of Parliament, audit institutions, finance and performance monitoring institutions.

Themes in budgeting relating specifically to South Africa were that spending on infrastructure was short of the 10% objective as set out by the National Development Plan. South Africa’s infrastructure spending was currently closer to 8% of Gross Domestic Product. Despite significant increases in the budget allocated to human settlements and the delivery of over three million houses, housing backlogs remain at levels similar to those in 1994.An estimated R300bn was required to address the 2.1m backlog in housing units.

He touched on where the process was currently at in parliament. The 2014 Appropriations Bill was tabled in parliament on the 26 February 2014 at the time of the Budget. The Bill provided for the appropriation of funds from the National Revenue Fund in terms of section 213 of the Constitution and section 15 of the Public Finance Management Act (PFMA). Spending was subject to the PFMA and the provisions of the Appropriation Bill itself. Parliament needed to pass the Bill so that the Act could be promulgated before the end of July 2014. 

Discussion
Dr Madlopha asked to what extent the Committee could be assured that revenue was equally distributed. She asked on what basis was the decision taken to cancel a grant. Perhaps the grant was needed by communities but capacity was lacking to deliver it.
She asked whether National Treasury had guidelines in place to prevent fiscal dumping from taking place. If there were no such guidelines why were there not.
Why were the financial year ends for local government and national government at different times? What were the real reasons behind under spending by local governments?
She asked what the reason for the late receipt of information from departments was.

Mr Masoeu stated that on the issue of division of revenue the first question was about equitability. South Africa's National Treasury was considered competent. He noted that there were explanations attached to the division of revenue bill. The fiscal competency of provinces was also looked at.
The cancellation of grants was explained by way of an example. He noted that the Rural Housing Infrastructure Grant had over the last three years not performed well. The previous Committee had felt that the Grant should not have been a direct grant but rather an indirect grant. National Treasury however decided to choose the middle road and said that the Rural Housing Infrastructure Grant should have a direct and indirect component.

Dr Madlopha asked whether the Committee was entitled to get the real reasons why there was under spending at local level. What were the problems at local government level?

Mr Masoeu confirmed that the Committee was entitled to get the reasons why there was under spending at local government level. 

Ms M Manana (ANC) also asked whether there were no guidelines to prevent fiscal dumping taking place close to financial year ends.
The presentation had alluded to the fact that the Committee experienced difficulties in collaborating with the Standing Committee on Public Accounts. What recommendations had the Committee support staff made to rectify the situation?

Ms Hulley speaking on greater collaboration with the Standing Committee on Public Accounts noted that the onus was on themselves as support staff to improve the working relationship. Communication with their counterparts was of key importance.  

Mr M Figg (DA) commented that at most times there were deficits in budgets. Were there any limits for deficits? He felt it unfair when grants were cancelled that dependants of such grants were the ones that suffered the most.

Mr Masoeu said that the deficit had to remain at around plus minus 5%. There were guidelines in place.

Mr Zamisa noted that when grants were cancelled the suffering of its recipients was a dilemma for the Committee. It was sometimes not just about cancelling a grant however inefficient its delivery was given that there were recipients that depended on the grants. It was an academic debate which needed to be picked up.
 
Mr N Gcwabaza (ANC) asked whether it was acceptable for the Committee to contact department entities’ directly or should it rather be done via their respective departments. As it were the performances of some entities were not good.  
Given the Ugandan example where the financial years of different spheres of government were aligned, he asked whether the previous Committee had made a recommendation to align the financial years of South Africa's three spheres of government.
He felt it important that the Committee insist that government departments provide it with information and documentation timeously.

Mr Masoeu said that it was acceptable for the Committee to invite entities of departments to appear before them without going through the departments themselves.

Mr Shaik Emam referring to quarterly expenditure reports asked whether the Committee relied solely on national portfolio committees’ information to ensure that budgets were timeously spent.
He asked what system was in place to ensure that budgets were in line with what market prices were. There were occasions where tenders were not awarded because the prices tendered were considered too low when in actual fact it was on par with market prices.

Mr Masoeu responded that on an oversight visit taken to Limpopo Province the Committee had seen the use of consultants because capacity was lacking at local government level. Greater dialogue was required at local government level over the issue.

Mr Zamisa said it was correct that the financial information about the performance of departments themselves sat with them. National Treasury was the custodian of finances. However department information was consolidated and verified by National Treasury.

Ms S Shope-Sithole (ANC) said that it was the Committee’s responsibility to dish out funds to departments. Having said this she suggested that the Committee not only meet in the precincts of parliament but should also go to provinces to check on things. It would also be helpful to the Committee if a National Treasury official was present at all times when the Committee met. It was an unfortunate fact that only those who had resources and knowledge were able to access parliament. What about the persons at grass-roots level?

Ms Manana asked what the relationship of the Committee was with the National Council of Provinces (NCOP). When was the NCOP’s report expected to be received by the Committee?

Ms Hulley explained that once the Committee had dealt with the Division of Revenue Act a report was furnished to the House. The House referred the report to the NCOP. Thereafter the NCOP furnished a report to the House. The reason why the Committee sent its report to its NCOP counterparts was to avoid duplications and contradictions. 

Mr Figg picked up from the presentation that there were issues of non compliance. What was to happen to the perpetrators? 

Mr Masoeu responded that issues of non compliance should not be tolerated by the Committee.

Mr Zumisa agreed instances of non compliance were unacceptable. It was the Committee’s task to try to ensure that it was not repeated.

Mr Gcwabaza referred to the housing backlog in SA as mentioned in the presentation on page 20. Yet there were so many houses built over the last 20 years. He felt that there were many reasons for the backlog. The movement of persons from rural to urban areas was one reason. The mobility of people across provinces was another.
He said that the problem was that a single person often owned three to four houses in different provinces which they often sold off. Why was there a backlog? Was the SA population growing at so fast a pace? There were factors which government had not looked at. Duplication could possibly be a problem.
 
Dr Madlopha asked whether the special committee to work with the heads of the Education Committee and the Council of Education Ministers which was expected to be established in 2014 had been established.
Relating to the issue of under expenditure by municipalities, she asked whether municipalities were required to furnish business plans.

Mr Masoeu agreed to check whether the committee had been established.
He noted that at the beginning of the budgetary process National Treasury provided guidelines. Municipalities were required to have business plans. The Division of Revenue Act required that national government receive business plans from the local sphere.

The Chairperson stated that the housing issue raised by Mr Gcwabaza was an important one. The test for parliament where problems were found was what to do about it. The fact of the matter was that funds needed to be spent properly. How was fiscal dumping taking place? How come there was irregular expenditure? These and other issues would be fleshed out by the Committee in its strategic sessions.
The Committee needed to understand its role. The idea was to improve the quality of peoples’ lives at grass roots level.

The meeting was adjourned.
 

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