Committee Report on 2014 Appropriation Bill

Meeting report

Introduction by the Chairperson
The Chairperson noted that the Committee had heard submissions by the Treasury, the Parliamentary Budget Office; the Financial and Fiscal Commission (FFC), and the Public Service Commission. There had been advertisements for submissions by the public, but none were received. The Appropriations Bill had to be passed before the end of July. It had to be ready to be presented to the National Assembly for debate on 25 July. The draft version would be deliberated on in this meeting. A final copy would be prepared for the House, with any disagreements noted in the minutes. Political parties could then further debate it in the House. The content adviser would take the Committee through the draft document.

First draft Appropriations Standing Committee report on the 2014 Appropriation Bill
Mr Tshepo Masoeu, Committee Content Adviser, noted that the Bill was referred to the Committee on 12 March 2014, but had then lapsed with the last sitting of the Fourth Parliament. It was revived on 18 June 2014 in the National Assembly. The 2014 Budget was tabled within the framework of the National Development Plan (NDP). The 2014 Budget allocated MTEF baseline additions to government’s policy priorities in a number of function areas. The largest growth would be in employment and social security.

Mr Masoeu reminded the Committee of the hearings on the 2014 Appropriation Bill and noted the questions / concerns the Committee had raised with National Treasury. These were: The cost of servicing government debt. There had to be a shift in spending away from consumption and towards productive investment. Interim funding of the new government departments from existing departments could have a negative impact. National Treasury should monitor the implementation of cost containment measures. Committee approval of the centralised procurement approach, but was concerned about the effect on provincial and local service providers. There was concern that investment in higher education had not led to sufficient increase in the skills levels of the country’s workforce.

The Parliamentary Budget Office (PBO) submitted that the economy had experienced the first contraction since the 2009 financial crisis. Slower growth was likely to result in lower revenue. The PBO highlighted that significant risks that existed with the wage bill. Projected MTEF estimates provided for inflation linked salary increases. The inflation outlook posed risks to costs of providing public service. The Committee was concerned about funding made available for housing and basic services relative to housing development outcomes. With regard to wage bill risks, the Committee felt that there was a need to strengthen partnerships between public and private stakeholders to create capacity and develop growth strategies.

The Financial and Fiscal Commission (FFC) stressed the need for the Department of Basic Education to strengthen its support to provinces. One had to ensure that Further Education and Training programmes were successful levers in the skilling of young people. The FFC welcomed employment tax incentives to alleviate youth unemployment and foster economic growth. The Committee noted with concern that municipal performance in infrastructure development and basic services was poor, despite funded capacity building initiatives. The Committee emphasised that resource allocation had to respond to differences in provincial and local socio-economic conditions. The Committee sought clarity about standardisation and salary disparities in the public sector.

The Committee Report stated that Public Service Commission (PSC) reported "improvement in the number of Heads of Department evaluated over the preceding five financial years". The PSC highlighted that potential strategies for public sector wage efficiencies depended on the number and grading of posts on the establishment and post levels. The Committee expressed concerns at the disjuncture between budget spent and outputs achieved by national departments; the delays in filling funded vacancies, and the duplication of skills in the use of consultants.

The Standing Committee made recommendations based on its findings and observations. Priorities were the implementation of strategies to enhance the revenue generation capacity of local governments; strategies to link funded municipal capacity building programmes with Further Education and Training programmes; strategies to ensure that municipalities plan and budget effectively; the development and establishment of norms and standards for public service functions; filling of funded vacant posts in government departments, and building capacity for the implementation of the Schools Infrastructure Backlogs Grant and Education Infrastructure Grant.

The draft report concluded that the Standing Committee recommended the adoption of the 2014 Appropriation Bill, without amendments.

Discussion
The Chairperson suggested that the draft be gone through section by section, to look at concerns covered such as grants, capacity and wage bill risk. The report noted that the budget framework was in accord with the National Development Plan (NDP). He proceeded to give a summary of the NDP goals. Those were quality basic education; health; safety; the creation of a skilled and capable workforce, an improved economic structure network; rural development; improved household life; efficient local government; development of natural assets; an efficient public service and social protection system, and to transform and unite society.

Mr M Figg (DA) suggested that the document first be edited.

The Chairperson responded that editing problems be highlighted in the course of discussion. The document was a first draft. There would be a final draft later on. It was important that the report reflect the observations and recommendations of the Committee accurately. In the meeting with National Treasury, the Committee had been concerned that there was too much emphasis on expenditure, and not enough on producing revenue. Local revenue collection had to receive attention. There had to be a discussion with the Deputy Minister of Finance about savings. Treasury had recommended that the private sector invest so as to cope with contraction in the economy. A huge infrastructure rollout was pending, with a lack of resources. There was emphasis on appropriation for expenditure, but the growth of revenue also needed attention.

Mr A Mclaughlin (DA) noted that in the graph on page 3, the percentages did not add up to 100%. A column should be added.

The Chairperson responded that the graph had been taken from the Treasury submission.

Mr Masoeu explained that debt service cost was not included in the graph. There could be a note that the graph excluded debt servicing costs.

Mr Mclaughlin referred to the National Revenue Fund. The ATC on that day requested that the budget votes of new departments be added. He asked if the report would include them.

The Chairperson said that he had read that, but was not sure.

Ms Zandile Hulley, Committee Secretary, noted that it had been gazetted separately. These would be referred to the Committee on the following day. It could be noted in the conclusion that the report was approved with acknowledgement of technical amendments.

The Chairperson said that the Committee would wait for the Minister to come back, and then include an annexure with amendments. It was necessary only to refer to the five new departments. There was as yet no indication of funding for the new departments. That would have to wait until the Medium Term Budget Policy Statement.

Mr Mclaughlin noted that fraud and maladministration had been lumped together. Fraud was a crime, but maladministration was a mistake. He asked if that was the sense being conveyed.

Ms Hulley replied that this would be looked into.

Mr Mclaughlin referred to the first sentence of the last paragraph on page 8. He asked about the phrase could negatively affect.

The Chairperson responded that the risk was that if inflation went up, services could be compromised.

Mr Mclaughlin said that the formulation was unclear. Cost themselves could not be at risk. Whoever was paying was at risk.

Mr Gcwabaza (ANC) asked if it could be re-phrased to state the risk was to the provision of services.

The Chairperson replied that cost was important, but something had to be inserted before it.

Mr Mclaughlin asked what the 73% referred to on page 9, was a percentage of.

The Chairperson replied that it was 73% of the previous year.

Mr Mclauglin pointed out that The Commission reported that there was a steady improvement in the number of Heads of Department which were evaluated over the past five financial years (page12), was wrong. One needed to indicate that it had at first improved and then dropped.

Dr C Madiopha (ANC) noted that the figures had only dropped in the last year.

Mr Mclaughlin referred to 3.16 of the Committee findings (page 15). It stated that the number of Heads of Departments evaluated was less than 30% in the preceding four years. The average was in fact less than 18%.

The Chairperson asked who had made that point.

Mr Masoeu replied that it was a Committee finding.

The Chairperson asked that the average of the four years be calculated.

Dr Madiopha agreed that it came to 18%.

Dr Madiopha referred to 3.13 of the Committee findings, to the effect that the Committee welcomed government’s intention to maintain employee numbers at a constant level in the following three years. It had to be read together with 4.2.4, that all funded vacant posts within departments were to be filled. She felt that it had to be stated that posts must be filled.

The Chairperson added that it had also to be stated that posts had to be filled timeously.

Mr Dlamu Phelelani, Parliamentary Researcher, noted that the term 'must'  was not used in government discourse. The correct term was 'should'.

The Chairperson referred to issues of economic growth. The Committee recommended that Treasury develop measures to encourage and attract the private sector. The Committee had to express a concern about the growth of revenue.

Ms M Manana (ANC) asked about provincial capacity for revenue collection.

The Chairperson agreed that a concern with that had to be stated.

Mr A Shaik Emam (NFP) said that municipalities were writing off hundreds of millions in uncollected revenue. It had to be emphasised that such policies and processes had to be looked at.

Dr Madiopha said that the report should state that local government had to strengthen credit control policies. There were municipalities that were unable to collect revenue. There was lack of capacity to enforce, and an inability for customers to pay.

The Chairperson advised that care be taken with terms such as credit control. It could make people think of Red Ants. Revenue was written off because local government lacked capacity to collect it. But it was not possible to compel local government not to write it off.

Mr Mclaughlin suggested that 4.1.2 be enhanced to include debt collection. Unrecovered debt had to be recovered.

Mr Shaik Emam remarked that the problem of non-payment for services had to be included. At eThekwini there were 45 000 houses that did not pay for water. A great percentage of those were in fact required to pay.

The Chairperson said that during oversight, CoGTA could be called in and asked about strategies to collect revenue.

Mr Phelelani cautioned that provincial issues resided with the National Council of Provinces (NCOP) committees. The fiscal framework had to be studied for finance purposes. It could be crafted in passing that the assignment would be given to the NCOP to run with. The NCOP had greater oversight capabilities.

The Chairperson said that the Committee would recommend that the National Treasury and CoGTA come up with strategies. The NCOP could fill in details.

Ms S Shope-Sithole (ANC) said that she wished to differ from Mr Phelelani. The National Assembly was responsible for the budget. It was not for the Committee to assign jobs to the NCOP. The question was what would happen if they failed to engage with the matter.

The Chairperson told Mr Phelelani to some laughter that Ms Shope-Sithole had won the debate, because she was a Member of Parliament. The Committee had to ensure that concerns were addressed. It could monitor what other committees were doing. He asked if it was advisable to recommend savings. The country had to be encouraged to save, to deal with the contraction of the economy. He suggested that a sentence be added to the effect that the Treasury had to come up with proposals to encourage savings in households, government and the corporate sector, to mitigate against contraction constraints.

Mr Shaik Emam asked if that would be included under Committee recommendations. The Department of Human Settlements grappled with the problem of people selling houses provided to them. It created the impression that houses were not being provided. There had to be a survey audit. Houses had to be kept in the family.

The Chairperson responded that the recommendation had to be made to the delivery department, not to Treasury. But it had to be investigated, and included as a note for consideration when there was engagement with the Department of Human Settlements.

Dr Madiopha stressed the importance of the link between funded municipal capacity building programmes and Further Education and Training (FET) programmes.

Mr Gcwabaza added that local government technical capacity challenges had to be stressed. FET programmes had to respond to these challenges.

The Chairperson said that capacity building programmes were funded by the Treasury. The FET had to offer training.

Mr Shaik asked about possible amendments to the conclusion of the report: "adopt the Bill without amendments".

The Chairperson replied that finalising the conclusion would have to wait until the final report was referred to the Committee. The Committee would then move for adoption with the inclusion of any amendments.

Ms Hulley said that any corrections to the Bill would be tabled through a motion in the House on 25 July. National Treasury would table Bill corrections, either in the conclusion or the body of the report.

The Chairperson said that editing would be done, so that a final copy could be adopted on the following Tuesday, 22 July.

Ms Hulley noted that amendments would be underlined in the final copy.

Ms Shope-Sithole asked when the Appropriation Bill debate would take place.

The Chairperson replied that it would be on Friday, 25 July. There was time until the following Tuesday to prepare speeches for the House. The next meeting would take place at 10h00 on Tuesday, 22 July.

The Chairperson adjourned the meeting.