Appropriation Bill: National Treasury briefing & finalisation

NCOP Appropriations

29 July 2014
Chairperson: Mr S Mohai (ANC, Free State)
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Meeting Summary

The National Treasury told the Select Committee that a balance was sought in the Appropriation Bill between the need to support a contracting economy and the need to consolidate the fiscus. Funding for infrastructure development was a priority, but the Treasury was clamping down on frivolous expenditure. The Treasury had instituted cost containment measures and undertook expenditure reviews to see if spending was effective. The employee compensation budget was under strain. Spending was growing in priority areas like defence and science. Payment for financial assets was the fastest declining area of expenditure. There was increased investment in social infrastructure. The largest component of the Bill was vote shares, among others Social Development; Police; Cooperative Government and Traditional Affairs; and Transport. The President’s new Cabinet Portfolios would receive funding from existing budget votes once the various functions had been transferred.

The draft Committee report on the Appropriation Bill was tabled and adopted without amendment. The Democratic Alliance’s decision to neither support not oppose the report, was noted. Minutes of the previous meeting was adopted.

During the discussion, the Committee asked whether the decline in payment for financial assets was doing the country any good. There was concern over the fact that millions were spent on student loans, while students were not being adequately absorbed by the public sector. It was remarked that areas of skills required had to be identified along with related fiscal constraints. The importance of oversight of public entities to prevent government loss was stressed. The need for oversight of spending the amount of R847 billion for infrastructure was voiced. Spending of conditional grants in provinces had to be checked. 

Meeting report

Introduction by the Chairperson
The Chairperson said the Appropriation Bill process was nearly concluded. The Committee report on the Bill would be presented to the NCOP on Thursday 31 July for approval. He noted the good cooperation with the Finance Select Committee.

Briefing by the National Treasury on the 2014 Appropriation Bill
Mr Hennie Swanepoel, Chief Director, Budget Office, said the Appropriation Bill had been tabled in February 2014. The Bill then lapsed, and was revived in the National Assembly in June 2014. The Public Finances Management Act (PFMA) made provision for spending by government departments while the Bill process was being concluded. Government fiscal policy was reflected in the principles of countercyclicality; debt sustainability and intergenerational fairness. Balance sought in the Bill was between the need to support a contracting economy, and the need to consolidate the fiscus. Funding for infrastructure development was a priority, but the Treasury was clamping down on frivolous expenditure on travel and consultants, among others. The Treasury had instituted cost containment measures. Expenditure reviews were undertaken to see if spending was effective. A Chief Procurement Officer was established. The central procurement process was under review.

Compensation of employees growth had declined strongly. The employee compensation budget was under strain, due to a growth in the number of government officials. Spending was growing in priority areas like defence and science. Capital expenditure on basic education had been cut down, but money was rescheduled, not removed. R847 billion was available for spending in the public sector.

Payments for financial assets were the fastest declining area of expenditure. Payments for capital assets grew substantially. Growth in transfers and subsidies declined marginally, while growth in debt service costs had declined to 6 percent. There was increased investment (additions to the previous year’s baseline) in social infrastructure. Over the Medium Term Expenditure Framework (MTEF), R900 million would be available through the municipal human settlements grant, to allow metropolitan municipalities to perform a housing function, once it would be devolved to them from provincial governments. The largest component of the Bill consisted of vote shares. Social Development; Police; Cooperative Government and Traditional Affairs, and Transport had the largest votes.

The Department of Public Service and Administration was leading a process to give administrative effect to the President’s new Cabinet portfolios. Once structures were in place, changes to vote and programme structures and financial allocations would be included in the Adjustments Appropriation Bill, 2014, and/or in the Appropriation Bill, 2015. New departments would receive funding from existing budget votes, once functions were fully transferred. For the time being, new departments would coexist with current votes.

Discussion
The Chairperson remarked that the budget reflected the spending capacity of departments. There were measures to arrest the privatisation of government.

Mr Swanepoel replied that public entities like Eskom were outside the systems of government. They were being dragged in, through a quarterly reporting system. It would be included in quarterly reports to the Committee. Reserves were built up in public entities.

Mr V Mteleni (EFF, Limpopo) referred to expenditure by economic classification and payments for financial assets. The latter showed the most rapid decline, which was not doing the country any good.

Mr Mteleni said the Gautrain project was still costing taxpayers millions of Rands per month. He asked about budgeting for the project, and whether the Treasury budget was sufficient.

Mr Swanepoel replied that the question had better be put to the budget analyst who dealt with the Passenger Rail Association of South Africa (PRASA).

Mr Mteleni said that the country was spending millions on loans to students. There had to be a balance between loans awarded and graduates absorbed for work, both in the public and the private sector. It had been reported in the media that over the preceding five years government had not adequately absorbed students. Government had to seek employment for those awarded loans.

Mr Swanepoel replied that issue of student loans was a complex one. The National Students Financial Aid Scheme (NSFAS) was a new process that allocated money to universities. The education portion was not only from NSFAS. There was an intern programme in government to absorb students. The NSFAS specialist could prepare a note on the matter.
The Chairperson remarked that some questions had come up during the debate on higher education. Important issues were areas of skills required and fiscal constraints.

Mr L Gaehler (UDM, Eastern Cape) complimented the presentation. Oversight of public entities was highly important. Agriculture had paid the most money to private entities. Government had lost money.

Mr C De Beer (ANC, Northern Cape) said that the role of the Select Committee was crucial in oversight. R847 billion had been voted for infrastructure. Spending of conditional grants in the provinces had to be checked before December. The provincial treasuries of nine provinces had to be called to account about what had been done since 1 April.

Mr J Julius (DA, Gauteng) asked if R24 billion in transfers for that year had been paid.

Mr Swanepoel replied that payment for financial assets were once-off transactions. Growth rates on loans could be funny, which large variations from year to year. Foreign transaction transfers were done through the reserve bank. International organisations had put pressure on the country. Equity contributions could be classed as funny money. A breakdown could be provided.

The Chairperson remarked that it had been an adequate briefing. The Committee had to talk to the Parliamentary Budget Office on matters touching the macro economy. The brief had focused on the appropriation background. It was a tool to monitor expenditure. Areas had to be factored into oversight of conditional grant spending. The National Assembly had dealt extensively with the appropriation background in its report.

Tabling of the Committee draft report on the Appropriation Bill
Mr Lubabalo Nododa, Committee Secretary, tabled the report for adoption. He read out the proposition that the report be adopted without amendment.

The Chairperson noted that the report would not be voted on. It had to be adopted.

Mr De Beer moved for the adoption of the report. There would be voting on the coming Thursday, 31 July, at the plenary session.

Mr T Motlashuping (ANC, North West) seconded the motion.

The report was adopted.

Mr E Von Brandis (DA) noted that his party would neither support nor reject the report.

The Chairperson responded that the report had to be adopted for tabling in the House.

The Secretary said that the DA position would be noted.

Adoption of minutes
Mr Motlashuping asked if provision was made to raise matters proceeding from the minutes.

The Chairperson responded that matters arising from the minutes of a previous meeting could be raised in the meeting where the minutes were being discussed.

The meeting was adjourned. 

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