Medium Term Strategic Framework: briefing; DBSA Amendment Bill: voting; Budgetary Review & Recommendations Report: briefing

Meeting report

The Chairperson reminded Members that the meeting was part of a capacity building exercise and flowed from  calls by the EFF and the DA to explain the term 'radical economic transformation'. It was realised that the MTSF also dealt with the ‘radical economic transformation’, but what the MTSF offered was not sufficient for Parliament to understand what the executive meant. The MTSF was a five year plan of the 30 year National Development Plan (NDP).

Overview of Medium Term Strategic Framework (MTSF)

Mr Sean Muller, Economic Analyst, Parliamentary Budget Office (PBO), discussed the background of the MTFS highlighting the MTSF 2009-2014 and then gave an overview of the MTSF 2014-2019 before covering two themes, namely, radical economic transformation and improving service delivery. As with previous MTSFs, the intention is that MTSF 2014-2019 will directly inform departments’ planning and oversight of plans and performance. Of particular interest is the structure of the MTSF 2014-19. There are two overarching themes in the current MTSF- radical economic transformation and improving service delivery, as well as 14 priority outcomes, building on previous MTSF and the NDP. Within each priority outcome there are: Broad objectives and themes and a set of specific sub-outcomes specifying: actions required, Minister responsible, the relevant indicator with current baseline and the MTSF target. A set of core ‘impact indicators’ drawn from the sub-outcomes will be used to monitor and evaluate performance in the relevant areas.  Two perspectives are particularly relevant to the Committee-  1. The role of the Committee in conducting oversight over the activities and performance of National Treasury, its agencies and SARS;  2. The role of the Committee in conducting oversight over alignment of the Budget, fiscal framework, revenue collection and various money bills with policy priorities.

Mr Dumisani Jantjies, financial analyst at the PBO, discussed some of the 14 priority outcomes of the MTSF particularly outcome 4– the economy, outcome 6- infrastructure, outcome 7- rural areas, outcome 8- human settlements, outcome 9- local government, outcome 10- local government, outcome 11- international, outcome 12- public service and outcome 13- social protection (see document).

Discussion

Mr D Ross (DA) said businesses would have aligned their policy with the NDP and now find in it some deviation in terms of the shorter term MTSF plans. The relevance of the BRRR to the MTBPS could not be discounted, as it was not only the financial performance but also the performance of departments on a yearly basis. Was there financial oversight on the over or under spend of all departments and was this an additional responsibility of the Committee? If so, the committee would require a briefing on this.

Ms S Nkomo (IFP) noted that there were no targets specified or commitments made regarding investment in Research and Development (R&D) in science and expressed concern over the challenge of the maintenance of existing infrastructure.

Dr M Khoza (ANC) said the issue pertained to how best the Committee could identify areas of focus of fiscal oversight. The objectives of the constitution had been placed verbatim in the MTSF and the MTSF set ambitious targets yet had nothing substantial. It would have been preferable to read something more substantial on local economic development in it. As a point of debate, to what extent could the Committee influence budget allocations. Everything had become a priority-in the context of efficient utilisation of resources, for instance decreasing the spend on low cost housing in favour of supporting the role of Development Finance Institutions in the gap housing market. This was sustainable development and was an issue that needed teasing out.

Ms P Kekana (ANC) supported Dr Khoza adding that there could be further spin-offs in which municipalities would be assisted with revenue generation. Parliament needed to develop a mechanism to monitor the implementation of the NDP. This would also allow the Committee monitor issues of alignment and coherence between the NDP and the MTSF. The NDP’s silence on R&D targets was a cause for concern. The Local Government equitable share, in particular, and the Division of Revenue, in general, should be in alignment with the NDP and the MTSF.

The Chairperson said the departments had given input to Treasury for the Budget even before the elections and had until February to put forward more concrete goals. Hence, the generalised objectives would become more concrete goals by the first quarter of the following year, although it was uncertain whether they would be clearer goals. Regarding the objective of reducing unemployment to 14%, this was meaningless without an explanation on how it was going to be achieved. In a addition what did the phrase ‘reduction in unemployment’ mean? Did it mean Expanded Public Works Program jobs or sustainable jobs? The phrase ‘radical economic transformation’ was not radical as what was described in the current MTSF had all been described in the past.

Mr Ross wanted confirmation that the reference to the 2014 election manifesto referred to the ANC’s manifestoI and requested that the sentence ‘emerged from the SONA address by the president’ be added to the manifesto sentence.

The Chairperson agreed and reiterated that there was nothing radical in clause 9 of the MTSF- this was not acceptable and the executive should be held to account. The researchers needed to give more content to the term ‘radical economic transformation’.

Mr Ross asked that the GDP growth and unemployment figures in the presentation be updated with the 2013 figures.

Mr Muller agreed and said the figures in the presentation came straight from the table in the MTSF document and was out-dated. How the growth figures were arrived at should be interrogated. There were many other factors that impacted on the targets, not only the departments. There had been some contestation around the NDP. Some stakeholders thought that ‘radical economic transformation’ was separate from or complementary to the NDP while the MTSF laid out ‘radical economic transformation’ which was already captured in the NDP and perhaps Parliament should take the views of other stakeholders also. In their view the MTSF emerged from an intergovernmental process.

Mr Jantjies said the BRRR could be used as a monitoring tool to monitor implementation.

The Chairperson said the meeting was a brainstorming workshop to find the right balance and to crystallise the role of the Committee in overseeing the Budget. Could the Committee, for example, influence how much could be allocated to a departmental program? It was doubtful if the Committee would be given that latitude but it was correct that Committee members raised issues such as these. It was about finding the right balance between undue influence and not doing anything.

Ms Nkomo said the Committee’s role should be reviewed closely especially where its role could be expanded and that they could make recommendations to other committees.

Ms Kekana suggested that the Committee could have bilateral meetings with other portfolio committees. While the Committee considered financial issues, the portfolio committees might  take other non financial issues into account.

Mr Jantjies said the Money Bills Act governed what the Committee could do in terms of the Budget.

The Chairperson said that while a more ambitious role for the Committee might be possible, whether it was realisable, given time constraints, was another matter.

Consideration and adoption of the Development Bank of Southern Africa (DBSA) Amendment Bill [B2-2014]

The DBSA Amendment Bill [B2-2014] was adopted by the Committee. The DA reserved their rights. The Chairperson said he had spoken to the CEO of the SA Local Government Association (SALGA) who was very unhappy with the decision that a SALGA member would not be on the Board of the DBSA.

Regarding international agreements which appeared before the Committee for ratification, the Chairperson noted that the Committee was not exercising proper oversight and questioned whether the Committee had the capacity and the time to do it. The Chief Whip had been informed that the Committee was giving the PBO one month to set out how Parliament had been processing agreements and how the Committee had been effecting its oversight role. If it was just a matter of a formal tabling of the agreements, did the Committee have to spend a lot of time on it? The rules of Parliament needed to be reviewed. 

Overview of the Budgetary Review and Recommendations Report (BRRR) by the Research Unit

Ms Bridgette Diutlwileng, Committee Researcher, said the BRRR was following a new template. She gave some background to the BRRR and spoke to the legislative requirements, how the legislation was translated into practise, the mandate of the Committee, the BRRR processes and lessons learnt from previous iterations of the report (see document). Primarily, the BRRR report was aimed at assessing department’s service delivery performance given available resources; Assessing  effectiveness and efficiency of department’s use and forward allocation of available resources; and may include recommendations on the forward use of resources. The BRRR provides an opportunity to influence budget formulation through recommendations and ensure service delivery to improve the quality of life of the people.  On lessons learnt, essentially, the key purpose of the BRRR is to make recommendations on future budget allocations based on past performance and expenditure. There is a move from a backward looking approach only to one that is both backward as well as forward looking. Furthermore, there is a move to an understanding that all the work that the Committee has done (in oversight visits, budget hearings, expenditure hearings, oversight meetings etc) informs the recommendations contained in the BRRR.

Discussion

Mr Ross said that the BRRR was an important report as it took the Committee’s recommendations forward to inform the MTBPS.

Ms Kekana said the BRRR was a tool to track financial performance and service delivery emphasizing value for money and cost containment and poor planning which should have synergy with its provincial equivalent. She called for the BRRR to include the trend of departments with infrastructure elements because there were areas of overlap with other departments. The departments were sometimes taken for a ride because they were involved with infrastructure without having the engineering capacity to do so. Hence the Department of Public Works’ centre stage role on infrastructure became more critical.

Ms Nkomo said the BRRR report was a tool to answer critical questions like under spending and that the quarterly financial report on spending should also acknowledge areas of real savings and good spending, value for money being a critical area. The report also had to note virements which was supposed to be limited to 8% but were sometimes 25%.

Mr N Kwankwa (UDM) said the BRRR enabled to the Committee objectively assess the performance of departments.

Ms D Mahlangu (ANC) said she noted Ms Kekana’s comments on the contested area of the mandate of departments such as public works and health and education for example, in terms of what their core functions were. The Annual Performance Plan (APP) should have outputs and so what would the correct procedure be if the Department changed its APP in reviewing its budget?

The Chairperson said equating outputs with outcomes was far reaching at the moment. The Committee had to take quarterly reports beginning 2015- it would take the quarterly reports of the Treasury and SARS and a few entities and ask the Auditor General (AG) to recommend these as being priority entities. The process would cover all entities in a three year cycle. The format of reports were too long and should be three to four pages long- the MTSF report could be 12-15 pages. The AG’s report was an open report and the entities would hear the AG first before the entities were given a chance to reply.

Regarding the adoption of the MTBPS report, Ms Diutlwileng said that the Act provides that the BRRR had to be submitted before the adoption of the report, not the tabling of the MTBPS. Recommendations of 2014 would be for the 2015/16 budget, so recommendations made up till the end of October would still be in time before the February report. Hence, there would be time to amend recommendations of the BRRR.

Regarding oversight visits, it was important from the perspective of verification. Treasury was a subsidiary department for many of the outcomes of the MTSF so the Committee would have a role to play in ensuring value for money in departmental expenditure.

The Chairperson asked if there had been a situation in which a BRRR recommendation led to amendments by Treasury in the following year.

Ms Diutlwileng said that had not yet happened. The Minister in the budget review included an annexure which responded to Parliament. Most of the committees had similar recommendations.

The Committee discussed other internal matters.

The meeting was adjourned.