2014 Medium Term Budget Policy Statement: hearings with NUMSA, Equal Education and Public Service Accountability Monitor

Meeting report

NUMSA submission on the 2014 MTBPS
Mr Woody Aroun, Parliamentary Officer, stated that the MTBPS had to be geared to reducing unemployment, poverty and inequality. There were persistent differences among projections and final outcomes in terms of GDP growth and expenditures. Differences in expenditure due to underspending undermined service delivery and social prosperity in South Africa. MTBPS priorities were not in line with the main problems of the country. Negative real growth meant that expenditures did not keep up with inflation. Declined GDP growth coupled with lower real expenditure growth meant that it was not a counter cyclical budget. Reducing the wage bill in the public sector would have a negative effect on job creation. Withdrawing funding and freezing recruitment would worsen matters. Vacant posts needed to be filled, not cut. The sale of non-core assets would lead to higher privatisation rates and less control over pricing. It was questionable if the SOEs were giving back to the economy. There were broad differences across Eskom vs municipal electricity pricing schemes. NUMSA took exception to remarks that labour disruptions contributed to the poor economic growth rate.

Mr Aroun briefed on problems with procurement; wind farms; ETIA concerns; and rating agencies. Rating agencies were influencing local policy choices. There was a need for incomes policies to support growth of demand; growth enhancing fiscal policies, and industrial policies to promote investment and structural transformation.
 
Discussion
Mr A Shaik Emam (NFP) remarked that NUMSA was affiliated to COSATU. It was possible that NUMSA and COSATU Had had prior deliberations, and COSATU would also present later in the day. There could be duplication. It might have been more valuable if the separate contributions had been put together.

Mr Aroun replied that there was a history to that. Not all unions had Parliamentary Officers. The People’s Budget Commission, composed of the unions and churches, used to make joint statements but it had withered away.

Mr Shaik Emam noted dissatisfaction with the government policy on manufacturing and incentives to the textile industry. He asked if government was trying to reduce such industries.

Mr Shaik Emam referred to the debt deficit. Government would reduce debt service costs. There had to be more money for the most needy. The Treasury had come out with mechanisms to close loopholes against fraud, corruption and maladministration. Yet other loopholes were found. Still it seemed that Treasury was successfully closing gaps. Something was working.

Mr Aroun replied that NUMSA acknowledged what had been done to close loopholes, and also wanted to make sure people did not get away with fraud and corruption.

Mr Shaik Emam asked what NUMSA was doing to assist with the challenges people were facing. Demands from labour were sometimes extravagant. The question was if too much was expected from government. Labour had to be willing to sit down to solve problems.

Mr Aroun responded that there had been engagement with the Labour Portfolio Committee about a national minimum wage. There were public hearings. Statistics South Africa had indicated that for more than 50 percent of workers, it was the employer who decided on the wages. It was negotiated by bargaining councils and individuals. There was a huge casual and informal labour market.

Mr Shaik Emam noted that NUMSA did not have confidence in the Division of Revenue Bill. He asked what was suggested as alternative options. There was a global economic downturn, and the effect on South Africa posed serious challenges. Too much could not be expected too soon. The right mechanism had to be put in place. All stakeholder opinions were important to that process.

Mr Aroun replied that incentives to reduce unemployment had to recognise that it was a structural problem. NUMSA had pronounced against the Bill the year before, with no response from Treasury.

Mr M Figg (DA) in reference to the statement on slide 14, said reducing the wage bill in the public sector would have a negative effect on job creation. That statement was true if the state was the main provider of jobs. There also had to be private sector investment for job creation.

Mr Figg referred to the statement that affordable electricity had to be ensured (slide 17). There was only so much that could be done to provide free electricity. Ultimately the country had to borrow to sustain free services. It had to be reduced, not increased.

Mr Aroun responded that there had been different policy instruments since 1994. The situation with regard to access to water and electricity was that more people were being disconnected.

Mr Figg referred to the NUMSA statement that it took exception to the remark that labour disruptions contributed to the poor economic growth rate. It was not mere labour disruption that was a problem. The issue was violent and protracted labour disruption.

Mr Aroun responded that labour had a right to bargain. It was not possible to determine the length of a strike beforehand. There were criminal laws that could deal with violence.

Mr Figg remarked that it was pointless to worry about rating agencies influencing local policy choices. South Africa was lacking in resources to fund its own budget.

Ms R Nyalungu (ANC) asked how increased free electricity services was to be achieved (slide 17).

Ms Nyalungu asked what a “harder stand” on breaching of procurement regulations would mean (slide 20). There were laws to guide dealing with such irregularities.

Dr C Madlopha (ANC) noted that NUMSA did not agree with the decision to withdraw unfilled funded posts. She asked what NUMSA itself was doing in that regard. There was the provision that exceptions would be considered for critical positions. She asked if NUMSA was of the opinion that funds for unfilled vacancies had to be kept.

Mr N Gcwabaza (ANC) referred to the proposed budget cut in allocation to national departments of R6.2 billion. There were no proposed cuts in budget allocations to the lower spheres. The Minister had asserted that the budget would not be balanced on the backs of the poor. Government wanted more service delivery at the provincial and local government levels. There were no suggested cuts to social security. There was the possibility of building provincial and local economies and creating jobs.

Mr Gcwabaza remarked that the medium term budget estimates showed increases in allocation. There was no fiscal contraction in a broad sense. Efficiency was emphasised. Wastage and maladministration would be avoided. Allocations to local government capacity would make it possible to improve government performance.

Mr Gcwabaza remarked that the Minister was saying that more money could not be asked for if existing money was not spent. The President had called for a filling of vacancies in 2011, and it had not happened. It was said posts were not filled because requisite skills were not available. There were scarce skills needed at the technical level. But government had to create skills. The question was whether posts that had remained unfilled for a long time were really needed. Departments had to be forced to say what skills were still required. The question was how posts were to be created, funded and filled. It would not do to to downscale employment in the public service. The focus had to be on posts relevant to the building of a capable developmental state.

Mr Gwabaza remarked that a report the week before stated that there were 20.1 million people active in the South African economy. But there was still unemployment. Researchers had to revisit that area. Union membership had increased by 22 percent. There had to be economic growth, but it was hampered by unemployment. He advised that COSATU and other unions relook the economic situation.

Mr A McLaughlin (DA) remarked that he agreed with a lot of what was said, but there were anomalies. He asked about the NUMSA definition of social prosperity.

Mr Aroun responded that the NUMSA position was that quality of life could not be measured by the GDP. The UN had compiled a happiness index. The UN was in favour of a developmental trade policy.

Mr McLaughlin referred to the Public Sector Wage Bill. When one segment of the economy stopped employing, people simply went looking elsewhere.

Mr Aroun replied that NUMSA did not want a bloated public service. But a skills base had to be built. There was no proper audit office. NUMSA could not speak for the public service. There were public service unions. But cuts for more efficiency were being made in a country with the highest inequality in the world. Rising levels of inequality had to be dealt with.

Mr McLaughlin asked if NUMSA was in favour of selling non-core assets. Due to the deficit, there was a R6.2 billion reduction in the budget. There had to be funding from somewhere. Government either had to sell assets or borrow.

Mr McLaughlin asked about the NUMSA position with regard to pricing.

Mr Aroun replied that there had to be incentives to reduce unemployment. Unemployment was a structural problem. NUMSA was a manufacturing union, and was concerned with beneficiation. The Department of Trade and Industry (DTI) had changed export parity pricing. It was a market price and would not speed up beneficiation. The strongest lobbyist was the Chamber of Mines. A sound industrial base had to be built. There had to be decent employment.

Mr McLaughlin referred to rating agencies. Such agencies represented the interests of people who had money. Bad economic performance caused lack of confidence for investors.

Mr Aroun replied that rating agencies had too much influence on local policy space. The question was how to leverage own resources. There was capital accumulation with too much money leaving the country.

Mr McLaughlin asked why NUMSA took exception at the term “labour disruption”. Even so, no answers in favour of the unions had been given.

Mr Mclaughlin referred to local procurement. It was a fact that some elements could not be produced locally. He could also understand why a Spanish wind power company would want to use Spanish drivers. A South African company operating in Spain would most probably have insisted on South African drivers. NUMSA was upset because it was said at the indaba that social development was not the core business of the wind power companies. But it was their core business that they were bringing to the country in the first place.

Mr Aroun responded that the wind farm project had been launched with fanfare, in terms of the green accord, to fast track renewable energy. The companies could not be compelled to say when their obligations would be met. The division between project development and localisation was 70 percent to 30 percent. There were seven first round bidders. Companies were written to, to ask for figures. All the winning bidders also applied for National Energy Regulator of South Africa (NERSA) licenses. They used flowery language and accepted the 70/30 division. Their applications should have stated that there was to be no signed agreements about allocations for localisation. The companies saw that as restraint. Siemens and others were already in the country. There was a market that was only lucrative for them. They stated local content requirements in construction and civil engineering. But jobs would be semi-skilled and of short duration. Operational maintenance required specialised skills. Stellenbosch University was setting up a research centre.

Mr Aroun continued that industry and technology had to be localised. Agreements had to be in place before people were invited to invest. Financing through concessions was not used. There had to be solid agreements, visible in the public domain. The building of towers for wind turbines had commenced, with a lack of tangible agreements. Imported content had to be lowered.

Mr McLaughlin asked about NUMSA Employment Tax Incentive Act (ETIA) concerns. The figure of 211000 jobs had to be placed in context.

Mr Aroun replied that it was hard to get an audit of the figures. Treasury had briefed the Public Finance Monetary Policy Chamber/ Labour Market Chamber in NEDLAC on the ETIA. Treasury reported a figure of 211000, but it was by its own admission an estimate. Treasury could not explain the deadweight jobs.

Ms S Shope-Sithole (ANC) said she hoped NUMSA would still be in the meeting when COSATU presented. Fighting crime was a challenge in the public and the private sector. She asked how people were corrupted. Corruption in the private sector had to be discussed, also with the Competition Commission.

Ms Shope-Sithole referred to the funding of posts. Money was sitting and people were not being employed. She agreed with NUMSA about rating agencies. She also did not like the idea of the country being talked down. The question was how to deal with the matter.

Dr Madlopha asked that NUMSA comment in writing about instruments to stabilise prices. She asked if NUMSA had proposals for alternatives to inflation targeting.

The Chairperson concluded that the SC would write to NUMSA about what was required from the union. He thanked NUMSA for the budget issues raised, which assisted the Committee. NUMSA had commented on the shape of the fiscal framework. The Committee agreed with NUMSA that government spending priorities had to take unemployment and equality into account. Economic growth was not at the level desired. A 5 percent growth rate had to be achieved. Failing that, there would have to be fiscal consolidation. It had to be ensured that service delivery was not affected. Expenditure levels were retained at municipal and provincial levels, but the question was what to do to stimulate the economy. 45 percent of the GDP went to public debt. It could be pushed to 50 percent to make the economy grow. The Minister did not say that there was to be no borrowing. But borrowing had to assist growth. The question was how to grow the economy.

Equal Education and the Public Service Accountability Monitor joint submission on the 2014 MTBPS
Ms Zukiswa Kota, PSAM Researcher and Ms Hopolang Selebalo, Parliamentary Liaison Officer for Equal Education, briefed the Committee. It was noted that R397.7 million had been shifted from the indirect school infrastructure backlogs grant to the education infrastructure grant. There had been significant progress with the delivery of school infrastructure but many South African schools were still considered unsafe or “inappropriate”. The Education Infrastructure Grant (EIG) was intended to be supplementary to provincial infrastructure programmes. Non-reductions suggested good use of budget allocations by provinces. There was concern about transparency in the implementation of the EIG. The Accelerated School Infrastructure Development Initiative (ASIDI) was intended to ensure the eradication of inappropriate schools by replacing 496 mud schools between 2011/12 and 2013/14. There were massive challenges with regard to expenditure over the years, with reductions to the budget. There were challenges facing the education system in the provision of scholar transport. Yet the MTBPS and the proposed Division of Revenue Amendment Bill did not allocate funding for learner transport exclusively. The briefing considered funding for school nutrition through the National School Nutrition Programme NSNP. The Department of Basic Education (DBE) had to consider the inclusion of all eligible learners that were currently sponsored on the NSNP. Quintile 4 and 5 schools were not eligible, but some had nutritional needs.

Discussion
Mr Shaik Emam commended the suggestion that quintile 4 and 5 schools be included in the nutrition programme. There were challenges in the urban areas, with children coming to school hungry. Resources were limited. He asked if the two entities could facilitate the involvement of civil society and private business.

Ms Kota replied that there was in reality only so much in the public purse. The emphasis had to be on better spending. The Department supported business interventions. In the Eastern Cape there was support for food production to assist the programme. There were gaps in interdepartmental cooperation. There was agricultural production at schools, with NGOs providing support. Civil society was filling gaps. But there was a need for interdepartmental collaboration. There were women cooperatives that could push food production and necessary knowledge. There were opportunities for joint ventures between civil society, the community, and business. There was space for NGOs to provide knowledge and expertise towards poverty alleviation.

Ms Selebalo added that food gardens at schools cut down costs, but there were water problems. Some schools had to buy water.

Mr Figg referred to the nutrition programme (slide 21). Service providers were not paid by the provinces. It would be better for them to be paid from the National Treasury. Small business did not have adequate capacity.

Ms Selebalo replied that schools were saying that the Department was depositing money for them, but there was uncertainty about payment to service providers.

Mr Shaik Emam asked how many schools had been built in the Eastern Cape. He asked if the building of new schools had reduced transport needs.

Ms Selebalo replied that there were not enough new schools to mitigate transport needs. Many schools were situated far from main roads. At places like Mount Fletcher and Port St Johns learners had to walk 17 kilometers to school, sometimes over rough terrain.

Mr Figg referred to the photograph of a rural school on slide 7. There were still mud schools in the Eastern Cape. It was an indictment against government.

Mr Figg noted that the full ASIDI amount had not been spent, as contractors had not performed.

Ms Selebalo replied that there were 74 schools produced by the ASIDI programme, with  others under construction. The initial plan had been to build in batches, but the first 49 schools took very long. There were many delays. The schools were completed in March 2014. The ASIDI issue centered around learner numbers. The mandate of ASIDI had initially been to eradicate mud schools, but the term had been changed to “inappropriate schools”.

Mr Figg said the briefing did not contain anything on textbooks.

Ms Kota replied that there had been interventions around textbooks; teachers; punctuality and time spent in class, by Equal Education and PSAM and others.

Mr Figg urged that something be done about transport. There were children who had to walk long distances, and only got to school by 10h00.

The Chairperson remarked that the Committee shared the concerns of the two entities. There would be a meeting with the Department of Basic Education in September. There was concern about grants. The Treasury had reduced the level of expenditure. The issue was on the SC radar screen. The problem was not always money. The SC wanted to visit the Eastern Cape. There had been lots of interventions but the Committee wanted to see more. The entities could share information on school infrastructure with the Committee. There were adequate resources for education, but it had to be used productively, through efficient investment of grants for transport, for example. Members would study the report and engage with the two entities again. There had to be engagements with education again if necessary, and also with the Treasury, about the efficiency of grants.

Dr Madlopha remarked that education was a priority. Access was of key importance. She asked what the other components of access to education were, besides infrastructure. Other hindrances to access had not been considered.

Ms Shope-Sithole remarked that she was glad to see youth standing up for themselves. She asked that the two entities leave contact details, so that issues could be discussed.

Ms Kota replied that access interventions were expensive. There was a lack of access to Early Child Development (ECD) support during the first 1000 days of the child’s life. The youngest and most vulnerable were being targeted. Access for South African learners had increased, but it had become time to target quality issues. Nutrition problems were a hindrance to access. A hungry child could not work, regardless of good textbooks and teachers. The question was if education reached such children.

Dr Madlopha asked about transparency, with regard to the EIG.

Ms Kota replied that transparency was a national problem. There were challenges of access to provincial budgets. There was a need for comprehensive availability of budget detail. There were big transparency issues related to ASIDI. Questions had to be asked about the spending of budgets. There were principals who did not know that schools had to be upgraded.

The Chairperson adjourned the morning session of the meeting. The Committee was going to proceed with a presentation from COSATU during the afternoon session.

Presentation by COSATU
Mr Mark Parks, COSATU Deputy Parliamentary Coordinator introduced himself to the Committee stating that COSATU was concerned with the 35% unemployment rate in the country which translated to the fact that many South Africans still suffered from poverty.

Mr Parks said COSATU was also concerned about the stagnant economic growth rates which translated to unemployment and other issues of under development. He added that the alarming number of corruption rates in South Africa was also a concern for COSATU as it translated to the fact that money that was meant to be used to upgrade the lives of the poor and previously disadvantaged was used in a malicious manner. He also said they were concerned with under expenditure of government departments because this also meant that the objectives set out by any department at the beginning of the financial year were not achieved if at the end of it there was under expenditure by the department.
He added that COSATU also had broad macro-economic concerns which encompassed policies that were counter cyclical and that they needed radical economic transformation. He said in terms of economic growth forecasts, they wanted to see rapid economic growth as well as government expenditure reduction and that there was a decline in real growth in the economy. He said in terms of government expenditure savings as well as austerity cut backs there had to be legitimate savings as well as cut backs.

Mr Parks told the Committee that there had to be inherent savings in provinces and municipalities and a rapid decline in wasteful expenditure and corruption. He made an example of the Department of Public Works which he said was one of the departments which had an alarming number of irregular expenditure. He said there needed to be cut backs on wasteful expenditure as well as balancing the budget on the backs of the poor as a result of things such as wasteful expenditure. He also added that unfunded and unfilled vacancies were a problem and that in going forward they needed to build a capacitated developmental state.

In terms of the Wage Bill, COSATU's fundamental problem with it was that it catered for low wages and created wage gaps. He said this needed to be eliminated so as to create a motivated and capacitated public service as well as to boost the local economy. With regards to state owned enterprises and assets, he said there needed to be a disposal of non-strategic state assets as well as the eradication of wasteful expenditure. In respect of expenditure priorities as well as division of revenue he said there needed to be an increase in social services expenditure, NHI funding models as well as an 11 million job target by 2030. He also said they had to tackle corruption collectively as government y having political will and have successful prosecutions. He said their medium terms strategic framework interventions needed to include government commitments to boost energy, rail, port, oil and gas, infrastructure as well as improving labour dispute mechanisms.

In respect to the Expanded Public and Community Works Programmes, Mr Parks said COSATU had found inherent problems in it such as the fact that it seemed to be temporary relief and that the issue of minimum wages was difficult to monitor and that they had found that in some areas people were paid with food parcels instead of the wages they deserved. He said the public works programmes were meant to stimulate skills development and that they needed to be guarded so as to protect local people from being used as cheap labour instead of being given decent work. In terms of manufacturing, agriculture beneficiation and industrialisation, he said there needed to be further manufacturing support, support for the agricultural sector, mining beneficiation as well as nuclear energy.

With regards to transport, he said there needed to be rail upgrading and procurement, development of public transport and the issue of e-tolls and user pay needed to be addressed because as COSATU they believed that the state made enough revenue through income taxes and other forms of tax to be able to service their own roads without disgruntling the public. He said in respect of basic education, they wanted to see an improvement in school infrastructure, elimination of mud schools; they wanted to hear no reports of schools not having textbooks as well as to fill teacher vacancies and increase their salaries accordingly. In terms of post-school education and training, he said they were pleased to see NFSAS funding expansion and they were happy that the result was that more students were able to get funding in 2014. He said with regards to health, they were pleased with the development of the ARV's and urged that there be a swift move towards NHI, He said social protection needed to be a priority and it needed to be expanded.

With regards to defense, public order and safety, Mr Parks said the judiciary backlogs needed to be alleviated and the corruption inherent in correctional services needed to be addressed as it was crippling the entire process of correcting criminals so as to bring them back as better people in society. He said the SSA 3 billion rand corruption allegation was alarming and needed to be thoroughly investigated. He said in respect of rural development and land reform the state needed to provide sufficient funding to address the backlog in restitution claims and provides new farmers with sufficient support. He said with regards to public procurement there needed to be tender transparency and local content in state procurement. He also said there needed to be long term solutions to local government funding and they were pleased to see Minister Pravin Gordan moving towards this direction.

Mr Parks said all in all, COSATU was happy with the developments and progress on the side of government but said there was always room for improvement and it was their job as COSATU to constantly show the government where it is that they were lacking so as to create a better life for all South Africans.

Discussion
The Chairperson thanked COSATU for giving a clear presentation. He said he would only allow one round of questions because the meeting had to conclude by 14:00 so as to prepare for the House sitting.

Ms Shope-Sithole  said the Committee appreciated the views of COSATU and they as the legislature were mandated to make sure that government and its entities functioned in manner that would ultimately translate to South Africans having better lives.

Mr Shaik Emam said COSATU should present the Committee with a document stating their exact view on how to change the status quo. He also enquired about strikes pertaining to wages. He said those kinds of strikes crippled the economy when an unrealistic figure was asked for. He asked whether unions considered the percentages they asked for so as to not ask for unrealistic figures so that countries could continue operating irrespective of the strike. He said he appreciated the fact that COSATU realised that a lot was being done and that there were positives and negatives and ask them to assist the government in finding solutions.

Mr Figg said he could not foresee 11 million jobs materializing in 2030 due to the fact that the country was in a lot of debt. He said he concurred with the notion that all vacancies in government departments should be filled and that people who were in positions they were not skilled to be in were also a burden in government departments. He said it was the union’s job to protect peoples' interests and he was glad that they were indeed heeding to their call.

Mr McLaughin asked whether the 35% unemployment rate referred to formal or informal employment and also asked if when referring to the poor they were referring to the unemployed poor or the poorly paid. he asked why unions did not raise the minimum wage before the budget was approved as a strategy to prevent their call being rejected on the basis of the budget already have been adopted.

Mr Gcwabaza said the 35% unemployment rate was a problem and an increase in government spending to stimulate the economy was a solution but it was not the only solution. He asked what COSATU thought the government should do in respect to this. He also said there needed to be a review of the structure of entities in different government departments and to evaluate if there was a need for boards because it could be that they were relevant in the past but not today. He also added that a recent study had shown that membership to unions had increased by 22% yet unemployment had been reported to have decreased and that they needed to evaluate whether the economy was increasing or not. ]

The Chairperson said although Mr Parks could respond to some of the question, he could prepare some responses in writing.

Mr Parks said the Members raised very important questions and that a comprehensive economic document was to be given to the committee. He said in general there was very little growth in the economy and unemployment was too high. He also said there was labour unrest in the country which resulted to workers embarking on strikes. He said workers suffered the most during strikes as they did not get their wages which was already low to begin with. He said they had to ask for a higher percentage so that they could have hope of realising the exact percentage increase they wanted so it is not that their request was unrealistic but rather strategic and necessary to achieve their aims.
He also said when workers were disgruntled and had suffered for a long time it was hard to tell them that their demands were 'unrealistic' because they knew exactly the conditions they worked under and how much their labour was being exploited. He said in respect to the Expanded Public Works Programmes, they had formulated a task team with NEDLAC and that they had engaged the ministry in order to alleviate the problems inherent in the programme. He said while there was a national minimum wage set by the department there were parts of the country where it was ignored and that they had found that in some areas people were being paid with food parcels instead of the wage they were meant to be given.

Mr Parks said the 35% included of those who were unemployed as well as those who had given up on finding jobs. He said in general, there was a bad perception of public servants, they were viewed as being lazy and unable to work. He said this perception needed to be changed and the public service needed to be equipped so as to perform their tasks adequately. He said cancelling police and teacher vacancies was not a solution to solving the manner in which some of them were not adequately equipped to perform their tasks. He concluded by saying he hoped he had answered all the questions but there was an inherent time constraint and their office was always open for members to engage.

The Chairperson thanked Mr Parks for his response and said the Committee would keep in touch and that Members would await their economic policy document.

The meeting was adjourned.