Committee Reports on 2014 Medium Term Budget Policy Statement & Adjustments Appropriation Bill

Standing Committee on Appropriations

18 November 2014
Chairperson: Mr P Mashatile (ANC)
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Meeting Summary

The Committee Report on the 2014 Adjustments Appropriation Bill, noted that National Treasury, as well as two departments affected by these adjustments, the Departments of Tourism and Economic Development, had briefed the Committee on the Bill. The Department of Sports and Recreation was asked to furnish reasons for its requested adjustments in writing. The Committee Report contained an overview of 2014 budget adjustments; the 2014 macro organisation of the State; adjustments for identified department; Committee observations and findings, and recommendations.

In the consideration of the report, the Committee objected to the inclusion of the Deputy President’s salary as a separate item under direct charges to the National Revenue Fund (NRF). Concern over virements in excess of the 8% government limit, were highlighted. Vacancies were discussed. The Committee had to stress the need to fill critical posts. Virements from unfilled vacancies indicated that those jobs were seemingly not critical. It was felt that the Committee had to commit to assisting departments that were underspending. There was agreement that shifting of funds had an impact on service delivery, and was the result of inadequate planning. It was suggested that the Department of Sport and Recreation cooperate with the Department of Basic Education to enhance school sport.

For its consideration of the Medium Term Budget Policy Statement, the Committee had invited public comment by stakeholders. Hearings were held with the Financial and Fiscal Commission; Human Sciences Research Council; the Parliamentary Budget Office; the Public Service Commission; the National Union of Metalworkers of South Africa, Equal Education, Public Service Accountability Monitor; Wits University, University of South Africa, and the Congress of South African Trade Unions. The Committee Report covered the Medium Term Expenditure Framework (MTEF); the public hearings; the Committee’s observations and findings and its recommendations.

In consideration of its report, the Committee discussed debt and debt costs; the role and capacity of the Chief Procurement Officer (CPO); the inadequate funding for post-school education; shortcomings of the quintile system with regard to the school nutrition programme; the NSFAS student fund; the National Health Insurance (NHI); the role of the Department of Performance Monitoring and Evaluation (DPME). It was suggested that the Committee hold a media briefing once a month to provide an update on progress made by departments.

Meeting report

Committee Report on 2014 Adjustments Appropriation Bill
Mr Tshepo Mosoeu, Committee Content Adviser, took the Committee through the draft report.

The Committee Report on the 2014 Adjustments Appropriation Bill, noted that National Treasury, as well as two departments affected by these adjustments, the Departments of Tourism and Economic Development, had briefed the Committee on the Bill. The Department of Sports and Recreation was asked to furnish reasons for its requested adjustments in writing. The Committee Report contained an overview of 2014 budget adjustments; the 2014 macro organisation of the State; adjustments for identified department; Committee observations and findings, and recommendations.

The Committee recommended that the Departments of Tourism and Economic Development align budget planning with the strategic planning function to ensure that projected spending was in line with planned performance. It was recommended that the Department of Tourism consider the establishment of partnerships with the Department of Small Business Development to enhance the domestic tourism market and support for Small, Micro and Medium Enterprises (SMMEs) active in the tourism market. The Report concluded that the Committee agreed to the Bill without amendment.

Consideration
The Chairperson noted that the Economic Development Department (EDD) and the Department of Tourism had appeared before the Committee. The Department of Sports and Recreation was written to, but could not attend the Committee hearing.

The Chairperson referred to the fact that the salary of the Deputy President was cited as a direct charge against the National Revenue Fund (NRF). He was unclear why it had been cited as a separate item.

Mr Mosoeu responded that it was normally a line item. It could not be included in the Estimates of National Expenditure (ENE) under the Presidency.

Dr C Madlopha (ANC) noted that it might have been because there was a new Deputy President.

The Chairperson said that it was not advisable to have the salary as a separate item. He asked if the amount was currently being made available.

Dr Madlopha said that she was not comfortable with the salary being cited as a separate item. She advised that it be changed.

Mr Masoeu responded that formerly an allocation had been made for the President and Deputy President and Members of Parliament. It was governed by an Act of Parliament. It was stated in the Adjusted Estimates of National Expenditure (AENE) booklet.

The Chairperson suggested that budget adjustments of R342 million to estimates of direct charges against the National Revenue Fund be stated, and that it be left at that.

Mr A Shaik Emam (NFP) remarked that it had to be known if the matter would be interrogated in the House. If so, the Committee had to be able to explain why the information was not provided.

Dr Madlopha said that those interested could refer to the Estimates of National Expenditure (ENE). The breakdown of the amount was contained there.

The Chairperson noted that the booklet did not provide the reason that the Deputy President’s salary had been cited in that way for the first time. It had to be checked.

Mr Mosoeu noted that the Department of Sports and Recreation had exceeded the 8% government limit on virements.

Mr Shaik Emam said that the Committee had to be able to say that there were processes in place to prevent excessive virements in future. People had to be brought in line to comply with the original Annual Performance Plan (APP).

The Chairperson said that the Department of Sports and Recreation had to be closely monitored in the third quarter.

Mr Shaik Emam said that when departments deferred issues until the third or fourth quarter, they were treading on dangerous ground. Strategic plans could not be left until the last minute. Departments had to stick to their original plan.

The Chairperson advised that the Committee make a statement to the effect that there was concern about expenditure being too low.

Ms M Manana (ANC) asked why the Department of Sports and Recreation had been afraid to appear before the Committee.

Dr Madlopha noted that the norm for mid-year expenditure was 50%. Expenditure for the last two quarters would not improve if the Department was not ready to implement projects. Departments had to do planning during the first year of the three-year Medium Term Expenditure Framework (MTEF) period. The question was: What people were doing in Quarters 1 and 2?

The Chairperson said that the Department of Sports and Recreation had responded in writing because it had not been possible to fit them into the congested programme.  The Department had to be engaged with in the third quarter. Concerns about the department had to be noted as findings.

Mr Mosoeu noted that the shifted money had come from vacant posts.

The Chairperson said that it had been indicated to departments that vacancies in core functions had to filled. The question was whether these virements were taken from funding for critical, much-needed jobs. The fact that money was shifted from jobs could indicate that those jobs were not of critical importance.

Dr Madlopha noted that in terms of the latest MTBPS, provision would be made for the filling of key posts. Otherwise, all other posts would be frozen.

The Chairperson said that the freezing of non-critical posts had to be emphasised as a finding.

Mr Shaik Emam remarked that it was important for the Committee to comment on projected underspending. Concern about the unspent amount had to be noted. There was the challenge of different financial year endings within the different spheres of government. There was a lapse between the approval of the strategic plan and financial hearings. The Committee had to state that it would take action to assist departments. It seemed as if people were doing nothing, but there were also positive signs. The question was what could be done to change a negative to a positive.

The Chairperson suggested that concern be noted that unspent funds do not compromise service delivery. It had to be stated that unspent funds had to be shifted to areas where it could be spent. It came back to planning.

Dr Madlopha said that what the Committee was not hearing in the Committee Report was the consequences for failing to spend and implement the budget, and for failing to plan properly.

The Chairperson said that Treasury shifted funds to programmes that could spend the funds. But there was concern about where it was shifted from.

Dr Madlopha maintained that service delivery was affected when departments did not stick to the APP. Shifts caused problems.

Mr Shaik Emam said that the Department of Sports and Recreation had to provide a monthly update on its progress in meeting its challenges. Changes had to be made known. One had to ensure that people implemented in terms of their commitments. Departments had to be convinced to take Parliament seriously.

The Chairperson said that these concerns were noted. However, with current capacity, only quarterly reports were possible. However, Treasury could send monthly section 32 reports. The matter would receive attention in 2015. The vacant posts issue was cross-cutting. If posts were not filled, it meant they were not critical.

Mr Shaik Emam said that the Committee had to be more forceful in securing commitments from departments, to make compliance possible. It had to go beyond recommending what departments should be doing. There was a massive response to his request in a previous meeting that the EDD look into the situation of the vulcanised shoe factory at King William’s Town.

The Chairperson asked about recommendations for the Department of Sports and Recreation (SRSA).

Mr Shaik responded that the Department had challenges with implementation. There had to be cooperation with the Department of Basic Education at the grassroots level, from grade one. Nothing was happening to enhance sport at school level. Schools were saying that there was no room for an athletics track on their premises, when there was room 500 metres away.

Dr Madlopha remarked that there were also planning challenges. Activities were being put off until the third or fourth quarter, without regard for the possible challenges that will be encountered. There had to be oversight to ensure that activities were not left until the last minute.

The Chairperson said that enhanced planning allied to budgets could be a recommendation, and coordination with the Department of Basic Education to enhance school sport.
 
Dr Madlopha asked about the role of the Department of Performance Monitoring and Evaluation (DPME). It was supposed to be a planning centre. There was the challenge of departments planning in silos. Planning together could decrease virements. DPME had to assist other departments, and pull up its own socks too.

The Chairperson noted that the issue was dealt with in the MTBPS report.

A finalised report would be adopted on the following day.

Committee Report on 2014 Adjustments Appropriation Bill
Mr Tshepo Mosoeu, Content Adviser, took the Committee through the draft report.

For its consideration of the Medium Term Budget Policy Statement, the Committee had invited public comment by stakeholders. Hearings were held with the Financial and Fiscal Commission; Human Sciences Research Council; the Parliamentary Budget Office; the Public Service Commission; the National Union of Metalworkers of South Africa, Equal Education, Public Service Accountability Monitor; Wits University, University of South Africa, and the Congress of South African Trade Unions. The Committee Report covered the Medium Term Expenditure Framework (MTEF); the public hearings; the Committee’s observations and findings and its recommendations. The draft report did not as yet contain a conclusion.

Consideration
Mr Shaik Emam asked what the Committee recommended with regard to debt and debt costs.

The Chairperson responded that the fiscal framework was designed to decrease the budget deficit. The budget ceiling had been reduced. There was projected growth of debt levels but it had to be contained.

Dr Madlopha remarked that the debt to GDP ratio seemingly could not be improved.

The Parliamentary Budget Office (PBO) asked for permission to make a comment, which was granted.

Mr Rashaad Amra, PBO Economic Analyst, pointed out that Point 4.3 was not a factual statement. Russia and Brazil, who where BRICS partners, had higher debt deficit rates.

The Chairperson advised that 4.3 be deleted.

Mr Shaik Emam referred to the Chief Procurement Officer (CPO). The Auditor-General’s Report was based on documentation. Items were budgeted for in excess of value.  He asked if the CPO was in a position to see that. The CPO was not in a position to cover all issues. Value for money was considered, but it was not asked if the projects were really necessary. The question was if the CPO could go far enough to eradicate corruption.

Dr Madlopha said that the CPO had to be strengthened to address concerns in the local sphere, but it had to be backed up by capacity.

Mr Shaik Emam asked if the Committee could make a statement that challenges had to be identified at the local level.

The Chairperson asked that such a statement be crafted. There was concern about post-school skilling. There was a recommendation about funding under 4.13. The economy had to grow by 5% according to the NDP. There had to be more investment in post-school education. Post-school education was not funded well enough.

Mr Shaik Emam referred to the statement by Equal Education that the quintile system was not working to provide nutrition equitably. Each learner had to be investigated to see if they qualified for the nutrition programme. There were children in urban areas who went hungry, and it started at the pre-school level. It was a serious challenge. There also had to be follow up on NSFAS beneficiaries to see if they completed their studies. It was unfair to expect students to pay money back one year after graduation. There had to be in-service training to combine qualifications with experience.

The Chairperson advised that there could be a recommendation that Basic Education and Treasury investigate the effectiveness of quintile system measures.

Mr Shaik Emam remarked that the Department of Health did not as yet have the National Health Insurance (NHI) system going. There had to be pilot projects to see if it worked.

The Chairperson confirmed that the system was still being introduced.

Mr Shaik Emam referred to job creation in agriculture and manufacturing. There was a lot of red tape, and a lack of monitoring by the Industrial Development Corporation (IDC). Employment had to be accelerated and monitored.

The Chairperson agreed that there could be a recommendation dealing with that.

Mr Mosoeu said that the role of the DPME could be emphasised.

Mr Shaik Emam asked about the success of manufacturing incentives. The urgency of filling key positions had to be stressed.

The Chairperson remarked that it could be brought in under 4.11. Critical posts had to be filled to increase the capacity of the state to make government work.

The Chairperson said that the work of the National Planning Commission had to be defined. The DPME had to engage with Treasury.

Mr Mosoeu drew attention to 5.2.1, which recommended that vetting processes not create bottlenecks in the filling of vacancies.

The Chairperson noted that the conclusion would be added the following day. The Committee would recommend that the House adopt the MTBPS.

Mr Mosoeu noted that there were still recommendations to be made.

Mr Shaik asked if the Committee could hold a media briefing once a month. The public had to be updated about progress made, lest things look all doom and gloom.

The Chairperson responded that a good media person was needed for that. The Committee could approach the Parliamentary Budget Office about that.

The Chairperson adjourned the meeting.
 

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