Adjustment Appropriations Bill: Committee Report adoption; Division of Revenue and Conditional Grant Allocations to Provinces & Local Government; 2014 Committee activities

NCOP Appropriations

26 November 2014
Chairperson: Mr S Mohai (ANC – Free State)
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Meeting Summary

The Standing Committee on Appropriations considered, and adopted, draft Committee Reports on the approval of the Adjustment Appropriation Bill, the proposed Division of Revenue and Conditional Grant Allocations to provinces, the Committee's report on its activities from June to December 2014, and the draft Committee programme for the first term of 2015. The Member for Mpumalanga indicated that he wished to reserve his rights in respect of the Adjustments Appropriation Bill, and this was duly noted. In respect of the Division of Revenue and Conditional Grant Allocations (which the Select Committee must report upon in terms of the Money Bills Amendment Procedure and Related Matters Act 9 of 2009), a summary was given of the Committee's observations and recommendations, following the submissions made by stakeholders. The Committee had recommended that reduction of grants and reprioritisation of funds should be used as an interim measure only, while  efforts to improve efficiency in grant spending continued. Capacity to spend should be a determining factor in the design of grants, to avoid under-spending. Care should be taken, when trying to minimise support to State Owned Companies, to avoid unintended consequences, which might include rewarding under-performing entities and constraining those that did perform. The Committee appreciated the prompt action by National Treasury in responding to the Committee's recommendation to move money to finalise the Moloto Road Corridor project. It recommended that, in addition to centralised procurement, National Treasury should also explore other cost-cutting avenues, such as the use of shared services, better land and property utilisation, reducing printing, advertising and meeting costs (by using video-conferencing). National Treasury was also asked to expedite processes so that disaster allocations to the Matlosana Local Municipality could be funded from the 2015/16 budget. Members adopted that report, subject to the addition of a reference to the Committee's emphasis on multi-year planning for municipalities. It was noted that the Committee's Annual Report on its activities had been requested by the House Chairperson but did not need to be published in the ATC. Members also adopted the minutes of 18 November. Finally, the draft Committee Programme for the first term of 2015 was tabled. Members asked for the inclusion of a report by the Davis Committee on Tax, prior to the tabling of the National Budget, and recalled that provinces must report on provincial growth and development strategies, although that was scheduled for the second term. The Whips' training, scheduled for 27 to 29 January, would now attended by both the Whips and the Chairpersons, and an oversight visit to Eden in the Western Cape was scheduled. 

Meeting report

The Chairperson noted the co-option, for the purposes of forming a quorum for the adoption of reports, of Mr L Suka (ANC – Eastern Cape), and asked that Members consider the adoption of draft Committee Reports.

Draft Committee Report on the Adjustments on Appropriations Bill [B10-2014] dated 26 November 2014
Ms Estelle Grunewald, Committee Secretary,Select Committee on Appropriations, read out the draft Committee Report to the members, to the effect that the Select Committee supported the adoption of the Bill.

The Chairperson explained that the Committee had gone through the Adjustments  Appropriation Bill and was proposing that the Bill should be passed.

Mr F Essack (DA – Mpumalanga) said that he reserved his right on the Adjustment Appropriation Bill.

Mr L Suka (ANC – Eastern Cape) wanted some clarification on the statement made by Mr Essack. He wanted to know whether there would be declarations in the House.

The Chairperson explained that Mr Essack, by stating that he reserved his right on the Bill, was indicating that he neither rejected nor agreed with the adjustments to the Bill. He was abstaining from voting at this meeting, or indicating that he did not have a view. There was no indication yet that there was a request for declaration.

Responding to Mr Suka, Mr C De Beer (ANC, Northern Cape) explained the procedure for this Bill.

The majority of the Committee agreed with the adoption of the Committee Report, supporting the adoption of the Bill.

Draft Committee Report on the Proposed Division of Revenue and Conditional Grant Allocations to Provincial and Local Government
The Chairperson mentioned that the standard report highlighted the stipulations that the Committee must consider in preparing the report. He went through the report page by page and asked for comments or objections from the members.

He noted that, in terms of the Money Bills Amendment Procedure and Related Matters Act 9 of 2009, the Select Committee on Appropriations was required to consider and report on the proposed division of revenue and conditional grant allocations to provincial and local government, as contained in the Medium Term Budget Policy Statement (MTBPS). The report of the Select Committee, according to section 6(10) of the Act, must set out the following information:
- The spending priorities of national government for the next three years
- The proposed division of revenue between the different spheres of government and between arms of government within a sphere for the next three years
- Any proposed substantial adjustments to conditional grants to provinces and local government.

It was noted that the proposed division of revenue and conditional grant allocations were made during a time when there was a need for sustainable public spending, due to the current weaker economic environment and poor economic outlook. Growth projections were revised downwards in the MTBPS -  from 2.7% to 1.4% in 2014; from 3.2% to 2.5% in 2015; and from 3.5% to 2.8% in 2016. The MTBPS proposed lowering the expenditure ceilings for the first two years of the 2015 Medium Term Expenditure Framework (MTEF) by R10 billion and R15 billion respectively. The fiscal policy measures proposed to moderate expenditure were coupled with tax reforms that were aimed at increasing revenue to improve the fiscal position by R22 billion, in 2015/16, and by R30 billion in 2016/17 respectively.

The following observations had been made by the Select Committee on Appropriations  whilst considering and deliberating on the 2014 MTBPS and submissions by stakeholders:
- Government had reduced the expenditure ceiling and baseline allocations for direct and indirect conditional grants that reflected an under-spending, but the reduction would not affect the provision of services
- The expenditure of the Government would remain focused on social services, with about 42% of allocated spending of MTEF period going to social services.
- Government also adopted a deficit-neutral approach in financing state-owned entities
- Government proposed to shift funds from existing road allocations at provincial and national levels to the Moloto Road Project
- The Office of the Chief Procurement Officer would roll out a new national approach to procurement as a cost-cutting measure over the next three years
- The National Treasury would lend a collaborative review of the local government infrastructure grant system. It was aimed at making evidence-based reforms that maximised value for money from existing resources whilst improving the sustainability of the system and the assets created
- National Treasury had indicated that the North West Province request for disaster funding for the Matlosana Local Municipality had received attention and might be accommodated either within the 2015/16 budget or the 2015 Division of Revenue Amendment Bill.    
The recommendations of the Committee, following the submissions by stakeholders, were summarised, namely that:
- The reduction of grants and reprioritisation of such funds should be used as an interim measure while efforts should be made to improve efficiency in grant spending
- Efforts to minimise financial support to state-owned entities should avoid unintended consequences such as rewarding under-performing entities while constraining performing ones in their attempt to expand their capacity to fulfil economic and developmental mandates
- The National Treasury should be commended for swiftly responding to a previous Committee recommendation to fund the Moloto Road Project. The reprioritisation of the funds and trade-offs made were due to the current financial constraints
- In addition to the Central Procurement of certain services as a cost-cutting measure, the National Treasury should explore other cost-cutting avenues such as the use of shared services, better land and property utilisation, reducing printing costs, reducing advertising costs and using video conferencing instead of travelling
- The National Treasury should expedite its processes so that the request for disaster allocations in the Matlosana Local Municipality could be funded during the 2015/16 budget
- Capacity to spend should be a determining factor when grants were designed and introduced, to avoid under-spending that might lead to the unnecessary conversion of grants at a later stage, or unnecessary roll-overs or poor maintenance of such assets and infrastructure.

The Committee, having considered the 2014 MTBPS and submissions made by stakeholders, reported that it had agreed to the proposed division of revenue and conditional grant allocations to provincial and local government as contained in the 2014 MTBPS.


Mr De Beer pointed out that the Committee had earlier emphasised the importance of multi-year planning, specifically for municipalities, which referred to the conditions stated in the Division of Revenue at page 177. He pointed out that this specific recommendation by the Committee was not captured in the draft Committee Report (the Report) and the emphasis was in relation to the Municipal Infrastructure Grant (MIG) funding. The point must be captured.

The Chairperson agreed that this was a valid point that must be reflected in the Report.

Members adopted the Report, with the inclusion raised by Mr de Beer.

Consideration of the 2014 Annual Draft Report.
Ms Grunewald pointed out that the Annual Report on the activities of the Committee from June to December 2014 would not be published in the ATC, but was just an administrative report that was requested by the House Chairperson, who had indicated, at a previous Committee of Chairs meeting, that all Committees must write and adopt a report on their work during the year. This report reflected who the Members were, the bills that were considered, the submissions made, the strategic plan and the training embarked upon, as well as information on cancelled meetings and sponsorships received. The report reflecting the work done was in the format requested and would be  submitted to the Office of the House Chairperson by month end.

Ms Motara pointed out a misspelling of one Committee Member's name on page 1.

Subject to that correction, the Members adopted the Report.

Committee Minutes 18 November 2014
Members adopted the minutes of the meeting on 18 November, with no amendments.

Matters Arising
The Chairperson expressed appreciation to Mr Suka for readily being available to stand in at this meeting, to ensure that the business of the Committee could be concluded. He also expressed thanks to Members for their consistency in attending meetings, noting that absences disrupted the Committee's plans. He also made special note of the efforts and time expended by Mr de Beer, Chairperson of the Standing Committee on Finance, the Committee Whip, Ms Motara and Mr Essack, for the time and energy they had put into the smooth running of the Committee for the term. The Appropriation Committee had been empowered to deal with crucial matters around the budget, which was an instrument for the realisation of the expectations of people. This Committee must scrutinise figures not only as bare statistics but also see them as an important instrument towards the realisation of a better life for the South African people.

Mr Suka was excused from the meeting at this point.

Draft Committee Programme: First term 2015
Mr Zolani Rento, Committee Secretary, Select Committee on Finance, took the Members briefly through the draft Committee Programme for 17 February to 28 April 2015, noting that it had been circulated to Members already.

Mr De Beer emphasised that it would be helpful if the Select Committee on Appropriations could have a meeting with the Davis Committee on Tax before the National Budget was tabled. He proposed that the Committee  arrange this for the first Friday of February, Friday being a working day.

The Chairperson replied that some dates must still be finalised, as meetings on those dates had yet to be approved by the Chairperson and Whips, but in principle agreed that a Friday meeting would be suitable.

Mr Dr Beer raised another concern, which had to do with the growth projections as stated in the MTBPS. It would be helpful for the Committee if the provinces reported to the Select Committee on Finance on their provincial growth and development strategies. He proposed that a serious series of meetings with the provinces should be slotted into the schedule.

Mr Zondi reminded Mr De Beer that, at the previous management meeting, it was agreed that a series of meeting with the provinces would be held in the second term of 2015.

Ms Motara announced that Whips' training must be added to the programme, and this training would now attended by both the Whips and the Chairpersons, as announced by the Chairperson of Committees on the previous day. This three-day workshop would take place from 27 to 29 January. She also noted that from 3 to 6 February, there would be an oversight visit by the Committee to the Eden District, in the Western Cape.

Mr De Beer reiterated a question he had posed the previous day on the other sites for oversight visits in the Western Cape, stressing that Members needed to know this information before leaving for the recess.

Ms Motara said that the only indication that was given was that the oversight visit would be in the Eden district, and not throughout the Western Cape Province. However, the Committee Secretaries would definitely have the programme finalised before Parliament resumed next year.

The Chairperson added that the draft programmes would be tightened as the Committee proceeded with the new term, subject to the Steering Committee meetings. He reminded Members also that they had agreed that Committee Secretaries must draw attention to the areas of focus after the brain storming sessions.

The meeting was adjourned.


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