Committee Report on 2015 Division of Revenue Bill

Standing Committee on Appropriations

10 March 2015
Chairperson: Mr S Mashatile (ANC)
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Meeting Summary

The First Draft Report on the 2015 Division of Revenue Bill was placed before the Committee for consideration. Members were encouraged to make comment or changes to the Draft Report where deemed necessary. The Committee was taken through the Draft Report page by page and substantive changes were made, especially to the recommendations. Additional concerns raised by Members included in the recommendations were the lack of implementation at local government level and effective planning, monitoring and implementation was needed; localisation needed to be prioritised; and value for money needed to be achieved in the provision of services at local government level.
 

Meeting report

Draft Committee Report on 2015 Division of Revenue Bill
Mr Tshepo Masoeu, Committee Content Adviser, took the Committee through the Draft Report page by page. Members were encouraged to comment and suggest changes to the Draft Report where deemed necessary.

Mr Masoeu highlighted important points contained in the Draft Report. On page 2 one of the points made by Mr Masoeu was that National Treasury’s budget documents had since 2012 pointed out that a deterioration of the economic environment would warrant a reconsideration of expenditure and revenue plans. Economic growth had been revised down for the fifth consecutive year and was likely to remain below 3% over the next two years.

Mr A McLaughlin (DA) said that the figure was not 3% but 2.5%. He suggested that ‘projected’ be inserted to read: “Reduce the ‘projected’ expenditure ceiling by R10 billion in 2015/16 and R15 billion in 2016/17.” He also requested that the last bullet point be reworded.

The Chairperson said that the gist of the last bullet point which Mr McLaughlin was referring to should state that state owned companies should not burden the fiscus.

Mr McLaughlin on Page 3 referred to the first paragraph and said that the Report must mention 'cost containment”. On Page 6 paragraph 2 he suggested the insertion of ‘conducted’ and 'in' to read, “To ensure this change does not affect provincial budgets, an audit will be ‘conducted’ after the first year to ensure the change ‘in’ revenue is neutral for the provinces.”    

Ms Wendy Fanoe, National Treasury Chief Director: Intergovernmental Policy and Planning , suggested that the source of the tables on Pages 7 and 9 be stated as National Treasury and Committee Staff’s own calculations.

The Chairperson pointed out that the Committee needed to think about why the bucket system was still out there. It formed part of the Committee’s oversight work and the bucket system needed to be eradicated. He also felt that there were too many conditional grants. There were conditional grants that were ineffective and hence needed to be stopped. National Treasury should consolidate some of the grants.

On Page 10, Mr Masoeu read out the list of main changes found in the 2015 Division of Revenue Bill.

Mr M Figg (DA) referred to the second listed Division of Revenue change which read, “Refocusing the Neighbourhood Development Partnership Programme to support the development of economic hubs in large urban townships.” He asked who decided on what townships were considered ‘large’.

The Chairperson answered that perhaps it depended upon the population size of the township. Townships in metros were large such as the Alexandra Township where he was from.

Ms S Shope-Sithole (ANC) commented that she was from a small township called Hoedspruit and she envied the Chairperson for being from a ‘large’ township.

Ms Fanoe explained that the previous Neighbourhood Development Programme did not before make the distinction between large and small townships. Areas that needed attention needed to be prioritised. She felt that the Department of Rural Development and Land Reform needed to come on board where rural areas were concerned. ‘Large’ townships were identified by municipalities themselves.

The Chairperson agreed that something should be done.

Mr N Gcwabaza (ANC) said that reference was being made to Special Economic Zones. It was provided for in the Budget.

On Page 11, Mr Masoeu spoke to technical corrections that had been made as National Treasury had brought it to the attention of the Committee that there had been an allocation error for the 2015 MTEF allocations for the Municipal Disaster Recovery Grant. The mistake was the allocation of R10 million for the Umjindi Municipality in 2015/16. The allocations should be R4.6 million and R2.6 million respectively for Umjindi and Bushbuckridge Local Municipalities. The remaining R2.8 million would remain unallocated.

Ms Fanoe said that the unallocated funds remained in the Grant. She noted that two things could happen. The first was that the funds could be allocated to municipalities or the second was that the funds could be returned to the fiscus.

Mr Masoeu noted that Pages 11, 12, 13 and 14 provided synopses of stakeholder inputs on the 2015 Division of Revenue Bill. Inputs were made by the Parliamentary Budget Office (PBO), the Financial Fiscal Commission (FFC), and the South African Local Government Association (SALGA).

The Chairperson said that the Committee had noted the inputs made by stakeholders but that the Committee would make its own recommendations. 

Mr Rashaad Amra, Economist from the Parliamentary Budget Office (PBO), referred to Page 11 and stated that the PBO statements contained in the Draft Report did not accurately reflect their stance.

The Chairperson suggested that the PBO and the Committee Staff work on the PBO statements so that it was a true reflection of what was said.
                    
On Page 13, Mr Masoeu read out an excerpt from the SALGA input which welcomed the 2015 budget proposals and that it was cognisant of SA’s precarious state of finances.

Ms Shope-Sithole responded that the Committee had asked SALGA to retract the comments that it had made about the finances of SA. SA had a slow growth rate like many other countries. SA’s finances were not precarious. SALGA had agreed to retract the statements.

The Chairperson said that the Committee Staff could check on the minutes of the meeting concerned and the paragraph in the Draft Report would be reworked.

Mr Darrin Arends, Committee Secretary, noted that SALGA had apologised for making the statement. He said that the Draft Report would be amended.

Mr Masoeu proceeded to highlight the Findings and Observations of the Committee on Page 13.

Mr McLaughlin referred to point 4.1.4 which stated that, “the Committee was concerned about the revenue collection systems at local government level and the lack of significant turnaround in municipal revenue collection. The Committee notes the submission by SALGA that legislative instruments be considered for municipal revenue collection.” He asked that the word “considered” be replaced by the word “implemented”.

Mr Masoeu explained that SALGA was calling for more legal instruments to be used.

The Chairperson said that it should state that legislative instruments should be strengthened and implemented.

Mr A Shaik Emam (NFP) said municipalities were not collecting outstanding funds but merely writing off debt.

Mr Gcwabaza noted that collection instruments should be the focus of the Committee. There was existing legislation in place. The issue was whether collection instruments were up to date and modern or was the good faith of customers of municipalities being relied upon.

The Chairperson said that systems needed to be strengthened and the legislative framework needed to be implemented. Writing off debt was a matter that needed to be considered.

Mr Masoeu stated that an additional line could be added to 4.1.4 to reflect the Committee’s view that the current systems had to be strengthened and implemented.  
  
Mr Shaik Emam referring to point 4.1.5 where the Committee noted the efforts by SALGA to improve critical municipal oversight structures such as Municipal Public Accounts Committees (MPAC), Audit Committees and the Internal Audit function. The Committee was concerned at the lack of consequence management by municipalities to deal with poor performance by officials. MPAC could not do anything if Municipal Managers had not initiated anything. He had been under the impression that the MPAC was supposed to be an independent entity. He felt it was something that the Committee should look at.

The Chairperson said that the Committee should meet with SALGA to discuss the issue.

Ms Fanoe asked that National Treasury and the Department of Cooperative Governance and Traditional Affairs (COGTA) be invited to the discussion.  She stated that what government and provinces did also mattered and this needed to be worked into point 4.1.6.

Mr McLaughlin did not feel that the Committee had agreed to point 4.1.7 on Page 16.

The Chairperson instructed the Committee Staff to rewrite point 4.1.7 to state that the Committee noted what the FFC had said.

Mr Masoeu presented the Committee’s Recommendations on Page 16. Recommendation 5.1.1 stated that the Committee recommended that, “National Treasury ensure that the process of phasing out provincial and municipal conditional grants that are due to end in the 2015 MTEF or those that are due to be phased into the provincial and equitable shares does not compromise service delivery and the necessary support to be provided to ensure that provinces and municipalities are able to absorb adjustments. “

 Ms Shope-Sithole on Recommendation 5.1.2 said that the Committee’s focus should be on the provinces that were not doing well.

The Chairperson stated that the Committee would monitor incentives.

The Chairperson said that Ms Shope-Sithole’s concern would be captured in the Committee’s minutes.

The Committee agreed that Recommendation 5.1.4 needed to be reworded.

Mr Masoeu continued with recommendations that were aimed at the Minister of Cooperative Governance and Traditional Affairs. 

Mr Shaik-Emam referred to Recommendation 5.2.1 which spoke about systems and mechanisms put in place to improve local government infrastructure performance. He was however concerned about implementation of this at grassroots level. There was a need to have effective planning, monitoring and implementation.

Mr Gcwabaza noted that the emphasis should be on localisation. Why had pipes been sourced from China for a project in the Eastern Cape? Could the pipes not be sourced locally? Importation also caused delays. There was government policy on localisation.  It was a means to grow the domestic economy.

The Chairperson instructed the Committee Staff to include localisation under Recommendation 5.1.6.

Mr Shaik-Emam pointed out that value for money was an important issue that needed to be addressed. It was something hat came out during oversight visits.

Ms Fanoe stated that a recommendation could be made to the Minister of Cooperative Governance and Traditional Affairs that value for money needed to be achieved.

The Chairperson said that the Draft Report would be reworked by the Committee Staff and the Committee would adopt the Report the following day.

Committee Minutes
Committee Minutes dated the 3 and 4 March 2015 was adopted unamended.

The meeting was adjourned.

 

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