Finance Budget Review and Recommendations Report

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Finance Standing Committee

20 October 2015
Chairperson: Mr D Van Rooyen (ANC) (Acting)
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Meeting Summary

The Committee discussed and adopted the Budgetary Review and Recommendations Report with amendments and corrections, as it had to be submitted on that very day. It was considered in order to adopt the report before editing, as long as no changes to content were made after adoption. During consideration, matters that received attention were the National Treasury’s financial accounting and supply chain managementsystems; National Treasury’s action plans to address Auditor-General matters of emphasis; the “rogue spy unit” in the South African Revenue Services (SARS); the Border Management Agency Bill; intergovernmental relations pertaining to customs, and accommodation and appointment challenges of the Financial and Fiscal Commission (FFC). The DA registered its opposition to the report.


Meeting report

Welcome and Apologies
The Chairperson welcomed everyone and noted that apologies were received from Mr Y Carrim, Chairperson, Mr D Maynier (DA) and Ms S Nkomo (IFP). Mr Carrim was on an overseas visit.

Budgetary Review and Recommendations Report (BRRR)
The Acting Chairperson announced that a composite BRRR report was to be considered, consisting of the National Treasury (NT), the South African Revenue Services (SARS), the Financial and Fiscal Commission (FFC), the Land Bank, and the Accounting Standards Board (ASB). The Committee had to submit the report on that same day. The process followed would be to go through the report page by page, to see if content had been properly captured. Deliberations would focus on Committee recommendations. He suggested that the report be adopted, to be processed further. The report was not yet properly edited. Even the font of some pages differed. However, he deemed it acceptable that the report be adopted before final editing, as long as the content remained unchanged.

Mr A Lees (DA) remarked that he was comfortable with the draft, but not with adopting it without editing. He submitted that the report be gone through, with errors corrected, and that it then come back for adoption.

The Chairperson asked if there was dissent regarding Mr Lees’s submission.

Dr B Khoza (ANC) asked if the report was supposed to be finalised on that day.

The Chairperson asked the Secretary if that was indeed so.

The Secretary confirmed that it was so.

Mr N Kwankwa (UDM) asked if it was possible to adopt the report as minutes.

Ms T Tobias (ANC) submitted that the report could be adopted as long as there was no change to content. She asked that it be moved for adoption.

Ms D Mahlangu (ANC) suggested that the report be gone through page by page, and that the impact of changes be considered. It would not do to adopt the report under pressure.

Mr Lees said that he was happy with the process. But there were a lot of figures. It was not possible to check if tables were correct. Figures had to be checked against the annual report (AR). It could not be checked in such a brief time period.

The Chairperson advised that the Committee not reiterate a single challenge. The time for the process might not be sufficient, but the Committee had to comment, and do its best in the limited time available.

The Chairperson asked for comments on pages 3, 4 and 5.

Ms Tobias referred to programme 7 of the National Treasury -Civil and military pensions, contribution to funds and other benefits. It had to be stated if 100% compliance with National Treasury’s service level agreement would occur within six months.

The Chairperson asked if the issue was covered under recommendations. Recommendations on the issue was cross-cutting, it was not just an issue of staff capacity. Recommendations could be made under 5.8.

Ms Tobias asked that there be a briefing in the next quarterly report.

Dr Khoza referred to programme 5 (Financial accounting and supply chain management systems) (page 5). Only 22 out of 57 planned targets were achieved. NT was not a new organisation. It was a primary programme, and NT was the custodian of supply chain management in government. Something was not right there. The introduction of a new programming system was highly important. It was not in order for information about challenges to be missing.

Mr Lees agreed that there had to more clarity about challenges. The AR only reflected challenges identified by the Minister. There were unstated challenges that contributed to targets not being reached. The Minister had to report fully on challenges in the next quarterly report.

The Chairperson remarked that Mr Lees was not suggesting change, but was merely calling for more clarity. In the summary the process could be referred to recommendations. There had to be a report on challenges in programmes.

Dr Khoza noted that she also did not want to introduce anything new. What was identified with regards to the new centralised supply chain management system in the AR was not being reflected.

The Chairperson responded that it could be covered under recommendations.

Ms Tobias referred to the Development Bank of South Africa (DBSA) experiencing a delay in contracting a third call for proposals (CFP) projects, which implied that there was no capacity to open a new general funding round (programme 8, page 6). She remarked that projects were difficult to fund, and there was a lack of preparedness to close off programmes. With the advent of BRICS there would be bigger projects. She submitted that there be a recommendation that the DBSA present on a long term strategy to close off the first round of projects. 15 projects were not yet achieved.

The Secretary suggested that the entity be invited to report, instead of it being added to recommendations.

Ms Tobias insisted that it had to be a recommendation. The AR did not explain variances.

The Chairperson advised that it be put as a recommendation under 5.9.

Mr Lees asked that a sentence be added under 5.4, to the effect that the Minister had to initiate discussions about the privatisation of state owned entities (SOEs) in line with the stated policy of disposing of non-core assets.

Ms Tobias asked that the term “privatisation” be reconsidered.

The Chairperson remarked that the issue was how to approach SOE challenges. There had to be a call for further engagement of various departments.

Dr Khoza referred to the first sentence under 5.1 (performance achievements). The sentence read “while overall NT performed well, NT has achieved fewer of its targets in the 2014/15 financial year than in previous years”. She felt that the second part of the sentence, after the comma, contradicted the initial statement to the effect that the NT performed well overall. She suggested that the sentence start with “NT has achieved fewer of its targets…”

Mr Kwankwa suggested that the sentence be broken into two, with “however” inserted.

Dr Khoza agreed with that.

Mr Lees suggested that it be phrased “relatively well”.

Ms Mahlangu referred to recommendation 5.7. She asked that the NT present an action plan to the SC about addressing AG matters of emphasis, within seven days.

The Chairperson asked if that was practical. It had to be assumed that there was a plan.

Ms P Kekana (ANC) agreed that the NT had to lead by example. A period of 7, 14 or 21 days could be agreed upon to receive an action plan from the CFO office.

The Chairperson advised that 21 days could be granted.

Ms Tobias cautioned that it had to be reconcilable with the Committee programme. Dates had to be practical. It had to be part of the Parliamentary programme. The management committee had to look into the matter.

The Chairperson advised that it would be practical for it to be part of the progress report for the next quarter. The NT would have to report on progress with implementation of action plans.

Ms Mahlangu reminded the Committee that she had not asked for the NT to appear before it. She had asked for a submission.

The Chairperson advised that there be a submission within 21 days. Performance could be looked at during the next quarterly report.

Mr Lees said that he battled with the notion of whether the recommendations where requests or demands. Once adopted by the House, what was recommended had to be done. There was an escape route for departments if the term “must” was not used.

The Chairperson remarked that the spirit of the report was one of recommendation. What happened afterwards depended on oversight. It had to be determined through oversight how to deal with issues on the way forward. The spirit of recommendation was not to be compromised.

Ms Tobias agreed with not compromising a spirit of recommendation, as it was appropriate within the context of the powers and functions of Parliament. The AG recommendations could be stated more strongly. She agreed that the NT had to be asked about progress with action plan implementation during the next quarterly report. The Standing Committee on Public Accounts (SCOPA) was already privy to management actions. The spirit of recommendation was to remedy challenges. It was not to be punitive. The object was to promote change and mitigating actions. Recommendations were in line with the AG management letter. If it was not performed, the Committee could be more robust in the next quarter.

Mr Kwankwa agreed with that sentiment.

Mr Lees maintained that the Committee had the power to demand reports and recommendations.

The Chairperson advised that the question was how to deal with non-compliance to recommendations.

Mr Kwankwa referred to recommendation 5.3 (Capacity building for other government institutions). He advised that it start with “While recognising the resource and capacity constraints, the Committee recommends that NT seeks to do more to assist municipalities”. He referred to Ms Tobias questioning the term “privatisation” with regard to SOEs and suggested the term “restructuring”.

Ms Tobias preferred “capitalisation” as it made more sense.

Mr Kwankwa stressed that a term be used that was not ideological.

Dr Khoza felt that sufficient attention was not given to sound English usage. There were sentences that were difficult.

The Chairperson cautioned that it would take two days to work through the report if there was too much attention to language. He urged members to focus on matters of substance.

Ms Kekana said that the SARS clean audit had to be acknowledged.

The Chairperson responded that it was in fact spoken to somewhere.

Mr Lees opined that the second paragraph under “Core functions and policy priorities of SARS” was incomplete. It was stated that SARS as a revenue collector relied on global and local economic factors to attain targeted revenues. The fact was that SARS relied on its own capacity. It implied that the global economic problem could excuse the missing of targets. It could be due to an internal problem.

The Chairperson responded that it referred to the impact of the economic outlook.

Mr Lees suggested that it be qualified by using the term “in part” or “inter alia”.

Ms Tobias referred to a table setting out the financial position and performance of SARS –2014/15 (page 8). There was a comparative analysis that explained the loss of the tax base. SARS had to explain how unemployment contributed to lowering the tax base. Tabulated challenges had to be juxtaposed with figures from the Statistician General related to the employment and unemployment. The Statistician General had indicated a fall in employment in the mining and manufacturing sectors. It had to relate to Stats SA figures on unemployment.

The Chairperson agreed that the decreased surplus had to be explained. The surplus liability ratio was exceeded. The surplus was still far above liabilities. The operating surplus was not just affected by the economy. Operational expenses were incurred as SARS tried to improve internal performance. Total revenue had decreased. The question was how to approach that. There were challenges in the economic situation.

Ms Tobias said that she was speaking to the surplus of the year. It had to be juxtaposed to employment statistics to make it measurable. It had to be explained in numerical terms how unemployment contributed to lower the tax base. Surplus for the year showed a 69 percent decrease. Figures were not given about how unemployment contributed to lowering the tax base.

Mr Lees referred to 5.3 (Investigations into “rogue spy unit”) on page 11. The DA did not accept what was said about the intelligence matter. SARS had to be dealt with by the FSC, not the Joint Standing Committee on Intelligence (JSCI). The Minister had to pronounce on the KPMG report.

Dr Khoza said that the Committee had adopted a position on the matter. If Mr Lees was unhappy it was his own problem. The Committee had accepted that it was to be dealt with by the JSCI. It was not exclusively a finance matter.

Mr Lees maintained that it was not a joint matter. It was not an intelligence matter as stated. It was not similar to the situation with regard to the nuclear build programme. The DA agreed that the Committee had to meet with other portfolio committees on that issue.

Ms Kekana sympathised with the DA, as they had come in during the middle of a process. The Committee had decided that there were areas of overlap, and wanted other committees to be part of the process. Dr George (former DA Member) had asked that the Sikhakhane report be dealt with. The Committee decided to allow SARS to deal with it internally, after which it could be held accountable. There was ongoing reporting. The FSC could call on relevant committees.

Dr Khoza said that the fiscal focus of the Committee had to be borne in mind. The alleged spy unit belonged to a Committee entity but it was not a fiscal matter. It was elevated to the right bodies, and the Committee could still keep an eye on it. She could grant that it was a politically spicy issue for the opposition. It was a saucy topic but the issue was not meant for the Committee. It was no longer a fiscal matter.

Mr Lees responded that what was stated in the report was not in line with what Members were saying. He disagreed with the approach of merely keeping an eye on it.

The Chairperson noted that the disagreement would be registered.

Mr Lees referred to double tax treaties (5.5 on page 11). He asked if double tax treaties were a NT or SARS function. He asked if it was negotiated by the NT.

The Chairperson responded that tax expertise was needed, hence SARS had to negotiate.

Dr Khoza noted that there had been recommendations in a previous meeting about audit outcomes and IT security management. The Committee wanted IT security management strengthened. She did not see it reflected in the recommendations.

The Chairperson pointed out that it was dealt with under recommendation 5.2 on page 11.

Ms Kekana referred to the Border Management Agency Bill 2015 (BMA), cited on page 12. She asked if the recommendation captured what had been resolved by the Committee.

The Chairperson responded that it was resolved that the Chairperson would establish facts related to the matter.

Dr Khoza agreed that Mr Carrim as Chairperson was mandated to pursue the matter, but added that the Committee was violently opposed to it.

The Chairperson noted that Mr Carrim was interested in the reasons why the movement of customs to The Department of Home Affairs was required.

Dr Khoza said that while reasons were awaited, the Committee had to express serious concern.

Mr Kwankwa suggested that a sentence be inserted that spoke about the effect of moving customs. If the Committee was vehemently opposed to the Bill it had to be contextualised.

The Chairperson reminded Members that the BMA Bill issue had only been heard of from the SARS Commissioner, which meant that there was as yet only a one-sided view of the matter. As a parliamentary committee, it had to establish the facts. The SARS Commissioner’s concerns were not to be dismissed. Yet the Commissioners only raised the matter as a concern, without giving details.

Ms Kekana submitted that the recommendation be left as it stood, and that the process be allowed to continue.

Mr Kwankwa maintained that it had to be explained why Mr Carrim had to liase with the Minister of Finance and the Chairperson of the Home Affairs Portfolio Committee. If the matter was to be investigated it implied that there was concern, in that case about potential impact. He reiterated the suggestion that a sentence be inserted about the potential impact of moving customs.

The Chairperson asked that such a sentence be written.

Mr Lees asked what the basis was for the first sentence on page 12, to the effect that the Committee recommended that SARS seek to raise more revenue from customs and excise. It might have been that information was received that SARS was doing a poor job of raising what the law allowed them to. He asked if it implied that SARS was not doing well enough in that area.

Dr Khoza responded that it referred to intergovernmental relations pertaining to customs. SARS had mentioned that there were weaknesses. There were difficulties related to managing the different stakeholders. It was not even known at what level SARS had to perform. The context was that of seeking leverage for maximum revenue from ports.

Ms Tobias referred to the recommendation on balanced revenue collection (5.8 on page 12). Personal, corporate, customs, VAT and other sources of tax were cited. She asked if there was sufficient emphasis on customs and excise. There were containers entering the country of which the value was understated. The SARS collection pattern had to be looked at. The emphasis had always fallen on corporate taxing, and not on customs. Entries at borders were not being reflected. Personal income tax placed a burden on the poor. It was difficult for SARS to balance taxation. Other avanues for collection had to be explored. She was not saying that SARS was not collecting enough, but there was a need to tax wealth, for instance.

Mr Lees referred to the same recommendation. SARS had to maximise revenue collection. He wished to differ from the overall assessment (5.9, page 12) that SARS did well, given the external and internal difficulties faced. He could not buy that.

The Chairperson noted that targets had been surpassed.

Mr Lees responded that it should have been surpassed by a greater margin. He noted that Mr Bongani Khumalo of the FFC had been an acting Chairperson capacity for seven years. By remaing silent on that matter, it was made to sound good. There had to be a recommendation that the position had to be filled.

The Chairperson noted that the Committee had adopted a position on the matter in the previous BRRR report. The challenge had to be noted and the Committee position had to be stated.

Ms Tobias referred to issues related to the FFC offices being resolved with the Department of Public Works (DPW) (2.2, Challenges, page 13). Details of the challenge were lacking. The FFC was accommodated under a month to month lease. The NT had decided not to intervene. The Public Works Portfolio Committee had to resolve the matter. The Committee decision on the matter was not reflected.

The Chairperson responded that the matter was covered on page 17.

Ms Tobias maintained that it was agreed at the previous meeting that there would be a meeting with the Public Works Portfolio Committee.

The Chairperson responded that it was advisable to marry Ms Tobias’s suggestion to what was already stated on page 17.

Mr Lees submitted that it would be good to recommend that the Committee meet with the Public Works Portfolio Committee.

The Chairperson suggested that Mr Carrim first be allowed to report on his engagements with the DPW Director General and the Minister. To include a meeting with the Public Works PC as recommendation would introduce changes to content.

Mr Kwankwa agreed that Mr Carrim first had to be allowed to engage with the Minister and the Public Works DG.

Dr Khoza noted that the Chairperson had mentioned that it was hard to bring portfolio committees together.

The Chairperson advised that it be seen if the findings of Mr Carrim indicated a need for a joint meeting with the Public Works PC. He referred to HR management in the FFC. The Committee was informed by that entitiy that it was the prerogative of the Presidency to make appointments. Yet there was strong concern about the high percentage of male commissioners. Concern had to be registered at the level of the highest office. The Committee had to pronounce on the matter, or be judged by history.

Mr Lees said that some entities had not been deliberated on. He asked what the impact of that on the report was, and whether it had to be mentioned that some annual reports had not been dealt with. It could be explained that it was due to time constraints. The South African Airways (SAA) annual report had not been dealt with. He asked if he could introduce recommendations regarding SAA.

The Chairperson agreed that the matter had to be raised. He advised that it be done under 6.2 on page 28, which referred to limited time to process the BRRR. SAA could be mentioned. It would prevent the Committee from looking complacent.

Mr Lees asked if the Committee agreed on financial aspects of the nuclear build programme. The NT commented twice about it in its annual report.

The Chairperson asked for comments on a Committee position.

Ms Kekana responded that the Committee could not deal with nuclear financing. Agreement was reached on a position in the previous week. Other committees were involved. The Finance Standing Committee did financial applications for government, and would deal with nuclear financing at the right time. It was resolved that the Chairperson and Mr Majola, Chairperson of the Energy Portfolio Committee, would engage from time to time, until the issue came to the Committee. It was not advisable to sneak it in before that time. Nuclear build was not a deliverable of the NT.

The Chairperson told Mr Lees that the matter was under the Committee radar, and would be dealt with later. Mr Lees could raise it during debate. He asked if the BRRR report could duly be adopted with amendments.

Dr Khoza recommended that the report be adopted with amendments and corrections.

The Chairperson assured members that the report would be forwarded to them before circulation. The amendments and corrections would be completed by 14h00.

Dr Khoza moved for adoption and Ms Kekana seconded the motion. The report was adopted.

The Chairperson noted that the amended and corrected report would be forwarded to Members by 14h00. Members had until 15h00 for feedback, as the report had to be submitted on that very day.

Mr Lees noted that the DA did not support the report.

The Chairperson remarked that it had become customary for the DA to do so. He concluded that it could have been done better, but still the Committee did its best under the time constraints.

The Chairperson adjourned the meeting.


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