Division of Revenue Amendment Bill [B27-2015]; Adjustment Appropriation Bill [B28-2015]: briefing

Meeting report

Ms Malijeng Theresa Ngqaleni, Deputy Director General: Intergovernmental Relations at National Treasury,  noted that the Minister of Finance tabled the two Bills as part of the 2015/16 Adjustment Budget. The Adjustments Appropriation Bill amended allocations to national departments and the Division of Revenue Amendment Bill amended allocations to provinces and municipalities.

2015 Adjustment Appropriation Bill: briefing
Dr Kay Brown, Chief Director: Budget Office at National Treasury, outlined the seven components that an adjustments budget may provide for such as shifting of funds between and within departments or a rollover of unspent funds from the preceding year. These are noted in section 30(2) of the Public Finance Management Act (PFMA) of 1999. The 2015 Adjustment Appropriation Bill provided for increases or decreases to allocations set out in the main Appropriation Act, including shifts in the projected economic classification of that spending.

Public sector salaries for national government was adjusted to R1 173.5 million in terms of section 30(2)(a) of the PFMA. Three departments (Defence and Military Veterans; Justice and Constitutional Development and Police) would benefit from the salary adjustment. Unforeseeable and unavoidable expenditure was adjusted to R720 million in terms of section 30(2)(b) of the PFMA. This expenditure would be allocated to the Department of International Relations and Cooperation and Public Enterprises. R301 million will be allocated to South African National Roads Agency for the purpose of Gauteng Freeway Improvement Project.

There would be shift of funds between departments / votes to follow the transfer of functions and virements of over R100 million. R1 616.8 million would be adjusted in terms of roll-overs whereas self-financing expenditure was totalling R1 196.8 million. R3 233.7 million was declared unspent funds.

Dr Brown concluded that R433.7 million was the downward adjustment for 2015/16. The total adjustments means level of spending is decreased from a budgeted R1 222.3 billion to a revised R1 221.9 billion.

2015 Division of Revenue Amendment Bill: briefing
Ms Ngqaleni noted that section 12(4) of the Money Bills Amendment Procedure and Related Matters Act required that the Minister of Finance to table the Bill with the revised fiscal framework if the adjustments budget effected changes to the Division of Revenue Act. The main purpose of the Bill was to amend “Column A” of the Division of Revenue Act which showed the allocation for the current year. As a result, it showed the original allocation, the adjustment and the new allocation so as to maximise transparency in the adjustment process. The adjustment was made in terms of provincial equitable share, provincial conditional grants, local government equitable share and local government conditional grants.

Discussion
Mr C de Beer (ANC) commented that National Treasury together with the Department of Higher Education should look into the tertiary education fee crisis and find a durable solution. There should be an allocation of budget to higher learning institutions to address the FeeMustFall crisis. The world was watching South Africa.

Mr de Beer noted that the reduction of Northern Cape budget was a serious matter because such reduction would adversely affect learners. With regards to health, giving back unspent funds would also affect the Northern Cape health care system.

Mr M Figg (DA) seconded Mr de Beer on the students protest in tertiary education institutions, stating that the Committee had the power to make a change in higher education through changing the higher education budget. It is a time that the Committee should use its power to resolve the crisis in higher education. The Committee had to work with National Treasury to find a viable solution. The Committee should contribute to solving the crisis by amending the 2015 Adjustment Budget. The higher education crisis needed an urgent solution and, in his view, it could not wait until 2016. He suggested that the Portfolio Committee on Higher Education should be invited to address the Committee and parliamentary legal advisors should advise the Committee on how the crisis should be resolved. It would advise on how much money could be allocated to solve the higher education problem.

The Chairperson said that although higher education was in crisis, Members were not invited to discuss the higher education crisis but to seek clarity on the two Bills.

Mr N Mqikela, Communication Coordinator: Eastern Cape Provincial Legislature suggested that the issue of higher education should be taken note of. The manner in which higher education was funded should be reviewed. He asked about giving back unspent funds to the fiscus. How would this be dealt with if the provincial government had decided to allocate the money to other activities?

Mr A McLaughlin (DA) asked about the R20 million which was misappropriated and commented that such misappropriation was a source of the crisis. Misappropriation was not a new thing but something that had become a norm. The government had done nothing to alleviate the problem of misappropriation. This problem should be addressed urgently. He asked about unforeseeable and unavoidable expenditure with regards to the tenth claim submitted by Denel Aerostructures for damages and losses in terms of the indemnity provided by Government in respect of the A400M military aircraft contract. He could not get clarity from the Minister about what that money was for. He sought clarity on the R100 million which was added to accelerate housing delivery in Nelson Mandela Bay. Why now? Nelson Mandela Bay was established since 1994 and nothing had been done to develop it. He commented that transferring money from poor provinces such as Limpopo had the potential to affect basic service delivery such as water provision. Finally, he asked about the money owed by national government and provincial governments.

Mr F Essack (DA) asked for the full costs of the public sector. Referring to the R301 million allocated to South Africa National Road Agency: Gauteng Freeway Project, he asked what the impact would be if it was scratched out. He was of the view that R30.6 million which was not spent by the Department of Higher Education and Training had a great impact on service delivery.

Ms S Shope-Sithole (ANC) welcomed the presentation and commented that National Treasury had given the task to the Committee to work on. She agreed with other Members that the Committee had the power to use the 2015 Adjustment Budget to the solve the higher education crisis. The Committee’s powers were drawn from a several pieces of legislation. In light of the situation that higher education found itself in where tertiary students were claiming 0% increase, the Committee had power to resolve the matter. She suggested that the Committee should meet with its legal advisors and its budgetary officers to solicit their inputs on this. Members should refrain from using the crisis as weapon to point fingers. Rather, they should blame themselves that they did not do a proper job to meet the constitutional mandate. The crisis would not have happened if Members had conducted oversight visits at universities. The Committee should therefore invite all rectors to a meeting so as to seek some clarity and to find a way forward.

Ms M Manana (ANC) expressed her fear that colleges would also protest against fees. She agreed that the Committee should meet with the Portfolio Committee on Higher Education and the rectors. She asked about the rationale behind reduction of hospital revitalisation grants. She pointed out that HIV/AIDS was still a health problem and asked whether this reduction would not affect people living with HIV/AIDS. She asked about under-spending and the reason behind provincial under-spending and which province would be surrendering the most money.

Mr Xolile Nqatha, Chairperson, Finance Committee: Eastern Cape Provincial Legislature, commented that Members should refrain from insensitive comments about the notable housing development in Nelson Mandela Bay. The housing development programme was critical - to such an extent that people were in a situation comparable to that of refugees.

Mr Raymond Elisha, Chairperson: Premier, Finance, Economic and Public Enterprises Development Committee, North West Provincial Legislature, pointed out that professional guidance from National Treasury should be sought about municipalities that were not honouring their debt. South Africa did not have a "reactionary" parliament or a "reactionary" government. Government and Parliament should not sit to find a way to deliver only because there is a strike or a protest. Rather they should act in accordance with their governmental plan and, in the face of a crisis, they should engage with people to find a solution. They should refrain from resolving matters in a piecemeal fashion in that the Committee could not rush in allocating money to solve the higher education crisis. The Committee should look at the powers of universities deriving from their autonomy as private entities, particularly, their power to design school fees. The Committee should avoid creating a precedent which would cost South Africa.

Mr T Motlashuping (ANC) noted that the South African governance was based on multiparty democracy and thus opposition parties should not restrict the crisis only to the ruling party. They all should acknowledge, as Members of Parliament, their failure to meet their constitutional mandate. They should note that, prior to 1994, there was no student financial aid. What was crucial was to look at the needs of needy students but this had to been done without pressure from opposition parties. All Members were in support of the struggle of FeesMustFall and for the students to achieve their noble cause. It should be underlined that university autonomy was an integral party to that struggle. It was not ANC who had power to decide on tertiary education fees. Likewise, it was not the ANC that increased the fees. He suggested that the issue of fees should be investigated including the salaries of university staff. The salaries should be a starting point of departure in interrogating annual increases.

Ms E Louw (EFF) sough clarity on the difference between the shifts due to under-expenditure and other contending measures.

Ms G Parker, Chairperson: Portfolio Committee on Finance, Northern Cape Provincial Legislature, asked about public participation and on the negotiating mandates, and suggested that National Treasury should inform the public about the government’s financial situation.

Ms Ngqaleni, referring to the higher education crisis, responded that it was not a matter to be included in the 2015 Adjustment Budget but an issue to be discussed and possibly included in the 2016 financial year budget. It was important that the Committee engage with all stakeholders to find solution to the crisis.

Referring to roll-overs, Ms Ngqaleni replied that Provincial Treasuries looked at two aspects when considering requests for rollovers. The Provincial Treasury approved roll-overs in accordance with the equitable share. The department should make a case for the rollover and show that the department had the spending capacity to spend the money and that it has commitments that the money will be spent on. If the rollover was not approved, National Treasury would conclude that either the department did not have such commitments or it was not able to commit to spending the money.

There have been shifts in the conditional grants. Money has been shifted between other provinces. The whole idea was that where under-spending was occurring, the unspent money should be shifted somewhere else where there was capacity to spend. For example, Eastern Cape did not perform well in 2013/14 but in 2014/15 it was doing well. Money was added to its Human Settlements programme in order to solve the housing shortage. If that money could not be used, it would have been declared underspent and transferred somewhere else. National Treasury worked to ensure that this intergovernmental system was working.

Mr de Beer commented that Members were deployed in different geographic areas and should address their problems to the Committee. The issues that were raised in the Bills could be addressed without SALGA being present. He suggested that provinces should engage in infrastructure budgeting.

Mr Figg remarked that there should be funds designed to respond to the crisis. The Committee could not sit and say that nothing could be done. The Committee should at least resolve that this step be taken.

Ms Shope-Sithole also commented that there should be something the Committee could do about the crisis. She reiterated that universities should be invited to address the Committee and university autonomy should be limited in terms of amending their legislation. She expressed her concern about the universities who were the sources of the crisis and that government was being blamed for the problem it did not create. Government should therefore resolve the matter through amending the laws governing universities.

The Chairperson thanked National Treasury for their time and, in his concluding remarks, stated that the Bills would be subject to public consultation. The higher education crisis would be dealt with in its own dedicated meeting.

The meeting was adjourned.

[Apologies: Mr SP Mashatile (ANC), Mr LB Gaehler (UDM); Ms Van Lingen (DA)]