2015 Revised Fiscal Framework Report (MTBPS): consideration

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Finance Standing Committee

03 November 2015
Chairperson: Mr Y Carrim (ANC), Finance Standing Committee and Co-Chairperson: Mr C De Beer (ANC) Finance Select Committee
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Meeting Summary

The DA submitted that a number of core issues were not included in the observations and recommendations. These included concern over the rate of economic growth; changed policies for growth; expenditure; a lack of long-term fiscal guidelines; cost containment measures; the contingency reserve; debt levels; fiscal risks and the Public Sector Wage bill. The ANC supported the submission, although it was questioned whether some of the points made were not already covered in the report. It was also felt that an issue like national debt had political and ideological implications.
Both Committees adopted the report.

Meeting report

Background

The first section of the report consisted of inputs by the following stakeholders:

The Parliamentary Budget Office (PBO); the Federation of Unions of South Africa (FEDUSA); ilifa Labantwana; the Congress of South African Trade Unions (COSATU); the Rural Health Advocacy Project (RHAP); the Financial and Fiscal Commission (FFC); and Professor Jannie Rossouw. The second section consisted of observations and recommendations.

Consideration and adoption of the report

The Chairperson asked for comments on the first section, which was an overview. He stressed that the focus would be on observations and recommendations. No comments were forthcoming.

Mr D Maynier (DA) said core issues were not included in the observations and recommendations. Concern about the rate of economic growth had to be strengthened. The Medium Term Budget Policy Statement (MTBPS) contained no proposals to change policies for growth. He proposed a new recommendation about expenditure. Long-term fiscal guidelines had to be implemented. Consumption and capital expenditure had to be balanced. Capital expenditure was declining. Not enough attention was granted to cost containment measures and the concern that revenue was decreasing. The contingency reserve was wiped out. There had to be stronger concern with debt levels. The MTBPS contained no disclosure of additional contingent liability provisions. Mr Maynier referred to public sector debt and borrowing requirements. With regard to fiscal risks, there had to be measures to ensure that there not be another catastrophical demand on the contingency reserve to fund the Public Service Wage bill, in three years time. The public service wage bill could blow a budget.

Mr Maynier continued that National Treasury (NT) had to brief on fiscal risks related to the nuclear build programme. The SAA posed a fiscal risk. Even if there were a long-term turnaround, the budget needed neutral support.

The Chairperson commented that some issues were do-able, but others were party political and ideological.

Mr D Van Rooyen (ANC) said Mr Maynier wanted the issues raised captured as observations, but Mr Maynier was not introducing anything new. The observation about concern with economic growth was captured under observation 3.3. He supported Mr Maynier’s submission. A way had to be found to deal with it under recommendations.

The Chairperson agreed that concern with the rate of economic growth was captured under 3.3. It would not do to hold National Treasury (NT) alone to account. He asked what was not covered. NT had admitted that there could be no growth without revenue. The point about fiscal guidelines was a good one. The PBO had mentioned that it was difficult to get a clear sense from the global picture as to what local economic growth had to be. He asked Mr Maynier why he was sceptical about whether fiscal guidelines could be implemented.

Mr Maynier replied that his scepticism was based on the fact that the expenditure ceiling was a soft one. The NT had to brief the Committee in detail about fiscal guidelines.

The Chairperson said that could be included as recommendation 4.3 that NT had to report to the Committee on long-term fiscal guidelines. The capital project had to be appraised. There was no national plan. NT had to brief in the first quarter of the following year. There had been some improvement in cost containment.

Mr Maynier opined that NT had not made a dent, as far as cost containment was concerned. National and provincial departments were not supporting NT. NT was defeated. The facts had to be known.

Mr Van Rooyen maintained that there had to be facts to base observations on. He was seeing improvement, but agreed that the facts had to be known.

The Chairperson remarked that NT had to be there in future when the final report was considered. There were reductions in flights and conferences. It could be said that more had to be done, and that the Committee would monitor more closely.

Mr Maynier submitted that there be a recommendation that NT brief in detail on the matter. NT was not replying to detailed questions. It had to be compelled.

Mr De Beer said the Select Committee monitored provincial treasuries on a quarterly basis. Those reports were available.

Mr Maynier said he was looking for data for every single department, and NT was unable to furnish that.

Mr Van Rooyen said the Committees were agreed. Detail had to be called for.

The Chairperson asked what was the point of the quarterly reporting system, if such information could not be gathered from it. Cost containment had been the main preoccupation of NT over the previous week. There was no space in the programme. There were a number of bills on the way, and the MTBPS and budget processes. It could be said that there had to be more active monitoring of cost containment

Mr Maynier remarked that NT was not used to robust oversight.

The Chairperson said he ought not to flatter himself.

Mr Maynier maintained that a separate meeting had to be devoted to the matter.

The Chairperson referred to the decline in revenue.

Mr Maynier said there had to be a recommendation about the decline in revenue over the financial year and the medium term.

The Chairperson remarked that what the PBO had said had to be taken into account. Nobody would disagree with what Mr Maynier was pointing out. It was meant to be profound but it was actually banal. Obviously government wanted more revenue. Concern over the decline of revenue over the MTEF could be expressed. Observations and recommendations had to be correlated.

Mr Maynier insisted that the seriousness of the economic situation had to be stressed.

The Chairperson said that the Committee section had an understanding of what had to be done in terms of the Money Bills Act.

Mr Maynier referred to debt levels.

The Chairperson said the different parties had to discuss the matter. There was bound to be party political and ideological differences. It was not possible to go into acceptable debt levels.

Mr De Beer remarked that projections were being dealt with. Anything could happen. Labour unrest or international hiccups could have an effect. Stability was needed.

Mr Maynier said line items in the budget had to be observed.

The Chairperson remarked that debt was not a simple factual thing. Parties would not agree on account of ideological differences. He asked Mr Maynier to come up with a “limp” statement.

Mr Maynier said there were things that had not properly been taken note of in the budget, for 20 years. Facts could simply be noted under observations.

Ms Tobias said economic growth and stability had to be balanced. Political debate had to be avoided. Both international and internal factors impacted on economic performance. If Mr Maynier wanted to reduce it only to local factors, she would have an issue with that.

The Chairperson asked Mr Maynier about wording.

Mr Maynier responded that concern had to be noted that budget balances were tapering off at a slower rate than the main budget.

Ms Tobias told Mr Maynier that the observations he raised had to resolve the challenges. Solutions had to be provided. It had to be said what NT would be held accountable for in the next quarterly report.

Mr R Lees (DA) found the comment by Ms Tobias helpful. Concerns had to be provided with meaning in the future.

The Chairperson said he would craft something with Mr Maynier.

Mr Maynier noted that national debt and debt service costs was the fastest growing expenditure.

The Chairperson remarked that the question of what was the right budget deficit could be debated at length. People within the movement argued about it. When one looked at some other countries, the South African debt levels were not that high.

Ms T Motara (ANC, Gauteng) said it was not enough to simply repeat what the NT had said. The Committees had to say what could be done differently.

Ms Tobias suggested that the matter of percentages be parked. There was a thin line between holding NT accountable and prescribing what models had to be used. It was not the role of Parliament to set targets.

Mr N Terblanche, DA, remarked that there was not enough time to go into detail in the session. Concerns had to be flagged to make sure that it was attended to in future.

The Chairperson agreed that the issue of debt had to be deferred, and not mentioned in the report.

Mr Maynier maintained that national debt and debt service costs was of extreme importance. It could not be ignored.

The Chairperson responded that it could be said that the Committees took note of debt levels and debt costs. Debt had to be balanced against development goals. There were different views.

The Chairperson referred to fiscal risks.

Mr Maynier said his reading of the Money Bills Act was that contingent liabilities had to be addressed. There had to be new provisions for contingent liabilities. NT was evading his questions on that. There was no breakdown on contingent liabilities.

The Chairperson told Mr Maynier that he could raise the matter at the highest level, to facilitate further presentations.

Mr Maynier said NT was deliberately not replying to his questions.

The Chairperson referred to the public sector wage bill.

Mr Maynier responded that the question was how to avoid a situation in three years time when there could be catastrophic increases over which the Finance Minister would have no control.

The Chairperson noted that there had been concern about public sector negotiation a year before, because of low growth prospects. It was hard to arrange a meeting with the Public Service Portfolio Committee. The question was whether enough was being done to follow up on observations and recommendations. A debate on the Public Sector Wage bill was needed.

Mr Maynier returned to public sector wage agreements. There were unfunded mandates in the provinces. Measures to mitigate had to be explored. It had to be prevented from happening again in three years time. It was a serious fiscal risk.

Ms Tobias said Mr Maynier wanted to debate, but solutions were needed. Some of the issues Mr Maynier raised were not new and were raised before. NT had to be confronted with all views on the Public Service Wage bill. The Chairperson could approach the chairperson of the Labour Portfolio Committee. She suggested that the matter be deferred for the time being.

The Chairperson noted that he had spoken to the chairperson of the Energy Portfolio Committee about the nuclear build programme. There was a process. He asked if there was any allocation for the programme.

Mr Maynier responded that there was a R200 million allocation over the MTEF. NT had to brief on the matter.

The Chairperson said there was nothing new about the matter. It was all over the newspapers. It would not do to take over the responsibilities of other portfolio committees.

Mr Maynier insisted that NT had to brief on the nuclear build programme, with regard to financial modelling and implications.

The Chairperson said it would not make sense to meet NT without the portfolio committees of Energy and Public Enterprises. Financial implications had to be worked out.

Mr De Beer noted that the Select Committee had dealt with the Eskom Bill jointly with the Appropriations Standing Committee. Eskom was dealt with on a quarterly basis.

Ms Motara said it was an appropriation issue; hence that committee had to be called in. It did not belong in the current report.

Mr S Mohai (ANC, Free State) said the Finance Committees had to interface with the Energy Portfolio Committee to see if it were affordable. It was not a top secret. The Minister of Finance had said that existing priorities would be followed. Energy had to be met with. Government had to be compelled to account about the procurement framework.

The Chairperson said he would speak to the Energy chairperson that afternoon. He asked if SAA would be met with in the following week.

Mr Lees noted that the Minister had made far-reaching comments about SAA running at a loss for five years. He would recommend that it be stated that means had to be found for SAA to return to profitability within the MTEF.

The Chairperson agreed with that.

Mr Maynier said that NT refused to disclose contingent liabilities. The SAA could possibly be one.

The Chairperson suggested that it be stated that NT should seek to ensure that SAA return to profitability within three years.

Ms Tobias suggested that it be phrased as “soon”.

The Chairperson suggested “reasonably soon”.

(At that point the meeting was adjourned from 12h00 to 13h45. During the break certain changes were made).

The Chairperson took the reconvened meeting through changes made during the break:
Government had to ensure that the loan repayment system was strengthened. The MTBPS was not saying enough about economic growth. There had to be proposals in future. The words in red added to observation 3.4 made it more consistent with the new 4.3, on financing of tertiary education. There were additions to observations and observations regarding the fiscal risk posed by SAA. The SAA had to be returned to profitability “reasonably soon”.

The Finance Standing Committee adopted the report.

The Chairperson thanked Mr C De Beer, Chairperson of the Finance Select Committee. Mr De Beer was willing to cooperate, and he did so with grace.

Mr De Beer thanked the Chairperson in his turn, and asked for a motion for adoption of the report by the Finance Select Committee. The Finance Select Committee adopted the report.

Mr De Beer thanked the Select Committee for its cooperation in getting the report adopted. He added that “working together we achieve more”.

The Chairperson adjourned the meeting. 

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