Division of Revenue Bill: briefing & adoption; Financial & Fiscal Commission Submission on Bill

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Finance Standing Committee

02 March 2003
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Meeting report

JOINT BUDGET, FINANCE PORTFOLIO AND SELECT COMMITTEES: JOINT MEETING
3 March 2003
DIVISION OF REVENUE BILL: BRIEFING & ADOPTION; FINANCIAL & FISCAL COMMISSION SUBMISSION ON BILL

Chairperson:
Chairpersons: Ms B Hogan (ANC) [Portfolio] ; Ms Q Mahlangu (ANC) [Select]; Joint Budget: Mr N Nene (ANC) [NA] ; Mr T Ralane (ANC) [NCOP: Free State]

Relevant Documents
Division of Revenue Bill [B9 - 2002]
PowerPoint Presentation by National Treasury
FFC PowerPoint Presentation on its submission
FFC Submission on Division of Revenue Bill

SUMMARY
The Financial and Fiscal Commission noted that 2004 is the tenth anniversary of the Intergovernmental Fiscal System and that it is now starting to stabilize. The next challenge will be to look at ways to make it more effective. The presentation by the National Treasury was largely technical and the major concern was that performance measures need to be improved.

MINUTES
Financial and Fiscal Commission (FFC) submission on Division of Revenue Bill
The FFC was represented by its Deputy Chairperson, Mr Jaya Josie, Parliamentary Office & Local Government Projects Manager, Dr Hildegarde Fast, Budget Analysis Manager, Mr Conrad Van Gas and Fiscal Policy Analysis Manager, Mr Bongani Khumalo.

The submission was done in three parts:
Section 1: assessment of government's response to FFC recommendations.
Section 2: overview of government spending and financing trends and projections.
Section 3: measurement of progress in delivery of Constitutionally Mandated Basic Services.

Mr Josie presented Section 1. It was stressed that government had agreed with the FFC's recommendation that it needed to maintain the conditional grant mechanism for Early Childhood Development before incorporation into the Provincial Equitable Share.

With regard to HIV/AIDS, the government highlighted the difficulty of funding HIV/AIDS through the conditional grant mechanism only.

Mr Van Gas presented Section 2 and Section 3. What was apparent, is that there were declining learner enrollments except for Gauteng and the Western Cape (see Powerpoint presentation).

In conclusion, the FFC Deputy Chair, Mr Josie remarked that 2004 would be the tenth anniversary of the Intergovernmental Fiscal System, and that it was now starting to stabilize. The next challenge will be to look at ways to make it more effective. There needs to be a more focused and direct approach about how the FFC relates to Parliament and Government.

Discussion and Questions
Ms Taljaard (DP) asked what the reasons were for the surpluses and the decline in spending per capita.

Mr Van Gas replied that there had been considerable shifts in spending on basic services.

Mr Josie explained that per capita calculations are not a true reflection of the situation because of the stark economic realities between the rich few and poor masses.

Ms Taljaard sought clarification with regard to the difficulty the government has with funding HIV/AIDS through the conditional grant mechanism.

Mr Van Gas explained that the provinces have their own revenue allocations for HIV/AIDS.

Mr Moloto (ANC) wanted to know what factors were responsible for the decline in learner enrolment.

Mr Bongani explained that it was due to those who had become too old for the education system. These learners are referred to as being inappropriately aged.

Ms Southgate (ACDP) asked whether a two-tier system for local government would not work best.

Dr Fast asserted that measuring the fiscal capacity of municipalities was extremely difficult as there were problems with reliable data.

Mr Mnguni (ANC) asked whether HIV/AIDS grants are covered under Disability grants.

Mr Josie explained that it is covered by certain provinces, but not by others and that this was a matter for the Departments of Social Development and Health to consider.

Ms Taljaard wanted to investigate the practicality of having a national agency as a mode for service delivery.

Mr Josie explained that norms were set nationally, but funds were disbursed through the equitable share. The FFC speaks of a policy instrument, which could be referred to as a national agency that can be effectively used.

Mr Durr (ACDP) remarked that there seems to be continual explanations about a lack of data. To this effect, he asked what the cooperation with the Departments Statistics South Africa and Census were, and whether they knew FFC's requirements.

Mr Van Gas answered that the relationship between these institutions and the FFC is being discussed. Mr Josie continued to explain that the problem was not with the relationship, but the architectural structure of the data and the way it had been inherited from the past. However, he consented that there is progress in the right direction.

Mr Durr wanted to know whether rates were paid in return for services or whether it could be described as a tax, or a wealth tax.

Dr Fast explained that internationally local government has two major taxes: user charges and property/rates tax.

Ms Southgate asked why government declined the use of the contingency reserve in order to fund local government.

Mr Josie explained that the contingency reserve is supposed to be for emergency purposes, such as macroeconomic stability and so forth. The government felt that it has provided enough funds through the equitable share mechanism.

Ms Taljaard commented that there should be a debate on Social Delivery and Social Economic Rights.

Mr Josie remarked that the FFC's formula through the costed norms approach, is receiving growing acknowledgement within government.

There were no further discussion or questions.

Division of Revenue Bill: briefing by National Treasury
Mr Momoniat, Deputy Director General and Mr Kahla, Chief Director: Legal Services, briefed the Committee on the Bill (see Powerpoint presentation).

Mr Momoniat explained that the major concern was that performance measures need to be improved.

Discussion
Mr Durr remarked that central funds had to be made available in order to assist Local Government.

Ms Taljaard remarked that the committee needed to take up the cudgels with regard to oversight.

Dr Rabie (NNP) sought clarity regarding the functions of type B and C municipalities.

Deliberation and Voting on Division of Revenue Bill

Hereafter, the following technical amendments were noted by the department:

Corrections to the Tabled Bill to be made in the Finance Portfolio Committee
CLAUSE 1
Page 3, line 21: add 6A
Page 3, line 25: add 6A
Page 3, line 29: add 6A
CLAUSE 5
Page 4, remove "the" on page 56 and put uniform treasury norms in MFM Bill, and leave out once MFM is an Act
CLAUSE 11
Page 6, s11 (3): Delete
CLAUSE 18
Page 9, section 18 (1), line 17: add 6A and 7A
Page 9, line 24: add 7A
Page 9, line 38: add 6A exclude 7
CLAUSE 20 (AG changes)
Page 10, line 3 omit "must" and substitute "may"
Page 10, line 4 omit "and" and substitute "or"
Page 10, line 5 omit "not later than 5 months after the end of the financial year"
Page 10, line 19 put "Act" instead of "act"
CLAUSE 21
Page 10, line 34 omit paragraph (b) and substitute:
(b) the municipality is in breach of the measures contemplated in section 5(6); or
CLAUSE 22
Page 10, line 47: add 6A
CLAUSE 28
Page 12, section 28 (1), line 24: add 6A
Page 12, section 28 (2), line 31: omit "4,5 or 6" and substitute "2,3, 4, 5, 6 or 6A"


The ANC supported the Bill with amendments. The DP abstained. Thus the Bill was adopted with the above amendments.

The meeting was closed.

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