Division of Revenue Bill [B2-2016]: public hearings

Standing Committee on Appropriations

11 March 2016
Chairperson: Mr N Gcwabaza (ANC)
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Meeting Summary

At the outset, the Chairperson allowed time for the Democratic Alliance to air its views on the process that the Committee was following. The DA had raised issues in a previous meeting that it did not believe that the presentations were in line with either the Constitution or the Parliamentary Rules, and was worried that by proceeding the Committee was laying itself open to criticism. There was discussion on whether this was a draft or tabled Bill; the Chairperson pointed out that by virtue of the Minister of Finance introducing it, it was now in the public domain, and the process for advertising for the hearings was summarised. The Legal Adviser noted that whilst the Money Bills Amendment Procedure and Related Matters Act did outline a sequence of events, there was a reference to “consideration” of the Bill, which was taken to mean full discussions and taking decisions, rather than hearing briefings and submissions, and the authority for the Committee to take public submissions was in the Parliamentary rules. Other Members expressed the view that the continuous questioning was a stalling tactic and the NA and NCOP were now tasked with proceeding with the public hearings on that 2016 Division of Revenue Bill (the DoRB)

Equal Education (EE) presented a submission in which it introduced itself as a non-governmental organisation that aimed to uphold the norms and standards of education, ensuring adequate delivery from the National Treasury (NT) and the National Department of Basic Education (DBE). The key requests by EE were that key issues such as access to water and electricity in schools must be addressed, and the incentive based approach to infrastructure re-addressed. It was noted that two programmes were running, the Education Infrastructure Grant (EIG) and the School Infrastructure Backlogs Grants, also known as the Accelerated School Infrastructure Delivery Initiative (ASIDI). However, EE regarded the EIG programme as flawed because it required provinces to meet certain standards so that they could have access to the grant, and whilst economically successful provinces such as Gauteng and the Western Cape were able to do this, rural provinces often could not. This mechanism, whilst aiming to provide an incentive, in fact did not, and thus did not promote infrastructure growth, so it was suggested that this must be corrected. The imminent merger of ASIDI and EIG was not welcomed.

The Equal Education Law Centre (EELC) was aligned to the EE but its submission focused on scholar transport. The right to have school transport provided was the responsibility of the DBE, but it apparently had incorrect figures and whilst there was now a decision that scholar transport would fall under both DBE and the National Department of Transport, neither was addressing the problem. EELC was calling for more allocations to scholar transport, particularly since the lack of transport impacted upon the ability of learners and principals to ensure that they were properly educated.

National Treasury both responded to the EE submissions and outlined the ways in which this Division of Revenue Bill differed from previous years. National Treasury felt that the incentive schemes were successful but conceded that there were problems when municipalities underspent on grants. Scholar transport would have to be addressed by the DBE, since National Treasury could not actually run the policy, only fund it.

The changes to the DORB were described. R33.7 billion had been added to the provincial equitable share, and there had been changes to conditional grants and indirect grants, to focus specifically on addressing HIV/AIDS, targeting television provision, and creating national clinics aligned with the National Health Insurance (NHI) policy. A new grant was introduced to focus on early childhood development, and the increased EIG and indirect grant for education (as mentioned). A large portion of the allocations focused on the upcoming municipal elections in October. More revenue had been allocated to SA Local Government Association (SALGA) for new infrastructure and the refurbishment of existing infrastructure. Furthermore, there had been increased differentiation between urban and rural infrastructure grants in order to gear up larger secondary cities. The gazetting of human settlement and development has also been revised. National Treasury was largely in agreement with the recommendations of the Financial and Fiscal Commission (FFC).

The FFC also highlighted changes in the DoRB. It agreed with the stopping or withholding transfers of equitable share by government to municipalities as a result of non-payment to bulk service providers, holding that this would promote more cooperative governance, since at the moment municipalities were not honouring commitments such as free basic water and electricity. It was in favour of ring-fencing funding where municipalities continuously transgressed. FFC indicated that high debt owed to local government had led to loss of jobs and high inflation, whilst the economy was largely dependent on external trade and capital flow, so that South Africa would need to decide what action would be best taken to reduce dependence on rating agencies. It recommended that wage bills must be linked to productivity in government, that municipal services must be at least maintained but preferably improved, and that components of the equitable share were being reviewed since the numbers-only approach was not working.

SA Local Government Association indicated that the main points that it would have made had been covered by the FFC, with whom it agreed.

Members asked why SALGA had requested more money whilst municipalities were failing to spend. They questioned under which department scholar transport should fall, whether it would not make sense to build more schools in the rural areas and asked for more input on the merger of grants. Members asked if there was more information on the performance of each province and whether it was not possible to devise a new formula to address backlogs in service delivery. The legitimacy of some of the data in education was questioned. Members asked if the FFC had been consulted on the new municipal demarcations,and asked FFC to look into infrastructure also to provide for learners moving out of education into the work force, and why some boarding schools were not covered by the programmes. The point was made by National Treasury that even where norms and standards were set, this would not impact the division of revenue. Members also commended the work of Equal Education and suggested that it should liaise with the DBE and other committees.
 

Meeting report

2016 Division of Revenue Bill: Public hearings
Administrative issues

Before starting the public hearings on the 2016 Division of Revenue Bill (DoRB), the Acting Chairperson allowed members to raise some concerns that they had expressed previously.

Mr M Figg (DA) asked if the Chairperson had received his letter which raised important issues on compliance with the Money Bills Amendment Procedure and Related Matters Act (the Act). He told Members that this letter had requested the date on which the request for publications was made, and whether these were procedurally correct. Mr Figg reminded the Committee that the DA had objected to various presentations in previous meetings. The purpose of his and his party's query was to ensure that any legislation passed by the Parliament is compliant inn all respects with the framework legislation. The fact that there were no amendments ensures that the process is shortened. Mr Figg also asked whether the presentation on the Division of Revenue Bill (DoRB) was on the final Bill or the draft Bill.

The Chairperson confirmed that he did indeed receive the letter, and had responded, though it was possible that Mr Figg may not have received that yet.

Mr Figg confirmed he had not received a response. He indicated that the DA objects to the proceedings and procedure that was followed, because it felt this did not comply with the Act.

Mr D Maynier (DA) said that the meeting that took place on 26 February 2016 was a briefing on the draft of the Division of Revenue Bill, which was different to the tabled DoRB. He asked whether the National Treasury was going to comply with the Money Bills Amendment Procedure and Related Matters Act.

The Chairperson said that the Minister of Finance, Mr Pravin Gordhan, had by virtue of his 2016 Budget Speech introduced the Bill to Parliament, which then refers the Bill, which is now in the public domain, to the relevant committees. Advertisements for public hearings were sent out to a number of radio stations on 27 and 28 February (SAFM, Ukhozi FM, Lesedi FM, SABC, Umhlobo Wunene, RSG, Radio 2000). The Financial and Fiscal Commission (FFC) and the National Treasury were present to respond to the public hearings on the DoRB. Given that, he believed that procedures have not been undermined. He confirmed that the Parliamentary legal advisers would be consulted for legal advice.

Mr Maynier said that he believed the Chairperson should tread very carefully, and that legal advice was highly recommended. He said the Committee did not want to undermine the Money Bills Act and the Constitution, and in his opinion it would thus be wise to schedule a formal briefing by the National Treasury and the FCC, re-advertise to the public and begin the formal process in the Committee. He expressed his concern that the National Treasury and the FCC are unprepared for the presentation, and this meeting’s agenda was confirmed only on the previous night.

Mr Figg asked again whether the DoRB was a draft or a tabled “actual” Bill.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, replied that the Committee received inputs on the Division of Revenue Bill. Because of its status, the rules dictated that it had a draft Bill accompanying it. The purpose of the draft Bill is for the Committee to organise itself and the proceedings around the Bill. Adv Jenkins said that the purpose of the Money Bills Act was to outline certain sequential events that must be followed by Parliament: the overall fiscal framework must be adopted and thereafter the Committee can receive public hearings on the division of revenue, although the Bill is already in the public domain. The Act is very specific, and is intended to prevent the Committee from considering a Bill that might lead to a decision that is contrary to the fiscal framework adopted by the National Treasury. He reiterated that he reference to “consideration” of the Bill meant that the Committee must, in that meeting, apply their minds to reaching a decision. He repeated his view that there was nothing in the previous meeting that had undermined the provisions of the Money Bills Amendment Procedure and Related Matters Act in any way.

Adv Jenkins also said that it was important to see this Bill in the context of section 77 of the Constitution, and he confirmed that he would outline his views formally in writing.

Mr A McLaughlin (DA) asked Adv Jenkins to outline where the authority was for the Committee to consider the bills prior to receiving them, as outlined in Adv Jenkins’ written response on page 15.

Mr Maynier asked what the purpose was of the Committee receiving public submissions, if it was not allowed to apply its mind to them.

Adv Jenkins replied that the authority for the Committee to receive public submissions is outlined in the National Assembly Rules. The Committee is always applying its mind, that is a natural process, but this is distinct from the Members actually then taking a formal decision. At this stage there was no formal process; the Committee was applying its mind and must remain neutral and not yet take decisions on the public submissions.

Mr Maynier asked Adv Jenkins if it was not advisable to ‘play it safe’, or whether the Committee should request further public submissions.

Mr McLaughlin asked for more clarification on the authority of the Committee as set out in Rule 138 of the National Assembly.

Dr C Madlopha (ANC) said that she believed the DA had now had a chance to raise concerns, and had  received adequate answers from Adv Jenkins. She felt the Chairperson had been very lenient to allow such extensive deliberation on the issues. This meeting had a formal agenda – to hear the public submissions. She suggested that whilst the DA could raise their concerns in the informal proceedings, it was not fair to drag the process back and forth and delay the hearings. Dr Madlopha felt strongly that the meeting should return immediately to the formal agenda it was intended to cover.

Mr Figg said that it would be possible for the fiscal framework to be amended, and asked whether there was then any point in receiving the briefings from National Treasury and the FCC, if that fiscal framework can still change. Mr Figg declared that the fact that it had not changed for the past few years was simply a convenience.

Dr Madlopha said that the Committee has passed the “informal meetings” stage, where questions of this nature could be aired, and she repeated her view that the Committee now  needed to direct its focus to the formal proceedings and allow stakeholders who were present to share their concerns and advise the Committee on how to address the challenges of the people on the ground. The concerns of the Committee must not be personal, and it was necessary instead to turn attention towards the stakeholders and listen to what they had to say on the plight of the citizens of South Africa.

Adv Jenkins replied that National Assembly Rule 138 states that “a committee may, subject to the rules and the Constitution, conduct public hearings from invested parties”. The issues around the purpose of receiving public hearings before the fiscal framework was presented had, in his view, been dealt with, and that would not change the Division of Revenue Bill and the Appropriation Bill. He again confirmed his opinion that the Committee is  complying with the Money Bills Amendment Procedure and Related Matters Act in substance and purpose.

Mr Maynier said that the Chairperson had ‘his foot on a landmine’. He believed the Committee should reconsider. The stakes were high and he would not like to receive a ‘budget risk’ rating as a result.

Dr Madlopha requested that the DA indicate what formal processes it was suggesting and exactly what the Members were saying that the Committee should do.  She asked whether the DA’s questions were merely a stalling tactic so that the public stakeholders run out of time to present. The Committee advertised widely to public stakeholders, amidst a time of budget cuts, and still the DA was requesting that the Committee should start afresh and this would give the public less time. Dr Madlopha declared that this is the people’s government, and it is important that the Committee listen to the people.

Ms N Manana (ANC) agreed with Dr Madlopha, requesting that the Committee continue with formal proceedings and start the public hearings, so that time and money was not wasted.

The Chairperson said that the legal opinion, specifically paragraph 15, confirms that the Committee has not undermined Parliamentary Rules or the Constitution, by the holding of public hearings. He said he does not want to return to the stages prior to the fiscal framework, because the fiscal framework has been adopted. The Committee is now in the formal stage where it is receive submissions and comments from the public. The National Assembly is not the only formal player, there is also the National Council of Provinces. He declared this part of the discussion by the Committee closed.

Equal Education and Equal Education Law Centre submission
Ms Andile Cele, Parliamentary Liaison Officer, Equal Education, introduced Equal Education (EE) as an organisation and outlined its mandate. She said it is a movement of learners, parents, teachers and community members working for quality and equality in the South African education system. Ms Cele introduced the Equal Education Law Centre (EELC) as an affiliate to EE that provides legal services and advice on matters concerning education, particularly for socially and economically disadvantaged persons.

Ms Cele said that EE particularly wanted to comment on the expenditure on the Education Infrastructure Grant (EIG) and the School Infrastructure Backlogs Grants (SIBG), also known as the Accelerated School Infrastructure Delivery Initiative (ASIDI). The presentation will also look at how provinces contribute to funds towards school infrastructure from the Equitable Share (ES) transfers.

Ms Cele noted the key norms and standards for public infrastructure that EE has enforced, which were outlined in the Minimum Uniform Norms and Standards in November 2013 (see document). The first deadline for review of the norms and standards is on 29 November 2016. The key question was how National Treasury and the associated departments would be meeting these norms and standards. For example, how are all schools going to have access to electricity and sanitation, and what is to be done with the remaining schools that are incorrectly built, including mud structures. Economically strong areas such as the Western Cape and Gauteng meet these norms and standards, but rural areas such as the Eastern Cape, Limpopo and Mpumalanga do not.  This was reflected in the EIGs granted to certain provinces, based on the results that they receive the previous year. The Eastern Cape did not receive the EIG for 2015/2016 although it did indeed qualify. Limpopo and Mpumalanga did not receive at all because their scores were too low and so they did not qualify (see document). Ms Cele queried the allocation method of the EIG and said it was ironic that the most needy provinces failed to receive the grant each year. Furthermore, there were other discrepancies in the allocation as illustrated in the document that described the position in the Eastern Cape.
Ms Cele suggested that instead of adopting a ‘congratulatory’ method, it would be more efficient to view this grant along the lines of noting that there had been plans but asking now how they would be implemented. She said the National Treasury needs to keep schools and their respective provinces accountable, and thus she suggested that a new allocation methodology was needed, further details being provided in the attached document.

Ms Cele noted that the ASIDI grant is in its final year and it will be merged with EIG. The merger would carry  certain disadvantages, such as the slowness of implementation, and a change in the actual targets (taking inflation into account). The main disadvantage is that ASIDI was initially introduced to address backlogs. If the merger takes place and the programmes of ASIDI and EIG are combined, poor provinces will have to compete with other wealthier provinces to reach incentives and obtain grants. This will limit the number of grants to more needy provinces.

Ms Cele concluded by saying that the EE’s recommendations are not outlandish. The EE is simply requesting that the Department and the National Treasury must do what they said they were going to do, in order for education norms and standards to be met.

Mr Solminic Joseph, Attorney, Equal Education Law Centre, then presented a submission to have  increased funds allocated for scholar transport. The impact of a lack of scholar transport was ‘multi-fold’, but mainly affected learners in rural areas. For example, some school principals would get 60%-80% absenteeism of learners on a rainy day in Kwa-Zulu Natal because of exposure to the elements. That was why there was a definitive need for scholar transport outlined in the “2015/2016 Scholar Transport Budget and Expenditure Information and Target Information”. He pointed out that the constitutional imperative to meet the needs for scholar transport lay jointly with the Department of Education and Department of Transport but no conclusion had yet been reached because it was impossible to hold one department accountable.

Mr Joseph said that EE/EELC was confused with the figures presented by the departments, and these figures needed to be revised. Inaccurate figures caused miscalculations, and this would result in the most needy learners not having access to transport. As a part of a learner’s basic right to education, learners required adequate transport to get to school. Historically strong administrative provinces, like the Western Cape and Gauteng, were meeting the demands for scholar transport, but rural areas are suffering, and this was seen particularly for primary school learners. He reiterated that EELC was calling on National Treasury  to allocate more funds to the scholar transport cause and carry out its mandate of meeting norms and standards.

Ms Cele concluded by summarising the main points of the presentation, calling on Parliament and the Committee to address the key issues surrounding education, specifically meeting norms and standards, implementation timeline, the performance based incentive approach to awarding additional EIG funds and the issue of scholar transport.

National Treasury response to EE and input on the Division of Revenue Bill
Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, sought to cover some key issues on the Division of Revenue and respond adequately to the EE/EELC’s presentation. She agreed that it was critical to address education but National Treasury (NT) did

Ms Fanoe said that addressing education is a critical issue, but the National Treasury could not address a quality issue through the allocation of a grant.

Ms Fanoe said that the performance-based system was a project that started with an infrastructure programme fifteen years ago, which then became the ASIDI. It applied to both the education and health sector infrastructure, and ASIDI would ensure that infrastructure development followed all the necessary phases. Provinces were informed at least two years in advance, which gave them considerable time to prepare. Ms Fanoe said that each year the grant system is refined and the incentives/qualifications change depending on the input. Because ASIDI is reviewed each year, the system is not stagnant but is progressive with inputs changing annually.

Ms Fanoe said that the provinces who qualified but did not receive an allocation still received a base allocation (such as the Eastern Cape). Furthermore, the National Treasury implemented certain processes to help the provinces that did not qualify at all to meet the criteria, including the Free State, Gauteng, Limpopo and the North West.

Ms Fanoe indicated that some provinces do not have a singular growth, but move up and down. In 2015/2016 Eastern Cape only spent 39% of its EIG allocation and it projected to underspend by R600 million, so funds were redirected. The EIG should not be looked at in isolation, as there are also various indirect grants to provinces. The Eastern Cape received over 65% of the indirect allocation. Although the National Treasury continues to allocate revenue a certain way, the National Department of Education has struggled to spend the allocated money. She noted that ASIDI was always intended to be a three year, short term, indirect grant and provinces were meant to gear up their capacity. ASIDI was to be incorporated into the direct EIG grant next year.

Ms Fanoe stressed that the responsibility falls on the national sector department to meet the norms and standards of education, and not the National Treasury. That is a universal acknowledgement. The National Treasury cannot create a conditional grant where the norms and standards have not been set by the National Department of Basic Education. Ms Fanoe agreed that scholar transport is an issue, but she said that it is important to decide whether the Department of Basic Education (DBE) or the National Department of Transport (NDOT) will be responsible for addressing it. Ms Fanoe asked how the Parliament can strengthen the monitoring process by these two departments. She said that key criteria governing the process of grant allocations needed to be drawn up. Ms Fanoe further indicated that the Committee needs to call a hearing on the scholar transport issue at which ideally the FCC, DBE and National Treasury were present.

Division of Revenue Bill: National Treasury input
Ms Fanoe then commented that the Division of Revenue Bill showed some changes from previous years due to the decline in the South African economic context and the need to fund new priorities, which were highlighted in the 2015 medium term budget policy statement.

Ms Fanoe outlined the changes in this year, compared to previous DoRBs. The first round of reductions focused on efficiency gains and the second round targeted ways to make the current government employee bill more affordable.

R33.7 billion had been added to the provincial equitable share, and there had been changes to conditional grants and indirect grants, to focus specifically on addressing HIV/AIDS, targeting television provision, and creating national clinics aligned with the National Health Insurance (NHI) policy. A new grant was introduced to focus on early childhood development, and the increased EIG and indirect grant for education (as mentioned). A large portion of the allocations focus on the upcoming municipal elections in October. More revenue had been allocated to SALGA for new infrastructure and the refurbishment of existing infrastructure. Furthermore, there had been increased differentiation between urban and rural infrastructure grants in order to gear up larger secondary cities. The gazetting of human settlement and development has also been revised.

Ms Fanoe said the National Treasury operated largely in support of the recommendations of the FFC in the Division of Revenue Bill, and each year the National Treasury consulted extensively with the FFC to ensure the implementation of these recommendations.

Financial and Fiscal Commission submissions
Mr Bongani Khumalo, Acting Chairperson and Chief Executive Officer, Financial and Fiscal Commission, highlighted the changes in the Division of Revenue, in response to the letter on 29 February 2016.

Mr Khumalo said that the FFC largely supports the changes to the DoRB. It agreed with the stopping or withholding transfers of equitable share by government to municipalities as a result of non-payment to bulk service providers such as Eskom and the Water Boards. The FFC wanted in this regard to see a movement towards the principles of cooperative governance as outlined in the Constitution. The agreements that the municipalities had made were not honoured. The equitable share was supposed to ensure that the basic services were provided, and national policy states that local governments have to provide certain things for free. This includes a basic services component, such as free electricity and water. Mr Khumalo said that it is unacceptable if a municipality does not pay for electricity and water, as the Constitution prescribes this as the mandate of local governments. 

For municipalities that continually transgressed in respect of basic service, the FFC believed there was every reason to insist that the FFC should ring-fence the money that is intended for the equitable share. If the municipalities do not deliver, the FFC would be left with no choice but to intervene. Mr Khumalo pointed out that the Constitution does not prevent this, and sometimes it is necessary, moving into the medium term budget policy statement in October.

Mr Khumalo said that there is a lot of debt owed to local governments, which has led to a loss of jobs and higher than expected inflation. Local governments are feeling the pressure.

Mr Khumalo mentioned the key issues of the economy itself, and why it is important that the FFC, the National Treasury and the Committee do not raise expectations for the upcoming year. He said that where the pie was not growing, it was hard to try to share it between more people. The South African economy has taken a downturn into the predictions of 2010, and as a result the FFC and the Committee need to do certain things within the construct of a slow economy. Normally an exchange rate movement allows a country to deal with balance of payments, but South Africa was exposed, with no response to changes in the exchange rate because there is a highly inelastic input demand function. The South African economy depends largely on external trade and capital flow. The real challenge lies with internal matters, to decide what is the best action to take, to become less dependent on rating agencies. Mr Khumalo said that the impact is seen across three spheres of government.

In dealing with fiscal consolidation, aggregate demand is depressed, which has a negative growth impact. Mr Khumalo said that it is not easy to strike the balance when there is a composition of mainly government consumption expenditure instead of investment expenditure. He indicated the need to link the Wage Bill to the productivity of the public sector, and the need to look at the composition of the people who are employed. He said that there is an assessment into the Chief Directors in each department. Government must rather come up with better norms and standards to consolidate the employment, so that the expenditure generates more value. The important issues in the provincial sphere can be addressed with an improvement in spending. He said that although there is no growth of allocations in the economic slowdown, it is important to maintain the current municipal services, or even look to improve them. Part of the work is a review of the components of the equitable share formula, since the shifts in population are having a negative impact on the allocations. He revealed that 97% or 98% of the allocations are related to the population, and if people are lost or move away, money is lost too in relative terms. People numbers will always be important when dealing with issues of access, which the FFC has done well to address. The FFC must now deal with issues of impact.

Mr Khumalo also responded to the points made by Equal Education. The FFC had done a lot of work on the issue of scholar transport. He would like to meet with the members of Equal Education outside of Parliament so that they could make concrete recommendations. The Department of Transport had a policy for scholar transport, but it was now a matter of signing and implementing it.

The FFC noted that in respect of municipalities, the drought was the most pressing issue that needed to be addressed immediately by local government. Once again there was an issue around re-demarcations off municipal boundaries, because the pool is very small and allocations across municipalities are also very small. Mr Khumalo said the issue of slow spending by municipalities can be assisted through infrastructure.

South African Local Government Association submission
Mr N September, Programme Manager: Municipal Finance, South African Local Government Association said that all the necessary points from this Association (SALGA) were outlined in the presentation of 2 March 2016, and the main highlights were also noted by Mr Khumalo. However, Mr September pointed out that the equitable share allocation for SALGA is understated.

Discussion
Mr A Shaik Emam (NFP) asked why SALGA requested more money yet was failing to spend the money that had already been allocated.

Mr Shaik Emam asked Equal Education whether the issue of scholar transport should fall under the DBE or the NDOT. He asked whether schools can be built in rural areas, instead of signing an agreement for scholar transport. Mr Shaik Emam asked why, on a broader scale, Equal Education does not emphasise the quality of education, given that there had not been an improvement in areas such as the Eastern Cape. He pointed out that if EE wants results, it needs to address the quality of education. He Mr Shaik Emam asked whether the EE had looked into scholar nutrition issues. He also asked for clarification on the negative impact of the merger between ASIDI and EIG. 

Mr Joseph replied that Equal Education engaged regularly with the DBE on the type and the quality of teaching, and he felt that the provincial governments needed to be held accountable. In the rural setting, EE had found that although there were  massive costs associated with transporting learners, the costs of moving schools to areas near the learners would be even higher. These schools would be classified as ‘educationally non-viable’ by the Department of Education’s rating standards. Mr Joseph said the Constitutional duty to provide scholar transport lay with the National Department of Education. He maintained that scholar transport was cost effective, provided that the DBE, NDOT and NT could decide on norms and standards to be met, and if there was adequate funding and good budgeting.

Ms Cele replied that Equal Education believed ASIDI was not working because it was originally a three year plan, then moved to a five year plan and was now a six year plan.

Mr Joseph added that EE is aware that there are learners who cannot learn because they lack nutrition, are hungry and tired. However, there is also a misidentification of learners. He maintained that a problem cannot be solved with money alone, but it was also impossible to solve a problem without any money at all. Parliament must hold under-performing government departments to account.

Mr Figg thanked  the stakeholders for their presentations, and was especially appreciative of Equal Education.

Mr Figg asked about the moving of the central procurement office, if there is any major change to the Division of Revenue Bill.

Dr Madlopha asked if Equal Education has information on each province's performance because, as the FFC indicated, most municipalities had experienced a cut due to underspending. She asked the reasons for these provinces spending so little.

Dr Madlopha asked the FFC if a new formula could be devised to address the backlog of service delivery. especially for basic needs.  She suggested that the population of the province and the rating/current situation of the province could be combined in a policy to address the backlog.

Ms Cele made the point that the Eastern Cape, Limpopo and Mpumalanga were the worst performing provinces. As time progressed, each province received a decreasing allocation to their equitable share. High-performing provinces are given the highest level from the FFC.

Ms Fanoe stated that the National Treasury was aware that the budget available for EE was a priority, but pointed out that the 2016/2017 budget grew by 17%, far beyond inflation. The Director General of the National Treasury advocated that money would not create service delivery, but this would come about as a result of the school being built. Therefore, underspending was an issue, but the departments needed to focus on implementation too.

Mr Joseph repeated that he worst performing and rural  provinces also had the worst scholar transport programmes. He queried the legitimacy of the DBE’s data on scholar transport.

Mr Khumalo agreed with Ms Madlopha on the issue of provisions. When the formula was first introduced in 1998 it made sense to rely on population data, from Statistics SA, to ensure that everyone had access to basic services. However, this did not take account of the impact of migration. Most people moved to either the Western Cape or Gauteng, and once a school had been built it could not be moved to where the population moved. Stats SA numbers revealed that school enrolments were over what the schools were equipped to take, and that then impacted on the quality of the service. Mr Khumalo said that a new formula was needed that did take account of migration effects.

Ms Manana said that there had been some complaints concerning the Municipal Demarcation Board (MDB). She asked Mr Khumalo whether the FFC was consulted with regard to the new upcoming demarcations.

Mr Khumalo replied that there had been liaison with the MDB, although the process would need to be refined in the future. He was happy with the current emerging process.

The Chairperson commented on the point raised by FFC, and the issue of eradicating the backlogs component of infrastructure, combined with the imperative to build new infrastructure for the number of learners moving out of tertiary education into the work force. Again, there was a link to demographics.

Mr Khumalo agreed, and said that this was an expansion of the process with Equal Education, which the FFC would be pleased to look into.

Mr Shaik Emam reported that there were some boarding schools who would not accommodate learners over the weekend, citing one in Humansdorp.

Mr Joseph said that this too was a problem. The scholar transport programme, from 2015, had referred to “needy” learners only, and that often excluded boarding schools. This term was vague and had not been defined by the DBE or the Department of Transport. Mr Joseph agreed with the National Treasury that there needed to be norms and standards for departments to use as guidelines.

Ms Fanoe replied that norms and standards of the Office of Chief Procurement Officer (OCPO) were outlined in Chapter 6 of the Budget Review. She noted that any setting of norms and standards by national government would not impact the Division of Revenue.

Mr Khumalo spoke to Ms Cele’s earlier question on ring-fencing. The FFC could take a very drastic intervention measure as a last resort. That was provided for in section 100 of the Constitution. FFC could intervene, but only when Parliament had been consulted and the intervention was constitutionally valid. This was quite extreme, and therefore required that a thorough process be followed, after there had been  material and persistent breaches, and it was not taken lightly. There had been a breach in Eastern Cape, which the FFC had been dealing with in another committee, earlier in the week. The FFC needed to talk to the National Department to guarantee their support at the provincial levels. There was an opportunity cost to allocations since failure by a province to use money as it was intended meant that national targets would not be met, and so the money would be re-allocated. He stressed that it was futile to allocate money that would not be spent.

Mr Joseph responded that the grants had in theory given provinces the chance to build infrastructure for a decade, yet there was still not capacity. He felt that Parliament should oversee the capacity of the provinces.

Mr McLaughlin commended Equal Education on its work, and asked if it had given presentations to the DBE.

Ms Cele replied that Equal Education had not had this opportunity, but would certainly welcome it. The Standing Committee on Appropriations was the only committee so far to hear the EE’s presentations.

Mr Shaik Emam asked whether the EE was able to monitor the schools for the quality of education – and cited the Nelson Mandela Park Public School in the Eastern Cape. There was a problem with the quintile system and the criteria for learner performance.

Mr Joseph admitted that this matter was probably better suited to being handled by the DBE, although he agreed that the quintile system is indeed flawed. Equal Education, as a non-governmental organisation, does not have the same reach or financial capacity for monitoring progress as a government department would. EE receives information from learners, the media and concerned parents, but it can go only so far.

The Chairperson concluded that the question of multi-planning and the completion of projects within a time frame would be very important to address all the issues expressed in the meeting.

Adoption of Minutes
The minutes of 10, 11 November, 1, 2 March were adopted. No decision was taken on the adoption of the minutes of 25 February, which would stand over.

The meeting was adjourned.
 

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