The National Treasury noted that expenditure ceilings for the two outer years of the 2016 Medium Term Expenditure Framework (MTEF) period were reduced. Expenditure baselines were growing at the rate of 7.5% over the 2016 MTEF period. There was a drawdown on the contingency reserve within the expenditure ceiling. The main drawdown on the contingency reserve was to cover a portion of employee compensation budget pressures. Real growth declined in most areas, except goods and services, but all areas were growing in nominal terms, except payments for capital assets. Treasury listed departments that received the largest reprioritisation funding additions over the 2016 MTEF - the two largest additions went to Police (capacitation of existing Public Order Policing units) as well as Cooperative Governance and Traditional Affairs (provision of free basic services to poor households). Investment in infrastructure supported long-term growth and development.
In discussion, there was interest in the statement that real growth declined in most areas, whereas there was growth in nominal terms. Members asked if provision for the so-called luxury jet was included in the Bill; what the motivation was for projected funding additions over the MTEF which was described as a wish list; what made departments special that were singled out for funding additions. There was an urgent appeal that infrastructure spending had to be continually monitored. There was a question about debt servicing costs.
The Appropriation Bill was approved by the Committee, with an objection to the Bill from the DA and EFF. The DA also wanted to table proposed amendments to the Bill but the request was not entertained because other Members had not yet been presented with the DA proposed amendments.
The Committee Report on Municipal Infrastructure Grant rollovers was adopted.
The Chairperson said that the Appropriation Bill was approved without amendment by the National Assembly, and was referred to the NCOP for consideration.
Mr F Essack (DA, Mpumalanga) said that he wanted to obtain clarity on behalf of the DA. The DA wished to table amendments to the Appropriation Bill. He asked if that was best done before or after the presentation by the Treasury.
The Chairperson ruled that Treasury had to be heard first.
Appropriation Bill: National Treasury briefing
Dr Kay Brown, Chief Director: Expenditure Planning, noted that the expenditure ceilings for the two outer years of the 2016 MTEF period were reduced by R10 billion for 2017/18, and R15 billion for 2018/19. Expenditure baselines were growing at a rate of 7.5% over the 2016 MTEF period. It would amount to R1.15 trillion in 2016/17; R1.24 trillion in 2017/18, and R1.34 trillion in 2018/19. There was a drawdown on unallocated reserves within the expenditure ceiling. The main drawdown on the contingency reserve was to cover a portion of employee compensation budget pressures. Employee compensation budgets for departments that historically underspent were reduced by R6.8 billion over the 2016 MTEF period. The reduced expenditure ceiling meant that the real growth rate declined in most economic areas, except for goods and services. However, all areas were growing in nominal terms, except for payments for capital assets. Spending continued to grow in priority areas. A list of largest reprioritisation funding additions over the 2016 MTEF period included National Treasury; Higher Education and Training; Transport; Trade and Industry; Defence and Military Veterans; Correctional Services; Police, and Cooperative Governance and Traditional Affairs. The largest funding additions were for Police (11.2% of total Bill appropriation), for the capacitation of existing Public Order Policing units; and CoGTA (10.1%) for the provision of free basic services to poor households. Investment in infrastructure supported long-term growth and development.
The Chairperson noted that there had been engagement with the Budget since the Minister’s Budget Speech in February. There was a briefing to the Finance and Appropriation Committees, with the Minister present. The Division of Revenue Bill had been gone through and the provinces were consulted. The NCOP currently had to conclude the Budget vote debate. There was a breakdown according to departments, and areas of allocation were debated.
Mr F Essack (DA, Mpumalanga) referred to slide 4. He asked about the meaning of the statement that up to end July, expenditure was not to exceed 45% of the 2015/16 financial year budget.
Dr Brown responded that the Appropriation Bill was not yet enacted, which meant that there was a provision in section 29 that allowed for spending to continue against the Appropriation Act of the previous year. Expenditure was not to exceed 45% of the previous year in the first four months. If the Bill was only passed after July it became more restrictive. Caps would be restrictive.
Mr Essack referred to slide 10. It stated that all areas had grown in nominal terms except for capital assets. He asked the Treasury to elaborate.
Dr Brown responded that expenditure on capital assets was not growing, but was in fact decreasing. Budgets were tighter, which meant that departments had to find money somewhere.
Mr Dondo Mogajane, DDG: Public Finance, added that there was reprioritisation from underspending programmes, due to the tight fiscal position. There was a lot of unspent money in Water, for example. Zero-fee challenges made it necessary to look for money. Programmes with a history of underspending were targetted, to make provision for new spending items that money could not be found for.
Mr O Terblanche (DA, Western Cape) referred to slide 15 that dealt with aircraft. With reference also to slide 17, he asked if any provision had been made to start the process for the so-called luxury jet, and if the amount was included there.
Mr Essack referred to funding additions for CoGTA over the 2016 MTEF period. It amounted to a wish list. It stated what was desired, but there were no guarantees related to these figures. There were many factors that could have an influence. It could be called “thumbsucked” figures. He asked what the motivation for these figures was. Economic growth could slow down from 0.8% to 0.4%. Figures could have changed drastically by the next year.
Mr V Mteleni (EFF, Limpopo) referred to the departments that would obtain the largest reprioritisation funding additions over the 2016 MTEF period (slide 16). Percentages were highlighted for three years. He asked what was so special about these departments. Percentages were not included in the infrastructure expenditure estimates per department, on the next slide.
Mr C De Beer (ANC, Northern Cape) remarked that the figures Mr Essack had referred to were projections, based on a fiscal policy framework. If hiccups occurred in Washington, the UK and France, the fiscal policy framework could change overnight. Infrastructure spending was crucial. There had been a meeting on the Municipal Infrastructure Grant (MIG), so that Treasury and provinces could state what was happening in that area. Infrastructure spending had to be monitored, because it created jobs. Quarterly engagements were crucial. What was stated at the beginning of the year had to be measured. Oversight was especially important in the third and fourth quarters.
The Chairperson referred to servicing of debt costs. Treasury seemed confident that the current arrangement could strike a balance between debt service and service delivery.
Mr Mogajane responded that debt borrowing stood at R178 billion. One bond had oversubscribed, but there were no challenges. Provision was only made in the Budget for Defence equipment and maintenance. There was no provision in the budget for acquisition of the kind that Mr Terblanche had referred to.
Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, responded that the local government equitable share was informed by available resources. It also took population growth into account. Population growth data had to be updated every year. It had an impact on the number of poor households that had to have access to free basic services. There were increases in bulk service costs for free basic services. For electricity it had gone up by 7.9%, and for water by 8.9%, which was higher than inflation. She wanted to make a proposition to the Committee. The Chairperson had raised important points. When the Appropriation Bill was passed, it had to be taken into account what had been approved before that. The Fiscal Framework had been approved, and there was a Division of Revenue Act (DoRA). If changes were proposed to conditional grants or the equitable share, it needed to be raised as part of the Division of Revenue Bill (DoRB) in the Appropriations Committee.
Dr Brown added that the local government equitable share was topped up from the previous year. There had already been an estimate of what costs would be in the previous budget. Treasury looked at the differential. With regard to infrastructure spending, she referred to what Mr Mogajane had said – that Treasury was not worried about the ability to raise revenue needed to borrow. If there was underspending, running together with borrowing to make those funds available, available funds not used became a cost. Treasury had to find a means to make money available and debt service costs were already incurred to borrow that money, hence it had to be used. She answered Mr Mteleni that what was special about the listed departments with the largest reprioritisation funding additions was their size. Besides the departments highlighted, there were many more allocation adjustments, as could be seen in the introductory chapter of the Estimates of National Expenditure (ENE).
Committee Report on the Appropriation Bill
The Chairperson proposed that the draft report on the Appropriation Bill be adopted without amendment. It had been discussed and given consideration. The Appropriation Bill had been agreed to.
Mr Terblanche asked when Mr Essack would be allowed to table the DA proposed amendments.
The Chairperson replied that procedurally he had to put the Bill before the Committee first.
Mr Essack said that in terms of procedure, that since the meeting was now dealing with the consideration of the Appropriation Bill, he would find it appropriate that the DA be allowed to submit its proposed amendments. He had asked the Secretary to submit a copy to the Chairperson. He asked that the DA submission be gone through before the adoption of the Appropriation Bill. It would make no sense to consider the DA submission only after the adoption of the Bill.
The Chairperson noted that the submission came from Mr Terblanche. It seemed to indicate a Western Cape position. It was signed by Mr Terblanche.
Mr Essack objected vehemently.
The Chairperson told Mr Essack to be at ease, he simply wanted to make sure.
Mr Essack said that it was not a Western Cape position whatsoever. He wanted to put that on the record.
The Chairperson asked Mr Terblanche which areas were proposed for amendments.
Mr Terblanche noted that all budget votes were covered, starting with the Presidency.
The Chairperson noted that proposed amendments had been received from the DA. A re-drafting of the Bill was proposed.
Mr Essack responded that a re-drafting of the Bill was not proposed. What was proposed were amendments to the appropriations. The proposition was budget neutral. Nothing was taken away or added to the overall budget. He requested that in the interests of transparency each item be gone. If the proposed amendments could be gone through, the Chairperson would understand what he meant.
The Chairperson asked if Members accepted that.
Ms T Motara (ANC, Gauteng) responded that Members could not agree or disagree if the document was not in front of them. In terms of procedure the Committee first had to engage with the draft Committee Report received. Matters of contention could be dealt with afterwards. It had to be within the draft Committee Report so that Members could know what they were adopting. The DA had moved for amendment, but as things stood the Committee did not know what the DA proposed to amend.
Mr De Beer stated that the DA had a right to table the proposed amendments. But every budget vote had already been debated. Every party had the opportunity to put a position on the table in the NA and the NCOP, over the preceding five or six weeks. As the Appropriation Bill was a section 77 Bill, political parties would have another chance to issue a declaration when the Bill was voted on in the House. Members did not have a tabled document, and hence had no insight into the content.
The Chairperson asked what areas the DA proposed to amend
Mr Essack suggested that copies could be quickly made, or he could read them out, if the rest of the members would be happy with that.
The Chairperson said that the draft Committee Report on the Bill was received. He asked if there were any questions from Members, and if members were ready to approve the Bill.
Mr De Beer moved for adoption, and Mr Nzimande seconded.
The Chairperson noted that the DA had moved an objection to the Bill. The DA opinion would be included in the report. The DA could reject the Bill or reserve an opinion in the meeting.
Mr Essack insisted that it be stated that the DA had tabled an amendment that objected to the Bill, and proposed amendments. He wanted that minuted.
The Chairperson assured him that it was captured.
Ms Motara said that the move for adoption had been seconded. It had to be seconded with amendments to the draft Committee Report.
The Chairperson stated that the Select Committee, having considered the Appropriation Bill, agreed to it without amendment. A DA objection to the Bill would be noted.
Mr Essack insisted that it be noted that there were also proposed amendments. He wanted what he had said to be minuted.
The Chairperson assured him that the minutes captured everything.
Mr Mteleni said that the EFF did not have amendments but also objected.
The Chairperson noted that. He declared that the Bill was approved by the Committee without amendment, with DA objections noted. He thanked Treasury.
Committee Report on Municipal Infrastructure Grant rollovers for the past five financial years
The Chairperson asked if Members wanted any reformulation of the report. Page 1 dealt with introduction and background, and page 2 with the Treasury presentation. Page 3 clarified the conditions that applied, and page 4 dealt with the monitoring of expenditure on rollovers. Figures for 2016 were not yet audited.
Page 6 contained challenges and remedial measures, and observations. Members had had a chance to read it over the weekend. He asked if all were in agreement.
Mr De Beer moved for adoption of the report, and thanked staff for the quality of the report, and the capturing of data. An audited 2016 MIG statement would be ready in September. The Committee could have a meeting in September about the latest audited performance. He would move for adoption.
The report was adopted.
Minutes of 3 and 17 May were adopted without amendment.
Ms Motara, Committee Whip, said that the Finance Select Committee would meet the following day at 14h00, as there were plenaries in the morning. The programmes for the Finance and Appropriations Select Committees would be finalised when Members returned in August. The third term programme included a study tour. It impacted on the Twin Peaks legislation which the Finance Select Committee had to consider. The Finance and Appropriations Committees would receive a programme the next day.
Mr Essack asked why the plenaries where scheduled for the following morning.
Ms Motara replied that issues that the Appropriations Committee dealt with were first defined in the working group and then in the programming committee. She could only speak with authority on the Finance and Appropriations Committees.
Mr De Beer noted that application for the study tour had to be submitted on this week. It still had to be approved. He asked that Members get their passports ready. International relations would communicate with the Committee. He asked that Members get their passports in by 27 May.
The Chairperson thanked Members for their continual support. The Committee remained focused. It had the important task of monitoring expenditure and seeing to it that policy objectives spelled out in various government departments were attained. The Committee had to maintain vigorous oversight. It had to increase its capacity and coordination. Engagement with departments had to be stepped up with help from Treasury, to take service delivery to greater heights. He thanked Members for their consistency, which ensured that subjects dealt with received the utmost attention. The efforts of the Committee could increase the value of the NCOP. If the Committee played its part, the efficiency of government as a whole would improve.
The Chairperson thanked all for their attention, and adjourned the meeting.