2016 Revised Fiscal Framework (MTBPS): public hearings

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Finance Standing Committee

02 November 2016
Chairperson: Mr Y Carrim (ANC) and Mr C De Beer (ANC)
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Meeting Summary

There were many positive aspects in the MTBPS that the Congress of South African Trade Unions (COSATU) agreed with. The main issue was what impact the budget had on job creation as this was COSATU’s main priority. It was worried that government did not have a coherent and comprehensive job creation plan and programme implemented. COSATU was worried about the increase in Value Added Tax (VAT) as it would affect the working class and the poor. It wanted to see government cracking the whip on provinces and municipalities to ensure that they only procured locally. It felt that too often municipalities were still buying t-shirts from China for example. Government had good policies and laws but it needed to be enforced. COSATU was satisfied with the protection of social grants and hiring social workers yet more could be done especially on dealing with substance abuse. With regards to National Health Insurance (NHI), COSATU wanted to see government move with greater speed in laying the groundwork and there were reports that doctors’ posts were cancelled in Limpopo because of the freezing of public posts. COSATU also wanted to see more work done on addressing substance, alcohol and tobacco abuse. COSATU noted that government was not moving with enough speed to address students’ legitimate call for free education and  supported this movement for working class and middle class families but of course the rich had to pay.

In terms of the Expanded Public Works Programme (EPWP) and Community Works Programme (CWP), COSATU sympathised with government that it was desperate to try and create jobs for low skilled long term unemployed people, but COSATU was worried that it had become a source of cheap labour for municipalities and departments. COSATU was very concerned about State Owned Entities (SOE’s) and could not understand why South Africa needed three state owned airlines; there was a need to consolidate these. It could be done in a way without costing jobs. Too much money was also being spent on VIP Policing. The amount of bodyguards allocated to Ministers was multiplying all the time. It was questionable whether all deputy Ministers and MEC’s needed bodyguards. With regards to transport, COSATU was deeply worried about the affairs at PRASA. Also SANRAL was continuously asking people to pay e-Tolls but it was important to look at alternative models of funding infrastructure as the payment rates of e-Tolls indicated clearly that the public has rejected this model. Overall, government needed to engage with business and labour to solve some issues and look at ways to cut expenditure to increase revenues.

Rural Health Advocacy Programme (RHAP) advocated for the provision of quality healthcare for rural communities as these made up almost 38% of the population. He felt that rural communities should be able to have the same access to quality healthcare as the rest of the country. He noted that at the moment critical was looked at in a very “narrow way” and the directive coming out from government was to protect critical frontline posts which essentially meant nurses and doctors. However, healthcare delivery required a service platform which was made up a whole lot of different components to allow for effective delivery. Some of the biggest allocations in the budget had been into health and education yet a lot of things were at risk if government started to cut on the operating environment making it difficult to deliver effective healthcare services. Provinces especially hard a hard time prioritizing what were critical posts and what not. In some clinics it could be that a cleaner position was considered critical if there were six doctors but in some Community Health Centres (CHC’s) it was found there were no cleaners so the priority should then be on getting cleaners. This put infection control at risk.

RHAP felt that the equity efforts as per the National Development Plan 2030 were being undermined as rural districts were the most affected. There were no alternatives of care and no private sector hospitals. High levels of poverty in these rural districts had an impact as the cost and distance to facilities were troublesome for already marginalised communities. RHAP recommended that the goal of an approach to critical posts should include more than just clinicians. Rather, it should include the whole health system but prioritize rural, primary care levels and service needs.

Members felt COSATU had raised concerns and suggested that it should not be left there but for COSATU to propose something such as alternatives. They agreed with COSATU that the use of consultants, labour broking and outsourcing was causing more harm. Most issues raised by COSATU had to be directed to the relevant platforms. As the Committee in parliament, members could only be a “helping hand”. With regards to the issue of wasteful and fruitless expenditure, parliament and the Auditor-General South Africa (AGSA) were very hard on that. They also agreed with COSATU that the vacancies on Health had to be addressed. Government could not provide good health services without personnel as well as good education without teachers. Most issues COSATU and RHAP were raising were operational which could be dealt with through the relevant bargaining chambers at provincial level and the bargaining councils at national level. The Committee could help but not make any decisions. If COSATU and RHAP strengthened its appearance in all boards and bodies it would be able to resolve issues. Members were in agreement with COSATU on the Extended Public Works Programme (EPWP) and Community Works Programme (CWP) and felt that these programmes were not assisting people; it could be easily abused by municipalities. With regards to SOE’s, South African Airlines (SAA) would suffer job losses if there was any restructuring and consolidation.

Meeting report

COSATU Submission on the 2016/17 Medium Term Budget Policy Statement

Mr Matthew Parks, Parliamentary Coordinator, COSATU, thanked the Committee and Chairpersons for allowing COSATU to come and share its thoughts on the MTBPS. COSATU realised that government was going through difficult circumstances and felt that the MTBPS was not as “harsh” as it had feared. There were many positive aspects to it which COSATU agreed with. The main issue was what impact the budget had on job creation as this was COSATU’s main priority. Having one out of three workers unemployed in the long term was a fundamental crisis and all the good work government did could not be sustained if unemployment persisted. COSATU was worried that government did not have a coherent and comprehensive job creation plan and programme implemented.

He said that poverty and inequality was still a big concern for COSATU. Government was trying to stimulate the economy but it was not enough given the depth of the crisis. Some international examples of how to push the economy came from the United States of America and China on how to create jobs and keep debt levels under control. COSATU appreciated governments’ commitment to spend R987 billion in the next three years on infrastructure and not cutting social expenditure. Government could not have unmanaged debt and should try staying away from external debt. COSATU was seeing progress on minimum wage. With regards to revenue proposals, it was worried about the increase in Value Added Tax (VAT) as it would affect the working class and the poor. COSATU was also worried about income tax increases, and suggested that there was space for tax increases on the rich without being reckless about it. COSATU suggested tax be introduced on luxury goods and non-essential imports. A solution for taxes could be to look at how to incentivise the private sector to reinvest and procure locally and to beneficiate. It wanted to see government cracking the whip on provinces and municipalities to ensure that they only procure locally. He felt that too often municipalities were still buying t-shirts from China for example. Government had good policies and laws but it needed to be enforced.

In terms of expenditure, COSATU noted that the critical departments had above inflation increases projected. However, it was concerned about the level of public service vacancies. COSATU also wanted to see a reduction in the wage gaps in the public service. He emphasized the efforts government had taken to reduce wasteful expenditure but there was more work to be done. For example implementing cuts in the travelling budget of government officials and providing government vehicles to officials instead of having everyone buy cars. More work needed to be done by government to end outsourcing labour broking.

COSATU was satisfied with the protection of social grants and hiring social workers yet more could be done especially on dealing with substance abuse. He noted that it has not seen the release of a comprehensive social security discussion paper. The Minister committed in February 2016 to have it released by June or July 2016 yet it had not been released. With regards to National Health Insurance (NHI), COSATU wanted to see government move with greater speed in laying the groundwork and there were reports that doctors’ posts were cancelled in Limpopo because of the freezing of public posts. COSATU also wanted to see more work done on addressing substance, alcohol and tobacco abuse. Since the year 2008 to date and for the next three years there had been an increase in governments’ initiatives to assist university students and COSATU wanted to congratulate government on this. However, COSATU noted that government was not moving with enough speed to address students’ legitimate call for free education. COSATU supported this movement for working class and middle class families but of course the rich had to pay. Perhaps it was time to reconsider the role of the National Youth Development Agency (NYDA) because it had a huge budget of over R400 million.

Mr Parks highlighted that key departments for COSATU were the Department of Trade and Industry as well as the Department of Economic Development. They had done fantastic work in the clothing and textile industries and motor manufacturing. More money had to be allocated to those departments and more effort by government to work with those industries to reindustrialise for job creation. In terms of the Unemployment Insurance Fund (UIF), he felt that this was a solidarity tax by workers for when they were unemployed. It was not a possible way to address governments’ budgetary crises.

COSATU was worried about the funding of the local government model and was not sure whether the four tier government could work going forward. It wanted a relook at the role of district councils versus municipal councils and look at a sustainable long term approach. In terms of the Expanded Public Works Programme (EPWP) and Community Works Programme (CWP), COSATU sympathised with government that it was desperate to try and create jobs for low skilled long term unemployed people, but COSATU was worried that it had become a source of cheap labour for municipalities and departments. Those public works programmes were meant to deal with once off projects, yet municipalities across the country were using the project to deal with permanent municipal functions such as cleaning streets, building roads, laying electricity lines and some were even used to fight gangsters. In the City of Cape Town, COSATU had been told the programme was being used to clean municipal buildings. So basically it had become a way of balancing the municipal books and if that was the case then the funding model for municipalities had to be reconsidered.

In terms of Basic Education, COSATU welcomed the commitment of government to the infrastructure expenditure but it would like to hear from government when it finally planned to eradicate the mud schools or whether it was continuously going to shift its goalposts. COSATU also had worrying reports about vacancies being cut in schools. A report in Mpumalanga stated that 1 400 teacher’s posts were cut and looking at the Matric results in Mpumalanga government could not afford such drastic cuts. In terms of Energy, COSATU commended government for the massive rollout of renewable energy. There had investment of about R900 billion in the last few years and 27 000 job created. However, it was concerning that the department had not met its solar panel rollout targets for the last two quarters. COSATU saw renewable energy as the future for South Africa and encouraged government to be bold and push for all buildings to have solar panels in the next five to ten years as an example, which would lessen the electricity burden on Eskom. COSATU was very worried about Eskom’s tariff increases and it was basically squeezing poor people beyond what they could afford.

COSATU noted the Minister of Finances concerns about Department of International Relations and Cooperation (DIRCO) and its high expenditure levels. It wanted to see all embassies aligned with promoting trade to return all investment spend back to South Africa. COSATU was very concerned about State Owned Entities and could not understand why South Africa needed three state owned airlines; there was a need to consolidate these. It could be done in a way without costing jobs. Unfortunately, these parastatals were also the champions of labour broking, outsourcing as well as corruption. There was a great urgency for the Shareholder Management Bill to be tabled since it was in the pipeline for a few years already. Yet if government complained it did not have the capacity to intervene in SOE’s, it should be fast tracking this legislature. There had been major improvement at the South African Post Office (SAPO) where workers were now being paid on time compared to a year ago where workers were not paid on time and only half of their salaries.

Mr Parks felt too much money was being spent on VIP Policing. The amount of bodyguards allocated to Ministers was multiplying all the time. It was questionable whether all deputy Ministers and MEC’s needed bodyguards. The average person on the street did not know who a deputy Minister or MEC was. Where the police had to be deployed was in places such as Manenberg and Khayelitsha. Every year the crime levels in Khayelitsha and Gugulethu was getting worse and government was not able to handle it. In terms of Agriculture, Forestry and Land Reform, more support had to be given to farmers especially emerging farmers. There were worrying reports indicating more than half of restitution cases were collapsing because there was not enough support, training and equipment given to new and emerging farmers. Agriculture was a strategic sector of the economy and it was unfair to expect it to behave the same as those in the European Union (EU) or United States where agriculture was heavily subsidised. For example, in the EU a cow received a 10 US dollar per day subsidy. That amount was higher than the farmworkers wages in South Africa. However, it was necessary to discuss ways and means of improving the sector to create more jobs. Another issue with the MTBPS was the pace in which it was addressing the land claims backlog; there were around 70 000 claims still to be finalised. COSATU also wanted to see government move with speed around providing equity of land for farm workers. With regards to transport, COSATU was deeply worried about the affairs at PRASA. Also SANRAL was continuously asking people to pay e-Tolls but it was important to look at alternative models of funding infrastructure as the payment rates of e-Tolls indicated clearly that the public has rejected this model.

Mr Parks said the key issues for COSATU was about how government planned to deal with the unemployment rate of 33% to 36% and this budget was not sufficient to deal with job creation and stimulating growth. COSATU wanted to caution government against tax increases especially VAT increases which would hit the poor the most and suggested government look at other ways of taxation without hurting working class families. More effort was also needed in reducing wasteful expenditure. Government needed to engage with business and labour to solve some issues and look at ways to cut expenditure to increase revenues.

Rural Health Advocacy Project (RHAP) presentation

Mr Russell Rensburg, Programme Manager: Health Systems and Policy, Rural Health Advocacy Project, said this was the second time RHAP was able to make a submission to parliament. RHAP advocated for the provision of quality healthcare for rural communities as these made up almost 38% of the population. He felt that rural communities should be able to have the same access to quality healthcare as the rest of the country. RHAP made a presentation to the Appropriations Committee in 2015 and focused on the allocations to provinces not keeping up with growing Cost of Employment (CoE), blanket staffing moratoria was impacting on service delivery and the issue of annual accruals in the Health Department. He was happy to report that as a result of this engagement in 2015, in the budget speech for 2016 the Minister noted that budget cuts and hiring freezes would focus on administrative posts and frontline posts of healthcare professionals would be protected. Following the budget speech in 2016, National Treasury had engaged with RHAP and with the Department of Health. Roundtable discussions were held on policy directives for the identification and protection of critical health posts. However, there were still no guidelines by Treasury or Health.

He noted that at the moment critical was looked at in a very “narrow way” and the directive coming out from government was to protect critical frontline posts which essentially meant nurses and doctors. However, healthcare delivery required a service platform which was made up a whole lot of different components to allow for effective delivery. Some of the biggest allocations in the budget had been into health and education yet a lot of things were at risk if government started to cut on the operating environment making it difficult to deliver effective healthcare services. Provinces especially hard a hard time prioritizing what were critical posts and what not. In some clinics it could be that a cleaner position was considered critical if there were six doctors but in some Community Health Centres (CHC’s) it was found there were no cleaners so the priority should then be on getting cleaners. This put infection control at risk. Sometimes the prioritisation of posts should be on a contextual and facility level.

Mr Rensburg highlighted that RHAP found the prioritization of medical professionals were at the expense of other professions such as rehab therapy services and occupational therapy. New health facility organograms risked further cuts to small and thus fragile rural teams in the Eastern Cape for example. One rural District Hospital in one of the most deprived districts in the country stood to lose more than 50% of its midwives. Therefore RHAP felt that the equity efforts as per the National Development Plan 2030 were being undermined as rural districts were the most affected. There were no alternatives of care and no private sector hospitals. High levels of poverty in these rural districts had an impact as the cost and distance to facilities were troublesome for already marginalised communities. Also, outreach services to the most vulnerable people, rural people with disabilities, have been deprioritised and discontinued.

The cost of cost containment to the health system had also had an impact. There was a diminished capacity of staff to deliver services; poor supervision of junior staff caused medical errors. He felt that there was weakening of capacitating functions such as procurement, financial management and Health Management Information Systems (HMIS). Although there would be savings due to cost containment, there would be significant costs for government at a later stage. One example of this happening was the fact that there was a rise on medical legal claims as health facilities have become a target to these primarily in Gauteng and the Eastern Cape. He felt that government was also letting down severely handicapped children in terms of the facilities and support they were given. Sometimes the services of an Occupational Therapist could make the difference between “being alive and actually living”.

RHAP recommended that the goal of an approach to critical posts should include more than just clinicians. Rather, it should include the whole health system but prioritize rural, primary care levels and service needs. It was important for government to be wary of further growth in the management layer of the health system. Another recommendation from RHAP was that without an accruals bail-out and in the context of the health budget stagnation, provinces could not project all critical health posts. Rural adjuster to ESF was very urgent now or rural provinces would be further disadvantaged in resource allocations due to smaller population numbers. Critical posts guidelines had to protect the most vulnerable.

Mr Rensburg highlighted that the National Department of Health in collaboration with National Treasury should provide guidance through policy on how provinces were expected to protect critical posts at times of austerity. Critical posts also had to be defined locally and these had to prioritise health professionals but could also include support staff. Consequences on patient care should be the determining factor on deciding whether posts in facilities were critical given the circumstances. Districts were expected to develop costed recruitment plans at times of staffing moratoria. National Treasury had to play an active role in ensuring this happened.

Decision-making on cost-saving and cost-cutting had to be made at the district level by giving districts the amount to be saved and allowing the district to decide based on Promotion of Administration and Justice Act (PAJA) principles of rationality, proportionality and the over-arching constitutional right to progressively realise the right to health, not to stagnate and not to deteriorate. RHAP felt that corruption and unauthorised expenditure should be performance managed. Government also needed to provide guidance for National Treasury on how to exercise its discretion in protecting health rights where it directly intervened in the business of health administration.

Discussion

Ms D Mahlangu (ANC) welcomed both presentations. On COSATU she was aware of the things it appreciated from government. She wanted to know whether it had interactions with National Treasury on VAT and income tax. COSATU had raised concerns and she suggested that it should not be left there but for COSATU to propose something such as alternatives. The Committee had to do something. Mr Parks said the Committee should be cracking the whip on local government with regards to expenditure on t-shirts that were not locally manufactured. However, the bigger issue was whether the municipalities should be buying t-shirts versus service delivery. She agreed that government had to support local businesses but she would not encourage such things but rather focus on service delivery. She agreed with COSATU that the use of consultants, labour broking and outsourcing was causing more harm. Most issues raised by COSATU had to be directed to the relevant platforms. As the Committee in parliament, members could only be a “helping hand”. With regards to the issue of wasteful and fruitless expenditure, parliament and the Auditor-General South Africa (AGSA) were very hard on that. She agreed with COSATU that the vacancies on Health had to be addressed. Government could not provide good health services without personnel as well as good education without teachers. Most issues COSATU and RHAP were raising were operational which could be dealt with through the relevant bargaining chambers at provincial level and the bargaining councils at national level. The Committee could help but not make any decisions. If COSATU strengthened its appearance in all boards and bodies it would be able to resolve issues. She also agreed with COSATU on the EPWP and CWP and felt that these programmes were not assisting people; it could be easily abused by municipalities. With regards to SOE’s, she believes SAA would suffer job losses of there was any restructuring and consolidation.

Mr Parks commented that COSATU was not saying municipalities should not be buying t-shirts but it was important to look at procurement processes used. COSATU had noted a big reduction on consultants and rollover amounts coming from this. With regards to EPWP, it became problematic because big municipalities such as the City of Cape Town were using these workers to clean municipal buildings and police certain areas. In respect of SAA, its current status was not sustainable to have three airlines. Government bailouts were around R4.5 billion every year. COSATU’s point was to consolidate and save jobs in the long term. Government had to deal with it now instead of dealing with it when it reached crisis stage.

Ms Mahlangu suggested that RHAP work together with bodies and relevant structures. She said RHAP needed to go to Portfolio Committees so that it could engage directly with departments. On its recommendations, the approach to critical posts was held by the National Department of Health. The issue on the lack of cleaners had to be engaged with the relevant departments.

Mr Rensburg agreed that the presentation was focusing on the operational level of healthcare and the Committee could not do much to address this. It wanted National Treasury and the Department of Health to do a social impact assessment especially around the effects of cost containment. RHAP did work with other organisations and it was looking at the crisis in healthcare on how to manage it now before it became a bigger problem later. Equitable share was not being addressed; there were conditional grants for HIV TB and infrastructure but none for primary healthcare.

Mr D Maynier (DA) wanted clarity on whether COSATU was firmly opposed to the increase and VAT. He also wanted to know with regards to National Economic Development and Labour Council (Nedlac), where COSATU stood.

Mr Parks replied that a report that COSATU created on VAT was available. It had some interaction with National Treasury at Nedlac and it was useful but it found that sometimes provincial departments did not want to engage.

Chairperson Carrim noted that it was a very room but the country was experiencing a difficult economic climate. He wanted to put something in the report of the meeting that people were not taking government seriously. He felt that what COSATU was giving the Committee was not up to standard. He asked the PBO staff present to do some work on VAT and submit it to the Committee in early January 2017, especially on how an increase in VAT could be introduced without affecting the poorest of the poor. COSATU had to do what was appropriate. He wanted to know COSATU’s thoughts on Higher Education.

Mr Parks said the reason for the short presentation was because in the past members complained presentations were too long.

Chairperson Carrim said it was not about length but rather about quality.

Ms T Tobias (ANC) said that the presentation from COSATU was a “problem statement”. She wanted to see a document that created a scenario and gave suggestions. She also wanted COSATU to give a proposal on sugar tax. With regards to the wage bill, the Minister had already given reasons as to why cuts had to be made.

Mr S Swart (ACDP) said he was concerned about the low level of public participation. He wanted to know how to bring in more participation in order for these engagements to be meaningful.

Mr Parks replied that it was difficult for people to be aware of all public hearings as there were different ways in which Committees advertised. The Parliamentary Monitoring Group (PMG) website was very useful and always updated. Parliaments’ website was not useful as information on meetings were delayed.

Ms Tobias noted that the issues raised by the presentation should be taken up by the Committee and it should be able to make recommendations to the relevant departments.

Ms Mahlangu suggested that the issue of cleaners should be raised when RHAP met with the Department of Health and it should have evidence to support its statements. In rural provinces budget allocations were lacking and the battle was for a good cause.

Mr Rensburg said the issues of service delivery overlapped. The only funding for primary healthcare was through the equitable share.

Mr Michael Sachs, Deputy Director General: Budget Office, National Treasury, said that there were on-going discussions between it and civil society organisations. Spending pressures were mounting and he acknowledged all the issues raised by the presentations. It was not so much an issue of funding but rather decision making. When choices were made in departments, people had to live with the consequences. There was a need for a national dialogue on salaries and the importance of service delivery. Over the past 15 years since the year 2000 the Department of Education was spending R8 000 per leaners and now it was R18 000 per leaner yet the quality of education had not increased. With regards to the Health budget, there were 10 different budgets within that one. The funding was not appropriated by parliament but by the department. He suggested that the presenters and their organisations try to deal directly with the various departments involved. With regards to taxation, it was necessary to look at the system as a whole and not on individual taxes.

The Chairperson alerted members to their next meetings and schedule for the week ahead.

The meeting was adjourned.

 

 

 

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