Division of Revenue Amendment Bill [B15–2016]: public hearings

NCOP Appropriations

11 November 2016
Chairperson: Ms Y Phosa (ANC); Mr S Mohai (ANC, Free State)
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Meeting Summary

The Standing and Select Committees on Appropriations conducted public hearings on the Division of Revenue Amendment Bill. The purpose of the Bill was to amend the Division of Revenue Act passed by Parliament in 2016.

The Rural Health Advocacy Project, in its submission, made a recommendation that the government needed to provide guidance for treasuries on how to exercise their discretion in protecting health rights where they directly intervened in the business of health administration. It also recommended that the National Department of Health, in collaboration with the Treasury, should provide guidance through policy on how provinces were expected to protect critical posts at times of austerity measures.

It was concerned by the proposed revision of the provincial equitable share allocations, using the Census 2016 population as a baseline. Using census data as a population component was problematic, because the census did not account for temporary/circular migration, and temporary migration had a significant impact on health, with significantly increased morbidity and mortality, particularly amongst women.

The Equitable Share Formula (ESF) no longer accounted for historical infrastructural backlogs in rural settings and did not account for the higher average cost per person of delivering services in rural and sparsely populated areas. The poverty component of the ESF accounted for only 3%, while the population component accounted for 16%, yet poverty increased the burden placed on government services.

The Rural Health Advocacy Project further highlighted that indiscriminate cost containment did not always mean value for money. While savings on the overall cost of employees was acknowledged, there was a need to consider the cost of those “savings.” The centralising of recruitment decisions had led to longer recruitment lead times, and this left vacated posts unfilled for extended periods. This was severely impacting on service delivery, and impacted on facilities’ ability to do any kind of outreach. This resulted in the  late detection of preventable illnesses which had a long-term impact on the cost of health care delivery.

Members said that Treasury had not given the Committee satisfactory answers during the previous Committee meeting on the rationale for drought relief, the KwaZulu-Natal (KZN) roll-overs, the R72 million for the bucket eradication programme, and distressed municipalities. They commented that the presentation from the Rural Health Advocacy Project had raised a number of critical issues, but had painted a bleak future; asked for clarity on rural allowances for dealing with staff retention and curbing migration; remarked that the shortage of doctors remained a challenge, and that the allied professions went to the private sector because of good packages. They said that since it appeared there was no consensus about the calculation of the equitable share, they hoped the new formula would build something that took into account that all provinces could benefit from it, and that there were similar factors in all provinces.

Meeting report

Mr Russell Rensburg, Programme Manager: Health Systems and Policy, Rural Health Advocacy Project (RHAP), informed the Committee they were concerned by the proposed revision of the provincial equitable share allocations, using the Census 2016 population as a baseline. Using census data as a population component was problematic, because the  census did not account for temporary/circular migration, and temporary migration had a significant impact on health, with significantly increased morbidity and mortality, particularly amongst women.

The Equitable Share Formula (ESF) no longer accounted for historical infrastructural backlogs in rural settings and did not account for higher average cost per person of delivering services in rural and sparsely populated areas. The poverty component of the ESF accounted for only 3%, while the population component accounted for 16%, yet poverty increased the burden placed on government services. Socio-economic deprivation was the highest in provinces affected by ESF adjustments based on population components, and these provinces also had the most significant historical backlogs in infrastructure.

The National TreasuryThe RHAP was currently undertaking a detailed review of the ESF to “redress inequality and poverty across provinces”. The process was to be completed in 2018, though it was currently not in the public domain or fully transparent. As part of the review, a rural adjuster should be added to counterbalance effects of the population component. The rural adjuster should include factors that accounted for factors that increased need, demand and costs associated with service delivery.

Components of a Rural Adjuster:

  1. Unmet need: here deprivation as a proxy of unmet need was a robust example.
  2. Geographic remoteness: average distance to closest metropole from village or town.
  3. Population: size, density and demographic characteristics.
  4. Specific political/historical circumstances: e.g. former homelands or farming areas as priority focus areas.
  5. Cost adjusters: taking into consideration the need to account for differences in costs between urban and rural contexts.

He further highlighted that indiscriminate cost containment did not always mean value for money. While savings on the overall cost of employees was acknowledged, there was a need to consider the cost of ”savings”. Centralising of recruitment decisions had led to longer recruitment lead times, and this left vacated posts unfilled for extended periods. This was severely impacting on the service delivery. Non-filling of posts impacted on facilities’ ability to do any kind of outreach. This resulted in late detection of preventable illnesses, which had a long-term impact on the cost of health care delivery.

The prioritisation of medical posts had severely impacted on the recruitment and retention of other allied professions, such as rehabilitation services. Health care delivery was premised on a functional service delivery platform. Critical was the context -- for example, a cleaner could be more critical than a doctor in a facility where there was no cleaner. The cost of indiscriminate cost containment led to a diminishing capacity of staff to deliver services; poor supervision of junior staff; weakening of capacitating functions such as procurement, financial management and health management information systems (HMIS); and additional physical and emotional strain on overburdened staff.

Mr Rensburg shared with the Committee some few recommendations. He proposed that the National Department of Health (NDOH), in collaboration with the Treasury, should provide guidance through policy on how provinces were expected to protect critical posts at times of austerity measures. Critical posts needed to be defined locally, and these could include health professionals and support staff. Consequences on patient care should be the determining factor on deciding whether post A in facility B was critical under the given circumstances. Districts were expected to develop costed recruitment plans, but this did not happen; and if such plans were in place, it could help District Managers to identify priority posts at times of staffing moratoria. The National Treasury should play an active role in ensuring this happened.

Decision-making on cost-saving and cost-cutting must be made at the district level, by giving districts the amount to be saved and allowing the district to decide, based on Promotion of Administrative Justice Act (PAJA) principles of rationality, proportionality and the over-arching constitutional right to progressively realise the right to health, not to stagnate and deteriorate. The government needed to provide guidance for treasuries on how to exercise their discretion in protecting health rights where the treasury directly intervenes in the business of health administration.

Discussion

Mr M Figg (DA) said that Treasury had not given the Committee satisfactory answers during the previous Committee meeting on the rationale for drought relief; the KwaZulu-Natal (KZN) roll-overs; the R72 million bucket eradication; and distressed municipalities.

Ms Elsabe Rossouw, Director: Data Management, National Treasury, said that drought relief had been provided to seven provinces. A province or a municipality had to declare drought as a disaster so that it could be gazetted. For example, Gauteng had not declared it until very late. Provinces that were benefiting from the drought relief were the ones which had declared it as a disaster. That was the rationale for the allocation.

She said the reason for municipalities being financially distressed was not because there were not enough allocations. They were distressed because of problems with their financial management, governance, skills and capacity. National Treasury made an assessment every year to see which municipality was financially healthy or not. This was based on criteria provided by Treasury.

Mr Steven Kenyon, Director: Local Government Process, National Treasury, responded on the KZN road maintenance roll-overs, and said the province had spent the funds during the 2015/16 financial year. The province had used its own funds. The whole issue was about cash management. The province was going to get the roll-over. If it did not, it would have to get the money from the other programmes or projects.

On the bucket eradication, he said there had been delays in the spending of the funds. If the funds did not arrive, money had to be sourced from other programmes. An additional R72m would be allocated towards the bucket eradication programme. The Department of Water and Sanitation had said in June that it was aiming to remove South Africa’s bucket toilet system within the next two financial years.

Mr C de Beer (ANC, Northern Cape) commented the Committee had been engaging with Treasury regarding distressed municipalities, and needed to know the progress regarding the issue. The Auditor General’s (AGs) findings in the annual plans had come with action plans.

Mr A McLoughlin (DA) said there was not enough time to put together the Standing Committee report on budget adjustments. As opposition party members, they were often criticised that they did not come up with proposals, though they were not given the space to do so. What was important was to get information first, so that they could come up with proposals.

Ms Rossouw responded that the Committee needed to give Treasury adequate time to prepare, because this involved input information.

The Chairperson said all questions related to budget adjustments should be forwarded in writing to Treasury so that they could be responded to orally, or in writing.

Rural Health Advocacy Project

Mr T Motlashuping (ANC, North West)) said that the presentation on the Rural Health Advocacy Project had raised a number of critical issues. However, it painted a bleak future. It should have stated what the problems were, and indicated the good done. What was critical today might not be critical after five years.

Mr O Terblanche (DA, Western Cape) said it appeared there was no consensus about the calculation of the equitable share. He hoped the new formula would build something that took into account that all provinces could benefit from it, and that there were similar factors in all provinces.

Mr Rensburg said he was not qualified to respond to that comment, but pointed out that the population allocation would always impact on the health and education services.

Ms E Louw (EFF) commented that the presentation had put forward good recommendations. She hoped they would be implemented because they spoke to the same issues. Money was being pumped into research, but the recommendations were not being implemented. There should be commitment from Parliament and National Treasury to implement the recommendations from these research bodies. Regarding infrastructure backlogs, she said these projects should be awarded to skilled individuals.

Mr De Beer remarked that the equitable share formula was being addressed. During the February and March presentations with Treasury on the Division of the Revenue Bill, there had been a chapter that dealt with the formula regarding provinces. He proposed that video technology facilities should be implemented to make communication with and between municipalities and provinces easy. Time was being wasted, for example, by travelling from meeting from Springbok to Kimberley for meetings. Three working or business days get wasted, because the distance between these two towns was around 800km.

Mr Rensburg agreed with Mr De Beer on the issue of video technology. He said it would be a good idea for the government to invest in broadband facilities so that municipalities could be more efficient in the delivery of services.

Mr L Nzimande (ANC, KZN)) asked for clarity on rural allowances for dealing with staff retention and curbing migration.

Mr Rensburg said the problem lay with the definition of rural areas. Different departments defined “rural areas” differently and that posed challenges for allowances.

Mr McLoughlin wanted to know when the census had been done.

Mr Rensburg said it had been done early this year (2016) by Statistics South Africa (Stats SA).

Ms D Senokoanyane (ANC), commenting on the prioritisation of medical posts, said the shortage of doctors remained a challenge. The challenge with allied professions was they went to the private sector because of good packages, and that left the problem unresolved.

Mr Rensburg said there was difference between equality and equity. People needed to have the same rights to health, and their duty as Rural Doctors Association of South Africa (RUDASA) was to ensure that communities were not left behind, but were taken care of.

Mr L Gaehler (UDM) remarked that the budget allocation by National Treasury according to the census did not cover all the provinces. Some of the provinces included former homelands that did not have infrastructure. There was a facility in Maluti that catered for 3 000 people whereas a neighbouring town, which belongs to KZN, had the same facility that catered for 150 people. He said Treasury needed to do thorough research.

Ms Rossouw reminded the Members that the issues under discussion were for 2017. She then took the Members through a table on provincial allocations. The Eastern Cape was topping the list on allocations because of its rural status. Provinces needed to provide accurate information when they submitted information to the National Departments. The equitable share formula was updated every five years for both local and provincial government allocations. Some issues raised were policy related in nature, or financially related, and would require national and provincial departments’ attention.

Mr Kenyon said Treasury was aware of the issues presented and the formulas used. Rural municipalities had got fewer allocations than urban ones. In the review process of the new formula, these issues would be taken into consideration and rural municipalities would be compensated. Municipalities and provinces had told Treasury during road-shows why certain services could not be delivered, and some of the problems had been blamed on topography.

The meeting was adjourned.

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