Engagement with the Appropriations Committee of the Nigerian National Assembly

Standing Committee on Appropriations

30 November 2016
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

The Standing Committee on Appropriations met with its counterpart in the Nigerian National Assembly. Both sides expressed a need for cross-fertilisation. There was no formal presentation from the Nigerian side. A spokesperson explained to the Committee how their Committee did its work and what its mandate was. In Nigeria revenue was derived chiefly from oil, gas and solid minerals. Revenue had to benefit 80 million people. The Appropriations Committee had to define areas where resources had to be deployed. Allocations were made to service foreign debts. There were 93 standing committees to oversee the spending of public funds. There had to be harmony between the Senate and the House of Representatives, with agreement about every line item in the Budget. The Executive proposed the budget and the National Assembly had the right to amend it. Areas of need were prioritised. The budget was monitored to see if the purpose money was intended for was being achieved. Assumptions about the Medium-Term Expenditure Framework were made in a fiscal strategy paper. There were stringent procedures related to government money spent on contracts. The current budget had set aside a huge sum for social intervention and social problems.

Prior to the discussion, an ANC Member forthrightly asked the all-male Nigerian delegation where the women were. The Chairperson added that her Committee would have liked to see some gender sensitivity. However, that did not deter Members to show keen interest in the work and mandate of their Nigerian counterparts. There were remarks and questions about youth unemployment in Nigeria; the Nigerian debt to GDP ratio; intervention in Budget allocation; the legislative framework; unemployment; timelines to finalise the Nigerian Budget; mid-year Budget adjustment; public inputs from poor and rural populations, and why an oil rich country had to spend 80 percent of its budget on debt.

The Standing Committee on Appropriations Committee Researchers presented on the work and mandate of the Committee. The Standing Committee on Appropriations dealt with the Budget and had the power to accept, reject or amend budgets. The Committee was legislated. Its main focus was on budget approval and budget execution. The focus areas on Budget day were the fiscal framework, the Division of Revenue Bill, and the Appropriations Bill. Committee oversight reports asked if allocations were justified in terms of past performance and service delivery. The Committee relied on quarterly reports; public hearings; engagement with stakeholders, and reports from other committees. The legal fiscal oversight framework was comprised of the Constitution; the Public Finances Management Act, and the Money Bills Amendment Procedures and Related Matters Act (the Money Bills Act). The Medium-Term Budget Policy Statement contained the revised and proposed fiscal framework. Important stakeholders were National Treasury; the Auditor-General; the Financial and Fiscal Commission; The South African Local Government Association, and civil society.

In discussion, there were remarks and questions about public and civil society participation in the Budget process in South Africa; the percentage that could be spent by Ministries prior to appropriation; management of unspent budgets; fiscal dumping and the influence of political interests on that; tracking of the Bill of Rights to ensure equitable distribution; rollovers and declarations, and the use of consultants. It was asked if the Constitution prescribed oversight of provinces and municipalities, and if there had ever been an approved Budget that posed a problem for the President.

Meeting report

Introduction by the Chairperson
The Chairperson asked for a moment of silence for prayer and meditation. She greeted the delegates from the Nigerian National Assembly, staff and guests. She told the delegation that meetings were open in the South African Parliament, as it was a democratic government. It was advertised, and anyone interested could attend. The meeting of the day between the legislative committees of the two countries was highly important.
The most important policy instrument was the Budget. Throughout the world, the processes of raising, allocation and spending of public resources was one of the foundations of government. The way in which the Budget was spent determined the achievement of policy objectives. Public resources had to be utilised to achieve affordable quality education, healthy and productive populations, and opportunities for all citizens to be gainfully employed and to make a meaningful contribution to their communities. Immense benefits could be derived from a transparent, fair and equitable Budget. Budget allocations had to adhere to the principles of efficiency, effectiveness and value for money. To achieve such noble aims was a formidable challenge, both in developed and developing countries. It was especially difficult on the African Continent. With reference to the art of the possible, she quoted from a saying by Ben Okri that the most authentic thing about Africa was the ability to create, overcome, endure and transform, to love and to be greater than any suffering endured. She invited all present to a free, frank and open conversation about ways to better the beautiful Continent of Africa, and to enjoy the quality moment that the Lord had granted.

The Standing Committee on Appropriations (SCOA) and its Nigerian counterpart to introduced themselves, as well as the support staff and guests.

Dr C Madlopha (ANC) remarked that there were no female members in the delegation.

The Chairperson noted that the delegation was split, there were members in other committees.
           
Mr Matthew Uroghide, Chairman of the Senate Committee on Culture and Tourism, replied that there were female members but they were not there.

The Chairperson commented that the SCOA would have been happy to see gender sensitivity. She asked Mr Uroghide to explain the purpose of the visit.

Mr Uroghide replied that there was the privilege of cross-fertilisation about common issues. There were common African problems related to people and the environment. Nigeria was lacking in resources for developmental objectives. Notes could be compared to obtain a broad perspective. Funding objectives were spelt out in Chapter 2 of the Nigerian constitution. The delegation wished to correct itself with respect to prioritising expenditure.

The Chairperson said there was a need to meet and compare notes and learn from one another. She asked how his delegation worked as an appropriations committee.

Mr Uroghide said that, in broad outline, the mandate of his Appropriation Committee was to pursue the main objective of sharing of resources. Revenue from oil and gas and solid minerals were pooled together to serve a population of 80 million. The Committee had to define areas where resources had to be deployed. Allocations were made to foreign debts. A certain percentage was set aside for that. When the executive presented the budget, it was moved to the chambers for study. It was submitted to the budget office, who would decide what to give to the Ministries. There were 93 standing committees that had oversight of government agencies, and the spending of public funds. The positions of the Senate and the House of Representatives had to be harmonised. Both Houses had to agree on every line item in the budget. If there were disagreement a committee had to be set up to bring harmony. There was a bicameral procedure for adopting bills. The executive proposed the bill and the National Assembly had the right to amend it. For the purposes of equitable resource distribution, areas of need had to be prioritised. In Nigeria, the areas of need were road infrastructure, power, agriculture, education and health. The budget was monitored to see if the purpose the money was intended for was achieved.

Assumptions about the MTEF were made in a fiscal strategy paper. It had to be ensured that there was value for money spent. Unimplementable programmes were avoided. There were measures in place to see that resources were not wasted. A substantial part of the budget was devoted to personnel costs. All government workers were paid from a central source, which minimised leakage. Procedures were fraud free. With regard to capital expenditure there were leakages before 2007. Government money was spent on inflated contracts. There was a need for stringent procedures. Bidding processes had to be transparent, with oversight for compliance. People were placed in the National Assembly according to core competencies. An engineer would be placed in the Works Committee. There were challenges in the area of capital expenditure on the massive road system. There were huge oil and gas assets, but that was not enough to develop and diversify the economy. There was a growing population to feed. Food security and agro-industry projects had to be resourced. Unemployed high school graduates had to learn skills. In the current budget a huge sum was allocated to social intervention and social problems. South Africa and Nigeria were close culturally. The Committee wanted to see how resources were used in South Africa.

Discussion
The Chairperson thanked Mr Uroghide for a very informative input. There was passion to be seen. She advised that comments and questions from the SCOA be taken before the Committee made its own presentation.

Ms S Shope-Sithole (ANC) remarked that the presentation was a learning curve for her. She was committed to lifelong learning, and Mr Uroghide had been like a Professor to her. She was touched by his last remark that emphasised the importance of value for money, and going on site to oversee capital projects, thereby following the money. She asked for the e-mail address of the speaker. There had to be the development of an African relationship, and communicating as committees had a role to play. There was reference to the challenges of focusing resources on food security and youth unemployment, which was said to be 25 percent. The figure for South Africa was 26 percent.

Mr A Shaik Emam (NFP) concurred with Ms Shope-Sithole about shared contact. He asked what the Nigerian debt to GDP ratio was. He asked what was done about budget allocation and funding challenges, and whether there was the muscle to intervene when spending was incorrect. He asked how many tiers there were in the Nigerian government. The three tiers of South African government were national, provincial and local. It was mentioned that 10 percent of the Budget was set aside for creating jobs. He asked how the 10 percent of the Budget allocated to job creation was used.

Mr A McLoughlin (DA) referred to oversight. He asked what percentage of time was spent in committee, and what percentage was spent on the outside. He asked about challenges around the unemployment rate.

Dr M Figg (DA) asked about the legislative framework that informed the Nigerian committee. In South Africa, it was the Money Bills Amendment Procedures and Related Matters Act (the Money Bills Act). The legislative framework helped to determine timelines to finalise the budget. He asked how timelines to finalise the Nigerian budget were determined. He asked how many subcommittees there were, how frequently they met, and how often they reported to the Appropriations Committee. In South Africa, there were mid-year adjustments to the Budget. The applicable legislation was the Appropriations Adjustment Bill and the Division of Revenue Adjustment Bill. He asked if Nigeria had mid-year adjustments. He noted that the debt to GDP ratio in Nigeria had increased from 9.6 percent in 2010 to 11.5 percent in 2016. He asked why there was an upward trend, and why an oil rich country had to spend 80 percent of its revenue on debt.

Dr Madlopha remarked that locally, oversight was to the benefit of the public. She asked how Nigeria facilitated public involvement and input in the budget process. She asked about mechanisms to ensure rich and meaningful public input. The less affluent, the poor and rural populations and the uneducated were not equally able to provide inputs. There was usually an urban focus, and the rural population, who were the majority, could not make inputs.

Ms Shope-Sithole remarked that she had done a course on industrial policy the year before. The topic of resource care came up. It certainly applied to South Africa, and also to Nigeria with regard to oil.  She asked how it affected Nigeria.

Mr Uroghide replied to Ms Shope-Sithole that he would supply her with an e-mail address and a business card. There were challenges that both chambers of the Appropriations Committee were aware of. Both pursued objectives with resources at their disposal. Both chambers had to meet challenges with insufficient resources. In the deployment of funds, there were areas that had to be prioritised, especially with regard to critical infrastructure. Previous governments did not deal with human capital and other development problems. Power infrastructure was a critical area. 150 billion dollars were needed to put power in place, and the country did not have that. The annual budget was 6 trillion, and all could not be put into one sector. The money available had to be appropriated by all sectors, as the request demanded. Too much reliance on oil did not contribute to the well-being of Nigeria, it had rather led to laziness. Before oil there was only agriculture. There was agricultural production in the North of Nigeria, but the region had been plagued by droughts. The Southeast had coal, which was used by the British to develop the country. Oil clouded the vision for development, so that there was a development shortage. The situation had to be reversed. Nigeria had to look at what was happening in other economies. That was one of the reasons why the Committee was currently visiting South Africa.
Mr Emam had asked about the debt to GDP ratio. People were inclined to justify reasons for borrowing. A lot of African countries borrowed. Both military and civilian governments in Nigeria had borrowed, even in the face of new revenues from oil. Nigeria had a debt management office. It needed to borrow for development, but still a debt to GDP ratio of 12 to 15 percent was not justifiable. The statistics agency was saying that the country did not have the capacity to repay debts. Conditions for international borrowing where better than internal borrowing, but that did not mean that the capacity to pay back was better. International lenders would ask what borrowed money would be used for. Yet revenue from oil was small compared to solid minerals. It would be possible to deal with debt. Appropriations committees had the power to summon anybody. The Finance Minister could be called to account on what was given, and what it was used for. The Committees could act as a whistle blower who reported to the executive arm of government. There was an anti-corruption agency, the Economic Crimes Commission, that could be reported to. Those who were not giving value for money could be brought to book immediately.

There were three tiers of government. The federal government was at the centre. The National Assembly was located at the federal level. The President symbolised government at that level. The President could appoint Ministers. There were chairmen of local councils at a county level, and at local grassroots level. The National Development Agencies (NDAs) did oversight at the federal level, and councillors at county and grassroots level. There was an intervention into youth unemployment that made provision for 500000 graduates to be employed. 200000 of those had already been picked from all constituencies. Every segment was represented in government and the distribution of resources in the country. Programmes were run in coordination with the State government. There was federal oversight over such matters as roads, schools and health. Oversight was over anything that the national appropriation spent on. The unemployment rate was rising. It was not adequate for government to only provide white collar jobs. There were financial institutions that could assist, including commercial banks and the Bank of Industry. Banks were quick to intervene. People were taught skills and assisted financially to develop businesses.

With regard to a legislative framework, the current National Assembly was the eighth. The current national Assembly set itself the task of establishing a legislative framework. The legislative agenda that the National Assembly set for itself was different to that of the executive arm of government. Laws had to be made for the good of the country. Everything that related to representation and law making had to be fitted into a legislative framework. The National Assembly told the executive what it was seeing, and what it was dissatisfied with. The National Assembly did not have subcommittees. All the committees in the National Assembly were standing committees. The Nigerian budget process did not include medium term adjustments. There were supplementary budgets to address resource limitations. Once the budget was passed, it was up to the adjustments committee to make amendments.

On the role of the public in law making, before any law or amendment to an Act was passed, public hearings had to be called, by both chambers. In a second reading, the person who was leading the process had to lead debates. There had to be public hearings before a third reading. Those had to be properly advertised, and stakeholders were asked to provide inputs. The public was invited, and constituencies would be briefed on what was happening.

The Chairperson remarked that the two had a lot in common. There were areas where South Africa could learn from Nigeria. She asked if Nigeria had instruments to measure financial and non-financial performance, for effective oversight. She asked what percentage of the total budget was committed to debt servicing; and if the Nigerian Appropriations Committee had the right to amend the budget, and if it ever did so.

Briefing by the SCOA Researchers: Overview and mandate of the SCOA
The document was prepared by the Committee support staff, which included the two Secretaries and the Content Adviser, and presented by Committee Researchers Mr Musa Zamisa and Mr Phelelani Dlomo.

The SCOA dealt with the budget, had the power to accept, reject or amend budgets, and was legislated. The main focus for the Committee was budget approval and budget execution. Focal areas on budget day were the fiscal framework, the Division of Revenue Bill, and the Appropriations Bill. It was asked if past performance justified current allocation. Oversight reports would ask if allocations were justified in terms of service delivery. The budget had to be linked to strategic and annual performance plans. The SCOA relied on quarterly expenditure reports; public hearings; engagement with stakeholders; oversight visits, and reports from other committees. Challenges encountered included fiscal dumping, and budgets not underpinned by planning. The SCOA benefitted from the work of the Parliamentary Budget Office, the Department of Planning, Monitoring and Evaluation, and a dedicated support staff.

South Africa had a legal fiscal oversight framework that made Parliamentary oversight of the executive possible. It was comprised of the Constitution, The Public Finances Management Act (PFMA), and the Money Bills Amendment Procedure and Related Matters Act (the Money Bills Act). The Money Bills Act defined procedures to pass the Budget, and enabled Parliament to oversee budget expenditure by government departments, and to influence budget prioritisation. The Medium-Term Budget Policy Statement (MTBPS) contained the revised and proposed fiscal framework and outlined the spending priorities of government for the medium term. Recommendations from the Appropriations Committees could include proposals to amend the division of revenue. Stakeholders important to the SCOA included National Treasury; the Auditor-General; the Financial and Fiscal Commission (FFC), the South African Local Government Association (SALGA), and civil society.

Discussion
Mr Uroghide said the Nigerian Committee also used technical and support staff to make its mandate easier. It was enriched by support to minimise failure. The Committee had to oversee funds allocated and shared. All revenues were centrally collected. There was a joint account. The Appropriations Committee did not have legislation that empowered it to do oversight. The National Assembly only worked with the federal government. It was functionally empowered for oversight. Its oversight role was to check performance around capital expenditure. It was not empowered to keep track of and follow money in the way the South African Committee was. In Nigeria, the executive was not depended on to provide information. The public was called in. Civil society and stakeholders had to tell what happened to the money. When there was a proposition for building of an educational or health facility, funds were not given if information was not received from the public. The Auditor General was accountable to the public accounts committee of both houses.  The public accounts committee could summon anyone, including all the NDAs. If the public accounts committee did not agree, the budget was not given. In South Africa, it was compulsory to give detailed accounts within the year. In Nigeria, detailed accounts of the preceding year were required. He asked if oversight over provinces and municipalities were provided for in the South African Constitution, and if detailed accounts of the previous year were needed for a budget to be passed.

The Chairperson replied that it was provided for in the Constitution, and also in the legislation.

Mr Olanrewaju Tejuoso asked what percentage of the Budget Ministries were allowed to spend prior to appropriation. There were many declarations in Africa, for instance 10 percent had to be spent on agriculture and 15 percent on health, and by the time it was gone through it was over 100 percent. He asked how declarations were managed locally. In South Africa 14 percent of the budget was committed to health. In Nigeria, it was 4 percent. He asked if the internal administration of revenue by the Ministries were subjected to the SCOA at the beginning of the year, with respect to overheads and other expenses.
           
Mr T Orji asked how the unspent budget was managed.

Mr John Dyegh asked if consultants were employed, or whether civil servants did the work. He asked how fiscal dumping was defined. It was sometimes due to political reasons. There were different political parties in Nigeria. He asked how conflict of interest was avoided in South Africa.

Mr Muhammad Umar Jega asked who tracked the Bill of Rights to ensure that the budget took everything into consideration.

A Member from the Nigerian delegation asked if approval of the budget stopped at the table of the SCOA Chairperson. He asked if a budget was ever approved that posed a problem for the President.

Dr Figg opined that the questions were useful. The approval of the budget did not stop with the SCOA. The Committee made recommendations to Parliament, which was where the buck stopped. There was first a Budget Review and Recommendations Report (BRRR) process where each department looked at its needs, and then submitted to Parliament. The SCOA would then look at that and approve it. The Money Bills Act allowed for amendments to the budget. It would then go back to the Minister, who had four days to respond.

The Chairperson added that after it was taken to the Minister, there would be public hearings on amendments, if it was recommended that money had to be shifted.

Mr N Gcwabaza (ANC) commented that the percentage of the budget that the executive could spend before the approval of the budget was 40 percent. If approval was delayed, government spending would stop. Approval had to be on time. The Bill of Rights was tracked by the Department of Planning, Monitoring and Evaluation (DPME), and other agencies like the Human Rights Commission and the Public Protector. The public could lodge complaints with the Public Protector when government was not acting within its rights. It was all enshrined in the Constitution. Unspent funds had to go back to National Treasury. No department was allowed to roll over funds on its own. The Treasury only allowed a rollover if a project was not yet completed. Other tiers had to be included. There had to be sound reasons for rollover, otherwise it would be seen as irregular expenditure.

Dr Figg added that even if there were uncompleted projects, the department still had to report. There were criteria attached to the process.

The Chairperson added that the criteria included proof that the money was committed to a project. 40 percent of the budget could be spent by the executive before adoption. As politicians, the SCOA believed in the best interests of the people. In that regard, Parliament had to rise above political party lines. Government was not to be rendered dysfunctional. It was necessary to be sober minded, regardless of political party lines.

Mr Dlomo noted that there had been some comments about consultants. The SCOA did not use consultants. There was partnership with independent research entities, to tighten oversight of expenditure by local government. All revenue was collected by SARS, and dispersed through the revenue fund. 46 percent of the budget went into national, 43 percent into provincial, and 9 percent into local. There were a number of revenue streams. Provincial revenue funds were not sustainable. Provinces had to provide free services. Transfers from provincial to local took the form of conditional grants from the national tier to municipalities. National would spend on behalf of provinces and municipalities. The Standing Committee on Public Accounts (SCOPA) and the Auditor-General covered the process. The SCOA was also a mini SCOPA, and partnered with the AG as well. Provisions for oversight in the Constitution held the executive to account. The Ministers had to answer questions from MPs in Parliament. The percentage the executive could spend before adoption referred to the Appropriation Act of the previous year. 40 percent of what was allocated in the previous year could be spent. The Committee had until June to approve the Appropriation Bill. The Minister of Finance tabled the Budget in February. There were time constraints.

 He answered about declarations. It was not to be done overnight. Any re-adjustment affected other areas. There were different environments and different challenges that informed priorities. Domestic challenges received more consideration. Some departments had revenue of their own, like Home Affairs and Water and Sanitation, which became part of the report on budget adjustments. The adjusted estimate of medium term expenditure reported on all finances through the adjustment process. It was approved in October. In the first six months departments were allowed to adjust budgets and move fast.  In terms of the Public Finance Management Act that regulated expenditure, departments were not allowed to move more than 8 percent. Once that threshold had been exceeded, departments had to return to Parliament to have it approved by the SCOA. If more than 20 departments violated on that, a way had to be found to invite the worst case scenario departments, to ask why violation had occurred. Rollovers were only approved for projects money had been committed to, and were closer to completion. There were Treasury measures that required of departments to declare savings. National Treasury had to be informed about projected under expenditure. If that was known money could be reprioritised. Fiscal dumping was not a straightforward issue. A portion of the budget had to be spent. Some entities like ESKOM had to transfer to other entities. Some departments and agencies had to transfer 90 percent of their budgets, and could only keep 10 percent for themselves. There were different kinds of transfers. Transfers occurred mostly in the second and third quarters. There were challenges around requirements related to transfers. If requirements were not met, money could not be transferred, and it could end up with a lot of money not spent or transferred, which could be defined as fiscal dumping. Challenges were related to transfers to both provinces and municipalities. The Division of Revenue Act (DORA) prescribed transfer requirements. There had never been an occasion when the President had a problem with the budget.

Mr Zamisa added that the Budget amendment process was still maturing. Tracking the Bill of Rights was chiefly the responsibility of devoted Members of Parliament, but civil society also played a critical role. When the Budget was presented it had to be seen to that money went where it was supposed to go. It could not be quantified, as it was a qualitative exercise. In South Africa, most of the Budget went to social spending, health and education.

The Chairperson remarked with respect to transfers, that where there was a focus on service delivery, National Treasury had to assist departments that could not meet transfer requirements. It had to be innovative. If the Treasury failed to do so, it had to account itself for under expenditure. Innovation was needed.

Mr Mohammad Umar Jega thanked all for the interaction. It was bound to be beneficial to both sides. When the Nigerian delegation returned home, the experience gained would be applicable. It would also further the operations of the Pan African Parliament. He concluded with saying God bless Africa.

Mr Gcwabaza, SCOA Whip, concluded that a lot was gained. He hoped that it was not the last interaction between the Appropriations Committees of the two countries. The SCOA had gained a lot, and he hoped that the same held true for its Nigerian counterpart. Interaction had to extend beyond the Fifth South African Parliament into future administrations. There had to be engagement to exchange ideas about how public funds were taken care of. Government spending had to change people’s lives for the better.

The Chairperson thanked all and adjourned the meeting.

 

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