COSATU submission on Medium Term Budget Policy Statement; Office of Chief Justice on 2016 Adjustment Appropriation Bill

Meeting report

COSATU submission on Medium Term Budget Policy Statement (MTBPS) 2016
Mr Matthew Parks, Parliamentary Coordinator, Congress of South African Trade Unions, stated that the Congress (COSATU) appreciated the massive economic, fiscal and budgetary challenges facing the government. However COSATU remained concerned about the long term 36% perennial unemployment crises. COSATU was concerned that it was not seeing sufficient economic growth for creation of 100 000 new jobs monthly. It commended the government on efforts to save R400 million to date, and its commitment to invest R987 billion in public infrastructure over the next three years. However, it also was concerned with the impact of reduction in 20 000 public service posts through attrition and retirement. COSATU discouraged the increase of tax to middle and working class. It felt that any increase in Value Added Tax (VAT) will negatively impact on the working and middle classes. There should be an introduction of a luxury tax and an increase on the wealthy and non-essential imports tax.

COSATU did not support the reduction of wages of employees in the public services.  If government was considering a reduction of wages it should do so on the packages paid to national and provincial cabinets, Members of Parliament, judges, and senior management in parastatals. It was further recommended that the number of members in cabinets and legislatures be reduced. COSATU welcomed the government’s plan to introduce lifestyle audits, which it suggested should be extended to cover all national, provincial and local government representatives, parastatal and bank CEOs.

The following specific points were made by COSATU:
- It noted an increase in roll over and unspent funds.
- It welcomed the massive reduction in expenditure upon consultants.
- It was still confused about the need for Ministers and departments to spend money on overseas travel, saying that such funding should be reserved for opportunities which generate investment and trade
- It was disappointed that the government failed to release a Comprehensive Social Security Discussion Paper (CSSDP) which had been promised since 2002
- It remained concerned about the impact of the freezing of public service posts in the Department of Health and urged the government to allow the Department of Labour to review this decision and appoint further labour inspectors to ensure that workers enjoy full protection of rights
- COSATU was concerned about the lack of news on rapid realisation of a progressive, pro-poor National Health Insurance (NHI). It was, however, pleased to note government’s continued roll out of Anti-Retroviral drugs (ARVs) and its acknowledgment that more should be done to combat TB, drug and alcohol abuse.
COSATU then spoke to various sectors.

COSATU welcomed the 0% fee increase in higher education fees for working and middle class families but was distressed by the fact that the Medium Term Budget (MTB) does not unpack how government will meet the students’ demands for free education. It recommended that such demand can be met through a number of state funding and company, income and graduate taxes. The government should reconsider the usefulness of the National Youth Development Agency and consider if the R400 million saving should be spent on tertiary education for young people.

COSATU was happy with progressive interventions to protect, support and grow the clothing, textile and auto-manufacturing industries which had saved and created thousands of jobs. It urged Parliament to pass the Unemployment Insurance Amendment Bill by November 2016, since this will help thousands of unemployed workers and mothers on maternity leave to access the UIF. It warned the government not to touch the surplus in UIF funds.

In the transport sector, COSATU said that the crises in Passenger Rail Agency of South Africa (PRASA) must be dealt with as train delays and accidents cannot be allowed to continue. There is no need for three SA airlines. A roll over of R275 million in transport infrastructure funds is unacceptable.  

Government needs to assist the SA Post Office. The government is the biggest user of Post Office services. Telkom made most of its money on retrenching its workers, having seen a drop from 50 000 to 7 000 workers.

COSATU expressed concerns that the quality of housing provided by the government remains poor. RDP houses are too small and start to fall apart before occupation. Water provision to informal areas is being neglected due to certain informal settlements on private properties. There is a backlog of 70 000 land cases with less than 400 cases a year being solved. COSATU also cautioned against the Expanded Public and Community Programmes being used as a source of cheap labour for municipalities in cash crises.

Discussion
Ms S Shope-Sithole (ANC) thanked COSATU for the input but asked what was meant by free education, and also requested examples of any countries that ran such a system and how the model was funded.  She also inquired if COSATU had applied its mind on people who can be trained for posts in creating jobs.

Ms D Senokoanyane (ANC) also inquired into the form of free education and the balancing between a poorly performing economy and employment.

The Co-Chairperson required elaboration on the UIF surplus.

Mr N Gcwabaza (ANC) wondered whether COSATU had a forecast on which sectors might be stimulated to create jobs and said that perhaps special focus on certain sectors was necessary.

The Co-Chairperson inquired into any comprehensive research conducted into trade, because the Department of Trade and Industry (dti) regularly releases an action plan. The Chairperson agreed that good work was done on the automobile and textile industry and asked if COSATU had taken a stand.

Mr A McLoughlin (DA) drew attention to the fact that courts had declared that the obligation on the state to provide water to informal settlers remains even where settlements are on private land.

Mr Parks responded that COSATU supports free education to working and middle class persons and supports the proposal by the EFF to use pension funds in stock markets to fund education. It expressed disappointment at the decision of Stellenbosch University to increase its residence fees by 10%. It felt strongly that the public wage bill needed to be limited, and engagement with bargaining councils was encouraged. The UIF surplus is R120 billion. COSATU does not support the government decision to invest this into stock where it will only become available in two years. The surplus should be used to stimulate economic growth. Noting the court decisions on provisions of water, Mr Parks said the government has good policies that are not properly implemented

2016 Adjustments Appropriations Bill: Office of the Chief Justice submission
Ms Memme Sejosengwe, Secretary General, Office of the Chief Justice, stated that the mandate of this Office (OCJ) is to support the Chief Justice in executing administrative and judicial powers and duties as Head of the Judiciary and Head of the Constitutional Court. She described its functions as follows:

-Provide and coordinate legal and administrative support to the Chief Justice;
-Promote communication and relationship management services and inter-governmental and international coordination;
-Develop courts administration policy, norms and standards;
-Support development of judicial policy, norms and standards;
-Support the judicial function and render administrative support to superior courts;
-Support the Judicial Services Commission (JSC) in the execution of its mandate;
-Support the South African Judicial Education Institute (SAJEI) in the execution of its mandate;
-Administer the Judges’ Remuneration and Conditions of Employment Act
-Assist the Chief Justice in exercising responsibility over the administration of all courts in terms of the Superior Courts Act.

Ms Sejosengwe illustrated the strategic-orientated goals of the OCJ as follows:

- Goal 1: Ensure efficient and effective administration of the OCJ that provides optimal support to the judiciary
- Goal 2: Enable the Judiciary to deliver on its Constitutional mandate by providing administrative and technical support which include judicial training, administrative and secretariat support to the JSC, administration of judge’s registrable interests and administration of judge’s remuneration.
- Goal 3: Provide administrative and technical support to ensure efficiency and effectiveness of the Superior Courts in adjudication of cases.

In relation to overall performance for 1st and 2nd quarter, she noted that in the first quarter, there were 18 planned targets of which 14 were achieved. In the second quarter, there were 20 planned targets, of which 15 were achieved.

Ms Sejosengwe also presented on the targets not achieved for the 1st quarter and stated what remedial action the OCJ had taken in order to meet its targets:

a) 90% of funded vacant posts filled: not achieved, but the recruitment process is closely monitored to fast track the filling of posts

b) 65% audit findings addressed: not achieved: remedial action is that the Operations Committee will work with Unit heads to address outstanding action plans. The internal audit unit will conduct a follow up audit to provide assurance

c) 100% of reported fraud cases investigated. The remedial action is that the Forensic Investigator continually tries to improve on the management of witnesses and suspects in order to expedite the interview process, and to take statements timeously. OCJ is presently recruiting another forensic investigator.

d) 100% of warrants of release delivered within one day of the release granted: Not achieved. In future the warrant will be faxed to the main court immediately after being granted.

In relation to the second quarter, the following targets were not met:
a) 90% of funded vacant posts filled: The recruitment process is closely monitored to fast track the filling of posts

b) Tender process finalized: Not achieved: Documents are ready and submitted to BAC for approval.
c) Tender requirement developed and tender advertised: This was part achieved; a request for Information (RFI) was developed, but the tender was not advertised.

d) 100% of reported fraud cases investigated: There is a unit to fast track the appointment of the service provider for the forensic computer auditing. A Forensic Investigator continually tries to improve on the management of witnesses and suspects in order to expedite the interview process and to take statements timeously. OCJ has requested recruitment of a DD forensic investigator.

e) 100% of warrants of release delivered within one day of the release being granted: not achieved. A new protocol has been developed that will address, amongst other things, the transmission of the warrant of release by email from the Registrar Criminal Section.

Ms Sejosengwe stated that the OCJ had received and requested a further virement from the National Treasury (NT). The reasons were mainly in order to increase compensation of employees from R456.861 million to R555.261 million. The projected shortfall of R8.4 million is due to the following:

-The difference of 1.5% (R7 644 million) in cost of living expenses
-Salary increase was projected at 5.5% as per the NT guidelines during the 2016/17 budget but the actual increase was 7%. This shortfall had to be funded within the existing approved baselines.
-Filling of key posts for urgent capacitation of a new department. In order to attract experienced personnel for the effective functioning of the OCJ, higher notches had to be offered to some of the key appointments. These posts were budgeted for on the first notch of the salary scale. The estimated additional cost will be R756 000.

Ms Sejosengwe stated that the budget was calculated on a six-monthly basis with variants of 16.3% and 9.1%. The reason for over expenditure and under expenditure:

-Programme 1: OCJ telephone bill for superior courts was paid by the Department of Justice and Constitutional Development (DoJ). In regard to the payment of the e-filing system for R6 900 million, she indicated that this was budgeted for in the DoJ budget and so the OCJ has submitted its claim to the DoJ and expects reimbursement in the third quarter.

-Programme 2: Under spending is due to the telephone bills for the courts paid under Programme 1. Savings have been effected as a result of cost containment measures. The funds have been reallocated to other priorities during the Annual Estimates of National Expenditure (AENE) process, including a request for R8.4 million.

-Programme 3: Under spending is the result of the postponed judicial training process.

The reasons for over and under spending were then described by economic classification:
In Compensation of Employees: Overspending is a result of a shortfall in the personnel budget due to the difference in salary adjustments. The shortfall had to be funded within the existing approved baselines. Also, higher salaries were offered in key positions to attach experienced personnel with required skills.

Under Goods and Services and Purchase of Capital Assets, the under spending is due to the re-classification by the Accountant General of the expenditure for Judges’ vehicles, from goods and services to finance leases in the capital budget. The OCJ has reallocated the budget to finance leases under capital budget assets during the budget adjustment process.

For Transfers and Subsidies, the over-spending relates to the payment of a leave gratuity for judges due to termination of personnel since April 2016. This has been rectified during the budget adjustment process.

Discussion
Ms M Manana (ANC) inquired into the 16.3% and 9.1% variants. She pointed out that section 43 of the Public Finance Management Act (PFMA) allows only an 8% variance. Ms Manana also wanted to know why telephone bills are a contributing factor to over expenditure.

Ms Senokoanyane thanked the OCJ for the presentation but wanted to know the reasons for making higher notches in salary for the employment of experienced people. She also asked what informs a six month budget projection and why this did not reflect 50% of the total annual budget.

Ms Shope-Sithole laid emphasis on the 65% achieved in an internal and external audit. She emphasised that the OCJ was new and was disappointed to note that its performance was so low. She encouraged a break from “the bad habits of the DoJ before they seeped into the OCJ”. Ms Shope-Sithole emphasized that this figure meant that the OCJ was not listening to its auditors, and that it is urgent and necessary that it should be attaining 100% compliance, as a new entity.

Mr McLoughlin pointed out the inconsistencies in the targets, both achieved and not achieved, were in fact also reflected in the presentation; he wanted to know whether “90% vacancies had been filled” meant a 90% achievement, or a 10% achievement. He was also concerned as to whether the fraud cases being investigated were internal matters. He too was concerned about a virement that was contrary to the PFMA. He asked why it was paying more to judges than what was budgeted, and wondered if the initial budget did not allow for judge’s gratuities, and why judges should receive a 5.5% increase in salary when Members saw no increase. He wanted full justification for this.

Mr Gcwabaza asked what kind of information was requested on the tender and also pointed out that the OCJ was contradicting itself in terms of targets achieved and those not achieved. It should surely be assumed that when filling posts, it would know what level of skills to seek, and budget accordingly instead of budgeting too little and changing mid-way.

Ms Sejosengwe responded by saying that the OCJ was a new creation and it was effectively transferred as a going concern from the DoJ, with the existing base lines. When the OCJ was created, it did not have enough funds to execute everything. The NT only managed to fund the 2016/17 financial year and therefore, OCJ had to seek other sources of funding. Each judge has a secretary but there are no other support staff, apart from the Court Clerks or the Registrar. Statisticians were appointed to assist. Unfortunately OCJ had inherited the infrastructure of the DoJ. It could not offer entry level salaries to persons with vast experience, and judges were unhappy with existing lack of expertise when people were hired at entry level.

Mr Casper Coetzer, Chief Financial Officer, OCJ, stated that the six month projections were made because the OCJ did not have a financial history on which to base its projections. It had therefore been able only to look at the expenditure of the 2015/16 financial year and projections for the next year. In relation to telephone bills, he noted that when OCJ split away, there were a number of existing contracts that it took over. DoJ settled the Bill but claimed from the OCJ.

In terms of the 65% achieved in the audit Ms Sejosengwe emphasised that there were legacy issues inherited from the DoJ, especially in relation to superior courts. OCJ was unsure of its capacity for 2015/16. She noted that the OCJ aimed to fill 90% of all vacancies and 10% should be the highest target for vacant funded posts as the OCJ moved further.

The Co-Chairperson was concerned about the offering salaries at higher figures than were budgeted, and said that people applied for the jobs at a certain salary, so did not understand why they were then permitted to negotiate for higher salaries at interview.  This violated the principle of not spending money that an entity did not have and this should be avoided. The OCJ should lead by example and not deviate from the law. This tendency must be stopped now, the situation should be regarded objectively, not emotively, and the budget must be linked to the plans to get value for money.  The Committee wanted the monitoring and evaluation unit of the OCJ to tell the Committee whether the money allocated was making an impact. Furthermore, the Committee needed to know if the OCJ had a transformation plan and, if so, what the progress was.

Ms Shope-Sithole stated that the DoJ is a department that had continuously provided poor reports to this Committee. Only in this financial year had the DoJ come right, but certain legacy problems still remained.  She urged that the OCJ should not fall into that trap.

The Co-Chairperson emphasised again that the acceptable over and under expenditure and virement figures were is prescribed in the PFMA, and anything more than this would be an offence. She emphasized that this was a serious issue on which compliance must be maintained.

Ms Sejosengwe thanked the Committee for the input and assured the Committee that, as guardians of the rule of law, the OCJ tried always to abide fully by the law. It had never been convinced that the budget received was enough to cover the tasks given, and the courts had always, in her opinion, been under-resourced. She noted that the OCJ was focusing on tasks that would move it forward.

The meeting was adjourned.