Meeting with Budget Committee Rapporteurs from Germany

Meeting report

Opening remarks
The Chairperson opened the meeting with a minute silence. She said the way public resources were used was a major determinant of achievement of public policy objectives such as quality and affordable education, populations that were healthy and productive, opportunities to be gainfully employed and contributed meaningfully to their communities. These and more were benefits that arose from budgets that were transparent, fair, and equitable and budgets that adhered to the principle of efficiency, effectiveness and value for money. Achieving this noble aim was a formidable challenge that confronted both developed and developing economies.  She said they were aware through the Committee’s study tour that the German Federal Parliament played a very strong and positive role in the budget process. Fiscal prudence and a balanced budget were essential for boosting economic growth, addressing unemployment and driving infrastructure investments. She would like both the Committee and the delegates to share experiences and charged all to have a free, fair and open conversation. She asked the delegates to introduce themselves. She progressed by asking the Content Advisor (CA) Mr T Masoeu to make a presentation on the work of the Standing Committee of South Africa.

Presentation: Standing Committee on Appropriations
Mr Masoeu gave an overview of the budget process. He said the principles that governed the budget process which were essentially similar to German’s budget process were allocation efficiency, fiscal stability and service delivery. South Africa also had spheres of government similar to Germany and also had a law that governed how funds were allocated to the three spheres of government. The difference between Germany and South Africa’s budget was that the South African budget was outcome based while that of Germany was input based. South Africa had an Act that established the Committee of Appropriations and this allowed Parliament to contribute, evaluate and make a decision on proposals tabled by the Executives and how they amended the tabled budget. There were two Committees; one the Standing Committee on Finance which focused on micro economic framework and revenue assumptions, the second was the Standing Committee on Appropriations which focused on spending issues and how revenues raised from taxes were divided across the three spheres of government and how votes were allocated. It tabled appropriation to the house on how funds should be allocated to different service delivery areas.

The Financial and Fiscal Commission (FFC) had a mandate to ensure that division of revenue was equitable, effective and fair. The SC on Appropriations evaluated expenditure on a regular basis, specifically for entities whose funding was appropriated through the Appropriation Act. They received regular reports on them, made assessment and recommendations where necessary.  The budget cycle was similar to Germany’s system; it entailed that the executive first made proposal after which Parliament considered the proposal and made a decision. The summary of the budget process was in regards to the timeline, the budget was then tabled, the SC Finance approved the fiscal framework on appropriation while the SC Appropriations would consider to approve or amend the division of revenue and four months after would consider to approve or reject the Appropriations Act. The mandate of the SC Appropriations Committee emanated from the supreme law of the land which was a Constitution and it had power like other Committees in the Parliament. South Africa had a legal fiscal oversight framework in place that enabled parliamentary oversight over the Executive which comprised of the Constitution, Public Finance Management Act (PFMA) and the Money Bills Amendment Procedure and Related Matters Act which came into effect in April 2009. The main objective of PFMA Act was to ensure transparency, accountability, and sound management of the revenue, expenditure, assets and liabilities of all public institutions.

The Division of Revenue Act (DoRA) was a Bill which provided for the equitable division of revenue raised nationally among the national, provincial and local spheres of government. Any amendment had to be consistent with the adopted fiscal framework and Section 214 of the Constitution. The Appropriation Bill had to be referred to the SC on Appropriations after the adoption of the Fiscal Framework and amendments may only be considered after the DoRA Bill was passed. The Committees should facilitate public participation and then weigh the proposal of the Executives; the outcome may be reviewing, amending or rejecting the proposal depending on the input the Committee received and its decision. The amendment process had to take into account the implication for each amendment and demonstrate the impact of any proposed amendment on the balance between transfer payments, capital payments and recurrent spending. Important stakeholders included in the work of the SC Appropriations Committee were the Legislatures (Portfolio Committees, Finance and Appropriations Committees, SCOPA), Cabinet (National and Provincial Departments, National Treasury), Auditor-General, Public Entities, Constitutional entities, Financial and Fiscal Commission (FFC), South African Local Government Association, Civil Society and Parliamentary Budget Office.

Discussion
Dr L Gesine, the Chairperson of the Budget Committee from Germany, thanked the Committee for the enlightenment through the presentation and told the Committee that the delegates were interested in finding out the effect of the budget speech, what South Africans were saying about it and what the SC Appropriations Committee wanted them to take home from the budget.

The Chairperson said the overall reaction of people was that the budget was a balanced. It took care of the poor, addressed economic growth and radical socio-economic transformation which allowed the effect of public participation in the budget process. After the draft budget, the Minister talked with the key stakeholders. She said the budget was fair because it responded to the strength of public participation, because unemployment, poverty and inequality were issues that came up most during the public participation.

Mr E Sheik (NPF) was in agreement with the Chairperson and said the budget was generally well accepted, though tax increment often came with grumblings but the budget was pro-poor. However, he noted that the problem was often with budget implementation. He asked if Germany had problems with implementation, and how the delegates worked together as a Committee despite coming from different political parties. He said there were lot of breakaway parties in South Africa, and different party members fought one another forgetting about the need of the citizens

Ms D Senokoanyane (ANC) said in addition to what other members said, she noticed a focus on social transformation which would help to narrow the gap between the rich and the poor. Another area of social transformation was the area of support to education though the fund was not enough to address all the number of students that required help; she believed that the budget was fair.

Ms S Shope-Sithole (ANC) said the budget was well received by the greater number of the population especially the poor because VAT was not increased and the social grants, challenges in education and infrastructure development which would promote growth were addressed. She said Parliament should work more effectively by going on oversight instead of listening to the well-crafted reports of the bureaucrats.

Mr N Gcwabaza (ANC) said he would like to add that there was a focus on the whole education sector. The country needed to address the skills deficit and employment, particularly the youth. To achieve this, there was a need to focus on outcomes and this was a fiscal consolidation focus which was critical to contain South Africa’s debt to GDP which currently stood at 50%, by curtailing spending on non-essential items throughout the National Department, in the Provincial legislatures and Municipalities as well as the stabilization and reduction of the Public Sector wage bill. There was a need for efficient and outcome-based spending, which called Parliament to tighten its oversight functions on all the three spheres of government. The budget allocation on incentives would help to attract investors because it focused on incentives in sectors of economy that were productive and had potentials to create jobs. He said two main focus areas that were mentioned by the President during SONA were the ocean economy, IT infrastructure and IT skill development.

Mr E Deligoz, a Member of the Delegates (MOD), answered the question on auditing and control implementation of various measures, and said it was easier in Germany because of the strong Federal system that ensured strong government at local level. They followed the principle of subsidiarity, which implied that the State at Federal level did not do everything and there were control mechanisms to ensure that measures were implemented in the correct way. The Audit Committee in the German Parliament ensured that implementation was effective. He said that they had different parties in the Committee and they were able to discuss measures robustly which was also a part of the control mechanisms. Another MOD said another factor in German Parliament was the Portfolio Committee which controlled the effect of resolutions passed by the Budget Committee; this allowed Germany to manage long term projects. The purpose, implementation and realization of a project could be addressed. International interest rates should be considered especially for medium and long term planning, and one of the reasons Germany bridged the crisis years of 2008 and 2009 was the decision for pro-deficit spending.

Dr Gesine stated that it was important that the Budget Committee could take a stand towards Ministers and the various departments, not doing the bidding of the Ministers, because when Ministers knew that they had a strong majority they might go overboard, and did not take into recognition the inputs of the Members of Parliament and it was important that every question was answered properly irrespective of which political party they were affiliated to. Also, on the issue of corruption, she said in Germany, the gifts that were given to certain people were strictly controlled which led to a declined in corruption. She made a positive remark about the transparency of the budget in the way it was present to the citizens of South Africa and said the delegates learnt from it.

The Chairperson asked how they worked together harmoniously as a Committee despite belonging to different political parties.

Mr Deligoz responded that though they had not seen the South African Parliament in action, but German Parliament was hard in terms of tackling the matters but soft in the form it adopted. Also, there were rules which everyone had to adhere to.

Mr Phelani Dlomo, Researcher, Parliament, asked if the German Parliament amended their budget, the process of amendment and the implication of amendment. He said in South Africa, there was an Act which was passed in 2009 but it was not yet amended.

Dr Gesine said that there was a budget law that responded to such occasions and if it became necessary the budget would be amended. She highlighted that the budget rights were allocated to Parliament and not the government.

Mr Gcwabaza said the lessons learnt by Committee during the study tour to Germany was that multi-party unity was important for any nation to be an achiever. The opposition reflected even at the Committee level. He said one of the five focus areas of South Africa was corruption and work was on-going on fighting it.

The Chairperson said the group was interested in the areas of co-operation between Germany and South Africa with financial implications and this required the oversight of the Committee. She thanked the delegate.

The delegation presented a gift that was received by the Chairperson on behalf of the Committee.

The meeting was adjourned.