National Treasury on Quarter 3 Spending Outcome

Standing Committee on Appropriations

01 March 2017
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

National Treasury briefed Members of the Committee on third quarter expenditure. They explained that the benchmark for government spending was 75 percent and the current budget indicated that government did relatively well by spending 74% across all departments. In total, departments spent R15.6 billion or 2.8 percent less than the projected expenditure and spent R2.4 billion or 22.2 percent less than projected expenditure on payments for capital assets, which was down from 30.2 percent.

The presentation divided spending outcomes by functional groups. These spending outcomes of select departments per function group based on the amount and/or percentages of lower and higher spending compared to projected expenditure. These function groups were:

  • Health and Social Development
  • Education and related departments
  • Economic Services
  • Urban Development and Infrastructure
  • Justice, Crime Prevention and Security
  • Administrative services

These department spent R536.3 billion, or 74.0 percent of the available budget of R722.9 billion so far. The departments with significantly higher than projected expenditure (based on a variance of R400 million and/or higher percentage of projected expenditure) included:

  • Home affairs (R714.9 million or 12.9 percent) which was up from R542.1 million in the second quarter
  • Defence and military veterans (R428.2 million or 1.3 percent) down from R753.8 million in the second quarter.

The departments that spent significantly less than projected based on a variance of R400 million and/or percentage of project expenditure:

  • Higher Education (R3.1 billion or 6.8 percent)
  • COGTA (R3 billion or 5.6 percent)
  • Basic Education (R2 billion or 10.6 percent)
  • Rural Development and Land Reform (R1.4 billion or 18.4 percent)
  • Trade and Industry (R1.3 billion or 15.6 percent)
  • Social Development (R1.1 billion or 1 percent)
  • Human Settlements (R875.3 or 3.9 percent)
  • Police (R492.1 or 0.8 percent)

During the discussion, it emerged that Members found it unacceptable that delayed invoices were being used as an excuse for departments not achieving their spending targets. Additionally, they emphasised the need for proper planning and budget execution at all levels within departments and more effective evaluation and monitoring by Treasury, Parliament, and themselves. It was also suggested several times that the Department of Public Works should be called, along with the other relevant department, to the Committee to account for the role they were playing in other department’s lower than projected expenditure. Overall the message was that departments needed to meet their targets and analyse where they did away with wasteful spending. 

Meeting report

Introduction by the Chairperson
Mr N Gcwabaza (ANC) opened the meeting and apologised that the Chairperson, Ms Y Phosa (ANC), as well as other Members of the Committee and representatives from National Treasury, were going to be late due to heavy traffic and the present Members agreed to begin the meeting without them. This meeting of the Committee, Mr Gcwabaza stated, was to receive a briefing on the third quarter spending outcomes from the Department of National Treasury.

Apologies' were given by Ms D Senokoanyane (ANC) and Ms N Ndongeni (ANC).

Briefing by National Treasury
Mr Dondo Mogajane, Deputy Director General (DDG): Public Finance, National Treasury, began by stating that their goal today was to present the quarterly figures and raise issues that might be of concern to the Committee. Moreover, he pointed out that previously raised concerns by Mr AM Shaik Emam (EFF) that concerned parliaments spending on travel were noted and he was happy to announce that processes to ensure issues of budgeting were being addressed through the development of a protocol document.

In addition, in the physical 2016/17 Quarter 3 Spending Outcome report, he pointed out that there was a paragraph titled, Issues for the Committee to Note, which was specially included to help the Committee navigate the document and quickly pick up on some issue that Treasury thought were important for them to note and help empower them to engage with other committees.

From this, he detailed that the purpose of the day's meeting was to present the third quarters spending and help identify its status. He explained that the target for a department's spending was 75 percent of its budget saying that it was a concern if it was much higher or lower than this because it might indicate that there was wasteful expenditure or if there were problems with service delivery. Based on this 75 percent benchmark, he said that they were relatively happy with current expenditure trends. In addition, he explained that for the slide three and four of the presentation there was a detailed table on page two of the full report that they could refer to and get a complete breakdown of all forty votes, appropriations, and projected spending that this indicated a 2.8 percent variant. He said that figure accounted for the first three-quarters and was less than what was projected, but was near enough to the 75 percent benchmark for them to not to be too worried.

Mr Mogajane indicated that they arranged their presentation and report around six cluster groups (Health and Social Development, Education and related departments, Economic Services, Urban Development and Infrastructure, Justice, Crime Prevention and Security, and Administrative services). His fellow representatives from Treasury were responsible for them and would help him to answer questions that the Committee had.

Health and Social Development
Health spent R28.9 billion or 74.8 percent of its available budget, which Mr Mogajane noted was on track. He reported that this underspending was due to lower than projected spending mainly under hospitals, tertiary health services, and human resources development programme and administrative programme.

Social Development spent R1.1 billion or 1 percent lower than projected. Mr Mogajane said that the slow spending occurred mainly within the Social Assistance programme on the child support grant. This was because of a number children falling off the system due to the age cut off. He added that Social Development, and specifically its child support grants, was indicative of the past 10 to 15 years’ efforts between the South Africa Social Security Agency (SASSA) and Treasury to improve the modelling and projections for child support grants. He acknowledges, however, that this was challenging and they had to work with the philology of rather having more funds available that what was apparently needed for social development. Mr Mogajane said that it was partly due to this reason, and according to the time of the year, that social development commonly committed higher or lower than expected expenditure.   

In terms of economic classifications, Mr Mogajane said that Social Development spent R35.7 million more than projected under goods and services due to the payment of accrual commitments from the 2015/16 fiscal year for travelling coast, audit fees, venues and facilities, operating leases, fleet services, legal fees and computer services. Additionally, he noted that the Department was likely to overspend on goods and services. He also brought to the attention of the Committee that Social Development historically faced similar issues, which it was still trying to overcome and was represented in the fact they had to settle 2015/16 costs in the current budget. This limited the Department to fulfil and implement funds for current projects and programmes. On this point, he stressed to the Committee the need for them and Treasury to ensure sound budgeting practices.

Education and related departments
Basic education spent R2 billion or 10.6 percent lower than projected variance, mainly under Curriculum Policy, Support, and Monitoring programme (or programme 2) and Planning, Information, and Assessment (or programme 4). For programme 2, this shortfall in spending was in goods and services due to delays in receiving invoices for printing and distribution of workbooks from grades R to 9 and learner and teacher support materials for the National Senior Certificate retention programme (i.e. the 2nd chance matric programme). For programme 4, the lower spending was due to implementation delays in the school infrastructure backlog grants as well as poor performance by some implementing agents, the difficulties related to replacing these underperformers, and delays in finalising the merging and rationalisation of schools in the Eastern Cape Province. Additionally, Mr Mogajane noted that underspending for this grant was persistent since its inception in 2011/12. He noted that this issue was addressed in the most recent budget, stating that this was the last year that this grant would stand on its own and from the new financial year it would be incorporated under the Basic School Infrastructure grant. Nonetheless, he recommended to the Chairperson that Treasury and SCAPPROP have a joint engagement with the appropriate representatives from Education to better understand why there was underspending in the Department.

Higher Education and Training was reported to have spent R3.1 billion or 6.8 percent less than its projected expenditure. Mr Mogajane said that this shortfall was mainly attributed to delays in the payment of university infrastructure that was an earmarked grant under University Education programme (or Programme 3). Mr Mogajane said that these spending issues were occurring at two universities, Sol Plaatje and Mpumalanga. However, he said that they were confident that the Department was on top of the issues there.  

Labour, as it related to education, spent R123.6 million or 5.3 percent lower than its expected expenditure. It was explained by Mr Mogajane that this was primarily due to delays in filling positions and delayed payments of invoices for goods and services. With regards to the filling of posts, he mentioned that previously he was taken on by Members of the Committee for welcoming delaying filling vacant positions, however, he said that there was a need to contain compensation budgets across Government. In service of this, he engaged with various departments to implement a human resource business plans to make them as efficient as possible.

Arts and Culture were reported to have spent R176.2 million or 5.5 percent lower than projected. This was mainly due to delayed invoices from the Department of Public Works (DPW) for the repairs and maintenance of the National Archive under the capital works projects. He notes that this was not an issue, as it was good practice to not make payment transfers until invoices were received.

Economic Services
Trade and Industry were reported by Mr Mogajane to have spent R1.3 billion or 15.6 percent less than projected expenditure. This was explained by him to be mainly due to the Incentive Development and Administration programme (or programme 6) that had outstanding compliance documents, unprocessed claims and outstanding agreements of Enterprise Investment, Automotive Production, and Development programmes.

Rural development and Land Reform spent R1.4 billion or 18.4 percent less than its projected expenditure. Mr Mogajane said that this slow pace was due to a Constitutional Court ruling on the invalidity of the Restitution Amendment Act in July, which slowed the department's expenditure under the Restitution Programme. In addition, Mr Mogajane noted that slower than expected spending was seen at the National Geomatics Management Services programme which was attributed to late transfers to departmental agencies, in particular to the Registration of Deeds Trading Account budget.
 
Environmental Affairs fell short of their projected expenditure by R286.3 million or 5.9 percent. This was mainly due to slow spending on Expanded Public Works Programmes (EPWP) that encountered issues concerning contract negotiations with implementing agents.

Urban Development and Infrastructure 
Co-operative Governance and Traditional Affairs (COGTA) spent R3 billion or 5.6 percent less than its projected expenditure, which was due to two issues mainly. Mr Mogajane said that the first was due to withholding local governments’ equitable shares and the municipal infrastructure grants because of unapproved rollovers. Secondly, he explained, there was lower than expected spending for immediate relief disaster grants. He noted that this was an interesting case because as soon as a municipality’s equitable share it meant that they were unable to spend. This action was accounted for in the regulatory framework and was the last resort meant to ensure payments to entities such as water.

The Department of Water and Sanitation (DWS) spent R5.1 million or 0.4 percent more than what was projected. This was because of higher than projected payments for capital assets in the Accelerated Community Infrastructure Programme (ACIP) and the Regional Bulk Infrastructure Grant (RBIG). Mr Mogajane said that this would be the subject of a meeting he was attending on Friday and would also deal with municipalities not settling their account with the Department.

Human Settlement was reported by Mr Mogajane to have spent R875.3 million or 3.9 percent less than its projected expenditure. This underspending was mainly under the Human Development Finance programme and was due to non-payment of public entity transfers for operational and capital programmes. 

Justice, Crime Prevention and Security
Police Services spent R492.1 million or 0.8 percent less than what was projected. This lower than expected expenditure was attributed by Mr Mogajane to two programmes. The first was the Visible Policing programme, which due to delays in finalising the transversal contact, meant that there were hindrances on transport equipment spending. The second was the Detective Services programme, whose slow spending was said to be due to lower than expected compensation for employees that was due to vacancies. On this point, he said these measures meant vacancies were not being filled and it was important to help balance the country’s debt and gross domestic product (GDP) because it helped control its expenditure while there was slow growth. Mr Mogajane added that the Administration programme spent R662.4 million higher than what was projected and this was mainly due to higher than anticipated payments for computer services, particularly for the State Information Development Agency (SITA) system development: Operational support.

Under defence and Military Veterans, there was an expenditure that was R428.2 million or 1.3 percent higher than what was anticipated. Mr Mogajane reported that this excess spending occurred under three programmes. The first was under Administration, whose higher spending was due to the payment of accruals for accommodation charges. These accruals were said to have been because of delays in the receipt of invoices from the DPW and higher than expected payments that were made to the Department of International Relations and Cooperation (DIRCO), regarding the defence attaché offices. The second reason that was given by Mr Mogajane was higher spending by Landward Defence, which made a once-off payment and estimated R127 million for homeowners allowance that should have been paid in 2015/16 financial year. Again, he suggested that there could be more engagement with the Department to discuss its spending challenges. Finally, Mr Mogajane said that extra costs were accumulated because of the high costs of outsourced medical services and medical waste removal.

Justice and Constitutional Development spent R204.9 million or 3.4 percent lower than its projected expenditure. This was seen mainly under Administration, which encountered delays in settling employment bonuses, delays in submission of invoices for office accommodation by the DPW, and delays in the procurement of office furniture and equipment or head office. 
 
Administrative Services
The Department of Home Affairs spent R714.9 million or 12.9 percent more than its projected expenditure. Mr Mogajane reported that this was due to costs related to the issuing of enabling documents that were funded through self-financing allocated during the Adjusted Estimates of National Expenditure.

DIRCO spent R226.8 or 4.7 percent less than its projected expenditure. Mr Mogajane said that this was mainly due to the Administration and International Cooperation programmes. Under Administration, slow spending was accounted by outstanding invoices for Information, Communication and Technology (ICT) projects as well as the transfer budget in relation to storage. While for International Cooperation, the slow spending was due to cost containment measures that the Department had in implementing its missions abroad. This related to the Department being able to negotiate a zero percent increase for some leases abroad. He highlighted that cost containment measures like DIRCO did here were actions that Treasury was trying to encourage.

National Treasury spent R312.7 million or 1.5 percent higher than its projected expenditure. Mr Mogajane said that this was due to additional expenses incurred on the Integrated Financial Management System (IFMS) Solutions for the purchasing of software licences for the whole government. On the IFMS project, he said it was now implemented and running and will improve the financial management system for the South African Government.

At this Mr Mogajane reiterated that his presentation has summated the full 2016/17 Quarter 3 Spending report. In addition, he introduced his colleagues that arrived late that were Dr Rendani Randela, Chief Director: Justice and Protection Services, National Treasury and Ms Gillian Wilson, Chief Director: Administrative Services, National Treasury who would help him with responding to the questions and responses from the Committee.

At this Dr Randela added that there were some red flags being raised under the Justice, Crime Prevention and Security cluster because Correctional Services, which he said was not included in the presentation, but was included in the full report, were projecting overspending due to higher than expected nutritional services and farm supplier’s costs. He said that, although this was not reflected in this third quarter report, it would be apparent in the fourth quarter.

Ms Wilson also made comments on the issue of DIRCO, saying that the Department was implementing stringent saving measures to ensure that they did not exceed their budget. She also noted that to account for negative impacts of exchange rate fluctuation additional funding was requested and subsequently added to their budget. However, she said that Treasury did not agree to the full amount and requested DIRCO to introduce other cost saving techniques.   

Discussion
Ms Shope-Sithole (ANC) commented that Social Developments accruals and delayed payments of invoices amounted to negligence, especially if one considered the importance of this Department. In addition, she took exception to the number of delays that were caused by the DPW and suggested the Committee should call them in to answer for the delays they were causing for other departments. With regards to service delivery in education, she said that any delays in delivering reading material inhibited a learner’s ability to learn and said that this was a contributing factor for children not attending school.

With regards to DIRCO, she was wary of the idea that embassies might be closed in the interest of limiting their expenditure and suggested other measures should rather be sort after. The justification she gave for this reasoning reflected on current global affairs, specifically referencing Trump and Brexit, which for her suggested that globalisation might not be heading in the direction once thought and closing embassies might limit future opportunities not currently apparent in the current order.

Dr Figg (DA) first referred to slide 8 (Health and Social Development) and the accruals it referred to, questioning whether provisions should be made that accommodated expenditures that rolled over from previous years in current calculations. Moreover, on the same slide he questioned the wording that said spending "is on track", but then also said they were underspending and for him, it should be one or the other.

From this, he posed a question to the Treasury representatives that concerned SASSA and their current issues asking if they could give any updates to the Committee and if there was a possible alternative service provider; considering that this process would impact the current budget. Following on from this he inquired about slide 11 and if they could clarify how much of Art and Culture upgrades, which amounted to R172.2 million over budget, went directly towards the upgrades and if this was the total amount. On slide 13, where details of EPWP's slow spending were explained, he considered the slow spending as being criminal as it was the beneficiaries of this programme that needed money the most. He considered the delays coming from contract negotiations as an inadequate excuse and the perpetrators of these delays needed to be brought to account.

Dr Figg then brought slide 15 under scrutiny, with regards to water and sanitations purchase of capital assets. He wanted like to know if the capital assets were more expensive than projected or were there more items bought. For slide 17, which concerned Justice, Crime Prevention and Security, he had a similar question asking if the computers that were bought were more expensive than what was projected or if more were bought. In this regard, he mentioned that it was the purpose of the Procurement Department to set benchmark prices for certain items and asked that the Committee should inquire into their performance.

Next Dr Figg said he found it interesting that Treasury mentioned revenue shortfall and questioned if some adjustment needed to be made to afford a greater debt to GDP ratio or if government spending should be slowed. Finally, on slide 20 that dealt with Administrative Service, he sought clarification on the IFMS; if it was being implemented or running.  

Ms M Manana (ANC) referred to slide 10 and the delays in delivering workbooks from grade R to 9 and mentioned that she recently found out that most grade 5's could not read and she was wondering why this was the case. However, issues with the delivery of reading material, she wondered if this did not help explain why this was the case. In reply to Treasury's suggestion that they have a joint sitting with Education to deal with school infrastructure backlogs, she suggested that they also include the DPW. Next, she questioned if they were sure that the two Universities that were mentioned were going to use their whole budget in the fourth quarter.

On slide 15, which dealt with COGTA, she found it disturbing that some national and provincial departments were not paying municipalities and this issue had to be taken seriously. With regards to municipalities owing money to the Water and Sanitation Department, she said that it seemed that they were not one Government and Treasury should play an important role here to make sure that everyone was responsible for their own expenses. Finally, she suggested that the municipalities that were not paying what was owed to utilities should be named and shamed.

Mr A McLoughlin (DA) began by asking for clarity with regards to the comparison between the projection and the actual expenditure, and whether it was done in relation to the yearly budget or was it just the three quarters. For this, he received an immediate response that explained that it was just per quarter.

His next comment concerned slides 9 and 10. He mentioned that there was a tendency to look at things in isolation, however, Basic Education, municipalities, Water and Sanitation, and the DPW mandates all overlapped meaning that they could pass the buck for school infrastructure shortfalls. He used school bathrooms as an example of this and then asked if Treasury could give clarity of where responsibility should lie.

Moving on, on slide 13, Economic service, he mentioned that last year they were told that there was a backlog in the issuing of around 900 000 title deeds to those to whose land was already granted, whose conveyancing work cost billions of Rand. However, even though land was such a controversial topic these delays were occurring and someone should be held responsible.

On side 15 and COGTA, Mr McLoughlin mentions that this was a recurring issue for him and if you looked at the current situation you saw that the policy of the Government was to get service to its people and effectively as possible and local municipalities played the most vital role in this. However, municipalities only geo 9 percent of the National Budget and they should recover the rest of the budget from the community through rates and taxes, paying for water and electricity, etc. But, he made the point that while the economy was growing slowly, municipalities were constrained because the people living in that municipality found it increasingly difficult to pay for these annually increased services, which in turn, was making it difficult for municipalities to balance their books and thus their equitable share could be taken away. In his opinion, this was not right and a more conscious approach to municipality funding should be instigated.

The next concern that he shared, regarding the department of Water and sanitation, was that he was happy that the Department was spending more than in the past. However, it was concerning that billions of Rand was owed to them. He then asked the Treasury representatives if there was a plan to more effectively use the law to not only collect these debts owed to Water and Sanitation, but across departments and municipalities to make Government more efficient at receiving what it was owed.

On slide 17, which showed that there was a lower than projected expenditure for police and the reasons for this, Mr McLoughlin enquired if there was a problem in finalising transversal contract and asked if the Chief Procurement Office was competent and performing their task adequately because it seemed they were delaying many other departments. He also asked if this was something this Committee should be considering. For this slide, he also raised the issue of not filling vacancies to try to reduce the national wage bill. However, he thought this was sometimes used as an excuse for departments underspending and suggested that a departments’ budget should be adjusted down in accordance to these vacancies so that a more accurate representation of expenditure was represented. Additionally, he questioned the practice of outsourcing medical services and medical waste removal in defence and military veterans asking who was it being outsourced to and if the Department of Health should not be involved here in some way. Finally, he posed an inquiry to landward defence expenditure and said that in his mind this should involve the defence of our country. However, he saw the main expenditure for this Department was home owner’s allowances that should have been paid in 2015/16 and he noted that he was not sure how this helped defend our land and suggested they needed the Department of Defence to come and explain their expenditure. 
 
Dr C Madlopha (ANC) began by commending Social Development for reducing its expenditure by increasing its efficiency that saw corruption and the payments of child grants to ‘ghost children’ being reduced. Next, she asked if the amalgamation of grants under programme 4, which was mentioned on slide 10, would help increase expenditure efficiency. With regards to under spending, she noted that in the presentation it was explained that at times this was due to an underperformance by an implementing agent, so she would like to find out what were the hindrance to replacing them. This, together with delayed invoices in the education departments, she said was slowing service delivery and was putting the future of South Africa's children in jeopardy. She was hoping that Treasury could help point out who was at fault so they could engage with departments more effectively.

Regarding slide 11 and the general call from Treasury to not fill vacancies, she asked if this did not send out the wrong message about governments' commitment to combating unemployment and would it not undercut employment and inequality. Related to this point she suggested that a key point to increase employment was labour inspectors ensuring that the private sector was implementing the employment equity plan and making sure they were equipped with the resources to be able to highlight where the government needed to intervene.  Dr Madlopha also agreed that Public Works needed to be called in.

She then referred to slide 13 and Environmental Affairs. She was critical of this department's medium term planning and brought into question the fact that during the time of implementation they were still negotiating, which in her opinion should have been done during the planning stage and this was drastically slowing service delivery. She noted that issue of weak planning was also evident where there was higher than expected cost attached to the purchase of capital goods, which was the case for police's purchase of computers and was something that needed to be dealt with.

Next, she referred to slide 15 and stated that COGTA was a great concern specifically mentioning their unapproved rollover from the previous year. She noted that they once asked Treasury what its role was in this matter because the Government prioritised investing in infrastructure but there was underspending while there was unapproved rollover that resulted in projects that were announced to the public being delayed. This, she explained, led to violent service delivery protests and put the lives of local government representatives at risk and at the technocrat level they needed to better understand this. Withholding municipalities’ equitable shares, she said, was a related issue that caused delays in service delivery on the ground.

Finally, Dr Madlopha commented that Home Affairs should be more prepared and that higher than expected cost for the issuing of enabling documents was not acceptable. This was because the data that informed them about how many people were going to be applying for documents such as their ID cards were provided by StatsSA and this should be considered in their planning. She closed by stating that she appreciated that total spending for the third quarter was 74 percent and she encouraged departments to continue spending in accordance with a preapproved plan.

Ms Y Phosa (ANC) apologised for her lateness and asked about the role and impact that the evaluating and monitoring unit within Treasury, which complied spending reports every month, was able to deal with issues recurring like late transfers and how the Committee might ensure that more was done. With regards to delayed payment of invoices, she asked what Treasury did to put pressure on the departments. What were the possible solutions to this recurring problem that was also used as an excuse for departments underspending? In relation to this point, she noted the concern she felt during the electricity shortages and the fear that electricity might be cut off to communities who were not paying their Eskom bills and asked if Treasury had national crisis provisions so the people on the ground did not suffer. With regards to these later transfers, she said that it was something that needed to be addressed. In service of this Ms Phosa suggested working on a collaborative monitoring strategy with Treasury so they could ensure they were having a desirable impact. 

Dr Randela was given the first opportunity to respond and began by addressing issues raised about the security departments. He said that the issue with the transversal contracts was that there was some small adjustment that needed to be made, which have now corrected. He addressed concerns with slow spending and the plea to not fill vacancies. Since 2008 certain item were reviewed to increase their efficiency and effectiveness and this year departments were given the opportunity to adjust their human resource requirements. Hence, this created some vacancies as departments analysed and revised their staff requirements.

Following this, he explained that the homeowner's allowance in defence formed a proportion of wage agreements that also increased this allowance from R 900 to R 1 200. This should have been paid in the 2015/16 financial year but because the systems for this adjustment were not yet in place they could only be in this year. With regards to Polices' administration, he explained that the extra expense related to computer services and not to an increased cost of computers that came because of delays.

On the issue related to the outsourcing of medical services and medical waste removal, he said that this situation aroused when a member of the military visited a medical hospital but the required equipment was not available and had to be referred to a private hospital. However, he mentioned that they were expecting these costs to go down because upgrades to a military hospital in Pretoria were almost complete and it would be better equipped. On medical waste removal outsourcing, he said that he must find out more.   

On the issues raised about the DPW, Dr Randela noted that the security department was it biggest client and they were planning to meet on Friday, stating that they anticipated some of these challenges and he believed the Committee would play an important role to overcome some mandate complications in other departments and the DPW.  
 
Ms Wilson said that she took note of the caution with regards to DIRCO closing missions. She noted, however, that 80 percent of DIRCO's budget was susceptible to exchange rate fluctuations that made it unaffordable for the fiscus and impacted on the spending ceiling set by National Treasury. She explained though that there were other ways they could reduce their expenditure without closing embassies, which included renegotiating rental agreements and limiting the number of members per missions.

With regards to the DPW, she said that she fully supported the recommendation that they got the DPW in together with other departments they impacted on. Also, she commented that the DPW begun a turnaround programme three years ago that entailed a three stage programme that begun with identifying quick wins. However, they were now meant to be in the consolidation phase but she said they were not seeing the desired outcomes of this on their client departments.

With regards to issues with the Home Affairs budget, Ms Wilson said that the issue that lied with the enabling documents budget was that it was only received with the adjustment budget every year. She said that this created a mismatch between their expenditure for these documents and what the budget allowed. She said that they were looking at if they could allocate the money for this before the adjustment budget and make this allocation a part of the department’s budget to remove this mismatch.

Mr Mogajane in response said they would include in their quarterly reports an overview of the clusters projected spending for the full year in addition to the past quarter in future presentations. This he said would help members to gain context about a specific department spending trend.

Moving on from this point, he said that he could not agree more with Member's concerns over poor planning, budgeting, and executions that led to wasteful expenditure. In this regard, Mr Magajane suggested that before they made allocations they should analyse the plan that it would be going to. A step towards this, he noted, was the establishment of the procedure that required departments to submit procurement plans to the Procurement Office to better sync procurements with their budgets. With regards to vacancies, Human Resources Business Plans (HRBP) was in service of making revenue equal expenditure across government.

Mr Mogajane said that Treasury engaged with COGTA in terms of Community Works Projects about the R2.4 billion or 50.4 percent of its budget was spent and this clearly showed that there were issues here. He went on to say that this project was expanding services to rural and urban areas, however, this underspending was a concern and was an area they must focus on. From an auditing point of view, he said that Treasury engaged with COGTA and said they must keep their accounts in line. He went on to say that he engaged recently with the Acting Director General of COGTA and said that Treasury would be willing and ready to assist them through the Government Technical Advisory Service to arrest the challenges found in this programme.

DIRCO he said was an interesting case. He agreed that it was important to have missions in the changes in the world order that saw the right rising. He added, however, there was a need to rationalise the department's expenditure. For example, in DIRCO there was something called Foreign Service Dispensation (FSP) that allowed for a Deputy Director General, who was deployed abroad, to receive two salaries, one at home in South Africa and one in their country of operations. Moreover, in this position, an individual was also entitled to free fully furnished accommodation that was keeping with the status of the office. Mr Mogajane said that this kind of extravagant expenditure should be expunged from the system, but the functions that ensured service delivery must be maintained. 

Mr Mogajane said that he agreed with Dr Figgs comments about accruals and it was unacceptable that there were ‘invoices in draws’. He continued and emphasised the need to ensure that invoices were paid within thirty days. Additionally, in response to Dr Figgs inquiry about specific cost related to the Art and Culture upgrades, he said that he did not have the figures in front of him but he would make them available. He also agreed that the dysfunction of the EPWP programme was criminal and they needed to make sure that it was functioning correctly.

Moving on for this, Mr Mogajane made the point that over the past few years Treasury was trying to ‘trim the fat' in government's expenditure so that they could still make service delivery gains in difficult economic times while avoiding austerity measures. This involved making sure that when revenues fell, expenditure was adjusted accordantly and budgets were stuck to.

In response to Ms Manana, he said that he also agreed that the Education Department needed to be called in along with the DPW to ensure books and other service delivery issues in this cluster were seen to.

With regards to Higher Education and infrastructure spending, he said that the slow spending related to issues around when and how did they transfer the funds coming from the broader subsidies for Universities.
In response to municipalities not paying utilities, he said that this was an enduring problem and in the past, they had to get Eskom and municipalities together to ensure that municipalities paid what they owed. This was something that they looked to do first and withholding a municipality's equitable share was the last resort, but it was something available in the system and would be used if it did not negatively impact on service delivery. With regards to Treasury role in ensuring debts were paid, Mr Mogajane said that they along with the Committee should act as a middle-man and help wherever they possibly could.

In response to Mr McLoughlin concerns about the service delivery systems in schools, Mr Mogajane said that there was a need to review it but ultimately it was a maintenance issue and that they should challenge the Department of Education to employ local business or individuals to help with this. On this point, he said it was positive that the Committee was raising this point in this manner so that it remained on their radar. With regards to local government receiving 9 percent of the National Budget, he said that it was a choice that was made across several committees. However, with the passing of the most recent budget, he said the Committee had an opportunity to configure the budget in a way that they saw most fit. He mentioned that if the Committee though it was appropriate to increase this percentage they could, within reason and along the correct procedural lines. 

In response to Dr Madlopha comments about the employment equity plan, he said that this was vital and if there were any adjustments that needed to be considered to ensure that it was being followed by companies they were willing to look at it. However, they would take guidance from the relevant department.  As far as the issues surround SASSA were concerned, he mentioned that this was ongoing and on behalf of his department he was not able to comment. However, as far as he knew Treasury engaged in the process and was giving them advice but ultimately responsibility for the issues lied with the Department of Social Works.

In reply to Ms Phosa’s comments, he explained that in terms of their reform as Treasury since the 1990s, they built systems to bolster their oversight role, especially in provinces and national departments. However, he admitted that these systems were still found wanting. He mentioned that on page 55 page of the latest budget review for 2017 there was a reaffirmation of this commitment to constantly improve the spending efficiencies and that there was a side note that mentioned that part of this process required monitoring of expenditure execution to be continuously improved. He said that they were working towards this and gave an example when the Committee challenged them and they implanted as a system to improve their budget execution, which never existed before. In addition, the IFMS system was another example that he mentioned and would contribute towards efforts because it incorporated various modules into a single system which could produce several reports, for instance on delayed invoices, immediately. In the old system, he said this was not possible and their analysis was restricted to historical information and lacked a live stream of information. As Treasury, they believed that the IFMS system would help them greatly to monitor issues like accruals and would allow them to react more effectively.

He mentioned that he liked the idea of a partnership between parallel departments and committees, however, he said that Treasury should not overstep its role. He said that he would once again, before he finished, reaffirm the importance of planning, budget execution, evaluation, and monitoring.    

Mr Gcwabaza mentioned that someone remarked a few days ago that money shortages might not necessarily be a problem in the country, but what might be was how it was deployed and what returns were gained from it in terms of tangible service delivery, economic growth, and job creation outcomes. So, he stressed that no cent had go to waste and spent in 2017 that was meant to be spent in 2015/16, to put a stop to this accrual story. 

He noted that he was also worried that five departments were underspending by more than a billion Rand, no matter what the reason was  He said there might be a leeway of a few million but from R500 million to well over a billion Rand should not be acceptable and says that this said something about governments priorities not happening. Monitoring of spending and outcomes was important here and Parliament and Treasury had a big role to play. Because he said unless the screws were tightened nothing would change. He mentioned that he was raising these issues so that they realised that it was not just about receiving reports in meetings like this but it was a question of how they collaborated to move the country forward.

Finally, he mentioned that he was not sure if Treasury could set performance standards that could tell departments what reactions they could expect if they underspent and overspent in the quarter. Because too often he saw departments underspend for the first three quarters and then suddenly in the fourth quarter every cent was spent and this went unchallenged and continued but it had to be stopped.

Having said this, he thanked National treasury for the presentation and responses. He allowed the Treasury member to leave.

Outstanding Minutes

Before the meeting was adjourned the committee considered and adopted draft minutes:

  • Minutes from 15/02/2017 was accepted with amendments;
  • Minutes from 17/02/17 were accepted;
  • Minutes from 23/02/2017 were accepted with amendments; and
  • Minutes from 24/02/2017 were accepted with amendments.

At this, the Chairperson adjourned the meeting.      
 

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