Medium Term Strategic Framework outcomes progress; National Development Plan & MTSF alignment with budget priorities: DPME input

Meeting report

Introductory remarks

The Chairperson welcomed Committee Members back to Parliament, and recorded an apology from the Minister in the Presidency, Mr Jeff Radebe. He was of the opinion that in the absence of the Minister, the Director General should have been sent to represent the Department. The apologies were accepted.

The Committee was unhappy that the plan-budget alignment document reflected “2016” on the first page. They thought that the presentation about to be presented was that of 2016, instead of 2017. The delegation reassured them that they had merely forgotten to change the 2016 to 2017 on the cover page.

Department of Planning, Monitoring and Evaluation: MTSF Outcomes

Dr Thabo Mabogoane, Outcomes Facilitator, Department of Planning, Monitoring and Evaluation (DPME) gave an overview of the Department’s performance in the medium term strategic framework (MTSF) in relation to the National Development Plan (NDP) goals which was implemented via 14 set government outcomes from 2014-2019. The presentation was focused on key areas such as the capacity of the state and capabilities of South Africans, mining, manufacturing, financial services, agriculture and land reform, higher education and skills, small, medium and micro enterprises (SMMEs) and cooperatives, crime and corruption. The presentation was therefore focused on the midpoint cycle of 2014-2019, which was reflective of government’s NDP plan for 2030.

The NDP aimed to advance the government’s touted ‘radical economic transformation’ by using three pathways -- economic interventions, the capabilities of South Africans, and the state’s capacity and active citizenry. These were the levers to be used to achieve the NDP goals in 2030.

It was fair to say that the MTSF provided the building blocks through which the government would achieve the 2030 target. The NDP goals were threefold, and were to eradicate absolute poverty, reduce unemployment and drastically reduce inequality in our society. These should be done by implementing certain interventions with certain expected outcomes.

The expected economic outcomes were decent employment, a skilled and capable workforce, the creation of an efficient economic infrastructure and a valued protected environment. The corresponding outcomes for capabilities of South Africans included a superior basic education, a healthy life, sustainable human settlements and social protection. Finally, the expected outcomes for an active citizenry and capacity of the state were that all people in South Africa felt safe, an accountable and efficient local government, a development-oriented public service and the creation of a better South Africa, Africa and world. The government, it was said, could not achieve these lofty goals alone without the cooperation of the citizens.

Discussion

Dr C Madlopha (ANC) appreciated the the presentation because it gave an insight into where South Africa had come from and where it was now. However, if this MTSF included matters that were to be done in the next five years, was there any kind of harmonisation with other departments that had to implement them, knowing that the DPME was not the implementing department? On planning, when the DPME was established, it was conceived that various departments were no more going to plan independently, yet one still found many departments wanting in planning. This showed that the DPME was not hands-on in their mandate. There was still under-spending in various departments because of the lack of planning correctly. What was the view of DPME regarding under-spending in various departments, which was compromising service delivery, increasing inequality and poverty, and making no dent on unemployment?  Why were quality outcomes still not being achieved? The Department stated that radical socio-economic transformation denoted a fundamental change in the structure -- what was its view on implementing and changing the patterns of land ownership amongst the country’s black majority when there continued to be a slow pace in changing the socio-economic structure of the economy? How would the Department help the government to achieve its transformative agenda? How far was the government from meeting the key priorities of the National Development Plan (NDP)?  IF the DPME were to rate the progress towards meeting the objectives of the NDP thus far, where was the country sitting in percentage terms?  Was the Jobs Fund creating the expected outcomes?

Mr M Figg (DA) wanted to clarify the statement that 85% of households were connected to water in South Africa. Did this include people standing in a queue fetching water from one tap, or just people connected to water in their various houses? It had also been said that there were 17m beneficiaries of social grants; his information was that there were 5m tax payers in SA, instead of the 20m stated. Using his own figures, was it sustainable that 5m taxpayers could take care of 17m social grant beneficiaries? It had further been stated that those having a university degree stood a better chance of being employed than those having a Technical and Vocational Education and Training (TVET) qualification. These were different kinds of qualifications, and somewhere there was a problem with this assertion. What was the recovery rate of the 219 249 loans issued into the gap market by the Development Finance Institutions (DFIs) and the banks? One did not want a situation in which they would be converted to grants. There was the impression being created that transformation meant taking from one and giving to another, whereas the model should be the growth of the economy, which would then uplift the people along the way.

Ms D Senokoanyane (ANC) asked if the number of TVET students funded as at 2015 (235 988) had been the total number, knowing that the country was facing a serious skills challenge. Having said that progress needed to be accelerated from the period of 2014-2019 as a matter of urgency, was there any specific plan or approach the Department had in mind to do this? What was missing in the presentation had been any meaningful impact being made by the NDP in spite of the numerous challenges which had to be faced. Did the DPME have anything concrete to share with the Committee in this regard?

Ms E Louw (EFF) asked how fraud and corruption affected the capacity of the state to achieve its stated NDP goals.  What did the Department do to individuals or departments that were caught defrauding the state? She pointed out that it had been stated that it had to be ensured that the state did not pay a premium for land -- what was meant by a premium?  How did the DPME intend to resolve fees issues in the post school system – had it put any plans in place by itself?  Having the conception that anything free was cheap, how was it going to change the narrative that resolving the fees problem would not amount to cheapening the country’s higher education? It was important to reference were the DPME got its information from henceforth so the Committee could crosscheck if it needed to. A decline in mining, manufacturing and agriculture had been mentioned because of the global economic slowdown, lower metal demand and investment -- were these the only factors that had contributed to this state of affairs? If contracts were signed and bonuses paid for jobs not performed, then the country did not have a government that was accountable and had no political will. South Africa now had a government that wakes up in the middle of the night and takes decisions.

Mr A Shaik Imam (IFP) had concerns regarding the credibility of the statistics presented, and doubted its correctness. On the issue of health, he had misgivings regarding life expectancy, which was said to have increased in 2015 to 63.3 years. Such statistics had never being released, and the correct statistic was 62 years according to him. The statistics stating that under five child mortality had decreased from 41 deaths per 1 000 to 37 was also inaccurate, because the latest statistic was 39. Once more, the maternal mortality rate was said to have improved from 200 000 in 2011 (which was 200 068 then) to 165 000. It was therefore difficult to rely on the information that was provided by the Department. The whole situation was bleak, and it would be difficult to achieve what had been set out to do, so what was then hampering the government from reaching close to its targets? Its successes were very limited, and could anyone explain what was meant by radical economic transformation? South Africa was nowhere closer to closing the inequality gap.

In housing, this country would never be able to provide housing to everyone in need. His approach was to dignify people by giving them a site/land and some financial incentive at a very low interest rate to build a decent house for themselves. Radical economic transformation must not compromise quality. Building one room shacks with no recreational facilities and calling them houses was in no way changing anybody’s life. On corruption, the lower level corruption involving contracts of under R500 000, where only three quotations were needed to award a tender, was huge if added together. Enough attention was not paid to the problems in the country, such as 2 000 new HIV infections a week, TB and diabetes. Also, sustaining some of the grants paid by government was not possible. From 1994 to 2017, child support grants had increased from 4m to 17.2m. This was not sustainable, and the rate at which children were being born needed to be considered, so things could be done differently without depriving those in need of this support. Everyone knew that R350 per month could not take care of the needs of a child in SA. There was no mechanism to suck up those receiving the grants to be absorbed into the workforce.

Mr A McLoughlin (DA) asserted that the presentation contained a lot of information but gave a very slanted picture, especially when it was said that 28% of households and 48% of the population were living below the poverty line in 1995, but provided no information on how much had changed since then. An impression had also been created that it was the citizens’ job to help the government to make the country safe, but it was the job of the state in the first place to create a functional criminal justice system and police force. Why should the damaging of public property to be punishable by a long sentence be prioritised, when in fact damage to public property was a punishable offence already? Why did we not have the capability to bring such cases to court and punish offenders?  The problem was the inability to use existing laws, and always suggesting that more laws be introduced, and by so doing, spending SA’s meagre resources unwisely.

It had also been mentioned that direct black control over the Johannesburg Stock Exchange’s (JSE) market capitalisation of R11.9 trillion in listed companies as at 30 June 2014 stood at 3% (R358bn) for shares held by black South Africans. What was meant by black equity control? Control indicated members of boards, where they could make decisions in private companies or individual black people. What then was the percentage of equity control of individual white people in the JSE? Indirect control included banks, insurance companies, pension funds and the like. He added that blacks indirectly owned more shares in the JSE than whites, so it was a skewed picture that was being presented.

Strengthening the capacity of provincial and local governments to fulfill their mandates was another broad statement made in the presentation without suggesting how this was going to be achieved, because the local governments did not even have the funds. There were no suggestions either of how that could be achieved by allocating more budgets to them. Equity control over the JSE was not a good indicator of ownership of the economy, because not everyone was inclined to invest in the stock exchange. His experience as a lawyer was that more white people were invested in the stock market. One should remember that it was a risky place to invest, while blacks preferred to invest in property. What was meant by radical economic transformation? Did it mean an effective state that was decisive in its pursuit of structural change?  Did it mean infrastructural structure, or the actual structure of government? Or even the scrapping of Parliament? The DPME talked about enhanced performance for Directors General, Heads of Departments (HODs) and other senior officials, when only 18% of those in these positions were compelled to sign a performance-based contract. What were the bonuses paid to them based on?

Mr N Gcwabaza (ANC) wanted to know what happened to remaining 9%, if 91% of eligible social grants beneficiaries had access to the grant. Again, if R600bn in transactions had taken place from 1995 to 2015, how many of those had involved small, medium and micro enterprises (SMMEs) and cooperatives, and were they still operational and sustainable? It had correctly been said that concrete steps needed to be taken to attain the 30% target set aside for SMMEs and cooperatives for government-procured goods and services, but nothing had been said about the 60% that was earmarked for youth in the infrastructure bid project. The National Empowerment Fund (NEF), whose sole mandate was to fund black-owned companies, was recently reported to be requiring recapitalization, and IDC was to come to its rescue. This was an important vehicle to redress past imbalances, and if NEF was not rescued, it would lead to the decimation of black businesses. He asked the Department to check on this information and the beneficiation tracks from the Department of Trade and Industry (DTI) and report back to the Committee.  The country did not seem to be making much progress on beneficiation. What had it achieved towards having a skilled and capable public service?

Ms M Manana (ANC) was not convinced by the statement regarding the number of TVET students obtaining financial assistance annually increasing from 188 182 in 2012, to 235 988 in 2015, because the figures at her disposal were different. If enrolled students at public universities stood at 985 212 in 2015, what was the breakdown of the pass rate? On the decline by 19.1% in households involved in agriculture -- from 2.9m in 2011, to 2.3m of households in 2016 -- what were the causes of this decline and how could it be addressed?

The Chairperson commented that beginning from the first page, the report was billed as a high-level progress report of the MTSF 2014-2019, but it was a mere narrative and did nothing to tell where government was right now in the 14 outcomes so envisaged. Mention had been made of only nine outcomes -- why leave out the other outcomes? There were no concrete responses on what had been done or accomplished and bottlenecks encountered. The report stated that the majority of black people were still disempowered, but the DPME was supposed to plan, monitor and evaluate -- where were the figures, as evaluators, to back up an assertion like this? If it said that 85% of the wealth of the country was in the hands of 10% of the population, it gave no figures, or the challenges and way forward in the form of a recommendation. Evaluators were supposed to bring out figures broken down quarterly to back up such claims, because figures do not lie. The entire presentation was stale information, because it recorded figures only until 2015. Where were those for 2016?

If just 176 000 out of 826 000 title deeds had been issued in three years, what was the problem in just issuing a piece of paper to dignify our people? Was government really seriously committed to changing the lives of the people? Such information would guide it to make an informed decision on where to shift more resources in order to achieve the NDP goals. This report was very frustrating, because it failed to paint an accurate picture of what was happening, and what was not. The report claimed that the market share of the top four banks stood at 89% in 2015 -- where was that figure standing now? Did the DPME perhaps make use of StatsSA to help it get the latest statistical information?

There had to be a follow-through made on the decisions of Cabinet, because the Committee’s work was to assist the government to deliver on its promises to the people. The DPME was not telling the Committee what it had found, the impact it had made and its recommendations. As evaluators, its presentation should be based on the specific, measureable, attainable, relevant and timely (SMART) goals, but this had not been the case.

DPME’s response

Dr Mabogoane, in answer to the questions regarding data, responded that the Department strived always to use verified data. It was true that there were no data for 2016, especially in basic education, which he foresaw. This was because last year’s data would be made available only in October this year, when they had been audited and verified. The Department strived to give only audited information so it would not be accused of dishing out wrong information. It had noted the frustrations expressed by the Members and would henceforth endeavor to give reports with the outcomes and tables as the Members had indicated.

On the question of comparison of TVET institutions and universities, the unit of analysis was the probability of being employed. The NDP was clear that it aimed to increase the number learners attending TVET colleges, but if the students were frustrated after TVET completion and remained unemployed, then they were not being advised correctly to attend a TVET college instead of a university. The DPME had not been shy to state that the target of the NDP would never be in terms of enrolment because of the ceiling placed on how many learners that could be funded. Increasing enrolment alone, with scant attention paid to quality, was dangerous because of the employability of learners who completed higher education. Employers could employ such students only when they trusted the quality of the students and the ability of the students to do the job.

On the issue of solo planning, the DPME had always encouraged various departments especially when they were signing delivery agreements in terms of the MTSF, to plan together so as to get better quality outcomes. This was still a challenge because it was something new to them, as they had always been used to planning independently. The DPME was encouraging them to work together because they all needed each other to achieve their targets. 

The number for TVET colleges mentioned in the presentation was not the enrolment figures, but the number of funded students. The Department was modeling on how to fund free education in the universities. This would help it to identify where to source for the funds and the number of students to be helped due to budget constraints. It was also important to deal with quality because when education was free, it was important that it was still treated as a valuable investment. Experience had shown that when free education at the tertiary level was introduced in England, students continued to study without completing degrees, so SA also had to learn from such experiences to ensure that students did not abuse the system and actually completed the degree that they enrolled for.

Dr Mabogoane said he could also see that the unhappiness of the Committee was based on how the Department’s message had been crafted. It was aware that government was very much behind in achieving the NDP goals using those mentioned three levers -- reducing poverty, the creation of 11m jobs and reducing inequality. The DPME proposed to offer a package of where government was at in terms of these big, lofty ideas in the NDP and on the 14 outcomes. Sometimes when the Department did that, people complained of too much information, and that was why it had been a bit guarded in this presentation. Now that it knew that this was what the Committee needed, the DPME would provide it.

The political will question was difficult to answer, but the Department would continue to help were it could -- for example, the 30-day payment period for small businesses that did business with government. It have a report on what it had achieved via its direct intervention. The departments needed to set up mechanisms for resolving these issues without a push from the Presidency.

Mr Rudi Dicks, Outcomes Facilitator: Economy and Infrastructure, DPME, emphasised that the Department had a close working relationship with StatsSA and utilised their various data set. This relationship was being used so that accurate statistical information could be created. The Department also used a variety of sources besides StatsSA, such as the Reserve Bank data, and independent private sector data providers such as NGOs, etc.

The Department had also taken a different approach in its answer to the Committee’s request that it wanted to see separate outcomes. There were three key issues that the NDP spoke about, which were reducing household and income poverty, reducing unemployment and decreasing inequality. The view that government had taken, which was critical, was to see priorities set in the NDP plan as an overarching vision where SA should be in 2030, and radical economic transformation was central. The key areas identified for its execution needed to be implemented to achieve those objectives. In the area in which he worked -- the socio-economic impact adoption system -- some successes had been recorded. It had helped the DPME support its planning function in coordinating the work of new policy and legislation adopted.

The 3% mentioned in relation to the JSE, was direct black ownership. The country’s social grant system was one of the best in the world, particularly the child support grant. It had been introduced to deal with redress, because social grants had previously been designed only for white unemployed males. What was ideally wanted was full employment, which would increase the pool of taxpayers, and as this happened, many people would move away from relying on these grants.

Radical economic transformation was not about narrow-based ownership, but about increasing the broad-based ownership of the economy, control of the economy and participation, ownership of the JSE, ownership of SMMEs and township economies and access to various markets, workers getting ownership and shares, employment and a whole wide range of interventions aimed at changing the economy.

The figure from the JSE was that the total equity ownership, including the pension funds of blacks, was about 20 to 23%, and white ownership was forecast to be at 38% in 2030. Total foreign ownership in 2011 had been 34%, and this had grown to 39% in 2013, so SA had had a significant influx of foreign ownership of equity and shares. SA wanted foreign ownership, but the ideal was foreign direct investment (FDI), which was huge capital investments, and not the funds being put into the local bond market being witnessed at the moment. It was good but risky, because uncertainty led to massive outflows as well.

The Department was still reporting on all the 14 outcomes quarterly, but the presentation covered the outcomes prioritised and adopted by the Cabinet meeting earlier this year.

On the issue of paying a premium, the constitutional court had a given guidance that the government should not pay an excess over what the market price dictated on any land transaction.

A total of 11m people received child support grants, and 17m was the figure for all the grants received in SA. The child support grants were largely received by mothers. Studies had shown that the majority of mothers used them for their children, and few were said to use the money to seek employment.

Budget alignment

Mr John Kruger, Sector Expert: DPME, gave a short narrative on the alignment of the budget to the NDP in order to stimulate economic transformation. He argued that alignment could not be a onetime task but had to be a continuous exercise until the target envisaged by the NDP was reached. The summary of the points made in the State of the Nation Address (SONA) would form the main points of the presentation.

Twenty years after the dawn of democracy, SA was still sitting with unequal and low incomes, skewed property ownership, concentrated ownership of firms and the domination of white males in management. Economic emancipation was therefore needed, using the levers of legislation, regulations, licensing, budget and procurement to change the situation. Examples of what the government was doing to transform the status quo were that sub-contracting must not be above 30%, the criminalising of collusion, giving teeth to the Competition Act, land and market registrations, empowering women, the black industrialists’ programme, farmers, land reform and restitution, SMMEs and ICT/ cost of data, access to universities, mining ownership, fighting crime and corruption, and international relationships and trade. The budget was therefore one of the key levers to effect change.

The key NDP apex priorities were poverty and prosperity. There was a need to get poverty down from 39% to zero. In 2011, 39% of the population (20m people) had been classified as p;oor, and the NDP had the lofty objective of eradicating poverty by 2030.  There also needed to be a dramatic decline in inequality. The key NDP intermediate objective to achieve this was therefore to create jobs (11m) and incomes for an inclusive growth of about 5.5% per year. The NDP therefore gave a roadmap on how to achieve all this, which was via a strong economy, citizens with capabilities and a capable state. This all corresponded with the three-deep function groups, according to the budget. They were economic services, administrative services and social services.

Discussion

The Chairperson thanked Mr Kruger for the presentation, and said that the Committee had not struggled to understand it because they could see the figures, budget programmes and government priorities, and they were actually linked.

Ms Senokoanyane said the Committee had no illusions about the government not meeting the NDP goals, such as in poverty eradication and inequality. The question of the decline in agriculture needed to be addressed because increasing agricultural output was the way to go, but how much support was being given in this direction? The fact that people benefiting from restitution preferred taking money in place of land was sad, because so many people were trapped in the townships when they could actually be productive working the land. A mechanism to teach these people how to farm so as to become productive was needed.

Mr Figg spoke on the issue of the 11m jobs to be created -- were they long-term, skilled or unskilled jobs? For an economy to grow, a skilled workforce was needed, and to have a skilled workforce, skilled educators were also needed. Did SA have skilled educators in order to produce a skilled workforce? The table that showed a decrease in debt meant that the debt servicing costs should also decrease and not increase. If one had a target of 2.8m jobs to be created and achieved 2m, that would not look bad, but had the increase in population been factored in? Looking at the statistics, the position could look good, while in actual fact the population increases within this period not being factored in meant we were not keeping up with population increases. Why were there no figures for equality and the reduction of inequality? Could it be because the figures were just too bad? How then did the DPME plan, monitor and evaluate when it did not have the necessary facts?

Ms Louw said it was true that businesses continued to be dominated by white males, but if one looked at the top ten richest persons in South Africa, none was a female, so the emphasis should also include women. She agreed with the assertion that property ownership was still skewed, but what was the contribution of high property transfer costs to this situation? Early child development would be better placed with the Department of Basic Education -- what was the DPME’s opinion on this?

Dr Madlopha said better monitoring by the Department would be needed to give a clearer picture of what was happening. For example, when money was allocated to the universities, there was a notion that it was not being properly used for the purpose it had been given, so it was the DPME’s job to monitor what was going on so when these institutions were called, one knew what questions to pose to them.

Mr Shaik Imam wanted to know the criteria used to identify objectives, and whether consideration was taken of the growth rate which was sure to affect other sectors, as well as the volatile labour market, health issues, and the economic situation worldwide. What was the DPME’s view on free education?  What should be free, and to what extent? The National Student Financial Aid Scheme (NSFAS) was not sustainable because the repayment rate was only 12%, unlike in Germany and Sweden, where everybody paid back school loans. How could this be addressed to make it more effective?

Department’s response

Dr Mabogoane, in his reply to the question of why ECD was not incorporated into the Department of Basic Education (DBE), said the DBE only knew how to teach, but the Department of Social Development (DSD) served the early learners better because they had to deal with other issues in child development, such as immunization and other developmental challenges. Research conducted by the DPME had in fact recommended that ECD should be moved to an independent entity, not the DBE or DSD, because the first 1 000 days of life was very important, not just ECD. At conception, it was how the parents were looked after, whether they went for immunization, eating correctly -- which helped in developing a healthy child -- and when they were born, they had to be stimulated correctly and provided with the right nutrition.

On in-sourcing at the universities, it contributed to escalating their overhead costs because they had to internalise those costs and this ultimately impacted on how they utilised their funds. The Grade R teachers still did not have the right qualifications, unlike those from Grades 1 to 12. Universities had qualified but older lecturers who would be retiring soon, so there was a problem with the production of new knowledge and the replacement of the old. There was an even greater struggle in the TVET sector because this was a specialised sector. In most cases after qualification, students preferred to work in the private sector. The challenge was how to reproduce and retain their skills.

Mr Kruger responded on the issue of agriculture and rural development, and said the Department knew that there was a significant problem in terms of budgets and other constraints, but this would be better handled by an outcome facilitator dealing with that area who had an intimate knowledge of what was happening there. Should the Committee want a more detailed input on agriculture, the DPME could inform them to brief the Committee.

On what types of jobs were being created, the projections in the NDP were that there were 500 000 jobs in the expanded public works programme (EPWP). Unemployment without the EPWP was at 7.7%. 

On why borrowing was not decreasing, the problem was that in a slower economic environment, revenues were not growing and if one reduced borrowing, one squeezed spending and then the deficit went up.

When targets were set, jobs and population growth were factored in. The problem was that this was done before the 2011 census, and figures from that census showed there had been a big acceleration in births, so the NDP had underestimated the population growth. The employment target had almost been achieved, but then the unemployment went up.

On why the DPME could not just Google the numbers, he said it must be noted that if StatsSA did not have the numbers, then the world would not have them.

With regard to women in management, he agreed that it was something that needed to be done. 

There was a narrative that government was under-funding post secondary education, but this was not true, as government had rather pushed a lot of funds into that sector. The issue was that the cost in that segment had increased. It was a high cost sector and had to compete for highly skilled people, while research projects cost a lot.

Regarding the criteria used in setting targets, the problem was the general one faced in planning -- inadequate modeling. Therefore government needed to work harder to get a comprehensive model of the economy, and labour market simulations that could impact the economy.

Post secondary education could never be free because someone had to pay for it. NSFAS was a good idea, and one did not have to look for an alternative model. This was the bedrock of the Australian and British systems that were working very well, so all that was needed was to revamp and restructure the system to make it work effectively.

The Chairperson thanked the Members for their robust engagement and the delegation for responding to the Committee’s invitation and their presentations. The Committee would need a more detailed progress report on the NDP targets and the MTSF. It not only expected information on the progress made, but the bottlenecks and recommendations as well. It also needed a report on where teachers were still teaching without the requisite qualifications at the ECD Grade R level. More was expected from critical departments such as the DPME, because oversight could be effective when informed with well-compiled data. This Committee would assist the DPME to do its work, and it also expected the Department to empower the Committee.

The meeting was adjourned.