Division of Revenue Bill [B4-2017]: negotiating mandates

Meeting report

The Chairperson welcomed everyone and asked the delegates to read out the mandates from their legislatures.

Eastern Cape Provincial Legislature

Mr L Gaehler (UDM; Eastern Cape), confirmed that Eastern Cape was in favour of the bill.

However, he had a few concerns that he wished to raise. First, he expressed an unhappiness regarding revenue distribution amongst municipalities; an issue which, he stated, had been raised before. Secondly, he raised a concern regarding grants for the construction of dams in light of the current drought. Third, he raised an issue regarding grants for the construction of infrastructure. Finally, he raised a concern regarding the merger of two municipalities and how funds are allocated to ensure the smooth transition of this merger, and its operation in the future.

Free State Provincial Legislature

Mr N Van Rooyen (ANC; Free State) raised an issue of unfunded mandates, which must be resolved immediately, or risk the Free State slipping into further financial weakness. In addition, water and sanitation grants have been taken away from the Free State; because of the rural nature of the municipalities, they hope Treasury will reconsider this decision. Finally, he stated that the current equitable share must be addressed. He concluded by stating the Free State negotiates in favour of the bill.

Gauteng Provincial Legislature

Ms T Motara (ANC; Gauteng) raised an issue regarding the reliability and validity of the data that determines the equitable share. She stated that Gauteng is the most densely populated of the provinces, and the equitable share should reflect this. Second, she stated that treasury must maintain a delicate balance between government debt and GDP, arguing that Treasury cannot allow debt to affect service delivery. She concluded by stating that Gauteng negotiates in favour of the bill.

KwaZulu-Natal Provincial Legislature

Mr L Nzimande (ANC; KwaZulu-Natal), stated that KZN supported the bill. However, like members before him, he also raised concerns regarding the equitable share.

Limpopo Provincial Legislature

Ms B Mathebula (EFF; Limpopo) stated that Limpopo negotiated in favour of the bill.

Mpumalanga Provincial Legislature

Mr F Essack (DA; Mpumalanga) raised issues regarding informal settlements and the ongoing problem of bucket systems. In addition, he argued that 8% of the budget allocation must be targeting towards the maintenance of assets. He concluded by confirming Mpumalanga negotiated in favour of the bill.

Northern Cape Provincial Legislature

Mr C De Beer (ANC; Northern Cape) stated that the Northern Cape negotiated in favour of the bill. In addition, he explained that the ten issues which were raised during public hearings could be found in their submitted document.

North West Provincial Legislature

Mr T Motlashuping (ANC; North West) stated that the legislature supported the bill. It appreciated the budget increase on transport and roads maintenance with an acknowledgement that there is still much to be done. The legislature further commented that basic education is still characterised by an infrastructure backlog; hence the decision not to provide allocations for the outer years of the MTEF would exacerbate the situation.

Western Cape Provincial Legislature

Mr O Terblanche (DA; Western Cape) said that the province supported the Bill. In its mandate, the legislature highlighted that conditional grants must be spent accordingly so as to yield goos results for communities. Further, it was recommended that government should ensure that establishment and upgrading of sports facilities gets aggressive attention.

The Chairperson invited the representatives of National Treasury to answer the issues raised by members.

Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, stated that the need for funding to respond to the impact of the drought, and the general improvement of infrastructure relating to water and sanitation, are universal issues that Treasury is aware of. With regards to the provincial equitable share, she explained that Treasury is in the process of reviewing the current mode. Treasury is working with national departments, particularly health and basic education. Currently, it is assessing how one should deal with rural and urban areas in a share system, and they are observing how other countries respond to similar issues. In response to issues relating to basic education, she explained that the MTBPS will engage with this issue in greater detail. In addition, the MTBPS will also give more detail on the equitable share.

Mr Steven Kenyon, Director: Local Government and Budget Framework, National Treasury, indicated that the new equitable share is pro-rural and had a “pro-rural bias”. Wealthy municipalities such as Johannesburg and Cape Town did not receive the same amount of financial support and grants as areas which are not as wealthy. He stated that the impact of the new formula will become noticeable soon.

With regards to infrastructure maintenance and construction, Mr Kenyon stated that Treasury will monitor budget expenditure. In addition, Treasury has a system whereby municipalities are offered incentives for good practice - specifically maintenance on infrastructure.

Mr Kenyon confirmed that the bucket eradication grant has ended. However, there are still informal settlements which are hindered by the bucket system. As a result, this issue will be integrated within informal settlement upgrading projects funded by the Human Settlement Development Grant.

There had been significant changes to this year’s Division of Revenue Bill as it relates to district municipalities, specifically they have identified the 13 poorest municipalities in the country and have re-allocated funds that were received by wealthier municipalities to the poorer ones. There is need for a new funding model; however it only makes sense to introduce a new funding model when there is clarity on the future function of those district municipalities.

Ms Fanoe then addressed the issue of dams, which National Treasury has taken up with the Department of Water and Sanitation. She argued that it is an issue for the ministry to deal with, and not one which relates to the division of revenue.

RDP houses are currently not being made to standard. Provinces are not fixing them, and rather it becomes a burden for municipalities – which must be resolved. She assured members that Treasury will take this up with the relevant national department.

With regards to merged municipalities, Mr Kenyon explained that because the merger has resulted in a larger municipality, the bias will no longer be in its favour. However, he stated that grants will be allocated to support this transition, particularly the additional costs involved in the process.

Ms Fanoe stated that National Treasury is aware of issues relating to unfunded mandates, and that it is ready to assist with resolving the issue.

With regards to the drought, Ms Fanoe stated that it is a key that this matter be taken into consideration as it affects the entire country. She confirmed that there has been communication between Treasury and the Disaster Management Centre. However, communication between then often breaks down; or the Centre itself faces its own concerns around capacity.

Mr Kenyon, referring to his earlier point on incentives, stated that the Northern Cape has already been rewarded for itsexpenditure on infrastructure maintenance.

Ms Fanoe then responded to the issue relating to childhood centers, explaining to members that grants have been established to respond to this issue. With regards to budget allocation to local government, and the monitoring of expenditure, she agreed that this is a key issue. She confirmed that Treasury would participate in support strategies for monitoring struggling provinces. She, however, affirmed that this must be a two pronged approach, whereby parliamentary committee must also participate by providing oversight.

The Chairperson agreed with Ms. Fanoe regarding the committee’s role with providing oversight. He also suggested that joint meetings be held amongst the relevant Select Committees.

Outstanding Minutes

The Cairperson presented the consideration of the draft minutes. They were approved by members.

The meeting was adjourned.