Constitutional and Legal Services Office took the committees through a presentation on the review of the Money Bills Amendment Procedure and Related Matters Act. He outlined the rationale for the sequencing of appropriations. The requirement that the Division of Revenue Bill (DORB) and the Appropriation Bill may only be referred to relevant committees after the fiscal framework is passed (sections 9(1) and 10(1)) ensure that the consideration of these Bills are consistent with the fiscal framework. The sequencing also leads to the DORB to be passed after 1 April. Review process may consider whether allowing the referral of the Division of Revenue Bill and Appropriation Bill after tabling would allow more flexibility in Parliament’s programme. In the case of emergency situations that need government intervention, Parliament is bound by the fiscal framework, unlike Treasury. S. 13(4) therefore implies consistency with the fiscal framework on non-budget money Bills and constrains Parliament. Proposed S. 13(6) allows amendments to money Bills notwithstanding prevailing fiscal framework, based on section 16 of the Public Finance Management Act. Also, timeframe for ministerial response – 14 days – remains unchanged.
Constitutional and Legal Services Office said the Parliamentary Budget Office was critical in the implementation of the Money Bills Act. Section 15 of the Act establishes the Parliamentary Budget Office (PBO) with a mandate “to provide independent, objective and professional advice and analysis to Parliament on matters related to the budget and other money Bills”. It was emphasised that Parliament should give effect to this independence. The Act provides further that the Director, as head of the PBO, must be appointed by the Houses on the recommendation of the finance and appropriations committees. These committees must also recommend the conditions of service, such as the salary and allowance for the candidate, which must be ‘substantially the same as those of the top rank of public service.’ Legal Services asked if this specific provision for a salary scale of the Director must be reviewed in light of the fact that the PBO was much smaller than a government department.
Main highlights of the input by Members were the need for Parliament to be given latitude to formulate its owned desired model for the PBO. Parliament should have a say on the PBO that it wants. Some Members felt the committees should appoint the PBO director. Appointments should not the left to committee chairpersons. Also, Parliament had to be clear about what it meant by PBO independence. There was need for a balanced approach. The PBO was doing good work but Parliament had to make it workable and accessible. Mr C De Beer (ANC) said the committees had to make the Money Bills Act practical. It was very difficult for the provinces to comply with the timeframes and cycles currently provided for by the Act. Legal Services pointed out that the Act was initially drafted by the committees, with the former advising. The timeframes were very ambitious and there was need to make the timeframes more practical.
Constitutional and Legal Services Office presentation
Adv Frank Jenkins, Senior Parliamentary Legal Advisor took the committees through a presentation on the review of the Money Bills Amendment Procedure and Related Matters Act. He outlined the rationale for the sequencing of appropriations. The requirement that the Division of Revenue Bill (DORB) and the Appropriation Bill may only be referred to relevant committees after the fiscal framework is passed (sections 9(1) and 10(1)) ensure that the consideration of these Bills are consistent with the fiscal framework. The sequencing also leads to the DORB to be passed after 1 April. Review process may consider whether allowing the referral of the Division of Revenue Bill and Appropriation Bill after tabling would allow more flexibility in Parliament’s programme. The reporting can be sequenced instead of the referral. The risk of this option was that committees will be operating without the guidance of the Fiscal Framework when considering the Bills as the Fiscal Framework was meant to provide overall direction relevant to any amendment. Similarly, section 10(3) provides that the Committee on Appropriations may only consider amendments to the Appropriation Bill once the Division of Revenue Bill was passed; can be reviewed to provide that the amendments to the Appropriation Bill may only be reported on once the Division of Revenue Bill is passed. The adjustments budget had the same constraints in respect of sequencing (section 12(6)) viz.; the Division of Revenue Amendment Bill and the Adjustments Appropriation Bill may only be referred after the Revised Fiscal Framework has been adopted by the Houses. There must be some alignment between the Division of Revenue Amendment Bill and the Adjustments Appropriation Bill
In the case of emergency situations that need government intervention, Parliament was bound by the fiscal framework, unlike Treasury. S. 13(4) therefore implies consistency with the fiscal framework - non-budget money Bills – and constrains Parliament. Proposed S. 13(6) allows amendments to money Bills notwithstanding prevailing fiscal framework, based on section 16 of the Public Finance Management Act. Also, timeframe for ministerial response – 14 days – remains unchanged.
Functions and management of the Parliamentary Budget Office
Adv Jenkins said the Parliamentary Budget Office was critical in the implementation of the Money Bills Act. Section 15 of the Act establishes the Parliamentary Budget Office (PBO) with a mandate “to provide independent, objective and professional advice and analysis to Parliament on matters related to the budget and other money Bills”. He emphasised that Parliament should give effect to this independence. The Act provides further that the Director, as head of the PBO, must be appointed by the Houses on the recommendation of the finance and appropriations committees. These committees must also recommend the conditions of service, such as the salary and allowance for the candidate, which must be ‘substantially the same as those of the top rank of public service.’ He asked if this specific provision for a salary scale of the Director must be reviewed in light of the fact that the PBO was much smaller than a government department.
In addition, the Act stipulates that the Director of the PBO must engage directly with the finance and appropriation committees on administrative matters including the structure of the Office and budget. The Act also states that Parliament must transfer funds to the PBO on an annual basis (in a similar way that a department would transfer funds to a state entity) and report directly to the Houses on the use of these funds. In terms of the Financial Management of Parliament and Provincial Act (FMPPLA), the Speaker of the National Assembly and the Chairperson of the National Council of Provinces, acting jointly, constitute the Executive Authority of Parliament. The Executive Authority is accountable to the Houses for the financial management of Parliament. As such, the Executive Authority should have a relationship with the Director. To overcome these difficulties, the Committee may consider alignment with the FMPPLA: for example; that the Director be appointed after the Executive Authority initiate the process by directing the relevant committees on finance and appropriations. Furthermore, that the Director reports to the Executive Authority and the latter submits the reports to Parliament. Provision should be made to clarify the position that the PBO is an entity and the Director is the accounting authority. The Director’s fiduciary duties as accounting authority must be provided for. The structure and conditions of service of the staff of the PBO could be a function of a similar structure such as a board consisting of the relevant House Chairpersons and the chairpersons of the committees on finance and appropriations. Such proposals reflect the present situation. Members had to consider how the PBO could be aligned to the FMPPLA or include fiduciary duties for the Director as accounting officer for an entity. There was need for clarity on whether the PBO is an entity that receives a transfer of funds as well.
Adv Jenkins advised the committees as follows: that the language used in the Act could be improved to be consistent with language used in parliamentary processes (e.g. definitions); certain areas of the Act required further consideration (e.g. whether section 3 is necessary?); correction of section 11(4)(c), which incorrectly referred to subsection (7) instead of (6)); correction to section 12(6) to ensure constitutionality of legislative process; other corrections to the latest terminology used in performance reporting (section 5(1)) and typographical corrections (section 6(2)(d)); insertion of words to clarify meaning (e.g. definitions, sections 6 to 11); and definitions required to be added: “Executive Authority”, “Financial Management of Parliament Act”, “MTEF” and “tax and revenue proposals”.
Section 3 of the Act deals with the application of the Act. It provides that the Act applies to all proposed amendments to money Bills before Parliament. However, the Act provides a procedure to consider all money Bills before Parliament and not just amendments to these. The Act does not provide for the referral of the review of actual spending (section 6(2) (f)). The proposal was to referrer this to the committees on appropriations and, in addition, to any other committee. Adjustments budget envisages a joint sitting of Committees on Appropriations to consider Division of Revenue Amendment Bill (section 12(6)). As this is a section 76 Bill, the committees cannot sit jointly and vote jointly, an impression created by this provision. A correction was therefore required. (Other corrections are indicated on the draft working document)
Mr C De Beer (ANC) said the committees had to make the Act practical. It was very difficult for the provinces to comply with the timeframes and cycles currently provided for by the Act.
Mr A McLaughlin (DA) said the timeframes were not practical. Parliament was already operating under constrained timeframes. Legislation should be made from a practical point of view.
Adv Jenkins replied that the Act was initially drafted by the committees, with the Constitutional and Legal Services Office advising. The timeframes were very ambitious and there was need to make the timeframes more practical.
Mr S Mohai (ANC, Free State) asked whether Parliament should be given latitude to formulate its owned desired model for the PBO. Parliament should have say on the PBO that it wants.
Mr A Lees (DA) said the question about how the appropriations process works was somewhat fraught. Discussions on the Bill were meant to consider and ascertain whether amendments were required- there had to be a formal process with fixed and practical timelines. On the PBO model, the problem was that committees did not have substantial input on the Bill to set up PBO, and it could not be done by August 2017. Also, the question of National Treasury’s transparency needed to be looked at; there had to be provisions dictating timelines Treasury would be expected to adhere to in responding to the Division of Revenue and the Appropriation Bills from parliamentary committees. He asked how amendments in the appropriations Bill had been dealt with in the past. What was the format and timelines? He pointed out that in terms of establishing the PBO, it took too long to establish what was supposed to be a vital institution. The independence of PBO had to be made clear. He added that PBO had to be accessible to every Member of Parliament like it was in other jurisdictions.
Prof Mohammed Jahed, PBO Director, in response, pointed out that there were different types of PBOs around the world. He identified budget reviewing, budget amending as well as budget changing PBOs. South Africa had accepted a budget amending legislature, which limits its determination of the fiscal framework- it is left to the executive. The committees and Legal Services accepted the framework in previous discussions, and the PBO agreed to work through the Committee system. He added that it was up to Parliament to decide on the best model for the PBO.
Dr Dumisani Jantjies, Director: Finance, PBO, added that independence of the PBO was clearly stipulated in the relevant Act.
Adv Jenkins said committees could come up with the timeframes- guided by the Public Finance Management Act, the Constitution and Annual budget- as the terms ‘within a reasonable time’ were not definitive. Parliament might change timeframes if there are circumstances that require the change.
Mr O Terblanche (DA, Western Cape) said Parliament had to be clear about what it meant by PBO independence. There was need for a balanced approach. The PBO was doing good work but Parliament had to make it workable and accessible.
Mr De Beer said Members had to be mindful of the fact that Parliament has a budget shortfall of R1.2 billion.
Mr T Motlashuping (ANC, North West) asked about the powers of the PBO Director vis-à-vis Parliament, with reference to the proposed PBO model.
An ANC Committee Member said Parliament had an opportunity to innovate. She proposed a Money Bills pre-briefing phase within provinces so that people on the ground would be given an opportunity to familiarise themselves with proposed amendments before the briefing phase. She asked what was impeding Parliament in concluding the PBO structure as Parliament had already picked the preferred PBO model. She noted that Adv Jenkins indicated that the Minister of Finance had some discretion to direct additional spending in the event of emergencies. However, the Legislature has a fundamental constitutional function of oversight. What was it that Parliament could do to ensure that whenever such situations arose, Parliament could not be found wanting.
Adv Jenkins replied that having a pre-briefing phase on the Division of Revenue Bill could be an innovative solution that provinces would really appreciate. Also, the discussions should deal with what the committees can do with the Medium Term Budget Policy Statement (MTBPS). There was no policy role that the provinces were expected to play in that process but they could have inputs because MTBPS dealt with the forward-looking budget of the whole country- nothing stops Parliament from creating mechanisms to deal with that. The committees should create space for provinces to also discuss the MTBPS. Getting dedicated feedback from provinces on the MTBPS would be prudent, and it would help to put it in legislation.
An ANC Committee Member asked if Legal Services could formulate the scenario plans as a guide to assist Members get the provinces involved in the aforesaid pre-briefings. As expertise might not be available in some provinces, leadership would be required.
Mr L Gaehler (UDM, Eastern Cape) commented on the appointment of a PBO director. He felt the committees should appoint the director. Appointments should not be left to committee chairpersons.
Section 5(6) - Procedure prior to introduction of the national budget
Mr McLaughlin said it was not clear which committee was being referred to in the statement ‘Additional budgetary and recommendation reports may be submitted at the discretion of a committee.’
Section 6(10) - Medium Term Budget Policy Statement
Mr McLaughlin felt the terms ‘without delay’ were ambiguous. There had to be a stipulated timeframe to submit the report referred to in section 6(9) to the Minister after its adoption by a House.
Mr D Hanekom (ANC) agreed.
Section 9(3) - Passing the Division of Revenue Bill
Mr De Beer asked why the word ‘may’ was used instead of the standard ‘must’.
Adv Jenkins replied that the idea was to the give committees the authority. It was not meant to prescribe that the committees of appropriations ‘must’ report on the Division of Revenue Bill, after the adoption of the fiscal framework by Parliament. It was also not meant to give Parliament discretion on whether to or not to report.
An ANC Committee Member suggested the use of ‘should’. She was also not comfortable with the use of the term ‘may’, as it implied discretion.
Mr Lees suggested the use of ‘may only’. He expressed concern about the deletion of the statement ‘must not be passed no later than 35 days’. There must be a stipulated timeframe.
Adv Jenkins noted that the intention was not to use words implying there was some discretion. The subsection would be redrafted.
Section 10(8) - Passing the Appropriations Bill
Mr A McLaughlin (DA) pointed out that when the Standing Committee on Appropriations held public hearings in Khayelitsha, participants had limited knowledge about appropriations. The Committee got insights on the community and its concerns but certainly nothing relevant to the appropriations Bill. In future, the hearings on appropriations should be held in such a way that they addressed issues the committees would be dealing with.
Mr De Beer recounted his experience in the Northern Cape. During Meet the People campaigns by MPs, communities took such opportunities to voice their concerns. Such engagements were necessary.
An ANC Committee Member added that the identification of stakeholders within communities was important, but not to the exclusion of the grassroots. Excluding ordinary people was not an option as people raise issues they think government should focus spending on.
Mr Motlashuping asked why section 10(19) that reads ‘The Committee on Appropriations must report to the relevant House within 30 days after the tabling of the national adjustments budget’, was deleted.
Adv Jenkins said the purpose was to remove the 30 day timeframe. Legal Services would reconsider the subsection to bring it in line with committee discussions.
Ms D Mahlangu (ANC) pointed out the need for disaster preparation. Recurring disasters were not being budgeted/allocated for and interfering with the budget was the norm. This had to be looked into. How did Parliament expect disaster management portfolios within municipalities to run if funds were not being allocated for same?
Prof Jahed replied to questions about PBO independence. The Act was quiet clear on the form of independence PBO was vested with. The powers vested on the Director and his/her attendant responsibilities spoke to its independence.
Mr De Beer expressed the committees’ appreciation on the work done by Prof Jahed under difficult circumstances and limited resources.
An ANC Member sought clarity on the reporting mechanism. What format must the report take?
Dr Jantjies said PBO complies with the necessary parliamentary reporting procedures.
Mr De Beer said that reports must align with the financial management of Parliament. That was very crucial.
Prof Jahed referred Members to section 10 of the Money Bills Act, which indicates what aforementioned reports were expected to comprehend. He added that the PBO had not yet tabled its annual reports to Parliament, although they were prepared and filed.
An ANC Committee Member asked why reports were not being tabled to Parliament. She asked about the structure overseeing PBO work.
Prof Jahed replied that an advisory board acted as an oversight structure for the PBO, adding to the joint committee model.
Mr Lees said if comments by PBO directors were anything to go by, amendments to section 15(3 & 5) of the Act were not necessary.
An ANC Committee Member asked why the entire Schedule in the Money Bills Act had been deleted.
Adv Jenkins outlined the reasoning behind the deletion. Section 120(3) of the Constitution requires provincial legislators to enact the provincial Act making provisions for procedures to amend provincial Money Bills. Section 116 of the Constitution states that provincial legislatures are in control of their own internal processes and proceedings. The whole idea of the Schedule, at the time when the Act was passed, was to ensure consistency in all provinces. An option could be to have the Schedule as a guideline. He advised that Parliament does not have the power to deal with provincial legislatures with respect to how the latter carried out its internal processes.
Mr Motlashuping said South Africa is a unitary state, not federal. He asked Members to further examine the delimitation of powers between Parliament and provincial legislatures.
Mr Hanekom pointed out the need to comply with the Constitution. Also, expenditure priorities vary from province to province. He suggested a relook into the provision dealing with the powers of provincial legislatures to effect provincial Money Bills amendments. Having provincial legislatures amending budgets willy-nilly was not ideal.
An ANC Committee Member suggested that committees be given time to apply their minds on the deleted Schedule.
Adv Jenkins pointed out that Members had to take note of the fact that the budget process was a national process and provinces could not deviate from the national level. Section 41 of the Constitution requires that there be coherent government of the republic as a whole. Provinces cannot deviate from national prescripts, especially on finances. The aforementioned delimitation of powers had to be properly considered.
Ms Y Phosa (ANC) said the involvement of Parliament in the budget process in its formation stage by the executive could be helpful.
Adv Jenkins said it was going to be difficult to put in place legislation that appears to be inconsistent with the Constitution, which requires that the executive take policy decisions. Suggestions from Parliament could be taken up through an open consultative process, not stipulated by legislation.
Mr De Beer thanked Members for their vigilance.
The meeting was adjourned.
Carrim, Mr YI
De Beer, Mr CJ
Essack, Mr F
Gaehler, Mr LB
Hanekom, Mr DA
Lees, Mr RA
Madlopha, Ms CQ
Mahlangu, Ms DG
Manana, Ms MN
Maynier, Mr D
McLoughlin, Mr AR
Mohai, Mr S
Motara, Ms T
Motlashuping, Mr T
Nzimande, Mr LP
Phosa, Ms YN
Shope-Sithole, Ms SC
Terblanche, Ms JF