Appropriation Bill: briefing & committee report; Committee Report on Urban Settlements Development Grant

NCOP Appropriations

20 June 2017
Chairperson: Mr C de Beer (ANC, Northern Cape)
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Meeting Summary

The Department of National Treasury made a presentation the Select Committee on the Appropriation Bill for 2017, and highlighted that there would be a marked reduction in the national spending ceiling for 2017/18 and 2018/19 financial years, and this would effect both national and provincial governments. A lot of the spending was being geared towards infrastructure, as it played a very important role in the domain of economic transformation, but there had been considerable under-spending in this domain. An infrastructure facility was in the process of being set up to remedy this problem. The reprioritisation of budget allocations over the next three years would amount to R767 billion across various departments. This was due to the low growth South Africa had been experiencing in recent times.

Members’ concerns included the need for more operational employees, compared to the large number of administrative employees in the different departments. The incremental method of budget planning was criticised for not paying sufficient attention to rural areas, while the issue of how the national programmes would be coordinated was questioned. There was also a complaint that the infrastructure projects would not generate the number of jobs needed in the country. 

Meeting report

National Treasury Presentation

Ms Julia de Bruyn, Deputy Director General (DDG) Public Finance presented the Appropriation Bill (B5-2017) on behalf of National Treasury, and commenced by declaring a reduction in the national spending ceiling. This would lead to reductions of R10.3 billion (2017/18) and R15.9 billion (2018/19). The expenditure ceiling reduction would compromise general baseline reductions, revised social grant beneficiary estimates, and draw downs on the contingency reserve. The baseline reductions would amount to R7.5 billion (2017/18), R7 billion (2018/19) and R6.7 billion (2019/20). These baseline reductions were to be effected on national and provincial government departments.

The Appropriation Bill was the legislation that provided for the appropriation of money by Parliament from the National Revenue Fund, as stipulated in Section 213 of the 1996 Constitution. Section 10(7) of the Money Bills Amendment Procedure and Related Matters Act, 2009, required Parliament to pass the Appropriation Bill with or without amendments, within four months after the start of the financial year, namely 31 July 2017. Promulgation of the 2017 Appropriation Act was necessary, as it would allow for monthly expenditure above the transitional provisions contained in the Public Finance Management Act (PFMA) and ensure expenditure in accordance with the vote and programme purposes. as stated in the Act

Ms De Bruyn outlined the structure of the Appropriation Bill and said the allocations in the Bill were categorized as current payments, transfers and subsidies, payments for capital assets and payments for financial assets. Government spending was aligned to the National Development Plan (NDP) and the medium-term strategic framework (MTSF), which set out the NDP priorities from 2014 to 2019. The Department of Planning Monitoring and Evaluation (DPME) would lead the process of institutions setting their performance indicators and targets, as well as the monitoring and evaluation thereof.

Ms De Bruyn presented a chart demonstrating that public spending continued to grow in priority areas, and outlined the budget allocation for the medium term expenditure framework (MTEF). The MTEF indicated that infrastructure spending had received the largest spending allocation because of its effect on transformation. This spending would be carried out by national and provincial departments, as well as by State Owned Enterprises (SOEs), in a bid to encourage public investment and growth generation. Because of the importance of infrastructure, National Treasury was trying to establish an Infrastructure facility to address challenges related to under-spending in that domain.

Discussion

The Chairperson told Members to note that money not being spent was the problem, rather than a lack of money being available.

Ms De Bruyn said that the Treasury would come back to provide more detail on the infrastructure facility. The Departments of Transport, Energy, Housing and Cooperative Governance and Traditional Affairs were the big spenders with regard to budget allocations. The biggest reprioritization of spending concerning the Appropriation Bill would take place over three years, to the tune of R767 billion. The reduced expenditure ceiling was due to lower growth and increased compensation of employees.

The Chairperson said the Members would be completing meetings with provincial treasury heads, and would take note of the findings by 14 July. Regarding the point on employee compensation, he felt there was a need for more people to be doing work on the ground, because there were enough people doing administrative functions. Having more people doing operational work would allow MPs to do their work better.

Dr H Mateme (ANC, Limpopo) was of the opinion the incremental method of budgeting did not support the emergence of a developmental state, as very few resources were allocated to rural areas. This also meant equity was not being achieved. Reduced spending on capital projects would also prevent a developmental state from being established.

Mr S Mohai (ANC, Free State) was concerned about the capacity to coordinate the programmes which had been mentioned.

The Chairperson suggested the monitoring and evaluation exercises should be decentralised to the regions.

Mr O Terreblanche (DA, Western Cape) was worried that the infrastructure spending was insufficient to create a considerable number of jobs.

Ms De Bruyn responded to Dr Mateme’s question, and said the Department of Rural Development and Land’s reform objectives had been misunderstood, and she should have shown that a lot of the equitable share from other departments went towards rural services such as health and education through the municipal councils.  She talked about the incremental method of budgeting and how the Department was trying to move away from it through the MTEF, but often fixed costs such as compensation got in the way. However, bold choices needed to be made and changes would be made after consultations with the politicians.

Dr Mateme interrupted to ask about employee compensation, as she believed not all departments needed Directors General and Deputy Directors General, as these posts consumed resources.

The Chairperson agreed, and suggested Dr Mateme’s reference should be taken into consideration without compromising service delivery.

Ms De Bruyn said the DPME had increased the budget from R788 million to R928 million to improve the coordination of national programmes. She thought that more money needed to be spent on infrastructure, but pointed to the fact that some departments, such as Education, had backlogs in this area which led to under-spending, therefore infrastructure needed to be delivered on time.

Mr Mohai said the challenge with appropriations was finding out how one monitored the use of resources in a financial year, as the DPME could not do it on its own. He suggested they should work in tandem with institutions like Statistics SA, because they also had knowledge in this domain.

Ms De Bruyn said that the DPME and Treasury reported to Cabinet on a quarterly basis.

The Chairperson said that oversight made governance more effective and should be taken seriously.

 

Committee matters

The Chairperson read a letter from Mr F Essack (DA) dated 15 June, in which he expressed a desire to present amendments to the Appropriation Bill. However, the Chairperson had obtained the document only at 09h23 this morning due to his inability to open his email, and the session had commenced at 10h00.  In He asked if the Members had knowledge of the document and would give the DA the opportunity to present the amendments. He reminded them that every budget vote had to be debated in the National Assembly and the National Council of Provinces, and there would be an opportunity for discussion on this matter.

Mr Essack thanked the Chairperson for his prompt response and for allowing the item to be put on the agenda. He provided some clarifications concerning the amendments, saying that it was an alternative budget that would be part of the minutes. It was not a minority report, but rather proposed amendments.

Mr Mohai, speaking in his capacity as the Chief Whip, disagreed with Mr Essack’s proposal. He did not want the matter to be discussed, and stipulated there should be no controversy regarding this.

The Chairperson agreed with this assertion, and indicated that Members should look at the draft report on the Urban Settlements Grant Performance (USGP). He asked for a proposer for the adoption of the report.

Mr J Mthethwa (ANC, KwaZulu-Natal) proposed the adoption of the report.

The Chairperson announced that on August 1 the Committee would get a report from the Deputy Director General, and on August 2 they would go to the various metros. The following day they had the Annual Performance Plan presentation by the Land Bank, and on the Friday, KwaZulu Natal (KZN) would present its fiscal position.

Mr T Motlashuping (ANC, North West) remarked that the KZN MEC would not be available for the presentation, as he was aware he had matters to resolve with Cabinet. He offered his apologies, as he would be absent on Friday because he would be attending the Constitutional Review Committee.

The Chairperson took note of these pronouncements.

The meeting was adjourned.  

 

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