Cities integrated and inclusive development: National Treasury support framework

Meeting report

Introduction

The Chairperson welcomed the delegates from the National Treasury (NT), and said the meeting represented a continuation of the issues that had been raised at a meeting with the Department of Human Settlements on 26 May, 2017. The information provided by NT, together with what was contained in Page 47 of the budget review document received on 22 February, would help the Select Committee to prepare for the meeting with three metropolitan areas -- Johannesburg, Tshwane and Ekurhuleni -- the next day.

National Treasury Presentation

Mr David Savage, Programme Manager, City Support Program (CSP): NT, said the intention of the presentation was to explain thr specific context for the scheduled meeting with the metropolitan areas. It would be a mistake to look at the various government grants in isolation when considering urban development challenges in South Africa, because there was a need to provide an integrated and coordinated response to urban development challenges. The presentation was meant to unpack urban development policy, strategy and programmes, and to identify the key urban reform priorities.

The Chairperson requested the delegates to also focus on monitoring and evaluation.

Mr Savage said the NT had made progress in its reporting, which included monitoring and evaluation, and which had been set to achieve outcomes, not only to count numbers.

Ms Malijeng Ngqaleni, Deputy Director General (DDG): Inter Governmental Relations, NT, said it was hoped that the Committee would champion the required changes needed for transformation. It was important to have a committee that was interested in integration and coordination, as this was not the focus of some other committees, because they were more focused on having results in their area of oversight. As a committee which oversaw the activities of all government departments, it would be possible for the Select Committee on Appropriations to champion the cause.

The transformation needed in the urban spaces required a change in the way everyone in South Africa did business. Faced with difficult economic and structural constraints, there was a need for structural changes which could drive the confidence of the South African people. Also, growth had dropped significantly since the 2008/2009 fiscal year. The contracting economy was negatively impacting on growth, which showed that what was needed for growth was more than what the government had been doing. The population was growing while development had remained stagnant, which was responsible for poverty and equality. To avoid a collapse, there was a need for fiscal consolidation, with a deep and practical partnership between government and the private sector.

Ms Ngqaleni said there was a need for more inclusive and faster urban economic growth if national development was to be achieved because South Africa was not benefiting fully from the urban dividend. For example, the cost of public transportation was negatively impacting on the meagre salaries of the poorest of the poor. The situation could be rectified only if government did things differently, because how government had invested over the past years had contributed to the emergence of low density segregated cities.

South African cities had significant investment needs, and metros required an estimated R43 billion to unlock growth. There were three major priorities in urban development -- spatial integration for the urban dividend, expanded investment in core infrastructure, and deeper access to private financing to expand resources available for investment. In order to drive spatial transformation with inclusive growth policies and a legislative framework already in place, measurement for outcomes had been agreed upon and planning systems had been strengthened. To achieve transformation, there was a need for a well governed city through good leadership.

Mr Savage said there were four key areas on which NT had focused to create a more enabling policy and regulatory environment. It had built an alignment of planning instrument, using the Built Environment Performance Planning (BEPP) grant system as a lever to form the basis of stronger integrated and aligned planning. The four key areas were planning alignment, regulatory alignment, fiscal reforms and monitoring and reporting. Improved disclosure of investment pipelines and enhanced sequencing of investments were two steps towards planning alignment. There was a review of urban infrastructure regulations in process, and there were plans to strengthen the use of land development rights as a tool for urban transformation. Credible investment frameworks responding to their specific needs had been presented by the metros, which showed their response to the national strategy.

To strengthen the transformation plan, there was a need to improve disclosure around the investment pipeline by other spheres of government, which would answer the questions of what was to be done, where and when. The mechanism to do this was building on the infrastructure delivery management reforms, while the infrastructure reporting had been adjusted to get a better specialization, and there was an intention for enforcement of early disclosure. The Inter-Governmental Project Pipeline (IGPP), which helped to identify major sequencing issues, was made possible through disclosure. IGPP co-ordination allowed all spheres of government to see the net effect of public investment in targeted zones in individual cities, and helped to identify major sequencing issues. For IGPP to be strengthened, there was a need to strengthen coordination and approval requirements through the infrastructure management system and regulatory alignment. There were reviews of regulatory frameworks, norms and standards.

For transformation with inclusive growth, there was a need to focus on the inclusion agenda. The grants should guarantee service stability and sustainability, closing the gap between service responsibilities and the resources that were assigned to it. There was a need to reduce the growing trend of grant dependence, which could stop the benefiting authorities from exploiting other sources of funding, and to restructure grant use design. There were problems in grant administration, and grant designs often led to growing tension. The challenges in grant administration and use were captured in the new strategy, which targeted outcomes instead of numbers.

Mr Jan Hattingh, Chief Director, Local Governmental Affairs, NT, said the Built Environment Performance Plan for all metros was on the NT’s websites, and there was no other department with a matching plan. The strategy was not perfect, but compared with a decade ago the alignment was improving. The NT had discovered that the cities had been micro managed in the past and had been able to rationalise the process. It was currently building a consensus so that everyone could understand the strategy. It had developed a common approach, a set of comprehensive frameworks, and meaningful indicators had been identified. There was currently a focus on functional and integrated outcomes to bring about the transformation that was desired. There was a challenge in getting data for tracking performance.

Ms Ngqaleni said spatial transformation was what everyone desired, and the nation could not continue working the same way and asking the same questions while hoping for a different result. Integration was the most difficult aspect of the strategy. It was a long term project which required a broad-based strategy and deep, practical partnerships across society and targeted at outcomes.

Discussion

The Chairperson said the presentation was an appetizer for the next day’s meeting. He said NT needed capacity and when senior positions were vacated, this might lead to inconsistency. South Africa was not producing the skills needed in the labour market.

Mr T Motlashuping (ANC, North West) said the presentation was touching and informative. Cities were strategic in terms of economic growth, and were making attempts to promote it. Listening to the good initiatives brought into question the integrated Development Program (IDP) already adopted by the cities, and he asked how the strategies would be implemented in the cities, since they were already implementing their adopted IDPs. How would the several changing views on service delivery be managed, and how would the new ideas be integrated in the IDPs? Why were there so many protests over failures in service delivery, when there were many academic documents which referred to good leadership in the metros? He said the North-West Province had no rapid bus transport system, despite the fact that money had been allocated for that purpose. If the good presentations found expression in implementation, it would fruitful.

Ms T Motara (ANC, Gauteng) said that as an academic document, the presentation looked impactful, and asked how the strategy translated to what was currently happening. She asked the NT to give the Committee a sense of a timeframe for when the processes would be concluded. The grants impacted on how the services were delivered, and different departments often asked for intervention on grants. The reduction in grant dependency may not be achieved if there was no internal capacity, because the more capacity, the more right to grants. She asked what the practical plans of NT were when building capacity. Unless there were policies which stopped the argument about ‘who took what responsibility’ among the departments, it was difficult to move forward as a government. She asked for details of the role of NT in the reconstruction of the grant spending, because it was bound to generate argument.  She asked if the Auditor General’s reports would still consider financial reporting as a means of proper accountability.

Mr O Terblanche (DA, Western Cape) commented that although the presentation was a good academic work, it had taken ten years to develop the strategy and might take another ten years to implement it. He said the nation did not have the luxury of time, because when the Committee was on oversight, it found no impact of government expenditures. One of the problems was the lack of integration. He asked how NT intended to get an appropriate execution model to be able to implement it. There was a need for good governance, but he was not optimistic about the strategy because much work needed to be done.

Mr L Gaehler (UDM, Eastern Cape) said the plan was good on paper, as the rate of unemployment and human settlement needs in the country were soaring high. He believed the plan would attract foreign investors if properly implemented, and hoped it could be implemented.

Mr L Nzimande (ANC, KwaZulu-Natal) asked NT to describe the status of the strategy in terms of enforcement. Would it be just another road map or guideline, and what was the structural arrangement for commencement and completion? Who were the stakeholders, and was NT already involving them in all of the plans explained? The primary cities were already looking at similar strategies, so would it be able to carry them along with the strategy? Who were the stakeholders NT was working with, and how was it working with them?

Mr Hattingh said to understand a relationship between planning and implementation, the Municipal Finance Management Act, Section 71, page four, explained that the Act was implemented after 14 years of working with local government, yet ten municipalities could not meet the legislative requirement date. Audit outcomes after elections were very complex, and required balancing the tradeoffs between fulfilling the election promises and keeping the discipline on the financial side. The BEPP had been implemented. The Treasury had a responsibility to set norms and standards, so it prescribed all the formats. The Auditor General (AG) audited the Treasury’s norms and standards. The performance reporting was currently being reviewed by the office of AG, the Department of Monitoring and Evaluation, NT and the Department of Public Service and Administration to make sure that the frameworks of 2003 were updated to reflect new developments. The Accountant General’s Report evaluation was just one indicator which gave an overview on the state of governance, but the relationship between governance, service delivery and financial health was also important. The relationship with governance was not the core mandate of the NT, but all these relationships were preconditions for service delivery.

Ms Ngqaleni said the presentation should have been made earlier in the year, because it had been referenced in the BEPP, and the strategy was not one the gross strategies of government which were often spatially blind. It was important to look at the cities in terms of how they invested. It should be a lever to change the shape of the cities. The idea of spatial transformation had always been there, but the strategy demanded backing it up with an investment plan and investment prioritisation. This meant that the transformation of the spaces was not solely dependent on the investment of the metros.  The process of accessing the budget of a municipality looked at the BEPP, a link to IDP, and a link to the budget, and brings the public sector such as the Passenger Rail Agency of SA (PRASA) and Human Settlements into meetings.

The presentation was to help the Committee with the plans of the cities, as these plans had the capability to deliver investments that could transform the spaces. There was also an incentive grant to reward performance in terms of prioritising and aligning investment, and the ability to stay with the plan across the cycles. The recent plan reflected continuity despite changes in the political cycle, which was a reflection of the hard work by the NT with the cities to align their mindsets. The latest challenge of NT was to align the entire public sector.

The failure in service delivery was responsible for the several protests in the country. This was not the duty of the cities, but that of the national government and the provinces. The pace of addressing the problem of informal settlements was determined by the approach to funding.  Funding to build houses, as done by the government, was expensive and addressed few people, so a mindset change was needed. There was a new realisation by the National Department of a need to move faster. The need for champions of spatial transformation throughout the nation was one of the reasons for engaging the Committee. The champions were needed to douse the pressure that would come from opposition to the strategy by various departments. She was confident that the strategy would drive a change that would be visible.

The consolidation of the grant was progressive. There was a grant review committee, and the steering committee consists of representatives from Cooperative Governance and Traditional Affairs (COGTA), the South African Local Government Association (SALGA), the Department of Monitoring and Evaluation, and the Financial and Fiscal Commission (FFC). The public transport grant had been rationalised and refocused. NT was working with COGTA, which was currently leading a process to ensure that the Integrated Development Plan (IDP) could be more responsive to urban requirements. Transformation was taking place in phases.

She said NT was building a foundation for what would be presented tomorrow, and the report was meant to prepare the minds of the Committee Members for what they would be hearing from the cities and what kind of questions that should be asked. One thing achieved by NT was the ability to have a plan, and it had identified that regulations were blocking the acceleration of the processes which needed to be addressed as the process unfolded.

Mr Hattingh said that to eliminate grant dependency, a typical example was provided by the city of Johannesburg. Its capital budget was influenced by three resources -- internally generated funds, grants and borrowing. Looking at the last year’s budget, it had reduced its grant dependency ratio from 56% to 25%. Being efficient in the way it carried out its operations, it had been able to generate surpluses which would be used to augment the capital budget, and this in turn reduced grant dependency. This brought about local accountability, which was a desired outcome.

Ms Ngqaleni said the reporting process had been made clear, transparent and measurable. The change was meant to concentrate on the outcomes that should be delivered, and create a measurable process.

Mr Hatting said the presentation from the NT was in the IDP.

Mr Savage referred to the three cities which would be presenting the following day, and said the Committee would find areas of excellence and areas that needed improvement. There were investments in the pipeline for each of the metros, because the strategy was not abstract. There was a very good alignment, infrastructural growth prospects, and good support from the community and the private sector of large cities. There were practical areas emanating from the academic and technical aspects of the policy. Though the secondary and intermediate cities had not been in the immediate strategies’ focus, they were the next priority.

The Chairperson said that the briefing of the day would be linked to that of the next day. He thanked the delegates from NT, and promised to meet with them again the following day.

Committee matters

The Members deliberated on the modalities and preparations for a proposed study trip to Malaysia, and requested more research to be done to facilitate the trip.  

The minutes of the meeting held on 28 June for the engagement with the OR Tambo municipality was also adopted.

The meeting was adjourned.