Committee Report on National Departments Quarter 4 performance

Standing Committee on Appropriations

04 October 2017
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

The purpose of the meeting of the Standing Committee on Appropriations was to consider and adopt the Committee’s Report on the Fourth Quarter Expenditure Patterns of National Departments for the 2016-17 Financial Year.

There was a concern that Cooperative Governance and Traditional Affairs had underspent it allocated funding. One of the reasons given for underspending was the withholding of the 1.8 million of the government equitable share. A lengthy discussion followed on the concerns regarding the matter of the under-spending of departments. National Treasury had determined that a portion of COGTA’s funds were to be withheld because municipalities were not paying Eskom on time.

The Committee criticised the approach taken by the National Treasury to withhold allocations of funding to local governments following their failure to make timeous payments to Eskom, also to water boards. The effect of withholding money from municipalities only made it more difficult for them to make the necessary payments. The Committee understood that there had to be efforts to deal with municipal mismanagement but it sought creative ways to ensure that people’s rights were not violated.  The concerns were not only based on a matter of delivery of basic services, but also included a concern about constitutional rights and the Bill of Rights in respect of the poor affected by the inefficiencies of municipalities.

The Committee was faced with two issues: the failure of municipalities and departments to pay Eskom, and the water boards, and, secondly, the reallocation and withholding of funds by Treasury. The Committee believed that there needed to be a standard of responsibility to ensure that municipalities and departments were efficient and accountable.

It was noted that Eskom had engaged in negotiations with National Treasury and municipalities with the aim of reaching an agreement as to how the payments were to be made but that some municipalities had reneged on agreements made following the negotiations.

National Treasury was to be invited to send a report and to present it to a meeting to provide explanations for the withholding of money, so that there might be a better understanding of the situation.

The Report was adopted, with the amendments effected in the meeting.  

Meeting report

Opening
The meeting was opened and everyone was welcomed by the Chairperson who lead a moment of silence for prayer or meditation. She welcomed stakeholders and informed the Committee that the meeting had been advertised. She stressed the importance of advertising the Committee meetings, and ensuring that they received media attention on critical issues to show that the Committee was actively working to address issues.

 The purpose of the meeting was to consider and adopt of the Committee’s Report on the Fourth Quarter Expenditure Patterns of National Departments for the 2016-17 Financial Year which would close the fourth quarter. The focus would be on findings and recommendations. She requested that Committee Members adhered to procedure. There had to be no tolerance for wrong things.

A long-standing apology from Ms E Ntlangwini (EFF) was read, and the Chairperson asked the secretariat to enquire as to whether her absence was of a permanent nature, and if so, a replacement was requested.

Draft Report on the Fourth Quarter Expenditure Patterns of National Departments for the 2016-17 Financial Year

The report was circulated to members. The Chairperson invited both typographical and content amendments.

Mr A McLoughlin (DA) brought it to the attention that the Committee that his copy of the draft report did not contain page 4, but then realised that his document was not printed on both sides of the page. The other Committee Members discovered the same error on their documents. The Chairperson allowed an opportunity for the documentation to be replaced.

The Chairperson instructed the Committee to begin with a review of the findings, and then to include recommendations in response to the findings included in the report.

Extensive minor grammatical, punctuation and sentence structure corrections were accepted and adopted by the Committee as Members worked through the document.

Mr J L Mahlangu (ANC) drew attention to a project name on page 16. He suggested that to prevent ambivalence and misrepresentation of contexts and locations of projects, that project names should be specifically and clearly indicated.

The Chairperson concurred with the suggestion made by Mr Mahlangu, and requested the Committee to provide clarity by contextualisation of projects and their respective names. The secretariat recommended that brief descriptions of the projects referred to in reports be included.

Reading page 8 of the draft report, Mr A McLoughlin (DA) questioned whether the Committee had expressed, anywhere in the draft document, their concern that Cooperative Governance and Traditional Affairs (COGTA) had underspent. He explained that it had been stated that one of the reasons was the withholding of the 1.8 million of the government equitable share. He explained to the Committee that because municipalities were not able to pay Eskom on time, National Treasury had determined that a portion of COGTA’s funds were to be withheld. He was under the impression that the Committee had expressed its concern about the approach adopted by Treasury to withhold the equitable share owed to municipalities. He argued that the effect of withholding money from municipalities only made it more difficult for them to make the necessary payments. If they were given the money, they would be able to make the necessary payments. He regarded the approach to be contradictory to the goal. Mr McLoughlin acknowledged that, although the approach adopted by Treasury was within the terms of the law, he nonetheless felt that the Committee should make mention somewhere in the draft report that they had concerns about the approach taken by the Treasury.

The secretariat informed Mr McLoughlin that the draft finding could be found under paragraph number 3.3.2, and was in response to the withholding of allocations to local government. The draft finding captured the Committee’s concerns as expressed by Mr McLoughlin, in that they were concerned about the negative effects that the withholding of funds to municipalities may have had on municipal service delivery. He included a recommendation that the National Treasury reconsider its approach, especially with regards to the provisional payments of electricity services by municipalities, as well as compliance in relation to the National Credit Act. He had also included, in the draft finding, the fact that the Committee believed the approach might have the hampered provision of basic services by municipalities.

Mr J Mahlangu (ANC) noted the concerns raised by the Committee as being a ‘complex matter’, and was of the opinion that the recommendations drafted by the Committee might not be effective, as Treasury would continue to withhold money if there was underspending, or in relation to matters where there seemed to be a lack of compliance. He suggested that the Committee consider future recommendations for situations similar in nature to the one before the Committee, and that it sought creative ways to ensure that people’s rights were not violated. He emphasised that the Committee should be concerned about the rights of people who were affected by the very decisions that government made. He suggested that Municipalities should be instructed to make payments to Eskom first. A proactive approach was better than primarily punishing municipalities for inefficiencies.  It was a matter of protecting and prioritising the rights of people in that regard

The Chairperson agreed with the views shared by Mr Mahlangu and supported his suggestions. She suggested that there be a creative way for the Treasury to manage late debts owed by municipalities, whilst simultaneously allowing for service delivery to take place.

Mr B Topham (DA) provided a retrospective insight on the possible motivations behind the approach adopted by the Treasury, and explained that Treasury needed to ensure that funds were appropriately used for their intended purposes, and by their relevant deadlines. He stated that it might be a possibility that there had been inefficient management of public funds by municipalities as the withholding of funds had never happened previously. He believed that there had to be greater mismanagement if Treasury had withheld the money. However, it was a Catch-22 situation as National Treasury was withholding the money because Eskom had not been paid, but, by withholding the money, the municipalities did not have the money to pay Eskom.
In response to the Chairperson’s request for there to be a draft of a tangible solution to the recommendations and concerns raised by the Committee, Mr Topham questioned whether could request a report from National Treasury which included information on instances where the they had withheld equitable share funding or grants to have a more direct approach on the matter.

Mr Masoeu agreed that for the purposes of putting together the Committee’s resolution, they would require National Treasury to compile a report to the effect suggested by Mr Topham, so that it would be possible for the Committee to include Treasury’s findings into the Committee’s Report for when they finalised it for the Medium-term Budget Policy Statement (MTBPS).

Ms D Senokoanyane (ANC) referred to the issue of a number of municipalities not utilising the funds provided to them for the intended allocated purposes. She provided some insight into issues relating to misappropriation of funds in the Department of Health. In that instance, she explained, the Department’s funds had been withheld as it was evident that the money remaining in the budget had no potential to be effectively utilised by the end of the financial year, and explained that in instances where departments did not maximise their budgets allocated to them, funds were usually withdrawn from the department and reallocated by the Treasury.

Mr N Gcwabaza (ANC) noted that the Committee was dealing with two issues in the discussion: the failure of municipalities and departments to pay Eskom and the water boards, and, secondly, the withholding of funds by Treasury. He agreed with the suggestion put forward by Ms Senokoanyane that the Committee should make mention of the national departments who were not paying municipalities, as well as the municipalities who had not been paying Eskom, so that they were able to establish a clearer understanding of the issues surrounding the reallocation and withholding of funds by the National Treasury. The second issue was the withholding of funds arising from the misappropriation of the funds provided to some municipalities and departments. He cautioned the Committee against showing a tendency to encourage municipalities and departments not to honour their payments by urging for the National Treasury not to withhold their funds. He stated that there needed to be a standard of responsibility to ensure that municipalities and departments were as efficient and accountable as was expected of them. He suggested that in fact, the Treasury’s approach of withholding funds from the said departments was their means of effecting responsibility and accountability for the management of public funds, as they ascribed to legislative provisions in that regard.
He suggested that the final recommendation put forward by the Committee on the matter at hand should not be framed as though the Committee condoned wrong doing by departments or by municipalities, and that the details of the issues were important to resolve them. He suggested that the recommendations should be precise, and not general in nature.

Mr M Zamisa, a member of the Committee support team, brought it to the attention of the Committee that, during the period of the adjustment budget, the matter before them had been broadly discussed with National Treasury by the Committee.  In that meeting, it was said that the process of addressing that matter was underway, and there were means being taken to ensure that municipalities who that owed payments to Eskom were engaging in negotiations with the Treasury and municipalities, with the aim of reaching an agreement as to how the payments were to be made. He said it had recently come to light that some municipalities had been reneging on agreements made following the negotiations. That was a similar situation to that faced by Water Affairs. Mr Zamisa mentioned that, in addition to late payments, there were disputes on the amounts claiming to be owed to Water Affairs and Eskom respectively. Mr Zamisa suggested that the Committee should request an update from the National Treasury that would show the progress in making sure how the debts were being managed. He said since the mechanism had been put in place, an update had not been received from Treasury by the Committee. He suggested that would be best for the Committee’s response to be written once the update had been received in that regard.

The Chairperson suggested the Committee put forward a recommendation that the National Treasury would provide a response in due course. She mentioned that the Committee was of the opinion that the Treasury should pay the service providers, Eskom and Water Boards. She emphasised that those were basic services, and the importance and provision thereof could not be diminished or not prioritised owing to the failure of a municipality to perform its duty. She emphasised the importance of the needs of the population, as well as their human rights.

Mr Masoeu mentioned the legal aspect of the matter was that, in that compliance with the law, payment had to be made within thirty (30) days of services rendered. He suggested that be reinforced in the report, and all municipalities, state entities and departments be directed by the National Treasury to adhere to that legislative provision. He included a draft finding which noted the sentiments of the Committee that the Treasury’s withholding of funds from municipalities should be a means of last resort, and should not in any way affect the provision of basic services to poor households. He further included that the compliance in respect of the payment of services should be directed to all government departments.

Mr Topham suggested including the concerns raised in the report, i.e. that the concerns were not only based on a matter of delivery of basic services, but should also include constitutional rights and the Bill of Rights in respect of the poor affected by the inefficiencies of municipalities and departments, and the consequences thereof. He assumed that National Treasury had tried other methods of ensuring that municipalities paid their bills. He insisted that the Committee have the Treasury come to a meeting to provide explanations for the withholding of money, so that there might be a better understanding.

The Chairperson agreed that even national departments, such as National Treasury, had to uphold the Constitutional rights of the people. She asked for the meeting to be conclusive, and that the Committee come up with a solution before the adjournment of the meeting.  Following a final draft finding compiled by Mr Masoue, the Chairperson allocated a minute each to Committee members to provide a comment on the draft report.

Mr Mahlangu said the concerns and conclusions reached in the report and discussion were fair.

Mr Topham was satisfied with the report and discussion, and made a minor suggestion to place emphasis on constitutional aspects of the matter at hand.

The secretariat noted that National Treasury had the right in terms of legislation to withhold portions of a conditional grant.  There was some confusion as to when Treasury would be attending a meeting with the Committee but the Chairperson stated that she wanted the matter finalised before the report went to Cabinet.

Mr Masoue said the staff would take the resolutions of the Committee and implement them into the existing structure of the draft report. The Chairperson spoke on certain aspects of the procedures for adopting and tabling the report, and asked for further clarity on procedure from Mr Mahlangu.

The adoption of the Report on the fourth quarter expenditure patterns for the 2016-17 financial year, with the amendments effected in the meeting, was proposed by Mr Gcwabaza proposed, and was seconded by Ms Senokoanyane.

The Report would be sent to Committee members.  The Chairperson was to sign it off, and it would be put on the Announcements, Tablings and Committee Reports (ATC). 

Mr B Topham (DA) and the Chairperson congratulated the staff on a report well written. He requested that the final version of the report be sent to Committee members via e-mail, so that it might later be forwarded to their fellow MP’s for overview purposes.

The Committee discussed important dates for strategy and discussions in the future. The Chairperson asked that, in the event of any program adjustments over the week, the Committee be e-mailed and alerted.

The Chairperson suggested an improvement would be thorough preparation for future meetings. The Chairperson expressed her satisfaction with the outcome of the report, and the meeting, and commended the staff on assisting the Committee in achieving its objectives.

The meeting was adjourned.
 

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