NDP outcomes and alignment to budgets: Parliamentary Budget Office briefing

Standing Committee on Appropriations

06 March 2018
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

DPE Mandate Paper for Budget 2018
2018 Budget Speech

The Parliamentary Budget Office briefed the Committee on the implementation of the National Development Plan (NDP). Performance indicators in 2017/18 departmental Annual Performance Plans (APPs) were compared to the MTSF sub-outcome performance indicators. The objectives of the MTSF sub-outcomes were assessed for alignment with the purpose of budget programmes. The Committee was taken through a comparison of the performance indicators in the MTSF with those presented in Annual Performance Plans (APPs) for outcomes 6, 7, 8, 9, 10, 13 and 14. Conclusions reached were that between 16 and 62 percent of MTSF performance indicators were reflected in APPs. A comparison of the objectives in the MTSF with budget programme purposes showed that four departments required revision of programme structures to allow for the incorporation of MTSF performance indicators. The departments were Basic Education, Cooperative Governance and Traditional Affairs, Energy, and Environmental Affairs. A challenge was that reporting on Special Infrastructure Projects (SIPs) followed a process outside of the standard reporting system of government.

In discussion, it was resolved that information provided by the PBO be forwarded to the DPME and Portfolio Committees. There were remarks and questions about unrealistic performance indicators; the challenge of SIPs being outside of the standard reporting system; institutional capacity; pressure on departments and implications for the separation of powers; foreign takeover of the construction industry, and the impact of spending on provision of social services and economic growth. The PBO was asked how it could assist the Committee to ensure that the MTSF was aligned to budget programme structure. The Chairperson warned that in future the Committee would refuse to pass budgets, if there was a lack of alignment of the MTSF and budget programme structure.

Meeting report

Introduction by the Chairperson

The Chairperson welcomed the Parliamentary Budget Office (PBO). The PBO would brief the Committee on the integration of the Medium Term Strategic Framework (MTSF) into standard planning processes. There was a need to strengthen alignment between the MTSF, the SA Budget and the NDP, as per the Mandate Paper developed by the National Treasury (NT) and the Department of Performance Monitoring and Evaluation (DPME). The Mandate Paper sought to align the Budget and the NDP. She advised that it be revisited, and that Members read it on their own. The briefing received from the PBO would assist the Standing Committee (SC) to realise what was prescribed by the Mandate Paper. There was a need to align the budgets and implementation plans of all national and provincial departments, public entities and State Owned Enterprises (SOEs). As the SC found in the recent 2018 budget hearings on the Medium Term Expenditure Framework (MTEF), planning tools were not sufficiently embedded in the work of departments, SOEs and public entities. That posed a risk to the attainment of MTSF targets and NDP goals. She invited Members to engage with the briefing by the PBO, so that implementable recommendations could be made to the House.

Apologies were received from Mr Shaik Emam and Mr Maclaughlin, and accepted by the Committee.

The PBO was asked to proceed with the briefing.

Briefing by PBO on integration of the medium Term Strategic framework into standard planning processes

The briefing was presented by Ms Nelia Orlandi and Dr Mmapula Sekatane, Policy Analysts.

The PBO Policy Analysis Unit focused on the implementation of the NDP. The aim of its current project was to identify obstacles in the implementation of the NDP by determining the rate of integration of the MTSF into the standard planning and reporting systems. Performance indicators in 2017/18 departmental APPs where compared to the MTSF sub-outcome performance indicators. The objectives of the MTSF sub-outcomes were assessed for alignment with the purpose of budget programmes. The NDP provided proposals and actions from which 14 outcomes were derived. The Committee was taken through a comparison of the performance indicators in the MTSF with those presented in Annual Performance Plans (APPs), for outcomes 6, 7, 8, 9, 10, 13 and 14.

Outcome 6: An efficient, competitive and responsive economic infrastructure network

  • A comparison of the performance indicators in the MTSF with those presented in Annual Performance Plans (APPs) show that:
  • Of the 102 MTSF performance indicators 34(33%) are reflected in the APPs of the responsible departments
  • The responsible departmental budget programmes support the actions of sub-outcomes to implement outcome 6
  • Sub-outcome 3 (logistics and transport infrastructure) involves the implementation of SIPs 1, 2,3,5,7 and 17
  • Sub-outcome 4(bulkwater) involves the implementation of SIPs3, 5,7,17 and 18
  • Reporting on SIPs follow a process outside of the standard reporting system in government
  • The number of MTSF performance indicators (including SIPs) included in APPs (excluding SIPs) per contributing department are:
  • Water and Sanitation included 5 of the 19 MTSF indicators
  • Transport included 5 of the 19 MTSF indicators
  • Public Enterprise included 3 of the 20 MTSF indicators
  • Economic Development included the 1 MTSF indicator

Outcome 14: Nation Building and Social Cohesion

  • A comparison of the performance indicators in the MTSF with those presented in Annual Performance Plans (APPs) show that:
  • Of the 66 MTSF performance indicators 20(30%) are reflected in the APPs
  • The departmental budget programme structures support the actions of the sub-outcomes to implement outcome 14
  • Activities for sub-outcomes 2 and 4 requires the revision of the programme structures of COGTA and DBE
  • The rate of integration per sub-outcome is between 12% and 50%
  • Sub-outcome1: Fostering and constitutional values-12%
  • Sub-outcome4: Promoting active citizenry and leadership-22%

Conclusions reached were that between 16 and 62 percent of MTSF performance indicators were reflected in APPs. A comparison of the objectives in the MTSF with budget programme purposes showed that four departments required revision of programme structures to allow for the incorporation of MTSF performance indicators. The departments were Basic Education, Cooperative Governance and Traditional Affairs, Energy, and Environmental Affairs. A challenge was that reporting on Special Infrastructure Projects (SIPs) followed a process outside of the standard reporting system of government.

Discussion

The Chairperson remarked that the briefing for the current work had started the year before. Information was required on alignment of the MTSF with the budget. There were serious gaps. It was the task of the SC to plug such gaps. Information would also have to be made available to the DPME. Information also had to be forwarded to different Portfolio Committees for oversight over APPs.

Ms D Senokoanyane (ANC) agreed that the presentation was very clear. Performance indicators were often unrealistic. The low percentages of integration caused concern. It was cited that the SIPs fell outside the standard reporting system. Portfolio Committees were in a better position to interrogate such entities. She asked if it was possible to change the system.

Ms S Shope-Sithole (ANC) commented that the PBO did helpful work. She asked if it was possible to make the relevant departments aware of the information, so that there could be improvement. If it was the sole responsibility of the SC, it was too much work.

Ms M Manana (ANC) welcomed the presentation. She advised that information not proceed only to the DPME. Different departments had to see that the APP did not talk to indicators.

Mr N Gcwabaza (ANC) referred to infrastructure issues. The PBO had to look at the role that the Presidential Infrastructure Coordinating Commission (PICC) played to coordinate. There was a disconnection between the PICC and departments responsible for implementation, particularly in terms of both social and economic infrastructure. The PBO had to advise on how spending impacted on delivery of social services and economic growth.

Prof Mohammed Jahed, Director, PBO, agreed that departments had to be made aware. All Chairpersons had to be informed. If it were to be seen as emanating from the Chair of the Appropriations Standing Committee, it was possible for the PBO to write under the auspices of the Committee, which would give it more punch.

Ms Orlandi responded that there were individual reports for the 12 outcomes. Every time a report was concluded and approved by Prof Jahed, it was sent out to all Chairpersons. The DPME was a PBO stakeholder. The PBO was asked to present to the unit that analysed APPs. Besides the DPME there was also the Auditor-General of South Africa (AGSA). The AGSA had approached the PBO to ask how it could assist. Performance information and APPs could indicate to the AGSA where the big problems were. It was part of the AGs mandate to look at APPs. There had to be work to develop quality indicators and setting of targets. Findings could be communicated to departments so that they could work towards better quality reports. The AG could evaluate draft APPs.

Ms Orlani addressed Mr Gcwabaza’s query about SIPs. Outcome 5 included all SIPs. The only information available was through the budget review. The PBO tried to obtain information through the Cabinet submission, but could not get hold of that. In future, information from the budget review would be included, to try to track progress on an annual basis. Some SIPs ran over a number of years, and large amounts were granted. Annual SIP tables could be merged to annual tables in the budget review of individual projects, to see where they fitted in. It was one of the things that the PBO tried to present to the SC every year during budget analysis, to track progress with mega projects.  She could not answer Mr Gcwabaza’s question about disconnection between the PICC and departments responsible for implementation.

Prof Jahed responded that the PBO was concerned about PICC reporting to Parliament. The SC had oversight over it. In the previous year the Committee stated that the PICC would provide quarterly reports to the Committee on how to coordinate integration. He agreed with Mr Gcwabaza that not only economic infrastructure had to be taken into account, but also socio-economic transformation.

The Chairperson said that she was happy with information presented. The SC could move forward with its work. The Mandate Paper was clear for the 2018 period. It was circulated in the previous year to allow for preparation of alignment of the MTSF, the NDP and the Budget.  If things were corrected, good progress could be made.  As Parliament moved forward into the next administration, monitoring of alignment could begin. The current phase was the first implementation phase of the NDP. It was important to deal with alignment timeously. National Treasury was also aware of the necessity of alignment, also of alignment of the budget with all objectives included in budget plans. It was necessary to go back to the drawing board. There were issues around the separation of powers. It was necessary to sit with strategic plans, to decide what to exclude and what to include in the current cycle. The DPME could possibly assist with that. Budget planning had to see to it that the budget was aligned to the NDP. NDP objectives had to be attended to, and it had to start with strategic plans. It had to be aligned with the budget to make sure that all strategic objectives were met. There was a big gap but it was never too late to close it.   The SC recommendations would put pressure on departments to adhere to alignment as indicated in the Mandate Paper developed by the DPME and the NT.

Mr Gcwabaza remarked that an important issue was raised with reference to outcome 8: Human Settlements. It was the issue of institutional capacity. It had to be looked at holistically.  Government was seemingly overwhelmed by the magnitude of infrastructure, and budgets allocated to big projects. Government was not quite ready. For 10 years it had trudged along sluggishly, without recognising the need for capacity that would allow government to drive things faster and move more efficiently. He was well aware that Water and Sanitation had experienced problems for a long time. All departments besides Human Settlements that were responsible for infrastructure faced similar problems. Departments did not take it upon themselves to come to grips with issues. A solution could be to send students to university to focus on infrastructure. Many departments had budgets for subsidising students for relevant study, like Economic Development and Trade and Industry. The PICC was asked the year before, in October, how it was that infrastructure had to stimulate growth, and in many instances it failed to do so. There was a new challenge emerging in the construction industry. Foreign companies were coming in and registering themselves, and killed the local construction industry and took money out of the country. They could do so because there were relevant skills to implement. A threat was looming if capacity was not taken seriously in departments.

Ms Orlandi replied that the PBO focused on budget programme structure and purpose. Departments were saying that the NDP imposed a new mandate on them. But if the programme structure allowed for implementation of MTSF objectives, they did have a mandate to implement. Programme structures of Basic Education, GoGTA, Environmental Affairs and Energy needed to be revised to make it suitable to implement some MTSF indicators. But all 36 other departments had the necessary programme structure and funding, and hence had the mandate. It was only necessary to reprioritise and to change to what the MTSF required.

Prof Jahed answered about separation of powers. He did not know if the SC could put pressure on departments, but it was possible to put pressure on other Committees. The Chairperson had made the point that if information was taken to other Portfolio Committees it could provide them with ammunition. Addressing Ms Senokoanyane about the structure of reporting,  he agreed that structural constraints had to be sorted out.

The Chairperson commented on the way forward. The Secretariat had to assist to provide information to other Chairpersons. The report had to be circulated. There had to be a report to the DPME, and to other Portfolio Committees, which could be done through the House Chair. Pressure could be placed on departments through recommendations made for 2019/20. Departments would be given time for alignment. It could be stated that if a department failed to align, the SC would not pass the budget. As the SC had the power of the House behind it, its report could become a resolution of the House. Gaps had been identified, and it was evident that there had to be better alignment. There had to be alignment of the budget with the MTSF and the NDP. She referred to the Mandate Paper of the NT. Quarterly reports could be used to monitor. There had to be a first progress report after six months. That would grant enough time for alignment.

Prof Jahed noted that the new cycle started in August for the next MTSF five year period.

The Chairperson agreed that monitoring had to start in August.

Ms Orlandi added that pressure had to be put on National Treasury. The first draft for the next financial year had to be submitted to National Treasury. It had to start with the departments whose budgets were not suitable for the implementation of the MTSF. Strengthening of alignment could start with approval of changes to budget programme structure. Basic Education, CoGTA, Environmental Affairs and Energy had to be able to implement the NDP in terms of budget programme structure. It had to be seen if departments were able to implement the NDP in terms of the budget and programme structure.

Prof Jahed added that it was in fact the function of the Standing Committee to ensure that the MTSF was aligned to budget programme structure for the following five years. It was a critical, possibly the most important function of the Standing Committee. The PBO would monitor the allocation of resources, going forward.

The Chairperson asked how the PBO could assist the SC to perform that task more effectively.

Prof Jahed replied that the PBO could get involved to look at preparations for the following five years. Draft plans would be analysed. The PBO could return to the Committee to report on its findings about the first draft process. The Standing Committee and the PBO had to keep each other informed. The SC could also find out about the process.

The Chairperson asked about a first progress report.

Prof Jahed suggested that the PBO proceed immediately to find out what the process would be, and then return to the SC.

The Chairperson remarked that the interaction of the day was interesting. New value could be added to the work of the Committee. A difference could still be made during the term of the Standing Committee, which would give it a good legacy.

Adoption of draft Committee minutes

Draft minutes of 22, 28 and 29 November, and 27 and 28 February were adopted, with minor technical amendments to the minutes of 22 November and 27 February.

Announcements

The Committee oversight programme would be postponed to the second term, as Parliament had to sit on 27 March.

The Chairperson adjourned the meeting.

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