2018 MTBPS: Human Sciences Research Council briefing

Standing Committee on Appropriations

07 November 2018
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

The Human Sciences Research Council (HSRC) briefed the Committee on their overall assessment of the 2018 Medium-Term Budget Policy Statement (MTBPS). It highlighted that the spending priorities included reducing poverty and inequality, and increasing employment and inclusive growth. It stressed the need for an improvement in spending efficiency, government capacity and governance. Public institutions and state-owned enterprises (SOEs) had to be strengthened, and there was a need for structural reforms. More emphasis had to be placed on attracting private investment. Education and skills development were intertwined with the development of Fourth Industrial Revolution innovation capabilities, so optimising capability development would require an understanding of the nature of changes to skills supply and demand, and the resources required for skills development.

The HSRC commended the government for continuing to provide the bulk of the funding for the cost of the national HIV response. The transition to the National Health Insurance (NHI) was imperative in light of the National Development Plan’s (NDP’s) aim to achieve a significant shift in the equity, efficiency and quality of healthcare services by 2030. However, fiscal constraints were asking serious questions as to how exactly the country needed to pursue the quest for universal health care in the short, medium and longer term. While many important healthcare programmes were being implemented and scaled up, there were, in some instances, a lack of funding for large-scale prospective impact assessments.

The R2.5 billion allocated every year to provide extensive support to build municipal capacity was welcomed, but there was an urgent need to monitor skills capacity and its impact in all municipalities. The potential for employment creation in agriculture, biogas, water treatment, power generation and bio-composites offered tremendous opportunities for social and economic development. Funding for infrastructure had been squeezed, yet there was a great need for school infrastructure backlogs to be addressed. The HSRC stressed that internal efficiencies and better planning needed to be examined, especially in an environment of low economic growth and competing demands for resources.

The HSRC provided findings from their research on public satisfaction with different areas of government performance from 2003 to 2017. Social grants had received the highest approval rating of 72% in 2017, but the level of satisfaction had shown a decline of 5% since 2010. The areas of greatest concern to the public were job creation, crime reduction and low-cost housing. Regarding trust in the political system, 31% of the public viewed corruption as the most important challenge.

Since 2010/11, the size and value of the green economy had been growing. Investment in green research and development (R&D) activities accounted for some R8.23 billion, which represented 0.2% of gross domestic product (GDP). However, more R&D needed to be invested in energy and water. While 0.87% of GDP was spent on R&D, the national target was 1.5%. Clearly not enough was being spent on R&D across the system of innovation in general.

Members were concerned about the government wage bill, which was out of line with even advanced economies. They sought answers on how a balance would be achieved between the need for job-creating policies and the job-saving technology advances of the fourth industrial revolution. They acknowledged that infrastructure funding had been squeezed, but said many of the challenges to implementation were related to poor planning, capacity issues, and a lack of inter-governmental collaboration. There was concern over the data presented in relation to the increase in HIV infections, which indicated that the majority of new infections were as a result of men having sex with other men, and through sex workers, and this was a trend that needed to be addressed.

The Committee expressed their appreciation for the HSRC presentation, and stated that it had been a very insightful and a thorough analysis which would be of great assistance to them.

Meeting report

Chairperson’s opening remarks

The Chairperson said that the main objective of the meeting was to engage with the Human Sciences Research Council (HSRC) regarding their submission on the 2018 Medium Term Budget Policy Statement (MTBPS). During this time, the Committee engages various think tanks to solicit input and ideas for effective decision-making on issues affecting 57.7 million people, especially the 6.2 million men and women who were without jobs. It was against this background that the Committee had invited the HSRC, as a critical stakeholder. The HSRC was a statutory research body established to form an effective formulation of the monitoring and implementation of government policy and to stimulate public debate based on scientific research.

Human Sciences Research Council: Assessment of MTBPS

Prof Crain Soudien, Chief Executive Officer (CEO): HSRC, said that they were essentially going to try to answer the request that was made by the Committee which was to do an overall assessment of the Medium-Term Budget Statement --to do an assessment and analysis of the allocated efficiency, to look at the challenges and opportunities, and to offer a general assessment of what the Statement was all about.

Prof Ivan Turok, Executive Director: Economic Performance and Development, HSRC, highlighted the aspect of accelerated economic growth and said that the Statement had revised the forecast downwards from 1.5% to 0.7%, which was a bit gloomy but not surprising in the context of the recession that had happened in the first half of 2018. If they looked at the past decade, economic growth had averaged only 1.8% over that period. Somebody else had described this as the “missed” or “lost” decade and there was some truth in that. If South Africa had tracked some other emerging economies, the economy would be 30% larger than it was right now. There would be another 30% of the population in employment and other responding benefits all round. The National Development Plan (NDP) talked about a 5.4% average growth per annum, so they were well behind where they wanted to be, or where they needed to be.

The unemployment rate had risen in the previous week to 27.5% according to the latest data and the expanded definition was 37%. There were clearly big problems faced and the effect of this relatively slow-growing economy was that gross domestic product (GDP) per capita average income in the country had been falling because the population growth rate had been higher than the economic growth rate. As a result of this, tax revenues were down by R27 billion in 2018/19 which was a challenge in terms of public spending. Low growth creates problems for the social contract, for the fiscal framework, reduces the ability to spend and requires selective tax increases such as that seen in the Budget earlier this year. The VAT increase was very unpopular but considered necessary, given the state of the Government’s finances.

Particular weaknesses that had emerged this year had been in the key productive sectors of agriculture, mining and manufacturing, which had been concerning. The result of all of this was that there were about   people below the poverty line in the country. Therefore a number of indicators had been heading in the wrong direction and the Government really needed to take some important decisions about how they address these challenges.

Regarding spending priorities, roughly a third of the Government’s total spending was on wages -- public sector wages. There had been a big debate around whether this was sustainable, and how the wages could be brought down and so on. A third of the spending was on transfers to households, in particular social grants and other forms of service payments. That was huge spending on relieving poverty. The effect was that public investment on infrastructure was being squeezed and this was what they needed more of, considering economic growth and economic development, infrastructure, roads, electricity and water etc. The spending priorities were not new, but they were about reducing poverty and inequality, and increasing employment and inclusive growth.

Basic education, public health, social grants and basic services were all rising slowly in real terms. That was important -- they were not making poor people pay the price for these economic challenges. The Government was trying to protect the poor in this economic slowdown, in that they did not have to pay more for these social programmes. Other priorities were to improve the efficiency of spending, to increase government capacity and to improve the governance of some of their key areas.

In respect of the salary creep within the public sector, he said the common perception was that the increased spending on wages in the public sector related to employing more people. In fact, the increased spending on the public sector salary was more in terms of the increase in the average salary payment to existing staff, not about employing more people. It also came about through promotions The dilemma the government was faced with at the moment was whether they encourage public sector employees to moderate their pay increases in order to help, rather than slashing public sector jobs.

The second aspect he highlighted was infrastructure investment, and he said that the decline in public and private investment over the last decade was quite worrying, particularly the level of private sector investment. It was another big issue in the country -- how they were going to get the private sector to help grow the economy. Some people put the blame on self-inflicted damage caused by the government, such as a lot of red tape, making it difficult for the private sector to invest. That was a big agenda item, to try and facilitate private investment by streamlining some of the regulatory burdens on business.

The public investment in infrastructure had been a big thing for the last five years. The key message of the Statement was a special fund to improve the quality of government spending, by ensuring that the government was able to prepare and plan ahead for infrastructure spending. This was so as to not end up with under or over-spending, and did not end up with projects that they did not need. That was an important initiative, and was obviously not something that could be fixed overnight. Efforts were being made to fix the poor governance of state-owned enterprises (SOEs), and they were doing a lot about that, led by their brave Minister of Public Enterprises. Cleaning up government and restoring confidence in SOEs so that they could function efficiently and keep their administered prices at a limit so that people could afford the services they offered, was very important.

Another big theme of the Statement was private investment, and this had prompted a lot of discussion. The talk of blended finance, how the public and private partnership sector could partner together more effectively so that Government did not have to use 100% of its government spending, and could lever its resources to get additional resources from institutional investments. A lot of work was going on there. Therefore that was something that the Committee could think about in terms of leveraging private sector into increased investment.

Short-term policy priorities flagged in the Statement included policy certainty and investor confidence. This was extremely important. The Mining Charter was trying to do something about that in the minerals sector. Regarding renewable energy, there was clarity with the integrated resources plan. The Public Procurement Bill was trying to simplify and clarify policies in relation to public procurement, black economic empowerment (BEE) requirements and so on, in order to facilitate small and medium enterprises (SMEs), particularly from townships, to compete for public sector employment. The panel on land reform and the initiatives with tourism visas were areas where the Government was trying to simplify, streamline and reduce uncertainty to make it easier for the economy to expand.

The second area was around strengthening public institutions and SOEs, which was clearly a very medium priority for Government. The third one was creating partnerships for growth, involving business support for local procurement, employment tax incentives, youth employment service, small business, and an innovation fund and infrastructure fund. These were very important short-term initiatives in trying to stimulate more investment, more expansion and development and industrialisation.

There were certainly many commentators on the Statement who were asking what, beyond these short term priorities, Government’s agenda was to get the economy growing and developing more rapidly. What were the structural reforms that were top of the agenda in terms of really transforming the economy and society in order to make a bigger impact on the economic problems faced? How would they really shift from consumption to investment, how would they really attract more foreign direct investment? How would they shift a part of the economy to labour intensive, labour absorbing industry rather than capital intensive, manufacturing industry? This was a very big question that they did not get many answers to, but it was important that they ask these questions. How would they really transform and not just stimulate the economy, because transformation was needed and there was a need for much more employment from the way the economy grows.

Dr Vijay Reddy, Executive Director: Education and Skills Development, HSRC, said that she wanted to use the len of going beyond the budget and the money and try to look at efficiencies and possible ways of doing things differently. They still had to improve education and skills in the country, otherwise it became a vicious cycle.

One had to recognise that there were multiple imperatives and multiple demands, and all sides were very important. It was therefore about managing tensions and managing dilemmas, and some were listed with respect to education and skills. On the one hand, should one support equity and invest one’s resources in the poorest and the group that needs it the most? However, there was also a challenge to invest for excellence and raise the economy and leadership. Should one support higher end skills and the higher education fraternity, or should they support foundational skills -- Grade R and primary schools? To stimulate of the economy, was it highly skilled jobs that one would like to have, or low skilled jobs? Technology development had taken a major role in the current growth of the world economy, and with technology development there was automation, and this required high end skills, so which path should one choose? How could one stimulate the economy with labour intensive growth rather than capital intensive growth, in order to absorb the large numbers of the unemployed, the majority of whom had low skills? In these dilemmas there were no choices – one had to address both sides and find ways to respond to both sides of the imperatives.

From the MTBPS Statement, she would comment on four aspects. The first was the adjustments for school infrastructure backlogs, ‘eradicating pit latrines at school.’ It was so sad that a crisis and death was what created a whole lot of emotion and then a reaction to that. In the Budget Statement earlier in the year, there had been a drop in the infrastructure budget, and more towards the National Skills Fund. Now, in the adjusted budget, there was a move towards infrastructure and eradicating pit latrines. With regard to education, the Statement had also referred to school safety, which was a big issue. More than a budgetary issue, it also required attitudinal and behavioural changes for school safety. The third thing to talk about was the overcrowded skills policy environment, and how there were many initiatives to look at as to how one could reconfigure the Cabinet and different Government departments. The fourth point was the silence on skills development to support the technologically-driven fourth industrial revolution. A lot of the President’s speech and the various Government departments had mentioned the fourth industrial revolution and technological growth. The Statement talks loudly about industrial growth. Those were the four points that she wanted to provide evidence for and raise issues around.

With regard to basic school and home infrastructure, in 2017 45 schools had no running water, 72 schools had no electricity, and 40 schools had no toilet and sanitation facilities, 37 of which were in the Eastern Cape. While 37 schools had no toilet -- which actually boiled down to the issue of sanitation -- there were 4 624 schools that used pit latrines. That constituted about 17% of the country’s 26 000 schools. It was not just about having sanitation -- it was a human rights violation not to have those toilets in the 37 schools, and one was to looking at Ventilated Improved Pit (VIP) latrines, not all of them were water flush. That would also require a change from a pit latrine to a water flush toilet.

It was interesting to look at households, because they look at inequalities, the inequalities start at the home and continue to the schools. Those who do not have water flush toilets at home probably also go to schools with no water flush toilets. So there was this compounding effect of inequalities. It was important to compare over time to see whether there had been changes occurring. In this case, things had changed since 2003 but there were still some challenges.

Dr Reddy said that 12% of learners that attend no-fee paying schools come from households that had no electricity, whereas only 4% of those attending fee-paying schools had no electricity. Two-thirds of learners from the poorest households had running water, and one third did not have running water. The inequalities in the households repeated themselves in the inequalities in the schools.

The Chairperson asked where Dr Reddy got the figure of 12% of learners that had electricity in their households, as it was not reflected in the document.

Dr Reddy replied that 88% of them had electricity, so that meant 12% of them were without.

The Chairperson stated that in future, if they referred to figures, they must reflect them in the document.

Mr A Shaik Emam (NFP) said he was a little bit concerned about whether the statistics were correct. This was because in 2016 there was no electricity in 569 schools, and in 2017 it had dropped to 72, . Were they saying that in one year they had supplied an additional 500 schools with electricity? It would be very good if they did, and likewise with regard to the pit toilets – they had dropped from 9 203 to 4 624 in one year.

The Chairperson said that Dr Reddy would respond to this during the discussion..

Dr Reddy said that the matter of school infrastructure was related to the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) programme. The relationship between Department of Basic Education (DBE) and the Department of Public Works (DPW) was a very important one. In relation to school safety, it was mentioned in the Budget Statement and there had been many incidents of school violence recently. It was uncertain whether the violence had increased, or due to technology, the incidents were more publicised. School safety was not just about the physical safety, but it affected achievements, learning and a whole lot of other things as well. They had used a graph to correlate the levels of bullying in a school with the mathematics achievement. The more bullying there was, the lower the achievements were. In no-fee schools, there level of bullying was very high and the achievements were low, but obviously that was not the only factor leading to low achievements.

With regard to policies and regulations impeding delivery, the Organisation for Economic Cooperation and Development (OECD) economic surveys of 2015 had highlighted that barriers to trade and investment were high.

The Chairperson asked what the OECD was.

Dr Reddy responded that it was the Organisation of Economic Cooperative Development, and it was a European organisation.

Prof Mohammed Jahed, Director: Parliamentary Budget Office (PBO) said that it was not a European organisation, but an organisation of developed countries which included the USA, Japan and South Korea as well.

Dr Reddy said that the organisation was based in Paris, and this was one of those surveys where they do comparative studies and highlight the regulatory barriers to trade and investment in the various countries. South Africa, according to the survey, had a high level of regulatory barriers.

In a study that they did for the high level panel last year, where they looked at the influence of legislation on service delivery, they had mapped out the policies that related to post-school education. They had looked at the main policies and the National Qualification Framework Act, and how it interfaced with various acts for skills policy. The point they wanted to make was that there was such an institutional sprawl that it led to a delivery crawl -- that was what they called it in their reports. If they could go back and look at the issues of coordination, coherence and alignment and get them into a better framework, it would lead to better efficiencies.

The Budget had referred largely to industrial growth and not to technological growth but as a country, there was no option but to look towards the growth of the artificial intelligence sector, the Fourth Industrial Revolution, and the various sectors. The kind of economic growth that would occur meant that there was going to be a need for far more technological skills, and fewer physical and manual skills. The Budget did not mention how the growth of these skills would be supported.

Prof Leickness Simbayi, Deputy CEO: Research, HSRC, said that he would present on Health. In July of 2018, the HSRC had released the results of the 2017 national survey, which showed that the HIV epidemic was still continuing unabated. From the survey, they could determine that the total number of people living with HIV in the country was now 7.9million, which was 14% of the population. In comparison with the 2012 survey, it meant an additional 1.6million had become infected, and that was most disturbing. This was not to suggest that no progress had been made, as a lot of people were on treatment and were living longer. However, there were still new infections that were taking place, and that was the problem. In the case of new infections, the overall trend had been going down since 2008, but there was a relatively high increase in infections, particularly among young people, and young males especially.

With regards to HIV/AIDS and TB, the Government must be commended for continuing to fund the bulk of their national response. South Africa had the largest burden of HIV, but a lot of resources that were required were being put in, and the response was in kind. As a result of that, there had been an improvement in life expectancy, solely because of the effective use of treatment. There had been a growth in the life expectancy from 50 to 70 years -- or they expect it to reach 70 in the next few years. If this battle was to be won, clearly resources were needed because part of the national response was funded through donor funding. In terms of the national response they were doing well in terms of biomedical prevention, for example, treating the disease itself reduced the infectivity of those living with HIV so that they did not pass on the infection to their partners. This was a biomedical way of treating the disease, but beyond that they did need to work even harder in other ways which were mostly structural, social and cultural factors that were also known to drive the epidemic.

The overall health allocation had increased, and most of it was related to structures such as hospitals. With HIV mostly being a chronic illness, people were not dying as they did 10 years ago when there was no public health treatment programme, and there was now a need to invest more in emerging, non-communicable diseases (NCDs) that were among the top causes of death in the country, such as diabetes, hypertension, obesity, cardiovascular diseases and cancer. In fact, cancer was now killing more people than HIV in the country, so more resources needed to be allocated.

Prof Simbayi referred to a concentration index which was used in studies of inequalities in health. Basically, the idea was that if a value was zero for any aspect of healthcare, it meant that it affected both the poor and the rich equally. When a value was negative, it meant that it was more common among the poor, whereas when it was positive, it showed that it was more common among the rich. The spread of these numbers across the continuum of healthcare shows the extent of healthcare inequality in the country, which was why the National Health Insurance (NHI) scheme was needed. There was need to find more adequate funding for NHI.

Prof Narnia Bohler-Muller, Executive Director: Democracy Governance and Service Delivery, HSRC, said she would speaking on government and public service. They had the South African Social Attitudinal Survey which was a longitudinal nationally representative survey that they had been running since 2003. They had won an award for their data last year as part of the International Social Surveys Programme. They had some really interesting data around public perceptions and different areas of government performance, and they really needed to look at this context to understand how they could better develop a capable and skilled public service. Members could have access to all of the data they presented.

According to the survey, the public was increasingly concerned about jobs, health and crime, and it continued to increase. Social grants received the highest approval rating from the public. Regarding perceptions of service delivery, those living in formal areas and formal rural areas were more satisfied than those living in traditional and in urban informal settlements. There had been a general decline in public confidence in Parliament, national government and local government. Corruption was a societal problem and it had come through strongly in the Minister’s statement.

In relation to service delivery challenges there was a need to look at the powers and functions of the Minister of Cooperative Governance and Traditional Affairs (COGTA) and Members of Executive Councils (MECs). There was a growing scope for government functions and powers and a decline in the institutional capacity of the municipalities, which calls for the review of the powers and functions in terms of sections 84 and 85 of the Municipal Structures Act (MSA) of 1998. There had been a call by COGTA to look at these two sections, to ascertain how amendments to the MSA could facilitate a differentiated approach to the structure and functions of two-tier local government to enable the creation of a single-tier local government. The province that was really pushing for this was Gauteng, looking at wall-to-wall metros across the province to ensure effective integration of municipalities in order to meet the challenges of urbanisation.

There had been strong reference to SOEs in the Minister’s statement. There was a need to revisit the research already conducted to track the implementation of the 31 short and long term recommendations of the Presidential Review Commission (PRC). There were specific recommendations that should be looked at specifically, including that the mandates of SOEs should be subject to critical strategic review every five years, so they cannot leave the SOEs to carry on as they wish. A transitional SOE reform committee must be established to drive the implementation of the PRC’s recommendations. The proposed SOE Council of Ministers and the central SOEs’ authorities should develop customised human capacity building programmes. The last recommendation was that the Government should develop an integrated reporting, monitoring and evaluation capacity for SOEs across all spheres of government. This was because there was a tremendous amount of fragmentation in this area.

Dr Glenda Kruss, Deputy Executive Director: Centre for Science, Technology and Innovation Indicators, HSRC, said the Centre worked very closely with the Department of Science and Technology (DST). One of their big projects was to measure the expenditure and human resources that were devoted to research and development across South Africa, whether it was in the higher-end sector, the science council, government, the private sector or the non-profit sector. They had looked at the Budget to see what they could highlight this year, because last year they had spoken about whether they were reaching the target of 1.5% of GDP being expended across the system on research and development (R&D), and so on. What stood out was a growing concern for, and awareness of, sustainable development. The Minister spoke about some of the constraints being caused by problems in the water sector, issues of renewable energy and the rollout of the carbon pack, so they thought it would be useful to share some of the data that they had been doing on “green” R&D.

Prof Turok stressed the importance of water and energy in infrastructure development. Increasingly there was a recognition that economic growth could not be promoted at the expense of environmental degradation and that they needed to be more aware of a sustainable development path. What they tried to see was how well-equipped the system across the national system of innovation was in order to have a level of investment in research and development that would equip them to address these challenges going forward.

When they looked at the data since 2010/11, the size and value of the green economy itself had been growing. According to their most recent R&D data, the investment in green R&D activities accounted for some R8.23 billion, which represented 0.2% of GDP. If one considers that they were spending up to 0.87% of GDP on domestic research and development expenditure overall, that was a significant amount and represented 25% R&D expenditure. Overall, there had been an increase in green R&D expenditure, which was a positive sign, but more R&D needed to be invested in energy and water.

The latest survey, released a week ago, revealed that while 0.87% of GDP was spent on R&D, the national target was 1.5%. Clearly not enough was being spent on R&D across the system of innovation in general. What they had tried to show was the need for more R&D in critical fields that could promote environmental sustainability.

The Chairperson said that the presentation was very interesting and stimulating.

She asked if Prof Soudien had something to present as well.

Prof Soudien said that he did not have a presentation, but he just wanted to thank the Committee. What the HSRC had tried to do was to present an analysis of what the priorities emerging in the budget looked like. They had tried to put those priorities against an analysis of where the country was going in terms of the challenges experienced. They wanted to get a sense of what they were doing well and what the big concerns were, to which they should be paying attention. It was a very important to say that they must acknowledge progress on some fronts, but they were struggling really badly and there were danger signs in a number of sectors. That was seen in the education analysis, the health analysis and in public perceptions, which was a very important indicator. It was necessary for the HSRC to say that they had come to the Committee attempting to be helpful in terms of drawing attention to where the critical areas were.

The Chairperson thanked them for their insightful presentation, and said the Committee had been very lucky, as it was not every day that they had a full room of academics to come and pump information into them. Research was about applying maximum objectivity, searching for information and then coming up with findings, and the HSRC had also shared their findings with the Committee.

Discussion

Mr Shaik Emam thanked HSRC for their presentation and asked for clarity on the question he asked earlier about their statistics. They were too good to be true, particularly with regards to electricity where 569 schools had no electricity in 2016 and one year later, only 72 schools were without electricity.

One of the matters the HSRC was not addressing was that there was a massive move in key population groups with regard to new infections. He had been told a few weeks ago about HIV prevalence in infections, and had heard 57% was through men having sex with men, and another 20% involved sex workers. Almost 80% of new infections came from there -- what did they suggest should be done to address this? He had done some research on a dating site, and had been shocked that more men were looking for other men than they were for women. It was becoming a serious challenge and the HSRC was not looking at it extensively, which was why the infection rate was increasing.

The three-tier government system was not working, and he would like them to comment on that. The second tier, the provincial one, was not performing and he did not know what purpose they really served. There was a limited mandate for national departments and they could not anything about it,, because a lot of these things were provincial mandates. It was a grave problem. 

The presentation spoke about reducing the wage bill -- how did they anticipate doing this? This was because on one hand, one could assume it was not about increasing the numbers anymore, but they had to increase the salaries in line with the inflation because the cost of living was rising all the time. What did they suggest should be done, because it meant the standard of living of public servants was going to drop.

Mr M Shackleton (DA) said that looking at the infrastructure spend and the spend on education, it was clear that one could not solve problems by just throwing money at the provinces. Wherever they went in South Africa, it was not hard to drive or walk to a place where there had never been running water and/or sanitation. In all of these things, proper and adequate monitoring was what was needed, to be able to see what they were getting out of it. A different presentation had revealed that the highest percentage of the wage bill nationally was spent on education, but everyone knew that education statistics in the country were not very good. It also correlated with municipal grants, where municipalities essentially get enough money to develop infrastructure etc, but they lacked capacity in terms of engineers to actually implement what was needed in those municipalities. Across all of these things, there needed to be a way to monitor what was really going on because so many years after the country had gained democracy, there were still so many backlogs and the lives of citizens had not been improved to a significant extent.

Just as a thought on the green economy -- there were municipalities, such as the city of Tshwane, that had gone paperless. They would not receive printed reports and agendas, for instance, and would be able to access them only electronically. If Parliament or certain Parliamentary Committees could pioneer this, it could initiate a mind-set to think about what more could be done towards a green economy.

The Chairperson commented on the green economy in Tshwane, saying any change must not be radical and must take into consideration those who could not access or use such technology and were thus excluded. The transformation policies were about taking those who were excluded on board as well, therefore they would have to find a balancing act in that respect. 

Mr A McLoughlin (DA) thanked the HSRC for their work and their insight, as they tend to pick out, on top of what they already know, a few new frights. They had spoken about 13.4 million South Africans living below the poverty line -- what did they regard as the poverty line, and could they provide a percentage? He asked for clarification on GDP figures depicted in the presentation. The statistics on middle management movements were also confusing – it seemed that people were getting employed at levels they should not be at. What were the policies and regulations impeding delivery, and what were the regulatory barriers revealed by the OECD survey?

Mr B Martins (ANC) said that since the medium-term Budget Statement they had heard a number of presentations from various organisations, but it was the first time that he had had a sense of people interrogating the Budget stating where they were and what needed to be done. The HSRC’s presentation had dealt with different aspects and problematised them, giving Members the necessary analysis and insight to use in the forthcoming debates and to highlight issues regarding the strengths and weakness of the Budget..

The Chairperson told Mr Martins that that was the benefit of belonging to this Committee. It was only in this Committee that they could get so many academics to give them a free lecture.

Ms D Senokoanyane (ANC) said the presentation the HSRC had given was the type of presentation took them forward and helped them to identify matters of importance. The wage bill matter had been raised and they had looked at where the serious problems were -- at the bloated upper levels. If they hoped to achieve service delivery, they obviously would need people there, but there were situations where there were just too many.

Regarding spending priorities, she agreed that infrastructure was being squeezed out. However, there were capacity concerns in respect of the implementation of infrastructure. It was not just the allocation of funds -- in many instances there were challenges around people who were supposed to implement infrastructure, people who were supposed to complete projects and did not do so etc. That was one of her biggest concerns.

The study regarding the maths and bullying had been interesting and she would not have thought about it, because in terms of school performance, she would have looked at things such as school management, discipline, teachers being absent from school etc. Besides mathematics, what was the general performance of the schools, because some learners did not do mathematics?

On the increase in the HIV incidence of new infections, what would they associate this with? Was it because the programmes were not making the necessary impact? It was quite concerning that there were new infections because she was under the impression that people had been adequately educated around HIV matters.

Ms M Manana (ANC) asked for clarity with regard to health issues. The HSRC had stated that with HIV being a chronic illness, there was a now a need to invest more resources towards other non-communicable disease (NCDs) that were among top causes of death among South Africans including diabetes. They had also spoken about cancer, but had not elaborated on what the cause of the cancer problem was. Regarding the split of ill health between the poor and the rich, were they classifying mental health under the rich or the poor, because it seemed as if it cuts across?

Regarding the NHI indirect grant for beds and laundry services, she did not know whether the HSRC had done a study of this, because at most of the hospitals throughout the provinces, there was a shortage of linen and beds. If they had any information about this, could they share it with the Committee?

With regard to anti-retroviral drugs, there were reports about drug shortages or lack of drugs in different clinics in most of the provinces. She was not sure whether the HSRC was aware of this. What were they saying about the reallocation of resources to deal with that?

Mr N Gcwabaza (ANC) said he would like to associate himself with what Mr McLoughlin had asked about the poverty line. He wanted to go further and say that there had been a number of government actions that had sought to cushion the poor from economic pressures, such as the no-fee schools, free school transport, school nutrition, social grants, 6 000 litres of water to indigent reconstruction and development programme (RDP) houses, and so on. To what extent had all of those things put together, relieved households from such economic pressures to the extent that they would be able to live slightly on, or above, the poverty line? Had there been a study to look into those things, because that would inform Members whether all of these measures were inadequate? Besides unemployment, it was a major it was a major contributor to people living below the bread line.

He had raised this question because there had been a suggestion from one of the institutions that they consulted with, to say that perhaps it would help to increase the social grant by 10%. That had been about two or three weeks back. Had these measures not assisted at all? What more should Government do to lift these 13.5 million people out of this situation? How had they assisted and to what extent should they move forward and propose something new or additional in order to lift these people from being below the poverty line?

His second question referred to the appointment of new SOE boards, especially those which have been on the wrong side of behaviour. The MTBPS had stated consideration was being given to restructuring them, and the HSRC had referred to the recommendations of the Presidential Review Commission as part of the solution. Was there anything else that needed to be done?  This was because new boards could be appointed and they could restructure, but they still might not be able to solve the problems. What more could be done, and urgently?

The HSRC had correctly observed that the green economy, the blue economy, and the skills associated with them, were matters than needed to be focused on. The MTBPS, however, had been rather quiet on these things. Would a shift of focus in terms of sectors perhaps help stimulate the economy? This was because the green economy was very sector-specific. Was there a shift in focus, or was it just an oversight, or were they satisfied that they were doing well in those sectors and there was no need to make mention of or prioritise them in the MTBPS? The worry could be that if they were not being mentioned as part of the MTBPS, leading up to the Jobs Summit and the economic stimulus package, the funding thereof could be under threat as well.

The Chairperson said that Prof Turok had touched on inefficiency in spending, and he asked the HSRC to elaborate on it, because this was the opposite of what they wanted to see. She asked that, as they responded on spending efficiencies, they should touch on internal efficiencies. What were they? This was because everyone there would agree that all the problems they had emanated from ineffective and inefficient spending.

Prof Turok had said there needed to be a focus on transformation and not just stimulation -- transform and stimulate. They had to deal with the two for the Members to get more insight. They could also share their reflection on the Medium Term Strategic Framework (MTSF) in relation to the Economic Stimulus Plan. Was the Economic Stimulus Plan augmenting, or was it replacing? This was because they had the MTSF which had been adopted, but there was a new clarion call from the President -- the Economic Stimulus Plan. How did the two talk to each other?

If they could not respond to this now, they could come back again later. From their critical analysis, could they give the Committee the impact of this adjustment on the Division of Revenue Bill, as they were talking mid-term budget and about adjustments from the February Budget? The impact referred to both the positive and negative impact on the Appropriation Adjustment Bill.

HSRC’s response

Prof Soudien asked that Prof Turok first to respond to the economic questions, and then they would move to the education questions, health and infrastructure and the green economy.

Prof Turok said that the first question he was going to deal with was the three spheres of government not working well. There were two points he wanted to make. The first was that they talk about intergovernmental relations, but they do not carry it out in practice, therefore they needed to think harder about intergovernmental relations. There were silos within the three spheres of government, and there were also silos between the spheres of government. That was something that reflected on leadership at the top -- about Parliament and holding different spheres to account, about the maturity of the governing members and officials, and also about egos and managing egos. It was essentially about the culture of the public service. They needed to think harder about the public servants and people exploiting their power. Therefore there were big concerns about the culture. He would return to this when he responded to the question about what more could be done. So that was one thing -- making intergovernmental relations more mature, with a more cooperative relationship between the spheres of government.

He wants to make a specific point about provinces where there were strong metros with capacity, as in Gauteng, KZN and the Western Cape, as there was quite a good case that there were a lot of duplications in these three regions of the country. Perhaps the role of the provinces should be reduced to being responsible for the parts of the provinces where there was no metro and there was a need for capacity -- in rural KZN and rural Western Cape, for example. The provinces should focus on those areas and not the metros where there was a lot of technical capacity. That would be a good outcome to see.

There were two approaches to dealing with the wage bill, and one was attrition. This was basically about not replacing people when they leave and saving money that way and hope that somehow the department could deploy people to fill those vacancies that had not been filled. That was a pragmatic approach, but a more ideal and strategic approach would be to look at how to reduce the size of the Cabinet, reduce the number of government departments and find ways of saving costs that way. That was a more ideal than just going the route of attrition, because that could lead to unfilled vacancies in really important areas of government service delivery.

Regarding questions about the poverty line, there were three poverty lines that Statistics South Africa used, and which this data came from. The data of 30 million people on the upper poverty line was based on about R1 100 per month, per person. It was the upper bound line -- it was not the bread line, nor the basic food hunger line. It covered basic needs, where people could afford clothes and shelter, as well as food.

There had been a question about the number of people on different salary scales in the public sector. The reason for that was not so much that there had been a loss of people at the lower level, but that peoples’ salaries had been rising above inflation. More people have fallen into that bracket because they had been getting better paid, and this would relate to another question later on about efficiencies. Basically, salaries had been going up by about 2% above inflation in the public sector. One response would be not cutting people’s salaries but rather holding people’s salaries in line with inflation rather than giving them generous increases across the board, while incentivising good performance. In the context of a difficult economic environment, one way was to encourage people to make that sacrifice rather than risk massive slashes in staffing in the public sector.

 

Infrastructure implementation was a massive issue. There had been quite big cost over-runs. Tthe Gautrain would be a perfect example -- originally budgeted at around R10 billion, it went up to R30 billion within a space of four to five years. Therefore there needed to be more discipline about that, and it was a huge discussion as to how they could improve their capacity. He thought the government recognised the matter and was trying to do something to improve preparatory work on projects to ensure that all the factors were considered in advance, and that would help to ensure that implementation was smoother.

 

There was a question regarding what the government’s impact on poverty was, and the social data had been very substantial. Social grants in particular, and other such as free housing, disability grants and pensions had had a massive impact. Without those measures, poverty would be much worse in South Africa, there was no doubt about that. However, the poverty line of R1 100 per month was well above the child support grant that was roughly at the level of the pension or disability grant. Therefore, if these grants were shared in the households -- which they were in most cases, because the whole household was poor -- that would dilute the benefit of these grants because people were sharing the resources and it was not lifting the people above the poverty line. Therefore it had an impact on absolute poverty, but it was not solving the problem because it was a serious and large scale problem. More people were needed in jobs in the long-term.

 

On the point about the governance of SOEs and what more needed to be done, he wanted to make two points. The first was that they had to get over the culture of silos again. There were a lot stories about SOEs not cooperating with departments that were supposed to be supervising them, with conflicts and different agendas etc. They had to pull it together, and leadership was critically important -- getting government as a whole to work together, to cooperate and not to pursue different conflicting agendas. The culture and governance was really important, with public servants not spending extravagantly, and with no fancy cars and hotel stays. They had to realise that they were in an austerity period and they all had to tighten their belts. That was one point, that there could not be any unnecessary greedy, excessive spending.

 

However, there was another really good example of ineffective and inefficient spending. He had been doing a lot of work in a township in one of the cities where there was a serious crisis. The municipality in this township was spending R1million a month in “jetting” the sewers because it was a densely populated township. Jetting the sewers meant putting high pressure water down the sewers to clear them every month because there were more people living in that township than it had been designed to cope for. To increase the pipes to accommodate all the sewage going down the pipes would cost R3 million, but instead R1 million was being spent each month just on jetting the sewage. It was “firefighter” type of spending, rather than investing in a pipe to save R1 million a month. Another example was where they had put in an electricity transformer in the township and it had cost R80 000 to provide electricity for the people living there. Due to the lack of governance in the township, people were tampering with the transformer to steal electricity. It comes back to what was said about poor trust in government,. There was also pressure on space -- they were living right next to the transformer, and it was dangerous. It was full of oil, it could explode and people could be killed. The City was spending R250 000 to provide a steel cage around the transformer, which was three times more than the transformer itself. This was inefficient, wasteful spending in responding to a governance problem, and this was what they needed to sort out. If there was more trust in government then they could spend investment in productive ways, not on wasteful unproductive ways, and that would be much better for them going forward.

 

There was a question about stimulation vs transformation. Stimulation was about simply improving the quantity of activity -- more economic growth, more GDP, more income. Transformation was about the quality, it was thinking differently, ensuring that the rich and wealthy do not cream off the bulk of that income, and that it was distributed fairly. That was what they had to do more, not just recover and turnaround the economic growth rate. There must be a shift to a different direction where the bulk of society benefits from that growth.

 

There was a question about the adjustment. This would require a lot research and analysis and he needed to think hard about that. His gut feeling was that a lot of the adjustments were about ad hoc changes in response particular bits of under-spending, particular opportunities, particular matters that have arisen like the pit latrine matter, to require emergency spending to be moved to a particular direction. Therefore, he did not think they would see any significant improvement or deterioration overall, because it was an ad hoc adjustment rather than a strategic direction. However, they do not do that kind of modelling at the HSRC, and other organisations were probably better equipped to give the Committee a more authoritative answer.

Dr Reddy said she would be responding to the questions on education.

They had received the data on the infrastructure figures from the DBE, who submitted them to the Department of Monitoring and Evaluation (DPME) for their 25 year review. She had looked at the slight differences in the figures in the parts used, but in the main they were similar. Equal Education used the figures from the DBE as well, but she could go back and look at all the figures and come back and give them the sources. She wanted to link to the question on how infrastructure worked

Last week, she went to one of the primary schools around Durban where they had to build one more block for the school. This development had gone on for seven years and each year there was a contractor, money was given to the contractor, and there was non-delivery. That was why they were saying it was not only about the money, but the internal efficiencies as well. For six years there had been this incomplete block but there had been payment by the municipality. It also linked to the kind of culture there was in society and how the money was used.

On the OECD survey question, this was a report commissioned by National Treasury (NT) and she could provide the link for it. She was not a trade and investment person, but she read from NT what the OECD had said about it. Infrastructure investments were not made in the electricity and transport sectors, where economic development and telecommunications could support growth and boost housing and spatial planning for urbanisation.

The question of efficiencies came down to a governance issue. In their attempt for a better government, had they created too many policies? There were issues of alignment, of coordination, of coherence. The HSRC had analysed this in detail and had a report they could send to the Committee, including the regulations themselves which impeded delivery. The notion of governance and coordination was something in the works that the Department of Higher Education (DHET) had commissioned them to do on the labour market -- Intelligence Partnership for Skills and Development -- and one aspect was about governance and how to look at policies for better service delivery.

The reason she had referred to the silence in the Budget on the issue of skills for technological growth was because in a number of the President’s speeches and other speeches, one would read newspaper reports of talk about the Fourth Industrial Revolution. The Budget Statement spoke about the manufacturing sector and industrialisation and whether government had decided that they would rather have the benefits in manufacturing, because growth in the manufacturing sector in most countries leads to better growth in the country. This required high-end skills, whether it was the private sector that undertook the development of those skills and government in terms of a more inclusive role in manufacturing. Whatever it was, for a lay person reading the newspaper or listening to the Statement, there was this coherence between governance on how skills investment would take place. The unintended consequence of following this route would be the further loss of jobs. The choices were pretty tough. There was no one choice, and any choice would have some consequences.

Prof Simbayi referred to the question on the prevalence of HIV in key populations -- defined groups who, due to specific higher-risk behaviours, are at increased risk of HIV irrespective of the epidemic type or local context. Levels of HIV were highest amongst these key populations. He gave examples of men who had sex with other men, sex workers, people who injected drugs, and they could include transgender people. The levels were quite high. However, it was important to contextualise this. The estimate of the total number of people in these key populations was low. Altogether, all of them were estimated to be under one million in the country. The Department of Health believed that there were about 650 000 men who had sex with men, there were 195 000 or so female sex workers, over 4 000 male sex workers, 7 500 people who injected drugs, and about 72 000 transgender people. They were talking about a small segment of the population which was highly infected.

It was a problem that needed to be addressed, but they contributed little to the total population of 57 million South Africans. It was important that the epidemics among them were addressed and indeed there were initiatives by the SA National Aids Council (SANAC) and the Department of Health. Most of the programmes were funded by donors, so there were programmes that were currently running targeting these groups. The point was that relatively there were many more young people, estimated at about 15 million, so they were talking about a fairly large number. The male youth had had a much bigger increase compared to female youth, which was hard to explain, but it could be because there were a lot of programmes targeting adolescent girls and young women. Indeed, it was where a lot of infections were still occurring compared to other key population groups.

On the matter of new infections and why there was an increase, if people were not dying and whoever was infected was managing the condition, they would be able to live a long life. Although overall new infections were dropping, new infections were still occurring, particularly among young people, and clearly key populations were also a problem. Until recently there had been no programmes targeting key populations, but within the past two to three years there had been an increase in the activities targeting them.  

Regarding non-communicable diseases, he wanted to correct himself, as he got a bit carried away when was talking about NCDs. Essentially, cancer killed more people in the world than HIV, but in South Africa HIV and TB were amongst the biggest problems. The point was that cancer was a growing problem in the country, and was among the top ten killers. The most prevalent were breast cancer, lung cancer, colon cancer, prostate cancer and interestingly, there was an increase in skin cancers as well.  He needed to contextualise that it was a growing problem in the country. It was not the biggest killer in the country, but it had to be addressed.

The prevalence of mental health and Post-traumatic Stress Disorder (PTSD) according to socio economic status was about equal. For those who had access to medical aid schemes and private health care, the scale tilted towards the rich, but for those using public health facilities, it tilted towards the poor. There were differences, but they seemed to be slight.

Regarding ARV treatment, he had heard Dr Jebben Pienaar, DDG in the Department of Health (DoH), about two weeks ago addressing the matter of stock outs of medicines for HIV/Aids infected people. The supplies of drugs were erratic in some areas, and DoH and key stakeholders tried to redistribute where they had access to them. The explanation given was that the stock outs had occurred because there was a challenge in the manufacture of the drugs where they were sourcing them from. The matter had to be addressed somewhere in the pipeline, and the government could do very little but wait for the suppliers. The worry there was that people missed their drugs, because they were meant to take the treatment every day and if they did not do that for a considerable period of time they developed resistance to the drugs so that when they continued with their treatment, they would have to take an even more expensive drug. Essentially, the matter was being addressed by the DoH together with all stakeholders, including networks of people living with HIV.

Prof Bohler-Muller said much of the research that the HSRC had done had shown that intergovernmental relations was inefficient and not working, and the fragmented silo approach was very detrimental to service delivery. When they speak to residents and citizens about the delivery of basic services in informal settlements, people do not care who was supposed to deliver, as long as there was delivery. It was really important to realise that it was not working, and that they needed to rethink it. If the system was not working, they had to bring some innovations into the system. Life Esidimeni was an example of how things could break down. The DoH was trying to get rid of the blockage that happens at the provincial level with its NHI strategy, but there was a lot of resistance to it. She was not sure whether they would succeed in what they were trying to do. Schedule four of the Constitution provides that Health is concurrent when it comes to provinces and national, but provinces most of the time were not working concurrently with government and in some instances they were not implementing government policies with regard to health.

The HSRC had the research outcomes with regards to the SOEs. She thought the most important aspect was looking at legislation uniformity – again, not working in silos, ensuring that they reviewed mandates, that there was monitoring and evaluation, and possibly that there were public-private partnerships, because the President had mentioned the previous day that if they closed Eskom down then the economy would collapse.

She had been very surprised that the blue economy had not been mentioned in the Statement. They knew about Operation Phakisa, although there was no indication about how many jobs had been created. There had been a promise of 800 000 jobs over a specific amount of time, but they did not have the figures as to how far they were or whether it was working or not. That was the job part of it, but the blue part of it was very important.

When it came to looking at plastics, there needed to be urgent quality interventions around this. The situation now was that the oceans were becoming unsustainable. Fish had plastic material within them that people eat. When Canada led the G7 for instance, it placed tremendous emphasis on the blue economy, and this was happening in Europe and in the Indian Ocean Association. The government could not drop this off the agenda, because it needed to be looked at in terms of tourism and job creation, while urgently looking at issues around climate change and what it was doing to the ocean. They had to ensure that whatever jobs were created were sustainable.

Dr Kruss stated that she wants to reiterate that the national R&D expenditure was less than 1%, and this was a significant factor in the country’s falling behind in economic development and technological upgrade. Historically, SOEs had played a key role in research and development, but research in the past years showed that this had been declining and they were spending less and not doing as much. This lack of priority was very significant if they were talking about green R&D and economic and infrastructure growth.  

Regarding the state of the provision on linen in the hospitals, Prof Simbayi said that one of the things announced by Minister of Finance was that they were reprioritising the budget for beds and linen.

Further discussion

 

Mr Shaik Emam said his understanding was that most of the new HIV infections involved sex workers and men having sex with other men, so the focus of the attention had to move in this particular direction -- it was a reality, whether they liked it or not. The Department was doing a fantastic job, but the focus was not on the main area. He was not sure if the data they had was correct, because there was a stigma attached to men having sex with other men, so they needed to do more research on it.

 

One of the major challenges facing the economy was the self-inflicted wounds that they were creating. For example, Eskom was now borrowing from China, but it was owed R13.8 billion by the municipalities. Did it make sense that it had to borrow, yet it was owed? The lack of service delivery which gave rise to service delivery protests was because politics today was not about serving the people but rather about the politicians themselves seeking control and power. Public representatives, despite what the system called for, report to their political parties and not to the people that pay their salaries. The system had to be changed to get greater accountability and make politicians understand that they were serving the people and not the other way around. R200 billion was lost in the country each year because of inefficiency, corruption and not getting value for money. They could save so much.  

Mr McLoughlin said that Prof Turok had spoken about structural reforms. It had been said in speeches over the past couple of years that the country’s problems were connected to the global economic crisis. However, if they compared South Africa’s GDP growth figures to that of neighbouring sub-Saharan countries, South Africa was way behind -- they were third or fourth from the bottom out of 37-odd countries. Had the HSRC done an investigation as to what the difference was between those economies and South Africa’s? Where did the fundamental differences lie? Could they not so something to emulate the neighbours that were performing better? Was there not something that could be done to address structural reform in terms of this, because it must be something basic as these countries were in the same geographical part of the planet.

The Chairperson asked which aspects of the 2018 MTBPS held the most gains for low-income households.

Other stakeholders such as the FFC and the Public Service Commission have cautioned against under-funding of the public health sector. Had the HSRC conducted research in this area, and what were the findings?

Regarding trust in the political system, what did the HSRC think would bring a turnaround? Trust was needed to take them into a bright and better future.

Prof Simbayi responded said that he and Mr Shaik Emam were in agreement that the level of infection among key population groups was high. The issue was really that they constituted one million out of 57 million people. As he had said, there were 650 000 men who have sex with other men, but it was an estimate -- there could be more, there could be less. In those groups the rate of infection was very high and something needed to be done. There had been some modelling exercises to ascertain what contribution they made overall, and it was no more than a quarter of the new infections that could be attributed to that group. In summary, the modelling showed that the vast majority of infections were occurring amongst those who had sex with the opposite sex.

Mr Shaik Emam said that he thought he was being misunderstood. With the new infections, 57% were caused by sex workers and 28% by men having sex with other men. If they looked at the percentage of the increase now and the direction that it was moving, it was only a matter of time -- it was not about men having sex with women anymore, it was about men having sex with other men and sex workers. That was where it was moving. The statistics they had presented were what had been happening in the last 20 years.

Prof Simbayi said the statistics were from last year. They had the data from last year and on the key population from the year before that. They could share that information with the Member.

The Chairperson said that he should forward the information to the secretariat, and they would circulate it to each of the Members.

Prof Turok said his one liner answer to the question on accountability would be that they were too top down and too centralised. They had to fix local government. Local government was the hands and feet of government. They were close to the communities and they needed to get the municipalities working better. They had to focus this job on the whole of government, and could not just leave it to COGTA to take local government much more seriously.

With regard to Mr McLoughlin’s comparison with the rest of Africa, It was very hard to generalise about Africa because the performance was very uneven, but one reason for the performance difference was that many of these countries had started from a lower base. It was easier to get growth from a low base. The second point was many of the fastest growing countries were succeeding through gas and oil exports, such as Angola and Ghana. However, it was not a very qualitative form of growth and was not a very sustainable, as it was just digging and shipping commodities. They had done better than South Africa when the commodity cycle was strong, and South Africa could have done better than that. So the quality of growth was not fantastic. The third point was that some countries were doing really great things, like Ethiopia and Rwanda. Most people say that these were the standout successes of the last decade. One thing they were doing was seriously focusing on the economy. Their governments were saying that the economy was fundamental, that this was the way to sustainable development -- investing in infrastructure, attracting foreign investment and taking technology very seriously. If South Africa wanted to learn from them, those were the two countries that he would say they need to emulate and understand what it was that they were doing in terms efforts around economic development.

On the question of what was best from the MTBPS, he would say that trying to protect social grants was fundamental to create a basic safety net. It was not transformative, but it was survivalist. It was keeping people alive and it was helping people to survive, which was very important.

The Chairperson said that Prof Bohler-Muller had said the blue economy had been omitted from the MTBPS. She asked whether she thought the Fourth Industrial Revolution had been provided for in the MTBPS.

Prof Bohler-Muller responded that it was not sufficiently provided for. At the HSRC, they were studying people’s understanding of what the Fourth Industrial Revolution actually was. More could have been said about current developments and what kind of impact that might have on jobs so that they knew how to respond to that. She was not a Fourth Industrial Revolution expert, she was just stating that it was missing.

On the question about trust in government, number one was leadership. They had to have the right leaders in the right places. There was a saying that a fish rots from the head, therefore they needed to make sure that they had the right leaders in place -- people with integrity, who uphold constitutional values, with transparency and accountability, equality and freedom. Something that people wanted to see was government dealing decisively with corruption, because if they did not deal with corruption decisively, there would never be trust.

Prof Reddy said that to add on the Fourth Industrial Revolution point, she had just attended an international meeting around this. There had been people from Singapore there, and they had spoken about what the Fourth Industrial Revolution meant for them, and they had said that they were moving to a smart society. When asked what a smart society was, they had responded that it was a whole process -- everything was digitised, no paper etc. The Fourth Industrial Revolution, or the Digital Revolution, had many dimensions and one was a new way of working in the public sector or any sector. If it worked, it resulted in a lot of efficiencies but it meant a lot of retraining of people, and gaining a whole new set of different skills. The private sector would move towards different ways of operating, but they had a faster response time and abilities to retrain people in order to participate in this different way of operating.

The Chairperson asked what the HSRC’s recommendation was.

Prof Reddy said that globally, societies were moving towards a digital world and South Africa would also have to start preparing for that world. At the same time, South Africa had to deal with reading, writing and numeracy skills, so the challenge was to hold both realities together, but also to start preparing for the digital revolution.

The Chairperson asked Prof Jahed from the PBO about the link of the Fourth Industrial Revolution to the Budget.

Prof Jahed said that in their work they had been focusing on the mandate in the Money Bills Act, and they did not see it as something directly related. It was something that needed to be part of government policies and thinking about the developmental state and working on those issues.

The Chairperson said that the other stakeholder was National Treasury (NT) and asked for their comment, understanding that they had arrived an hour late.

A National Treasury delegate apologised for his late arrival and said that he would comment on the wage bill. NT’s assessment of the problem was that it was not about really about a bloated head count, as more people were needed for service delivery, such as in education and social development services. They really needed more people there. The problem was that the earnings growth of government servants was high -- they were paid so much more, even by international standards. Their employees were paid at least 30% more than their peers, including developed countries. That was not sustainable. He agreed that there was a need for wage settlements that were in line with inflation. If they did that, within the next 10 years they would solve the problem, and would be back in line with their peers. However, if they continued with CPI +1% wage agreements, plus the progression factors of 21.5% and 2% that was CPI+ 3% growth in earnings every year, that would not be sustainable, as they would be taking more out of the economy than they were putting back. It was more about how they deal with the unions and how they arrived at viable wage settlements. A CPI-related agreement would assist, there was no doubt about that.

The Chairperson asked Prof Soudien to give his closing statement.

Prof Soudien thanked the Committee for giving them the opportunity to understand what the Committee thought the pressing issues were and for them to respond to as adequately as they could. There were issues raised by the Committee that they could not address, and it had been important for them to say that. They would try to be as helpful as they could. The Chairperson had asked them to do a comparison between the Budget Statement and the Mid-Term Budget Statement, and as Prof Turok had remarked, it made them a little bit nervous because the scale of it was quite intense. It meant looking at the allocations on a line-by -line basis, and that might be difficult. He was not sure whether they could do that easily or in time for them to prepare for the debate but they would try.

The Chairperson said that when she was talking about a comparison, she had meant a desktop approach -- a comparison only on the key areas, and not on everything.

Prof Soudien said that the HSRC would try.

The meeting was adjourned.

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