Committee Report on Division of Revenue Bill 2019

Standing Committee on Appropriations

12 March 2019
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

The Standing Committee considered and adopted its Report on the Division of Revenue Bill. The Committee examined the draft report on a page-by-page basis, with the input of the National Treasury. The changes made were largely about grammar and numbering. However, a substantive debate on the mismatch between funding and performance in grants and government led to the insertion of a clause requesting an investigation on this matter by the National Treasury. Furthermore, the Committee debated the non-payment of bills owed to municipalities by government departments due to lack of clear ownership of government buildings. Treasury clarified that this was being addressed by an inter-ministerial committee led by the Department of Public Works. Some members were dissatisfied with the long implementation period of this working group. The report was adopted, however, with minimal substantive changes. Draft minutes for the 5th and 6th March were also adopted with minimal changes.


Meeting report

The Chairperson tendered her apologies for her late arrival, and welcomed members, by observing a moment of silence. She welcomed the delegation from the National Treasury and other guests.

The meeting would focus on the report on the Division of Revenue Bill, which was informed by many processes, including its tabling, Treasury’s briefing and the invitation for public input. The Chairperson would like to believe this was the last report on the DoR Bill they would leave, and noticed the importance of leaving quality work, not only for the committee itself, but for future generations.

The Chairperson noted that the report was circulated only the day before, however, Members were familiar with its content. She hoped the members had had a chance to peruse the report for quality control.

The Chairperson dealt with apologies: Mr B Martins (ANC), who was stuck in Johannesburg airport & Mr N Shaik Emam (NFP) who was attending another committee. The apologies were accepted.

The Committee Secretary noted that a report including Treasury’s input had been furnished to the committee, and asked whether the Committee would like to allow Steven Kenyon, Director of the Intergovernmental Budgeting Process, National Treasury, to explain.

The Chairperson concluded that the discussion document would be the report amended by Treasury.

Committee Report on Division of Revenue Bill 2019
The Committee went through the report page-by-page.

Ms M Manana (ANC) questioned whether the “Mr MG Buthelezi” stated on page 2 referred to the Member of Parliament for the IFP – the Chairperson clarified that this was a written submission in terms of public input on the bill from the member.

On page 4, the Treasury had an input. Mr Kenyon noted that the Treasury’s amendments were just small technical inputs on the report. In terms of page 4, the wording on the amount per household as being “set” at R4900 – this is just a statistic calculated from the budget process, not a decision. Mr A McLoughlin (DA) proposes changing the wording in the first correction to “average R4900” – the committee agreed. Mr S Kenyon clarified that amounts were higher “for” rural areas.

On page 5, Mr S Kenyon noted that the paragraph on the Human Settlements Development Grant belonged further along in the report (under “Ring-fencing of funds”, 3.1. F)), as subsection 3.1. C) handled expansion of the scope of grants, which had not happened. The committee agreed.

On page 6, the Committee corrected spelling errors.

On page 8, Mr Kenyon noted a very similar change to the earlier shifting of paragraph on the HSDG, under 4.1. C), wherein the scope of the Regional Bulk Infrastructure grant was not being expanded but merely ringfenced, and proposed shifting this, which the Committee accepted.  

On page 9, Ms Shope-Sitole asked if earmarking and ringfencing were the same. Mr Kenyon noted that “ringfencing” and “earmarking” were, for legal purposes, the same thing. These were descriptive terms describing how grants have conditions in their composition that only allow them to be used for specific purposes. Treasury usually used the word “ringfenced”. Ms Shope-Sitole appreciated the clarity, but preferred the use of “ringfencing” over “earmarking”. The Treasury and Chairperson agreed.  

On page 10, Ms Senokoanyane noted that section 5 must include the WCFID’s name as well. Mr Shackleton added that on subsequent pages the various organisations are mentioned that submitted, maybe the names of all organisations that submitted could be included in the opening paragraph (names to end 5.7.).

On page 12, Ms Senokoanyane proposed, under section 5.2., changing the word “reported” to “raised concern” regarding municipal finances in distress. Ms Manana raised that SALGA reported on local government finances. The Chairperson preferred “in their submission [they] raised concern”. Ms Manana countered SALGA did not raise a concern, they reported. Mr N Gcwabaza (ANC) noted there was not much difference between the two, but proposed using “report with concern”. Mr McLoughlin agreed with Mr Gcwabaza, and the committee accepted the change.  

On page 20, Ms S Shope-Sitole (ANC) wondered if it would be difficult to implement a chapter on gender in the Budget Review. Mr Kenyon stated this went beyond the scope of his work, but was an interesting recommendation. The Treasury had had chapters that focused on different issues in the past. Formerly, NGOs used to write analysis after the budget had been tabled. This was something for the Treasury to consider, as to whether gendered analysis was better done by Treasury itself or whether civil society was better placed. Ms Shope-Sitole proposed that it was necessary it be done by Treasury as women made up the majority of the poorest of the poor. Chairperson Phosa noted this could also be raised with the minister. Mr Kenyon raised that some work on gender based budgeting was being done by the Department of Women. Chairperson Phosa stated the importance of looking at the issue from multiple angles. Ms Shope-Sitole agreed that compartmentalisation had not worked, and it used to be that every department considered gender equity. Chairperson Phosa said she would ensure that something as done.

On page 21, regarding Mr N Gcwabaza’s question on the absence of Mr Buthelezi’s submission, Committee Secretary Arends noted it did not seem to be relevant to the bill so was not included. Ms Shope-Sitole questioned whether there should not be detail on the identity of Mr Matlala, submission 5.7. Mr Phelelani Dlomo, Content Advisor, Parliament, agreed that some information on the submitter’s identity should be included. Ms Senokoanyane proposed identifying Mr Matlala as “a community member”. Chairperson Phosa agreed, and the committee requested to include Mr Matlala’s province as well.

Regarding the performance of Human Settlements Development Grant (6.1), Mr McLoughlin questioned the divergence of assessment between the FFC, which saw its performance as good, and the Treasury, which was of the contrary opinion. Maybe this should not be included. Mr Kenyon replied that the HSDG had good performance in spending levels, but not in terms of delivery (99% of spending, but just 77% of performance targets). Mr McLoughlin proposed rephrasing this as “poor delivery performance”. Ms Shope-Sitole noted the Committee must not use the word “mismatch” in terms of spending and performance. If money doesn’t deliver, was there not a likelihood of corruption, and had the committee not failed in terms of oversight? Ms Shope-Sitole stated there had to be a follow-up in terms of the HSDG. Chairperson Phosa asked for a better term than “mismatch”. Mr Shope-Sitole, proposed it was wasteful expenditure. Ms Senokoanyane noted the committee was forever grappling with issue of people spending their budget but not meeting targets. Mr Dlomo stated that targets had to be aligned to the budget implementation: if they were aligned, there should be little disparity between implementation and spending. Ms Shope-Sitole identified the necessity for this to be investigated. Chairperson Phosa welcomed this brilliant idea but proposed this was an issue for the next administration. Ms Shope-Sitole proposed this had to be in the committee’s legacy report.

On page 23, Mr Dlomo clarified that members could look at the page and sequence of findings, every finding had a recommendation that it matched.

Mr Kenyon reassured the committee that the kind of investigation it was calling for as part of the Treasury’s work already. In the particular case of the HSDG, it was public knowledge that a number of provinces had taken HSDG funds from the end of the financial year and transferred it to the Housing Development Agency – this would reflect as money having been spent, but it was actually sitting in the HDA account. When it saw surpluses accumulating in the HDA, Treasury took back more than 1bn from these practices. Ms Shope-Sitole noted this was helpful, but the issue was not only Housing, it was in other departments as well. The Appropriations Committee had to ensure it was investigated and expenditure had to be clear and documented.

Mr Gcwabaza noted 2 issues at hand. Regarding the specific case of the HSD Grant – how money is being removed to agencies for parking of finances – this had been discovered. The mismatch between spending and performance, however, happened for various reasons and across government– this had to be discovered and stopped.

In terms of Section 7.1., Mr McLoughlin proposed that municipalities get too little money and more requirements are pushed onto them. The Treasury did not tell municipalities how to collect additional funds. It was impossible at municipal level to keep up with demands. Many things, like infrastructure and maintenance, were not budgeted for by municipalities.

Mr Kenyon noted that the payment of municipal bills was mentioned by the Minister of Finance in the Budget. However, this refers to issues that are systematic and cannot be addressed by once off payments. Maintenance must be budgeted for every year as it must be routine – it would take time to build this up, and Treasury had given significant relief in these matters. It used to be that grants could only be used for new infrastructure, now they could be used for rehabilitation too. However, routine maintenance had to be budgeted for from municipal budgets. In terms of money owed by provincial and national departments to municipalities, this was a longstanding issue and only accounted for 5% of total municipal arrears. By far the majority of arrears were held by households. The key issue in terms of governmental debt to be taken more seriously was that government departments were setting a bad example by non-payment. A working group on this matter was being led by the Department of Public Works. One of the big obstacles were disputed amounts regarding who owned government buildings, in terms of the PFMA, senior officials cannot sign off on bills regarding these buildings, if they are unsure of the ownership of the property. Treasury had allocated money to Public Works to update problematic buildings, in order to reflect ownership correctly and subsequently bills could be paid. If payments were still outstanding after this, departments would be out of excuses and then punitive measures could be ensured.

The Chairperson asked if there was a timeframe.

Mr Kenyon responded that there was a timeframe of 2 years. It was encouraging that new bills seem to be paid, and the backlog amount was no longer growing so rapidly. Departments were better at paying current amounts. The title deeds project had to run its course in terms of the PFMA.

The Chairperson asked for a 6-monthly reporting interval, Mr Kenyon replied the Committee might want to talk to the Department of Public Works.

Mr Gcwabaza complained that the problem with government was that it gave itself very long times to do things. 2 years to establish to whom a building belongs seemed too much, and the Treasury shouldn’t give itself leisure to accomplish something that was urgent. For years this had been raised, it was unacceptable that a 2-year period was needed. If Public Works were running the project, a specific number of officials had to be dedicated by Public Works to finish quickly. To sort out things that could be done in 6 months in 2 years was unacceptable. Mr Gcwabaza asked for Treasury to cut the implementation period.

Mr McLoughlin stated his intention to defend the Treasury – in theory administrative functions were easy, in practice they were much more complex. Disputes would arise and until these were solved, the deed would not be transferred. While 6 months may sound good, it was unrealistic.

Ms Senokoanyane noted that the committee was all frustrated by this problem. She noted that the abuse of government property was commonplace, and even senior officials lived or “owned” these properties, while not paying municipal bills. The MEC for Finance in Gauteng had decided that departmental payments would be handled by the Provincial Treasury and not departments because of this issue. Disbursement was one of the most difficult issues.

Ms Shope-Sitole wanted to support Mr Gcwabaza. She noted that in 2010, she visited an area of Rustenburg where blocks full of government-owned houses were illegally occupied and in arrears on debt due to non-payment. This issue was old and had to be solved quickly, not in 2 years.  

The Chairperson stated that Treasury had to come up with a strategy for this.

Mr McLoughlin referred to the possibility of garnishing orders, but noted that before this was resorted to, there was a need for a legal judgment. It would be much better if departments could reach an agreement through dispute resolution, rather than resorting to the courts.

Ms Senokoanyane noted a lot of government buildings had been hijacked. People in it were paying individuals, not government, their rent. The people in government houses were put there by someone. She also noted it was not always the case that people did not want to pay, but rather that they did not know how to. Solving the issue quickly would not be possible.

The Chairperson noted the National Treasury had processes in terms of the recovery of government debt, including attachment of property, after all avenues had been exhausted.

Mr Kenyon agreed with Mr McLoughlin. The Intergovernmental Relations Act and the Constitution required intergovernmental disputes to follow all mediation processes before they approached courts. The work on title deeds was guided by a working group who would manage these processes. To attach property for amounts due would require a judicial ruling on values.

The Chairperson proposed the committee could take solace in the fact something was being done at a high level by an interministerial committee.

The Chairperson noted the corrections on the Report on the DOR Bill B5 2019 were complete.

Ms Shope-Sitole proposed adoption, seconded by Ms Manana. Mr McLoughlin noted the DA reserved its rights for the record.

The Chairperson clarified the next meeting would be considering the Public Audit Access report. Mr Arends explained that, in the absence of submissions, there was no need for public hearings with the Select Committee, and suggested adopting the report the next morning.

The Chairperson accepted this, and noted that members would likely want to prepare for the afternoon’s parliamentary date, so scheduled the vote for 9am. The sitting and consideration of legacy report could be done the following week Wednesday at 10am.

Consideration of Minutes

The Chairperson moved on to the consideration of draft minutes for the 5th and 6th of March. The minutes of the 5th were accepted with small grammatical corrections: adoption was moved by Mr Shackleton and seconded by Mr McLoughlin. The minutes of the 6th were accepted with small grammatical corrections: adoption was moved by Ms Manana and seconded by Ms Shope-Sitole.

The Chairperson thanked members for coming to the meeting and for the dedication they had shown. She gave special thanks to the Treasury for assisting.

The meeting was adjourned.


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