National Treasury budget: Committee Report

Meeting report

Consideration of Committee Minutes dated 4 July 2019

The Chairperson welcomed  everyone. He referred to Committee minutes of the meeting dated 4 July 2019 and asked if Members have any outstanding concerns with the minutes, i.e. whether all were in agreement that it adequately represented the previous meeting or not.

Mr F Shivambu (EFF) referred to page five where there was a question left without a response. He wanted to know how the question was addressed. On page six, there was a question of funding of the rogue intelligence unit but this too was left unanswered. The procedure is to include matters arising when minutes are adopted.

The Chairperson responded that the way the minutes are written is quite a standard process but the question left with no response on page five needs to be addressed. In regard to the funding question on page six, the Deputy Minister alluded that there were many challenges with this and how the previous Commissioner was relieved of this responsibility. According to the Deputy Minister, this matter has been covered by the Commission’s report which has been implemented by the President. The matter was addressed by the Deputy Minister.

 Ms P Abraham (ANC) believed the minutes are accurate but would also like to have further responses from the Department as the minutes should reflect these responses more clearly.

Mr G Skosana (ANC) seconded the suggestion of Ms Abraham. If matters are raised, the response must be included. Those who were not present at the meeting may think there was no response to the question. The response could even be highlighted to make it clearer.

Mr Shivambu went back to his earlier point regarding further clarity. The minutes are not clear and do not accurately depict the meeting as many responses are omitted. He requested the Committee formally request the National Treasury report in terms of processes followed on the appointment of the current SA Revenue Service (Sars) Commissioner. Who was interviewed? Where and what were the responses? This Committee is the oversight body and has an obligation to scrutinise the appointment process of the current Sars Commissioner. The Public Protector has made findings against the rogue unit and Sars is heavily implicated in the matter. According to the findings, Sars has acted against the law and has illegal intelligence equipment which should be given to the State Security Agency. Sars should update the Committee on its compliance with the Public Protector’s (PP) report if it is not contending the contents of the PP’s report. If there is binding remedial action, Sars must explain how it would deal with the aspects and comply. Parliament is obligated to ensure the remedial actions of the PP are complied with.

Ms Abraham agrees noting that while the minutes are an accurate reflection of the Committee’s meeting, it should reflect on the responses provided to Members’ questions as well.  

The Chairperson noted all the points raised by Mr Shivambu were not raised in the Committee’s last meeting. It would however be dealt with in a future engagement with Sars and the Ministry.

Mr Shivambu reiterates that his point is in direct regard to page six of the Committee minutes so it was not new matters that he was raising – they were raised in the meeting.

Ms D Peters (ANC) said that if the Committee is not satisfied with a response provided by the Department, the Committee Secretariat is able to request the Department to be more thorough and provide more information to ensure this does not happen again. All matters raised in the meeting must be responded to and included in the minutes.

Dr Zakhele Hlophe, Content Advisor, Parliament, informed the Committee that some of the matters are also covered in the Committee’s Budget Vote Report which deals with the same meeting as that of the minutes.

Dr D George (DA) explains the question Mr Shivambu is interested in was one he asked in the previous meeting that these minutes were based on. The Members question was in fact replied to. The gist of the question on the funding of the rogue unit was derived from statements that the unit was not transparently funded. He believed the minutes were indeed accurate.

The Committee minutes dated 4 July 2019 were not adopted as the Chairperson wanted to wait until all responses were reflected.

Draft Committee Report Budget Vote 7: National Treasury

Dr Hlophe introduced himself explaining that he works with the Justice Committee and was merely assisting the Committee. Human resources were working to fill the position of Content Advisor to the Standing Committee on Finance. Turning to the Committee Report, he noted it was drafted to fit recommendations of the Committee as raised in its meetings. It is the task of the Committee now to give insight into the Report and make any recommendations and amendments it sees fit. He asked the Chairperson to allow for Members to go through the Report and to submit their ideas to be added into it before it is adopted.

Mr Skosana suggested Dr Hlophe briefly speak to each recommendation.  

- 7.1: welcomes the Executive and Deputy Minister wishing them well in their enterprises

- 7.2 explains what the Committee would be engaged in including considering the Legacy Report of the previous Committee and induction

-7.3 highlighted that there is not a Medium term Strategic Framework (MTSF) for the new administration yet

-7.4 budget of National Treasury is projected to increase over the medium term. Over the Medium Term Expenditure Framework (MTEF), the Treasury budget is projected to increase by 5.7%. SARS’s budget is projected to increase by R1.1 billion but it is still below Sars’s funding needs of R2.7 billion over the medium term. On page 5, table 2, there is a depiction of available projects and shows the shortfall per year

-7.5 notes many Bills that Treasury plans to bring to the Committee in 2019/20. This includes the Procurement Bill and other goals presented in the Annual Performance Plan (APP). These Bills must be brought in as soon as possible as this year is a little shorter and the Committee would benefit from getting to work as soon as possible

-7.6 Public Procurement Bill: the matter of deviations and some others were brought up in regard to this Bill. It must be expedited as it has been in the works since 2015

-7.7 appointment of the Chief Procurement Officer and other administrative positions: these matters were highlighted by the Auditor-General and there is a need for National Treasury to update the Committee on the process of filling these senior positions as there is a lack of leadership

-7.8 Integrated Financial Management System (IFMS): the question was brought up to require National Treasury to update the Committee on the forensic investigation and actions taken against anyone found to have violated the law in the next quarterly briefing. The main concern highlighted under this point is that there is no management for the IFMS implementation yet as the position of Chief Director was unfilled.

-7.9 Treasury reporting to the Committee on State-Owned Enterprises (SOEs) and contingent liabilities

-7.11 state of municipalities: this section requires National Treasury to report to the Committee on its own assessment of these problems, specifically in regard to the City Support Program and Finance Improvement Program. Matters relating to municipalities are also handled by the Standing Committee on Public Accounts (SCOPA). The matter is also connected to the regression of the audit outcomes of more than 50% of municipalities

7.12 SARS: measures to rebuild SARS were found to have challenges due to the process followed in appointing the new Commissioner. Majority of Members believed that Treasury needs to provide an explanation of this process

7.13 the Committee welcomed the report of the Nugent Commission and would discuss the report perhaps by inviting Judge Nugent to the Committee to present his report

7.14 the Committee welcomes the establishment of the large business centre and compliance unit at Sars

7.15 extension of the employment tax exemption scheme: the Committee recommended a detailed study be conducted on it and its impact on job creation

7.16 health promotion levy: concern noted that the levy was increased without any evidence. Treasury must update the Committee on this and its effect on job losses  

7.17 National Treasury and SARS need to supply more details to the Committee on how the rogue intelligence unit was funded. This recommendation might need more crafting as the matter of possible insourcing was raised in the Committee’s meeting

Discussion

Dr George wants to add a recommendation (7.20) to include the matter of progress in regard to the pension fund reform. This has been going on for over 15 years and while progress was made, it was only minimal. He would like National Treasury officially update the Committee on the progress of the pension fund or the pension reform process. This would useful for the Committee.

Mr Shivambu was quite confused as he found there were many matters in the Report which should not be there. National Treasury oversees about 15 different entities and all of these entities require budget adjustments. There are entities constantly receiving poor audit outcomes but Treasury continuously budgets for these entities. Even with the Public Investment Corporation (PIC) currently, there is a board which is not quorate and cannot take decisions. The Committee needs to know what is happening with the government pension’s scheme likewise with the Tax Ombud, New Development Bank and Financial and Fiscal Commission etc. These bodies are directly appropriated through Treasury. There must be a clear indication of what is happening with the IFMS. Treasury has incurred R67 million in fruitless expenditure and R768 million in irregular expenditure in the previous Financial Year. The Department should be teaching others how to comply with the procurement supply chain process but it itself has challenges. Treasury must explain how it would deal with its own internal systems. This irregular expenditure would not be curbed anytime soon. The Committee’s Report does not deal with these concerns and is therefore not thorough.

The Chairperson responded that the matter of IFMS is already expressed in point 7.8. Points were also raised in the Report on the appointment processes. The Committee would be meeting with some of the entities mentioned soon. The other maters raised by the Member can be integrated in the Report.

Mr Skosana referred to point 7.10 explaining it must conclude by saying the Committee is responsible for finance and Treasury needs to be accountable to the Committee for that reason. He would like an update from the National Treasury on how far along the programs are with assisting municipalities.

Dr Hlophe explains the Committee is unable to meet all entities that fall under finance. This happens with Annual Reports as well. The Auditor-General comes in and reports on all entities telling the Committee how they perform. This makes it difficult to add plans for entities when the Committee and the entity themselves never meet.

The Chairperson said points 7.10 and 7.11 are so similar that they should be combined to make one point. The report from National Treasury must show that it has nothing to hide. The public servants are raising this matter sharply already and this further report would ensure there are improvements.

Mr G Hill-Lewis (DA) explained SOEs are an important part of the debate. It is important to point out the state is considering very sizeable additional bailouts towards these SOEs. All bailouts are then accompanied by turnaround plans. The Committee and Department do not have the ability to truly make funds conditional on the success of turnaround plans. He would like to see some reflection  by not only mentioning the turnaround plans but describing that additional funds are purely contingent on the implementation and success of these plans.

The Chairperson said the Standing Committee must be in contact with the respective Portfolio Committee to ensure the decisions of one Committee are not overturned by another. He asked if such meeting had occurred before.  

Members respond saying that this has not happened before.

Mr Shivambu said the South African Airways (SAA) bailout was a victim of oversight and differing areas of reporting. The only crisis is that National Treasury does not have the capacity to oversee all entities.  

The Chairperson said the Committee needs a full report with all SOEs National Treasury ihas intervened in. This would help the conditions of bailouts and ensure improvements are secured. This means the Committee would not be taking on the task of SOEs but would be holding them accountable directly.

Dr Hlophe asks Mr Lewis to summarise his previous point on 7.9 so that he could document the recommendation.

Mr Lewis summarised that any additional financial support from the state should be contingent on not just theoretical turnaround plans but the actual implementation and success of these plans.

Members of the Committee adopted its Report on Budget Vote 7: National Treasury.

Mr Shivambu objected to the Committee Report.

Mr Hill-Lewis noted the DA reserves its position on adoption of the Report.

The meeting was adjourned.