2019 Appropriation Bill: public hearings and Treasury response
Standing Committee on Appropriations
16 July 2019
Chairperson: Mr M Buthelezi (ANC); Ms D Mahlangu (ANC)
The Standing and Select Committees on Appropriations held a joint public hearing on the 2019 Appropriation Bill and heard from the Congress of South African Trade Unions (COSATU) and from Mr Guy Harris.
Cosatu said it had expected the Budget to go further in addressing the economic, governance and budgetary crises. There was an absence of comprehensive government anti-corruption plans. Cosatu asked how much had been looted, how much had been recovered and how many arrests, convictions and asset seizures there were to show for the R400 million being spent on commissions of inquiry. It proposed comprehensive forensic audits of state owned enterprises and lifestyle audits of elected leaders and executive managers. Procurement for provincial and local government should be centralised under the Office of the Chief Procurement Officer.
Cosatu said it was not convinced that the government was on the right track to getting debt levels under control. There was a possibility of exceeding the 60% debt to GDP ratio and a danger that the country would be forced to borrow money from the International Monetary Fund. It welcomed the reduction in the number of ministers serving in the Cabinet, but believed there were still too many deputy ministers. Too much was being spent on executive perks such as first class travel, spousal benefits and catering.
Mr Guy Harris, a former business executive now involved in education initiatives and and youth development, said more money should have been found for early childhood development (ECD) and job creation through medium-sized businesses. There had to be a much stronger ECD base which was well funded and which made it clear where responsibility for implementing ECD lay. Job creation should focus on entry level upskillable jobs. Medium-sized business could provide these jobs and deregulation was needed to make it easier for them to do business. Current bargaining council regulation was driven by large businesses and imposed on smaller ones. There should be a three-tier system.
National Treasury briefed the committees on the proposed amendments to the Appropriation Bill. These included the R17.6 billion in emergency funding for Eskom which was authorised in April in terms of the Public Finance Management Act. The other amendments were to accommodate the reconfigured government departments announced after the elections. It was proposed that unfunded budget votes be created for the new departments and that funds be shifted to them once they were up and running.
During discussion of the Appropriation Bill, Members welcomed proposals to enlist 7 000 more police officers but called for resources to be shifted from low-crime areas to under-resourced townships and rural police stations.
Concerns were raised about Eskom and the management of other state owned enterprises. There were calls for forensic and lifestyle audits. There was agreement with Cosatu that the Appropriation Bill does not do enough to address corruption and that it did not appear to be giving effect to commitments made in the President’s State of the Nation Address.
The national government was urged to do more to support local government. Concerns were raised about reports that some municipalities were failing to pay salaries and that they were using the Community Work Programme and Extended Public Works Programme to provide cheap labour at rates below the minimum wage.
Mr Matthew Parks, Cosatu parliamentary coordinator, said Cosatu was sensitive to the budgetary pressures the government faced. However it expected the Budget to go further in addressing economic, governance and budgetary crises.
While the Medium Term Budget Policy Statement acknowledged the problem of corruption, there was an absence of comprehensive government anti-corruption plans. Cosatu wanted to know how much was being looted, how much had been recovered and how many arrests, convictions and asset seizures there were to show for the R400 million being spent on commissions of inquiry. Cosatu proposed that there be comprehensive forensic audits of state owned enterprises as well as state and local government departments. There should be lifestyle audits of elected leaders and managers. The role of national government’s Chief Procurement Officer should be expanded in order to centralise procurement for provincial and local government.
Mr Parks said Cosatu was not convinced that the government was on the right track to get debt levels under control. There was a possibility of exceeding the 60% debt to GDP ratio and a danger that the country would be forced to borrow money from the International Monetary Fund. He asked what was being done to recover money lost in wasteful expenditure on the Medupi and Kusile power stations, the Giyani water project and the passenger rail programme.
Cosatu welcomed the reduction in the number of ministers in the Cabinet, but believed there were still too many deputy ministers. Too much was being spent on executive perks such as first class travel, spousal benefits and catering. Mr Parks questioned the building of six department head offices at a cost of R13 billion.
Cosatu believed the public sector wage bill, which accounted for 35% of government spending, was in line with international norms. The public service head-count was falling by 1% a year. Instead of targeting ordinary workers, money should be saved by slashing provincial cabinets and mayoral committees, capping the salaries of managers at state owned enterprises and doing audits to eliminate so-called ‘ghost posts.’
Mr Parks outlined Cosatu’s views on the budget appropriations for government departments:
Trade and Industry: Additional funding was needed for industrialisation programmes.
Employment and Labour: More funding was needed for the department’s new mandate of job creation. Cosatu welcomed plans to employ an additional 500 labour inspectors and an extra 200 health and safety inspectors.
Agriculture, Land Reform and Rural Development: Adequate funding was needed for land reform and for supporting emerging farmers.
Cooperative Governance and Traditional Affairs: There had been a collapse of good governance in municipalities and some were failing to pay staff. There was a need to overhaul procurement processes and to revise the funding model for local government. Municipalities were using the Community Work Programme (CWP) and the Extended Public Works Programme as a way of obtaining cheap labour.
SA Police Service: Cosatu welcomed plans to enlist an additional 7 000 officers. However, there was a need to redeploy officers from head offices and low crime areas to high crime stations and units. Police stations in rural areas and townships were badly under-resourced.
Health: There were crises of management, staffing, resourcing and security at public healthcare institutions. Cosatu welcome the pending release of National Health Insurance Bill.
Social Development: There was a lack of strategy and resources to deal with substance abuse.
Basic Education: Clear timeframes were needed for school sanitation, security and infrastructure plans.
Higher Education and Training: Adjustments for inflation were needed for free tertiary education funding. Sector Education and Training Authorities (SETAs) would have to be repositioned for the fourth industrial revolution and would have to be overhauled to deal with corruption.
Water Affairs: There had been a collapse at the department. There was a need for plans to deal with water crises.
Transport: E-tolls should be scrapped. The government should intervene in collapses in the Metrorail system and should invest more in public transport.
Several committee members said they agreed on the need to redeploy police officers and improve conditions at township and rural police stations.
Ms D Mahlangu (ANC), Co-chairperson, described rural police stations as ‘depressing’.
Mr S Aucamp (DA) asked what Cosatu believed would be the best long-term strategy at Eskom. He asked how many people were employed in agriculture and what the effect on jobs would be if there was a collapse in the farming sector.
Mr D Ryder (DA) commented that only 9% of the fiscus was allocated to local government. There had to be a serious look at what national government was doing to support local government. He agreed that the Appropriation Bill was ‘very quiet’ on corruption.
Mr A Sarupen (DA) questioned whether centralising procurement was an effective way to deal with corruption. When the Gauteng government did this it resulted in a ‘monstrosity’ which was very difficult to dismantle. He supported the idea of auditing all procurement at state owned enterprises. He agreed that there was a need to deal with corruption at SETAs. Some of them contracted training of workers to fly-by-night firms which did not teach any real skills.
Several members commented on municipalities’ use of CWP and EPWP workers.
Mr Sarupen asked why these programmes were not subject to minimum wage laws.
Ms E Peters (ANC) said the workers were being used as cheap labour, while there was no system in place to ensure that they received mentoring and training.
Ms Peters said she fully supported the view that emerging farmers needed to be supported. She asked what South Africa’s role would be in the fourth industrial revolution. Would it be a key player or simply a consumer of technological goods and services?
Mr D Joseph (DA) noted Cosatu’s comment that the public sector wage bill was 35% of government spending and asked how the percentage was arrived at. His information was that it could be above 50% at some levels of government. He said the challenge of ghost workers had been around for a long time.
Co-chairperson Mahlangu said personnel systems needed to be cleaned up and run by competent people.
Mr Y Carrim (ANC) said the Appropriations Committees had a huge responsibility to see that money was used productively, yet they lacked capacity to do this. He said civil society organisations could assist by bringing concrete proposals to committee hearings instead of making submissions that were often too general.
On the public sector wage bill, Mr Carrim said the real issue was not salary scales but the productivity of workers. The overall performance of the public sector left a lot to be desired. Cosatu should focus not only on wages and working conditions. As part of its commitment to a developmental state it should also look at ways of improving workers’ performance.
Mr F du Toit (FF+) said strict labour laws made it difficult to employ people. While he was not in favour of exploiting workers, he wondered if the minimum wage was appropriate. High wages raised the price of goods and therefore the cost of living for workers. When strikes took place, it was workers who suffered a loss of income and not the union leaders.
On the labour laws, Mr Parks pointed to recent rounds of retrenchments, saying it was not too difficult to fire workers. On the minimum wage, he pointed to a study done in Brazil which found that putting more money in workers’ pockets meant they spent more and caused the economy to grow. Cosatu was frustrated that there had been no fleshing out of commitments made at the Presidential Jobs Summit.
On Eskom and other SOEs, Mr Parks replied there had been so much looting that forensic audits were needed to determine the extent. As to the future of Eskom, one suggestion was that it should develop markets in neighbouring countries by lowering the tariffs it charged them.
A larger debate was needed on support for agriculture. Support was not sufficient when compared to the European Union subsidies for farmers.
Mr Parks undertook to provide the committees with details of municipalities who were failing to pay salaries.
He said the wages paid to EPWP workers were 55% of the minimum wage. This was not satisfactory.
On SETAs, he suggested that consideration should be given to returning to a system of apprenticeships.
Guy Harris submission
Mr Guy Harris, a former business executive now involved in youth development and education initiatives, said he appreciated the budgetary constraints, but more money should have been found for early childhood development (ECD) and job creation through medium-sized businesses. Education was the key driver in reducing economic inequality and there had to be a much stronger ECD base which was well funded and which made it clear where responsibility for implementing ECD lay. Job creation should focus on entry level upskillable jobs. Medium-sized business could provide these jobs, However, while the government and large corporate businesses were cooperating, there was little input from medium-sized businesses.
Mr Harris said most brain development occurred before the age of six. More than 700 000 children had had access to early childhood education in the past financial year. This had established a firm foundation for a comprehensive ECD programme which should reach more than five million children.
The possibility of a R30 billion increase for ECD had been raised at hearings on the 2018 Appropriation Bill, but the 2019 Budget made no additional allocation. This year, responsibility for ECD would be shifted from the Department of Social Development to the Basic Education Department. Mr Harris asked if DBE had the capacity, given its difficulties in delivering on toilets, textbooks and teaching at schools.
Mr Harris said medium-sized businesses were the best hope for creating jobs. Small businesses had a high failure rate and employed few people, while big businesses recruited mainly highly skilled workers at a high cost per job created.
There was a need for re-regulation of businesses. Current bargaining council regulation was driven by large businesses and imposed on smaller ones. There should be a three-tier system: regulations for small businesses employing fewer than 50 people should focus only on health and safety; for medium businesses employing up to 500 people the regulations should focus on their management, with employees able to take exploitative employers to task; the current regulations should apply to big businesses. Tax, registration and compliance requirements should be dramatically simplified for small businesses.
Ms Peters thanked Mr Harris for focusing the attention on ECD. Parliamentary committees relied on civil society to bring issues to their notice. She asked where additional money for ECD could be found.
Mr Ryder said he appreciated Mr Harris’s efforts. If Parliament was to be a people’s parliament it needed more people like Mr Harris to engage with it and hold it to account. He said commitments made in the President’s February State of the Nation Address this year did not appear to be reflected in the Budget.
Mr Harris replied that he wished to issue a challenge to Parliament to ensure that ECD received sufficient attention in the Budget. He repeated his concerns about the capacity of the Department of Basic Education to oversee ECD and asked if the shift in responsibility for ECD would actually take place this year.
Mr Harris said it was the wealthy who could afford ECD. He compared the situation of his own grandchildren to that of children in Cape Town’s Lavender Hill area where ECD carers were paid only R3 000 a month. He referred to figures supplied by National Treasury which showed spending of R3 billion on ECD compared to R250 billion for 10 years of primary and high school education and R100 billion for tertiary education. Inequality was being compounded.
Proposed Amendments to Appropriations Bill
Adv Empie van Schoor, Chief Director: Legislation at National Treasury, said the amendments dealt with two issues: One was the R17.6 billion in funding for Eskom which was approved in terms of Section 16 of the Public Finance Management Act (PFMA). The other amendments dealt with the reconfigured national departments proclaimed after the elections.
The Eskom funding was authorised by the Minister of Finance in April. Section 16 of the PFMA required that the R17.6 billion must be included in the Appropriation Bill. It was proposed to do this by amending the budget vote for the Department of Public Enterprises. The amendments were consistent with the Fiscal Framework and Division of Revenue Bill as required by the Money Bills Amendment Procedure Act.
To provide for the reconfigured departments, it was proposed to create budget votes without funds for the new departments. Funds could then be shifted to the departments once functions, staff and assets had been transferred to them. The shifts would be done in terms of Section 33 of the PFMA and appear in the Adjustments Appropriation Bill. These amendments were considered to be technical amendments to be dealt with in terms of Section 14 of the Money Bills Amendment Procedure Act.
Mr Sarupen asked if the R17.6 billion in the proposed amendment was included in the R23 billion funding provided to Eskom in the Budget. He asked what conditions were attached to the funding.
Mr du Toit asked about additional funding for Eskom and from where this would be sourced.
Ms Peters said the Committees needed to support the amendments providing for reconfigured departments.
Mr Anthony Julies, National Treasury Deputy Director General: Assets and Liability Management, replied that the additional funding for Eskom would be required before the Medium Term Budget Policy Statement in October. This would be raised through a special appropriation. The R17.6 billion had been raised under Section 16 of the PFMA to meet obligations that became due before the current process. It formed part of the R23 billion provided in the Budget. He said conditions for the funding were announced by the President in his statement on Eskom and details would be provided by the Minister of Finance during the special appropriation process.
The Standing Committee on Appropriations adopted a motion of desirability for the Appropriations Bill. Chairperson Buthelezi explained that this was not a move to adopt the Appropriations Bill but to state that, in the Committee’s opinion, it would be desirable to appropriate money from the National Revenue Fund, subject to conditions.
National Treasury response to submissions
National Treasury submitted a written response to submissions on the Appropriation Bill. Its response was not discussed during the meeting. It addressed concerns raised by the Committees as well:
Treasury responded to the concern about the shifting of funds away from non-toll roads to funding e-toll roads. It said cash collection for the Gauteng Freeway Improvement Project (GFIP) of R65 million per month was significantly lower than projected. The SA National Roads Agency Limited (SANRAL) needed R240 million a month to service the GFIP debt. Treasury shifted R1.9 billion from SANRAL’s non-toll allocation to the GFIP in 2017/18. SANRAL’s total outstanding debt was R47 billion.
There was a concern that more funds were being allocated to the Passenger Rail Agency of SA even though PRASA had been unable to use all its allocated funds. Treasury responded that R2 billion was in fact reallocated from PRASA to SANRAL non-toll roads in the 2019 Appropriation Bill. A further R3 billion was shifted from PRASA capital funds to SANRAL non-toll portfolio during the year.
Members had said it was regrettable that the Economic Development Department was allocated only 12% of the country’s total budget. Treasury referred to the guidelines in the Estimates of National Expenditure. Treasury was working with the Presidential Infrastructure Coordinating Commission, the Department of Planning, Monitoring and Evaluation and EDD to develop a facility to support quality public investments.
The Committees had welcomed budgeted reductions in compensation of employees and had called for more cost containment measures. Treasury responded it was working on a Public Procurement Bill to provide a single overarching piece of national legislation to regulate public procurement.
- National Treasury response to submissions on 2019 Appropriation Bil
- Cosatu presentation on 2019 Appropriation Bill
- Cosatu submission on 2019 Appropriation Bill
- Mr G Harris submission on 2019 Appropriation Bill
- National Treasury proposed amendments to 2019 Appropriation Bill
- Media Statement - ‘Bling Culture’ in SOES Needs to be Addressed, Costau tells Appropriations Commmittees
Buthelezi, Mr S N
Mahlangu, Ms DG
Aucamp, Mr S
Carrim, Mr YI
Dikgale, Ms MC
Du Toit, Mr SF
Joseph, Mr D
Komane, Ms RN
Mathafa, Mr OM
Mkiva, Mr Z
Mlenzana, Mr Z
Moletsane, Mr MS
Morolong, Mr IK
Ntlangwini, Ms EN
Peters, Ms ED
Qayiso, Mr XS
Ryder, Mr D
Sarupen, Mr AN
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