Special Appropriation Bill [B10-2019]: committee report

Standing Committee on Appropriations

10 October 2019
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

The Committee adopted its report on the Special Appropriation Bill [B10-2019], with amendments to reflect the need for more stringent conditions to be imposed on the R59 billion bailout to Eskom over the 2019/20 and 2020/21 financial years

The Committee underlined that it did not want to give Eskom a blank cheque, with malleable conditions. It was faced with the task of wording and placing strong conditions as either legislation, regulations or as ministerial conditions. The Senior Parliamentary Legal Advisor, highlighted that any process of amending the Bill to include the conditions as subordinate legislation would be lengthy. It would entail a 14-day consultation period for the Minister of Finance, public hearings and deliberations by the National Council of Provinces.

The Minister of Finance’s cut-off point to transfer the money to Eskom was the end of October and thus the legislation would need to be passed before then. This would be unlikely if the Bill was subjected to a lengthy process for the conditions to be amended as legislation. This would result in Eskom missing the scheduled loan repayment date and incurring interest which would have cross-cutting effects on everyone.

Therefore, the Committee adopted the Bill with the recommendation that the Minister have authority to amend the conditions of further appropriations and that the Minister brief the Committee on the proposed regulations prior to the introduction of the 2020 Appropriation Bill. The Minister should be requested to brief the Committee on ministerial conditions by the end of November 2019.

Meeting report

The Chairperson announced the agenda for the day. Apologies were received from Mr S Emam (NFP) and Ms D Peters (ANC) who would be joining the meeting late.

The Chairperson took the Committee through the Draft Report on the Special Appropriation Bill [B10-2019] in a page by page fashion. The Report dealt with the conditions of the R59 billion bailout to Eskom over the 2019/20 and 2020/21 financial years. The Committee was asked to deliberate on the adoption of the Report on Bill [B10-2019].

The Motion of Desirability- Special Appropriation Bill [B10- 2019 (Reprint)] was adopted with no opposition.

The Chairperson asked Adv Frank Jenkins, Senior Parliament Legal Advisor, to provide feedback to the Committee from his engagement with National Treasury on the Bill [B10-2019].

Adv Jenkins stated that the wording of the conditions and the consequence management needed to be deliberated on. Furthermore, placement of the conditions are to be determined as either legislation, regulations or as ministerial conditions.

According to National Treasury, the conditions should become ministerial conditions as the Minister is bound by legality principles. If the Committee wants the conditions to be subordinate legislation, the Bill will need to be changed, to give the Minister that authority, as the Public Finance and Management Act allows regulations but not such regulations on appropriations. Regulations or conditions to appropriations should be in the Appropriation Bill, outlining what conditions apply. This is envisaged in Section 77 of the Constitution, which states an appropriation bill may only deal with appropriations and incidental matters to that appropriation.

Therefore, if the Committee opts for the conditions to be subordinate legislation, the Committee will be faced with the dilemma of changing the legislation by amending the Bill. If the Bill is amended, a 14-day consultation period is required with the Minister of Finance as he introduced the Bill. The Minister can waive this period. However, public hearings are required for the new amendment which may be debatable. Adv Jenkins advised the Committee to be cautious on this in the light of a court case involving the South African Veterinary Association. Parliament passed the Medicines and Relating Substances Amendment Act, which pertained to medical practitioners and veterinarians. When the amendment was made, there were no further public hearings. The Constitutional Court stated that an amendment that affects a specific grouping cannot be made without further public hearings.

Similarly, if the Committee amends the Bill, these conditions will affect Eskom, those monitoring Eskom and organisations such as the Organisation Undoing Tax Abuse (OUTA). These entities may want to contribute to a public hearing. This could delay the process and hinder the possibility of passing the Bill by the end of October. Furthermore, there are many behind the scene processes with Parliament, the Executive and the National Council of Provinces (NCOP) that will need to be undergone.

Adv Jenkins advised that the Minister should have authority to transfer the money to Eskom to pay its debt before it surpasses the due date for debt repayment. The Minister of Finance’s cut-off point to transfer the money to Eskom is the end of October and thus the legislation would need to be passed before then. This would be a very difficult task for the reasons mentioned. The Bill will also have to be handed over to the NCOP for them to fulfil their obligations which may also include public hearings unless the NCOP was satisfied with the public hearings held by National Assembly.

The conditions attached by regulation to the appropriation that must happen this year in the amount of R26 billion may or may not apply to the R33 billion for the following financial year, but the Bill will still need to be amended. It has been made clear that the Committee wants stronger legal powers in the conditions and to ensure consequence management. It is thus advised that the Minister of Finance be required to ensure this happens as soon as possible or at least is part of the conditions to be reflected in the Appropriation Bill that is coming with the Annual Budget in February 2020.

In the engagement with National Treasury, Adv Jenkins found that Members asked for more clarity, increased consequence management and “longer teeth”. What this means for Eskom must be considered. The Committee, Parliament, National Treasury and Eskom are under pressure. The creditors are not concerned about conditions but are rather focused on the fact that money is due to them and the consequences that will follow for late payments.

Parliament’s mandate of oversight is to ensure that there is value for money. This is achieved through conditions. The most important of these conditions is that the money be used for the sole purpose of settling Eskom debt and not for procurement irregularities or to pay contracts that were not well negotiated. As it stands, it is advised that the Bill be passed without amendments and the report include that conditions are to be reflected in the Appropriation Bill for the next year. Alternatively, for the Bill to be passed and the Minister to be granted the authority to make regulations to the Bill.

Discussion

Mr A Sarupen (DA) asked if there is a guarantee that National Treasury will pay attention to the recommendations stipulated in the Report? He acknowledged the role of creditors to whom Eskom owes money which may incur interest as per their loan schedules. However, the South African public must be considered, as they want to see greater accountability from Eskom. The Committee therefore, is accountable to the citizens and not to Eskom’s creditors.

Mr Z Mlenzana (ANC) stated that in a previous meeting held regarding this Bill, the conditions were not packaged in one basket. Some conditions could be part of principal legislation, some could be regulations and other ministerial conditions. Eskom has stringent timelines for debt repayment and if Eskom defaults on this, it will have a cross-cutting effect on everyone. Thus, the Minister should be allowed to act within ministerial arrangements to regulate the Bill. It has been agreed with Treasury that there will be weekly meetings to account for money spent. No expenditure will be made without prior approval by National Treasury. All that will be contained in a letter, with conditions that need to be met before the second payment is made. In February, the Committee can continue seeking advice to finalise the conditions for the second payout. This would avoid issues emerging as a result of a rushed decision.

Mr O Mathafa (ANC) concurred with the point made by Mr Mlenzana. He acknowledged the time constraint on the Committee and the Minister and for this reason the Bill should be passed with ministerial conditions that will allow for conditions to be strengthened at a later stage. The National Treasury has also expressed the need for strengthened conditions thus, whether it is packaged as part of legislation or the Bill, Treasury is aligned to the Committee’s stance on the conditions.

Mr I Morolong (ANC) concurred with Mr Mlenzana and Mr Mathafa that the Bill must be strengthened through conditions and consequence management. However, the Committee does not have the luxury of time. He stated that the Bill should be passed to avoid the consequences of late payment to Eskom creditors.

Mr D Joseph (DA) asked for clarity from Adv Jenkins regarding the amounts R26 billion and R33 billion. Which amount will the recommendations pertain to, or is it both amounts?

The Chairperson contributed to Mr Joseph’s point of clarity by asking if it is possible, without tampering with the legislature, to allow the Minister to continue with the payment of R26 billion and put in ministerial conditions for the following financial year of the amount of R33 billion? Is the differentiation in conditions between each amount possible?

Adv Jenkins stated that R26 billion will be paid out for this financial year. He is unsure in what amounts it needs to be paid however, the total of R26 billion needs to be paid by the end of March 2020. If at that point there is no authority for the Minister to put conditions in subordinate legislation, then there is no point in putting conditions on an amount that has already been appropriated.

For the next financial year beginning on April 1, 2020 and pertaining to the amount of R33 billion, conditions may be put in addition to the ministerial conditions that already exist. This may be subordinate legislation or a conditional appropriation within the bill that will be in affect before the second payout. The Committee can put in the report that the Bill is passed but further appropriations must be made by the Minister in further legislation. In other words, if the Minister does not comply with the report of the Committee, the Money Bills Act will allow the Committee to put those conditions through an amendment to the Appropriation Bill in 2020. Furthermore, there must also be a power of authority for the Minister to make Treasury regulations pertaining to this. However, it is usually standard in an Appropriation Bill.

Mr Joseph stated that the Provisions of the Bill (page 3 of the Draft Report) indicate that the Bill proposes additional financial support to Eskom for both amounts R26 billions and R33 billion. Thus, it is unclear that a differentiation in conditions per amount is possible. However, following the clarity from the Adv Jenkins, Mr Joseph agreed that the Minister should attach conditions to second payout of the R33 billion.

The Chairperson underlined that the Committee does not want to give Eskom a blank cheque, with malleable conditions. The report details this concern. Furthermore, he stated that it is not easy for the Executive to present this kind of bill to Parliament asking for a bailout. It is thus, in the interest of the Executive that there are conditions attached to the amount appropriated. He said it would be irresponsible of the Committee and as law makers to allow Eskom room to default on its payments, especially considering the consequences and unintended consequences that will arise from the late payment.

In relation to Mr Sarupen’s concern on the guarantee that the Minister will pass the Act with the recommended conditions, the Minister does not pass the Act, Parliament passes the Act. Thus, the discussion that is needed is how conditions will be classified. Discussions and a request for Treasury to begin working on this must follow as soon as possible.

The Chairperson ran through each page of the Draft Report on the Special Appropriation Bill [B10-2019 (reprint)]. The Chairperson added 5.10 to the report which notes that the proposed conditions are not stringent enough, however, it would be too risky to the fiscus to amend the Bill at this stage to include specific conditions. Under recommendations: 6.1.1, 6.1.2 and 6.1.3 were added, requesting the Minister to brief the Committee on ministerial conditions by the end of November 2019, it recommends the Minister have authority to amend the conditions of further appropriations and that the Minister brief the Committee on the proposed regulations prior to the introduction of the 2020 Appropriation Bill.

Mr Mlenzana asked if referring to the total amount of R59 billion in 6.1.1 rather than referring to the separate payouts will not create a loophole for the recommendation that each payout should have separate conditions.

Adv Jenkins said that the reference to the total amount of R59 billion in the recommendations does not create a loophole in the conditions as the additional recommendations refer to this financial year of the amount of R26 billion and for the next financial year which includes the R33 billion. Thus, the Committee has conditioned the appropriation in the principal Act as well as the authority of the Minister to make further regulations. That separates the terms of the conditions.

The Report for Special Appropriation Bill [B10-2019 (reprint)] was adopted with amendments.

Consideration and Adoption of draft minutes dated 17 September 2019
The minutes for the meeting were adopted as a true reflection of the meeting

Consideration and Adoption of draft minutes dated 18 September 2019
The minutes for the meeting were adopted as a true reflection of the meeting

Consideration and Adoption of draft Eskom Oversight Programme
Mr Joseph asked the research staff to provide the Committee with extracts of the financial report so that the Committee is empowered and does not solely rely on Eskom’s presentations when meeting with the Auditor-General on the impact of dismissals and terminations. He further asked if the Department of Labour will be present at the meeting with Eskom. Who will lead the discussion in the meeting, the Committee or the Department?

Mr Mlenzana said that ordinary South Africans may expect the Chairperson to address the public following the meeting with Eskom regarding the restructuring that will take place in Eskom. How does the Committee present the fact that they have not yet met the Chief Risk Officer (CRO)?

Mr X Qayiso (ANC) stated that it is important that the new CRO meet with the Committee as the CRO has given many excuses for not meeting the Committee. The Committee needs to outline to the public its role in meeting with Eskom. This will determine people’s input in the meeting.

Mr Mathafa asked if it is possible to have representation from Treasury when deliberating with Eskom.

Ms D Peters (ANC) stated that the Standing Committee should not unnecessarily bring the CRO into the picture. It should rather deal with the issues of Eskom as a company and avoid crossing the lines between SCOA and the Portfolio Committee areas. She concurred that the public must be informed that the Committee is embarking on an oversight programme at Eskom as well as provide feedback following the oversight programme. The public has been focused on the dealings of SCOA, however, the Committee has had limited communication with the public. The report makes reference to the public and how the consumption of energy without paying will come to an end with specific reference to Soweto, thus communication with the public is needed.

The Chairperson stated that the public does not know that SCOA exists thus, public education is required. The Committee has a huge responsibility in Parliament and needs to be known for reasons other than for bailouts.

The CRO will advise the Minister of Public Enterprises and the paper they come up with will encompass the advice that would have been given by the Committee. Therefore, SCOA should not be concerned with meeting the CRO for now. National Treasury has been invited to accompany SCOA to the Eskom oversight. Mr Lebohang Tekane, Parliamentary Liaison Officer for Public Enterprises, confirmed that Public Enterprises will accompany SCOA to the oversight at Eskom. An invitation has been sent to National Treasury to join the Committee at the Eskom oversight programme. They had yet to respond.

SCOA will engage with Eskom after they have presented. A big question that reoccurs is, what happens to labour when restructuring takes place? Labour is thus an important stakeholder at Eskom. The Chairperson has requested that the support staff find out which Unions will be present at the meeting and this will be emailed to the Committee.

The oversight programme was adopted with amendments.

The meeting was adjourned.


 

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