Special Appropriation Bill [B10-2019]: Committee Report

NCOP Appropriations

23 October 2019
Chairperson: Ms D Mahlangu (ANC, Mpumalanga)
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Meeting Summary

The Eskom Appropriation Bill was adopted by the National Assembly (NA) on 22 October, and the Opposition party argued that the National Council of Provinces (NCOP) was being coerced into adopting the Bill so soon after the NA -- on the following day.  It was submitted that the Bill process was flawed, that public participation was inadequate, and that the role of the NCOP was being reduced to “rubber stamping.”

The Democratic Alliance (DA), and other parties on the Committee, submitted that there had to be tighter, measurable conditions, and these were not included in the draft report. The Freedom Front Plus (FF+) agreed with the Economic Freedom Fighters (EFF) that investment would not save Eskom in the long run. The ANC did not agree, and argued that the turnaround strategy and new measures could redeem the Eskom situation. The ANC acknowledged that the draft report was still weak, and that the recommendations in it could be stronger. It was recognised that there was a risk of total collapse if the Eskom debt was not dealt with. The Committee expressed concerned about the absence of senior Treasury staff at the meeting.

The Bill was adopted, with an objection by the DA that the Bill had to be sent back to the NA. The FF+ did not accept the Bill, and the EFF abstained. The Committee’s draft report on the Bill was adopted with amendments and additions.

Meeting report

Eskom Special Appropriation Bill

The Chairperson announced that the aim of the meeting was to deliberate on and finalise the Eskom Special Appropriations Bill, which had been adopted by the National Assembly (NA) the day before. The following item on the agenda would be the adoption of the Committee report on the Bill.

She had received a letter from the Western Cape Provincial Legislature the day before about public participation, to which she had responded.  The public participation process was done jointly with the Standing Committee on Appropriations. The public was invited and consulted and engaged with. The Committee report contained the names of entities and persons involved. The Provincial Legislature  had argued that time had to be granted for the provinces to consider the Bill. But it was a section 77 Bill, with tight timeframes attached to it, and the process had to be concluded by 2 November. She had sought legal advice on the matter.

Mr S Aucamp (DA, Northern Cape) commented that there had to be information sharing. Henceforth there had to be complete information about public participation.

The Chairperson responded that the Committee report showed which stakeholders were involved.

Mr Aucamp responded that it was not sufficient. The report had to be tabled and discussed. Timelines were not to be that binding.

Mr E Njandu (ANC, Western Cape) opined that the Chairperson’s explanation was acceptable.

The Chairperson agreed that on the way forward, strategies of how best to deal with public participation would be shared. However, Members had gone through the Bill and it had to be adopted.

Mr D Ryder (DA, Gauteng) remarked that a gun was being held to the Committee’s heads, in the form of time pressure. It was a big multi-year Bill, and the process was flawed. The NA had considered the Bill only the day before, and the Select Committee already had to meet on it. The provinces first had to be consulted to obtain a mandate. Not enough time had been granted for that. Public participation had been inadequate. There had been many joint meetings with the Standing Committee and agreement had been reached, but it was not right that the Bill was passed to the National Council of Provinces (NCOP) so soon after the NA had adopted it. It was claimed that there was time pressure, but much time had been given to it. The matter was in the public domain, and there was concern about not handing a blank cheque to Eskom. Conditions had to be stronger. Conditions had been discussed the week before, and the DA had got nothing that it had recommended.

There had to be agreement about tightening the conditions and making it measurable, and there had to be measures to ensure accountability. The Bill affected other departments, as money was being taken out of the pot, away from provinces, municipalities and departments. The conditions had not gone properly through the NA. There was agreement that mechanisms to impose conditions had to be a combination of options, so that the Minister of Finance could add conditions. However, the DA was unhappy about the Select Committee having to sign the Bill off so soon. Eskom arrogance had been shown recently by senior executives refusing to be vetted. It had also not shown up for a meeting the previous week. Eskom was saying that it had to receive the money, or else the country would be put at risk. There had to be measurable conditions. The Bill had to be reworked.

Mr F du Toit (FF+, North West) said he supported this viewpoint. Eskom had absorbed R83 billion since 2006, and there had been no change. It was transferring its debt to the State, which could not cope with it. Huge investments in Eskom would not save the situation. It was doing no maintenance.

Mr Z Mkiva (ANC, Eastern Cape) said that the Eskom turnaround strategy would prevent a recurrence of past problems. He advised that the Bill be supported, and that it be hoped that new measures would remedy the situation. The picture could look much different in 2020.

Mr Aucamp remarked that it might well be asked why the NCOP was there at all. It was not supposed to simply provide a rubber stamp. The NCOP had agreed that there had to be strict requirements, and that money could not just be given away, but what had been resolved was not being enforced. The NCOP could not act as rubber stamp for the provinces, as whatever was given to Eskom would be taken from the provinces. The provinces had to be assured that the money would be used well. The NCOP was not to be a puppet of the NA. The Bill had to go back to the NA.

Mr Y Carrim (ANC, KZN) said that there had been agreement in broad terms. Advocate Jenkins, the Parliamentary Legal Adviser, had had to pronounce about the legality of consultation with the provinces. He did not think that it was a constitutional requirement to take the Bill to the provinces. If that had to be done, as the DA and the FF+ demanded, the whole cycle of Parliament would have to be changed. He agreed that the NCOP should not be a rubber stamp, and the ANC also required conditions. He understood Mr Ryder’s anger. What disturbed him was that there were no senior officials from the National Treasury (NT) present. He asked the official present what his level was.

Mr Ravesh Rajlal, National Treasury, replied that he was employed at the Chief Director level.

Mr Carrim continued that Mr Rajlal had to convey to the Director General that the Committee was unhappy about the absence of senior personnel. He felt the anger of the opposition parties, but there could be no clarity about where Eskom would be, one year into the future. There was indeed a risk that if Eskom was not assisted, the country would collapse. There were other countries in Africa that were worried about the Eskom situation.

His party was not saying that money of itself could save Eskom, but total collapse could not be risked. However, the NT had to be challenged to present its argument, and to convince the Committee about why conditions could not go into regulations. He felt that the Bill could not be voted on without looking at the report. The report was still weak, and had to be strengthened. It could be stated in the report that the Select Committee wanted conditions to be in the regulations, so that the Minister had to report to the NA and the NCOP jointly. The report had to be toughened. There also had to be strict conditions for the NT. The legal situation with respect to the need to consult with provinces had to be clarified.

Mr M Moletsane (EFF, Free State) said that the causes of the problem had to be dealt with. There was no guarantee that a cash injection would sustain Eskom. Eskom governance was weak. If cash was given without a corresponding skills improvement, Eskom would default again.

Mr Aucamp said that everyone was in agreement, but it had to be known exactly how conditions would be imposed. Procurement contracts had to be reviewed. Eskom had to formulate separate plans for generation, transmission and distribution. There could be no bonuses for senior management while the Bill was in effect. The Treasury and the Finance Minister had to assess the Eskom asset base. Municipalities had to be assisted with generation.

Mr Njandu said that the Select Committee had indicated its seriousness from the beginning. Adopting the Bill was not to be seen as rubber stamping. Conditions had been thoroughly discussed. He agreed with the principle of accountability to the NCOP. There was a shared responsibility with the NA for Eskom to be held accountable. The role of the Minister had to be clarified.

The Chairperson pointed out that it was a section 77 Bill, and that a mandate from the provinces was not required. Only section 76 Bills required mandates from the provinces. The Select Committee had done enough consultation for a section 77 Bill, and had been advised by the Parliamentary Budget Office (PBO) and the Financial and Fiscal Commission (FFC), among others. The Select Committee had indicated to the Department of Public Enterprises (DPE) that it wanted stringent conditions. It was not rubber stamping. There was time pressure. She agreed with Mr Carrim that the Minister had to be present, and that the NT had to send its senior people to show that the Select Committee was taken seriously. That dissatisfaction would be expressed when the report was presented. She agreed that the report had to be strengthened, and when it was presented to the House, it had to be firm about the role and responsibilities of the NT and the DPE. She asked Adv Jenkins to explain the difference between section 76 and 77 Bills.

Adv Frank Jenkins, Senior Parliamentary Legal Adviser, said that in terms of the Constitution, the public participation process was the same for section 76 and section 77 Bills. It was done legally through joint NA and NCOP public hearings. The brief time that elapsed between the Bill being passed for adoption from NA to NCOP, was a policy issue. It was controversial legislation, and there seemed to be a need to look at public participation more carefully. It seemed like the Committee wanted to do more, and wanted the Minister to impose further conditions. In the Medium Term Budget Policy Statement (MTBPS) process, the impact on the provinces in the outer years of the Bill had to be considered. 20 percent less money would be received in the following three years. There was a constitutional obligation to realise socio-economic rights. If Eskom was to drain resources, government would fall short of that, and the budget could be reviewed by a court. The Human Rights Commission (HRC) had made a submission to Parliament about socio-economic rights. Eskom could pose a fiscal risk to the country, but there was a need to deal with contractual debt.

The Chairperson observed that the question was how to maneouvre to achieve what needed to be done. She was concerned about the weaknesses perceived in the report. The Treasury had to convince the Committee.

Mr Rajlal responded that the funds that the Finance Minister had requested for Eskom in February 2019, to the tune of R20 billion over the next 10 years, had to be brought forward earlier. In terms of section 16 of the Public Finance Management Act (PFMA), R13 billion had been paid out already. However, lenders were not supporting Eskom, and the amount had increased to R26 billion. The NT had met with Eskom and the DPE, and had been told that the release of funds had to be quick, as soon as November. If conditions were included as regulations, it would take longer than November. Part of the conditions had to be included in a Ministerial letter, otherwise there would be default by Eskom. It was not only a matter of added funding, but also of funds having to be released more quickly. There was a R20 billion risk to liquidity, which could escalate to R40 billion. Eskom had to do its own budget cuts.

Mr Carrim commented that it was stated that conditions as regulations could delay the release of funds. It had to be explained what was meant by default, and why a delay of one month could lead to default. The NT had to explain exactly what default was.

Mr Ryder said the NT had asserted that Eskom was not willing to view matters as “business unusual.” It was not willing to do cost cutting, and still was asking for more. Eskom was arrogant, and was making demands without making changes. There had to be conditions in legislation that Eskom had to adhere to. If conditions were only Ministerial, a new Minister could scrap them. It had to be in legislation.

Mr Du Toit said that Eskom’s financial statements had to be looked at. The R59 billion was to soften the blows, but it had to be known what amount would be needed, and over how long a time period.

Adv Jenkins said that he had consulted with Adv Empie van Schoor of the Treasury. The Bill did not provide for the Minister to impose conditions through regulations. The PFMA did not allow that. If the Committee wanted conditions as regulations for the second appropriation, the Minister could bring an amendment to the Bill.

Mr Carrim asked where Adv Van Schoor was.

Mr Rajlal responded that he himself was the designated National Treasury representative for the meeting. Default meant that if Eskom did not get money in November, it could not settle interest on debt and pay suppliers, and the bill for government would eventually be larger. There was a risk that R280 billion in debt could be called for. Cash flow had to be secured for Eskom. Eskom had to find cash to mitigate the amount required to secure liquidity for 2021 also.

Mr Mkiva commented that the risk referred to could not be afforded. There had to be clear deadlines, and conditions had to be adhered to. It was not advisable to send the Bill back to the NA. Added conditions could still be developed.

Mr Ryder reiterated that the Committee was being coerced. The NT should have informed the Committee earlier about the position with respect to regulations. The Committee was being asked to present a blank cheque to Eskom. He proposed that the Committee meet again on the following day.

The Chairperson noted that at the last joint meeting with the NA, the NT had presented conditions, and objections had been raised. The timeframe to rework conditions was seven days. No response had been received from the NT.

Mr Carrim commented that the proposals from the Western Cape Provincial Legislature were included in the conditions presented by the NT, albeit in a softer form. He could not see how meeting on the following day could change things. Not much could be done in one week. It was not advisable to send the Bill back to the NA, as it would simply open up other issues. The Committee had no choice. The best that could be done was to see how conditions could be strengthened. Some issues were policy issues that were related to the role of the NCOP. It would not do for the NA to be held to ransom by the provinces. SA was a unitary state, not a federation.  Mr Ryder held to a different notion of what the state was.

Consideration of Committee draft report on the Bill

The Chairperson asked the Committee to focus on recommendations. Non-ethical behaviour by Eskom was not to recur in future. Recommendations could still deal with oversight of the NT, the DPE and Eskom. Funding was not to be dealt out as a lump sum -- it had to be part of the conditions that transfers had to be motivated to the Treasury.

Mr Njandu commented that it had to be emphasised that consequence management of non-compliance had to be reported on by the Finance Minister and the DPE to Parliament.

Mr Carrim added that there had to be full compliance, or else stoppage. There had to be reporting to Parliament on a monthly basis. It had to be stated that the Select Committee very grudgingly, or very reluctantly, accepted that conditions could not be in regulations by the Minister, as the NT had argued that it could delay the process. However, there had to be reporting to Parliament on a bi-monthly basis.

In future, when the NT introduced Appropriation Bills, it had to be done timeously. The NT could have brought the Bill earlier, as there was currently a situation where the Bill had to be dealt with in MTBPS time. Recommendations had to be toughened, especially with respect to regular progress reports on consequence management.

Mr Njandu added that Eskom had to report on its debt collection strategy.

Adoption of Eskom Special Appropriation Bill

The Bill was adopted, with the FF+ not accepting the Bill, and the DA objecting that conditions had to be in regulations, and insisting that the Bill be returned to the NA. The EFF abstained.

 Adoption of Select Committee report

The report was adopted with amendments and additions. The DA and the FF+ indicated that they desired to view the amendments and additions. The EFF abstained.

Adoption of minutes

The Committee’s minutes of 17 and 18 September, and 9 and 22 October, were adopted without amendment.

Committee programme

The Committee Secretary said that the programme dates related to Provincial Legislature negotiating and final mandates, would have to be changed. The Legal Adviser commented that public participation for the Division of Revenue Amendment Bill was essential.

The Chairperson adjourned the meeting.

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