2019 Adjustments Appropriation Bill & MTBPS: finalisation & committee reports

Standing Committee on Appropriations

03 December 2019
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

MTBPS Speech by the Minister of Finance
Medium Term Budget Policy Statement (MTBPS)

The Standing Committee on Appropriations considered and adopted both the 2019 Medium Term Budget Policy Statement Report and the 2019 Adjustments Appropriation Bill.

The Committee spoke about the need for the private sector to play an important in encouraging investment. The ease with which the private sector retrenched workers was also discussed. Parliament and the Parliamentary Committees were encouraged to perform more effective oversight on the relevant Departments. The Committee also noted the issue of absenteeism in the Government workforce and how this problem seriously needed to be addressed as it impacts the economy. It was agreed that all relevant Committees and Departments needed to have a workshop so that they were all on the same page when it came to performing effective and efficient oversight.

Meeting report

Report on the 2019 Medium Term Budget Policy Statement

The Chairperson took the Committee through the draft report on the 2019 Medium Term Budget Policy Statement.

Ms E Peters (ANC) raised an issue on pages 6 and 7 of the draft report, under the point on ‘Learning and culture’. She said the Committee should have included, somewhere in that section, a mention of Early Childhood Development (ECD). The report did speak about ‘improving early grade reading and mathematics’ but she thought including ECD would be relevant in this section.

The Chairperson reminded Ms Peters that the Committee was not making any recommendations yet. The Committee was just going through the points recorded from the previous meeting. He added that her point might be relevant when the Committee is working through the recommendations.

Mr D Joseph (DA) said that under the point ‘Social Development’ it stated ‘higher allocations to early childhood development grants in the provinces will increase’. The issue of early childhood development was therefore covered on page 7.

Mr Z Mlenzana (ANC) raised a point on page 34, paragraphs 7.4, 7.5 and 7.6. The first sentence of each paragraph should read that the ‘Committee notes with concern’ and not ‘concerns’ as currently stated in the draft report.

Mr Sifiso Magagula, Parliamentary Content Advisor, proposed that the Committee go through the findings under section 7. He explained that these were the proposed findings and it was up to the Committee to discuss the findings and the recommendations further.

The Chairperson agreed with him and went through the findings in section 7.

The Chairperson raised a point about the debt to GDP ratio. Focusing on debt was not the only way of decreasing the debt to GDP ratio. That ration can also decrease if you increase the GDP and leave the debt alone. The point he wanted to make was that Government and the private sector do everything possible to ensure economic growth occurs. He was worried about the private sector because they usually only focus on the wage bill and the decrease of debt. Debt needed to be decreased, yes, but the private sector also needs to focus on economic growth. Government was working on various programmes to encourage economic growth but in the private sector investments were flat. The Committee needed to be concerned about the private sector investments.

The private sector also needed to stop targeting workers with regards to retrenchments. Retrenching workers decreases the Government’s tax base. Retrenching workers also decreased their buying power and disposable income which is also important for economic growth. The private sector was ‘trigger happy’ when it came to retrenchments. The private sector was quick to retrench workers and this had an impact on economic growth. This Committee, which had a strong background of working in trade union movements, needed to protect worker’s rights.

Mr Magagula suggested that the Committee include that under the recommendations part of the report. As much as the Committee wanted National Treasury to look at the public sector wage bill, it also wanted National Treasury to look at the ease with which the private sector retrenched workers.

The Chairperson said that the report should first note that the private sector retrenched workers easily. The report should include a recommendation from the Committee that it should not be easy for businesses to retrench workers. There were other avenues for businesses to take. For example, there were many executives who were receiving large bonuses and salaries but those people are never affected.

Mr Joseph highlighted that recommendations 8.2. stated that National Treasury would conduct a comprehensive study on the public sector wage bill at all levels of Government. This dealt generally with the point that the Chairperson raised.

Mr Joseph acknowledged the Chairperson’s point but said that the crux of the matter was that Government could not find solutions to deal with the public sector wage bill.

Mr X Qayiso (ANC) said he remembered the public service wage commission but he did not know why it had been neglected by Government? He added that would assist in the process of determining the wage bill.

Ms Peters said that the Committee should call on the Department of Employment and Labour to conduct a study on the way in which labour is treated. The point the Chairperson was making is important. What can be done to protect the workers?

The Chairperson asked if Ms Peters was only talking about the public sector workers?

Ms Peter said she was not referring to only public sector workers. The Department of Employment and Labour has the responsibility to protect the workforce. They need to protect both workers of the public and private sector. They also needed to create a conducive environment for job security. There was a need for the Department and National Treasury to do a national study on the ease with which workers and blue collar workers were retrenched during economic hardships.

Mr Joseph said that his first point on the wage bill was the Government sector. The Department of Public Service and Administration needed to have a workshop with the role players like National Treasury and the Department of Employment and Labour. The issue he was referring to was not the reduction or the retrenchment of staff. The point he wants to raise had to do with ‘trimming the fat’. In government, there was a lot of ‘fat’, that was added during the economically good times, that could be trimmed. All the bonuses that have been added over the years, especially in relation to the State-owned entities, needed to be targeted before the Committee looked at the retrenchment of workers. For that, a joint concerted effort was needed because there was a lot of money. The Committee could play a part in reducing the wage bill by reviewing the various benefits that have been added during previous economically prosperous times.

Mr Mlenzana said that the Committee needed to avoid being inward looking when referring to the debt to GDP ratio. It should not only be applied to Government. He added that Government should be making the way easy for business.

The Chairperson agreed that Government needed to create a conducive climate for private sector investment. There were a number of things that government was already doing and it was time for the private sector to come in.

Mr Mlenzana agreed with the Chairperson and said that was exactly what he meant. This needed to be a bullet point below point 7.6. This would then lead to an added recommendation under section 8.

Mr Magagula on the recommendations and the public sector wage bill, said that they could add the suggestion by Ms Peters that a comprehensive study on the wage bill needed to be done by the Department of Employment and Labour in unison with National Treasury. The basis of that point is that reading through the Midterm Budget Policy Statement it is clear that the Minister of Finance is concerned with the public wage bill. The support staff felt that the Department of Employment and Labour could be added to that point to assist in the study and that the study also considers the broader economic impact. National Treasury is concerned by the wage bill but the Committee did not know what caused their concern. Did they have a study that they used as the basis or cause of their concern? The new section 8.2 will state that National Treasury and the Department of Employment and Labour will conduct a comprehensive study.

The Chairperson said that the Committee must not come across as being fine with the wage bill. The Committee was urging the Departments to proceed and give them more information on the public wage bill.

Ms Peters raised a point on 7.17, which spoke about the HIV/AIDS pandemic especially amongst the youth. Statistics needed to be added on the prevalence of HIV/AIDS in a certain age group. Some of the wording in 7.17 needed to be changed. It states ‘the Committee strongly feels strongly’. One ‘strongly’ needs to be removed. The point also includes ‘religion leaders’. Was the correct term not faith based organisations?

The Chairperson said they should be politically correct and that it should be changed to faith based organisations.

Mr A Shaik Emam (NFP) said that in one aspect the Committee was talking about value-for-money. The government was losing a lot of money because of supply chain processes where there was no standardisation of prices. Should the Committee not call on supply chain to put in measures so that there was some way of measuring that the item cost in one province is the same in another? It was estimated that government was losing over R200 billion a year.

The Chairperson said that the point raised by Mr Shaik Emam should be raised during the recommendations section of the report.

Mr Magagula said that the support staff made some technical inputs on point 7.16. There was also a technical error in 7.18.

Ms Peters said that 8.1 needs to say ‘Parliament should commence’. Then 8.2 needs to state that ‘National Treasury should conduct’. Further down the adjustment ‘State-owned companies and municipalities in order to determine the exact impact of aggregate wages’ needed to be included.

Mr Mlenzana raised a point on 7.20. It needs to state ‘The Committee notes with concern’ and not ‘The Committees notes with concerns’.

Mr Shaik Emam raised a point on page 37. The fourth line from the top should state that ‘focus should be more on making’.

Mr Joseph referred to section 8.1 which states that ‘Parliament should consider developing a government guarantee oversight model’. He just wanted clarity on what is meant by Parliament? Was it a Committee of Parliament? Was it a structure of Parliament? How was Parliament defined in this instance? Who would perform this government guarantee oversight model?

He then wanted clarity on section 8.2 which said National Treasury should conduct a study on the public wage sector bill. His view was that National Treasury should be in a position to share with the Committee information on the impact of what the public sector wage bill is all about. He wanted clarity on the whole of 8.2 specifically what was meant by ‘wider implication of reducing the public service on tax revenue, unemployment and skills leakages within the public sector’.

Mr Shaik Emam said that the Committee needed to be mindful of what the Minister said on the wage bill. It was not necessarily that the numbers were big but rather the increases that were given over a period of time and the salaries which were causing a serious challenge. 

The Chairperson agreed. That was definitely what the Minister had said.

Mr Mlenzana wanted the Chairperson to clarify this.

The Chairperson explained that National Treasury knows what the impact of the wage bill was on debt. Government was not going to retrench. The jobs should be protected. Government needs to look at what can be done to protect the blue collar workers and trim the ‘fat’ in the upper echelons of businesses.

Mr Joseph said that he still wanted clarity on 8.1. What does it mean that Parliament must perform the oversight? Then on 8.2 what does ‘all levels of government’ mean? Does it mean from entry level to the highest official?

The Chairperson replied that it means national, provincial and local government.

Mr Joseph said that the Committee also needed to take into account the points raised by the various stakeholders when they addressed Parliament.

The Chairperson replied to Mr Joseph’s question on who would be performing oversight on government guarantees. He said that Parliament will decide which Committee will perform the function but that it will be a structure of Parliament. The Committee should raise a point saying that there was a concern that government guarantees were being abused. There should also be clear communication that guarantees were being given. The Committee should call for transparency with regards to the guarantees. What are the conditions of the guarantees given to the SOCs? Those conditions should be made available to everybody. The Committee did not currently know who received guarantees and under what conditions.

Mr Shaik Emam said that the issue was the lack of oversight on guarantees. He was of the view that the guarantee process needs to stop. State-owned entities needed to be run like businesses. They should be given loans instead because then they will know they will be held more accountable. Giving them guarantees was the same thing as bailing them out. There was not much difference between the two. They never seem to comply with the conditions.

Mr Mlenzana said that point 7.7, which states the budget principles of efficiency, effectiveness and economy, should include the need for more stringent conditions placed on SOCs when they are given guarantees. The concern over guarantees should be captured under observations first before being added under recommendations. He said then paragraph 8.1 could then be left as it is. Parliament needed to be consistent. In the 4th administration Parliament changed the terminology from State-owned enterprises to State-owned companies. Parliament was trying to influence the entities to be more like companies because at that time they could have been operating on their own. That was why guarantees were given so that they could run themselves. A guarantee is just a question of assurance. Now the economy was shrinking and the old terminology of State-owned enterprises was being used. He suggested that the Committee not be too hard on the SOEs but that concrete measures of observation be put in the report.

The Chairperson replied to Mr Shaik Emam’s point and said that he knew some SOCs that were given guarantees and they repaid their guarantees. A stricter mechanism of oversight was needed for guarantees and the conditions attached to guarantees. National Treasury also needed to come to Parliament and report on the status of the guarantees. Oversight also needed to be more proactive. Government should be proactive with regards to the state of SOCs. The role of Committees should be to see the issues coming before they happen. For example, that money is not being spent in a specific Department and then corrective measures can be put into place.

Mr Qayiso agreed with the proposal. The Committee’s oversight cuts across over 40 Committees. There was nothing stopping the Committee from determining a line at which point National Treasury must intervene. There cannot be the same situation occurring in 2020 where a Department has unspent money during December.

Mr Joseph said that in the New Year the Committees that deal with SOEs must come together and look at the various recommendations to develop a solution for the SOEs or the Departments that constantly remain in a crisis. If the trend is going to remain the same then the SOEs and Departments are going to put Parliament under pressure. He called for cooperation, whether it was a workshop, and for all the relevant information to be put together so that they could be speaking with one voice in solving the various issues.

Mr Shaik Emam said that one of the problems was with the quarterly reports. Sometimes the first quarterly report is only received towards the end of the 3rd quarter or last quarter. By that time the damage has already been done and there is little time to deal with the issue. A new mechanism needs to be looked at. Maybe reports need to be given on a monthly or bi-monthly basis to Parliament. Particularly from those departments that have not performed well or continue to underspend. There was little strategic planning taking place in the various departments. The budget reports and the budget process was not up to standard. What they were doing was if they needed R10 billion last year this year they ask for R11 billion. That was why when the monies were appropriated they were not able to spend the money. The issue of strategic planning was a serious problem in departments. The quarterly reports coming at a time when it was very difficult to make any changes was also a problem. 

Ms Peters said that her point was exactly what Mr Shaik Emam was talking about. In the departments there are monthly reports which are signed off by the Director General to the executing authority and then National Treasury. Parliament comes in at the end of this process. The Committee had raised an issue over the quarterly reports where the 4th quarterly report was only given to Parliament in the 2nd quarter of the new financial year. ‘There is a level of malicious compliance’ once the quarterly reports have been submitted. They are not interested in doing an analysis of the spending as long as they submit their report. Another issue that the Committee needed to consider was the fact that the departments were allowed to use the unspent money for performance bonuses. That was a perverse incentive. A water-tight system was needed, with shorter periods to submit performance reports, which allowed for immediate intervention. In one of the reports from Statistics South Africa it said that departments will over spend by about R50 million because in the previous year they budget for compensation of employees were cut and they still need those particular skills. The issue was the timely submission of the quarterly report and that an intervention can be made at that particular time.

The Chairperson noted the points raised and said some of them will be discussed in the following meeting.

Mr Musa Zamisa, Parliamentary Researcher, recommended that the Committee remove point 7.23 because it was covered in point 7.22, which speaks about the Committees concerned about the serious risks posed by the State-owned companies.

The Chairperson said that 7.23 should be included as it elaborates the point made in 7.22.

Mr Magagula proposed that under the recommendations it should say that National Treasury provide the Committee with monthly reports so that the Committee can intervene when it was still useful. He wanted to include a recommendation that would ask National Treasury to provide the Committee with the early warning systems reports.

Mr Mlenzana asked if the Committee could include the reduction of the debt to GDP ratio in the recommendations. The Committee had discussed it a lot and it needed to be included.

The Chairperson agreed that the debt to GDP ratio should be reduced by concentrating on both debt and the GDP.

The Chairperson then said that what they were doing was looking at ways to make Parliament more effective in its oversight role. How can the Committee make its work more effective? He asked the secretariat to make the proposed changes and asked the members if the Committee could adopt the report?

Mr Shaik Emam asked if his recommendation would be a part of the report? The recommendation was that National Treasury, in conjunction with the other relevant Departments, put mechanisms in place to ensure that with regards to goods and services value-for-money is obtained including the prevention of overpricing.

The Chairperson said it would be included in the report.

Mr Magagula said National Treasury did have a procurement system but that the point could be stressed in the report.

Mr Shaik Emam moved to adopt the report.

Mr Mlenzana seconded the adoption.

The Report on the 2019 Medium Term Budget Policy Statement was adopted with amendments.

The Report on 2019 Adjustments Appropriation Bill

The Chairperson took the Committee through the Report on the 2019 Adjustments Appropriation Bill.

Committee Observations and Findings.

Mr Shaik Emam had an issue with paragraph 5.1 which stated that ‘The Committee is concerned by the R3.9 billion in declared unspent funds due to the potential negative impact’. The R3.9 billion unspent funds is going to have a negative impact on service delivery programmes.

Mr Magagula said it could be changed to say ‘The Committee is concerned by the R3.9 billion in declared unspent funds given the potential negative impact’.

The Chairperson asked why say ‘potential negative impact’ when it would definitely have a negative impact? The Committee agreed that ‘due’ and ‘potential’ would not be in the report. It would read ‘The Committee is concerned by the R3.9 billion in declared unspent funds given the negative impact on service delivery programmes where these funds were initially planned to be spent’.

Mr Shaik Emam said on paragraph 5.4, which states ‘The Committee notes with concern that the under expenditure of infrastructure budgets by especially the Department of Water and Sanitation, Health, and Basic Education’, the word ‘that’ should be removed. It currently indicates in that sentence that it will be expanded upon further in the report but it is not.

Mr Magagula noted that the support staff made a mistake in paragraph 5.6 with the amount of declared unspent funds. The accurate amount is R3, 909286 billion.

Mr Mlenzana said the wording in 6.1 needed to be changed. It should say: ‘The Minister of Water and Sanitation should ensure that mechanisms are put in place so that there are consequences’. Then in 6.2, it should state: ‘National Treasury should carefully scrutinise Government departments’ abilities’. Further, he also asked the Committee to look at the wording in 6.3 and 6.4.

Mr Shaik Emam said that the report needed to be consistent and just say Departments.

The Chairperson said that the various Ministries would still be named in the report.

Mr Mlenzana said on 6.7 that it should include: ‘The Minister of Justice and Constitutional Development should brief’.

The Chairperson urged the Committee to be realistic with its timeframe and deadlines. The relevant Departments named in the report would now have 90 days within which to respond to the report.

Ms Peters said that just because the Members of Parliament would be in recess it did not mean Parliament would be in recess and that the deadline of 60 days should be kept. She also had a question on 6.7. Was that paragraph referring to the Standing Committee on Finance or Appropriations?

The Chairperson said he would agree with the members that 90 days would be better as December and January were months in which not much could be done.

Mr Shaik Emam said that 6.1 should say ‘to ensure there are consequences’ and then 6.5 should say that ‘The Eskom Chief Restructuring Officer must report to this Committee’.

Ms Peters recommended for the sake of consistency that all the parts of the report that says ‘60 days’ be replaced with ‘90 days’.

The Chairperson agreed.

Mr Joseph had a question on 6.2. Was the Committee saying National Treasury not doing a good job and that they must improve? In his view they were already performing the functions mentioned in 6.2 so he was not sure why it was included in the report. And then the same could be said of 6.7. That paragraph was not applicable to the work of this Committee. The legislation regarding cannabis was not the mandate of this Committee. He was interested in the economic impact on the cannabis industry.

The Chairperson agreed on 6.7 and said it should just be removed. He disagreed with Mr Joseph on 6.2 and said that it should remain in the report.

Mr Shaik Emam said that 6.7 did have relevance for this Committee because this Committee would need to appropriate resources to develop the cannabis industry. If the Committee did not understand what the actual legislation dictates it make it difficult for the Committee perform its duties. The cannabis industry was a viable and profitable industry. There was no clarity on what the position is regarding cannabis. He also said that the Khoi and San Community believe that they have a major role to play in this and the reallocation of their land.

My Qayiso said that legislation needs to make clear the stance on cannabis and the potential industry.

The Chairperson said that there was no doubt about the potential economic impact of cannabis but there was currently no legislative framework. The Committee needs to call on the Departments to fast-track the legislative framework. This would involve various Departments like Agriculture and Health. The Committee was calling for legislative certainty from the Departments and Ministers.

Mr Joseph said that the group that presented to this Committee should have their report forwarded to the relevant Department.

Mr Shaik Emam agreed that 6.7 should be left out and that the relevant Departments needed to discuss the legislation.

Mr Mlenzana disagreed that 6.7 should be removed. He said that certain members appeared to snub the presentation previously made to the Committee. The whole paragraph has been carefully structured. It is giving the Committee a way of saying it listened but there are these hurdles that constrain the Committee. The Committee could not shy away from this matter as business opportunities were being created in various parts of the country.

The Chairperson said that clarity and certainty needs to be given from the Executive with regards to cannabis legislation.

Mr Magagula said that the issue of cannabis was a constitutional matter and people cannot be against it. It must be implemented.

Mr Joseph said he was not sure about the previous remark made. All he wanted to say was that a presentation was made to the Committee and that presentation must be referred to the relevant Department. Some organisations come to Parliament to promote their points of view and sometimes they do talk to the wrong Committees. There was nothing wrong with them presenting. It was the Committee’s responsibility to guide them to the right Committee to influence legislation. He did not give a personal view or Committee view or party view. His comment was just on the processes.

The Chairperson agreed with the point Mr Joseph made. He wanted to go back to the topic of underspending. The points made in the discussion of the previous report around Parliament’s oversight mechanisms with regards to bi-monthly or monthly reports was relevant for this report too. Other Portfolio Committees need to perform their duties and perform their oversight function. Proper and effective oversight by Parliament, through the Committees, needed to be included in this report.

Mr Shaik Emam had a concern on the issue of oversight. There was a lot of money being spent on oversight mechanisms in the country. It is obvious that even though a large sum of money was being spent on oversight in the country it still does not work. At some stage all the Committees need to come together, like in a workshop, and look at what are the shortfalls of oversight? Why were the Committees not successful in making people compliant and preventing unspent funding? The time had come to strengthen and relook at the oversight mechanisms.

The Chairperson said that the thrust of their discussion was clear. How does Parliament make itself more effective and efficient in what it does?

Mr Magagula said that the Committee was recommending that Parliament must ensure effective budgeting and performance oversight over the Executive to ensure timeous intervention where there is evidence of underperformance.

Mr Shaik Emam said that in the reports the Committee had received it is estimated that 30% of public servants are not at work at any given time. This was costing the tax payer money because people are not at work. He was not sure what the Committee could recommend, together with the Department of Employment and Labour, to challenge this issue. There was too much leniency and protection from the Department of Employment and Labour and that is why the problem is so significant. He was not saying that people cannot get sick but 30% of the workforce not being present at any given time was unacceptable. At the end of the day it was having an impact on the economy because of the money being lost. He suggested that that needs to be looked at and a report needs to be done. Each department gives a report, either to National Treasury or this Committee, on how many workers have not been at work? What did it cost the state? So that the Committee can see how serious the problem is and interventions can take place.

The Chairperson said the Committee notes the concern of the high rate of absenteeism in the government workforce and its negative impact on the economy. This points back to the oversight that needs to be performed by the various portfolio Committees. This point talks to Parliament not being effective in oversight. The Committee was calling on the responsible Ministers and the relevant Committee and Public Service and Administration is something they should place close attention to. 

Mr Magagula said that maybe the Committee could record that in the meeting minutes and then recommend the relevant Departments to brief the Committee. He did not think it was applicable to the Appropriation Bill.

Mr Shaik Emam raised a point on political party funding. It was the responsibility of Parliament to provide oversight on political party funding on the constituency offices. Some political parties do not get offices. The money that is being appropriated needs to be accounted for.

Mr Zamisa said that the discussion in the report cannot be closed without discussing the need for greater consequence management for underperformance.

The Chairperson agreed to incorporate that into the report. There should be greater consequence management and the Committees should be briefed by timely reports.

Mr Shaik Emam said that National Treasury was also to blame because it was not giving the Committee the report. The Committee had previously requested, based on poor performance and consequence management, a report of all the repeat offenders so that great accountability to occur. The Committee had not received the report yet.

The Chairperson noted the points made.

My Qayiso moved to adopt the report.

Mr Shaik Emam seconded the adoption of the report.

The Report on the 2019 Medium Term Budget Policy Statement was adopted with amendments.

Outstanding Minutes

The minutes of the previous two meetings were moved and adopted with amendments.

The meeting was adjourned.

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