Quarter 3 Spending Challenges: Treasury report

Standing Committee on Appropriations

18 February 2020
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

National Treasury briefed the Committee on 2019/20 Quarter 3 Spending Outcomes for departments. It spoke about expenditure reporting by public entities and the challenges in verifying this.

The overall spending for the Quarter 3 of 2019/20 shows spending of R683 billion, an underspending of R14.4 billion. The largest deviation was on transfers and subsidies (R23.7 billion) followed by goods and services (R2.7 billion). The government paid more for financial assets than anticipated (R13 billion).

A major concern raised is the Road Accident Fund lack of financial standing which if not addressed could be another Eskom. The Committee agreed with National Treasury that legal representation takes the bulk of Road Accident Fund (RAF) claim payouts and agreed that a new system must be looked at. Treasury explained in detail the no-fault based system of the Road Accident Benefit Scheme. It suggested benchmarking RAF procedures with what is being done in other countries.

It was agreed that the Department of Health needed address the Committee on NHI funding.

Based on the items that arose in the discussion, the Committee requested the following items from Treasury:
• Add SAPO to the list of SOEs that National Treasury reports on.
• Ask SARS to submit the IT report and the progress and why it needs the money over the MTEF
• Department of Small Business Development (DSBD) must report on how it spent the R700 million and the list of small businesses it funds.
• Provide the list of municipalities with unfunded budgets
• Provide the list of universities that have not submitted progress reports
• Follow up on the conditions of the SOEs
• Write-up on road accident payment scheme.
• Look at the legal costs associated with medical-legal claims
• Proposals by the Department of Women on GBV

The Chairperson noted that they will not allow fiscal dumping during the last quarter when departments and their entities are supposed to be making a meaningful impact on the lives of citizens throughout the year. This is something the Committee will be monitoring closely.

Meeting report

Quarterly expenditure reporting for public entities
Dr Mampho Modise, Treasury Deputy Director-General: Public Finance, noted they have challenges on reporting on public entities. This is because the system for verification of data provided by public entities is not on the Basic Accounting System (BAS) and thus cannot be verified. Another reason is public entities do not have budget programme structures like a department that are approved by Treasury; hence their programmes are not necessarily linked to deliverable objectives. Also their spending is only in economic classification terms. Further, departments use a modified cash basis versus accrual accounting for public entities. The type of entities do not enable a comparative analysis (service delivery agencies, regulators, development finance institutions, social security funds). Another challenge is they operate on different financial years, for example, water boards operate on the municipal financial year from July to June (not April to March).

Quarter 3 Spending Outcomes for 2019/20 by departments
The summary of spending by national departments for Quarter 3 of 2019/20 shows spending of R683 billion, an underspending of R14.4 billion. The largest deviation was on transfers and subsidies (R23.7 billion) followed by goods and services (R2.7 billion). The government paid more for financial assets than anticipated (R13 billion). The following departments showed the most significant variances in spending:

Cooperative Governance and Traditional Affairs
In the 2019/20 municipal fiscal year, 127 municipalities tabled unfunded budgets. National Treasury wrote to them warning that if they do not adopt funded adjusted budgets then the December tranche of the Local Government Equitable Share will be withheld. 61 municipalities adopted funded budgets and the remaining 66 – even with  National Treasury and Provincial Treasury support – could not mainly due to the debt owed to creditors such as water boards and Eskom. Municipalities were also required to ensure their cash flow adequately covered this year’s financial commitments. 29 municipalities were not able to do so by December and their equitable share was withheld.

Higher Education and Training There were delays in the transfer of payments to Higher Education Institutions for earmarked grants: University Capacity Development Grant, Historically Disadvantaged Institutions Development Grant, University Infrastructure and Efficiency Grant and the Student Housing Infrastructure Programme. These grants could not be processed as initially projected due to the failure of universities in submitting timely progress reports. Payments, however, will be processed in the Quarter 4.

Social Development – A R14.6 billion advance was required in December to effect grant payments for January. Grants are paid on the 1st of each month, however, if the 1st is on a weekend or a public holiday then they are paid on the working day before that. The 1st of January 2020 payments fell on a public holiday and therefore the funds were required in advance in December 2019. However, for accounting purposes, payment will only reflect in January as these are essentially January grants and not December grants.

Human Settlement – This was mainly due to persistent underspending in cities on the Urban Settlements Development Grant and non compliance with the Division of Revenue Act on the Human Settlement Development Grant.

Public Enterprises – Allocations to Eskom are being disbursed in line with the revised drawings following the accession of the Special Appropriation Act (No 25 of 2019) and the Adjustments Appropriation Act (No 29 of 2019). In December 2019, R13 billion of the R26 billion allocated in the Special Appropriation Act was transferred to Eskom. The remaining amounts will be transferred in the last two months of the financial year as guided by the payment schedule.

Transport (DoT) – It is higher than planned because of conditional grant transfers on the Provincial Roads Maintenance Grant and the Public Transport Network Grant were made earlier than projected. The payment schedules for these grants were amended but the department did not adjust their projections to reflect this.

Science and Technology – Overspending is mainly under transfers and subsidies due to payments made towards the implementation of the South African Research Infrastructure Roadmap (SAIRIP) project, National Integrated Cyber Infrastructure System and Science Engagement: Marine and Palaeosciences. The department had withheld processing of funds to these projects due to failure by implementing agencies to submit timely performance reports. These have since been received and expected to fast-track the spend.

Small Business Development – Spending was more than projected due to higher than planned transfers to the Small Enterprise Finance Agency for the Small Business and Innovation Fund (SBIF). R664.8 million out of a budget of R700 million was transferred. Overall spending is still within the R700 million budget for the year. Going forward, the department is not expected to transfer more than budgeted.

Mr A Sarupen (DA) referred to NHLS (National Health Laboratory Service) asked if there other provinces other than Gauteng whose non-payment are affecting the cash flow and the balance sheet of the NHLS. This is because Gauteng is being reported as having historical debt.

On the South African Social Security Agency, he said that the low payment is as a result of the non-payment to the South African Post Office (SAPO) because they have not been able to reconcile beneficiary payments by payment channel. He asked if this was not in the performance agreement between SASSA and SAPO initially and if so, was there any duty of allegiance under the contract   

Mr O Mathafa (ANC) noted on slide 4 and 5 that there is a general underspending of grants, that is, the first part was unconditional, and the second part was conditional. He is worried by the approach of withholding the equitable share payment for the municipalities as this has a dire impact on service delivery. There is a need to adopt a different approach in order to capacitate those municipalities.

On NSFAS and PRASA he said the personnel compensation underspending was due to the vacancy rate. He asked if these are critical skills and if they are they allowed to headhunt for those particular skills.

On RAF he said that there is no correlation as he sees a lot of fuel stations popping up and the volumes which are being sold are less. Why the interest of individuals in opening up these filling stations when they know that they are not selling large volumes? He asked if they have a tracking mechanism on what quantities are sold starting from the mass producers to the filling stations.

On the ICT at SARS, he noted that this is a matter that has been in the news for quite some time. They are still sitting with the same situation and this needs to improve. He asked what benefits they are deriving from the current system and how was it procured.

Mr D Joseph (DA) said that he wanted to see a report at the end of the financial year which shows how much money is spent on Small Business.

On PRASA he asked what their projection for the last quarter was given there was underspending and looking at the adjustment budget perhaps they must do more. This is because the underspending is too big in the second quarter and when they have to do the adjustments, they can look at that as a proposal.

On RAF liabilities he asked what the depth of the legal expertise. This is because where there are liability claims, it is important for legal people in the entity to understand what the claims are about. If they do not have legal expertise this may lead to claims being paid without any challenges to the claims that come. They have seen it in the RAF. There is a need for research to see how the claims have shifted from one government body to another and then look at the expertise within each body to see if it can actually challenge the claim.

Mr A Shaik Emam (NFP)  asked for information on those municipalities underspending the Urban Settlement Development Grant and perhaps the reasons for their underspending, particularly repeat offenders.

Knowing the challenges RAF is facing such as corruption in the legal fraternity, he asked if they have considered a new direction or a new plan, for example, taking it away from government responsibility completely. Allow a percentage from licence fees for every motor vehicle on the road and then let it go to an insurance company to manage it. This is because it is common knowledge that whenever government is involved, people will take it for a ride.

He also said that they need reports on the Department of Small Business Development. This is because they are hearing some small businesses complaining that they are not receiving money and the question is who then is getting the money. Are there specific people who get the money because of who they know? He said that they also want to know the success of those that are being given the money, that is, are the small businesses becoming successful or not.

Welcomed the intervention and the turnaround in the National Health Laboratory Service (NHLS), he said that they must commend NHLS because not long ago they were in a dire situation. He, however, wanted to know if Treasury really understand the implementation of the NHI. People on the ground especially in the medical fraternity, are worried and they want to leave because they are not spelling out how they are going to protect the doctors. He suggested that the Committee call the health department to come and explain.  

Ms E Ntlangwini (EFF) said that they cannot call all the departments that were red-flagged by National Treasury. She thinks they need to take a proactive approach to write to the departments noting they have a variance and request an explanation.

She asked if the SARS software challenge is the same software problem or is it a new one and why they are not budgeting effectively for it. There is some deviation also with the National Treasury which is quite concerning. She asked them to explain.

On slide five of the presentation, there are some universities that are said to have failed to give their progress report. She asked the list of the names of the universities so that they hold them accountable.

Ms E Peters (ANC) agreed about flagging the universities that have not yet given their progress report. This should also be done with municipalities so that they know which ones they are.

She said that she supported writing of letters to departments about under expenditure. Her worry is that what are the anticipated risks that they need to foresee because they have already started the fourth quarter. She asked what the anticipated risks are and the mitigating factors they will put in place. This is because they do not want to hear at the end of the financial year stories of fiscal dumping.

On the Road Accident Fund, she wanted to find out if there is a proposal from Treasury on how the RAF can deal with the liabilities.

She asked if it is not time for Treasury to fix the road infrastructure funding model that will then be able to alleviate the pressures on SANRAL (South African Roads Agency Ltd) and its inability to raise money from the markets. She believes there could be some form of intervention.

Ms Peters said that there is a need to have a discussion on the non-payment culture for services that they are facing in South Africa. She asked where they are going as a country with this kind of a situation because they are the same people that complain about the lack of service delivery and yet they do not want to pay for those services. She asked what they can possibly do as Members of Parliament to impart a culture of responsibility.

Mr Z Mlenzana (ANC) said the 26th is Budget Day. Looking at the current scenario of underspending, is there a cash flow management strategy going forward taking into consideration the State of the Nation Address (SONA) injunctions.

He has not seen the conditions attached to the special appropriations given to the SOEs, particularly Eskom. Some of those conditions should have now been part of the budget legislation.

Mr X Qayiso (ANC) said the conditional grant transfers were amended but the DoT did not adjust their projections to reflect this. What they are going to do about this?

He said that they have been talking about filling of vacant positions. The skills development programme expenditure was lower than projected. There is a need for vacant positions to be filled.

On the funding of small businesses, he agreed that there is a need for a breakdown of this R700 million.

Mr Shaik Emam  said that the Land Bank Fund was suspended. The money is just lying there. Also there is an outcry because people are not receiving payment for claims from the Compensation Fund. He wanted to know what they are doing about this. Additionally, he asked were the R1.6 billion is which the President promised would go towards the fight against Gender-Based Violence.

The Chairperson said that they need the Department of Health to address the Committee on the NHI. They also need to call the Department of Small Business Development to address them.

The NHI was reported to be doing alright but in 2018/19 it was shown that about half of the budget was on irregular expenditure. This is very concerning and need clarity on what is happening.

He also asked how relevant the Skills Development Fund training is in how they are training the people.

He remarked that by now he thought there would be a solution for the RAF. When they employ people to take up positions they must come up with solutions – especially looking at the medical liability claims which have become huge. He asked Treasury to speak to that.

Ms Marissa Moore, Chief Director: Urban Development and Infrastructure, National Treasury, replied that in some cases departments are responsible for management decisions on the filling of vacant posts and why they are left for that long. Therefore why they do not go through the recruitment process is a management decision in the province. Also how money gets shifted in the budgets is a management decision in the department.  

She then went into the specifics of dealing with the differences in finances of the national, provincial and local governments and said that part of it is probably a capability and capacity issue within their systems and human resources. She said that if they were to have a national government including public entities, provincial government and local government with the same financial year, they would have audits that need to happen at the same time for all these institutions. That is 260 municipalities, 200 public entities, 190 provincial departments and 42 national departments. It's a systems and capabilities problem on whether the systems can hold together. The Auditor General has two months to audit according to the can work within the legal requirements set out in the Public Finance Management Act, so to add 200 institutions plus the entities is difficult.  

On the question of how they reconcile what is coming in the budget, one of the important things they do as budget analysts is to look at spending performance as they make recommendations through the budget process. it is a very important tool to that influences the recommendations that they make. what the Minister of Finance will be tabling in the following week is a combination of a whole range of analyses that have been done from a governance / financial management / performance management / service delivery point of view and this drives whatever decision is taken within the national budget. The allocations next week will take into consideration serial underspending within programmes, where programmes are performing and what the priorities are. the analysis and reports they provide are an important internal tool in Treasury in assessing the performance of programmes and where they are going, given the government programme of action.

Moving on to the very specific items in her sectors starting with the projections on the provincial road maintenance grant and the public transport grant. conditional grants are not only governed by the Appropriation Act and the PMFA, but they are also governed by specific requirements within the Division of Revenue Act (DORA) and how reporting happens. Within conditional grants, DORA requires the national DoT to table it and provide the national treasury with the payments schedule on what basis they will be transferring money to the provinces and municipalities. That is very different from when departments report to them on the Appropriation Act and the requirements of the draw-downs that sit within the Appropriation Act. So its two separate systems that should speak to each other and in the case of the DoT this time around, it did not. So when they amended the payment schedule, when they requested the maintenance schedule in terms of DORA, what DoT didn’t do was in the expenditure reporting system in terms of section 40 of the PMFA. They did not amend the projections which is what they should have done and this is what caused this mismatch. Treasury rightly focuses on a monthly basis raising these concerns and taking remedial action. One of the things specifically flagged with the departments is that every time they amend a payment schedule, they should ensure their projections are adjusted in their Section 40 PMFA reports so they do not have this misalignment.

On the matter by Ms Peters about the infrastructure funding model. Part of the issues around this are policy decisions that need to be taken in the DoT. It is a very technical issue around at what stage they decide on user charges for roads and how do you deal with very important principles within road user charges. So the economic argument around the road is that as public roads become more congested you start excluding people from it and that has a cost to the economy. That is why they ask people to pay and that is why they have road user charges. So it’s the policy choices around all of that that the DoT needs to make and that is the first component. The second component is what kind of principles are they trying to preserve within the road use charge policy. That is, do they want it to be equitable because that is a very important principle and they do not want lower-income travellers to subsidise higher-income travellers. If they needed to deal with geographical disparities they would not want richer provinces to benefit at the expense of poorer provinces like Eastern Cape and Limpopo. Once they have those principles embedded, they are able to move with the policy. She thinks that the sustainability of the road infrastructure network is dependent on very important principles that we need to iron out in this road infrastructure funding model.

On the Road Accident Fund, there are fundamental differences within the two systems and the Portfolio Committee on Transport is deliberating on the Road Accident Benefit Scheme (RABS) as they speak. The RAF is a liability insurance scheme that is fault-based. That is, they have to find fault for example in any insurance scheme someone must be found to be at fault whereas in RABS that falls away and there is an important principle around that because RABS is based on social security principles which are more equitable and more affordable. On the question of private insurance handling it, it really then becomes an important policy principle as that system is fault-based and policy position is that it will not be a fault-based system.

The second thing is that the current rate system is a pay as you go system which is causing a whole range of liabilities and they cannot deal with the uncertainties around  that. It is partly a broader issue around road traffic management that they have to deal with. When one looks at the statistics, almost 80% of our road accidents are human error. It is something to do with training and there are all sorts of road principles they have to think of such as enforcement and engineering. For instance, drunk driving is an enforcement issue and how do you deal with that. Part of the problem is that when they have a fault-based system and they do not control the parameters around what needs to happen within the system. They have to go to court and in some cases, they do not have to because you can accept the offer from RAF. Then it does create this position that the RAF itself has no absolute control over the potential claims made against it and it requires other parts of the system to work really well. What they are pinning their hopes on to fix this is RABS because it’s a system that is based on social security services and it allows for a more equitable distribution of resources. An important issue that popped out in the road traffic fund report around the RABS reforming the road accident system is how do they ensure that it is a system that is sustainable and affordable. There is two ways on how we look at affordable and how to ensure that that they do not make road traffic victims worse off but also not make those who are paying for it - the road users - any worse off than what they actually are. That the system is equitable is an important principle in the benefits you get out of RABS in relation to other social security benefits that sit within the system. They have lots of work they have done on what is happening in the Road Accident Fund. The shorter measure with the RAF seems to be money but at what stage does this become unaffordable to road users if they put another 50 or 70 cents on the fuel levy. Who pays for it especially when lower-income households drive older cars, and higher-income families drive fuel-efficient cars? Does this mean the poor are subsiding the rich? How do they deal with all those things within the Road Accident Fund?

The Chairperson said he would like to get some benchmarking on how other countries deal with the problem.

Ms Moore replied that only three other countries have no-fault schemes: Australia, Canada and New Zealand. All the others have liability insurance schemes. So what makes them different from everybody about having a liability insurance scheme is that only 30% of households in South Africa own cars. If you are to do this as a liability insurance scheme on the back of 3rd party insurance we have a lot of South African road users who don’t own cars and use public transport. So how do they then pay for it when 70% of road users don’t own a car that they use. So there are some equity issues they have to think about. However, lots of other countries have a common law way of dealing with it where they go after the wrongdoer and sue the wrongdoer and so everybody takes what you call a third party insurance in case someone sues them for that. She does not think that it is a policy decision they have taken in South Africa given that most road users don’t own cars and it will be very difficult to take out third-party insurance. Also, how would they deal with a taxi driver or a delivery vehicle. Who takes responsibility for that? These are quite complex. Treasury would be happy to write to the Chairperson on the work that has happened on the evolution of the road accident payment scheme.

The Chairperson said that this is one big red flag and they need further engagement on this because it has the potential of becoming another Eskom. This is because year in year out they are not getting a solution. He is very much reluctant to accept that once they have done this then there is going to be a panacea. When they come with the presentation with RAF itself, they would like to see more meat.

Mr Shaik Emam said that what is important is to be mindful of the fact the RAF is open to abuse and as a government they are not able to manage this. They cannot manage it as it is open to abuse. He does not agree that some are going to be paying for what everybody else is using. The system will protect everybody that is going to use any form of transport in any case. He expressed his confusion and said that for certain things, if one cannot manage it, one should privatise it. The RAF liabilities is a sore point. However, they must find a way to give people the protection.

On the Road Accident Fund, Ms Moore replied that Treasury noted one of the ways to probably deal with growth and liabilities in the RAF is probably to review the administrative system, and at what stage they are making an offer, and a lot of times when you ask for lots of money, it’s because there is an issue with both internal and external legal counsel in how they process the money in the claims administration. There is anecdotal evidence that suggests that the way the RAF deals with its claims process is not the way other insurance liabilities are dealt with.

Ms Moore replied that PRASA faces a very unique position where it runs massive operation deficits, that is, it operates at a loss, yet it is unable to spend its capital budgets. Cash flow from operations is in a negative position at the end of Quarter 2 of about R1.2 billion. The cash it is sitting on at the end of the quarter was about R18 billion and this is because it is unable to disburse its capital budget. The decision recently taken by the Minister of Transport around governance within PRASA, they hope that will help start turning things around. It’s a management decision and they have to hold the management accountable for all the decisions that they make.

Mr Mlenzana asked if Treasury participates in the strategic planning sessions of the various departments were they can infuse their thinking.

Ms Moore replied that it all depends if they are asked to do it. Some departments will invite them to the strategic planning as observers and others will ask them to make an input.

She replied that the Department of Human Settlements in November had consistent underspending. That is municipalities at the beginning of November had spent less than 25% of what was transferred to them from the National Department. This was viewed as significant underspending. It was the City of Cape Town, Tshwane, Ekurhuleni and Mangaung. The department asked these cities to write them a recovery plan. If they were happy with the recovery plan the money was then transferred in December. The City of Cape Town and Ekurhuleni submitted their recovery plan and the money was transferred to them. The money was withheld for Tshwane and Mangaung because of their failure to submit the recovery plan.

Mr Shaik Emam asked if they have a breakdown on how much they underspent.

Ms Moore replied that at 30 November the underspending in the City of Cape Town against the transfer was R255m, Tshwane was R240m, Ekurhuleni was R301m and Mangaung was R122m. At the end of Quarter 3, R503m was withheld from Tshwane, R120m was withheld from Ekurhuleni and R382m was withheld from Mangaung.

Mr Shaik Emam asked Treasury to provide the Committee with total underspending by these municipalities.

On the question about withholding of the equitable share, Ms Moore replied that it is a difficult one, but she thinks it as an important reform in trying to instil financial discipline in municipalities. It is about changing the behaviours within the municipality system. All they had asked the 29 municipalities is to show positive cash balances at the end of December. Only 28 municipalities were able to show that in January. The one municipality which was not able to show this was Mangaung. So in January, 28 municipalities got the money and only Mangaung did not get its money.

On the fuel volumes sold, the Central Energy Fund published information on how the RAF gets its money. One of the things that one can see in the long-run trends in the decline in the energy sold. Fuel service is not really a source of revenue because of the decline in sales. Fuel service is also a function of travel demand and if that demand declines, it results in a decline in fuel sales.

Ms Pebetse Maleka, Treasury Acting Chief Director: Health and Social Development, replied about the NHLS, that they are generally happy with its performance because it is emerging from a period where they were not able to manage their cash well primarily because provinces were not paying their accounts. That dispute has been resolved and provinces are now paying as required. The difference for this quarter is that Gauteng paid more than what was expected.

On medical-legal claims, in 2018/19 the claims reached about R2 billion. The department of health has engaged in several measures to address this and some include partnerships e.g. state lawyers. From the department side, the problem is looked at from a multifaceted angle because part of the problem is having inadequate records and inadequate quality of care which is the basis for people having claims against the system. One of the plans the department will be working on in the coming financial year is the national health quality improvement plan which they hope will improve the quality of service and reduce the number of incident that leads to medical claims. The other part of the intervention is the State Liability Amendment Bill which is sitting with Parliament which a response to try and manage medical-legal claims.

Mr Shaik Emam said his understanding is the R2 billion for medical-legal claims excludes the state’s legal costs. He asked if they have any idea what the legal costs were.

Ms Maleka replied that it does exclude their legal costs and she does not have that amount but they will look into that and report back to Parliament.

Ms Maleka replied that the reconciliation of claims was part of the agreement between SASSA and SAPO. This is precisely why SASSA is withholding payments from SAPO because SAPO has not been able to provide reconciliations for a number of months. Treasury had a discussion the previous day with SASSA and SAPO and both departments. They were asked to look into this and see how it can be resolved to enable SASSA to pay SAPO what is due to it.

On the R1.6 billion allocated for the fight against Gender-Based Violence and Femicide (GBVF), this is a little tricky because what they had was an emergency response plan that came to Parliament mid-year. The departments had to respond as per request from the Steering Committee and the President. Therefore this R1.6bn entails a variety of measures from the relevant departments. It was not a new allocation but an allocation that was intended to respond to GBV and it will include responses dealing with sexual offences that were already budgeted with the Department of Justice and Police. It will include measures such as social worker appointments. So it is not necessarily a new allocation. Reporting on this amount will, therefore, be reflected when departments report on their expenditure.

Mr Shaik Emam asked referring to the President’s R1.6 bn announcement if any initiative been introduced and what are the cost implication so they can measure that with the feedback of the programme.

Ms Maleka replied that when the President announced this, the Department of Women wrote a proposal on how these funds should be spent. When they looked at the proposal in Treasury, apart from the commission they wanted to set up, most of these functions already exist within the different departments and Treasury had a consolidated meeting with the departments to iron out what needs to be done. For example, are there sufficient police rape kits. From the proposals of what needs to be done, Treasury monitors what the departments are spending towards that proposal in the plan. The Department of Women will monitor the interventions of departments on gender-based violence. What they found is that the money allocated towards GBV is actually more than R1.6bn but it is hidden in the system. What makes the R1.6bn difficult is that it is not a fund but it is a function and the Department of Women is too small to perform that function. Therefore the different departments have to perform the function, but it remains responsible for monitoring if the other departments have done so. What Treasury has also done is to look at the budgeting and how they are shifting funds to deal with GBV. They did allocate about R50 million for the council that will look at what needs to be done and all this should be put in the Annual Performance Plans of the different departments so that they can implement. If the money is announced as a fund, it would be easy rather when it is in the system, it is difficult to lift it up.

Mr Shaik Emam said that they want to see the proposal from the Department of Women so that they follow it. Secondly, he did not agree that no amount was allocated as it is going to come from somewhere. He asked what impact it will have on those departments that have to take the money from elsewhere. For example, SAPS had already received an allocation for rape kits for every police station throughout the country. If they provide more, he wants to know from where they took the money and the impact that is having.   

Ms Maleka replied that the R1.6 billion was not new money. It was part of an allocation that was already in the baseline to respond to gender-based violence-related issues. The rape kits of the police will therefore be part of the R1.6bn and where they have a gap to invest around forensics then they can shift resources from another area. So it is about departments recognizing areas where they anticipate possible underspending and immediately shifting those resources to GBV responses. The team that is responsible for regulating this programme is asking the departments to report to it on their progress. However, the problem with reporting regularly is you can only get a report more of the activities rather than the impact. So they will probably get a sense of where the programme is going and its impact at the end of the year.

On the NHI, Treasury has written a finance paper and looked at the possible options on how they can implement this because one has to look at the inter-governmental issues between the functions, that is, who performs which function. Also given the fact that there is no money in the system as the NHI was not budgeted for, they must try to ascertain how they can implement it over the scale of a long-term period. They are hoping that they will publish the paper with the budget review, but this is a discussion that they will have with the Minister. However, the financial paper exists.

Mr Shaik Emam asked how they can have a proposal if they really do not know what is required in terms of funding to make a success of that. They need the Department of Health to be realistic because otherwise they going to implement the money and not be able to make use of it successfully.

Dr Mampho Modise, DDG: Public Finance, said that they have taken the point. They have been working with the Department of Health and the department itself will come and make a presentation.

On vacant posts and scarce or critical skills, Dr Modise replied there have been two departments that wrote to the National Treasury asking for secondments. They are starting to look for skills within the state so that they can mobilise the skills better. If they are struggling to fill critical posts and they cannot find them outside, the departments are already asking other departments to assist them with filling critical posts either on a permanent or a contract basis.

Dr Modise replied that for SARS, if it is E-filing season they have short term people come in to assist. They also have these short-term people to help at the call centres when it is peak time.

The list of universities that did not complete the progress report forms include Nelson Mandela University, Sol Plaatje University, North West University, Sefako Makgatho University and the University of Limpopo.

On why National Treasury is not on the underspending list is that they present a summary of those that they think need to be highlighted.

On the Compensation Fund, the reason it spent more than expected was that it was now dealing with the backlogs. It is true that they were not processing claims fast enough but now they have started to pay the backlog claims. What they are going to do is look at how big the backlog is and how fast they are processing the backlog.

The function of monitoring the money to the end was moved to the Department of Planning, Monitoring Evaluation. However, Treasury does just not say because the function has been moved that they no longer follow the money. They use other mechanisms to try and force the department to report to them. For example, the conditions for the small business fund say they will report on progress and who they disburse the funds to and the allocations for future years will be dependent on their performance on the current disbursements. If they want additional funding the following year, they have to adhere to the conditions.

On training across government, they are starting to look at reviews with COGTA and other departments on the Community Works Programme (CWP) and its implications to see what happens with these people and if the training programmes are useful and helping the people. However, she not sure how they can ask the SOEs to incorporate training as part of their programmes. The last response they got was that they have interns. Treasury's biggest worry is that if they take X number of interns the unions expect them to absorb all these interns. So it becomes difficult to train more than they can afford in the system. However, there is a need for a conversation on how this can help.

Ms Modise noted the list of items requested by the Committee from the Department:
• Add SAPO to the list of SOEs that National Treasury reports on.
• SARS to submit the IT software report and the progress and why it needs the money over the MTEF
• Department of Small Business Development (DSBD) report on how it spent the R700 million and the list of small businesses it funds.
• Provide the list of municipalities with unfunded budgets
• Provide the list of universities that have not submitted progress reports
• Follow up on the conditions of the SOE special appropriations
• Write-up on road accident payment scheme
• Look at the legal costs associated with medical-legal claims
• Proposals by the Department of Women on GBVF.

On blended finance, Ms Lebogang Madiba, Treasury Director of Strategy and Risk Management in the Asset and Liability Division, replied that it was introduced in 2017 with an amount of about R370 million. It was meant to address some shortcomings because some farmers were double benefiting from government incentives on agriculture and also to ensure funding from the private sector. It was introduced for smallholder farmers and emerging farmers particularly black farmers that want to commercialise their farms. However, there were some limitations and challenges along the way and in 2019 it was recapitalised with R3.9 billion.

Treasury was then called to Parliament in March 2019 to present the challenges and how they intend to address them. The challenges were about the allegation that some of the companies using the blended finance scheme were fronting. There was also criticism of the criteria used by Land Bank in not having a limit on how much it can disburse to a farmer. This means that one farmer would get as much as possible and this would cut out others that are also eligible for the scheme. Based on those concerns the fund was suspended and a review was called for the blended finance by the Department of Agriculture, Rural Development and Land Reform together with the Land Bank. The money is still in the coffers of the Land Bank, but they cannot implement until the challenges have been resolved. Another area of concern is that there is no publicity on this programme. There is a need for a sufficient stakeholder consultative process. The application process is also cumbersome, and some people end up giving up. The consulting process is done and the Department of Agriculture presented a draft agreement to National Treasury last year in November to ensure that they are on board and the successful implementation of the blended finance. Treasury is hoping that by the end of the financial year the programme will kick start again.

The Chairperson expressed his concern on why programmes should be stopped when being reviewed.

Ms Madiba replied that capitalisation of the blended finance is a grant-loan funding and the grant portion came from government, particularly the Department of Agriculture and the Department of Land Reform. The loan funding was by the Land Bank that was organising the funding from the private sector and not necessarily from the balance sheet of the Land Bank.

Mr Shaik Emam said that she mentioned that there were farmers that were double benefiting. Are these people deliberately misleading government to be able to get those resources.

Ms Madiba replied that she did not have an answer but that was a concern raised by the Department of Agriculture. There was a tracking system in the Blended Funding Model to ensure that there is no double benefiting.

The Chairperson said that they need to find a day where they can address the specifics that were raised.

The Committee adopted the minutes from previous meetings.

The meeting was adjourned.

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