Division of Revenue Amendment Bill: public hearing & consultation with Parliamentary Budget Office

Standing Committee on Appropriations

10 July 2020
Chairperson: Mr S Buthelezi (ANC) and Ms D Mahlangu (ANC, Mpumalanga)
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Meeting Summary

Video: Division of Revenue Amendment Bill: public hearing &consultation with Parliamentary Budget Office

Metropolitan Municipalities: COVID-19 Response Plans

The joint Appropriations Committees were briefed by the Congress of South African Trade Unions (COSATU) and by the Parliamentary Budget Office (PBO) on the 2020 Division of Revenue Amendment Bill.

COSATU said South Africa was facing a series of crises, such as a 40%-plus unemployment rate, dangerous levels of inequality and poverty, collapsing state-owned enterprises (SOEs), municipalities and departments, increasing corruption and wasteful expenditure, declining levels of revenues, and an economic recession. Very few of its expectations from the supplementary budget had been fulfilled. There had been very little sign of a bold R1 trillion stimulus plan, or an intention to seriously tackle the high levels of corruption and wasteful expenditure by the state.

It supported the channeling of funding towards key departments, such as health and transport, basic education, human settlements, water and sanitation. However, Treasury had made a mistake by not reinforcing key economic departments, reducing the funds for the departments of labour, trade and industry, and agriculture.

COSATU highlighted a number of weaknesses which urgently needed to be addressed. These included filling critical posts, the lack of consequence management, the debt of provincial and local government to ESKOM, schools without teachers, or water for sanitation, and no clear safety plan for metro rail. Government needed to finalise the R1.1 billion relief funding for taxi sector. It was critical that it be tied to taxi owners becoming compliant with tax, labour, traffic and other laws, and providing the Unemployment Insurance Fund (UIF) and Compensation Fund with registration certificates. It also warned that reneging on the public service wage agreement would lead to wildcat strikes and violence, and employers would use these wildcat strikes as an excuse to dismiss workers.

COSATU’s stimulus plan proposals were built upon the R500 billion in economic relief measures announced by the President, although it believed twice as much was needed to counter the 16% drop in the gross domestic product (GDP) and increasing unemployment levels. Relief to businesses had to be conditional on job retention and incentivised for job creation. Badly affected sectors of the economy – such as retail, hospitality, transport and tourism -- needed extra support.

The key economic interventions needed to create growth were stimulating the digital spectrum and digital economy, a reliable and affordable electricity supply, the issuing of water licences, mass local procurement and “buy local” programmes, and affordable and accessible credit. COSATU also proposed a wealth tax for people with annual incomes above R1.5 million among other measures to boost the South African Revenue Service’s (SARS’s) revenues.

The PBO said the policy priorities towards addressing the Covid-19 pandemic were related mainly to national and provincial government, while the reprioritisation of funds was mainly towards national and local government. Nationally, the transfers were to support households and the Land Bank, and locally they were to support local government revenue shortfalls. Provincial governments had to reprioritise the provincial equitable share funding towards the health sector.

In the supplementary budget, the main priority was to respond to the C19 pandemic. The three priority areas this budget focused on were primary health (mainly provided by provinces), social development (shared by national and provincial government), and peace and security (provided mainly by national government).

The repurposing of the Provincial Equitable Share (PES) towards Covid-19 initiatives showed how R20 billion (3.7%) of the R538.5 billion nationally had been reprioritised, of which R15 billion was reprioritised towards health, and R5 billion towards other needs at the discretion of the provinces.

The conclusions the PBO had reached on the reprioritisation of funds in order to address the needs of the population during the Covid-19 pandemic were:

  • Not all revisions within the supplementary budget were due to the Covid-19 pandemic;
  • Additional funding for Covid-19 did not focus on provincial health and social needs. Provinces had to re-prioritise within;
  • Additional funding to local government was not aimed to improve or increase services;
  • Conditional grant funding to improve services had been reduced, although there was uncertainty as to whether this could have an impact on the continuity of projects.
  • The effect of the suspension of conditional grant funds could be monitored, because no targets had been set in the grant schedules for 2020/21.

Members questioned the fairness of the PES, where the NC had received R14.3 billion, while Gauteng and KwaZulu-Natal had received R112.1 billion and R111.4 billion respectively. They asked what could be done to effect accountability and improve governance structures in local government, and whether the PBO could assist with that. What was COSATU doing about ensuring that government procured personal protective equipment (PPE) from local sources instead of China? Why did the DBE not recruit more teachers, especially for schools in the townships? Why had the system of “temporary teachers” not been resurrected to fill the shortages as an emergency measure?

Meeting report

COSATU: Division of Revenue Bill

Mr Matthew Parks, Deputy Parliamentary Coordinator, Congress of South African Trade Unions (COSATU), started by painting a picture of the current crises facing the country. These were rising unemployment, dangerous levels of inequality and poverty, collapsing state-owned enterprises (SOEs), municipalities and departments, rising levels of corruption and wasteful expenditure, declining levels of revenues, and an economic recession.

He spelt out the expectations COSATU had from the supplementary budget, and how it would be fulfilled or not by the actual supplementary budget. The key expectations were a bold R1 trillion stimulus plan -- of which there was very little sign in the budget -- and an intention to seriously tackle the high levels of corruption and wasteful expenditure in the state, as well as job creation, of which there was almost no sign (See presentation).

COSATU agreed with government that there had to be a debt reduction plan, but it believed in stimulating the economy to achieve it. It also believed that it had to increase revenue and reduce corruption and wasteful expenditure. The presentation spelled out the measures. Government was not doing anything to prevent corruption. COSATU wanted the Chief Procurement Officer in the National Treasury (NT) to oversee procurement throughout the state apparatus, but government was not interested in giving that office the powers to do so.

COSATU supported the allocation of funding to be channeled towards key departments like the departments of health and transport, basic education, human settlements, and water and sanitation. It appreciated the speed with which the government had moved to reprioritise the funds, but it had missed a key part of reprioritisation by not reinforcing the key economic departments. Taking funds away from the departments of labour, trade and industry and agriculture had been a big mistake.

The Bill, voluminous as it was, gave little clarity on the impact of reprioritisation. Expenditure reduction was good, but what was the impact of not filling critical posts, for example. More insight and analysis was needed on the impact of reprioritisation.

The Auditor-General (AG) had found that only 20 out of 257 municipalities had received clean audits, and 28 municipalities had not been audited due to their failure to submit financial statements. No official was being held responsible. Provincial and local government owed Eskom approximately R37 billion. The budget did not respond to these phenomena.

Mr Parks referred to the impact of Covid-19 on municipal workers, saying 63 had died and more than 4 500 had tested positive. Many municipalities were not compliant with Covid-19 regulations, such as not providing workers with the necessary personal protective equipment (PPE).

The key COSATU proposals for the public service and local government were to recognise the lessons from Covid-19, with the need for a capacitated state; honour the public servants on the frontline and the 2020 wage agreement; honour the local government 2020 wage agreement; engage on the next three wage agreements; and via the Public Investment Corporation (PIC) provide home and educational loans for public servants.

Mr Parks said the Department of Education found itself in a situation where 47% of schools did not have sufficient teachers available due to co-morbidities, and 31% of schools did not have enough water for washing purposes.

In health, were the reprioritised funds enough to get the country through the crisis? Was it wise to invest in temporary hospitals, while existing hospitals were being neglected?

Regarding public transport, there was no clear safety plan for metro rail. Government needed to finalise the R1.1 billion relief funding for taxi sector. It was critical that it be tied to taxi owners becoming compliant with tax, labour, traffic and other laws, and providing the Unemployment Insurance Fund (UIF) and Compensation Fund (CF) with registration certificates.

The sorry state of sanitation in informal settlements massively undermined the fight against Covid-19. Epicentres in Cape Town of Gugulethu, Khayelitsha, Nyanga, Phillipi etc, were evidence of this.

COSATU’s stimulus plan proposals were built upon the R500 billion in economic relief measures announced by President. Twice as much (R1 trillion) was needed to counter the up to 16% contraction in the gross domestic product (GDP) and the expected 50%-plus unemployment levels. Stimulus relief to businesses had to be conditional on job retention, and incentivised for job creation. Dedicated support was needed for badly affected sectors of the economy, such as the retail, hospitality, transport and tourism sectors.

The key economic interventions COSATU felt were needed to stimulate growth were stimulating the digital spectrum and digital economy, providing a reliable and affordable electricity supply, the issuing of water licences, mass local procurement and “buy local” programmes, and affordable and accessible credit.

COSATU proposed a R1.6 trillion investment into infrastructure funded by public and private financial resources. It also proposed a raft of economic relief measures, such as R40 billion disbursement from the UIF, extended grants from the SA Social Security Agency (SASSA), the COSATU pension fund withdrawal proposal, turnaround interventions for SOEs, value added tax (VAT) relief for the indigent, and a wealth tax (See presentation).

Parliamentary Budget Office

Ms Nelia Orlandi, Policy Analyst, and Mr Dumisani Jantjies, Deputy Director: Finance, Parliamentary Budget Office (PBO), said the policy priorities towards addressing the Covid-19 pandemic were related mainly to national and provincial government, while the reprioritisation of funds was mainly towards national and local government. Nationally, the transfers were to support households and the Land Bank, and locally they were to support local government revenue shortfalls. Provincial governments had to reprioritise the provincial equitable share funding towards the health sector.

Only part of the budget had been reprioritised. The rest remained available to provide for the normal running of government.

In the supplementary budget, the main priority was to respond to the C19 pandemic. The three priority areas this budget focused on were primary health (mainly provided by provinces), social development (shared by national and provincial government), and peace and security (mainly provided by national government).

In primary health, government had up-scaled capacity in the public health system and contracted private hospitals to supplement the public sector capacity.

In social development, it had up-scaled and maintained social assistance interventions for distressed and vulnerable households, and reprioritised funding to prepare social facilities for safe reopening and service delivery.

In peace and security, there was increased deployment of the South African Police Service (SAPS) and the national defence force during the lockdown.

Reprioritisation already started in the 2019/20 financial year (FY), and at a national level, R9.9 billion had been reprioritised. Local government had received slightly less in conditional grants, and NT had provided reasons for this reduction. The national total increase had been R8.3 billion.

For the 2020/21 FY, R32.6 billion had been reprioritised at the national level, as well as R7.4 billion at the local level, while R4 billion had been taken away from the provinces.

(See presentation for projections for 2021/22 and 2022/23 FYs).

The PBO demonstrated how the budget had been changed and how funds had been channeled towards where they were needed. Social development had gained the most, with an extra R25 341 million.

A table demonstrating the repurposing of the Provincial Equitable Share (PES) towards Covid-19 initiatives showed how R20 billion (3.7%) of the R538.5 billion nationally had been reprioritised, of which R15 billion was reprioritised towards health, and R5 billion towards other needs at the discretion of the provinces.

Breakdowns of the revised and repurposed amounts were shown as they applied to the different provinces. The Western Cape had indicated that it would not use its conditional grant for this FY. This was a normal function of fiscal management.

The PBO, in its analysis of output vs. impact, had found that the performance indicators in the conditional grant frameworks were mainly output driven. There were a large number of outputs in most of the conditional grants. A direct link with the budget per output was not possible, so a determination of efficiency was not possible. Performance indicators/outputs were duplicated in the conditional grants. The performance indicators in the grant frameworks did not provide impact indicators. For effective monitoring and evaluation (M&E), it was important to be able to link budgets with performance. The absence of this link made it difficult for oversight bodies to determine actual performance-- whether the funds spent actually addressed the need or not.

The PBO indicated that KwaZulu-Natal (KZN) had spent 155.9% of its capex budget, while Nelson Mandela Bay Metro had spent 188% of its capex budget. This budget had been adjusted downward. Capex served to stimulate economic growth.

The conclusions the PBO had reached on the reprioritisation of funds in order to address the needs of the population during the Covid-19 pandemic were:

  • Not all revisions within the supplementary budget were due to the Covid-19 pandemic;
  • Additional funding for Covid-19 did not focus on provincial health and social needs. Provinces had to re-prioritise within;
  • Additional funding to local government was not aimed to improve or increase services;
  • Conditional grant funding to improve services had been reduced, although there was uncertainty as to whether this could have an impact on the continuity of projects.
  • The effect of the suspension of conditional grant funds could be monitored, because no targets had been set in the grant schedules for 2020/21.

The PBO concluded its presentation by providing details of the suspension of baselines in a number of selected national departments (See presentation).



Mr J Mpisi (ANC, Gauteng) announced that this morning he had buried his father-in-law, Mr Ronald Mofokeng, who had been a member of this Committee from 1999 to 2009, and had decided to come to this meeting in his honour. He had been a highly disciplined national treasurer of COSATU and had also chaired the Standing Committee on Public Accounts (SCOPA) at some point in the National Assembly.

The Chairperson and Members extended their condolences to the family of Mr Mofokeng.

Mr Y Carrim (ANC, KZN) proposed that a letter of condolence be written by the Chairpersons of the two committees to the family of the late former Member. He had known Mr Mofokeng personally, and could attest to his excellence in the political roles he played. The meeting agreed to his proposal.

The passing of Mr Ronald Mofokeng was an indication that Covid-19 was a reality. A Member of the KZN legislature, Mr Mthembu, had also passed away the same week as a result of Covid-19.

Mr D Ryder (DA, Gauteng) said he agreed with the rhetoric of COSATU in this instance, especially regarding its proposals on what the government’s stance should be regarding the taxi industry. He endorsed the proposal that any aid the government contemplated giving the taxi industry had to be made conditional on taxi owners being able to prove compliance in terms of tax, labour laws and regulations, and any other legislation which applied to the transport industry. He felt that this rhetoric had to be extended to all other industries where employers applied and were given financial aid by the state during the pandemic. No industry/employer should receive a blank cheque. All allocations had to come with serious responsibilities.

Mr Parks thanked Mr Ryder for his comments. He said that there was nothing wrong with agreeing. Trade unions had to be pragmatic. Members’ jobs were on the line. Unions had to focus constantly on ways to save jobs, to save industries and it had to be based on economic logic. Slogans would not bring bread home for workers to feed their families, especially in this crisis.

Mr E Njandu (ANC, Eastern Cape) said the COSATU presentation had provided a detailed analysis of the current situation in SA, which he welcomed. It had to work with government to find solutions to every challenge, as laid out in the detail.

Mr Parks replied that COSATU agreed 100% that a social compact between government, business, organised labour and Parliament was the only way to resolve the crisis. However, Parliament was playing a harsh role in the government’s failures. The state was collapsing, and in the private sector many industries were hanging by a thread. Nobody had the luxury of time.

Mr X Qayiso (ANC) was especially interested in the conditions COSATU suggested to be attached if the taxi industry were given financial bail-outs. One could not have a situation where taxi drivers defied the regulations and rules for social distancing when loading passengers to 100% capacity, and then demanded that government cooperate with them regarding bail-outs. There had to be conditions -- for example, compliance on UIF payments by employers in the sector. He also encouraged COSATU to approach the relevant portfolio committees, in this case the Portfolio Committee on Transport, to engage them on the issues raised.

Mr Parks replied that the taxi relief was a unique opportunity. That industry, for a very long time, had been a lawless industry. Everybody knew that it had the capacity to create anarchy and chaos, so government had to be very blunt. It had to say to this industry: “If you want this R1.1 billion relief, these are the conditions. You register in terms of the Compensation for Occupational Injuries and Diseases Act (COIDA) and for the UIF. You pay outstanding traffic tickets. If you behave like hooligans, the money gets withdrawn.”

Mr Parks added that COSATU had met with the Minister of Transport twice, and another meeting was planned for later the same day, to see whether a solution could be found. COSATU had met with the South African National Taxi Council (SANTACO) and the Taxi Drivers’ Association frequently, and Mr Qayiso was right. It the taxi industry wanted financial support, it had to behave. The era of hooliganism had to come to an end.

Mr Ryder said there was a mismatch between COSATU’s rhetoric in Parliament and its members’ rhetoric on the ground. He felt that, at municipal level, some COSATU members were not equally on board regarding the national project.

Mr Parks said that Mr Ryder was also right -- union members were not happy at the municipal level. There were 29 municipalities which frequently did not pay workers on time, especially in the Free State, North West and Limpopo. It was impossible to tell those members to be happy when they saw councillors getting paid, but they were not paid for months at a time. And of course, when one had 4 500 municipal workers hit by Covid-19, it would deepen the anger. This situation was going to explode at the end of July if those workers did not receive their salary increases, and there was no amount of alliance politics that was going to manage this issue. In many workplaces in the private sector, when workers did not receive their salary increases or UIF payments, wildcat strikes were taking place. It was very difficult to manage, and workers were right to be angry.

Mr W Aucamp (DA, Northern Cape) agreed with Mr Ryder that there were many aspects of the COSATU presentation he agreed with, which was uncommon. The COSATU presentation had painted a very bleak picture. The presentation had mentioned municipalities collapsing, referred to the SOEs and their problems, and pointed out that 10% of the state budget was lost to corruption and wasteful expenditure. Only 20 out of 257 municipalities had received clean audits. The country was in trouble, and all parties agreed on that fact. The focus had to be on the solutions -- to get out of the hole the country was in. This was where the parties differed. He believed cadre deployment was one of the biggest reasons for the problems the country currently had. Did COSATU not consider it high time to abolish the practice of cadre deployment, in favour of appointing candidates on merit?

Mr Parks replied that it was a bleak picture, and it had been bleak for a while. This was what frustrated COSATU. It did not feel the government had come with clear plans to grow the economy, to save the state, to save the SOEs, to create jobs. It felt that the government, even with the supplementary budget, had presented a very laissez-fair, business-as-usual budget, while the country had 40% unemployment levels, and this was rising. There had been no mention of job-creating targets in the supplementary budget.

COSATU felt government was wasting time, which the country could not afford. It hoped that this Level Three government approach could be impactful, and something meaningful would be seen in the Medium Term Budget Policy Statement (MTBPS) in October, but it remained very sceptical. The picture with local government was very scary. Most municipalities were in a state of collapse. 90% of them could not do basic financial management, which it was paid to do. It was a crisis.

Mr Mpisi said COSATU had been deploying its members through the ANC to Parliament. There was nothing wrong with cadre deployment. What was wrong was what happened in Tshwane, where people were employed under the DA municipality, where the chief of staff and some senior members had been employed without proper qualifications. It was wrong to deploy somebody without capacity to a particular office.

Mr Aucamp responded that the current state of SA’s finances was a good indication of the fact that incompetent cadre deployment had taken place.

Mr Parks replied that as Mr Mpisi had said, all parties deployed people, but people had to have appropriate qualifications for a certain position. If one was a municipal manager or engineering services manager, one had to have an engineering degree. But government was also soft. There was the Auditing Amendment Act, which empowered government to start using a heavy stick to deal with offending officials, and no-one had been dealt with so far. Cadre deployment did not mean that a person could employ his wife or friend so that they could share tenders. Corruption was corruption, irrespective of the party.

Mr Aucamp said everybody was talking about a turnaround strategy when it came to SOEs, but nobody was really pin-pointing what needed to be done. The DA had on numerous occasions in the past stated that privatisation needed to be instituted. He asked what COSATU suggested should form part of the turn-around strategy for SOEs. Money was being put into SOEs all the time to bail them out. At the end of the day, it was the people at ground level that paid the bill. It was service delivery that was trampled on, due to the fact that SOEs had to be bailed out repeatedly.

Mr Parks replied that the SOEs were meant to be capacitating the state and injecting life into the economy, but now they were a burden to the state and the economy, and workers were having to subsidise them. COSATU had been crying for a long time to see a clear business model -- a restructuring, a turnaround plan -- to see how SOEs could be saved. The consequence of not having these interventions was that many of them were dying or had died. One did not know whether the SA Post Office (SAPO) would survive. SAPOO wanted to cut workers’ salaries by 25%. SA Express was beyond dead.

COSATU was hopeful that the Presidential Council on SOEs, on which labour would have seats, would come with urgent plans to deal with the situation. It would mean consolidating, restructuring and finding new business models etc. COSATU thought the key SOEs had to be prioritised, which were ESKOM, Transnet and Metrorail. This was also what had informed COSATU when it had intervened at ESKOM in 2019. COSATU had asked:” What could labour put on the table to save these critical SOEs, because union members’ jobs were on the line?” It was quite alarming that many SOEs were retrenching workers by the thousands, and often line function departments were silent. They were not speaking out on this issue. Workers were saying: “It’s our ANC government retrenching workers, and the different ministers are keeping quiet”. It was not easy. It was a crisis.

Ms D Mahlangu (ANC, Mpumalanga) said that whenever COSATU made a presentation in Parliament, Mr Aucamp made sure that the country knew his constituency. His comments on privatisation were just a waste of breath, because he knew COSATU and the alliance had anti-privatisation campaigns, and privatisation did not feature anywhere on COSATU’s list of solutions to the current politico-socio-economic crises the country was facing. Who were going to benefit from privatisation? The tripartite alliance was not hiding the fact that it had a pro-poor bias. Privatisation was not going to help SA.

Mr Ryder said Mr Aucamp had been completely misunderstood. He knew Mr Aucamp to be on the side of the poorest of the poor. He wanted SA to implement the policies of the winning nations, and was afraid the ANC was implementing the policies of the failing nations of the world.

The Chairperson said a date had been set aside to debate the policies implemented by the government.

Mr D Joseph (DA) said that as long as dialogue could happen, there was hope, and the COSATU presentation provided hope. It provided the space to talk openly about the status of this country -- in particular, local government. All the questions that he had on the debt reduction plan, austerity measures, the AG’s findings, job creation and bringing the taxi industry to compliance had been asked.

He wanted to focus on one point, which was very central to the whole presentation of COSATU, which was where it spoke about honouring the local government 2020 wage agreement. He was a founder member of COSATU, and the principle was that if one engaged with government from that perspective, then government also had to honour its agreement. If government did not honour its agreement with the unions, it broke the trust that government had built up with COSATU, and that could lead to a very costly and chaotic exercise in the country. The Committee had to deliberate on this matter after the presentation and discussions had taken place. This Committee also represented the government. SA could not afford further destabilisation, because NT, according to COSATU, was walking away from a wage agreement. This destabilisation would be another crisis, on top of the crises SA was dealing with already. Government had to create stability.

Mr Parks replied that there was a critical need for hope and solutions. He was worried that collective bargaining and the trust in government was in danger of collapsing. When government ran away from wage agreements, it made it very difficult for COSATU to sell compromises to its members. It could easily agree to something, but the members had to be in agreement and it was not easy when members felt angry or that they were being thrown under the bus.

What made it difficult, was that when NT at the Public Service Coordinating Bargaining Council (PSCBC), and more recently at the SA Local Government Association (SALGA), had said it wanted to withdraw, it had provided no alternatives. NT had just said: “We’ll give you 0%,” which meant a 5% salary cut to those workers, and at the same time workers were asking: “What was government doing about corruption and wasteful expenditure? Why must a worker in OR Tambo District take a salary cut in effect, when the municipality just ate up R6 million on a bogus door-to-door campaign during C19, and there had been no consequence for the municipal management or the leadership there?”

It was going to make it difficult to get workers to continue risking their lives if one told them there was going to be no salary increase.

Mr Qayiso said COSATU’s proposal made a lot of sense. He wanted to touch on the issue of the Wage Bill. It was a matter that popped up in many presentations, and it seemed to be a ticking bomb for the government, as it had been warned about the bill. There had been assurances that the matter was being attended to. Currently, at the level of local government negotiations, the issue of the Wage Bill had surfaced again. As COSATU had reported, NT had sent a letter to SALGA saying it had retracted from the commitment to the wage agreements for the 2019/20 FY. In his opinion, this action actually increased the problems that the country was facing. Government had to step in and resolve this situation.

Mr Parks replied that the public service wage bill currently was at arbitration. COSATU was hoping there would be solutions soon. Members were angry. Nurses were being decimated by COVID-19, and if they did not get a simple increase, just to protect their wages against inflation, it would be difficult to explain that them, while the Minister who made the decision was earning 12 times what the nurses were earning.

COSATU was worried that the unilateral withdrawal from the proposal by NT was going to provoke wild-cat strikes, as members were angry. It would have been more constructive if government had come to the workers timeously, not five minutes to midnight, when the wage agreement was supposed to come into effect, and said: “How can we find a win-win solution?”, even if the parties had to look at the next three-year agreement, or there could be a five-year agreement. But the three-year agreement would have to be done to give fiscal space to the NT to budget and to plan. The demands were quite low, compared to previous agreements. There was space to find each other. Inflation had plummeted by half. However, if the government wanted to sell a compromise on the Wage Bill, one had to see what ministers earned and what municipal managers earned, and agree on significant cuts otherwise workers would not be convinced.

Ms D Peters (ANC) said that in communities, policemen and women were starting to suffer the impact of COVID-19. In her hometown of Galeshewe, Kimberley, she had seen the burial of police officers and the narrative was that they had been infected when doing duty at the testing sites, or while monitoring illegal funerals.

Had COSATU engage the different ministries, especially the Department of Trade and Industry (DTI) and the Competition Commission with regard to the cost of PPE, and the fact that PPE was imported, instead of procured from local manufacturers.

Mr Parks said COSATU had been engaging with the different ministers. It thought COVID-19 would give the parties the opportunity to reflect a little bit, but it was meeting five times a day with different ministers, including NT, the DTI, Basic Education, Transport, Labour and Health, and those engagements had been helpful to unblock many issues. A task team had been set up with the DTI, business and labour, to make sure local the procurement of PPE was promoted. This action was beginning to bear fruit. The weakest link there was the provincial governments, which were often unwilling to give information. It cost about R15 to produce a cloth mask, but because NT had said it would buy a cloth mask for R25, there were many opportunists racking up the prices to make a profit at the expense of public funds, when government did not have the funds.  

Ms Peters was glad that COSATU had raised the issue of the health and safety of refuse removal workers. This category of worker was exposed, as COVID-19 positive people threw used tissues in the dust bins. Refuse removal workers picked up the dustbins without the adequate PPE, and became infected. The people working in water and sanitation services were equally exposed to infection. How could COSATU assist in these situations?

Mr Parks replied that COSATU was quite worried about the high infection rate amongst refuse collection workers. Even the City of Cape Town was not protecting those workers sufficiently.

Ms Peters asked whether COSATU had engaged with the departments of police, defence, health and other departments which oversaw essential workers.

Regarding the information COSATU had provided in connection with the DBE, she believed this Committee could engage the DBE, but equally so with the Portfolio Committee on Basic Education, because that portfolio committee needed to make sure it had proper oversight over whether schools were ready to operate. She recommended that the Committee engaged with the DBE on this matter.

Mr Qayiso referred to the 47% of teachers in the education department who were not at school because they suffered from co-morbidities. He asked whether COSATU should not also approach the Portfolio Committee on Basic Education to engage around the issues which were related to the state of readiness of schools, and other related critical issues, so that it could get a proper response.

Mr Parks replied regarding the readiness of schools, and said COSATU felt that the government was not ready to re-open schools. Many schools still did not have toilets or water tanks. He added that more teachers had to be employed in townships, where the learner/teacher ratio had been increasing over recent years.

Ms M Dikgale (ANC) said teaching staff were severely affected by COVID-19, and schools were not safe .She did not know whether the teachers’ unions had had meetings with the DBE about this situation. Learners were suffering as a result, and were not focused on their school studies. They were thinking of other means of earning money to support their families, like driving cars. Many teachers were not at schools because they were of advanced age and had co-morbidities, and had a high level of vulnerability to COVID-19. She did not know whether teachers could give the DBE ideas on how to remedy the current situation. One of the ideas could be the idea of “temporary teachers”. Way back in the past, there had been a system of recruiting temporary teachers into the school system. These were people with an interest in teaching, but who were not fully qualified, but worked in schools to assist the situation.

Mr Parks replied that the SA Democratic Teachers’ Union (SADTU) and the other teachers’ unions had been engaging with the Minister and the DBE on a daily basis, but he thought the Department also had to accept management responsibility. All five teachers’ unions were on one page with the school governing bodies, but the DBE really lacked serious leadership capacity and there needed to be political accountability for this.

Ms Peters asked what COSATU’s view was on a voluntary severance package for those above 60 years of age who were still employed, and who were working in areas where they could not work remotely or work from home, but who were also presenting with co-morbidities.

Mr Parks replied that COSATU did not support workers taking voluntary severance packages. The point was to create new jobs, not to shuffle jobs from older people to younger people. Older workers had children and grandchildren they supported, and the workplace lost valuable skills if older workers left the workforce en masse.

Ms Peters asked whether it was not time that COSATU started driving a culture of paying for services, especially for water and electricity, and then realise the proper subsidisation of those who could not afford to pay.

Mr Parks said, regarding the need to pay for services, that part of COSATU’s proposal regarding ESKOM was that all electricity provision had to be through a pay-as-you-go system. One could not have one half on a pay-as-you-go system, and the other half, especially the municipalities and provincial departments, paying whenever they felt like it. COSATU believed government had to honour the ANC’s commitment about providing increased subsidies for electricity and water services for indigent households. This was part of the VAT relief agreement agreed to by the previous administration.

What was needed was a sustainable funding model for municipalities, because many of them depended upon electricity tariffs, and that might mean the District Model approach had to be fast- tracked, because at least 257 municipalities were simply not sustainable. Prince Albert and Beaufort West were just too small to sustain a municipality, for example.

Mr Carrim wondered what the Committee and the Members thought about the fact that there was only one public submission for these hearings. The previous week there had been hearings on the fiscal framework, and a substantial number of the representations had not dealt with macro-economic issues, but rather with appropriations issues. There had been many submissions which the Finance Committee had felt were more suited to be addressed by the Appropriations Committee, and these had been referred accordingly. One particular issue stood out for him -- which the Finance Committee had asked this committee to process further -- dealt with the Basic Income Grant (BIG). Currently it was R350 for the next few months. The morning on which this meeting took place, he had seen an article by OXFAM online, where it had stated that SA was a hunger hotspot.

The situation was becoming bad. The Committee had said that hunger was stalking the country and that the BIG had to become permanent. This was being discussed in the majority party. Some Members were in the National Executive Committee (NEC), and would know more than he. This should be considered as a recommendation. He urged that the Committee Chairpersons and staff read what the fiscal framework said, before the hearings, to see how the recommendations applied to appropriations and how the Appropriations Committee could take it further.

It was also difficult for people to appear before the Finance Committee, and 10 days later to appear at another public hearing, so he was not criticising the presentations which had carried more appropriations than fiscal framework issues.

On the R1 trillion package, all parties were in agreement. While one agreed with COSATU’s values and broad aims, he realised it was difficult, with the COSATU representative and his team being so limited in terms of resources. More needed to be said on how each of the proposals on securing additional resources and funding could be achieved. One could not keep saying, as the Committee did, that one should deal with illicit financial flows, tackle it more effectively, or set up an inter-ministerial committee. This had been said for four years. The debate had to move on to the next stage. COSATU had to assist the Committee to address the matters that had been reiterated so many times. They had to tackle NT more effectively to find funding within the restricted budgets that SA currently had. He supported COSATU’s stance on local procurement and infrastructure. Everybody knew the way to recover from the crisis was to focus far more on infrastructure than was currently the case. The resources had to be found to do that.

Mr Parks replied that it was shocking that the R350 BIG, which was meant to be given to the long-term unemployed, had not been disbursed yet. COSATU would support having a discussion on the BIG, and the Minister of Finance had made positive comments in that regard.

Mr Mpisi thought the issues COSATU had raised were issues that the Committee, as elected leaders, had to look at very seriously. COSATU had been consistent at working with Parliament. He was a former COSATU central executive committee member. From that experience, he knew that COSATU had consistently been making submissions for some time, and this was continuing under the current leadership, with Mr Parks as the Parliamentary representative. COSATU had been putting forth proposals to different portfolio committees, and Parliament needed to appreciate the fact that COSATU had been consistently willing to work with it.  He thought the Committee needed to look at finding a better way to say that government must not just pay lip service to its proposals.

COSATU had never been anti-Parliament, and had managed to stabilise the relationship between the unions, as well as the relationship between the unions and the legislature in Gauteng, because the legislature believed that if there was engagement between the workers and the state institutions, challenges could be addressed better.

Mr Njandu said he agreed with Mr Mpisi on what the relationship between COSATU and Parliament should and could be.

Mr Parks said that Mr Carrim was 100% right -- it was easy to chant slogans and make demands. COSATU thought the way to increase revenue would be to capacitate the SA Revenue Service (SARS) to look at some wealth taxes for those earning above R1.5 million per year, or a solidarity tax. SARS had to crack down on customs evasion, because only 5% of customs duties were enforced at the ports. COSATU had agreed to the funding model up till then, including the interventions, but the fact was that if the corruption and wasteful expenditure was not managed, it did not matter how much tinkering happened around the tax revenue. If tax revenue bled 10%, the holes were not being plugged.

COSATU supported reprioritisation. There was a longer-term solution to fast-track impactful investments. Government on its own would never have enough money to drive the infrastructure programme. It meant that the PIC and the development finance institutions (DFIs) must have a much more aggressive programme for local procurement and investments, especially linked to job creation. COSATU thought there were sufficient funds available, and the sector education and training authorities (SETAs) needed to be tapped into. The UIF commitment to the COVID-19 relief was R40 billion. COSATU had pushed the UIF to increase it to about R53 billion, and was still pushing them further for more injections into the economy, because the country had to throw every single thing it had at this crisis.

COSATU would be happy to engage with NT, because the NT on its own could not manage it the situation. It would be happy to engage with NT at Parliament or at NEDLAC, 24/7 to see whether government and COSATU could assist each other, and where it was wrong, COSATU would be happy to admit it.

Mr S Buthelezi (ANC) asked whether COSATU had studied what government was getting in exchange for the financial bailouts that companies had received due to the COVID-19 pandemic, with a special focus on retrenchments. What conditions were attached to bailouts?

Mr Parks said this was an issue COSATU felt government was too soft on. Government was pumping economic relief into the economy, which was a good thing, but it had to be conditional on these companies retaining jobs. Government could not use public funds to bail out at a company, only for the company to turn around and retrench workers. The country had an unemployment rate of higher than 40%. One also had to look more strategically at the incentives government provided through the DTI etc to businesses, to make sure they were also further strengthened and incentivised for job creation, so that government could create conditions for employees to create more jobs.

Mr Buthelezi said Mr Parks had spoken about the SA Reserve Bank (SARB) intervention, especially the R200 billion facility, and that there had been only about a 3.5% off-take. This had many implications, because it meant that businesses had not benefited from it. This meant that the R200 billion, which was meant to stimulate macro-economic growth, was not circulating in the economy, and to have impact it had to circulate. Why had only 3.5% been picked up?

Mr Buthelezi asked COSATU what it thought about this fund being available only to the commercial banks. He thought part of this fund had to be made available to the provinces, and to developmental organisations within the provinces, so that so that people in the provinces could also benefit from this fund.

What was COSATU doing about companies which charged inflationary prices, exploiting people during the COVID-19 pandemic?

Mr Parks replied that COSATU supported government throwing everything it had at the economy, including tax relief for employers, from the skills levy, the contributions, the pay-as-you-earn holidays, to try to save every single job, every single place of work. Regarding the tax relief, there were no conditions being attached. The tax relief had to be conditional. There should be clear job creation- and retention conditions, accountability to government, and also local procurement conditions, otherwise government was bailing out employers who were going to just pocket the money and run away afterwards.

Mr Aucamp asked COSATU how many people in the tobacco industry would lose their jobs as a result of the ban on tobacco products during the COVID-19 pandemic. Did COSATU not think it was high time to fight for the jobs of people in this sector as well?

Mr Parks replied that the tobacco industry was a difficult case. He did not know the figure for job losses, because the figures doing the rounds were so extreme. The overall job loss figure for SA would not be less than one million. After the UIF COVID-19 injection into the economy, SA should try to avoid the numbers of job losses the country saw in 2008, when one million jobs were lost. The idea was to pump in that money to avoid breaking the relationship between the employer and the worker and to help save those jobs, but it was difficult. If one went to a restaurant, one might see only one customer there, when there used to be 50 customers. The research now indicated that about half of the employers which received the COVID-19 relief fund were likely to retrench about 20% of the workforce when the fund came to an end, and it would come to an end within the next few weeks.

The tobacco issue was a complicated one. There were about 500 tobacco farms in the country, and the tobacco industry placed a heavy cost upon the public health system, with people dying of lung cancer, but COSATU also agreed with the critics who said the state was losing out on the tax revenue. Smokers were addicted. They bought cigarettes illegally, and they were going to continue, no matter what. Before the lockdown, the country had been losing about R7 billion to illicit cigarettes. The tobacco and cigarette industry was a very corrupt industry, because often people would have their hands in both the legal and illegal sides of it.

Mr Mpisi said some companies used the COVID-19 pandemic as a scapegoat to retrench workers.

Mr Buthelezi asked COSATU what plans it had to retain jobs, because it was easier to retain jobs than it was to create new ones. There was whole chain of economic repercussions when a job was lost. It had an impact, amongst others, on SARS, on consumption and the GDP.

Mr Parks replied that sufficient support had been given to heavily battered sectors of the economy, in particular the retail, restaurants, hospitality and entertainment sectors. The Department of Tourism and the Department of Small Business Development had each given less than R200 million to those sectors, and that was a drop in the ocean compared to the hundreds of billions the country was bleeding.

COSATU believed that all the relief given to employers had to be conditional upon job retention and creation. It was really shocking that of the R200 billion government was standing surety to for the banks, only R10 billion had been disbursed so far. COSATU had met with the Banking Association of SA (BASA) earlier this week. It did not think the banks were taking this crisis seriously. He put the problem on the banks, because they were blocking this process. The conditions the banks determined, for employers to receive the funding, were far too strict. They were too honerous, and there was no glory in having R190 billion unspent when the economy was on its knees.

What was also worrying for COSATU was that BASA had told COSATU that the government had so far signed surety for only R100 billion, not R200 billion, as had been announced. Another worry for COSATU was that the government was also not moving with speed to push the banks to fast-track the relief into the economy. Everything had to be thrown into the economy as fast as possible.

The other thing that had been critical for the economy was ESKOM. COSATU thought the new CEO had been doing some good work, but the challenges were huge. COSATU would be signing the ESKOM social compact within the following few weeks at NEDLAC, which it hoped would trigger impetus. For COSATU, local procurement was critical in both the public and private sectors, as well as for consumers. He hoped that Members themselves stayed true to that philosophy, and bought locally produced clothes. Government needed to fast-track other regulatory reforms, like water licensing, the digital economy and so forth. He also thought the biggest crisis of the supplementary budget was that there was no stimulus plan, and for COSATU, that was the major crisis. Not only COSATU had called for it; but most economists and the President had also called for it.

Mr Buthelezi said the Committee had received reports that companies had claimed UIF on behalf of workers and received pay-outs, but workers had complained that they had never received the money. Was COSATU aware of this, and what should happen in these instances? COSATU had been silent about this issue, which affected its constituency.

Mr Parks replied that to be fair to the UIF, it had never been established for a complete shutdown of the economy. Before the lockdown, the UIF did an average of R17 million worth of payments daily. This had escalated to R700 million worth of payments per day, which was a huge increase. So far, about R29 billion of COVID-19 and another R3 billion of normal UIF payments, had been disbursed for April and May to over four million workers, and that had been a massive injection. It was almost a third of the UIF’s funds. It would likely hit about R53 billion at the end of the June payments. There were huge problems with the UIF. There were still about 950 000 applications which had not been dealt with, for a variety of reasons. There were very scary reports about corruption seeping in. When the UIF did payments, it cross-referenced the bank account details with the banks, and the banks had been flagging numerous bogus accounts as elements of corruption. It was going to be a huge task when auditors went through those payments, because they were going to find significant incidents of corruption.

COSATU had received a lot of complaints from workers who had not been paid, yet when it checked on the system -- because one could check on the system using one’s ID number -- one would see that the UIF had actually paid that employer a month previously. There were cases where employers lent money to those workers. This nation, across the board, had a really huge problem with corruption.

COSATU was pushing the UIF to see what additional support it could come up with beyond June for those over 60 who could not work, those with co-morbidities, and those workers from sectors which were not allowed to open under the current COVID-19 directives. It was a challenge.

Mr Buthelezi asked what COSATU was doing about employers defrauding workers out of their UIF pay-outs.

Mr Parks replied COSATU had increasingly been seeing reports about employers pocketing the money. Reports had started increasing around May, and it was a difficult challenge. As a result of the UIF COVID-19 agreement, the country was threatened with a possible collapse of the UIF system, because the UIF was never built for a total shutdown of the economy. The fact that the UIF paid out R17 million per day before the lockdown, and currently paid out R700 million per day, showed the huge increase in the volume of cases it had to deal with. During the first week of the lockdown, the UIF hotline had collapsed under the 70 000 calls per day it received. Part of the agreement was that employers would be compelled by the ministerial directive to apply on behalf of their workers to ease the pressures on the UIF, to avoid the collapse and to help get the money through. It was also to make it easier, because the UIF application procedures were bureaucratic and technical, and it was not always easy for mining, construction or domestic workers, who did not have easy access to IT facilities, to apply. The consequence of that good intention was that employers had pocketed the money.

One of the interventions put in place to try and address this new unintended crisis, was to put on the UIF website a facility where workers could check for themselves what their payment status was by putting in their ID number. This process helped to expose corruption and illegal activity. The UIF was pursuing, with the help of SAPS, 67 cases of corruption. It could be more. One of the requirements of the UIF COVID-19 relief to employers, was that employers had to account within seven days to the UIF, giving proof of payment that they had paid the UIF pay-outs over to their workers. 99% of employers did not comply with this directive. There was going to be a huge amount of corruption, and it was very worrying.

Initially, the UIF had paid the employers, who were in turn supposed to pay their workers. There had then been delays in the system, and the UIF had wanted employers to pay workers upfront, and then recover their money from the UIF. The UIF had then increasingly started paying directly to workers, even though employers still applied on the workers’ behalf. This came with its own challenges, but it was done to try and reduce the scope of corruption.

The situation was serious. Wildcat strikes were taking place in the Free State, the Western Cape and KZN, especially in the clothing and textile industry. Workers were angry and violent. It was a very combustible situation. In turn, these wild-cat strikes were used as an excuse to dismiss workers.

COSATU was meeting with the UIF at least once a day to try to address these issues. It had set up a technical committee consisting of the UIF, Business for South Africa and the three labour federations to try to address all these issues. The fact that there were 951 000 unprocessed applications showed the extent of the crisis. There were huge challenges. When the UIF was busy with the June payments, the system kept collapsing. It was July 10, and no payments had been made for June.

Ms Peters asked whether COSATU had engaged with its members in the local municipalities, as well municipalities themselves, on the audit outcomes, because the biggest losers would be workers in this particular instance, if municipalities collapsed.

Mr Buthelezi referred to the reports of fruitless and wasteful expenditure, as well as negative audit outcomes for municipalities, which he called evergreen problems, because they had been in existence for a long time and did not get resolved. What consultation did COSATU have with SALGA to address these problems? These problems kept on coming to Parliament, but it was always after the fact.

Mr Buthelezi asked whether COSATU was engaging with SALGA, and what had come out of those engagements.

Mr Parks replied that COSATU’s relationship with SALGA had been bad for a while. Many municipalities and local mayors had a very hostile relationship to unions. Often it was because the trade unions were exposing corruption, mismanagement and wasteful expenditure. COSATU thought SALGA was agreeing with government’s withdrawal from the wage agreement, and this could provoke wild-cat strikes, and provoke workers to occupy municipal offices.

Mr Buthelezi said the problem of the SA economy was a lack of growth. There was an expectation on national government, through NT, the DTI or the Competition Commission, to stimulate economic growth, but he believed it was the responsibility of all spheres of government to stimulate economic growth. He had also asked SALGA the previous day what local government was doing to stimulate inclusive economic growth. The solutions to SA’s problems were economic growth. Local government saw the ignition of the economy as the sole mandate of national government, while all spheres of government had the duty to stimulate economic growth. He whether COSATU thought enough was happening at that level to generate growth.

Mr Parks replied that there had to be a stimulus plan, which had to include dealing with corruption and wasteful expenditure, making sure the infrastructure programme happened, and included the private sector. Other requirements were sorting out ESKOM and the other SOEs, regulatory reforms in the economy, the PIC and DFIs investing in job creation projects and “buy local” campaigns and making sure impact investment by the private sector happened, sector relief for the battered sectors of the economy, and the banks playing their part -- making access to credit affordable and easier. The banks had to get the R200 billion through, reduce interest rates further, and put job creation at the centre of everything.


Parliamentary Budget Office

Ms Peters asked the PBO whether it was better for an entity to under-spend its budget, or to return the money to the fiscus, because of consistent roll-overs.

Ms Orlandi replied that the surrendering of funds happened all the time, and when a province/department was not ready to spend, due to something going wrong with a tender, it was sometimes better to surrender the funds to be allocated to where it was needed, and where it could be spent, rather than hold on to the funds and under-spend. It was much better to re-prioritise in time, than to under-spend.

Mr Njandu said the PBO presentation had spoken about the reprioritisation of budgets at provinces, municipalities and departments. He wanted to know what impact it had on COVID-19 if those provinces, municipalities and departments did not spend their bugets.

Ms Peters asked whether the surrendering of funds by a department, municipality or other entity, was an indication of a lack of planning. Allocations were done by the NT on the basis of a need and a plan, and if money was surrendered, it meant that that entity had failed to plan properly, and because they wanted to avoid being reflected as under-spending, they surrendered their funds. She did not want people to believe that entities had clean books, like the City of Cape Town, because they returned funds to treasury, while they denied ordinary citizens much-needed services.

Ms Orlandi replied that if one surrendered funds, it would definitely have an influence on the provision of services, but in the case of the Western Cape, where it had indicated that it could re-prioritise the funds for the transport grant, normally the negotiations with NT would be just to postpone the spending, so it was not a loss and the funds did not disappear. The money might be allocated again in the next financial year, when the entity was ready to spend the money. The money was still used. It was just a postponement of the date of spending.

She agreed that the surrendering of funds had a direct influence on service delivery, and it was an indication of bad planning if departments could not spend. There was a good example of the Department of Social Development surrendering funds for a few years, which were social grants that had not been paid out. In this case, it might have been a problem with the modelling of the funds which it required to transfer to SASSA in terms of social grants.

Mr Jantjies replied that surrendering funds was a big issue, because it touched on infrastructure expenditure as well. Firstly, the government borrowed money to finance service delivery plans over the years, and if this money was not used there was a cost implication. It was a problem for service delivery, as well as for economic development. The second part of this was that it brought back the debate around zero-based budgeting. Surrendering and revising was part of the budget process, but at the same time, if one did it over a very extended time, or without clear measures, it threatened or brought into question the integrity of the budgeting process.

Mr Buthelezi said the PBO was talking about output vs impact as if they were two different things. He asked PBO to educate the Committee and explain exactly what it meant by that.

Mr Ryder said the PBO presentation had mentioned that there was a link between performance and budget. The Committee could not work through all the Budgetary Review and Recommendations Reports (BRRR), but it needed a report on a department-by-department basis, of what percentage of the budget was being spent compared to what percentage of the targets was being met.

Ms Orlandi explained the impact indicator. For example, if the challenge was that 60% of people did not have access to housing and that needed to be addressed, and a target was set to achieve 80% of people gaining access to housing within the next few years, that would be an impact indicator, because it addressed directly the challenge in the country in terms of access to housing. Output indicators that would contribute directly to that impact indicator, for example, would be the number of residential units provided, or the number of serviced sites provided. There was therefore a direct link between the outputs and what government spent on, and the impact that it would make, and it had to be measured and monitored to see the change over time, that it had increased.

Mr Ryder said the budget for the Nelson Mandela Bay Metro Municipality had been reduced, but some of it had been spent already. This already put Nelson Mandela Bay Metro Municipality in a position where it was not going to get a clean audit, while it was being impacted by an act of NT. What was this saying about the reality of the budget that had been presented and the DORA that had been presented? The fact was that a clean audit was already not attainable. The South African National Defence Force (SANDF) had the same issue, in the sense that its allocation was not sufficient for the additional duties it had been given. Was this a realistic budget? Could the PBO comment on this?

Mr Ryder said he wanted to confirm something and get it expressly stated. Was it legal for NT to reduce a budget in an adjustment budget process, when they had already given the budget amount out, and the entity had spent more than their adjusted budget? Through this sequence of events, NT had put Nelson Mandela Bay Municipality out of fiscal compliance -- was this practice legal?

Ms Orlandi replied that it was not NT which had adjusted the budget in NMB – it had been the municipality itself which had adjusted its budget. NT could only re-prioritise or withhold funds which it transferred to the municipality. The municipality did its own adjustments with its own resources which it allocated in terms of its budget.

Mr Qayiso said if he understood PBO well, it was saying that one should not rush towards zero-based budgeting. One should rather examine the effectiveness of the monitoring and evaluation tool, or reconfigure it. He wanted clarity on that issue.

Mr Buthelezi asked PBO to educate the Committees by providing it with a two-page critical evaluation of zero-based budgeting and its pros and cons.

Mr Jantjies welcomed the question on zero-based budgeting.

Ms Orlandi replied that just by implementing a proper M&E system, one could already determine why programmes were not performing, or why programmes were not spending efficiently and effectively. It was not necessarily a funding issue. It could also be a content issue as to how the priorities, objectives and performance indicators of a programme had been developed.

Mr Qayiso said Ms Orlandi had talked about M&E and zero-based budgeting, but he did not get PBO’s recommendations regarding these two matters. What was its views on them?

Ms Orlandi replied that not all programmes would have to be zero-based. Zero-based budgeting involved a lot of capacity and a lot of work. M&E could assist government to decide which programmes needed to be zero-based. If the M&E of a programme indicated that it was not performing due to the specific components of the assessment policy, such as the context or the capacity, and one found that it was a funding problem, then one could go back to zero-based budgeting. However, if it was just a content or context problem after one had done the evaluation, then that could be fixed through the development of plans or quality programmes.

She added that zero-based budgeting could be addressed at another meeting.

Mr Buthelezi said the PBO was talking about capital expenditure (capex) per province and metro. He did not understand what PBO was trying to convey with this, and asked for an explanation.

Mr Jantjies replied that there was a global trend that showed that capex was important for service delivery, economic recovery, and could also help government to respond to some of the challenges brought on by the COVID-19 pandemic. In some of the responses of government to the pandemic, a lack of infrastructure had emerged as a big issue. The DORA revised budget focused less on the lack of infrastructure. Parliament, as part of the recommendations, had to consider the detailed plans. There was a plan of some of the specific projects that government planned to execute in the short, medium and long term. That needed to be part of the information that Parliament used in its oversight to try and deal with its concerns about the lack of spending on infrastructure. The reason why there was under-spending and a lack of investment in capex was largely because the lack of a clear framework in terms of how infrastructure would be implemented over the years, and he thought there has been developmental discard as well as a lack of proper oversight by the plethora of government oversight structures.

Ms Dikgale said PBO was talking about equitable share, but she did not see the fairness on the table. She asked PBO to explain how it was fair.

Mr Njandu asked PBO exactly what informed the equitable shares, as the budget was divided to go to provincial and local governments.

Ms Peters responded to Ms Dikgale, saying that Limpopo and the Northern Cape always had a very good rural alliance. To hear Ms Dikgale saying that the NC did not need the resources worried her, because it appeared that she did not understand the challenges of the vast geographical areas which were sparsely populated. Everybody from Lekkersing, Port Nolloth, Alexander Bay, right up to Ga-Ntatelang, Ga-Masipa and John Tau Logaitsheuw in the NC, and Pixley Ka Seme District municipality, the JZFM, Francis Baard, and the people of Phokwane, were currently sitting without electricity, so the resources were needed. It was costly to provide water and electricity, particularly in that type of province, so she wanted to tell Ms Dikgale the people of the NC could be watching and would be disappointed in her saying the province did not need the resources that much. She was sorry, because she knew it was a slip.

Ms Dikgale said she had said the equitable share was not fair at all. She had not said the NC was not important, compared to Limpopo

Mr Parks replied that these were the kind of difficult things COSATU was trying to fix. Ms Peters had said one of the worrying things about the supplementary budget was the R1 billion which had been cut from the Department of Energy's electrification programme, and was going to have a severe impact on rural areas. Ms Peters had grown up in the NC, but she had studied and become a SANCO activist in Limpopo province, so she was the embodiment of that interprovincial alliance.

Ms Orlandi said that the equitable share formula provided for 48% on education, 27% for health, and then there was a basic component of 16%, the institutional component was 3%, and there was an economic component of 1%. This was how the provincial equitable shares were allocated to the provinces. The 3.7% was the only guideline that had been given to provinces for reprioritisation, and the 3.7% of the respective equitable shares came to R20 billion.

R15 billion had been allocated directly towards health, and the provinces could decide at their own discretion how they were going to spend the remaining 5%. It could be spent on PPE for education, the social development department, or it could be spent in other departments which needed assistance.

Mr Ryder said the Money Bills Amendment Procedure and Related Matters Act stated that the main objective of the PBO was “to provide independent, objective and professional advice and analysis to Parliament on matters related to the budget”. He felt that the PBO was not providing sufficient advice or interpretation. To him, it felt like a presentation by National Treasury. The Committee needed a little more in-depth analysis and some pointers in the right direction.

Mr Carrim acknowledged Mr Ryder’s comments that it was not independent from NT enough and did not provide enough in-depth analysis, but in contrast, he welcomed the much more strident, critical position PBO had taken over the previous 18 months towards NT.

Ms Orlandi replied that the purpose of this presentation was basically to assist Members in considering and processing the 2020 supplementary budget, specifically in terms of the Adjusted Division of Revenue Bill. The mandate of the PBO was to analyse the documents that were tabled by the Minister of Finance. If Members wanted to request an additional analysis of budgets, that could be considered, but it depended on capacity, and requests had to come through the Chairperson of the PBO committee. This applied to the budget for the Mandela Bay Metro Municipality. One could not just say it was a realistic or unrealistic budget. One really needed a comprehensive analysis of a budget, including the Integrated Development Plan (IDP) of a municipality to get to the results, and to be able to determine whether it was realistic or not. All the analysis of the PBO was technically based, and it was based on a budget analysis framework which was approved by the previous PBO director. In terms of understanding zero-based budgeting and also the M&E, what the PBO was trying to say was that it was not possible to zero-base all programmes in government. It had its advantages, but it was not realistic to always do it, because there were also legislative responsibilities for funding health and all the other social programmes. However, it was possible to have an additional meeting on zero-based budgeting and what was required.

Mr M Moletsane (EFF, Free State) asked the PBO, when it talked about weaker financial management and weaker monitoring and evaluation systems, if it was not only local government which needed to be focused on. In some provinces, weak financial management practices persisted, and service delivery programmes were implemented within both the local and provincial spheres.

Ms Orlandi replied that it was totally outside of the mandate of the PBO to do audits of financial statements to determine whether there was corruption or mismanagement or spending in respect of budgets at the local government level.

Mr Moletsane asked what type of consequence management approaches to corruption the PBO would advise this Committee to take in order to make sure it had an impact on corruption and looting.

Ms Peters said she wanted to start where Mr Moletsane had ended. She asked whether the PBO could advise this Committee on whether its injunctions for consequence management, including Parliamentary reports, had ever borne fruit, because it would be important to know whether there had been positive outcomes from what the Committee had always maintained -- that there had to be consequence management.

Ms Orlandi replied that it was the responsibility of all accounting officers to implement the performance management system on a departmental basis.

Mr Jantjies added that he wanted to answer the question on control measures the legislature should be implementing, but he thought the big issue was governance measures at the local government level. He was assuming this was what Mr Moletsane was referring to. It was important to look at the effectiveness of the governance structures at the local government level.

The roles of provincial government, district provincial and also national government structures were very important in terms of ensuring that there was consequence management in some of these poor governance structures, to ensure that the budgets were spent as they were approved and service delivery was achieved. Even the AG had emphasised the importance of governance structures over the years. Governance structures had to ensure that consequence management measures were put in place and implemented, and that recurring poor governance was prevented. Sometimes a huge impact could be made by following through on Parliamentary reports. In his opinion, Parliament had lacked in this regard. Allocating budgets was not enough. Parliament had to make sure that the human and institutional capacity was in place to spend the budgets effectively.

Ms Peters asked the PBO where the R20 billion which was meant for local government and the Department of Social Development for social relief of distress had gone to if so many entities had claimed they had not received it. In her understanding, local government was supposed to be the biggest beneficiary, in order to use the funds for water provision, and also to support hygiene in the squatter areas.

Mr Jantjies replied that he wanted to make sure he understood the question, and he would report back to the Committee in that regard. It was still early days to determine the value for money for this relief effort that was currently taking place.

Ms Dikgale referred to where the PBO’s presentation had talked about the repossessing of equitable share towards COVID-19. In the last sentence, the presentation had said R15 billion should go towards health, and R5 billion towards “other” needs. She asked the PBO to specify what “other” meant, because if it not specified, the province would spend it on a R4 billion door-to-door campaign during lockdown, and it would be criticised.

Mr Joseph also referred to the R15 for healthcare and R5 billion for other social development needs, and said the criteria for the allocation of the money and the reporting lines for COVID-19 were important. He wanted COSATU to support government to reinforce the rules so that the money allocated to provinces was spent properly, so that the people could benefit. That was important.

The PBO presentation had stated that “additional funding to local government was not to improve or extend services.” He was concerned about that point. The money that went to local government also had to be used for water and sanitation provision. That part made it COVID-19 compliant

Mr Moletsane asked what concrete control measures PBO could propose to prevent corruption, maladministration and fraud with the COVID-19 relief fund? He was very worried because of what the AG’s report had reflected. A lot of money had been redirected to this fund. He was not convinced that the current financial system was adequate and ready to safeguard such resources.

Ms Orlandi replied that at this stage, it was difficult to monitor it because there was no indication of any outputs or targets required for the re-prioritisation. NT had also indicated that the business plans needed to be updated, and those business plans had not been updated up to now or submitted to Parliament, especially not to this Committee. One could therefore inquire about this and actually ask for the outdated business plans, so that one could monitor the outputs and targets that had been set for the additional funding or the re-prioritised funding.

Mr Buthelezi said expenditure for the financial year was about R2 trillion. What did the PBO think about this also contributing towards economic transformation and broad-based black economic empowerment?

Ms Dikgale said that with the change in spending priorities, the PBO had touched on community development programmes, but the type of programmes had not been specified. For example, in the rural areas, in some traditional areas, there were 34 villages accommodating roughly 90 000 people, but there was no library. She asked the PBO to try and assist with these types of programmes.

Ms Orlandi replied if it was required, she could provide the Member with the objectives and the specific priorities of that grant.

Closing remarks

Mr Mpisi said he welcomed both presentations, and the recommendations had to be taken forward. The majority of Members agreed that COSATU had to work with Parliament, and had to make sure that all the issues raised which were implementable, were implemented by the committees that COSATU presented to. He did not want the Committee to pay lip service to the recommendations. He believed COSATU was consistent, and thanked it for its consistency.

Chairperson Mahlangu reiterated her belief that privatisation would not solve any of SA’s problems. She thanked Mr Carrim for reminding the two Committees to write a letter of condolence to the family of Mr Ronald Mofokeng.

The meeting was adjourned.



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