Committee Report on Division of Revenue Amendment Bill; Overview of Adjustments Appropriation Bill: Committee Researcher briefing

Standing Committee on Appropriations

14 July 2020
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

Video: Standing Committee on Appropriations, 14 July 2020

Tabled Committee Reports

The Committee met to consider and adopt its report on the 2020 Division of Revenue Amendment Bill. The Committee was also taken through a research brief listing and detailing departments and main issues that the Committee may prioritise in its consideration of the 2020 Adjustments Appropriation Bill.

In considering report on the 2020 Division of Revenue Amendment Bill, the Committee recognised that the Bill was introduced to fund a response to Covid-19 and the negative impact this had on public finances across government. The increased government spending to respond to Covid-19 was funded in part by increasing the budget deficit and in part by reprioritising resources. The Bill was tabled by the Minister of Finance in Parliament on 24 June 2020 during the presentation of the 2020 Supplementary Budget and was subsequently referred to the Committee on 8 July 2020 after the National Assembly adopted the Revised Fiscal Framework.

Members commented on the reprioritisation of unspent funds due to lockdown regulations, particularly infrastructure grants that could not be spent under level 4 and level 5 regulations. Had Treasury taken into consideration the impact of this reprioritisation on economic recovery and development? The Committee should also follow up on issues of poor performance and underspending on key infrastructure grant allocations which have been raised in this report. They emphasised the importance of the state in leading investment in infrastructure spending to get the economy back to a growth trajectory, to protect jobs and to provide a safety net to the poorest of the poor. With those inputs and amendments, he put the report up for adoption.

The Committee Report on the 2020 Division of Revenue Amendment Bill was adopted with amendments. The EFF abstained from the vote.

The Committee Researcher, in presentation on the main issues that the Committee may prioritise in its consideration of the 2020 Adjustments Appropriation Bill, noted that, apart from the additionally allocated resources, the extent of the proposed budget adjustments reflects the overwhelming effect of COVID-19 on public resources. The proposed trade-offs were significant and will inevitably affect the achievement of the National Development Plan (NDP) objectives and key flagship project such as the National Health Insurance (NHI). Some reductions reflect historical pattern of underspending. They include reprioritisation and downward revision across various sectors, departments, programmes, transfers and conditional grants. They affect critical service delivery areas, virtually across the board. If not well managed and mitigated, reductions could threaten the capacity of the state to deliver basic services and guide the progressive realisation of constitutional obligations such as rights to water, housing, education among others. Most of the proposed trade-offs seem inevitable given the financial impact of COVID-19. However, they should be subject to parliamentary scrutiny in order to identify possible alternatives and measures for mitigating unfavourable impact. In the final analysis, the big question was: How will government achieve economic recovery and growth, and job creation?

The Committee appreciated the presentation as it gave a clear picture about the tasks at hand for the Committee.

Meeting report

The Chairperson welcomed everyone to the consideration of the Committee’s draft report on the 2020 Division of Revenue Amendment Bill. The Committee would also receive a presentation from Committee staff on the 2020 Adjustments Appropriation Bill.

 

Committee’s draft report on the 2020 Division of Revenue Amendment Bill

The Chairperson said the Committee recognises that the Bill was introduced to fund a response to COVID-19 and the negative impact this had on public finances across government. The increased government spending to respond to COVID-19 was funded in part by increasing the budget deficit and in part by reprioritising resources. He invited comments and inputs from Members. The draft report had been sent to them prior for their perusal after it had been initially sent to National Treasury for verification of presented figures.

 

Mr A Shaik Emam (NFP) commented on the reprioritisation of unspent funds due to lockdown regulations, particularly infrastructure grants that could not be spent under level 4 and level 5 regulations. Had Treasury taken into consideration the impact of this reprioritisation on economic recovery and development? The Committee should also follow up on issues of poor performance and underspending on key infrastructure grant allocations which have been raised in this report.

 

Mr Z Mlenzana (ANC) said Members were not naïve about the far-reaching consequences of the COVID-19 pandemic. However, whilst focusing on the pandemic, the need to facilitate economic recovery through infrastructure development should not escape policymakers. Why not, within the same budget, prioritise infrastructure development to address the imperatives of economic growth?

 

Mr N Kwankwa (UDM) agreed that reigniting the economy was paramount and would not be possible if infrastructure development is not prioritised. Underspending and reprioritisation of infrastructure grant allocations was not the best way forward.

 

Mr D Joseph (DA) noted the terminology used in the recommendations section of the report and advised that the drafters should be guided by and be mindful that the country was dealing with a crisis. There obviously will be delays in implementation of targets owing to the COVID-19 crisis.

 

Ms D Peters (ANC) noted that provinces underspent their grants by R3.4 billion in 2019/20, and potential underspending of R5 billion in local government was identified for reallocation in 2019/20. Such recurrent underspending by provincial governments was working against the President’s economic development framework.

 

Mr Shaik Emam said underspending in metros is a serious problem as it hampers service delivery, and equal attention should be given to this problem. Capacity should be enhanced at all levels of government to improve people’s quality of lives. The urban settlements development grants to metros should not be reallocated. Instead, capacity to spend those funds should be developed. He proposed that the Committee recommend that National Treasury should reconsider the approach of reprioritisation of funds away from especially the urban settlements development grant and focus more on enhancing the capacity at local government level to effectively, efficiently and economically spend the grant allocations.

 

The Chairperson agreed and added corruption should be dealt with at all levels of government.

 

Ms N Ntlangwini (EFF) proposed that the Chairperson write a letter to departments to highlight some of the Committee observations in the report so that they are looked into, particularly around wasteful expenditure.

 

Mr Shaik Emam said the country was losing a lot of money on corruption. It is estimated that 40% of revenue is being lost as a result of government departments and entities not getting value for money. It was concerning that government is being charged exorbitant prices by service providers who often collude with public officials. This results in government’s limited resources not being used in an economic, effective and efficient manner, resulting in government not deriving value-for-money from services provided. The Committee should strongly urge the three spheres of government to ensure that the intended beneficiaries receive what is due to them and that corruption be punished, irrespective of who is involved.

 

The Chairperson was agreeable to the proposals and recommendations. He emphasised the importance of the state in leading investment in infrastructure spending to get the economy back to a growth trajectory, to protect jobs and to provide a safety net to the poorest of the poor. With those inputs and amendments, he put the report up for adoption.

 

Mr X Qayiso (ANC) moved.

Mr Shaik-Emam (NFP) seconded.

Ms Ntlangwini (EFF) abstained from voting.

The Committee report on the 2020 Division of Revenue Amendment Bill was adopted with amendments.

 

Presentation by Committee Researcher on the 2020 Adjustments Appropriation Bill

Mr Musa Zamisa, Committee Researcher, took the Committee through a research brief listing and detailing departments and main issues that the Committee may prioritise in its consideration of the 2020 Adjustments Appropriation Bill. The selection criteria was based on the size and critical nature of the proposed budget adjustments (.e.g. suspension of critical spending, reductions and reprioritisations with potentially significant impact on service delivery, infrastructure development, job creation, economic growth and transformation).

Apart from the additionally allocated resources, the extent of the proposed budget adjustments reflects the overwhelming effect of COVID-19 on public resources. The proposed trade-offs were significant and will inevitably affect the achievement of the National Development Plan (NDP) objectives and key flagship project such as the National Health Insurance (NHI). Some reductions reflect historical pattern of underspending. They include reprioritisation and downward revision across various sectors, departments, programmes, transfers and conditional grants. They affect critical service delivery areas, virtually across the board. If not well managed and mitigated, reductions could threaten the capacity of the state to deliver basic services and guide the progressive realisation of constitutional obligations such as rights to water, housing, education among others.

Various reductions in the Department of Agriculture, Rural Development and Land Reform could significantly affect food security, assistance to small and emerging farmers, food security for rural household, progress in land reform, restitution and tenure. Spending cuts exist in various infrastructure grants and projects across departments (e.g. Departments of Basic Education, Health, Higher Education and Training, Transport as well as Justice and Constitutional Development). The reductions in the allocation for the Department of Justice & Constitutional Development could affect the capacity of the justice system.

Most of the proposed trade-offs seem inevitable given the financial impact of COVID-19. However, they should be subject to parliamentary scrutiny in order to identify possible alternatives and measures for mitigating unfavourable impact (see presentation). In the final analysis, the big question was: ​How will government achieve economic recovery and growth​, and job creation?

Discussion ​

Mr Joseph appreciated the presentation and said owing to the pandemic, government has been found wanting and has been exposed. Most of the identified challenges were not new. Development needed to be sustained at local level, particularly in rural areas, to relieve pressures in urban areas as a result of rural to urban migration. The question would be about what the Committee needs to do to support these efforts.

Mr Shaik Emam said his understanding was the Committee’s hands are tied as well. The tender system was being exploited and Members should ask themselves how they could play a more proactive role to prevent such abuses and identify the sticky areas. Most of the identified challenges were being dealt with after the fact. How the Committee can drive the processes to deal with challenges such as unemployment and gender-based violence proactively rather than reactively should be foremost on the agenda.

Mr Qayiso appreciated the presentation as it gave a clear picture about the tasks at hand for the Committee. Questions on the rationale of some areas of reprioritisation and expenditure cuts were important.

Mr O Mathafa (ANC) acknowledged the good work by the Committee staff and welcomed the presentation. He wanted to know whether Parliament has a resolution tracking system as part of its oversight mandate. Also, the Department of Planning, Monitoring and Evaluation should be invited to appear before Committee and explain how deliverables were being followed-up in government. There were recurring challenges for years on end and nothing seemed to be happening.

The Chairperson noted Members’ inputs and invited comments from the Parliamentary Legal Advisor.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, took it that Members were familiar with the Money Bills Procedure and Related Matters Act, and the budget cycle. What has happened this year due to the COVID-19 pandemic was a first- it is the first time that Parliament processes an adjustments budget in June/July. Due to the pandemic, there has been radical changes in government priorities. However, amending the 2020 Adjustments Appropriation Bill based on what the Committee has heard before would be difficult as it was tabled due to extraordinary circumstances, and not part of the usual budget cycle. The realignment process and the recommendations on the Committee report would influence the medium- term budget policy statement (MTBPS) process.

The Chairperson appreciated the inputs and added the country was in crisis mode owing to the pandemic. The 2020 Adjustments Appropriation Bill will be processed further.

The meeting was adjourned.

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