The Select and the Standing Committee on Appropriations convened on virtual platform to hear inputs from the Congress of South African Trade Unions (COSATU), the Organisation Undoing Tax Abuse (OUTA), Equal Education, Section 27, the Equal Education Law Centre and the Parliamentary Budget Office (PBO) on the 2020 Adjustment Appropriations Bill.
COSATU welcomed the reinforcement of key departments on the health frontline against COVID-19, but it opposed the budgets cuts imposed on the ones which played a significant role in the country’s economy, particularly the Department of Small Business Development, Department of Tourism and Department of Agriculture, Land Reform and Rural Development. Additionally, the union recommended a reversal of the R1.7 billion cut made to the Department of Trade, Industry and Competition as well as a reversal of the R55 million cut made to the Department of Employment and Labour. The union criticised the Adjustments Appropriation Bill for a lack of clarity on the impact of the reallocations, specifically how the budgetary cuts made to the Department of Human Settlements and Department of Water and Sanitation would affect the provision of decent sanitation in informal settlements. This was particularly important because a lack of adequate sanitation undermined the fight against COVID-19 and further exacerbated the condition in informal areas which had been identified as epicenters. The union said that the administering of the R200 billion credit guaranteed scheme needed to have conditions for job creation.
Members reckoned that the union raised a valid point on the lack of conditions attached to loans amounting an approximate R100 billion. She said it was pivotal for the country to know what the conditions were behind the loans; these needed to be shared openly and transparently with all concerned parties.
Members agreed with COSATU that there was not enough consequence management following the Auditor-General’s findings on fruitless and wasteful expenditure. This was an area requiring attention to ensure that civil servants did the jobs they were called to do on behalf of the nation.
The overarching message of the Organisation Undoing Tax Abuse was that government had no more money to waste. The organisation said it did not support the adoption of the Adjustment Appropriations Bill in its current form. It recommended that the Committee should reject the additional appropriations which had been made for the Department of Police and Defence. The supplementary budget presented an opportunity to demand fiscal discipline from underperforming departments. The funds should instead be allocated to departments that had a strong emphasis on social development and infrastructure. The organisation was deeply concerned about the cutting of R1.5 billion from the Integrated National Electrification Programme grants which would have a direct impact on the livelihood of South Africans; it called for greater transparency and accounting in the zero-based budgeting approach. The organisation said it was still waiting for Cabinet to end the Gauteng e-tolls system.
Members asked how the organisation perceived the decision to reprioritise non-toll funds in South African National Roads Agency Limited (SANRAL) to cover the Gauteng Freeway Improvement Project.
Together Equal Education and SECTION27 reported disappointment in the consistent deprioritisation of basic education funding. Trends indicated that the share of government’s non-interest expenditure allocated to basic education had been declining over the last decade. The sector had further been deprioritised following the supplementary budget which cut funding to the Department of Basic Education by R2.1 billion. Equal Education questioned why basic education was not deemed a frontline sector, while the South African National Defence Force (SANDF) and South African Police Service (SAPS) were the departments that received an additional R6.7 billion in funding. Basic education played a huge role in community health and learners’ basic right to education and nutrition through the National School Nutrition Programme, which had been suspended.
The Members asked how Equal Education would propose the nutrition programme was administered while schools were closed and how equity in education could be achieved during the pandemic.
Parliamentary Budget Office reported on the loss of three million jobs and an increase in the reporting of household hunger. The biggest budget allocations had been made towards the Department of Social Development and the Department of Cooperative Governance. A key highlight of the presentation was the distribution of grants and food parcels to remediate the impact of the pandemic. The Office reported that the cost per food parcel ranged from R400 to R1 456.
Members asked why the cost of food parcels was varying across provinces. The Members also expressed disappointment that government had not utilised the e-voucher system to limit discrepancies in procurement.
The Standing Committee on Appropriations concluded that section six of the Adjustments Appropriations Bill would be amended as suggested. This would be contained in the report of the following meeting.
The Chairperson opened the virtual meeting, greeting all Members and delegates in attendance. He said that the main objective of the joint meeting was to receive submissions on the Adjustment Appropriations Bill from the Congress of South African Trade Unions (COSATU), the Organisation Undoing Tax Abuse (OUTA), Equal Education Section 27 and Equal Education Law Centre and the Parliamentary Budget Office (PBO).
The apologies received from the Members of the Select Committee: Ms D Mahlangu (ANC, Mpumalanga) and Mr M Moletsane (EFF, Free State). The Committees were notified of the passing of Ms Mahlangu’s grandmother; sincere condolences were expressed by the Committees. Mr Moletsane was wished a speedy recovery following his admission to hospital. From the Standing Committee, apologies were received for Mr O Mathafa (ANC), and Ms M Dikgale (ANC) who would join the meeting at a later stage.
The meeting was chaired by Mr E Njandu (ANC, Western Cape) and co-chaired by Mr S Buthelezi (ANC).
The Chairperson emphasised the importance of time management and urged presenters to be brief in their submissions in order to allow substantive discussion.
Presentation by COSATU
Mr Matthew Parks, Deputy Parliamentary Coordinator for COSATU, said that the union understood the fiscal constraints currently faced by government. He then reported on the various reactions that COSATU had concerning the Adjustments Appropriations Bill.
COSATU had expected government to reinforce key departments on the health frontline against COVID-19. The union welcomed the adjustments which were made in this regard. However, the union opposed cuts which were made in key departments on the economic frontline. COSATU expressed disappointment in the lack of plans to intervene in collapsing State-Owned Entities (SOEs), municipalities and departments. The union was also disappointed that little action had been taken against rampant corruption and wasteful expenditure within departments.
COSATU had hoped to see a robust R1 million stimulus plan and more clarity on the details of the infrastructure programme. The Supplementary Budget failed to mention any key economic and regulatory interventions and plans to increase local procurement.
The Adjustment Appropriations Bill prohibited the use of savings made in departments towards the public wage bill. Mr Parks said that government could not encourage departments to make savings and then refuse to use those savings to find solutions to the wage bill challenges. It was important to honour public servants such as teachers and nurses who were on the frontlines.
COSATU agreed with government that a debt reduction plan was crucial. However, the union disagreed with preemptive austerity cuts and rather encouraged government to stimulate growth which would result in increased revenue. The union believed that government had been too soft on corruption and wasteful expenditure; it expressed disappointment that government had not utilised its powers afforded by the Auditing Amendment Act. There was a lack of accountability for officials involved in maladministration as well as action by the National Prosecuting Authority (NPA) and South African Police Service (SAPS).
Key issues with the Adjustments Appropriation Bill:
- Lack of clarity
- Impact of reprioritisation
- Frivolous and wasteful expenditure vs. infrastructure delays
- Impact of not filling posts
- Scope of permanent reduction
Mr Parks highlighted COSATU’s input as far as key departments were concerned. These were as follows:
Department of Basic Education
The extended closure of schools under the COVID-19 pandemic was indicative of a history of neglect of school infrastructure and a failure of the Department to adequately prepare schools, particularly where sanitation was concerned.
Department of Health
COSATU asked if the reallocation and reprioritisation was sufficient and if the reduced allocation to employing health workers was wise given the need for more personnel.
Department of Transport
COSATU welcomed additional allocations but was disappointed in the R2.2 billion cut for PRASA and R1.9 billion for public transport. The union supported the R1.1 billion taxi industry relief and felt that it was problematic that this industry was not subsidised. However, the relief fund must be conditional upon compliance to tax laws and COVID-19 regulations.
Department of Human Settlements and the Department of Water and Sanitation
Mr Parks said that the Bill failed to account for the impact of the respective R2.2 billion and R257 million cuts made to the departments. Additionally, there was evidence that demonstrated a direct correlation between COVID-19 epicenters and a lack of decent sanitation in informal settlements. COSATU asked: How many informal settlements will be upgraded and by when? How many will still not have sufficient water and sanitation?
Department of Higher Education & Training
COSATU was disappointed that there had not been decisive effort to shift to online learning. Mr Parks reported that many universities did not have the necessary resources to provide laptops and had been selling to students. This posed a significant impediment for the learning outcomes of students from historically disadvantaged institutions.
COSATU’s main recommendation was for government to reinforce instead of making cuts to key economic frontline departments, namely: Department of Employment and Labour; Department of Trade, Industry and Competition; Department of Mineral Resources and Energy; Department of Small Business Development; Department of Tourism; Department of Agriculture, Land Reform and Rural Development and the Department of Communications and Digital Technology. The union recommended the reversal of some of the budget cuts and additional sectoral support in areas such as rural electrification, small, medium and micro enterprises (SMMEs) and agriculture which was one of the largest employers in the country.
Security Frontline Departments
Similarly, COSATU had hoped to see a reinforcement of security frontline departments such as SAPS, which currently had 10,000 infected members, and Correctional Services, which were potential pandemic outbreak sites. Mr Parks reiterated the need to see concrete action addressing corruption following state capture allegations.
COSATU recommended further reprioritisation of public expenditure and SARS interventions on taxes. The union supported Finance Minister’s (FinMin’s) proposal to review Regulation 28 to influence private sector investment. However, Mr Parks said it was crucial for government to address rampant corruption and wasteful expenditure which accounted for a loss of 10% of the budget.
Mr Parks thanked the Committee for the previous engagement with the FinMin addressing the delays in the disbursement of the R200 billion credit guarantee scheme. Only 5.5% of the fund had been disbursed so far, which raised concerns on how impactful the intervention would be. He recommended using online applications to reduce the turnaround timeframe, the relaxing of credit requirements and reducing interest rates. COSATU believed that this was a critical issue as it represented 40% of the total economic relief package. The union suggested that the Committees engage with banks and National Treasury to discuss this matter and to provide progress reports.
Presentation by OUTA
OUTA’s Parliamentary Engagement Manager, Mr Matt Johnston, reported that the essence of the organisation’s message was that there was “no more money to waste”. OUTA recognised that the country was facing the worst recession in a century with dwindling resources. The organisation supported government’s response to the COVID-19 pandemic and economic relief. However, improved fiscal discipline and oversight over-expenditure was critical.
Mr Johnston reported that OUTA did not support the adoption of the Adjustment Appropriations Bill in its current form.
Key highlights included:
- Support zero-based budgeting and recommend it at all levels of government and across entities. Request for National Treasury to provide detailed guidelines on this.
- Need for greater transparency in budgeting, programme performance indicators and procurement. There was not much clarity on how decisions on interim measures were being made in short time frames.
- Disappointment that consistently underperforming departments had not seen any commensurate budget cuts
- Support National Treasury in reducing the disproportionate cost of remuneration in line with performance outcomes and relative public benefit
- Reject additional appropriations to the Departments of Police and Defence and fund electrification instead
He said that he believed in the discretion of the Committee and its ability to influence change following the inputs it received. He told the Members that military dictatorships were the only kind of states where spending towards social development programmes was deprioritised instead of police and defense.
OUTA had the following inputs for key departments:
Department of Health
OUTA was concerned about the ability of certain provincial health systems to cope, even with additional funding.
Department of Mineral Resources and Energy
OUTA was concerned about the R1.5 billion cut from the Integrated National Electrification Programme, particularly during a time where people are forced to stay at home.
Department of Water and Sanitation
The Department had seen gross corruption and poor audit outcomes over the years and had failed to deliver its mandate effectively. OUTA called for an independent water regulator.
Department of Police and Defence
OUTA recommended the rejection of the proposed increases in the budget for the Department. Any additional expenses should be financed through the existing budget; additional funds should be redirected towards departments that had an emphasis on social development and infrastructure.
OUTA agreed with Minister Mboweni and the National Planning Commission (NPC) on the urgent need to reform SOEs.
OUTA raised concern over the continuous financial challenges raised by local government but a lack of concrete solutions. Mr Johnston welcomed President Ramphosa’s speech demanding that taxpayers deserve accountability and transparency from their government. This was a collaborative effort which required cooperation from bodies such as the South African Local Government Association (SALGA).
OUTA had engaged with the Auditor-General’s Office and found a lack of accountability. The additional funds which had been allocated to municipalities, in response to the pandemic, should set a precedent for the future. OUTA recommended that the Committee required clear monthly accounting of these funds.
Presentation by the Equal Education, Section 27 and Equal Education Law Center
Equal Education’s Parliamentary Researcher, Ms Jane Borman, told MPs that the organisation was very disheartened by the deprioritisation of basic education funding, which had accelerated in the Supplementary Budget.
Trends in Basic Education Funding
Mr Daniel McLaren, Budget Analyst at Section 27, reported that the basic education budget had been on a consistent decline over the last couple of years. The share of government’s non-interest expenditure allocated to basic education was approximately 18.6% in 2017/18 financial year and was deprioritised to 17.3% at the beginning of FY2020/21. It had been further deprioritised to 16.8% following supplementary budget.
Overall, the decreasing trend in the consolidated basic education budget had left the sector with fewer resources. Research recently published by Stellenbosch University illustrated that government was spending less per learner today than it did 10 years ago. As a result, schools in KwaZulu-Natal, Northern Cape and Mpumalanga, which could not supplement government’s budget with fees, were no longer being funded at the minimum gazetted level per learner. This was particularly worrying in the context of the R2.1 billion budget cut and the lack of fiscal support for schools to finance COVID-19 relief efforts.
Mr McLaren cited schools in Limpopo which had been told to use up to 45% of their budgets for COVID-19 related expenses. This presented concerns on how much would be left to be spent on necessities such as textbooks, electricity and maintenance. Ultimately, this would have an impact on the core service delivery requirements of the sector compounded by a school year that had already been disrupted.
Drastic cuts in infrastructure (R1.7 billion), support for mathematics, science and technology (R68 million) and HIV/AIDS Life Skills (R59.6 million) would carry long term implications.
National School Nutrition Programme (NSNP)
Ms Borman reported that despite increased poverty and hunger in households, R50 million had been reprioritised from the NSNP to COVID-19 sanitation measures. Most learners had not received their meals since lockdown measures were imposed. Irrespective of lockdown, the North Gauteng High Court confirmed that this was an egregious infringement of children’s rights to education and nutrition. The Department of Basic Education must now ensure that learners were provided meals, which may warrant an increase in the budget.
Basic Education as Frontline Sector
The NGOs challenged the decision to not declare DBE as a frontline department. Schools were at the center of community safety and this was indicated by the decision to rescind re-opening. Ms Borman said it was crucial to ensure that schools were safe and secure as they were essential for learners’ basic right to education and nutrition.
- Committees to support a call for improved transparency of rationale and underpinning documents in advance of the tabling of the budget
- Advocate for basic education to be deemed a frontline service in the fight against COVID-19
- Advocate for basic education sector to receive additional funding
- Demand minimum per learner funding thresholds were met by provinces for the rest of the 2020 school year, especially no-fee schools
- National Treasury implements a system to monitor provincial COVID-19 expenditure
- Consider need to provide additional funding for NSNP
- Monitor key decisions in the lead up to the MTEF planning process
Presentation by the Parliamentary Budget Office (PBO)
Dr Nelia Orlandi, Policy Analyst for the PBO, reported that the supplementary budget was developed to support activities relating to health, households (foster care, old age grants) and to support revenue shortfalls resulting from limited economic activity.
Dr Orlandi reported that South Africa had faced various challenges resulting from the COVID-19 pandemic; these included: the loss of three million jobs, 47% of households running out of money to buy food and 22% reported household hunger in the past week. For this reason, responding to the pandemic had become government’s central priority with particular immediate focus on primary health provision, scaling up social development interventions and increased deployment of police service, and national defence for peace and security purposes.
The lockdown had also created significant economic challenges resulting from shortfalls in revenue collection; this was primarily what the Adjustment Appropriations Bill aimed to address.
Highlights of the presentation:
- Estimated under-collected revenue stood at approximately R300 billion for the 2020/21 financial year
- The COVID-19 fiscal package identified R500 billion in economic relief
- R45 billion had been reprioritised – an additional R23.6 billion had been allocated
- R19.6 billion had been provisionally reserved for allocation in October
Dr Orlandi explained that government had arrived at the R23.6 billion allocation by reducing employee compensation (-R1.4 billion), of which R812 million was reallocated for COVID-19 purposes. A net increase of R1.6 billion had been proposed for goods and services. The largest reduction was in transfers and subsidies to provinces and municipalities and departments (-R88 billion), of which R25.4 billion was reallocated for household level grants.
The most notable budget increases were noted for: the Department of Cooperative Governance; National Treasury; Department of Health; Department of Social Development; Department of Defence and the Department of Police.
Grants and Food Parcels
Dr Orlandi said government had made significant allocations towards the distribution of grants and food parcels. The cost of food parcels varied widely across provinces, the lowest being R400 (per parcel) in the Western Cape and the highest being R1 456 in Mpumalanga.
KwaZulu-Natal received the highest proportion of the total disaster relief funds (31.5%). This grant was for the purpose of supplying protective equipment and ventilators.
Notable reductions were incurred by the Department of Basic Education which had a total cut of R2.2 billion, mainly from the Education Infrastructure Grant. The Department of Higher Education budget faced cuts in the following areas: university education transfers (R889.5 million), technical and vocational education and training transfers (R525 million) as well as compensation of employees (R73.7million).
The Department of Transport faced a total reduction of R4.5 billion across rail, road and public transport. Each province incurred a 15.7% budget cut with an additional surrendering of funds by the City of Cape Town.
Phase two and three adjustments
The immediate and long-term associated socio-economic impacts of COVID-19 would likely require further government spending towards health and support for vulnerable households and businesses. Phase two of economic adjustments would be decided in October 2020, followed by phase three which aimed to restore the country’s long-term growth and prosperity. These adjustments would be considered following National Treasury’s assessment of spending areas in zero-based budgeting as well as spending reviews on key service delivery programmes.
Moving forward it would be crucial to assess whether the proposed adjustments would be enough to address the immediate needed of the pandemic and if they could be monitored to determine effectiveness. Dr Orlandi highlighted that as was, the Appropriation Bill did not include specific targets. The Committee would now have to focus on how it could impact the appropriation of the R19 billion, which was prioritised and earmarked for COVID-19. When assessing the requirements for phase two and three, it would be important to deliberate on how to balance social needs while preserving the economy.
Questions and comments from Members
Mr Z Mlenzana (ANC) noted Equal Education’s query of the additional funds reprioritised towards National Defence and SAPS. He asked what the NGO’s understanding of the role of these entities was in so far as gender-based violence and child abuse were concerned during this time. He said that the role of defence went beyond security and patrolling because the Department had a variety of medical professionals.
He said that PBO raised a pertinent concern about the ability to monitor the expenditure trends relating to the adjustments. He asked if it was realistic to cry foul about budget cuts when they were intended for a three-month period. He cited the R2.2 billion reduction in the DBE’s budget and asked if this would have been effectively spent during the three-month period.
He quoted PBO’s presentation on the varying cost of food parcels across provinces ranging from R400 to R1 456. He asked all the presenters to provide their insights on the provincial variations in prices.
Mr D Ryder (DA, Gauteng) said that the visual displays presented by Equal Education showing the declining trend in basic education funding should be a stark wakeup call for MPs. The illustrations indicated how misaligned government’s priorities were. Although education was said to be government’s apex priority, the data showing consistent erosion in the budget suggested the contrary. He said it was shame that gazetted numbers were not being met.
He said that the statements made by Equal Education on internal repriorisations were incorrect and that National Treasury had in fact done a good job. He agreed with Mr Mlenzana and queried the cost of food parcels across provinces. The fact a food parcel could cost up to four times more in one province spoke to issues of corruption in procurement processes.
Ms N Ntlangwini (EFF) emphasised the need to investigate the cost of food parcels. She said this relates to a point she had previously made on the importance of digitising the programme for food distribution in order to reduce corruption. She asked what was included in the food parcels that made prices so variant.
Like Equal Education, she had raised the issue of the significant cuts made to basic education with the Minister. She said that the Committee needed to discuss on the steps it would take following the inputs it had received concerning the budget. Her fear was that these inputs would simply be compiled into a report without any further actions. When she had raised some of her concerns, she had been called a bully by the Minister. She said that she would rather be called a bully than to be found complicit in sending children back to schools that did not have appropriate infrastructure and water and sanitation in place. She commended the presenters for their submissions and said it was now the job of the Committee to follow up on these recommendations and determine a way forward.
She said that COSATU raised a valid point on the lack of conditions attached to loans amounting an approximate R100 billion. She said it was pivotal for the country to know what the conditions were behind the loans; these needed to be shared openly and transparently with all concerned parties.
Mr D Joseph (DA) noted that all the presentations mentioned the need for transparency, which was an indication that the public wanted to see more of this. The organisations must understand that this was a priority budget with the specific purpose of dealing with the pandemic.
He said that COSATU had raised an important question on what Parliament intended to do with the AG’s findings on the state of municipalities. He asked COSATU what efforts would be pursued to ensure open discussions between themselves and Minister Mboweni on the wage bill.
He said that he was glad that both OUTA and PBO had spoken about the zero-based budget which was a new approach that would guide government during the next budget adjustment. It was important for the Committee to gain a good understanding of zero-based budgeting and to share this knowledge with the public.
He told Equal Education that there was always debate on whether establishing a wealthy nation should come first or focusing on creating educated nation. However, this budget was specifically about health measures in the fight against the pandemic. He said many schools needed to undergo review as far as the quintile system was concerned.
He asked PBO what its predictions were on phase two and what it meant for them given the fact that the country anticipated a second wave in winter 2020.
Mr Y Carrim (ANC, KZN) said that Members and presenters could not always be 100% sure on the comments made especially where appropriations were concerned as this was all about tradeoffs. The term tradeoff was more relevant now given the uncertainty of COVID-19. He agreed with 90% of what had been presented by the various civil society stakeholders. However, very little information was provided on where to find these tradeoffs. He recognised that the stakeholders may not have the necessary skills and capacity to concretely identify these tradeoffs. However, one could also say they possessed knowledge and expertise which MPs did not have.
He acknowledged the urges for increased transparency but pointed out that global institutions had ranked South Africa highly for its openness and transparency in budgetary processes.
He said it may be worthwhile to engage with Treasury on why it deemed it appropriate to cut funding for PRASA by R2.2 billion. He agreed with COSATU on the repeated call to stop the flow of illicit goods but the issue was not what should be done but rather how it should be done. In his view, COSATU had the expertise to provide details on how this could be achieved.
He agreed with OUTA on the need for increased accountability throughout government and Parliament; this time called for more effective oversight. Members had already fought against a militarised state during apartheid and would fight against any military leader. The current conditions did, however, call for an increased role of SANDF and SAPS. He said that OUTA’s critique of the Department of Water and Sanitation was warranted but one could not deny the immediate need for water; the same went for the Department of Basic Education. OUTA failed to raise the issue of value for money as South Africa’s budget for education was amongst the highest globally, yet it has poor learning outcomes. He emphasised that he agreed with the majority of the content in the presentation, but it did not account for the tradeoffs required during a time when hunger was at its highest.
Mr W Aucamp (DA, Northern Cape) agreed with COSATU that there was not enough consequence management following AG findings on fruitless and wasteful expenditure. This was an area requiring attention to ensure that civil servants did the jobs they were called to do on behalf of the nation. He asked COSATU if there had been any further negotiations on the wage bill in the last few weeks.
He cited COSATU’s statement on agriculture being the second largest employer. He asked what impact the ban on alcohol and tobacco would be on agricultural employment. How many people will lose their jobs as a result of the ban? Does COSATU think something should be done to assist these individuals?
He said that the military had been deployed because government did not trust the public to comply with the regulations it had put forth. He agreed with Equal Education that these funds could have been directed towards schools to ensure they were adequately equipped to ensure safe reopening. The re-closure of schools was an indication that government failed to make the necessary provision.
Ms D Peters (ANC) thanked the presenters for the work done. She asked Equal Education how it suggested government could realise equity in education given the current challenges associated with the pandemic.
She asked COSATU how it proposed government dealt with the current situation where many workers, particularly those within SANDF and SAPS, were in hospital or isolation. How should government deal with public school teachers who refuse to return to school because they are fearful, yet they send their own children to private schools or, alternatively, choose to homeschool their own children? This all related to achieving equity in education. She asked if COSATU had just realised how dire the situation was with poor infrastructure, water and sanitation in schools. If not, have they consistently raised this issue with DBE prior to COVID-19? She asked COSATU what views it had on contractors who had been accused of delaying the rolling out of sanitation infrastructure projects in rural areas because it demanded a 30% share in the contract.
She asked OUTA what views it had on the City of Cape Town, which voluntarily surrendered funds to avoid reflecting under-expenditure. What does this reflect about performance and the quality of service delivery? She said that there were serious challenges when it came to the provision of efficient and affordable public transport for the poor. She asked OUTA how it perceived the decision to reprioritise non-toll funds in South African National Roads Agency Limited (SANRAL) to cover the Gauteng Freeway Improvement Project (GFIP). This was important because interventions such as the scooter ambulances in the Eastern Cape were conceived to overcome challenges associated with poor road infrastructure.
She asked OUTA and Equal Education how the NSNP programme should be administered during lockdown considering that learners lived in different parts of cities and communities. If students were expected to come to schools to receive their meals, they might as well stay for an education.
Mr X Qayiso (ANC) asked PBO to provide clarity on the distribution and expenditure on disaster relief grants across provinces. He said that the low percentage expenditure reported did not make sense given the dire conditions faced by people during the pandemic. Further, he asked PBO where it located the establishment of the Sovereign Wealth Fund and the Presidential Infrastructure Coordinating Commission (PICC) in the current discussions around infrastructure and the current COVID-19 pandemic. PBO had not indicated how these instruments could be utilised presently
The Chairperson invited MPs who had any outstanding questions to engage in a second round prior to responses by the civil society stakeholders; following which, the co-Chairperson would deliver concluding remarks.
Ms Peters asked PBO which proposed reductions the Committee should directly focus on. She asked if the PBO still thought the National Development Plan (NDP) targets were attainable.
Ms Ntlangwini asked if any research had been done on how many unemployed South Africans had received the promised R350 grant. She said on 21 April 2020 Parliament had been told that R100 billion would be allocated towards job protection and creation. However, only R6 billion was accounted for in the supplementary budget. Similarly, R20 billion was expected to be allocated towards health but the budget only accounted for R2.1 billion despite the collapse in healthcare and shortages in personal protective equipment (PPE). She asked PBO to provide insight on these issues.
Mr Joseph commented on COSATU’s recommendation to reverse the cuts made to the budget for Trade and Industry as well as Tourism. He said the Committee supported the R3 billion being reprioritised to the Land Bank despite the cuts made to the Department of Agriculture. It was important for government to start making plans on how it would ensure economic growth moving forward.
The Chairperson said that the budget was indeed intended to address the COVID-19 pandemic and to provide relief for vulnerable households and communities. This was important to keep in mind as it would guide further discussions. He handed over to the co-Chairperson.
Co-Chairperson Buthelezi asked if the presenters had looked at the criteria used to inform the reprioritisation of the budget. He mentioned that one of the criterions was the removal of funds from departments or institutions where non-expenditure was common – PRASA being an example. National Treasury had made consistent cuts to PRASA’s budget, yet it still failed to spend. He asked COSATU if it was in their view that these funds be left alone instead of being reprioritised.
He asked PBO if they were sure that the items included in food parcels were consistent across provinces. This was a crucial detail that was left out of the presentation. He suggested the use of food vouchers which allowed people to choose the items they required while reducing the chance of inflationary pricing as this was potentially why costs were so variant across provinces. Additionally, it did not look good when people were given food parcels of different quality and or quantity; the standard should be consistent throughout the country.
He asked COSATU if they had interacted with the taxi industry to understand the issues it was facing because the challenges appeared to be embedded. He said the taxi recapitalisation programme had been cut but this was a programme that was always budgeted for, yet funds were underutilised.
He informed OUTA that the Committees had consistently brought up the issue of the audit outcomes of municipalities with SALGA. However, there were towns such as Vryheid and Dundee which were previously coal productive prior to 1994. Following 1994, they had become unviable with a non-existent tax base or revenue. He asked OUTA what it proposed should be done in the case of such municipalities that were unproductive yet in need of service provision. He clarified that he was not suggesting that these municipalities should not be held accountable.
He asked Equal Education if the entity’s expectation was for the budget for DBE to always be increasing. Post-1994 it was necessary for the budget for education to be large in order to deal with a backlog of issues. He noted that the presentations had focused primarily on the amount of funds allocated for certain causes; this gave off the impression that the organisations view money as a panacea for government’s ills.
He said that there was a lack of understanding on the work done by the SANDF. People had the impression that defence solely constituted of individuals shooting guns, yet the Department had other expertise such as a flying academy which produced pilots for the aviation industry. In addition, the health services within SANDF were going to be used during the fight against the pandemic. Given the criticism over the increased budget allocation for defence, he asked if the stakeholders believed this Department should not be involved in the work it was doing.
He asked PBO to expand on the money voluntarily surrendered by the Western Cape and the potential impact this would have on service provision.
He asked COSATU if it thought that it was enough to just use bank to administer the credit guarantee scheme. Will this reach all intended recipients? How would COSATU respond to a proposal to use development financial institutions (DFIs) and regional developmental institutions?
Role of police and defence
Mr Parks responded that COSATU welcomed the involvement of SAPS and SANDF in enforcing the lockdown measures as well as the additional budget allocations to make this possible.
Conditions of reprioritisation
He replied that COSATU supported the reprioritisation of funds in response to non-expenditure or wasteful expenditure but the union was concerned about the potential negative impacts that would arise from freezing vacant posts in key departments such as health, education and police. He said this impact was already clear in hospitals where vacancies had not been filled and one nurse was responsible for work that would typically require six. Health personnel were being stretched.
He said it was crucial to find a balance between ensuring people’s health and safety while stimulating the economy because a healthy person could not remain healthy without a job. The weakness with the budget was that it did not identify the cause behind reprioritisation. The way that the budget was formed tended to disempower Parliament and the public as there was no explanation behind of the details informing the decisions.
R200 billion credit guarantee
Mr Parks said that COSATU welcomed the provision for the guarantee scheme but after consulting with various business owners, the union believed there were too many conditions and hurdles which were impeding on the rate at which the grant was being administered. It was critical that the loans were accompanied with some form of job creation requirement. The loans needed to work in a way that incentivised the provision of employment opportunities; it could not simply be the issuing of cheques. COSATU would welcome if Parliament played an active role in how the programme was administered. Additionally, the union agreed that additional support from DFIs and small lender banks was required to make sure the programme was rolled out successfully. The current bottlenecks were indicative that this was crucial.
COVID-19 unemployment relief grant
COSATU had received numerous complaints that individuals had waited in line at post offices to receive their R350 grants and had been turned back, being told that the money was not available
R100 billion job creation
COSATU would like to see more effort to speed up the roll out of this fund; there was currently not much detail on this issue. However, approximately R35 billion had since been released for the Unemployment Insurance Fund (UIF) for COVID-19 relief. An additional R4 billion was released. COSATU welcomed government’s extension of the programme.
Mr Parks responded that COSATU did not want to see the state collapse because the first causalities would be public servants who would have their wages and pensions cut and probably would face retrenchment. He added that wages were currently at the lowest they had been and that unions had been willing to compromise. COSATU had approached government in 2019 with a variety of proposals including how to set costs on the wage bill. Discussions were currently with the Public Service Coordinating Bargaining Council (PSCBC) as mediation failed; there was also an open court case. It was disappointing that government had walked away from the wage agreement and that it was now at the municipal level.
Cuts to Trade and Industry
He said that that issue of jobs was critical to COSATU as well as the role played by the DTI. He recommended that Parliament should use its full powers to reverse the cut of R1.7 billion from this Department as there were many jobs associated with it.
He agreed with Mr Carrim that there had to be tradeoffs and compromises between government, business and labour. This was what had motivated COSATU to provide a variety of proposals on how to provide Eskom with financial support for debt relief. The primary reason for this was to help the economy and to save jobs.
Alcohol and tobacco ban
Mr Parks notified Members that COSATU had met with the alcohol industry. The union supported government in its efforts to ensure the health of safety of the public. The increase in alcohol related hospital admissions was an indication that the country had a serious social issue with people who were unable to behave accordingly after consuming alcohol. This presented real implications for healthcare workers and the incidence of gender-based violence. COSATU was still concerned with the economic implications that the ban on alcohol would have. The union met with NEDLAC and business to see what could be done to support workers. The alcohol industry had been instructed to come up with concrete proposals on what could be done to reduce alcohol abuse. COSATU also encouraged government to come up with solutions as up to one million jobs were at stake. Equally, banks needed to give support to the industry.
Infection of essential workers
Mr Parks acknowledged that essential workers faced a higher rate of potential infection. He said that vacant posts in critical service delivery departments needed to be filled urgently to reinforce those departments.
Basic education infrastructure
He responded that teachers’ unions were looking for government to put in place the necessary sanitation to allow re-opening going forward. He said that private schools had more resources and resolved to ensure that sanitary and social distancing measures were applied. This was also an indication of where equity in education currently stood.
COSATU had previously raised concerns over the state of school infrastructure for many years. They had done this through bilateral meetings with the Minister and through Parliament. The union felt that the DBE had not taken its concerns seriously. He said that there were allegations that funding had been allocated for a ghost school which did not exist.
COSATU would support an engagement with government and business at NEDLAC prior to the proposed phase two of budgetary adjustments. Government could not wait for next February and could not do the task alone.
Mr Parks responded that COSATU welcomed any reprioritisation done in response to non-expenditure and wasteful expenditure. Some of the allocations as far as health was concerned were commendable but the economic front was worrying. The union was not suggesting that funds which were not being used at PRASA should just be left alone but there needed to be efforts to intervene and to ensure that funds were being utilised as PRASA had a critical role but was collapsing.
Digitised food grant programme
Mr Parks replied that it was disappointing that government had not used the food e-voucher system for the distribution of relief to households across provinces.
There were meetings with the South African National Taxi Council (SANTACO) and the Minister of Transport, Mr Fikile Mbalula, through NEDLAC and bilaterally. COSATU supported the R1.1 billion relief fund as the industry had suffered like all other industries. However, this must be conditional to the following of social distancing measures. The taxi industry also needed to undergo behavioral changes such as registering employees to the UIF, paying taxes and complying with road regulations.
Mr Johnston said that OUTA agreed that reprioritisation must be context specific. The Financial and Fiscal Commission (FFC) had raised similar concerns about the approach that had been taken in cutting provincial budgets without considering the varying degree of needs. OUTA agreed with MPs and Minister Mboweni that government could not spend its way out of its issues; there was a need for widespread reform in order to achieve change.
He agreed that departments which had not achieve performance targets should not continue to get the same funding. However, underspending in certain programmes did not mean they were not essential; this should be determined through qualitative analysis in collaboration with those the programmes were meant to service. This should not be left to government and National Treasury to decide.
Mr Johnston responded that the varying cost of food parcels across provinces was concerning. Once enacted, the Public Procurement Bill could be useful in this matter. This Bill should focus on openness and transparency.
Although Mr Carrim had indicated that South Africa was highly ranked for budgetary transparency, there was a difference between access to information and whether this visibility allowed people to influence what happened. Unfortunately, this was not the case in South Africa. Mr Johnston said the engagement was one of the few opportunities he had seen where civil society had been allowed to potentially influence budget outcomes. Even so, the outcome of public hearings was not always apparent. There needed to be partnerships with civil society and local government that ensured that discretion on how budgets were spent did not lie solely with executives and accounting authorities.
Role of SANDF and SAPS
Mr Johnston recognised the work done by police and defence in addressing gender-based violence and child abuse, but this was a reactionary question. Instead, he asked what had been the role of economic collapse and government-imposed lockdown on gender-based violence. What SAPS and the Department of Defence were doing was symptomatic relief and did not address the root cause of the social ills. Increasing budgets to the Department reinforced the idea that society responded to violence with violent solutions instead of proactive ones like education.
OUTA was disappointed that MPs did not deliberate more substantially about electrification. Mr Johnston urged the Committee to approach the Minister of Mineral Resources and Energy to challenge the deprioritisation of electrification.
Mr Johnston responded that the public was asking government to find the tradeoffs Mr Carrim asked about. OUTA was specifically asking that the Department of Police and Defence receive no more than R7 billion in additional funds and for money to be allocated towards other sectors. He acknowledged the value of the social services work done by SANDF through the Vaal water clean-up project and various other projects. However, there was a lack of accountability, which was why OUTA recommended a fiscal discipline response. OUTA also recommended a qualitative response in the form of an independent water regulator for the DWS.
Surrendering of funds
OUTA did not agree with the voluntary surrender of funds by cities and believed more should be spent towards providing accessible transport. However, it was important to ensure that these processes were well managed, and that accountability was enforced. OUTA was looking at the Economic Regulation of Transport Bill [B1-2020] and looked forward to hearing the Committee opinion on this.
OUTA was disappointed to see non-toll funds diverted from SANRAL to GFIP projected and understood how this appeared as an anti-poor move. For five years both OUTA and COSATU had been saying that the e-toll system was a failed scheme from the beginning. Had this been headed debt would not have reached the point was it currently at. The ad hoc removal of funds intended to finance road infrastructure in rural areas would not have been necessary if action had been taken earlier.
OUTA had not done focused work in this area but government could not succeed in this programme alone. It required collaboration with civic society organisations, learner and parent bodies on how to continue to administer the programme safely and effectively.
Criteria for reprioritisation
OUTA asked how the South African Nuclear Energy Corporation (NECSA) had been prioritised over electrification. One of the criteria was to cut from areas that would not have an adverse impact on the public, of which electrification did. Therefore, OUTA questioned why this was done and strongly recommended that the decision be reversed.
Mr Johnston said that this applied with PRASA but certain qualitative and structural actions must be taken prior to more budget allocations as the standard, particularly of the Metro Rail, was below what was expected.
OUTA agreed that local government, in its current form, was not financially sustainable and required reform. However, Parliament should not rely solely on SALGA for solutions because it simply recommended that local government needed more money. OUTA had recommended that high earning local government officials should have their salaries cut.
Department of Defence
Mr Johnston agreed with Co-Chairperson Buthelezi that the Department of Defence was a black box to the public and that people did not have full knowledge on its operation. He said withholding additional funds from the Department may force it to make the necessary internal changes to help government in the long-term.
Response from Equal Education
Ms Borman said that the main concern of Equal Education was that some of the internal reprioritisations had been justified by saying savings were made during the lockdown period or through the cancellation of infrastructure projects. However, these savings signaled a decrease in the ability of the DBE to effectively carry out its mandate. For example, savings may have been made through the suspension of the NSNP, but this meant millions of learners did not receive a nutritious meal. This could be seen in the HIV/AIDS programme and infrastructure. It may be easier to take from infrastructure projects that did not offer immediate benefit, but this impacted the long-term realisation of outcomes such as the right to education and an equal society. Equal Education found trouble with reprioritisations being rationalised as savings.
Education and Health
Equal Education believed that the ideals behind a wealthy nation and an educated nation were inextricably linked; one could not be put before the other. Health was directly related to the ability of schools reopening safely and for education to be maintained during this time. Education was equally as vital and a failure to preserve it would have devastating impacts.
Equity in Education
Ms Borman said that it was important to focus on addressing corruption in order to achieve equity in education. Equal Education had provided input trying to find ways to reduce wasteful expenditure and to build capacity within departments to ensure that money was spent more efficiently. This was particularly important for the education sector and was a way the equity could be realised. Additionally, the provision of infrastructure in the form of water and sanitation was crucial for an equal education system.
The COVID-19 period has demonstrated that government could act swiftly. The distribution of water tanks was an example, although a temporary solution. This showed that the capacity to act quickly existed and that more pressure needed to be applied in petitioning for improved infrastructure. The budget reflected government’s priorities and the declining trend in education was disheartening.
Equal Education responded that the provision of meals to learners holds less sanitation concerns than a full school re-opening. Learners could collect meals at their school during designated time intervals to ensure they did not spend an extended period there. Learners had indicated their willingness to do this. Another solution would be to have meals delivered to learners at different locations.
SANDF and SAPS
Mr McLaren responded that increased budget allocations for SANDF and SAPS had been brought up for the purpose of comparison and to question if money was being spent in the best way possible. He had not looked at the specific programme allocations and could not comment on how the adjusted allocations would contribute towards the Department’s fight against gender-based violence and child abuse. However, the budget for the Department of Women, Youth and Persons with Disabilities had been cut by approximately R133 million, with some cuts made in programmes relating to gender equality. It was not evident in the supplementary budget if there were any dedicated efforts towards gender equality.
Equal Education said MPs were aware of the dire need for improved school infrastructure, but surveys had shown that many other areas in education could benefit from increased funding. Cutting funds was regressive and further impeded on the ability to achieve equity in education.
He said that it was debatable that SA spent at a high per capita rate for education. When one looked at the per capita spend in the poorest of schools, it was not high when compared to other countries. The idea that the country spent a lot for education was simply untrue.
One of the reasons there was underspending towards infrastructure was a lack of capacity and planning with the DBE; this was raised by the FFC. An additional component was added to the budget for human resources to ensure DBE had internal capacity such as engineers to promote infrastructure development. In order to gain value in the long run, money had to be spent; the focus could not always be on savings.
Mr McLaren responded that it was unfair to suggest that Equal Education was being idealistic in its petitions when these were informed by various studies and reports and advocacy on the implementation of education. Section 27 had done extensive research on sanitation and had made several recommendations to Parliament.
Section 27 and Equal Education contacted National Treasury and the DBE three months prior to this meeting inquiring about the reprioritisation of the education budget. Unfortunately, the requests were refused following which the organisations issued legal requests that were also refused by Treasury and the DBE. Equal Education urged the Committee to consider how it could help to ensure better public participation and transparency in budgetary processes.
Dr Orlandi responded that the per-parcel-cost was derived from the numbers presented by the Department of Social Development on how much provinces had spent on food. No information was provided on the content of the parcels. PBO agreed that the voucher system may be more appropriate than the parcels.
Surrendering of funds
The reason the City of Cape Town voluntarily surrendered funding was due to delays in the construction plans for the expansion of the network. It would then be decided when the funds were returned to the City for the purpose initially intended.
Dr Orlandi clarified that the numbers in the provincial disaster relief grant distribution did not reflect the percentage expenditure but they reflected the percentage allocated per grant. These were based on figures presented by Cooperative Governance and Traditional Affairs (CoGTA).
The reductions made in the supplementary budget were not based on performance as we were only one month into the financial year. A blanket approach based on percentage cuts was applied. PBO said that the amount required for reprioritisation was set prior to identifying the areas in which changes would be made.
National Development Plan
PBO had been monitoring the progress towards achieving NDP goals but there was no reporting for the last year of the first five-year medium-term strategic framework. PBO had not seen the plan for the 2019 to 2024 period and could not monitor progress because targets had not been set. In a previous analysis, PBO found that the programme of action and reporting were not working, and a different methodology should be considered for the implementation of the NDP. Targets and outputs should be integrated with the Annual Performance Plans (APPs) of all departments.
Phase two and three
Dr Seeraj Mohamed, Deputy Director of Economics for PBO, told MPs that the supplementary budget was a bridge towards the upcoming budget process in October. However, there was a lot of overlap within the different phases, especially between phase one and two. More certainty needed to be provided to the public before the next budget process and the long-term impacts of the pandemic needed to be discussed. Therefore, PBO indicated the likelihood of a second wave. Until there was a secure vaccination, the virus would continue to spread like a forest fire.
From a macroeconomic perspective government must provide certainty and assurance to households and business during this time. The earlier government presented plans on future fiscal plans, the better it was for business and households.
The experience of Sweden illustrated that opening did not mean the economy would immediately recover. When compared to neighbouring countries that imposed lockdowns, Sweden was still facing the impact of the pandemic. Therefore, phase three would potentially come with a variety of challenges including trauma and mental health. SA needed to consider the long-term before prematurely cutting the budget.
Dr Mohamed said that part of the problem was that the spending in areas such as education and infrastructure was not viewed as investment which had successive returns for the economy.
Deputy Director of Finance, PBO, Dr Dumisani Jantjies, emphasised that the supplementary budget aimed to deal with both the pandemic and the general economic challenges and should be viewed through this lens. He agreed that some of the money towards infrastructure would not have been used but in the context of a declining trend in funding and the long-term impacts the reprioritisation may seem worrying. The criteria needed to consider the implications for service delivery outcomes and development.
He emphasised that spending on research, innovation and new technology was particularly important following a crisis. This presented an opportunity for growth and was worth monitoring by the Committee as it had long term impacts on the economy.
SARS had been building up technology to address illicit financial flows. An area to be considered was the digital economy and how much national revenue could be created in this area.
The Chairperson thanked the presenters for their submissions and MPs for their insight. The Standing Committee was asked to remain on the virtual platform to discuss internal matters.
Consideration of the proposed amendment to Section 6 of the Adjustments Appropriations Bill [B10-2020]
The Chairperson indicated that he had requested Senior Parliamentary Legal Adviser, Adv. Frank Jenkins, to provide insight on the legality of the section.
Adv. Jenkins reported that he had consulted with National Treasury and did not have any legal concerns. He told Members that the amendment of the Adjustments Appropriations Bill was to allow the amendment of the Appropriation Act. Treasury had previously explained that the Act had a provision which allowed the Minister to spend money up until the point that a new adjustment was made. It was necessary to now redo this provision, allowing the Minister to spend funds which had not been specifically allocated. This expenditure would be reflected in the next adjustments budget. This expenditure was still expected to be reported to Parliament. He did not see any constitutional concerns as the legal process had been duly followed.
Mr Joseph asked about R5 billion and R7 billion provisional allocations referenced by National Treasury. He asked why R5 billion had been set aside if every budget had a contingency reserve.
Adv. Jenkins said that in his understanding the budget holder must determine how large the contingency reserve needed to be. It was likely that Treasury saw the need to increase the contingency reserve given the current budget fluctuations or it had identified specific needs. However, he could not speculate on the rationale used to increase the contingency reserve.
The Chairperson said that he was satisfied with Adv. Jenkins’s response on the legality of the Bill. Any further questions on the details of the budget would be for National Treasury.
Mr Mlenzana asked if the Committee was supposed to move for the adoption of the Minister’s proposal separately from the report which would be compiled on the Bill.
Adv. Jenkins said that the Committee should deal with the amendment like any other proposed amendment; this would then be reflected in the report.
Mr Qayiso moved for the adoption of the amendment.
Mr Mlenzana seconded the motion.
Ms Ntlangwini objected on behalf of the EFF.
Mr A Sarupen (DA) objected on behalf of the DA based on the addition of R7 billion to the contingency reserve without any clear guidelines. The party was not convinced that this money would not be used for South African Airways.
The Committee Secretariat requested that Mr Sarupen forward the reasons for objecting in writing.
Ms Peters asked if Mr Sarupen was suggesting that the National Revenue Plan should not have a reserve although it was already provisioned for in the initial budget in February.
The Chairperson said that he did not want the Committee to engage in further debate and encouraged Mr Sarupen to formally submit the objection.
Mr Qayiso, Ms Dikgale, Ms Peters, Mr Mlenzana, Mr I Morolong (ANC) voted for the adoption of the proposed amendment.
Mr Sarupen, Ms Ntlangwini and Mr Joseph voted against the adoption.
The Chairperson said that the Adjustments Appropriations Bill would be amended as suggested. This would be contained in the report of the following meeting. He thanked Members for their contributions.
The meeting was adjourned.
- OUTA submission
- COSATU submission
- National Treasury - 2020 Supplementary Budget:Adjustments Appropriation Bill[B10-2020]
- Equal Education, SECTION27, and Equal Education Law Centre presentation
- PBO - 2020 Adjustments Appropriations Bill
- Equal Education, SECTION27 and Equal Education Law Centre submission
Buthelezi, Mr S N
Njandu, Mr EJ
Aucamp, Mr S
Carrim, Mr YI
Dikgale, Ms MC
Joseph, Mr D
Mamaregane, Ms ML
Mkiva, Mr Z
Mlenzana, Mr Z
Morolong, Mr IK
Ntlangwini, Ms EN
Peters, Ms ED
Qayiso, Mr XS
Ryder, Mr D
Sarupen, Mr AN
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