2020 MTBPS: Committee Report

NCOP Finance

10 November 2020
Chairperson: Mr J Maswanganyi (ANC) and Mr Y Carrim (ANC; KZN)
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Meeting Summary

2020 Medium Term Budget Policy Statement (MTBPS)
Budget Documents

Tabled Committee Reports

In this virtual meeting, the Standing and Select Committees on Finance met to consider and the report on the 2020 Revised and Proposed Fiscal Framework.

Members from the DA raised concerns around the lack of support for entrepreneurial activity in the Economic Reconstruction and Recovery Plan (ERRP), and the statistical anomaly with the reporting of the unemployment rate using the narrow definition of unemployment. This concern was noted and there was agreement to include figures using both the narrow and broad definition of unemployment.

Members raised concerns around the lack of localisation, despite government’s promise to push for localisation. The Committees agreed that the Chairpersons of both the Standing and Select Committees of Finance would host a telecom conference with the relevant officials in the Presidency, regarding this issue. The Committees will also write a letter to the Minister of Finance. The issue of bailouts to failed State Owned Enterprises at the expense of crowding-out service delivery on education and health, was also a concern for Members. The Committees agreed to have a joint meeting with the Appropriations Committees and Public Enterprise Committees, in which South African Airways (SAA), the business practitioners and Minister Pravin Gordhan, are brought in during the February Budget, to fully account for what the money allocated to SAA will be used for. The DA and FF+ did not support the prescription of assets in the report.

Despite the DA’s reservation and the objection from the EFF and the FF+, the Standing Committee on Finance adopted the Report with amendments

Meeting report

Chairperson Maswanganyi welcomed everyone in attendance and informed Members that Mr I Skosana’s (ANC) father passed on last week, and offered his condolences.

The Committee Secretariats noted apologies from Mr D Ryder (DA, Gauteng), Mr W Aucamp (DA, Northern Cape), and Mr G Hill-Lewis (DA).

Committee Report on 2020 MTBPS (Revised and Proposed Fiscal Framework)
Chairperson Maswanganyi announced that the Committees would begin line-by-line deliberations on the report from section 8, the committee observations and recommendations.

Dr D George (DA) remarked on paragraph 8.3. He stated that the DA is of the view that Operation Vulindlela should include the facilitation of entrepreneurial activity. It presently does not, and so the DA does not believe that it will be effective. He also commented on paragraph 8.4, stating that the Economic Reconstruction and Recovery Plan (ERRP) is about more government involvement to rescue the economy. It should rather empower people through entrepreneurial activity.

Chairperson Carrim acknowledged receipt of amendments to the report, from Mr Ryder. He requested his colleague, Dr George to read Mr Ryder’s proposed amendments on his behalf.

Dr George read Mr Ryder’s comment on paragraph 8.4. Mr Ryder stated that the real reason for the decline in the unemployment rate is the narrow definition of unemployment, which requires active job seekers in order to be included. The decrease was due to a statistical anomaly, and this should be made clear in paragraph 8.4.

Chairperson Maswanganyi requested the secretariats to assist with getting the latest unemployment statistics from Statistics South Africa (Stats SA), to include the unemployment statistics using the broad definition.

Dr George commented on paragraph 8.5. The ERRP focuses on government driving economic growth, however, an incapable government cannot do that and should rather focus on giving power back to the people by supporting entrepreneurial activity.

Dr George read Mr Ryder’s comment on paragraph 8.5. Mr Ryder stated that “value for money” should always be considered and the definition of value must be considered as well. R100 spent and kept locally beats R90 spent overseas.

Ms D Mahlangu (ANC, Mpumalanga) pointed out that encouragement of local buying is covered in paragraph 8.5.

Ms P Abraham (ANC) stated that the Committee should have its own definition of unemployment, which will include entrepreneurs. This is so that in future recommendations, the definition will not have to supplemented with more information.

Chairperson Maswanganyi replied that the secretariats would include statistics using both the broad and narrow definition of unemployment in the report. The question on whether government should have no role and give power to the people is an ideological debate. He agreed that government does have a role to facilitate conditions for the private sector to thrive.

Ms Mahlangu stated that active economic responsibility lies with government, to ensure the economic environment is optimal for investment and private sector growth. She added that the concern regarding entrepreneurs has already been captured in the report.

Ms Abraham asked if the committee is of the view that there has been failure to insistently respond to the issue in paragraph 8.5, by the Office of the Presidency. If the current legislative framework does not assist with localisation, then the Committee needs to look at new legislation or amendments to ensure localisation is achieved.

Chairperson Carrim stated that it is hypocritical for the Committee and ANC forums to argue for localisation and then refuse to act on a decision that has been on its agenda for long. It is unacceptable that 4 years later, the Presidency has not responded to an issue that was raised. It should start with the Executive. He requested that himself and Chairperson Maswanganyi have a telecom conference with the relevant officials in the Presidency to be held accountable. He also proposed writing a letter to the Minister of Finance.

Ms Mahlangu agreed with Chairperson Carrim and stated that the President made this commitment during the 2019 or 2020 State of the Nation Address (SONA). The Committee needs to be proactive in following-up on when the commitment will start.

Chairperson Maswanganyi stated that the Public Procurement Bill will have to look at the issue of localisation, amongst other issues. The Financial and Fiscal Commission (FFC) and Parliamentary Budget Office (PBO) both strongly advocated for localisation. He noted Mr Carrim’s proposal to speak to the officials of the Presidency as Chairpersons of the Standing and Select Committees on Finance.

Chairperson Maswanganyi remarked on paragraph 8.6, stating that spectrum has been a longstanding issue. He requested the latest update on this issue so that whatever is captured in the report regarding spectrum, is in line with the latest developments. He added that the President was emphatic about the issue of localisation in the ERRP. He requested the secretariats to expunge the President’s exact statement, so that it can be cited when making follow ups with the Minister and officials. He added that policy and legislation both need to be tight, as trade partners will protest against localisation, and even issue threats like the United states of America (USA)

Ms Mahlangu stated that the research team would be more relevant to provide clarity on the latest developments with spectrum.

Dr Zakhele Hlophe, Parliamentary Advisor, replied that the digital spectrum auction is part of the items being prioritised for the ERRP. It has not been done as yet, and so the cost of broadband is still high. What is in the report captures what is currently happening. Even though there may be plans on the way, it has not been auctioned yet.

Dr George read Mr Ryder’s comment on paragraph 8.7. Mr Ryder proposed the addition “that policy certainty is imperative in order to stabilize investment”.

Ms Mahlangu asked if what Mr Ryder is raising is a new issue because it does not seem like it. Instead the Committee should emphasize that what government has committed to, be implemented.   

Dr George agreed that it is not a new issue and proposed phrasing it differently so as to show that it is not a new matter being raised.

Ms Abraham suggested that the Committee reiterate government’s view and urge for implementation.

Dr George read Mr Ryder’s comment on paragraph 8.8. Mr Ryder stated that several commentators pointed out that National Treasury’s (NT) projections are overly optimistic. This is mentioned in paragraph 8.11 and so he suggested that a cross-reference to 8.11 be made in paragraph 8.8, to assist with ease of reading.

He also read Mr Ryder comment on paragraph 8.10, which states that the bailouts to failed State Owned Enterprises (SOEs) have already been flagged by the Finance Minister as unsustainable and undesirable. Some Members are of the view that this is reckless, populist, uninformed and naïve. Giving up spending money desperately needed for service delivery to the most vulnerable, for the sake of propping up an elitist project, is forsaking the people of South Africa.

Ms Mahlangu stated the Minister had stated that it was not a bailout, however she failed to understand what it is if it is not a bailout. She expressed concern with the language being used by Members. She requested that the Committee report make use of modest and parliamentary language. She understood Members are disappointed and angry as the issues around SOEs have been recurring. The Committee can still express its sentiments and the gravity of the situation using more diplomatic wording.

Dr George stated that despite the Minister saying it is not a bailout, it still looks like one. Regardless of what it is called, it is additional money that is being given to a failed SOE. The allocation is not enough to keep South Africa Airways (SAA) afloat so it is just wasted money at the expense of the people. He agreed that the Committee does not need to use inflammatory words, however, the extent to which this matter is concerning should be conveyed. The issue of SAA comes up again in paragraph 8.16. The key concern is that a lot of money has been put into SAA and other SOEs yet there has been no clear turnaround or indication things will work out. It is even at the expense of crowding-out service delivery on education and health. Members of Parliament are obligated to at least point this out and express that it is unacceptable.
Members are concerned about whether it will work in the future and if there will be any changes.

Ms Abraham stated that paragraph 8.10 in its current form is incomplete. The Committee’s concern for growing the economy through job creation and reducing inequality, needs to be captured.  Emphasizing that the public submissions need to be considered by National Treasury can cover this concern as well as the concerns of Mr Ryder.

Chairperson Maswanganyi requested the secretariat to take note of Mr Ryder and Members’ additions, however, expunge words like reckless, populist, uninformed and naïve. It is not good for a Parliamentary Committee to use that kind of language. The additions should be phrased in such a way that shows the Committee’s concern with the bailouts. He reminded members of the agreement to call in SAA and also proposed bringing-in the business practitioner during the February Budget, to get a full account of what the money will be used for.

Mr S Du Toit (FF+, North West) suggested that Minister Pravin Gordhan be called-in as well, since he is also in charge of what is happening around SAA. This is to get a full account of what the situation entails and what the way forward will be.

Chairperson Carrim proposed that this happen in a joint meeting with the Appropriations Committees, as the issues raised are primarily concerned with appropriations and not just the fiscal framework. He also suggested that the broader Public Enterprises Committees in both houses also be included in the engagement,

Dr George read Mr Ryder’s comment on paragraph 8.13. Mr Ryder stated that since the budget cuts are now reliant on a court process, it is not fully understood whether the cuts to each Department will be reversed to ensure salaries are paid, should the Court’s decision not be in favour of government. Is the Committee to expect a budget adjustment later in the year?

Chairperson Carrim stated that Sharon from the South African Institute of Chartered Accountants (SAICA) raised the issue of government’s plan B if it loses the court case, last week. He stated that Mr Ryder’s point is valid, as he is concerned with whether another appropriations bill will have to be passed at a later stage. He proposed that this be included by highlighting in the report that the Committee notes the concerns of the public, the PBO and FFC regarding the wage bill. As this is an appropriations matter, the Committee recommends that the Appropriations Committee looks at the matter, whilst keeping in mind that this matter will ultimately be shaped by negotiations with the Public Service Co-ordinating Bargaining Council (PSCBC). He stated that he believes that the scenario painted by Mr Ryrder is unlikely to happen. What is more likely to occur is that the issue will go back to negotiations with the Council and be sorted there. However, the Committee can note the point that has been raised.

Mr E Njadu (ANC, Western Cape) stated that paragraph 8.13 made reference to the public sector wage bill. He concurred with Mr Carrim’s sentiments.

Ms Mahlangu agreed with Mr Carrim that the adjustment appropriations bill will be dealt with by the Appropriations Committee.  

Chairperson Maswanganyi stated that it is unknown in whose favour the court will rule.  He agreed that the concern around government reaching an amicable settlement in the negotiations should be noted in the report.

Dr George read Mr Ryder’s comment on paragraph 8.14, who stated that he disagreed with the symposium proposal on the austerity/stimulus debate. He stated that it is an ideological debate and questioned the appropriateness of parliament funding a “talk show”, as the symposium will cost money.

Chairperson Carrim stated that proposal for a workshop on the austerity/stimulus debate is a long overdue conversation. At some point, Treasury took on the PBO for its views against austerity. The workshop is to facilitate an engagement between NT, the PBO and public stakeholders on the differing views around this matter, as the debate has not been completed. The workshop can be costless and done online via zoom meetings.

Dr George stated that “every public participant who presented did not support the bailout to SAA”, should be noted in paragraph 8.16 of the report.

Dr George read Mr Ryder’s comment on paragraph 8.16, who stated that waiting for the next quarterly briefing does not enable any Member to make an informed decision in choosing whether to support this framework or not. It is a key policy issue and allocating funding for this would be irresponsible. The Minister should inform Members on the SAA allocation before approving the framework. Time constraints are not an excuse.

The Chairperson noted the concern.

Dr George commented on paragraph 8.17, stating that the wording is weak. The report currently makes reference to SOE dependence on the fiscus having to be reduced. This implies that SOEs would remain dependent on the fiscus and this was not the intention when the enterprises were established. The enterprises were intended to sustain themselves instead of draining the fiscus. He suggested that the wording be changed to ensure there is no dependence.

Dr George read Mr Ryder’s comment on paragraph 8.17, who questioned why a new council needs to be established when a Ministry has already been established. He added that this introduces a new layer of costs.  

Chairperson Maswanganyi explained that the conception of the Presidential State Owned Enterprises Council comes from a recommendation by the Presidential Review Commission (PRC), that was led by Ms Riah Phiyega at the time. Amongst other things, it would be established to tighten oversight and the monitoring of enterprises. The recommendation draws from the experience of either Singapore or Indonesia. The rationale for establishing the Council well-detailed in the PRC.

Dr George requested the Committee to note that the DA does not support the introduction of prescribed assets in paragraph 8.20.

Mr Du Toit requested that it be noted that the FF+ does not agree with prescribed assets.

Chairperson Carrim remarked on paragraph 8.21, and explained that the land tax debate has been raging for years and Mr Meakin keeps coming back to make the same point. None of the parties agreed with his view that only land must be taxed. Land is a very sensitive issue in South Africa, not only in terms of value, but also in terms of customs and traditions. The issue can be settled by writing to him in private and then publicising it.

Chairperson Maswanganyi raised concerns about a possible bias regarding the mentioning of the names of one or two public stakeholders in a parliamentary report, whilst others are not mentioned. He proposed that if names are explicitly mentioned due to a recurring debate, then it should be justified.

Dr George read Mr Ryder’s comment on paragraph 8.24, who proposed the addition that “the Committee further encourages law enforcement agencies and justice clusters, to expedite processes to bring corrupters and corruptees to book, in order to send a message on the management of public money. The slow pace of justice is impacting negatively on economic sentiment”.

Adoption of the report by the Standing Committee on Finance

Chairperson Maswangayi proposed the adoption of the report.

Dr D George stated that the DA reserves its position on the report.

Mr F Shivambu (EFF) stated that the EFF objects.

Mr W Wessels (FF+) stated that the FF+ objects.

Ms M Mabiletsa (ANC) moved for the adoption of the report with the amendments.

Ms Abraham seconded the motion.

The Standing Committee adopted the report on the 2020 Revised and Proposed Fiscal Framework, with the amendments.

Adoption of the report by the Select Committee on Finance

Chairperson Carrim proposed the adoption of the report.

Ms Mahlangu moved for the adoption of the report with the amendments
Mr Njadu seconded the motion.  

Mr Du Toit stated that the FF+ objects.

Mr M Moletsane (EFF, Free State) stated that the EFF objects.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, pointed out Mr Ryder’s written submission that the DA reserves its position, despite not being physically present.

The Select Committee adopted the report on the 2020 Revised and Proposed Fiscal Framework, with the amendments.

Closing remarks
Chairperson Maswanganyi, in closing, thanked everyone in attendance,

The meeting was adjourned.


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