2021 Division of Revenue Bill: National Treasury briefing

Standing Committee on Appropriations

10 March 2021
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

Viideo: Standing Committee on Appropriations, 10 March 2021

In a virtual meeting, National Treasury (NT) briefed the Standing Committee on Appropriations on the 2021 Division of Revenue Bill.

The NT noted that large reductions had been made in the allocations to national departments and the provinces as a result of the more than R300 billion being removed from the wage bill from 2020/21 to 2023/24. The provincial equitable share (PES) reduction amounted to R205.9 billion over the 2021 medium term expenditure framework (MTEF), and 85% of PES reductions for the provinces were for the compensation of employees, as there were no salary increases across the board for government employees and political office bearers. The local government equitable share reduction amounted to R14.7 billion over the 2021 MTEF.

The criteria for effecting reductions were:

  • Infrastructure spending was protected from the reductions, except where there was evidence of perpetual under-spending.
  • Reductions took into account the service delivery impact, such as school nutrition programmes.
  • Due consideration was given to the government’s response to COVID-19, and expenditure on COVID was cushioned.

Though the tax base was concentrated in urban areas, the rural areas received more per capita/per household through the division of revenue. Compensation of employees had outpaced economic performance and gross domestic product per capita. Spending reviews were revealing where significant savings could be made. Government continued to expand the tools available for provinces and municipalities to improve spending and build operational and technical capacity.

Members asked why money had been taken from the National Student Financial Aid Scheme (NSFAS) to fund the development of the Covid-19 vaccine. The NT responded that they could adequately respond during their presentation on appropriations, as they were still waiting on Cabinet, which was dealing with the matter.

Members asked why there was poor consequence management and no convictions, regardless of the reports of fraud and corruption. The NT responded that it required an enabling political environment.

The Committee raised questions on how gender-based violence was being factored in budgeting. The NT responded that feedback would be provided during presentations on appropriations.

Members asked about the role of the NT in dealing with the challenges of informal settlements. The NT responded that they were providing grants to provide infrastructure and promote in situ informal settlement upgrading.

The Committee proposed organisational restructuring processes which reconsidered the remunerative rates for executives in state-owned entities. The NT responded that it was already implementing some of these measures.

Meeting report

2021 Division of Revenue Bill


Ms Malijeng Ngqaleni, Deputy Director-General (DDG): Intergovernmental Relations, National Treasury (NT), took the Members through the presentation.


The presentation covered the redistributive nature of the division of revenue, emerging trends in salaries, improving value for money, factors affecting sustainability and provincial and local government allocations.


The presentation also covered division of revenue bill clauses and recommendations made on the Bill.


[see presentation attached for further details]




Mr O Mathafa (ANC) said that his comments were going to be few because the Committee had been interacting with the Division of Revenue Bill for a while. The information provided in slide 15 showed that the conditional grants were growing at a rate faster than the equitable share. On a regular basis, year in year out, the Committee lamented the poor spending of conditional grants.


He asked whether the growth in conditional grants was in line with the tenets of zero-based budgeting because in another presentation, the Committee had been informed that where there were best performances, there were no downward adjustments in the budget.


He asked whether the organic growth in conditional grants was backed by performance by recipients. Zero-based budgets must consider an assessment of performance as well as a review of the quality of performance.


He asked if there was a way to assist municipalities in addressing a challenge that had been on the rise, especially in Gauteng. When governments intervened and built houses for the poor, there were invasions before the houses were allocated to those identified as beneficiaries.


He said there were a lot of grants that were within the infrastructure column. He asked if there was a way to ensure that some of the grants were used where there were gaps between the construction and allocation to beneficiaries.


In some areas, like where he came from, these gaps had resulted in violent confrontations within the community. There was conflict between those who had been identified as the beneficiaries for the houses and those that just invaded, and the state was caught in between. He asked if anything could be done through the grant to make sure that this was prevented from happening. Maybe it could be in the provision of security. It could be in the provision of better administrative processes to ensure that when the construction started and ended, everyone was part of the process. He wanted to find out if anything could be done through the appropriation of funds that would enable this situation to be mitigated.


He appreciated the redistributive nature of the Division of Revenue Bill, but noted that there were a lot of job losses and rising unemployment. Even though the Bill was redistributive, he asked if there was going to be a correction through interventions aimed at local economic development. He asked how employment was going to be created through the grants that had been allocated. The presenters had alluded to the possible jobs that could be created if the allocations were used. He asked if there was a view that this could be corrected, especially in urban households.


Ms D Peters (ANC) thanked National Treasury team for the presentation and for anticipating the questions that she would have had. She said that slide 9 was a pre-emptive strike, because she was going to raise a question about the support that the NT provided.


She said the Deputy Director-General (DDG) in the National Treasury had to remember that last year when these questions were raised, she had come back very strongly to say it was a big challenge, because the people that were said to need training were employed in very senior positions with very high rates of remuneration. She was happy to see the interventions that the NT had made through the Government Technical Advisory Centre (GTAC).

She appreciated that the NT had made sure that the infrastructure delivery system for local and provincial government officials was in place, and hoped that these interventions would give results. There were indications in the presentation that there were about 171 000 employees in all provinces who were above the age of 55. She supported early retirement processes to open the space for younger people with the requisite skills and competencies. These would not be in areas that required long periods of training before they could be employed. There were thousands of young people who were graduates but unemployed, and there were nurses who were unemployed although there were concerns about hospitals being understaffed.

She appreciated the slide 12, which showed the key factors affecting sustainability. The slide would help in zooming in on important areas with regard to their expenditure patterns when the Committee met with other Departments.

There were about 160 forensic investigations which had not been backed up by any action. These investigations were there, and they were costing the government lots of money, but nobody had been convicted. She said that it was worth considering that the investigation units were also given money by the same government. If the work that they did was not going to convince society that the government was serious about dealing with fraud and corruption, then there was something to worry about.

During a meeting with the office of the chief procurement officer (OCPO), there had been concerns over the number of investigations, and she requested a report on that. There were concerns over the failure to provide a report of the last five years of the investigations undertaken, as well as the outcomes. 

She said that to ensure an enabling political environment, there was a need to engage with the Minister in the Office of the Presidency, as well as the Department of Cooperative Governance and Traditional Affairs (CoGTA). CoGTA was the link in the intergovernmental framework -- it took the reports and engagements to the President. It was important that CoGTA was informed about the constraints in the political environment which had a bearing on the administration.

She commented that the NT had indicated that it had an informal settlement upgrading programme, or partnership, and asked how it could be that informal settlements were continuously being upgraded instead of being eradicated. In Masiphumelele, there were protests against people putting up informal houses on sports fields. The people would go and clear up the area, put up poles, put up material, and the next thing the municipalities would put people in there as opposed to looking for another area that was good for human settlements.

Another issue in the communities was that agricultural land had been occupied by illegal occupiers, turning it into illegal settlements. The government would then come with a grant to upgrade the illegal settlement, forgetting that there were existing challenges with food insecurity. In some of the communities, municipalities had tried in the past to put up areas which they called transit camps for people who did not have anywhere to stay while they were preparing to transfer them to an area that had services, but these transit camps had become permanent. The Informal Settlement Upgrading Grant was responsible for the permanence of the transit camps. There were areas in this country that, despite the government’s good intentions to electrify these communities, it was impossible to reach some of these areas because they had been classified as not electrifiable. There was an area in Mamelodi that, because of the way the informal settlement was formed, it was impossible to electrify. Even if people were to march on a daily basis demanding electricity, that area would not be electrifiable because one would have to move all those people.

Regarding the growth in conditional grants surpassing equitable share, could the NT make sure that it had a level of control and accountability? The conditional grants could have conditions attached to them so that municipalities and provinces did not have the leeway to do what they wished to do with these grants.

She said that there was need to see the infrastructure delivery system in practice. The water and sanitation situation in the communities was undesirable. The quality of the electricity supply was also poor, and when the wind blew there was no electricity. People had decided to call everything load shedding, even when it was a power cut caused by weather elements. The roads in municipal and provincial areas were deteriorating, despite the grants that the NT said it was providing. One of the big challenges in municipalities and provinces was that of maintenance. The infrastructure was not being maintained. When the infrastructure was installed, at a later stage it had to be removed and replaced with new infrastructure.

She commented that the submissions of the NT showed that the Antiretroviral (ARV) uptake was now lower, which required consideration. She asked why the expenditure for the ARVs in the Northern Cape and Mpumalanga had surpassed the other provinces.

She asked why R9 billion from the National Student Financial Aid Scheme (NSFAS) had been used to fund the development of the Covid-19 vaccine. Although the vaccine was important to deal with the pandemic, qualified professionals were also important. The implementation of the District Development Model needed people who were competent and adequately capacitated.

The realisation of the Sustainable Development Goals (SDGs) and the National Development Plan (NDP) were premised on a capable state which needed qualified and competent professionals. She asked how tackling the triple challenges of poverty, unemployment and inequality was envisaged while compromising on education. To implement the Economic Recovery Plan (ERP), as outlined by the President, education was key. The NT and the Department of Higher Education and Training were supposed to come at a later stage to brief the Committee on South Africa’s vaccine initiative. If the pandemic was to be considered in the long term, then there was need to develop the capacity for vaccines locally.

Mr Z Mlenzana (ANC) asked about the extent to which the NT had assessed the capacity of district municipalities to spend any additional budget allocation. When money was transferred to district municipalities, was the NT going to monitor the budget and ensure that funds were not misappropriated? He asked whether the NT was able to supply the Committee with an evaluation of performance reports showing the expenditure trends in district municipalities.

Mr X Qayiso (ANC) said he agreed with Ms Peters on the issue of forensic investigations. Out of the160 cases, there had been no convictions, and although one may not know the reality of the costs involved, but he assumed that the same money could be invested in the provision of services.

He said that the NT should not just be focused on figures and ticking the boxes -- there was need to provide a report on progress in the period under review. Sometimes just dealing with figures might not assist the Committee that much. There was a need to read the reports together with the NDP. He requested a report on the progress that the NT had made in terms of redistribution.

He asked on how the NT would deal with the problem of the wage bill and the NSFAS issue. The NT had taken a risky approach when it came to the public service wage bill. He asked what this risk implied.

Regarding the NSFAS issue, he said it was not proper to compromise on education, given the situation that the economy was in. He asked what was being done to resolve the challenges with NSFAS

The Chairperson said there was a focus on the training of employees, and he asked if it was not better to employ adequately capacitated people into positions. There were situations where there were chief financial officers (CFOs) who could not draw up financial statements. He questioned the competency of such personnel in managing the funds of municipalities. He asked how the NT was coming up with mechanisms to ensure that people who were appointed to positions were adequately trained.

On the provincial equitable share formula, there was a one percent weighting that was attached to economic activities, and he asked if the NT could expand on the meaning of that weight. Could the NT share the current ratio of public infrastructure spending to gross domestic product (GDP)? He enquired on the performance of South Africa relative to other developing countries. Was the government assessing whether the current infrastructure improvement was achieving a developmental and transformational impact?

He asked if the NT could explain the differences in spending for ARVs across provinces. Was the transversal contract for the purchase of ARVs centralised at the national Department of Health? There was a need to grow the economy to improve the fiscal position of the country, so what were the bottlenecks that constrained businesses when they wanted to invest in South Africa?

He asked if there were people in the NT who assisted municipalities in ensuring the ease of doing business in municipalities. Bottlenecks at the local government level were constraining progress. He asked how the infrastructure fund mentioned in the presentation worked.

Ms Peters said that early retirement plunged public servants into poverty overnight because of the protracted nature of the application process. She said that the NT was supposed to expedite the process.

She asked how municipalities accounted for the households that were not being covered by the social grants. The impact of the Covid-19 pandemic on middle income urban households was severe. The weight that the NT was using did not consider the urban settings in determining allocations. The municipalities would be affected significantly, because the people would not be able to pay rates. In the guidelines that the NT provided for the procurement of personal protective equipment (PPE), she asked if it would not be better for the NT to get provincial and local governments to participate in the transversal contracts for PPE.


Ms Ngqaleni referred to the growth in conditional grants exceeding equitable share, and said zero-based budgeting was a method that the NT was evolving. It had started with the implementation of expenditure reviews that would strengthen the analysis of programmes as the NT moved through zero-based budgeting. The NT had not yet started a deeper analysis, but what had been observed was that in areas like the Integrated Public Transport System (IPTS) grant, nothing was happening. There was need to reduce allocations to municipalities to give them time to improve their performance. The NT intended to improve spending on non-personnel investment, to stimulate investment.

On the issue of unemployment, the urban spaces were critical in driving the economy, because that was where the economic activity happened. 50% of the gross domestic product (GDP) came from the metros, which was huge. If there was not sufficient effort to promote investments that would drive employment, there would be problems. The contribution that the grants would make was in ensuring that there was adequate infrastructure, but also to make sure that the infrastructure was renewed and maintained. One of the major issues that the businesses were considering when assessing the ease of doing business was sustainability, reliability and cost effectiveness of the services that the municipality provides. The NT aimed to stimulate growth in these areas and benefit the national economy.

As the older people retired, the NT would seek to renew the public service by bringing in younger people with the skills that were required in technology. The younger people also came in at the entry level, which would also reduce the cost of employment.

The biggest challenge with investigations involved consequence management, because the reports were there. The challenge was in ensuring that the recommendations could be implemented. The NT was committed to ensuring that it pushed strongly for more effective consequence management to bring about fear of consequences, and reduce fraud and corruption.

The grants were not the cause of informal settlements. The grants for informal settlements’ upgrading meant that properly sited informal settlements got services in an orderly way. That was what these grants were trying to achieve. The NT wanted to work and partner with the communities so that it could begin to improve the lives in informal settlements’ dwellers, and even enable them to build their own structures. Infrastructure provision could be accelerated by upgrading well-sited informal settlements. This would help in meeting the housing demand.

The NT was not trying to control accountability in conditional grants’ growth. It aimed to grow public infrastructure investment through conditional grants because equitable share funds were more for operational expenditure. The deterioration of infrastructure services was a major problem that the NT’s leadership had agreed upon in the budget forum. The conditional grants were meant to ensure that local government could implement new infrastructure projects.

The NSFAS issue was being dealt with at the national level. Cabinet was seized with this problem, and the DG was waiting for the National Treasury to revert on the Appropriation Bill. There would be more feedback on what the government was doing regarding the NSFAS challenge.

On the issue raised about shifting funds to local municipalities or districts, and whether capacity had been assessed, there were concerns that if funding was withdrawn from non-performing municipalities, the communities would be left without infrastructure. When the local government was not performing, the NT looked at whether the district could perform. Instead of taking the money out of the district, it was better to move the funding to the district so that the community could benefit from the infrastructure.

Mr Edgar Sishi, Acting Head of the Budget Office, NT, said that the budget had not included a recommendation for the shifting of funds from NSFAS to the vaccine. The vaccine had been funded by temporarily raising the spending ceiling. One component of that was proposed to be immediately allocated to the Department of Health. Another part would be funded through the contingency reserve. He directed Members to chapter one of the budget review, which outlines how the vaccine was funded.

The challenge with pensions was an administrative one. The Government Employees Pension Fund (GEPF) and the Government Pensions Administration Agency (GPAA) had indicated before to Parliament that they were committed to reduce the turnaround time for pay-outs to an average of 30 days. Parliament could always call back the GPAA to get an update.

With respect to the infrastructure fund, as the budget review indicates, the idea behind it was that it would provides a viability gap facility, where the government was obligated to seek the support of the private sector in the context of public private partnerships (PPPs where there was a viability gap, and the infrastructure fund would fill that gap. That was the principle around which it worked. It was part of a broader ecosystem that was meant to mobilise financing in both the private and public sector.

Regarding the public sector wage bill, the NT had identified in the budget review, as well as in its presentation to Parliament, that the public sector wage bill was a risk to the fiscal framework. The NT had first indicated in the 2019 National Treasury Budget Speech (NTBS) that the Public Sector Coordinated Wage Agreement was unaffordable. This had become even more unaffordable when tax revenues began to collapse because of the Covid-19 pandemic.

The NT had been pursuing an affordable outcome for the wage bill for a long time now. This was something that had been on the table, including in previous budgets. The 2020 budget reflected a reduction in compensation of employee (COE) baselines -- the June special assignment budget reflected the same and the 2020 Medium Term Budget Policy Statement 2020 (MTBS) also reflected the same. The baselines for COE had been there for some time.

The journey to achieve savings on COE had been ongoing. The NT had applied last year to the Public Service Co-ordinating Bargaining Council (PSCBC) to withdraw from the last lag of the previous wage agreement due to unaffordability. Unions had disputed this and some had initiated a court case which the NT won. The labour court ruled in favour of the government and it discovered that in terms of the public sector regulation, the NT had a mandate to certify whether a wage agreement was affordable according to regulation 79 of the public sector regulations. Trade unions had appealed to the constitutional court and the NT was waiting for its judgment. Trade unions had also made new wage demands.

The way that the NT approached the fiscal framework was by growing the economy, which was something that was reflected in the budget by moving funding to infrastructure. If the NT was forced to increase wages to an unaffordable level in line with the demands that were on the table and if the government was unable to resist, the first thing that would happen was that funds would have to be sourced from somewhere to pay these wages, and the first place they had to come from was the infrastructure additions that the NT had made. Having increased wages to above where they were now, which was very high, the NT would pay about R640 billion in wages this year, having collected only R1.2 trillion in taxes which meant that half of the government’s tax revenue was already going to paying wages. Therefore, the NT was fighting to control the wage bill. The NT was committed to the process of achieving control over the wage bill. So far, it had been successful and there was a need to ensure that growth in the wage bill was controlled.

A Treasury official referred to the question of what happened to public housing beneficiaries once reconstruction and development programme (RDP) houses were completed, and said the problem was not a funding one, but an administrative one. In the normal project planning process, the province and the municipality must attach a beneficiary to each of the subsidy houses that were being built. Sometimes that did not happen, resulting in a mismatch between where the houses were being built and when the beneficiaries were called, as to whether they were getting the houses. This was part of a broader process in the administration that was not working as well as it should.

Regarding the question on informal settlements upgrading, the biggest reform that was required was city-wide informal settlement planning, instead of doing it on a piecemeal basis. When the municipalities were responsive, this would limit land invasions. Where informal settlements were well located and where they did not pose a hazard to these communities because a lot of them were built on servitudes, in situ upgrading was recommended. The power of having a separate grant was to encourage in situ upgrading that was provided for in the broader framework for informal settlement upgrading.

The approach to informal settlement upgrading by the municipalities and the provinces had always been through greenfield developments. Informal settlements were a function of the state and the market failure to adequately respond to where housing was demanded. One of the tools that in situ upgrading provided was an understanding with the communities of what they needed, how they needed it and when they needed it. This went beyond the hard infrastructure around secure tenure and around water and sanitation, but dealt with the social component where there was an understanding with the communities of the social services that were required on top of the hard services that came with informal settlement upgrading. An important component within the programme also was that not all households living in informal settlements qualified for the fully subsidised RDP house. In situ upgrading provided services for all members of these communities. It allowed for some of the other subsidies that the NT had, like the consolidation subsidy. It provided for the building of houses for some people who qualified for it and it also provided for some alternative options around rental houses and high-density houses that allowed for the creation of more sustainable settlements that had mixed uses and provided not only the houses, but also opportunities. It also included social services such as clinics and early childhood development (ECD) educational facilities.

National Treasury said it worked closely with CoGTA to establish whether the implementation of projects should be done by a local or a district entity. Given the monitoring system that the NT had put in place to oversee the implementation of the Division of Revenue Act, there was information available to make that determination. The NT had published the second quarter financial results, as well as the conditional grant performance, on 3 March. Parliamentary officers had been asked to share the conditional grant performance report with the Committee. The process was tightly monitored monthly, but when it came to the overall capacity of the district, COCTA would be in a slightly better position to know the exact capability on the infrastructure side as to whether a municipality would be able to implement the grants.

The NT would like to be more involved in the appointment of chief financial officers, but there were constraints currently because councils were the ones which made the appointments. Going forward, when it came to the finances of municipalities, the NT would like to play a bigger role. It had issued a competency regulation to facilitate the process of employing competent personnel, but the implementation of that had been derailed by insistence that the regulation be shifted over time. After ten years of implementation, the NT was not yet in a position where all personnel were fully equipped. However, the NT’s support programmes would also kick in, as it had the responsibility to provide hands-on training. Ultimately, if the NT was to be more involved in the appointment of CFOs, there would be a need for some legislative changes.

Mr Maruma, of National Treasury, said he would respond on the transversal contracts for ARVs and the Anti-retroviral Therapy (ART) treatments. In terms of the ART treatment, the NT had been made aware as early as August by provinces that they were experiencing a drop in the number of patients that were remaining on treatment. In the early days of the Covid-19 pandemic, there were a lot of debates about how the virus would affect chronic patients. The virus was expected to be severe to those that were affected by HIV and AIDS. This had resulted in a lot of patients on ARV treatment to be reluctant to visit facilities to get their treatments in the fear that they would contract the Corona virus. This had resulted in a massive decline in health facility visits. There were also issues with distribution and delays in the procurement of condoms, because of the pandemic. Most provinces indicated that the distribution of condoms to places like schools, taverns and other public spaces was also impacted during those higher levels of lockdown. The rate for HIV tests was also impacted in all the provinces, which resulted in provinces not being able to enrol a new ART treatment. These were the challenges that provinces were facing in sustaining the programme.

On the issue of ARVs being put on transversal contracts, there was a current transversal contract -- RT 71 of 2019 -- that was running until June 2022 for ART treatment. The NT negotiated prices with suppliers regarding PPE such as sanitisers and masks.

Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, responded to the question on the effects of political challenges on NT processes. These issues had been elevated to the Presidential Coordinating Committee, and would be discussed there.

Regarding economic development being stifled due to constraints emanating from local government, such as difficulties in obtaining licences, there was an NT programme that was dedicated to working with municipalities to ensure the ease of doing business. There had been efforts through this programme to identify these gaps in local government and deal with them.

On the Presidential employment initiative, in the Minister’s budget speech on 24 February, he had indicated that R11 billion would be made available to that the programme could continue from 2021 up to 2022. The NT was working together with the Presidency to extend that programme, based on that allocation. The NT would report to the Committee in that regard as well.

On the question of the performance of the NDP and sustainable development goals (SDGs), the presidency was responsible for monitoring progress on those indicators.

Regarding the local government equitable share and the proportion that was directed towards free basic services, at least 95% of the local government’s equitable share was based on the number of poor households that do not have access to basic services. Spending patterns showed that much more money was allocated through the local government equitable share towards free basic services than what municipalities spend for free basic services. This was a concern that required attention, because the local government equitable share was a general revenue source for municipalities, and how they spend it was determined by their priorities. Currently, there was a lot of local government equitable share that was being used for the funding of salaries.

Further discussion

Ms Peters asked what had happened with the NSFAS R9 billion. She wanted to know how this money had been used. She said that when money was returned to the Treasury, it was supposed to be part of the bigger pool that was redistributed. She asked about the wage bill and if it was not possible for the mandating committee of Cabinet, the Department of Public Service and Administration and the NT to wait for the next round of negotiations. She said it was important for the NT to consider reviewing the organisational design of departments, because the wage bill was not only going to be resolved through the negotiations, but there was need for conscious decisions to be made daily.

She said that departments might not fill the vacant posts so that they could save money. There was a way of dealing with the wage bill without having to go back on something that had already been negotiated. The organisational structure of SOEs and parastatals should be dealt with as a complete package so that there were no chief executive officers (CEOs) that earned obscene salaries.

She asked the NT whether it would ever be possible to halve or eradicate poverty. When the Department of Human Settlements was created, the Committee had been informed that modern human settlements were going to be developed. People were not supposed to be living far away from places of employment and recreation so that the poor did not subsidise their own transport. In most cases, the poor worked to pay for transport and they did not have money to live. She asked how modern settlements would be created if there was continuous investment in upgrading informal settlements.

Mr Qayiso asked about the extent to which the national budget was sensitive to gender based violence (GBV), and how the problems associated with GBV were included in Division of Revenue Act (DORA).

He wondered why the issue of restructuring the salaries of CEOs at state-owned enterprises (SOEs) and parastatals was not being considered. He asked on whether a reserve was being created from vacant funded posts. He referred to fiscal dumping, and said the patterns showed that towards the end of the year there was fiscal dumping from the national sphere of government, which created a picture that local municipalities were not spending enough, resulting in penalties.

NT’s response

Mr Sishi said that for several years the NT had been working with the Department of Public Service and Administration on the issue of vacancies in the public sector. There was a framework that was in place around vacant posts which mandated the filling of posts within a specified time, otherwise the post became unfunded or abolished. The NT had started publishing the Compensation Annexure, Annexure B, which provided a detailed breakdown on where the NT was on compensation issues, and the 2020 MTBS also included that information. The NT was doing all the things that the Members had mentioned, and in some cases, they had been done already.

The analysis that the NT had made indicated that the main challenge that was being faced was that of the unit cost of compensation -- that is, wage settlements that increase the unit costs in the public sector were higher than affordable. As indicated in chapter 3 of the current budget review, South Africa was in a position where it had the highest public sector wage bill in the world as a percentage of its economy. The salaries of employees and managers in SOEs were not part of the public sector calculation in the budget and therefore were not funded directly through the budget, but they were part of the assessment which the Department of Public Service and Administration was doing as part of the project on the government’s approach to public sector remuneration.

The details on NSFAS could be dealt with in the discussion regarding appropriations. He said the Committee could be served quite well when the NT had the opportunity to provide those details.

Ms Ngqaleni said one of the issues the NDP aimed at addressing was the failure of government programmes, especially the problems with informal settlements to address the challenges that were left by the spatial form of apartheid. Even now, it was difficult to consider cities and new towns that would be viable, because that would also require a lot of investment. Municipalities were now promoting infill developments close to areas that had economic opportunities because if development continued in areas outside the urban edge, this perpetuated exclusion. The solution lay in densification and promoting social integration. If spatial and social integration were not promoted in the way cities were being built, inclusive development would not be achievable. That was why the NT was working hard with the cities and with the private sector.

Regarding NSFAS, at the moment there was nothing that she could say, because the Cabinet was still engaging with the issue. When the NT dealt with appropriations, it would then answer questions regarding NSFAS more adequately.

A Treasury official said the Free State was the only province that had done a project where they had analysed how their budget was responsive to GBV. The first project had been completed, and it had emerged that gender did not reflect in the budget. However, what had been currently happening was that the NT was working in conjunction with the Department of Women, as well as the Department of Performance Monitoring and Evaluation (DPME), to implement a gender-based budgeting framework that had been developed by the Department of Women. It was still a new approach that was under construction and was being led by the Department of Women, assisted by the DPME, because they came from the performance side.

Ms Ngqaleni said that the broader national programmes regarding gender-based budgeting would also be covered in the presentation on appropriations.

Fiscal dumping had to do with how the conditional grants were managed, so the NT was monitoring how local governments were spending the grants. If the local governments were spending less than 40%, stopping and reallocating grants became important because there was a need to prevent fiscal dumping. Sometimes the money would be used for projects other than infrastructure. There was an outcry that the NT took away money where it was needed, because where there was lack of capacity, that was where the money was most needed. The other challenge happened in housing programmes, and the NT was dealing with that because sometimes transfers were not sufficiently planned. There was a need for proper planning within local government so that the transfers could be done in an orderly manner. There was a lot of money that was spent by local governments but was not linked to service delivery, which was a challenge.

The Chairperson said he appreciated the responses that the NT team had presented, and acknowledged the complexity of the space in which the NT was working. The Committee was seeking an improvement in the areas raised by Members.

Adoption of minutes

Previous committee meeting minutes were adopted.

The meeting was adjourned.


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