Committee Report on 2021 Fiscal Framework and Revenue Proposals

NCOP Finance

09 March 2021
Chairperson: Mr J Maswanganyi (ANC) and Co-chairperson: Mr Y Carrim (ANC; KZN)
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Meeting Summary

Video: Joint Meeting: SC on Finance and S C on Finance, [NA] [NCOP]

ATC210309: Report of the Select Committee on Finance on the 2021 Fiscal Framework and Revenue Proposals, dated 09 March 2021

Fiscal Framework 
Revenue Proposals  
Tabled Committee Reports

In this virtual meeting, the two finance committees met jointly to discuss the 2021 Fiscal Framework and Revenue Proposals.

The meeting’s focus was directed to the recommendations aspect of the report. Topics raised were: GDP, projections and risk management, implementation of reforms for economic growth, debt management, waste negotiations, public procurement bill and pension fund act, addressing corruption and wastage and covid-19 vaccinations.

The most contested item was zero-based budgeting. The DA proposed an amendment to paragraph 6.2.5 or addition of 6.2.6 to include zero-based budgeting. Members contributed a spectrum of positions based on both speculation and fact. Overall, members agreed that the Minister had mentioned this matter twice in public speeches that government would pursue the zero-based budgeting approach. The primary discrepancies between members was whether zero-based budgeting was a matter of government policy or not. It was eventually agreed that National treasury should brief the joint committee as soon as possible to give a full briefing of their position on zero-based budgeting. This would then allow the joint committee to take a stance on the methodology.

Both committees considered the reports separately. The reports were adopted by the majority in both committees despite the objections of the EFF and FF+ in both instances.

Meeting report

Welcoming and Attendance
Chairperson Maswanganyi welcomed members of the Standing and Select Committee, officials and guests in attendance.

The Secretariat provided apologies – it was only Mr N Kwankwa (UDM) from the Standing Committee and Ms D Mahlangu (ANC, Mpumalanga) from the Select Committee who had submitted apologies for the meeting.

Chairperson Carrim was invited to give remarks.

Chairperson Carrim said the committees needed to use their oversight role far more effectively than before. They needed to be focusing more on recommendations. It was their constitutional and legislative responsibility to encourage public participation. There were two issues here. The first was that all submissions needed to be put on the website so that it was recorded. They also needed a wider range of demographic participation and this discussion could continue offline. If this was something the majority agreed on, he suggested this should be made the norm.

Chairperson Maswanganyi thanked Chairperson Carrim for his contribution and took the time to thank the research team and secretariat for their work. They were able to compile the reports in the shortest space of time, which was not easy. Their work often went unnoticed, but they were not unnoticed. Both committees acknowledged their work and thanked them.

Both Committee had compiled reports on the 2021 Fiscal Framework and Revenue Proposal but they would be adopted separately.

Report on 2021 Fiscal Framework and Revenue Proposals

Chairperson Maswanganyi led the committees to consider the report and went straight to sub-heading number six: the committee’s observations and recommendations. 

GDP Projections and Risk Management
On paragraph 6.1.2, which dealt with Gross Domestic Product (GDP) predictions and risk management, Dr D George (DA) added a comment. He said It was obvious that the GDP growth-projections had not been accurate for ‘a long time’. He suggested that National Treasury (NT) should improve on the accuracy of its GDP forecasting.  Though he understood the task was very difficult, it was also possible to get closer to accuracy.

Implementation of Reforms for Economic Growth
On paragraph  6.1.4, which dealt with implementation of reforms, Mr S Moletsane (EFF, Free State) commented that reindustrialisation and delocalisation were discussed in the context of helping economic growth.  He hoped that the country would see this happening ‘very soon’ to support the economy. The clause should not have been written unless it would truly be implemented and assist South Africans.

Debt Management
On paragraph 6.2.3, which dealt with Debt Management, Dr George pointed out that much was discussed around what NT needed to do, but since it was a government department, it could not actually do anything if irresponsible political decisions were taken. This might be a matter for political debate, but this was a critical point. If government made decisions (like funding State-Owned Enterprises etc.), there was very little the NT could do about that – other than make a plan based on what it already had. It was thus important that it was the government making the policy and often NT’s hands ‘were tied’ by that policy.

Waste Negotiations
On paragraph 6.2.4, Chairperson Maswanganyi said that the Committees had raised the matter in 2020 and so they would make a follow-up on the progress of the negotiations between government and the trade unions. The sooner there was progress, the better.

Zero-based Budgeting
Mr D Ryder (DA, Gauteng) proposed an amendment to 6.2.5 or addition of 6.2.6. The Minister had spoken specifically about zero-based budgeting again in his speech. It was raised briefly in their discussions as a committee, but there was nothing underpinning it in the report. With this in, he suggested they bring in a paragraph under fiscal policy issues (6.2.5) about the zero-based budgeting, so that it would remain on the table and something government would follow-through. He felt they needed to acknowledge this in the report.

Chairperson Maswanganyi sought clarity whether Mr Ryder wanted NT to move towards zero-based budgeting, or if he was just noting the Minister’s comments. He wanted to be clear on the proposed recommendation.

Mr Ryder clarified that he meant that the committees needed to mention the Minister’s indication of government continuing in the direction of zero-based budgeting. This remained a government strategy – though it was a fiscal policy issue, it was not being noted anywhere else.

Chairperson Maswanganyi said that committees could also deal with this once there was certainty that Treasury wanted to take the route of zero-based budgeting rather than simply noting comments by the Minister. He felt they should deal with policy rather than comments by the Minister, who was entitled to make comments as the political head of the Department. The Minister would be held accountable on decisions, policy and legislations in place and he felt they should approach it in that manner. Though he understood where Mr Ryder was coming from, he also said that there should be clear policy guideline whereby NT would indicate government was taking the zero-budget approach and could be held accountable for such. The joint committee had had a long discussion on zero-based budgeting in 2020, though this was put aside and introductions to the zero-based budgeting system were muted. He did however understand what Mr Ryder was saying.

Mr F Shivambu (EFF) rejected the DA proposals of the inclusion of zero-based budgeting into the report. The EFF would be rejecting the entire report on the basis of austerity. Zero-based budgeting was the extreme levels of implementing austerity measures, or ‘so-called’ fiscal consolidation. There were plenty of scientific illustrations, even among the submissions for example by the Budget Justice Coalition. He asserted that austerity was not a mechanism to reduce the debt to GDP ratio. The budget before them was based on the ‘nonsensical’ approach to budgeting which would only serve to shrink the economy. If EFF members were not present when the decision was taken on adopting the report, it needed to be noted that the EFF fundamentally rejected the budget and the revised framework discussed.

Dr George supported the position put forward by Mr Ryder. When the Minister spoke about moving towards a zero-based budget, the reason was so that government could be enabled to look at what it was spending money on (its expenditure) and decide if it wanted to spend on ‘that’ or not. The guiding principle of this approach would therefore give an opportunity to re-assess where expenditure was going. It was certainly mentioned by the Minister and discussed between members, and either was or should be the government policy. He felt that they did need to have some kind of point in the report about the fact that they needed to move towards zero-based budgeting. It was clear from the report that ‘more of the same’ would put the country into a place they did not want to go i.e. a debt crisis. ‘More of the same’ would not ultimately solve the problem.

Chairperson Maswanganyi continued to probe the matter. He asked Dr George if it was a current policy, that government wanted to go the route of zero-based budgeting. Alternatively, was this something raised by the Minister? As Parliament, they held government accountable on its policies, legislations and its decisions. They did not make policies for the executive. Rather, it was the executive’s decision to make policies and bring legislations to parliament, take decisions on certain things – this was how they were held accountable. If the committee were to make a policy decision for government, would they not be crossing the line in terms of separation of powers?

Dr George said he understood the Chairperson in the sense that if this was not a matter of government policy, this is not something they would pursue, but then members of the joint committee needed to be clear. The Minister spoke about zero-based budgeting. His understanding was thus that zero-based budgeting was the policy or intention. If the Minister was giving comment, without it being policy of the government then obviously they were speaking across purposes, but this needed to be clear. The Minister of Finance spoke on behalf of the South African government. If there was any confusion, this is where it was coming from. If the Finance Minister’s comments were not aligned with the government (in this case, on zero-based budgeting) then was the Minister at odds with the government? This scenario was ultimately more complicated and troubling.

Mr W Wessels (FF+) agreed that zero-based budgeting should be included in the report. He said that zero-based budgeting was not austerity. The Minister first announced that government would move in that direction in June 2020. The frequency of the Minister mentioning the zero-based budgeting approach (which was mentioned in three budget speeches) should be an indication that it was policy that government was moving toward. Because a budget speech gave policy direction, he did not think it was wrong to include this or note the mentioning of zero-based budgeting such that the implementation thereof be hastened.

Mr E Njandu (ANC, Western Cape) said that members were focusing on the Minister’s statement while tabling the budget. As such they could not take the statement as a principle point in implementation. He suggested they wait for NT to implement the process of the zero-based budget as a policy matter, so that Treasury could introduce it and they could take it from there.

Mr Ryder referred to the Minister’s speech in which he said that the Department of Public Enterprises would be piloting the zero-based budgeting methodology. He said that if they were to pretend this was not a policy issue, then the report was futile. There was a clear indication in the speech that zero-based budgeting would be a fiscal policy going forward and that two departments would be piloting the approach going forward – this made it policy. The committee thus needed to make some comment on the zero-based approach instead of pretending for the sake of internal politics (e.g unity issues). There was an absolute necessity to realign their spending to projects and efforts which had the nation’s benefit at heart, considering the fact that their resources were substantially diminished with substantially large calls on the resources by the Department of Health.

Mr G Skosana (ANC) concluded that they were all in agreement that the Minister spoke about the necessity of applying zero-based budgeting at least on two occasions. However, the joint committee was unclear whether this was already a government policy or not. Since they did not have the clarity they needed, his view was that they should not include the zero-based budgeting issue in the report until they were clear that this issue was indeed a government policy. The Chairperson had recalled two instances where the Minister had spoken about zero-based budgeting but was not sure if it was policy. As such, some members were speculating in their responses. There was no definite clarity.

Mr E Buthelezi (IFP) agreed that the zero-based budgeting paragraph should be put in the report. He was of the view that it was not speculation but fact – NT was finalising the framework to implement zero-based budget. This was an indication the approach existed and it was just a matter of being finalised and implementing. Since it was not something that NT was ‘still considering’, he felt it should be included in the report and that it would be wrong for the joint committee to leave it out.

Mr G Hill-Lewis (DA) pointed out that on the Treasury website, they had already completed 16 spending reviews. These were posted live to the website, and he had read a number of them. The purpose of the spending reviews (done on each government programme) was to gather data for implementing zero-based budgeting. The fact of the matter was that irrespective of their debate, the process of implementing zero-based budgeting had already begun. He thus agreed with Mr Buthelezi and other members who had said that the zero-based budgeting clause should be included in the report.

Chairperson Carrim said he would go by the majority views. He said that perhaps the staff could recall a previous discussion where they agreed they should seek to bring quarterly reports through the National Assembly (NA) to the joint committee, but perhaps they had struggled to fit it in. With a report, a briefing was supposed to take place – in this case it would be an opportunity to explain zero-based budgeting for those who did not know. At the time, however, he said that there was no grievance within the ANC ranks about zero-based budgeting. As such, he was unconvinced it mattered or not whether zero-based budgeting was an official policy because it had been raised before. He suggested they could include a written amendment to the effect that the committee urged NT to present its position on zero-based budgeting so that the committee could take its own policy on it. This kind of briefing would not necessarily mean that they agree with the zero-budgeting methodology, but it was an opportunity to be informed which was important because some members were in favour of the approach and others not.  Zero-based budgeting was a complicated practise and could be applied differently in different contexts. He went on to say it would be picked up in the media or within parties that there were senior members who were opposed to zero-based budgetingMoving forward, he suggested the joint committee request a briefing on zero-based budgeting and then members could take a position on it.

Chairperson Maswanganyi asked if they could move in the direction Mr Carrim had put forward. In the next meeting, the Minister should come and brief the committee about the zero-based budgeting framework so that they had clarity whether this was a policy position, a pilot or an agreement of government or cabinet. They would accommodate the matter while getting an understanding at a full briefing by the Minister.

This motion was supported by Mr Njandu.

Mr Wessels affirmed that it was a resolution by the committee in July 2020 that was also referred to in the Budget Review 2021 (page 112) and was responded to by NT. The resolution was that the committee required the NT to brief it on ‘why zero-based budgeting is being proposed, how will it be implemented and what its implications are’. NT responded that they would brief the committee at its earliest convenience. They also referred to the 30 spending reviews that took place/were being conducted to evaluate zero-based budgeting. He thus cautioned that the committee would be repeating itself if they went to ask for a briefing that was already due to happen as per the resolution. If the committee did request the briefing, however, they should ensure that it would truly get the briefing.

Chairperson Maswanganyi thanked Mr Wessels for the reminder and said they would continue to work through the Secretary to get NT to brief the committee to give a full briefing of their position on zero-based budgeting. The decision of the committee for NT to come back to them as soon as possible was reinstated.

Public Procurement Bill and Pension Fund Act
On paragraph 6.4.2, Mr George said he was unclear of what the point meant and asked for clarity.

Chairperson Carrim responded that this simply referred to the fact that the process had begun and was gazetted, though at committee-level they had not yet discussed it. Following the gazetting, it would need to be put into practise (into effect). It also needed to be done efficiently, which meant not just speed but accuracy. Pension fund leaders would need to co-operate and at the same time those who were affected needed to feel that those managing their pensions were not doing so recklessly. They needed to ensure that the implementation of this point incorporated interest groups, otherwise they could have a backlash. Since Mr George himself had been one of the members pushing for the matters addressed in 6.4.2 – if he could find better wording for this point, so be it.

Mr George said that the interpretation provided by Mr Carrim was sufficient. He agreed that things were in progress and needed to move efficiently.

Addressing Corruption and Wastage
On paragraph 6.4.4, which dealt with consequences and implications of corruption and fruitless expenditure, Mr Ryder said that while he agreed that the paragraph needed to be included, he felt it was trying to deflect NT’s role in tackling corruption and waste of public resources. The trust deficit government had built up made doing business so much more expensive. NT thus had a large and specific interest in corruption and wastage investigations. This was foregrounded by ‘many businesses’ that refused to do business with the government because of the associated complications and expectations of ‘jumping through hoops’ because of endemic corruption. There were limited people willing to tender for business or transact with government, which pushed ‘the cost of everything’ up. It was thus a case of supply and demand – were suppliers willing to meet government’s demands? Those that were willing to do so thus had the ability to increase their prices, but they also needed to factor in their costing that government would not pay them within 30 days but would take 180 or more days to make payment. This financing cost was also factored into the costings. There was also a factor of whether they might need to pay a bribe, which they might factor 15% - 20% of their cost for this. All of this inflates cost of doing business with the government, which pushes up the cost of how much government is charged. While recognising that this was not the responsibility of NT alone, Mr Ryder proposed the committee added something to the effect of NT having a strong and urgent need to deal with the issue of inflating costs.

COVID-19 Vaccinations
On paragraph 6.4.6 the Chairperson asked a side question of when they would be getting vaccinated as members of Parliament.

Mr Ryder said that he would wait his turn and be vaccinated once those who needed to vaccine could get it.

Paragraph 6.4.7 had been expunged from the report as it was an internal matter.

Chairperson Carrim agreed that he was fine with this. There was a note to bind the committee and the Public Benefit Organisation, but he was okay this be expunged.

Standing Committee on Finance – Consideration of Report
Chairperson Maswanganyi confirmed with staff that they met quorum as the Standing Committee. He asked if the Committee adopted the report.

Mr Shivambu rejected the budget and report on behalf of the EFF as part of their official position.

Ms D Mabiletsa (ANC) moved to adopt and was seconded by Mr Skosana.

Mr Hill-Lewis said the DA was not objecting and agreed with the report.    

Mr Wessels said the FF+ rejected the report.  


Having considered the 2021Fiscal Framework and Revenue Proposals, the Standing Committee on Finance agrees to the 2021Fiscal Framework and Revenue Proposals as presented, with the recommendations.

The report was adopted with amendments.

Before handing over to Co-Chairperson Carrim, Chairperson Maswanganyi announced that the following day’s meeting would not take place. The team briefing the committee was not ready.

Select Committee on Finance – Consideration of Report
Chairperson Carrim opened the floor to the Select Committee Members.

 Mr Zolani Mkhiva (ANC, Eastern Cape) moved to adopt the report, seconded by Ms E Nkosi (ANC).

Mr Ryder spoke on behalf of the DA and said that although the report was thin in places, it was comprehensive. There were minor changes they wanted to see which would not change the essence of the report. As such they did not object and supported the report.

Mr M Molestsane (ANC, FS) confirmed that the EFF rejected the report.

Mr F Du Toit (FF+, NW) spoke on behalf of the FF+ to object to the report.  

Chairperson Carrim announced that Mr Njandu would chair their meeting the following day, which was shifted to 3pm because the house was voting at 10am on the report discussed in that meeting.  

Both committees would sit to adopt the strategic plan in the following week or in the week of 23 March. They would start with a common strategic plan, followed by splitting appropriations and fiscal framework issues.  

Mr du Toit said they had not received any communication from the Section 100 ad-hoc committee on the oversight visit taking place from 14 March. This was despite the fact they had said it should take place during members’ constituency period. Members would appreciate enlightenment on this.

Chairperson Carrim said he could not attend the last study group. As far as he knew, Mr du Toit had attended more meetings than himself and he did not have any more knowledge and asked the co-chair of the Section 100 Committee for assistance. They would communicate following the meeting. The oversight was happening in the following week from the Friday until the Sunday.

The meeting was adjourned.


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