Impact of budget shortfall on Stats SA; Committee Annual Report; with Deputy Minister

Public Service and Administration, Performance Monitoring and Evaluation

17 March 2021
Chairperson: Acting: Ms R Lesoma (ANC)
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Meeting Summary

Video: Portfolio Committee on Public Service and Administration, 17 March 2021

In a virtual meeting, the Committee received a briefing from StatsSA on the impact of the budget shortfall on the compensation of employees and critical statistics. The Statistics Council and Statistician-General also fed into this brief.  The Committee was also briefed by National Treasury (NT) on the current and future budget intervention to address historic budget shortfalls impacting on the efficacy of StatsSA to render its services effectively

The Deputy Minister said StatsSA had experienced budget cuts that affected its compensation of employees, goods and services, statistical operations, provincial coordination, and other programmes. StatsSA had written to the late Minister in the Presidency and the Minister of Finance requesting a review of its budget via National Treasury (NT).  Key in the address by the Deputy Minister were the additional allocations for compensation of employees (CoE) received by StatsSA, after due meetings between the Minister and StatsSA, the challenges of COVID-19 which made StatsSA unable to spend the funds in filling vacant posts, information on how StatsSA had been able to navigate given its budget cuts, its accountability status, and the new structure approved in March 2020 and implemented in April 2020.

Members asked StatsSA to state the strategies it has put in place to ensure that provincial and district offices achieved the standards of government on space planning norms and standards for office accommodation for state organs; for StatsSA to confirm if it was in charge of recruitments in provincial and district offices; if StatsSA would consider building rather than renting offices in collaboration with the Department of Public Works and Infrastructure (DPWI) and to confirm if the reason for the death of field workers who travelled was attributed to the vastness of the sample sizes or the need to travel between many multiple municipalities.

StatsSA provided information on the historical reductions, the 2020/21 budget reductions, the impact of budget reductions, challenges that had affected StatsSA, and how budget cuts had affected and negatively impacted the economic, population, and social statistics statistical infrastructure. StatsSA informed the Committee that budget cuts had impacted negatively on the work of StatsSA both on the CoE and discontinuing of certain critical surveys. The brief also focused on the dangers of underfunding StatsSA as it led to data unreliability and poor data quality, and the loss of experts to global institutions as StatsSA was rated globally.

The Committee heard from the Chair of the Statistics Council said that ‘the dialogue should not centre on how to cut costs on office accommodation or vehicles but should be centred on how StatsSA could be empowered to carry out its core mandates This would enable StatsSA to maintain a sustainable agency that generates quality data and produces reports that can be defended when global investors come to ask for data and reports’.

The Committee was briefed by National Treasury on, among other things, the role of Parliament in the budget process, a brief background on NT’s current and future budget interventions to address StatsSA’s historic budget shortfall, the funding model review recommendations and the spending review recommendations of NT. Highlights of the brief by NT included the necessity of budget cuts, the role of Parliament in the budget process, a brief background on NT’s current and future budget interventions to address StatsSA’s historic budget shortfall, the funding model review recommendations and the spending review recommendations of NT. Two important questions by Members were to confirm if the outsourcing of field workers would lead to a reduction in timelines of reports and to further state if outsourcing of field workers would not lead to errors in reports.

The Committee cautioned National Treasury for advising StatsSA to outsource its core business function such as fieldwork and advised StatsSA to consider other recommendations such as reducing the number of district offices and vehicles. The Committee instructed StatsSA not to outsource its core business functions. The Committee agreed that government and the private sector used the information obtained by StatsSA for nation-building and development. The Committee also informed the delegation that it would call for additional funding for StatsSA and further engage with the Standing Committee on Appropriations because statistics produced by StatsSA was a baseline that served as a basis for informing evidence-based planning.

Meeting report

The Acting Chairperson welcomed Members and read out apologies from Mr S Malatsi (DA), Ms R Komane (EFF), and Inkosi R Cebekhulu (IFP). She asked the Committee Secretary to state other apologies.

The Committee Secretary said that apologies were received from the Minister, the Deputy Minister and the DG of National Treasury.

Ms M Ntuli (ANC) observed that the Minister was always missing these meetings and asked what could be done to ensure that the situation was changed.

The Acting Chairperson observed that Members had noted that the Acting Minister could not attend these meetings because he was involved in meetings with other departments. She said that in the future the Minister would be informed ahead of the Portfolio Committee meetings to ensure that the Minster could attend meetings with this and other Committees. 

She remarked that this meeting was convened to address the impact of budget cuts on StatsSA. She said since 2016, StatsSA had experienced budget cuts that affected its compensation of employees, goods and services, its statistical operations provincial coordination, and other programmes. StatsSA had written to the late Minister in the Presidency and the Minister of Finance requesting a review of its budget via National Treasury (NT). However the review is on-going hence this Committee invited the NT and StatsSA to understand the reasons for the budget cuts. She invited the Deputy Minister in the Presidency, Ms Thembi Siweya, to brief the Committee on the rationale of the budget cuts by NT.

Deputy Minister Remarks

Deputy Minister Siweya said the apologies from the Acting Minister [in the Presidency] were due to meetings with the Portfolio Committee on Small Business Development which clashed with those of this meeting and made it impossible to attend both meetings. She said that after due meetings between the Minister and Statistician-General, StatsSA received additional allocations from NT on compensation of employees (CoE) but was unable to spend the funds because of COVID-19 that led to the suspension of activities in filling the vacant posts. She said the Statistician-General (SG), Mr Risenga Maluleke, would give more information on how StatsSA had been able to navigate given its budget cuts, accountability, and the new structure approved in March 2020 and implemented in April 2020. She invited the SG Maluleke to continue with the presentation.

StatsSA Budget Cuts and Impact

SG Maluleke said the brief would include information on the historical reductions, the 2020/21 budget reductions, the MTEF 2021 budget reductions, and the impact of budget reductions. He said StatsSA had been affected by two phases of challenges. Phase one was due to health risks due to COVID-19 and Phase two involved risks due to gender-based violence, unemployment, poverty and inequality, collateral illnesses, and economic consequences. Since national statistical systems are the backbone of an informed and robust policy response in a crisis, StatsSA needs advice on how and when to intervene to mitigate the short and medium-term impacts. StatsSA had decided not to fill posts but focused on getting data on the poverty survey, however StatsSA has faced historical CoE budget reductions due to unauthorised expenditure in 2017/18, 2018/19, and 2019/20 in the amounts of R57m, R49m, and R57m which totalled R157m. Hence further cuts on the CoE will plunge StatsSA into crisis as certain products will be stopped and some produced with poor quality. In 2020/21, funds for the income and expenditure survey was R150m, and funds for goods and services was R50m leading to a Special Budget Adjustment in June 2020 of about R200m. Also, another R120.6m reduction was done on the CoE during the Adjusted Estimates of the National Expenditure (AENE) in respect of the Cost of Living Adjustment (CoLA) and bonuses on NT funding. This was reflected in the Medium Term Expenditure Framework (MTEF) 2021 budget reductions guidelines of the NT. This has led StatsSA to abolish 198 posts with effect from 1 April 2020. Hence, unauthorised expenditure on the CoE over the MTEF period would continue if these cuts are implemented. Also, a CoE without the tools of the trade funded (under goods and services) will render employees incapable of performing their duties. Although COVID-19 has resulted in a reduction in the loss of employees moving to other employments, the major challenge that StatsSA has is that high expertise staff are lost. This means that some of the research data these employees had worked on would be at risk. Budget cuts have affected economic statistics leading to a loss of; periodic service delivery information and a loss of detail (industry, variables, geographic) on all economic surveys. The quality of sample sizes is compromised because they cannot be maintained or increased, monthly surveys cannot be reviewed and the entire economy cannot be appropriately measured. The impact is that there is less accurate information on the economy (economic growth measurements). It leads to non-compliance with international standards, a negative impact on monetary, fiscal sector, and micro-economic policy reports. It also affects the District Development Model, and the NDP reports, and reduces the international comparability of StatsSA reports. Budget cuts have also affected population and social statistics. StatsSA has had to suspend the domestic tourism survey; and the frequency, accuracy, and the detailed General Household Quarterly labour force survey has been lost. Also, mortality and causes of death reports are being delayed.

The impact of budget cuts on population and Social Statistics are less accurate mid-year population figures. It also affects the report on the Division of. Revenue Act (DoRA), social policy, NDP, SDG, reports on crime from the perspective of victim’s insights to employment and unemployment, and also the District Development Model. The suspension of the Domestic Tourism Survey has affected the tourism demand-side data such as the Consumer Price Index (CPI) report. Budget cuts have also affected statistical Infrastructure such as that StatSA cannot afford the contractual commitment of the unitary fee of Head Office accommodation, and provincial and district offices. Also, statistical frames such as Geographic information and Business register frames have not been maintained.

StatsSA has also cut-down on ICT infrastructure & services. The impact of budget cuts on statistical Infrastructure has led to over-expenditure on accommodation and some district offices have been closed. It has also compromised the quality of economic statistics, population, and social statistics. StatsSA has stopped Investing in technology for the future. Budget cuts would also lead to a loss of trust in official statistics and have resulted in fragmented and poorly fitted policy responses to economic shocks in the aftermath of the crisis, causing collateral damage to the economy and society.

Presently only 3 313 posts were approved by NT which translated into 601 vacant posts (18.1%) approved hence StatsSA needs additional funding for its CoE.  The vacancies would have been higher had StatsSA not implemented a new structure. To maintain minimum functionality 135 critical vacancies still need to be filled. Although StatsSA commenced with the filling of critical vacancies (based on R45 million funding received in the current financial year less than the R24.8 million that had to be returned during the AENE process). This under-expenditure was due to COVID-19 that delayed the commencement of the recruitment process. StatsSA needs additional funds to function in 2021/22, 2022/23, and 2023/24. The new structure was approved in March 2020 and the internal placements at Chief Director and Director Level have been concluded. The recruitment process for vacant DDG posts has not yet been concluded. The Committee should note that at the DDG level, almost all staff in these posts is acting. StatsSA continually engages with NT regarding funding to ensure that the production of statistics to inform policy programmes and decision making is not negatively affected. He informed the PC that citizens could not be adequately taken care of if the statistics required were not available. He invited the Chair of Statistics Council to address the PC.

Briefing by the Chair of the Statistics Council

The Chair of the Statistics Council, Prof David Everatt, said that the StatsSA SG had just given a summary of the fears of StatsSA if adequate funding was not received. He reminded the Committee that StatsSA had been having budget cuts since the 2015/16 financial year. He said StatsSA had been faced with a suspension of employment and reduction of the sample size which has led to its data becoming unreliable. He informed the Committee that if StatsSA remained unfunded, government at the national and provincial level would need to hire consultants at inflated costs. StatsSA finds it impossible to carry out surveys on poverty level with the funding available presently hence international investors might have to rely on consultants. For instance, the budget for the census survey is not adequate hence it is not advisable to run the census if the tools needed to analyse the survey data are not available. Vacancies are increasing and it is approaching 20%. The fear is that experts in critical posts are leaving and young graduates do not seek employment at StatsSA because StatsSA does not have the technical equipment needed to carry out its mandate.

The Acting Chairperson confirmed that the Committee agreed with StatsSA that the challenges had negative impacts on StatsSA’s productivity. She invited NT to brief the Committee.

Briefing by the National Treasury

Dr Mampho Modise, DDG: Public Finance, NT, said the brief by NT would include the role of Parliament in the budget process, a brief background on NT’s current and future budget interventions to address StatsSA’s historic budget shortfall, the funding model review recommendations and the spending review recommendations of NT.

Dr Modise said NT and other departments conduct budget bilateral meetings and the reports are sent to Cabinet.  Also, all budget reviews and budget cuts are approved by Cabinet. The Money Bills Amendment Procedure and Related Matters Amendment Act, 2018 requires that after the tabling of a national budget, Sections 8(3), 9(3), 10(7) are implemented. The budget is dealt with by the Standing Committees on Finance and Appropriations and individual committees dissect the budget and strategic plan for each national department and the Public Accounts Committee deals with post-facto issues raised by the Auditor- General. The SA budget collapsed because of COVID-19 but the question that needs to be answered is if SA wants to continually spend funds that it does not have. The budget has been presented but the specific situation is that NT has to present what SA can afford. Budget cuts are not limited to StatsSA alone as all departments have received budget cuts. She invited Ms Gillian Wilson to continue the brief with the permission of the Acting Chairperson.

Ms Gillian Wilson, Chief Director, NT said the budget of StatsSA was driven mainly by CoE and goods and services spending. StatsSA does not have a baseline budget; the funds’ allocation for 2021/22 is larger than that of 2022/23 and 2023/24 because of the funds allocated for the census survey. NT has implemented expenditure ceilings for StatsSA CoE. In 2017, there was an under expenditure in CoE in managing the public service wage bill.  NT responded to budget reductions by placing a moratorium on the filling of posts as they become vacant from October 2016 as a mitigation strategy to cut its present cuts. Budget adjustments in StatsSA from 2016 - 2021 MTEF showed no baseline hence NT introduced large budget cuts. Based on engagements between NT and StatsSA over the years, additional allocations have been made over time to StatsSA.  In the 2019 MTEF: R105.8 million was granted for the Census Survey in 2021/22. In 2020 MTEF: R154.4 million was granted for CoE and the filling of some critical positions. Funds allocated to StatsSA to run its poverty surveys were R150 million in 2020/21, R60 million in 2021/22, and R109 million in 2022/23. Also, additional allocations to activities relating to the Census 2021 were R855 million in 2020/21 and R2.2 billion in 2021/22. COVID-19 did not allow StatsSA to conduct some of its surveys which led to these activities being postponed. Although StatsSA still needs to fill some critical posts, it has been able to advertise senior positions in 2020/21, and NT has conducted a review of StatsSA’s expenditure. The funding model review suggested that StatsSA conducts a total of 58 surveys but can only accommodate 53 surveys within its existing budget baseline. The five surveys that are unfunded include the Living Conditions (LC), Income and Expenditure (IE), General Household (GH), Census and Large Community (LC) surveys. The funding model review recommendations are that StatsSA should not appoint more fieldworkers permanently but should outsource the fieldwork as it is more cost-effective, reduces expenditure on irregular surveys by spreading the fieldwork costs over two consecutive budgets, contains the cost for the LC and IE surveys at the equivalent of R121 million (in 2015 Rand value) spreads this over two financial years and conducts the poverty surveys every three years.

The Acting Chairperson interjected and requested that StatsSA state recommendations that affected 2022/23.

Dr Mampho Modise invited Ms Mokghatla Tenan to brief the Committee.

Ms Mokgatla Tema, Director: Public Finance, NT, said that NT decided to conduct a standing review to convert funds on funding practices that were cost drivers. The review was conducted by collaborating with the GTAC. The largest cost driver was CoE as mentioned by Ms Wilson. Expenditure is driven by population sizes as provinces with the lowest population size like the Northern Cape and the Free State show lower spending and a lower staff complement, while provinces with the largest population size like KwaZulu-Natal and Gauteng show higher spending and a larger staff complement. Generally, NT observed a high cost per employee in small provinces mainly due to the high number of posts between levels 12 and 13 in relation to posts in the lower levels. Office accommodation is the second significant expenditure and is mainly driven by the number of offices and the size of the staff complement in provinces. StatsSA does not follow the Government Gazette on space planning norms and standards for office accommodation used by organs of state states (the average area per full-time equivalent should not exceed 12 square metres). Also, StatsSA’s current ratio of a vehicle to a field worker ranges from 1:0.7 to1:1.6 per province for the Quality Labour Force Survey and General Household Survey. The cost of vehicle and fleet services could be halved if the ratio of 1:4 (i.e. four fieldworkers per vehicle).  NT has submitted a recommendation report to StatsSA to provide solutions to funding challenges in 2022/23 but StatsSA has not yet responded as yet.

Discussion

Ms M Kibi (ANC) welcomed the briefs by both StatsSA and NT. She asked StatsSA to state the strategies it has put in place to ensure that Provincial and District offices achieve the standards of government on space planning norms and standards for office accommodation for state organs. She asked StatsSA to confirm if it was in charge of recruitments in provincial and district offices. She asked NT to confirm if the outsourcing of field workers would lead to a reduction in timelines of reports and further state if outsourcing of field workers would not lead to errors in reports

Ms B Maluleke (ANC) asked if StatsSA would consider building rather than renting offices in collaboration with the Department of Public Works (DPW). She also asked StatsSA to confirm if it would agree with the recommendation of four fieldworkers per vehicle as recommended by NT.

Dr M Gondwe (DA) agreed that the survey reports produced by StatsSA were important as they allowed SA to plan for the future of its citizens. She asked StatsSA to state the number of its office accommodation that were located in urban areas and asked StatsSA to confirm if it had considered constructing office accommodations as opposed to renting. She asked StatsSA to state why it was not collaborating with the DPW as NT had alluded that such collaborations could be cost-saving. She also asked StatsSA to inform the Committee how it had acquired so many vehicles. She asked NT to explain how it was possible for StatsSA to incur over-expenditure on filling vacant posts despite the moratorium placed on filling vacant posts. She asked NT to justify its recommendation that StatsSA outsource field workers as this recommendation could negatively impact staff at the District office that was employed to conduct surveys. She also asked NT to clarify if it would be beneficial to outsource field officers as outsourcing field workers could compromise data generated from surveys.

Ms M Ntuli (ANC) observed that based on the briefs over-expenditure could continue to occur at StatsSA as long as it continued to fill vacant posts as budget cuts had ensured that CoE expenditures were not authorised. She asked StatsSA to confirm if the reason for the death of field workers who travelled was attributed to the vastness of the sample sizes or the need to travel between many municipalities. She advised StatsSA to strike a balance on renting or ownership of office accommodation. She observed that over-expenditure was a serious challenge and asked NT to recommend ways of bailing out StatsSA to ensure that the agency allocates its funds adequately.

Ms C Motsepe (EFF) asked NT to state the impact on the permanent staff at StatsSA District offices of the recommendation to outsource field workers. ‘Based on the knowledge that SA has zero-tolerance for outsourcing please state the ideas influencing outsourcing and the risks of outsourcing of core business deliverables’? ‘StatsSA please state why most of your core employees in the Provinces/District offices are in Levels 12 and 13’.

Dr L Schreiber (DA) observed that the budget cuts presented risks to the core mandates of StatsSA and what it wanted to achieve. He asked why better funding packages were procured to bail out South African Airways (SAA) while StatsSA was not receiving appropriate funding to carry out its core mandates even though its data inputs are needed to plan economic growth adequately. The Chair of Statistics Council Prof David Everett has said that after COVID-19 StatsSA might have challenges on the reliability of its data.

The Acting Chairperson remarked that the data obtained from StatsSA had consistently been used to plan the budget and SA’s development programmes. And this data is one of the tools used by the government to allocate funds for projects. She invited the Deputy Minister, StatsSA SG, and the Chair of the Statistics Council to respond to Members’ questions.

Deputy Minister Siweya said StatsSA would review the recommendations of NT on office accommodation and get back to the Committee. She said it was unfair to compare StatsSA and SAA as the comparison did not show that government prioritised the funding of StatsSA. She said she and her team had taken note of the recommendations of the Committee.

SG Maluleke said the funds released by NT for CoE were not enough to pay staff salaries so NT continually recorded over-expenditure on staff salaries because it was unauthorised. A mass de-mobilisation of field workers would cause instability in the public service. In the last four years, StatsSA could not employ or promote deserving staff because of the shortfall in CoE. StatsSA has been rated as one of the top five agencies in the world and is highly sought after in Africa and in the world. The shortfall in funds for goods and services has affected the procurement of technology infrastructure and this affects the quality of StatsSA’s data collection. The role of a data statistician is to defend the method of data collection and analyse the data generated. StatsSA has approached international donor agencies for funding but these agencies are not interested in conducting surveys that help shape the policies of SA. Accidents often occurred and the lives of field workers. For instance, data generated on household surveys has to be cross-checked on farms and rural areas. The drivers involved with surveys in Eastern Cape and Northern Cape are always tired because they drive up to 350-700 km to visit respondents.

The Chair of the Statistics Council, Prof Everett, said it was inconceivable for StatsSA to outsource field workers. Private sector consultants might not do due diligence as this involves long-distance travel during call-backs. NT should differentiate between savings that could accrue from following recommendations on office accommodation and the funds needed to acquire technological equipment to carry out the core mandates of StatsSA. The truth is that NT had created the challenges that StatsSA had even before COVID-19 by reducing the funds allocated for CoE and discontinued certain critical surveys since the 2015/2016 financial year. The dialogue should not centre on how to cut costs on office accommodation or vehicles but should be centred on how StatsSA could be empowered to carry out its core mandates. This would enable StatsSA to maintain a sustainable agency that generates quality data and produces reports that can be defended when global investors come to ask for data and reports.

Mr Bruce Jooste, Acting Deputy Director-General: Corporate Services, StatsSA, said StatsSA had identified anomalies in the recommendation report of NT but had not being able to engage with NT because the recommendation report of NT was submitted when StatsSA was conducting the census survey. StatsSA collaborates with DPW on office accommodation and has already informed DPW of its concerns on safety. StatsSA signed lease agreements of three to five years but attrition and reduction in the headcount of staff led to non-compliance to the government gazette on the staff/office space ratio. StatsSA had to return about 400 vehicles to service providers as a result of CoVID-19 and this has been captured as savings in the financial reports of StatsSA. To ensure that the quality of data generated is maintained field workers have to visit respondents wherever they are living even if the respondents live in farms or rural areas. COVID-19 health protocols limit the number of officers that are attached to vehicles. Only the Head office of StatsSA was constructed but all other office spaces and staff accommodation were sourced by collaborations with DPW. A detailed report on all answers given to the Committee would be submitted.

The Acting Chairperson said that the purpose of convening the meeting was not for any party to get defensive. She cautioned National Treasury for advising StatsSA to outsource its core business function such as fieldwork and advised StatsSA to consider other recommendations such as reducing the number of district offices and vehicles, and instructed StatsSA not to outsource its core business function. She agreed that government and the private sector use the information obtained by StatsSA for nation-building and development. She informed the delegation that the Committee will call for additional funding for Stats A and further engage with the Standing Committee on Appropriations because statistics produced by StatsSA was a baseline that served as a basis for informing evidence-based planning. Members appreciated the Deputy Minister, StatsSA, and NT for honouring its invitation and released the Deputy Minister and her team.

She invited Members to consider the annual reports of the Committee and said that it was a legacy report. She asked for Members’ opinions on the submission of the annual report to the Chair of Chairs.

When Members did not respond, she suggested that Members go back to check if the report was a true reflection of what was achieved during the period.

She invited Members to consider the minutes for adoption dated 23 February 2021/

Dr Gondwe made corrections on the purpose of the meeting captured on the first page of the minutes. She said the word ‘transformation’ should be deleted as the purpose of the meeting did not include a transformation. She also asked the secretary to correct the name of the presenter of the report.

The Acting Chairperson agreed with the corrections made by Dr Gondwe and instructed the Secretariat to ensure that the changes were made.

Dr Gondwe said in the attendance, the phrase ‘Council for Medical Scheme’ should be changed to ‘Council for Medical Schemes’. She also reminded Members that they might have been premature with the minutes as it was not a final minute but a preliminary minute.

The Acting Chairperson remarked that Dr Gondwe was right as the meeting was a joint meeting and the minutes generated should be a preliminary minute report.

The minutes were adopted.

Committee Minutes dated 24 February 2021

Dr Gondwe said the word ‘Microsoft Teams’ should be substituted with the word ‘Xoom’ under the venue of the meeting.

The minutes were adopted.

Committee Minutes dated 3 March 2021

The minutes were adopted.

The Acting Chairperson said the office of the Chairperson had called for a special Committee meeting during the recess. The agenda of the meeting would be to determine if the Bill received from the Bills Office was under the purview of the Committee based on the legal advice received, consider the programme of the Committee for the next term and the annual performance of the Committee as the Auditor-General would assess it.

The Committee Secretary said Ms Ntuli had requested that the Committee hold a special meeting on the wage bill as the Minister had requested to meet with Members on the processes used for the wage bill. The next meeting of the PC would be in May 2021 and the programme for the next term would have to be decided.

The Acting Chairperson said the office of the Chairperson had also urged Members to indicate issues that should be part of the PC’s programme in the next quarter. These suggestions should be submitted to the office of the Chairperson by close of business on 19 March 2021. She instructed the secretary to circulate the updated programme to Members. She informed Members that the Minister wanted to take Members into his confidence on the process of administering the new wage bill during the recess.

The meeting was adjourned.

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