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PORTFOLIO COMMITTEE ON FINANCE
1 November 1999
BRIEFING ON ADJUSTMENT ESTIMATES 1998-1999, SECOND ADJUSTMENT ESTIMATES 1999-2000
Documents handed out:
Explanatory Memorandum: Adjustment Estimates 1998-1999
Explanatory Memorandum: Adjustment Estimates 1999-2000
Portfolio Committee on Finance Programme
[Documents attached to end of minutes]
The committee was briefed on the adjustment estimates for 1998-1999 and 1999-2000. On the adjustment estimates for 1998-1999, general concerns were raised as to the allocation of funds to the Free State for outstanding commitments. As for the adjustment estimates for 1999-2000, concerns were raised pertaining to the substantial amounts of roll-overs of certain departments, at the end of the financial period.
The Chairperson, Ms B Hogan, welcomed and introduced Mr A Du Plessis (Chief Director) and Mr Marais, both from the Department of State Expenditure.
Adjustment Estimates 1998-1999
As an introduction Mr Du Plessis informed the meeting that the purpose of adjustment estimates is to request Parliament to provide for unavoidable or unforeseen expenditure by departments. He went on to present the 1998-1999 Adjustments Estimates. (See Appendix 1)
Questions from members
Dr L Luyt (FA): An additional amount of R400 million was included for unanticipated expenditure, of which R200 million was made available to Free State province. Will this amount be recovered from the province?
Response: The assistance was made available to the province to cover outstanding commitments and clear their overdraft. The amount will not be recovered from the province.
Dr G Woods (IFP): This is a very delicate situation of subsidising losses of provinces. Are we going to do this every year?
Mr A Feinstein (ANC): Does this allocation not reflect a problem in budgeting by the provinces?
Response: The main reason for the R200 million expenditure is the increase in interest rates and maintenance of capital equipment, which is expenditure that could not have been foreseen when drawing the budget. Because these factors could not have been foreseen at the time of drawing the budget, the additional amounts were made available.
Dr Woods (IFP): What interest rate are we talking about?
Prof B Turok (ANC): How do you track the spending of this sort of thing by provinces?
Response: I do not have details of interest rates with me, but these could be provided. As for tracking of this expenditure, there is an ongoing process of how calculations are done.
Mr Feinstein (ANC): Surely there must be other government institutions who are also affected by the very same interest rate, which you have made mention of, but it is not evident that they have come up with the same expenditure.
The Chairperson requested the Public Accounts Committee, through Dr Woods (Chairperson), to look seriously into this issue, to ensure that the problem does not recur.
Second Adjustment Estimates 1999-2000
Mr Du Plessis presented the 1999-2000 adjustments estimates to the committee. (See document attached: Adjustments Estimates 1999-2000)
Questions from members
Prof Turok (ANC): Who controls or is responsible for the Umsombomvu Trust and its expenditure?
Response: The R855 million will not be voted for, but the Department of Finance is responsible for this. As for the administration of the trust I do not have any details.
Prof Turok (ANC): This money of the Umsombomvu Trust must have been around for some time. Where is it? Who is earning the interest?
Response: The funds of the Umsombomvu Trust are paid into the National Revenue Fund and from there it is transferred in to the Umsombomvu Trust. The Umsombomvu Trust has a board of trustees and the Department of Finance only acts as a conduit.
Prof Turok (ANC): As for roll-overs, could you give indications of the principles on which roll-overs are based?
Response: There are certain provisions on how departments can roll-over. We do allow departments to roll-over capital funds, as well as current expenditure.
Prof Turok (ANC): Could we get a copy of the rules upon which roll-overs are based as we need to know what principles are applied. The roll-overs of the departments of Health, Public Works, Welfare and Trade and Industry are a cause of concern. Could you explain these large amounts?
Response: The roll-over of Health is due to the school-feeding programme. As for Public works and Welfare the poverty relief and infrastructure expenses were late inclusions. Trade and Industry has over the years build up a history of roll-overs, they are in a better position to explain why.
Mr T Mofokeng (ANC): What happens to roll-overs at the end of the financial period?
Response: We do not allow departments to top-up their budget with savings.
Mr B Nair (ANC): In practically all departments there are roll-overs. Does this mean that there is bad budgeting in all departments? Why is there this tendency?
Response: When having or allowing roll-overs it is easy to see which departments overspend. This is a very delicate issue as we are also trying to avoid departments from investing money in stock, towards the end of the financial period, to use in the next financial period.
Prof Turok (ANC): As for donor funding, why the substantial reduction from R750 million initially budgeted for and the R350 million actually received?
Response: When budgeting it is difficult to make a good estimate of what donor funding would be and therefore the substantial reduction.
Mr S Leeuw (ANC): Could you give an example of `Special Provincial Projects'?
Response: At this stage there is an investigation into the allocation of this amount for `Special Provincial Projects', pending investigation the Department of Finance could be asked about it.
Dr G Koornhof (UDM): As for allocations made to local authorities for Y2K issues, on what basis was this made? Was there any consultation?
Response: The Department of Constitutional Development made a detailed investigation and received input from the different departments, and feedback was used to determine the amount allocated.
Mr Leeuw (ANC): Regarding Public Enterprises, there is no Director-General, why does the department make provision for it?
Response: Previously there was no Director-General, but only a Deputy Director-General. The responsibilities of the Public Enterprises have increased due to the privatisation process, therefore the need to upgrade the position to Director-General.
Dr Koornhof (UDM): The Incentive bonus payments of the South African Revenue Services, should this not have been foreseen in the drawing of the budget?
Response: Yes, it could have been foreseen, but the process of calculation makes it difficult in that the actual amount could not be calculated. The amount can only be calculated once certain procedures have been followed.
Chairperson: As for the Legal Aid Board, could you give an indication why this amount was needed?
Response: The idea was to cover the expenses of cases taken for the period. It is unforeseen as it is difficult to determine the cases and how long they are going to last.
Mr Leeuw (ANC): The Scorpion expenses, are they part of the Adjustment Estimates?
Response: Yes, they do form part of the Adjustment Estimates.
Dr Luyt (FA): Sports and Recreation, was the government the main sponsor of the 7th All Africa Games, considering the amounts allocated.
Response: The original budget provided for funds for the Games, but it was not enough therefore the additional allocation. There were sponsors, but that could not cover all the expenses.
Ms R Joemat (ANC): Welfare have had savings in the last few years, now we see there is an Adjustment Estimate of R5 million. Why is this?
Response: The R5m is a specific allocation for the [cyclone] relief fund for the Western Cape, which could not have been foreseen.
Dr Woods (IFP): Could you explain the large allocation for improvement of conditions of service?
Response: We provided for this in the main budget to the amount of R3,6 billion, but more money was required due to the new negotiations.
Chairperson: Why was the inauguration of the President not budgeted for? Was it not foreseen?
Response: Exactly how this inauguration was going to be dealt with was only sure after the election, since the President decides on that. We could have made provision for a certain amount, but it would have been very difficult, therefore we left it over.
The Chairperson informed the meeting that certain department would be called upon to explain to the Committee why certain adjustment estimates have been made.
There were no further questions or comments. The meeting adjourned.
EXPLANATORY MEMORANDUM: ADJUSTMENTS ESTIMATE: 1998/99
1. An additional amount of R400 million was included in the expenditure level for unanticipated expenditure not included in the 1998/99 Adjustments Estimate. It was indicated in the Budget Review that this amount would be authorised in terms of section 7(1 )(b) of the Exchequer Act, 1975 (Act 66 of 1975). However, section 7(2) of the Exchequer Act, 1975 stipulates that steps shall be taken, not later than the next ensuing session of Parliament, for the appropriation of any amounts which have been or will be utilized in terms of subsection (1). This amount must therefore now be appropriated by an act of Parliament.
2. The amount of R400 million was authorised for the following services:
2.1 Department of Transport - SA Rail Commuter Corporation (SARCC):
The amount allocated to the SARCC during the 1998/99 financial year was scrutinised by the Departments of Finance and State Expenditure and was found to be insufficient to maintain essential rail operations. In addition the interest rate increases during the year aggregated the shortfall of the SARCC. An additional 200 million was therefore allowed to be transferred to the SARCC in the 1998/99 financial year.
2.2 Free State Province - Outstanding commitments: R200 million
The Free State Province experienced a cashflow crisis and based on an intensive evaluation by a joint team consisting of officials of the Departments of State Expenditure and Finance in collaboration with the provincial treasury, it became evident that without financial assistance service delivery in the Province would be seriously hampered. On 12 March 1999 it was decided that a section 100(1)(a) of the Constitution, 1996 would be invoked on the Province and that an additional amount of R200 million would be made available to assist the Province with outstanding commitments reflected in the form of a bank overdraft.
2.3 Department of Housing - Housing Support Organisations
Amounts of R40 million for the SA Housing Trust and Ri2,5 million for
SERVCON respectively were included in the printed Adjustments
Estimate: 1998/99 for the Department of Housing. These two items were
indicated as column 2 items. In the Second Adjustments Appropriation
Act, 1998, the two amounts were combined under Contribution: Housing Support Organisations. The amount was, however, printed in the Act as
R52 500 and not R52 500 000. In order to ensure that the Department of Housing could spend funds as intended in the Adjustments Estimate: 1998/99, the Minister of Finance granted his authorisation in terms of section 7(1 )(b)(ii) of the Exchequer Act, 1975 for the column 2 item to be exceeded. Although no additional funds were required, an amount of R52 447 500 previously included in column 1 of the Second Appropriation Act, 1998 need to be shifted to column 2.
3. The Adjustments Appropriation Bill. 1999 is hereby tabled in Parliament for consideration.
[ed. Note: please email email@example.com for the Adjustment Estimate Excel spreadsheets to be emailed to you. Below are poor non-Excel copies of 2 of the 4 annexures available]
CALCULATION OF THE REVISED EXPENDITURE FOR 1999/2000 AND EXPLANATION
OF THE INCREASE COMPARED TO THE EXPENDITURE PROVIDED IN THE
MAIN BUDGET (BUDGET REVIEW)
This annexure has been compiled to give a complete overview of the total estimated
revised expenditure for the 1999/2000 financial year in R'000
A. Total Expenditure provided in the Main Budget
(RP 2) " 210,828,986 "
Plus: Supplementary Estimate (Second Print)
Vote 4: Agriculture " 25,000 "
Vote 7: Constitutional Development " 3,000 "
Vote 12: Finance " 17,000 "
Vote 15: Health " 28,000 "
Vote 16: Home Affairs " 17,000 "
Vote 18: Improvement of conditions of service " 2,999,999 "
Vote 21: Labour " 50,000 "
Vote 27: Public Works " 274,000 "
Vote 29: SA Police Service " 17,000 "
Vote 35: Water Affairs and Forestry " 120,000 "
Vote 36: Welfare " 50,000 " " 3,600,999 "
Estimate of Expenditure (RP 2 & 4) (Budget Review) " 214,429,985 "
Plus: Standing appropriations " 50,000 "
Donor funding " 750,000 "
B. Total Estimated Expenditure " 215,229,985 " 1)
Plus: Adjustments Estimate To be voted (RP1â€”1999) " 6,557,906 " Statutory amounts " ( 1,564,700 )" Parliament (One month's salary to outgoing MP's) " 3,300 " Finance (State debt) " ( 1,568,000 )" Umsobomvu Trust " 855,000 " Donor funds " ( 400,000 )" " 5,448,206 " Less: Roll-overs " ( 2,125,000 )" C. Total Revised Expenditure " 218,553,191 " D. Increase (C - B) " 3,323,206 "
Plus: Adjustments Estimate
To be voted (RP1â€”1999) " 6,557,906 "
Statutory amounts " ( 1,564,700 )"
Parliament (One month's salary to outgoing MP's) " 3,300 "
Finance (State debt) " ( 1,568,000 )"
Umsobomvu Trust " 855,000 "
Donor funds " ( 400,000 )" " 5,448,206 "
Less: Roll-overs " ( 2,125,000 )"
C. Total Revised Expenditure " 218,553,191 "
D. Increase (C - B) " 3,323,206 "
1) Amount indicated as total expenditure " 215,229,985 "
"Plus: Poverty relief, infrastructure investment and job summit projects " 450,000 "
Plus: Contingency reserve " 1,100,000 "
Total estimated expenditure according to Budget Review " 216,779,985 "
Increase can be ascribed to:
(i) Externally funded services " 61,912 "
(ii) Expenditure already announced " 450,000 "
(iii) Adjustments by Treasury " 1,691,475 "
(iv) Roll-over of funds " 521,666 "
(v) Over-expenditure (unforeseen and unavoidable) " 143,153 "
(vi) Umsobomvu Trust " 855,000 "
(vii) Donor funds " ( 400,000 )"
" 3,323,206 "
The details of the above-mentioned amounts are as follows in R'000 :
(i) "Externally funded services - R61,912 million"
The following externally funded services are included in the Adjustments Estimate:
Domestic grants received for human resource development " 34,891 "
Proceeds from the sale of products - Correctional Services " 1,691 "
Purchase and sale of SANDF helicopter and optic system " 12,080 "
Upgrading of SAPS vehicles " 10,250 "
Catering income of Parliament " 3,000 "
" 61,912 "
(ii) Expenditure already announced - R450 million
Allocation of unallocated part of funds provided for poverty
" relief, infrastructure investment and jobs summit projects" " 450,000 "
(iii) "Adjustments by Treasury - R1 691,475 million"
Increased allocation to Provinces for debt redemption and
backlogs in rank and leg promotions " 1,419,700 "
Special provincial projects " 69,000 "
Increased allocation to Local Authorities to address
Y2K issues " 202,775 " " 1,691,475 "
(iv) "Roll-over of funds - R521,666 million"
"Lower expected roll-out of funds - an amount of R2 646,666 million is rolled"
" over from 1998/99 while a saving of only R2,125 billion is expected in"
in 1999/2000 for financing " 521,666 "
(v) Over-expenditure (unforeseen and unavoidable)
"- R143,153 million"
Parliament " 3,592 "
Constitutional Development " 15,000 "
Defence " 47,000 "
Education " 5,500 "
Environmental Affairs and Tourism " 1,200 "
Finance " 444,422 "
Foreign Affairs " 97,792 "
Government Communication and Information System " 1,200 "
Home Affairs " 14,016 "
Improvements of conditions of service " 250,000 "
Justice " 147,805 "
Labour " 15,000 "
Public Enterprises " 6,624 "
SA Police Service " 94,315 "
Sport and Recreation " 31,100 "
Transport " 457,000 "
Water Affairs and Forestry " 85,514 "
Welfare " 5,000 "
Presidency " 13,000 "
" 1,735,080 "
Statutory amount " 3,300 "
Savings indicated by departments " ( 27,227 )"
Decrease in State Debt costs " ( 1,568,000 )"
See Annexure B for details " 143,153 " (1)
(vi) Umsobomvu Trust - R855 million Transfer of funds obtained from demutualisation of insurance companies "855,000" (vii) Donor funds - Decrease of R400 million An amount of R750 million was included in the expenditure level while it is expected that only R350 million will realise. " ( 400,000 )"
(vi) Umsobomvu Trust - R855 million
Transfer of funds obtained from demutualisation of insurance companies "855,000"
(vii) Donor funds - Decrease of R400 million
An amount of R750 million was included in the expenditure level while it
is expected that only R350 million will realise. " ( 400,000 )"
(1) Details are included in Annexure B.
DETAILS OF UNFORESEEN AND UNAVOIDABLE EXPENDITURE
TO BE PROVIDED FOR IN THE ADJUSTMENTS ESTIMATE
The amount of R143,153 million is compiled as follows:
Vote andService R' 000 R'000
Vote andService R' 000 R'000
Parmed Contributions 3,200
Equipment for disabled MP's 392 3,592
7 CONSTITUTIONAL DEVELOPMENT
Disaster relief in Western Cape 15,000
Operational commitments in support of SAPS 47,000
National Technical Examinations 5,500
11 ENVIRONMENTAL AFFAIRS AND TOURISM
Legal claim for fire damages caused by Nature Conservation 1,200
Incentive bonus payments (SARS) 301,422
New strategic objectives (SARS) 143,000 444,422
13 FOREIGN AFFAIRS
Inauguration of the President 44,000
Commonwealth Heads of Government Meeting 39,200
UN Peacekeeping contribution 10,492
Contribution to Commonwealth 4,100 97,792
14 GOVERNMENT COMMUNICATION AND INFORMATION SYSTEM
Operational expenditure, purchasing and upgrading of IT equipment 1,200
16 HOME AFFAIRS
ID Campaign (R8 m) and additional staff at airpo 8,537
Repatriation/deportation of illegal aliens 3,000
ID Task Team 2,479 14,016
18 IMPROVEMENT OF CONDITIONS OF SERVICE 250,000
Implementation of the Witness Protection Act 2,000
National Prosecuting Authority 37,474
Human Rights Commission 1,331
Legal Aid Board 107,000 147,805
Sheltered employment 5,000
24 PUBLIC ENTERPRISES
Upgrading of Office for Public Enterprises 6,624
29 SA POLICE SERVICE
Budget shortfalls relating to elections 94,315
30 SPORT AND RECREATION
7 th All Africa Games 31,100
Commuter Rail subsidies 432,000
Construction of Lubombo Spatial Development Initiative from
Hluhluwe to Mozambique 25,000 457,000
35 WATER AFFAIRS AND FORESTRY
Restructuring of forests managed by DWAF 85,514
Social Relief Fund 5,000
Restructuring costs of new Office 13,000
Plus: Statutory amount
One month salary to outgoing MP's 3,300
Less: Savings indicated by departments (27,227)
Decrease in State debt costs (1,568,000)
PORTFOLIO COMMITTEE ON FINANCE
(Subject to change)
28 October 1999
Friday, 29 October 1999
Tabling: MT Budget Policy, Statement Second Adjustment Estimate 1999 -2000 Revenue Laws Amendment Bill
Monday, 1 November 1999
Briefing on the Adjustment Estimates, 1998-99 Briefing on the Second Adjustment Estimates, 1999 - 2000
Tuesday, 2 November 1999
09:30-17:00 (this may be curtailed)
Formal consideration of the Revenue Laws NB
Briefing on the Financial Service Board NB
(Adoption of the Report of the Land Tax)
Wednesday, 3 November 1999
Formal consideration of Adjustment Estimates, 1998 - 1999
Formal consideration of Second Adjustment Estimates 1999 -
Thursday, 4 November 1999
08:00-18:00 Hearing on the Medium Term Budget Policy Statement
Friday, 5 November 1999
09:30-17:00 Briefing on the Procurement Bill
Ratification of the Double Taxation Agreement
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