Appropriation Bill & Special Appropriation Bill: FFC Input

Standing Committee on Appropriations

11 May 2021
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

Video: Standing Committee on Appropriations

The Appropriation Bill and Special Appropriation Bill are being considered at the time when the economy is starting to show some recovery. The shortfall for the 2021/22 financial year is estimated to be R132.6 billion. The risk is that the budget votes that are crucial for economic recovery continue to receive a small portion of the total appropriation.

Government should appropriate allocations to State Owned Enterprises (SOEs) through the Special Appropriation Bill. Most SOEs are in a weak financial position and will likely to require further support from the government. The government’s exposure to SOEs is high and represents a risk to debt sustainability. On infrastructure allocation, the information presented by way of graphs show that there has been a decrease in the expenditure allocation for with a steady increase onwards.

The Special Appropriation Bill contains additional allocation to the Health vote (R1.250 billion) and Social Development Vote (R2.826 billion). Part of the recommendations were that consequence management and accountability should be strengthened.

 The Committee raised concerns with the infrastructure spending particularly the fact that money is allocated every year to infrastructure but the allocations are not being spent. It was stated that the underspending is negatively impacting service delivery and the economy.

Members were concerned about the lack of consequence management in addressing fiscal leakages. The Committee acknowledged that recoveries were being made through civil claims but lamented the fact that irregular and wasteful expenditure still persists.

Members indicated that the country needed to try and increase localisation to boost economic growth and increase job opportunities.

The Committee stated that the was an urgent need to implement the NHI as the country is moving out of the immediate threat of the COVID-19 pandemic. Lessons from the implementation of the COVID protocols could be utilised to accelerate the implementation of the NHI.

Meeting report

The Chairperson said the meeting was a follow-up on the budget presented by the Minister. In the previous week, the Parliamentary Budget Office had made a submission on the budget and it was important to hear what the FFC had to say. The FFC submission would guide the Committee on how to deal with the Appropriations and the Supplementary Appropriations Bills.

Financial and Fiscal Commission (FFC) submission
Ms Elizabeth Rockman, FFC Commissioner, stated that the Appropriation Bill is being considered at a time when the economy is starting to show some recovery. The shortfall for 2021/22 is estimated to be R132.6 billion and some of the risks are that the votes that are crucial for economic recovery continue to receive a small portion of the total appropriation and also that the COVID-19 baseline reductions are likely to interrupt or reduce service delivery levels.

Most state owned enterprises (SOEs) are in a weak financial position and will likely require further support. Government exposure to SOEs is high and represents a risk to debt sustainability.

On infrastructure allocations, the information which was presented by way of graphs showed that there has been a decrease in the expenditure allocation for 2020/21 with a steady increase onwards. The Special Appropriation Bill contains additions to the Health Vote (R1.250 billion) and the Social Development Vote (R2.826 billion). Part of the recommendations were that consequence management and accountability had to be strengthened.

Mr O Mathafa (ANC) thanked the FFC for a sterling presentation. He stated that the presentation assisted the Committee in having a meaningful discussion as far as the fiscus is concerned. He referred to the point on the lack of consequence management in addressing leakages. There is tremendous progress as far as recoveries in civil claims by state entities are concerned where mismanagement and fraudulent activities took place. On a daily basis, former executives of various entities appear in court and attachments are being made.

He indicated that irregular and wasteful expenditure still persists and is increasing. If that is not addressed and without any preventative measures, the State will continue recovering after-the-fact which will motivate people to try their luck. As a result, there is need to strengthen consequence management. The fact that Eskom might require R1 billion per week to remain afloat proves the importance of strengthened consequence management. Eskom is a risk to the economy because in the rating agencies cited unreliable energy supply has led to a low rating for the country. It was important that the leakages be dealt with especially Eskom to reduce the amount required to keep it afloat.

He asked questions on the efficiency of the mechanisms to support the Economic Reconstruction and Recovery Plan. The question was motivated by the slippages in direct and indirect tax collections which were leading to economic slowdown. Do we see the red card on corporate tax as one of those mechanisms? Will it be efficient and what is the view of FFC if Treasury had opted for a targeted approach aimed specifically at Small, Medium, Micro Enterprises or specific sectors that are suffering from unrelenting job losses?

Mr Mathafa commented on the R200 billion Loan Guarantee Scheme for SMEs. Whilst the Committee welcomed the three month extension and supports the view that the credit guarantee scheme should be extended, it was also a concern that the scheme was a dismal failure. Most entrepreneurs who visited his constituency office raised the concern that the scheme had been a failure. The scheme had failed in that those hardest hit by the pandemic did not have access to the scheme. He asked if reliance on commercial banks to assist government expedite its mandate was prudent. Secondly, could the Reserve Bank have intervened more aggressively by lowering the debt for businesses and driving economic growth?

Businesses that could not access the Loan Guarantee Scheme were black entrepreneurs, emerging businesses and businesses owned by the youth. The Minister of Small Business Development said that the underspending on the scheme was because it only assisted those who would have gotten assistance through applications at commercial banks.  

Mr Mathafa asked for the FFC view on policy interventions and structural reforms that would be required to create a demand to return the economy to pre-COVID output levels. The last report by the World Bank and United Nations showed that immediately after coming out of the hard lockdown, the Johannesburg Stock Exchange recovered much better than the economy of the country which shrunk by a further 7%. With that in mind, he was interested in knowing the current levels of private sector investment particularly on infrastructure. He noted that infrastructure had been identified by the President as a key driver to economic turnaround and the Committee shared the same view.  Does FFC also has that particular view? What is its opinion on South Africa’s exposure by the private sector in the infrastructure market compared to other developing countries?

Mr Mathafa asked what the FFC saw as evidence of real growth in the Local Government Equitable Share (LGES). There is a significant reduction in conditional grants to that sphere of government and he asked what the likely impact of these reductions will be particularly on the notion of real growth in the LGES.  

Mr A Sarupen (DA) said he always enjoys the FFC submissions as they always cut through to the heart of matters. On State Owned Enterprises (SOEs), he referred to the slide which stated that in the medium term budget of the next couple of years, there will not be much aggressive spending on SOEs as there had been in the preceding financial years. He asked if FFC believed that to be true considering the financial state of SOEs and the annual demand from SOEs for bailouts and additional funding. Does FFC believe that this is the largest risk to state finances and if this consequently is pushing the state closer and closer to the fiscal cliff?

He referred to the example of state-owned airlines and their subsidiaries for which there is going to be subdued demand when there are town without water because the infrastructure has collapsed. There is a far greater multiplier effect getting the water sorted out in those towns than getting the airlines flying again in this environment. He asked if FFC thinks that is the case or that the state will be able to meet the projections of not putting further money into recapitalising or bailing out SOEs. Is the plan not likely to meet fruition given the actual state of the SOEs?

Mr Sarupen asked if FFC believes that the allocations made to local government in the last few years have been done so efficiently? Should the state be circumscribing even more specifically what local government should be spending its allocations on? Or does FFC think that the current way in which the money is allocated is efficient?

The Chairperson thanked FFC for raising issues for the Committee’s consideration. He asked FFC to comment on the capacity to spend by the economic departments and the peace and security departments. FFC stated that the allocations to those economic departments are not increasing, what is the observation as far as their capacity to spend is concerned? What has been the historical expenditure patterns of those departments?

FFC stated that the challenges could be dealt with by cutting projects that are ineffective and duplicative. He asked FFC to state the projects that could be considered as duplicates and ineffective.

It was worrying that in the MTEF, there was an allocation of about R800 billion to infrastructure based on the hypothesis that the state would get a better multiplier effect in terms of growth, employment creation and revenue growth. However, FFC stated that the country is witnessing a negative multiplier effect in infrastructure. He asked if that was normal. To what would FFC attribute that? Infrastructure has been identified as a way out of the economic stagnation the country is in so what could the reasons be? Which areas have shown positive multiplier effects if any? If one looks at the aggregate demand equation such as with the R350 special grant, is FFC able to say how it impacted on economic growth? What were the positive multiplier effects coming from those expenditures?

The Chairperson said that it was worrying for the Committee that year in and year out, there is an allocation of money to infrastructure but at the end of the year, the allocation is not spent. The impact of that on service delivery is visible for everyone to see and the impact on the general economy is also negative. He asked what FFC considered as bottlenecks in infrastructure spending and what should be done to correct that. What would FFC advise the Committee  and Departments to do?

FFC stated that PRASA capital expenditure is being used for current expenditure. Did it have an idea of the percentage of infrastructure expenditure going to current expenditure and the reason for this?

The Committee often gets reports from the Office of the Chief Procurement Officer about contract deviations. A worrying trend has been that there are a lot of deviations. He recalled that Eskom had contract deviations totalling R60 billion. He asked FFC to comment on that and its point about making changes to the procurement regulations.

The Chairperson said what he always finds missing in the submissions is the impact of the expenditure of budgets on economic transformation. The consolidated expenditure for the year is over R2 trillion and he wanted know if this was making a dent on economic transformation to ensure that the previously disadvantaged such as black people, women, people with disabilities and those in the rural areas  also become economic participants. It was important for the Committee that the budgets that are appropriated to departments serve the purpose of transforming the economy of the country.

The Chairperson stated that the country needed to increase localisation. He asked what the responses of the Departments and SOEs have been on localisation. What could be done differently to ensure that there is localisation? Every Rand that is spent on importation negatively impacts economic growth; it equals to exporting jobs that are needed in the economy. How do we make localisation take place so that we kick-start our economy and ensure increased job opportunities for the young people of our country?

Ms D Peters (ANC) thanked FFC for the presentation and asked what was needed for the South African economy to return to pre-COVID times?

In the last few weeks, she had been in and out of public hospitals. During visits, she found that adherence to COVID protocols had improved the conditions of the hospitals. Therefore, the need for the implementation of the National Health Insurance (NHI) was becoming urgent. The passages and toilets are always spotlessly clean and she was of the belief that the standard should be enhanced post-COVID if there ever is going to be a time like now. Measures like social distancing contribute to a clean environment in the hospitals and the lessons from the implementation of the COVID protocols could be utilised to accelerate the implementation of the NHI.

She asked if FFC was of the view that the Reserve Bank needed to intervene to lower the cost of debt for businesses and to drive the economy especially in view of the dismal failure of the R200 billion Loan Guarantee Scheme. The Committee had been informed that the businesses that benefitted were predominantly white businesses yet Members believe that the scheme was supposed to benefit even small businesses that were especially hard hit by the lockdown. Did FFC believe that the Reserve Bank need to intervene in the onerous requirements by banks when dealing with SMEs and private individuals?

She holds the belief that banks are hamstrung by the right to property ownership. Many people were going to lose ownership of their only asset such as their homes because of job loss and the hard hitting economy. Therefore, it was important for the Committee to hear from FFC if it believes the Reserve Bank is doing well or needs to do more.

Ms Peters asked how far the South African government is in achieving the NDP 2030 targets particularly in investing 30% of GDP in infrastructure. She affirmed that infrastructure spent is a major job creator and that it can enable the reduction of poverty and inequality. It was important that the Committee hears from FFC if it believes the government is moving far or nearer.

She noted that submissions to the Committee always raise the Basic Income Grant (BIG). It was important to know if now was the time for the South African government to consider a mandate for the tax commission to search for solutions to expand on the Social Relief of Distress grant or to implement the BIG. Does FFC believe that government needs to implement the BIG?  

The Chairperson highlighted that base erosion and profit shifting (BEPS) and illicit financial flows (IFFs) has been raised year in and year out. The Committee is constantly told that the country is losing billions and billions of money through these schemes which are sometimes complicated. Are we doing enough as a country to deal with these challenges? Please advise what the Committee and Parliament need to do? Are there specific laws that might need to be promulgated to deal with these twin evils of BEPS and IFFs?

Ms Sasha Peters, FFC Programme Manager: National Budget Analysis Unit, replied that the need to address the infrastructure spending bottlenecks is a focus that FFC raised with the Portfolio Committee on Basic Education. The low levels of spending on infrastructure grants have a lot to do with the way in which the infrastructure projects are rolled out. Departments tend to separate planning and budgeting phases of infrastructure projects from implementation. There is a heavy reliance on implementing agencies for project rollout on the ground resulting in distance between those accountable for spending and those responsible for implementing the project on the ground. Often times, this leads to implementing agencies that are not incentivised to manage projects properly and the result is projects that are over budgeted and not in line with timelines for infrastructure development.

She emphasised the need to strengthen oversight and said the fact that a Department has an implementing agent does not mean that the people in the Department can sit back and relax. Rather, there will always be need for the oversight to be much stronger so that the minute the opportunity for fiscal appropriation arises, the Department is there to jump in.

Although there may be a disconnect in relying on implementing agencies, the Departments are also building infrastructure delivery management system (IDMS) sections within Departments and recruiting people like quantity surveyors. If money is going to be spent employing those types of skills, the expectation is that over time, there will be little less over-reliance on consultancy. The key to solving the infrastructure problem was to strengthen the oversight role of government.

Ms Peters replied that the Local Government Equitable Share finances the operational costs associated with the delivery of basic services especially to indigent households whereas conditional grants fund infrastructure development. The reduction in the number of conditional grants will likely cause slower development of infrastructure and projects will take long to be wrapped up.

On capacity to spend, for Police and the Justice and Constitutional Development votes it is clear that underspending has been relatively low over the last few years. There are no alarming underspending rates in the Economic related programmes.

There is an opportunity to streamline projects and activities. There are a number of conditional grant programmes with similar objectives, for instance in the Basic Education sector, there is the Education Infrastructure Grant and the Schools Infrastructure Backlog Grant. There are areas of overlap that could be rooted out and the two grants merged. In other instances, the process may require better cross-departmental interaction to determine where there is duplication so that the departments can work together to minimise underspending.

Mr Sabelo Mtantato, FFC Senior Researcher: Fiscal Policy Unit, replied that South Africa’s economic growth has been constrained by low levels of investment in infrastructure as compared to other developing economies. The extent of infrastructure spending in the economy is reflected in the gross fixed capital formation as a percentage of the GDP. The measure captures the amount of money from the total economy activity that is being invested in capital goods such as equipment, tools, transport and infrastructure. Several studies consider an acceptable norm of gross fixed capital formation as a percentage of GDP to be in the region of 30-35% especially for a developing country. South Africa, according to World Bank data, is still at around 18% of GDP. FFC needed to investigate further to give more detail to the Committee on the role that the private sector is playing in infrastructure.

The use of monetary tools to boost economic activity growth is acceptable. However, there was need for FFC to further investigate the extent and the right approach through which that can be done, the fiscal and monetary interdependence and how that can be transported into the economy to boost economic growth. For some of the questions raised by the Committee, FFC needed to investigate further so that they give a much more definitive and firm response. The Commission was going to assess the role being played by the Reserve Bank particularly if it should do more and how that can be done.

Mr Thando Ngozo, FFC Senior Researcher: Macroeconomics and Public Finance Unit, reiterated the point made in the presentation that there was an anticipation that some of the SOEs were going to ask for more financial support from the government. Some of the SOEs were negatively impacted by the COVID-19 pandemic and others were already in bad shape even before the pandemic due to governance issues. It is therefore expected that they might ask for more financial support and bail outs from government.

The important thing is that there be a clear pace for holistically tackling the challenges faced by SOEs. For instance, the Government Shareholder Management Bill has to ensure that procurement regulations are tied in so that the current weaknesses experienced with SOEs do not continue.

He agreed with the Committee that the Eskom deviations to the tune of R60 billion was huge. He emphasised the key role that Parliament has to play in ensuring that everything is done to tighten procurement regulation in the Shareholder Management Bill and other regulations to tackle governance weaknesses that are resulting in Eskom experiencing financial trouble.

Mr Eddie Rakabe, FFC Program Manager: Fiscal Policy Unit, said if one looks at the composition of the budgets of some departments, one would realise that 80% of the allocation actually consists of transfers to agencies. From the 80% that goes to agencies, 30% goes towards compensation of employees and the rest goes to beneficiaries as grants. So, there is capacity to spend but increasingly, allocations to the Economic Departments end up with the agencies.

When the budget analysis is done, FFC tends to overlook transfers to the agencies reporting to the Departments. It is within these agencies that quite a lot of money sits and that is apparent especially towards the end of the financial year. If there is under expenditure in these Departments, they tend to transfer the funds to the agencies. He emphasised the need for Parliament to strengthen oversight and to look closely into the agencies.

Mr Rakabe said that a study was done by the Reserve Bank that indicated negative multiplier effects on infrastructure and the issue boils down to the infrastructure management delivery process. FFC did a study in 2017/18 as part of its submission on the Division of Revenue Bill. In the study, it looked into the infrastructure management delivery system and its weaknesses for  local government. Part of the findings was that the biggest bottleneck is the huge costs overruns associated with infrastructure projects and completion delays.

Sometimes, due to the limited budget allocations to infrastructure projects, it takes a long time for the municipalities or departments to complete a particular project. So by the time a project is finally completed, it already needs huge maintenance or refurbishment and as a result, that directly affects how infrastructure impacts economic growth especially if this happens on a large scale.

He cited the example of the allocations to Eskom since the Eskom infrastructure programme started. There have been huge costs overruns even though the project has not yet been completed. It is for that reason government does not see a positive infrastructure spending growth effect because of these inefficiencies in spending. If a stop is put to the inefficiencies, there is likely to be a positive effect.

Mr Rakabe noted a report by FFC in 2012 on the impact of infrastructure spending on economic growth. The indications from the report were that infrastructure spending on water, electricity as well as sanitation have much more growth effect than other economic areas. There is always an assumption that the spending on economic infrastructure contributes to economic growth but the result from the report was that spending on more basic items such as water and sanitation has much more growth effect than other big projects. This is evidenced by the fact that there are companies dragging municipalities to court over being unable to provide a reliable water supply and sanitation. Essentially, that kills the local economy. FFC would share the report with the Committee.

Mr Rakabe stated that there is a paper that FFC is working on which looks at the impact of leadership on infrastructure delivery. FFC will show the extent to which poor leadership affects the delivery of infrastructure projects and the negative effects that has on the economy.

The impact of total infrastructure transformation is a huge question that the FFC is also asking. It was looking into it in the next submission. The broader question depends on how the term 'economic transformation' is defined. The matrixes published by Stats SA show that there is a gradual improvement in the number of people who have access to water and electricity. However, the question is the reliability of these water services. The fact that 95% of the population has access to water does not mean that there is reliable water coming out of the taps all the time. That is where the issue of transformation comes in particularly if infrastructure such as pipes has been laid. The information from Stats SA shows that there is some concern on the reliability of basic service delivery despite the availability of infrastructure to provide the services.

Mr Rakabe replied that the issue of the Reserve Bank is linked to the Loan Guarantee Scheme and why it has not worked. The reason the scheme has not worked has little to do with the Reserve Bank but mostly to do with compliance from the businesses applying for the credit and also the strict eligibility criteria applied by the private banks despite the guarantee from the Reserve Bank. He recalled that the last time FFC presented to the Committee, it stated that the eligibility criteria could have been used in such a way that businesses which do not comply would be able to access the funding. Also, it was important to ensure that the businesses that have access to the credit guarantees are not only based in Gauteng so that the scheme is distributed more equitably across all provinces. The eligibility criteria was another way that could increase access to the scheme.

IFFs is a difficult one. However, there are some studies that are beginning to indicate that government can use some of the procurement regulations to deal with IFFs. This could be achieved especially by excluding companies which have exposure risks to IFFs as well as tax havens. When the government issues tenders, there has to be an audit for the companies that respond to the tenders to see the extent to which they may be exposed to countries that are likely to be tax havens or to IFFs. FFC would research further on the issue.

Prof Trevor Fowler, FFC Commissioner, stated that a recent study has shown that the support for local government is done through CoGTA national and provincial offices. The Constitution envisaged that support for local government should be by the entire national government, the entire provincial government and coordination by local government departments.

An increase in the Local Government Equitable Share and the reduction in conditional grants would mean that the amount of money that is being spent without conditions would be quite a percentage. This would mean that local government would have a greater say in the spending of the LGES. The reduction in conditional grants would mean that there will be less oversight and fewer conditionalities.

There is always an indication that local government is weak yet the support that is being provided is not adequate. National Treasury provides a certain amount particularly on expenditure finance but when it comes to all the other programmes, it is not that well-coordinated.

Prof Fowler highlighted that the changing of boards for SOEs over the last few years has weakened the entities. Good governance practice states that a third of the board has to be changed even though that might cause problems. His suggestion was that it is better to ensure stability of the SOE and then change the board in a measured fashion with a vision of the change that is required.

Prof Fowler stated that an Infrastructure Coordinator has been appointed. However, there is need for greater planning to ensure that the capacity to deliver the infrastructure is great. He recalled that the R800 billion allocated to infrastructure years ago when he was still in government and the country is still lagging behind when it comes to spending the allocation.

The COVID-19 R350 grant has had a significant impact on addressing the impact of the pandemic on poverty in the country. FFC was going to look into the indications of the Basic Income Grant to see if the grant would have the same impact as the current R350 grant in dealing with poverty that resulted from COVID-19.

Prof Aubrey Mokadi, FFC Commissioner, agreed with the Committee that regardless of the instruments used to curb the problem with consequence management, the problem continues to persist year in and year out. In most cases, government responds only when there is media noise on the corruption by replacing the people implicated. The new appointees tend to continue with the status quo or in some cases become much worse. He agreed on the need to be proactive in dealing with consequence management as corruption continues to afflict the fiscus.

He restated the FFC recommendations on the need for legislative and governance reform, the need for procurement regulation and need for a performance management framework. The recommendations could find a clear expression through the development of the Government Shareholder Management Bill.

Prof Mokadi said when the Bill is enacted, it will give rise to the Presidential State Owned Enterprise Council and hopefully it will deal with the governance concerns that were raised such as board appointments. However, everything depends on the mercy of mankind because unless the people entrusted with the implementation are themselves committed ethically and morally to uphold good values, the country will still be talking about the same challenges 20 years from now.

It is a difficult situation in South Africa in which the work ethic is affected by poor moral standards. He noted that the President spoke about professionalising CoGTA through the National School of Government and again, that depends on how people themselves respond to that. Therefore, there is need to put in a deep stick into the work ethic and morals in South Africa to assess exactly where the country is on the identified problems. Hopefully thereafter it accepts that it is a critical situation that requires constant monitoring, evaluation, assessment and intervention when needed.

He repeated from the presentation that it was clear that there would be no proper implementation unless there is political will. He recommended the Parliament's Portfolio Committees hold the Executive accountable and continue to monitor, ask questions and engage proactively so as to change the culture that is so negative to good intentions.

Ms Rockman said the country is still missing the opportunity for economic growth that is inherent in agriculture. Agriculture has an unexplored or underexplored potential that needs to be addressed more aggressively because of the fiscal multipliers associated with the sector.

She replied that the NHI was shifted a bit to the background in 2020 because of the pandemic. However, in the submissions made in 2020, FFC dealt extensively with the NHI pointing out that there are uncertainties that still need to be addressed in the proposed legislative framework and the impact on provincial health departments. In addition, FFC did some work on the proposed costing models for the NHI. The National Treasury responded to its Division of Revenue Bill submission and FFC still has to engage with the response from National Treasury.

She emphasised that the implementation of the NHI is increasingly critical to ensure equal access for all to quality healthcare. As the country begins to move from COVID-19 and the immediate crisis, the NHI must therefore come stronger on the agenda.

The Chairperson thanked FFC for the responses. He recalled having asked a question on the negative multiplier effect coming from infrastructure. His follow up question was in the aggregate demand curve, which ones have come up with a positive multiplier effect?

He noted that there seem to be very little movement towards localisation yet it is very important. He asked what can be done to ensure that the budget is used to enhance localisation?

He reminded FFC of how the budget has been used to enhance localisation by PRASA in the manufacturing of trains. PRASA seems to be one project where government expenditure has been used to promote localisation. If taken to its logical conclusion it may end up being used to promote exports especially with the African Continental Free Trade Area (AfCFTA)  signed by heads of states of African governments. He asked what could be done differently to enhance localisation with obvious positive effects on the wider economy.

Mr Chen Tseng, FFC Research Specialist, acknowledged the importance of localisation in increasing productivity. In the terminology ‘the product value chain’, the focus word is ‘product’ and in its last annual submission, FFC emphasised strongly the need to identify those products that have competitiveness and comparative advantage.

He reminded Members of the 2021 SONA in which the President pronounced extensively on the product value chain approach as adopted in the Economic Reconstruction and Recovery Plan. When compared to other countries, South Africa has not yet implemented that notion of the product that is Proudly South African that the country is thought of as the producer. South Africa needs to move and diversify the portfolio of production from just mining gold and platinum and look into other labour intensive industries such as manufacturing and textiles.

Mr Tseng referred to the Asian experience in which the semi-conductors and cheap labour resulted in cheap labour returns in manufacturing of unsophisticated small household appliances. Such an identification was yet to be made for South Africa and it is something that has to be looked into. This is mainly because productivity compounds into the issues of spending that were raised.

It was important to distinguish the rates when talking about overall monetary injection, SOEs and economic growth. the Reserve Bank has some control on rates but what is important to consider is the rate margin. The banking sector seems to have been charging obscene fees for the rate margin hence there is need for some oversight not just in decreasing the rates but also after the decrease. It becomes important because if the banks are still putting obscene mark-ups on those rates, that could also affect the price effects of those rates, impacting the general economic productivity and growth in South Africa. 

Ms Rockman indicated the need to look at the effectiveness and the gains from the black industrialists programme. It will not be surprising to find the same challenges with access to the programme that are being witnessed with the loan guarantee scheme. There was need to look at the gains from the Special Economic Zones and at local government level to assess the readiness to bring localisation into the Local Economic Development plans.

She noted that if there is increased compliance on spending by national and provincial departments and municipalities, immediate gains could be realised.

She acknowledged the point that there is need to look into the budget that each department is getting but emphasised the need to focus strongly on the impact that the budget allocations in the Appropriations and Special Appropriation Bills are making. FFC was going to be taking that point forward.

The Chairperson thanked the FFC team for their input. It had given the Committee things to look at when it interacts with various departments.

The Committee adopted minutes of the meetings held on 4 and 5 May 2021.

The Secretary noted that the next meeting was Friday 14 May with the Department of Public Enterprises and SAA on the Special Appropriation Bill.

The Chairperson indicated that the meeting had been scheduled for 12 May but was postponed as the Department of Public Enterprises had another engagement.

Meeting adjourned.

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