In a virtual meeting, the Standing Committee on Appropriations heard submissions on the Appropriations Bill from the Children's Institute and the Center for Child Law; Organisation Undoing Tax Abuse (OUTA); the Public Service Accountability Monitor (PSAM); and the Congress of South African Trade Unions (COSATU).
Among the concerns raised in the submissions were inadequate budget allocations for child support grants; the need for greater public input as budgets were drawn up; and the need for greater efficiency in spending taxpayers' money. Cosatu called for an overhaul of the macroeconomic framework and for the introduction of a basic income grant.
Committee Members discussed ways of holding the government to account for irregular expenditure. Concerns were raised about children roaming the streets, and holding parents accountable for their children. There were also concerns about abuse of child grants and people cashing in on foster care grants.
Members discussed a suggestion by OUTA that the fuel levy should be ring fenced and used for funding road networks. They raised concerns about the state of roads, particularly municipal roads.
Another topic for discussion was calls for the Government Employees Pension Fund to provide loans to struggling public service workers.
Another issue raised was that while calls were made at public hearings for departments’ budgets to be increased, some departments failed to use all their allocations by year-end.
The Chairperson welcomed Members. He said the Committee Secretary seemed to be having a problem with his computer and thus there was a need to find someone to co-host the virtual meeting platform. He welcomed members of the media and presenters to the meeting.
The following organisations would make submissions on the Appropriations Bill: the Children's Institute at the University of Cape Town; the Center for Child Law at the University of Pretoria; the Organisation Undoing Tax Abuse (OUTA),; the Public Service Accountability Monitor (PSAM); and the Congress of South African Trade Unions (COSATU). One of the requirements of the bill was that there should be a lot of public involvement. Members were aware of the conditions under which this meeting was taking place, including low economic growth, the fiscus under serious stress, and high unemployment rates, among others. The Covid-19 pandemic had worsened all those things.
Apologies were received from Ms M Dikgale (ANC), Ms N Ntlangwini (EFF), Mr A Shaik Emam (NFP), and Mr Z Mlenzana (ANC).
Since there were several submissions to be made, he asked presenters to keep presentations within 20 minutes.
Submission by Children's Institute and Center for Child Law
Ms Katherine Hill, Senior Researcher, Children's Institute, presented a submission on behalf of the Children's Institute and Center for Child Law. She said there were two problematic decisions on the Department of Social Development (DSD) budget: too little money was budgeted for the Child Support Grant (CSG), and there was no budget to address a ten-year Foster Child Grant crisis. The Covid-19 lockdown had increased poverty and hunger, causing unemployment to breach the 40 percent mark in 2021. Child hunger had increased after grant top-ups and caregiver allowances were stopped. Parliament could correct the regressive steps on children in the 2021/22 budget by ensuring that just a little more than R1 billion was allocated in the October Medium Term Budget Policy Statement (MTBPS). This was made up of R798 million to increase the CSG by R10 to R470 per month, and R260 million to provide a 50 percent CSG top-up for orphans living with relatives from October 2021.
[see submission attached for further details]
Submission by the Public Service Accountability Monitor (PSAM)
Ms Andile Cele, Research and Advocacy Consultant, PSAM, presented a submission on the Appropriations Bill. PSAM supported not only the call to increase the space for public input on fiscal policy and oversight, but also the development of progressive mechanisms by which the public could contribute in advance of budget decisions being taken and receive timely feedback.
Suggestions were made about ways in which Parliament could strengthen transparency for more equitable outcomes. These included engagement by the Committee with Parliament’s Public Education Office to develop concurrent public education and participation mechanisms. These would specifically target public knowledge of and more informed engagement with the Appropriations Committee and related committees. These participation mechanisms could be in the form of public participation offices, ad hoc meetings or workshops with civil society organisations and focus groups. On procurement failures and the impact on social sectors, it was pointed out that according to a SIU report in August, questionable Covid-19 tenders worth more than R5 billion were being investigated.
[see submission attached for further details]
Presentation by Organisation Undoing Tax Abuse (OUTA)
Mr Matt Johnston, Head of Research and Policy, OUTA, noted a need to improve effectiveness and efficiency of spending as reprioritisation was not happening. Consolidated expenditure of R2 trillion was proposed for 2021/22, thus there was enough money to spend. Key recommendations included the need to eliminate unnecessary activities; to end the endless bailouts of State Owned Enterprises (SOEs); and to cut the Cabinet by 20 percent, including cutting duplications in merged departments. OUTA said Parliament should establish a platform for public commitments so that MPs could be held accountable in constituencies. The Department of Cooperative Governance and Traditional Affairs (CoGTA) had spent R627 billion in the past nine years, but most municipalities were in a mess. Where was the value? Consequence measures should be enforced against suspected maladministration and irregular spending, and against service providers who did not fulfil their contracts. (Increasing the fuel levy to fund the Road Accident Fund (RAF) was falling into a debt spiral, with legal professionals benefiting while many road accident victims were left in the lurch because of the RAF’s deteriorating financial position. The fuel levy could be ring-fenced for major road infrastructure projects such as the Gauteng Freeway Improvement Project (GFIP).
[see submission attached for further details]
Submission by Congress of South African Trade Unions (COSATU)
Mr Matthew Parks, Parliamentary Coordinator, COSATU presented the submission by COSATU.
Ms N Hlonyana (EFF) raised a point of order by requesting that COSATU remove the ANC sign in their background as party symbols were unparliamentary.
The Chairperson said that applied only to Members of Parliament and not members of the public, and Mr Parks could continue with the presentation.
Mr Parks proceeded with the presentation. On the Fiscal Framework, COSATU proposed the need for meaningful review and overhaul of the government's macro-economic framework to ensure that it balanced the need to reduce the debt and deficit levels and trajectories with the need to stimulate the economy and plug the gaping holes in the fiscus.
On provincial and local government appropriations, COSATU appreciated the need for budget shifts given the need to allocate massive amounts of resources to fight the Covid-19 pandemic, provide economic and social relief and support the economy’s reconstruction and recovery.
The Bill was silent on the almost R40 billion owed to Eskom by municipal and provincial governments. This was threatening to collapse Eskom and as a result Eskom was forced to repeatedly increase electricity tariffs. The Finance Minister had made a commitment to deal with this in 2020. The National Treasury and COGTA needed to explain what the plan was to deal with the billions lost to corruption and wasteful expenditure and in some cases the outright collapse of municipalities.
On economic and social relief, the R350 Covid-19 unemployment grant needed to be continued as these workers would not miraculously find jobs overnight. The ANC and the government had repeatedly called for a basic income grant (BIG). The R350 Covid-19 grant was a BIG in essence, with all its challenges. The time to have a BIG was when the economy was facing its worst crisis in a century, not at some indeterminate time when things were better.
[see submission attached for further details]
Ms D Peters (ANC) said the Chairperson had disconnected and asked her to facilitate the meeting.
Ms N Hlonyana (EFF) thanked all the organisations for the presentations, which had enlightened Members in many ways. The Committee felt the pain of the Children's Institute and Center for Child Law. Children were very important, and it was a serious problem for 13 million children to be affected. They needed to get as much nutrition as possible, they needed to grow up to become responsible citizens of this country. If the state could not take care of its own children, it was a serious problem. The Committee had heard about the R1 billion, which was needed. Members hoped that the government of the day had heard the presentation and would ensure that children were taken care of.
OUTA’s presentation had referred to public participation in the Special Appropriations Bill and advised the Committee to halt the process so that it should be done at the beginning of the budget process. How would this benefit the process? The EFF agreed that the Cabinet of the Republic of South Africa was bloated. There were too many cadres. The EFF had said it before that there was no need for deputy ministers.
The PSAM’s presentation had referred to inclusive public participation in the budget process as very critical. The Committee agreed. The presentation had also referred to irregular expenditure. The current government and irregular expenditure were like bread and butter, they could not be separated. What advice would the PSAM give opposition parties, who must constantly hold the government to account?
The Acting Chairperson thanked all the presenters. Apart from COSATU, the rest of the presentations were not numbered, and it was difficult to make notes about what particular slide about which one would want to raise issues.
She agreed with Ms Hlonyana that Members were touched deeply by the presentation related to the conditions and the standard of living of children. If one iwas to project into the future, it was worrying what type of children the country would have. Members were happy to hear that the Children's Institute and Center for Child Law participated in the public engagement processes of the Portfolio Committee on Social Development. In their research, did the Children's Institute and Center for Child Law cover the entire country, or did they only focus on areas where the institutions operate from, the University of Pretoria and the University of Cape Town? Was the research conducted in Gauteng and Western Cape only?
Members were worried that the more there was input about increasing the Child Support Grant, the more children were found roaming the streets. Something must be done to hold parents responsible and accountable for their children. One of the things that did not seem to get much focus was the responsibility of families for the children. Before the state and government could come into the picture through the Departments of Social Development, Health, and Basic Education, there was a parent and a family. It is important to have a kind of emphasis on the role of families. What was the state of households and families in South Africa? Children were roaming the streets during schooling time while they were getting the grant. It had been seen through different TV programmes that children were neglected despite them being beneficiaries of the CSG.
There was also the tendency of people wanting to cash in because the Foster Care Grant seemed to be more than the Child Support Grant. Could the Children's Institute and Center for Child Law help with information about incidents reported in Limpopo and other parts of the country, where people borrowed children to go and apply for grants? This worked against the objective that was being motivated at this meeting. In their solutions, the Children's Institute and Center for Child Law did not specify where the money should come from to top up the grants as recommended. Mobi.com was also doing research on child support grants. Was there any relationship between all the agencies that were focusing on child research? This would help to have a comprehensive package of inputs.
OUTA had indicated that they had done a study on the role and relevance of the Parliamentary Constituency Offices (PCOs) and the existence thereof. It would be very important for the Speaker of Parliament to know if parties were really utilising the resources they are given for MPs to have a presence in the communities, and to be able to service them.
Did OUTA also have the opportunity to make these presentations to municipalities and provinces? Some of OUTA’s indications were related to audit outcomes of municipalities and provinces. Provinces needed to have a direct linkage and oversight over municipalities. It would be important for the Committee to know if OUTA had any engagements with provinces and municipalities, because such information was valuable for planning and projections in the provinces and municipalities.
On the fuel levy for major road infrastructure, how much did OUTA suggest the fuel levy should be raised by to cover the challenges faced by the 750,000 kilometres of road network,. Only about 30 percent of those which were in good condition were under the South African Roads Agency (SANRAL) which operated the National network?At times one could not differentiate district and municipal roads, and the regional and provincial roads. They were just clubbed together. The Minister of Transport had spoken about roads in municipal areas not being his responsibility. But the country had a responsibility to ensure that the norms and standards of the roads were something to be proud of, regardless of whether they were municipal, provincial, or national roads. However, if the fuel levy should be for the funding of the road infrastructure, how much should a quantum be? Motorists would be over-taxed. Members understood the concerns about the RAF, but there were now efforts to address the challenges being faced by it. The Board and the new CEO needed to be invited to the Committee to inform Members on what they were doing. There seemed to be light at the end of the tunnel. How much did OUTA suggest that the fuel levy should be increased by? Would ordinary South Africans be able to afford this fuel levy?
She supported COSATU’s point that the Government Employees’ Pension Fund (GEPF) should be used to help struggling public servants. Some public servants who contributed to the GEPF were in huge debt. Some of them did not even qualify to get loans to build homes. Public servants lived in shacks, only to die and have their beneficiaries receive the benefits. Was there a particular percentage that COSATU was suggesting should be utilised by the GEPF to support struggling public servants to become homeowners?
There was mention of the Social Relief of Distress (SRD) grant. How did COSATU suggest the government should fund a Basic Income Grant (BIG)? The debate about the need for a BIG is getting into fertile ground. However, considering budget cuts this financial year, where did COSATU suggest the BIG could be funded from? What would be the guidelines other than the fact that the person was unemployed? On the suggestion of a temporary intervention of extending the SRD, how did COSATU suggest it should be funded? A presenter in the previous public hearings had said the rich could be taxed. However, in considering the motivation that the South African Revenue Service (SARS) needed to be capacitated and supported to be able to collect more revenue, the rich could only be taxed up to a particular threshold. Beyond that, the rich would then become a burden to the state because they would have to qualify for certain tax breaks to make it possible for them to become consistent contributors to the revenue fund.
The Chairperson thanked Ms Peters for facilitating the meeting while he had a technical fault. He thanked the Children's Institute and Centre for Child Law, PSAM, and COSATU for taking time to talk to the Committee and raising issues which concerned the wider public. What the Children's Institute and Centre for Child Law presented reminded him of a TV story from KZN, where one old lady lived with a lot of children. The children travelled a distance of more than 100 kilometres to sell brooms, when they were supposed to be in school. This summarised the plight of some children. Members congratulated the KZN Government for responding to that disaster. MEC Jomo Sibiya, the Premier and other departments went to attend to that case. However, this showed that there was a big challenge as far as children were concerned. Was somebody not getting money for those children? For those from rural areas, a parent would be living in an urban area and getting all the money, while leaving the children in the care of a grandmother. The parents knew that they must collect grants for the children, but most of them did not reside with their children. Government and the community in general needed to consider this. Somebody was getting money for those children.
Ms Peters continued facilitating the meeting while the Chairperson tried to log back into the meeting.
Public Service Accountability Monitor
Ms Zukiswa Kota, Head of Monitoring and Advocacy Programme (PSAM), thanked Members and said she was also encouraged by the engagement and inputs from fellow members of the public.
The question about the role of MPs in relation to recommendations on irregular expenditure was an important one. Part of the PSAM’s written submission outlined some of the areas that were particularly problematic, with proposed solutions. It was encouraging to see the amount of work that the Auditor-General of South Africa did on a regular basis to outline things like the poor internal controls that often resulted in irregular expenditure. This was work that had been done already and was available to committees. In most instances, harnessing and leveraging the audit findings by the AGSA was very important. Secondly, the high levels of tolerance for noncompliance in provinces that had been outlined year after year was one area in which committees could call accounting officers to account. When accounting officers presented to Parliament, the committees on appropriations and others should hammer hard, based on the very important findings from audits by the AGSA.
Another area of concern in PSAM’s written submission was monitoring and oversight of departmental procurement. It considered some of the findings by the Special Investigating Unit SIU and the AGSA, especially now in relation to the COVID-19 context, but also beyond that. Much of the work for committees would be to hold to account procurement officers and those responsible for supply chain failures within departments and across provinces. Procurement is a fundamental area whether in education, health, or other sectors. Committees could facilitate the work that the AGSA had been doing to date, to create much greater awareness on the importance of oversight, auditing, and audit terminology. This empowered many within constituency contexts. This was another area where MPs could play a role by creating and helping with that awareness within constituencies. An example was the findings of the AGSA in relation to the COVID-19 procurement, and the role of civil society and members of the public in giving input on what is happening on the ground. MPs could be involved in this area whether during constituency periods, or in the regular work of committees in the context of education and engaging with their constituents. That was another space for leveraging and harnessing the work that was already underway and happening routinely through the AGSA. The preventative aspect and preventative controls were important. When committees sought to hold responsible the Executive and accounting officers reporting to them, there must be questions on what preventative measures are in place to avoid irregular expenditure and other non-compliance. She thanked Members for other observations made.
Children's Institute and Center for Child Law
Ms Hill thanked Members for the comments, and said it was good to feel heard in Parliament. There was a lot of pain in the country, from issues of children, to railways that did not work. Hopefully, this information got to National Treasury. The Children’s Institute and Center for Child Law did engage regularly with the Treasury, but sometimes it was very difficult to convince them. It could be difficult for the Department of Social Development (DSD) to convince the Treasury of some things. The Treasury was in a position of power where it could at times just make policies without other departments.
While the Children’s Institute and Center for Child Law were happy to have come to the Committee, they were unsure about how the process worked from here. While understanding that, based on the Constitution, Parliament had authority to amend the budget, the Division of Revenue Bill had been passed and departments were already expending the budgets. Thoughts were now on the October MTBPS to push for budget changes or additional budget within the current year. Since the Children’s Institute and Center for Child Law were not very familiar with the Committee, it would be important to know if the Committee met and held public hearings in July ahead of the budget and brought Treasury into those public hearings so that Parliament could exercise its oversight role and ask Treasury to explain its decisions. How could the engagement continue through the Committee? How would the process work so that the institutions had an opportunity to influence the budget process?
Responding to Ms Peters, she said all the research of the Children's Institute was national. The work focused almost exclusively on policies and programmes of national scope. It was the same with the Centre for Child Law which also worked nationally and took on cases that had national and systemic impact. Both organisations worked very closely with collaborative civil society groups across the country. The research often drew on the work of Statistics South Africa (StatsSA). An important point was raised in one of the presentations about the reduced funding for Stats SA, which was an important source of information that enabled tracking of household situations across the country. That national resource was very important.
On concerns about children in the streets, there were 20 million children in the country and school attendance rates were very high. However, they were lower for younger children because Early Childhood Centres were not always available, affordable, or fully funded. This was another issue that the Children’s Institute and Center for Child Law had been raising in other forums. The important thing in considering the need to support families who were struggling to care for children was precisely this issue of decimation of the welfare services in the country. Social workers needed to be on the ground in the community. They should not be sitting at desks in offices pushing papers around and chasing foster care backlogs. The solution that was described as the Comprehensive Legal Solution was specifically designed to address that problem.
On the question of where the budget should come from, the Children’s Institute and Center for Child Law reiterated that their narrow presentation was not asking for more money, but rather to correct the fact that the country went backwards. The state had effectively taken money away from orphaned children by reducing the FCG budget and had allocated the savings to a non-child item. Social justice iwas at the core of the Constitution, but often when organisations who worked to achieve social justice made these points, questions were asked about where the budget should come from. If Treasury had been asked where it was going to get the budget to bail out SAA, and it responded that it was taking from social grants meant to go to poor people and orphaned children, that might not have been approved by Parliament. In this instance organisations were not asking for additional budget, but simply asking for a replacement of the budget that was already there and which was taken away.
On the case in KZN of children having to travel long distances to sell brooms to support themselves, these individual cases were examples of systemic problems of high rates of poverty. Even those families who did receive CSGs struggled enormously to provide for the children. This was partly because the CSGs were too small. Secondly, there was a missing area where there were large numbers of unemployed people who were caregivers, but were not able to access any social assistance for themselves. This was another big policy question about comprehensive social protection. She apologised for missing the last question from the Chairperson as the connection had frozen.
Mr Johnston thanked Members for the questions and comments. On the issue raised by Ms Hlonyana who said she hoped the government was listening, he said that OUTA expected that was so because the majority of Members of the Committee were from the ruling party. He apologised for the statement made on the Special Appropriations Bill submissions happening earlier. Probably this had caused some confusion about public hearings. The statement made earlier was that he did not want to go into detail about it, knowing that the public hearing was coming on Friday, and he did not want to speak on behalf of his colleague who would be presenting there. OUTA had made a separate submission on that. However, this question was important, following remarks of the previous speaker about the timing of this hearing, and whether it had any impact at all on the budget. Previously, more experienced Members particularly of the ruling party, for example the previous Chairperson of the Standing Committee on Finance, would give responses to say institutions should not complain about the process because that was what it was. Institutions were told to just accept that and be grateful. If this process were to happen earlier, institutions would then proactively comment on what the National Treasury intended to table as the Appropriations Bill the following year, rather than commenting in retrospect. Institutions could influence that.
The question from a member of an opposition party was appreciated. Civil society and opposition parties were in a similar position of trying to persuade the ruling party to change its mind about certain things. But for that to happen, the ruling party must be susceptible to change, and listen to public voices that might differ from its own decisions. However, it would be more useful if that were to happen while the decisions were being made, and not afterwards.
On the comment made about cutting the Cabinet, it was acknowledged that EFF had also been pushing for this. If civil society was saying this was something that should happen, if the sitting President had committed to it, and opposition parties wanted it to happen, surely this Committee could make a recommendation to have this raised at the top of the government's priority list. Although many people might be frustrated about such a decision to consolidate the Cabinet, unpopular decisions needed to be taken. This was something that could happen very quickly if there is political will to do so.
He apologised for not numbering the slides and said that would be done in future.
On the issue of constituency offices raised by Ms Peters, he said this was something that OUTA had not noticed anyone else pick up. There was an amount of money, coming from the fiscus through Parliament, flowing into political parties that was supposed to be funding these constituency offices. These were supposed to be the bridge between communities and Parliament. However, the report by the Joint Standing Committee on Financial Management, suggested that there was no real measurement of the performance of these offices and that some did not seem to exist, yet money was continuously allocated. This was an important principle that the presentation was trying to bring across. OUTA would take this further, but it would be useful for this Committee to also take it up and make a recommendation that the financial records of constituency offices be made public so that those offices and political parties could be held accountable for that money.
On whether OUTA had opportunities to engage with provinces and municipalities, there had been exceptional cases of that happening, but in general it was not taking place. OUTA would like to do that. The PSAM also made it very clear how that could instil some confidence in the public that the government was listening and willing to change the way it spent money in response to people's priorities in their everyday life. This was not seen as happening in this Appropriations Bill and that was a serious issue. OUTA would continuously try to engage with the provinces and municipalities, but Parliament and this Committee needed to take some responsibility for oversight by calling provinces and individual municipalities to come and account on what they were doing to alleviate situations such as the Eskom debt.
On the question about how much the fuel levy should be increased by in order to service the entire road network, he apologised for misspeaking as that was not at all what he was suggesting.. Ms Peters had said that the Minister of Transport had said that municipal potholes were not really his problem. That was the problem in general. Intergovernmental fiscal relations were not constructive, with communication and a comprehensive strategy to deal with the road network. However, OUTA was not suggesting that the fuel levy should be used to finance roads across the country. The fuel levy was one of the few sources of Government revenue that was ringfenced. The comment made in the presentation was referring to the Road Accident Fund being a beneficiary of that ringfencing. On many occasions the National Treasury had refused OUTA’s request to ringfence, but it did ringfence. The problem here was that this money was going to the RAF. Treasury had stated that the accumulated deficit of the Road Accident Fund was set to be roughly R590 billion by 2022/23. That was an enormous sum of money. If additional revenue was raised by increasing the fuel levy to support an institution that was obviously financially unsustainable, why could that not be done for capital expenditure for investment in infrastructure, as COSATU had also alluded to? Why could that not be done as opposed to money being allocated to the RAF? Many years ago, OUTA had said that the fuel levy could be used instead of e-tolls, specifically for the GFIP. That recommendation was not heeded, and e-tolls were basically pushed forward, and were still being pushed forward. There was still no resolution about that. Clearly it was not financially sustainable. In the meantime, a lot of debt was accumulated. If the proposal would be accepted to not allocate money to the RAF but to something like the GFIP specifically, the debt would not have accumulated. Besides, there were also very serious allegations of corruption in those kinds of contracts, in addition to the secrecy in road tolling concessionaires and their relationship with SANRAL and how much profit they made. The government would need to justify any decision to raise additional money from the public.
Mr Parks agreed with the point raised by Ms Peters about everyone having the responsibility to contribute, compromise, or even sacrifice at times for the broader good. This did not just extend to parents taking responsibility for their children, but everyone helping to rebuild the economy of the state. This was COSATU’s motivation in the past year of the pandemic in calling for the release of about R70 billion from the Unemployment Insurance Fund, which was the workers’ fund, into the economy, into workers pockets, to give them money to buy food, to keep their companies open to prevent retrenchments.
COSATU was also motivated to assist Eskom with its issues, including the recurring debt. In terms of government’s Economic Recovery Plan, COSATU had looked at supporting local procurement in different sectors, bargaining councils, and industries, although in a small way.
COSATU also supported the call from public servants to allow those public servants who did not qualify for bank loans or Reconstruction and Development (RDP) housing to get affordable and competitive GEPF loans. How could police officers who earned R180 000 annually afford a home loan? It meant they were condemned to living in backyards and shacks. This was where people were open to the temptation of corruption because they were simply struggling to survive. COSATU was pushing for the GEPF to resolve this issue soon. This was also a way of easing pressure on the government wage-bill by helping public servants who were struggling because they were highly indebted.
Referring to the R350 COVID-19 grant, Mr Parks said that in one way or another, everyone supported some form of basic or universal grant. There were many issues on the R350 grant, which covered those who did not receive any other grants from the State. There had been countless problems, including people not receiving it. However, with all its imperfections and the small amount, it had still reached millions of people who otherwise would have nothing with which to buy bread. The long queues showed that people wanted it. Now when there was a recession was when people needed to have it, and not when the economy was growing and unemployment was decreasing. The cost per month was approximately R1.8 billion, less than R20 billion a year. This was about 1.5 percent of the national budget. It was easily manageable without breaking the fiscus and being reckless with the finances, as state finances were extremely overstretched.
Ms Peters had asked about the funding for this 1.5 percent of the budget. Hard solutions must be looked at, and the hard solution was that hundreds of billions of rands were lost to corruption and wasteful expenditure. There were never ending stories, for example at Eskom, Transnet, and across the board. This could be tackled. The fact that the government and Eskom had managed to reduce Eskom debt by about R80 billion in the past year showed that, with determination, things could start being fixed. Ms Peters was 100 percent right, there was limited space to increase taxes, and the tax ceiling was being reached in many areas. There were a few areas that could be tweaked here and there, such as income tax upon those who earn above R1.5 million. But the real way to generate more tax revenue was to capacitate SARS to implement lifestyle audits and tap on the massive tax evasion gap. The 95 percent of all goods that were not inspected for customs duties in the ports could yield hundreds of billions of Rands, in duties on clothing imports, tobacco, and alcohol. Even with the five percent of goods that are inspected, there were huge amounts of fraud taking place, where Chinese clothing came in and the true value of the goods was under-reported. Bribes were paid to the officials to accept that it allegedly cost R2 to produce a suit from China, yet in reality it would have cost at least R1 000.
There were additional ways to generate savings and thus free up money. There could be a single wage agreement for the entire state, all the 1.2 million employees of the state. Money could be freed up by reducing what was paid to politicians in executive offices, specifically putting salary caps on what management in SOEs earned. There were other leakages in the state. In the past Medium Term Expenditure Framework, R13 billion was spent on building six new government head offices, and even revamping the consulate in New York. That was half of what the R350 grant would cost. The benefit of the previous year’s R350 grant was that money was spent in the local economy on food, electricity, and other needs. Government would get more money back through VAT and electricity tariffs, among others. It was not lost in wasteful expenditure.
Ms Hlonyana asked the PSAM to elaborate on points they had raised about breakdowns in the process leading from policy to budgeting to spending and service delivery.
Ms Peters said that, as she pointed out in the last public hearings, every time the Committee received inputs from the public about some of the challenges of society, Members realised that the time allocated was limited, and there was a need for more time. In future, presenters should be called back for additional engagements. It was pleasing that they had an opportunity to present to portfolio committees, which meant that there were more ears of MPs listening to their inputs. However, when it came to dealing with the actual rands and cents, Members would need to apply their minds more.
Referring to OUTA’s response on using the fuel levy for road infrastructure, she said OUTA would know that it had always been said that the GFIP was not a transport issue but rather a funding issue. It was good that it was now coming to the fore. Probably, when the Department of Transport was busy with SANRAL on the Road Infrastructure Funding Model, OUTA and COSATU would be among the key participants. However, the deterioration of the road infrastructure in municipal areas was a concern. Although the Minister of Transport spoke the way he did, the understanding would be that municipalities needed to jack up their revenue collection. If inequality and poverty were increasing, it meant revenue collection in municipalities would continue to be a challenge. There needed to be a comprehensive approach to road infrastructure funding, not just looking at the national network. Members were enlightened and happy with the presentations for the day.
The Chairperson said the Children's Institute and Centre for Child Law had partly addressed the question about which grant could be reduced to increase the Child Support Grant. How far had the Children's Institute and Centre for Child Law gone with the National Treasury, and what type of response did Treasury give? It was important for a nation to invest in its children because investing in future human capital was very critical for the economy of the country.
On OUTA’s presentation, the question of R4.5 billion paid for people who were staying at home and not doing anything was a problem. This was money that the people of South Africa invested without any return. In most cases, the problem was not the people who were suspended, but the organisations themselves, government or SOE’s, who suspended and then started investigating while people were staying at home. This was not a workable formula. There were people who had been at home for between two and six years while they got paid. Government just did not finish these cases. Investigation should have been happening first. This resulted in service delivery being compromised because in some instances these were the executives in government or in SOEs. Portfolio committees and Parliament must find a way of dealing with this. COSATU must be fully aware that there was a Constitution and people had rights. The leakages in the economy and in the public purse were not something that the people of South Africa could stomach, especially under present conditions. There is no value in this money, it could even be called fruitless and wasteful expenditure.
OUTA said it would like to engage with portfolio committees. What was stopping OUTA from this engagement? It was possible to write to any portfolio committee and ask for an audience to present a matter.
A figure of R300 billion in illicit financial flows had been cited and it was said that there was tax erosion and profit shifting. This was talked about yearly. Did OUTA think that it was only a money issue, or could there be other issues that were a hindrance in addressing it? What exactly did OUTA mean in the statement about the relationship between SANRAL and some of the partners in the PPP being opaque?
On the presentation by the PSAM, the Constitution enjoined Members as public representatives to engage with the public through their formations or individually. Did the PSAM not think that the ways that it was proposing were largely elitist, while the people who were most affected by the decisions of the Committee were the poorest of the poor and the marginalised who would end up not being able to engage with the process? What would the PSAM propose for the parliamentary committees to engage with people in rural areas? What was the PSAM proposing, taking into consideration all the constraints, especially that of time.
On COSATU’s response, the Public Procurement Bill went out for public comments. Did COSATU make inputs on this? Could they share those inputs with the Committee? COSATU used to have a very good research capacity, was this still the case? Many proposals had been made, as far as spending was concerned, on basic income grants, extension of other grants, and bigger budget allocations for other departments like Tourism. Were there any statistics or models that COSATU was using to evaluate this to ensure that there was no debt crisis or debt explosion, with the country losing its sovereignty.
Members of the governing party agreed that the GEPF should also be used for the benefit of the owners of that money, who were the workers themselves, as Ms Peters had said. One would struggle to find a company on the Johannesburg Stock Exchange (JSE) which is not funded by the Public Investment Corporation (PIC). However, COSATU was hardly heard talking on issues which affected private companies, because COSATU was ultimately a shareholder in what was happening in those companies. For instance, considering payments of some executives of companies on the JSE, one executive would get about R60 million. What was COSATU’s position on private companies? COSATU had presented that it had made proposals for assisting Eskom. How far was that process?
Regarding the question from the Children's Institute and Centre for Child Law about what happened following the presentation to the Committee, the Committee raised the issues with the whole Parliament through its reports and debates. The Committee also interacted directly with the National Treasury to raise the issues. Since there was also the MTBPS, as Ms Hill had said, some of the issues were reflected in the MTBPS. It is very important for the government to interact with the public. This engagement was Parliament’s own way. However, nothing stopped institutions from interacting with the departments and the ministers concerned.
One of the frustrating things for the Committee was that issues were raised about the need for more budget for certain departments, yet at the end of the year those institutions were unable to use that budget. Some of the money that went there was money that the country had borrowed at a cost. While service delivery was compromised by not spending the money, the cost of the money also fell into the category of wasteful expenditure. Sometimes the money would be in the bank and the interest that was earned would be far less than the interest that the government had borrowed at. This was one of the challenges that Parliament and the country were facing, and it was frustrating to the Committee.
Following up on what Ms Peters had said, the input in these public hearings helped the Committee to recognise some of the blind spots. National government was a very critical level of Government, but about half of the budget went to provinces and local governments through the Division of Revenue Act. The capacity of the institutions who presented their submissions in this meeting might not allow them to reach all the local governments, but it would be good to find ways of engaging with the provincial governments. For instance, for the big spenders which were health and education, most of the money was spent at provincial level. There were also many grants which went to provinces and local government. It would not be a waste of time for the institutions to interact with those levels of government.
Center for Child Law
Ms Hill responded to the question about which grants could be reduced to increase the CSG. She said Members would have seen her smiling if her video were on. There was agreement on the need to invest in children, and the Children's Institute and Centre for Child Law were not proposing to redistribute allocations within the social assistance budget. The grants went to people who needed them, such as elderly people who did not have private pensions, disabled people who were unable to work, children in the protection system where families needed to provide care for them on behalf of the state, and children in very poor households. These grants could not be reduced. It was not a matter of taking money out of the social grants budget. This had already happened. The Treasury took R36 billion out of the social grant budget of the MTEF. This was heard from colleagues in the Department of Social Development who were instructed to reduce the budget. Where was that spent? No one knew. Enough had been heard about bailouts of SOEs and wasteful expenditure, which meant there was fat in the budget somewhere. Certainly, the government should not be reducing the social grant budget in any respect in a time of a health pandemic and an economic recession. The country was ultimately about people and infrastructure was there to serve them.
She appreciated the clarification of the process after the hearing. The Children's Institute and Centre for Child Law had also engaged with the Portfolio Committee on Social Development on the budget. They were not really able to play a role in amending budgets. It was a surprise to note that the CSG top up was not included in the budget. The expectation of everybody was that it would have been since the Portfolio Committee on Social Development had worked very hard to pass the Social Systems Amendment Bill the previous year to make this possible. There was communication failure within the different parts of Government. The fact that they only found out after the budget decision had already been made showed why it was very important to open up the budget decision making process before the Treasury made decisions, or in July before the decisions about the October budget were made.
Public Service Accountability Monitor
Ms Kota responded to the question on the breaks between policy and service delivery. She said the presentation by Ms Cele had shared PSAM’s perspective of using a lens of social accountability. Within that lens, one of the primary areas of focus was the extent to which the aspirations within existing policy (fiscal or otherwise) could be attained, with the bottom line being service delivery. There was a recent report on poverty and prosperity that reflected on the COVID-19 crisis globally. Some of the overarching issues that persist in low to middle income countries were reflected in that report. Leadership was central in dealing with the tough challenges in eradicating inequality and poverty, unemployment, and the issues bedevilling service delivery. The role of invested leadership that prioritised a range of issues could not be over-emphasised. Solid leadership at all levels would help to ensure that policy aspirations met service delivery needs.
There were questions about the human rights orientation of the fiscal framework in South Africa, and the human rights orientation of the budgets, which was also in the PSAM’s submission. Yet even within the existing context, there was not enough political and administrative accountability and responsiveness to ensure that service delivery goals were met.
Sometimes, the existing data did not reflect realities on the ground. Service delivery needs could not be met where there was no credible data and up-to-date information. This needed robustness of implementation systems in both fiscal policy and service delivery, particularly at provincial level. The Chairperson had raised an important point about the local government and provinces. Where the rubber hit the road in relation to service delivery, the feedback loops to ensure the link between the plans and what happened on the ground were missing. There were many plans including annual reports, annual performance plans, and operational plans. What was missing was the voices of the people who were ultimately impacted. The need to nurture social solidarity and public trust might seem like a soft point in terms of the technical considerations of plans and budgets, but it iwas another area of importance in ensuring that the public had trust in both the elected representatives and the Executive to engage in participatory processes of input. There were capabilities in implementation which were fundamental, and leadership spoke to that.
Committees had a role to play. On one hand, the ground was laid out by the findings of the AGSA. There was a need for committees to play a stronger role in parliamentary oversight by calling accounting officers and ministers to account where those links did not happen. Committees must question why there were breakages in those links. This was still about oversight, which was a fundamental problem even for provinces. Over the years, the PSAM had particularly engaged the provincial legislators in the Eastern Cape. Another project also considered the extent of openness, accessibility, and the space for participation in the provincial area.
This related to the other question raised by the Chairperson about the PSAM making proposals that were elitist in terms of participation. What the PSAM had attempted to do in the written submission was to outline the mechanisms by which those who were not budget advocates for example, who were most directly impacted by poor service delivery, were still able to inform the space. One area that the PSAM had considered in its work was the platforms that were offered by the legislators at the provincial level in a programme called “Taking the Legislature to People”. The PSAM had raised ideas for ways in which such a platform could acknowledge that “the people” are beyond civil society organisations, coalitions, and organised movements. The Chairperson’s point was well taken, and the PSAM had tried to outline responsibility for public education and awareness. Undoubtedly, this was a very technical space, since budgets were complex, and one cannot pretend otherwise.
The PSAM also suggested that perhaps there was a role for Public Parliamentary Education Officers and offices to do deeper exploration of the linguistic challenges. Another area was the zero rating of online platforms to open accessibility to legislators and committees. There were many proposals in the submission, and the PSAM was happy to share the others with the Committee. The emphasis was precisely to ensure that it was not lust those with means or civil society organisations based in Cape Town, Johannesburg, and Pretoria who have access, but that anyone who had a perspective to share with MPs and committees could do so.
On the comment about ways of engaging the provinces, the PSAM worked in six Sub Saharan countries. The challenges at the provincial level and engaging with provincial legislators were important. The PSAM had been encouraged by recent developments, for example the introduction of provincial amendments bills. The PSAM has made comments on this, emphasising public participation, transparency, and openness. The provincial spaces were significant, but the problem was scope and reach because of the nature and work of the PSAM. The hope was that in engaging the National Assembly, and committees of the National Assembly and NCOP, there would be ways to connect those dots.
Mr Johnston thanked Members for the questions and said while civil society was always very critical, these engagements over the years were getting better, and more substantive and constructive.
He said he would not comment much on the questions raised by Ms Peters since the Chairperson had made responses. He agreed about municipal roads being in a crisis, and the big role that local authorities and provinces needed to play in overseeing how that money is spent.
He appreciated the Chairperson’s agreement on money paid to people who had been suspended not bringing any value to the public. This was a serious issue and the Chairperson and COSATU had referred to the need for expedited investigation and prosecution. OUTA had spent many resources and time over the past five to ten years to bring substantive evidence to law enforcement agencies to help them do these exercises more quickly. However, that did not happen. There needed to be frankness and honesty that in many instances, these were self-correction issues. Law enforcement agencies had capacity constraints themselves. In many cases, it was an issue of political will to self-correct, but this was not seen. People could not stay in their positions until investigations were completed if those investigations took two to five years. In many instances the allegations were about money being siphoned off, contracts being inflated, and procurement policies being flouted. All that translated to the money being wasted. An amount of R2 trillion would be spent in the current financial year. There was money that was just being misappropriated. Parliament had not intervened significantly in what was put forward by the Executive arm of government for years. What the Executive put forward was a function of political decision making, and that had not changed significantly over time, even though there was this global pandemic. There had been an economic recession and crippling corruption. This was still being exposed. The magnitude of what happened at Eskom and other institutions was only becoming known now, but it involved enormous amounts of money. There should not be questions about where money was going to come from. Money needed to stop being wasted, and the mandate of OUTA was to try and contribute to curbing the abuse of tax revenue.
On the question about what is stopping the institution from engaging with portfolio committees,
OUTA tried its best, and some chairpersons were responsive while others were not. OUTA had also tried to alleviate that problem by engaging with Presiding Officers and House Chairpersons to intervene to get responses from some Committee Chairpersons, because in some instances they simply did not feel accountable to anyone in the public. They felt accountable to their political parties, and that problem was ongoing. It was good that it was being talked about, but it was something that still needed to be resolved.
What OUTA was recommending was not ad hoc engagements between the public and portfolio committees, but more structured and proactive engagement. For example, the budget review and recommendation reporting processes of each portfolio committee could be made more inclusive by regularly providing a space for people to come and think about various departments’ budgets and discuss why the previous year’s budget did not have the intended impact. This could be done every year at a predictable point, probably before the MTBPS. The committees could only make recommendations, they could not dictate to the Executive about what must be done. But if there was solidarity in the public to say the budget had a problem as it was not achieving its intended outcomes, then Parliament would surely have the mandate to ask for it to change, and the departments must change.
OUTA would continue trying to engage with departments, municipalities, and other authorities directly in the same way as National Treasury. But Treasury had made it clear in the engagements over the years that they also had limited capacity. To a large extent, they also acted on political directives. That was where the decision making happens, not necessarily in Treasury. Probably, the Treasury would like to see Parliament playing a strong role to sometimes say “no” to budgets.
The question about limited funding for addressing the R300 billion in illicit financial flows was an important one. It was partially about how much money was allocated to the NPA, SARS and SIU. There is definitely a capacity constraint, but what OUTA had come to believe was that over the past five to ten years, and probably beyond, those institutions’ capacity was purposefully eroded to facilitate the abuse of tax as an organised state-capture project. Obviously, allocating more money would not solve this. It was believed that systematically the right people were being put into those important positions, and with appropriate resources they would be able to fix that issue.
OUTA hoped that some of the specific recommendations made in this hearing would hit the road. For example, money was being allocated to the State Security Agency, and the public had no idea what that organisation did with that money. All that was known was that there were allegations of serious mismanagement of assets, while money was not allocated to Statistics South Africa. Surely the Committee could make a recommendation that something like that be overturned if it really wanted to.
On the question about SANRAL and their contractual relationships, OUTA had engaged in litigation on this issue. Ms Peters had said OUTA should talk to SANRAL to be brought to the table. OUTA would like nothing more. It was not necessarily this Committee’s or Parliament's problem to check what was happening between SANRAL and international or domestic private sector partners to see how they decided to finance and maintain certain major infrastructure projects. However, when people were asked to pay toll fees, they should know what that money was used for. Currently, that was not the case because those contractual agreements were opaque. They did not allow for sharing of the terms of those contractual agreements with third parties. That was a classic private sector argument. But SANRAL iwas a public entity, and through parliamentary recommendation, they could be told to bring the public to the table to see what was going on, so that they could be held accountable and that the companies that worked for them as subcontractors could also be held accountable.
On the question about the importance of engaging with provincial governments, OUTA tried but sometimes provincial governments are part of the problem. The Department of Cooperative Governance and Traditional Affairs (CoGTA) was the custodian of local government, and Parliament did have authority over CoGTA. The public would like to see that sort of intervention from portfolio committees. The Standing Committee on Public Accounts (SCOPA) was one committee that had done that. They had shown that it could be done. There was a municipality at Masilonyana in the Free State, where many of the issues being talked about were manifest. There was virtually no local government in place as it had basically collapsed, as in many other places. One thing that was continuously prioritised when these collapses happened was that people still received their salaries, whether they did their job or not. That was something that absolutely must change. When there was too little money, social expenditure and expenditure on infrastructure needed to be prioritised.
Mr Parks agreed with the comments from the Chairperson on the endless suspensions taking place in the public service. For instance there was the most notorious case of the former Chief of Crime Intelligence who was on suspension for ten years. It underlined the principle that “Justice delayed is justice denied”. The country could not afford the shortage of public servants and skilled workers while there were people on suspension in perpetuity.
The Treasury could always correct him if the figures were wrong, but the government had spent roughly R100 billion on insurance and legal claims, especially for healthcare malpractice. Management needed to be seen tackling this more decisively, because the state could not afford to waste a single cent.
On the Public Procurement Bill, COSATU had been waiting for a very long time, and had raised it with the President in 2019, and with the Treasury, and the Minister of Finance, Mr Tito Mboweni. The government had now availed it for public comment. They were committed to more engagement later this year. Hopefully, those public hearings would be decisive and bold enough to address the Public Procurement System, because SOEs and local governments were seats for wasteful expenditure and corruption.
COSATU was glad to share with the Committee its initial comments and principal position on the Bill. COSATU wanted a single, open, and transparent procurement system binding for every organ of state, not just the public service. This could then be linked to local procurement, since there were too many departments which often gave tenders illegally for imports. It would also help effect economies of scale, and also save money for the fiscus.
COSATU was glad to share with Members some of the research done on economic interventions, and the public service wage bill. COSATU agreed with the Treasury that the debt must be bought under control instead of the massively increasing trajectory. It would make the situation far worse to go the Greek route, where the country would lose its sovereignty by going to the IMF for a bailout and have them impose conditions of austerity which would be brutal. When COSATU drafted its economic intervention package proposals in October 2019, the idea was to find ways to help address the fiscal leakages from corruption at the SOEs, wasteful expansion, bloated management in the state, recapacitating SARS, and growing the economy.
COSATU was not isolated from the well-being of the state. COSATU strongly agrees with the Chairperson’s comments on the PIC and the need for shareholder activism including from unions, the PIC, and fund managers, as shareholders had been found badly wanting in some of them. In the Fifth Parliament, shareholders were found wanting on the issue of Steinhoff. PIC was a large shareholder of Steinhoff, but the PIC representatives themselves did not even attend the Steinhoff meetings after the explosion of corruption was exposed. Companies called payday lending companies which targeted public servants had been seen exploiting their vulnerabilities, yet the PIC was a majority shareholder. This made no sense. As part of the organised labour’s commitment to the economic recovery plan, there was training of union representatives and union investment fund trustees, to embrace the spirit of shareholder activism. The aim was to tackle the issues of excessive executive wage packages, wage gaps, local procurement, corruption, and prioritising local investments and things that could grow the economy. People could not just collect allowances for sitting on boards, and not champion the things which all unions were calling for and desperately needed This was not just a COSATU programme, but it is being done in collaboration with other federations in the National Economic Development and Labour Council (NEDLAC) like National Council of Trade Unions (NACTU) and Federation of Unions in South Africa (FEDUSA), because all are on the same page. There had been weekly meetings at NEDLAC with the government on the various commitments in the Economic Recovery Plan, including local procurement, SME financing, transport, and energy, among others. These things needed to succeed, the country could not afford for the government to fail.
On the executive wage gap, there was a Companies Amendment Bill at NEDLAC from the Department of Trade and Industry (DTI) which sought to require that in future companies disclose the wage gap - what was paid to the CEO and the lowest paid worker. The colleagues in business were not keen on it, but transparency should not be feared. In many of these companies, the PIC was a shareholder, and these were requirements of the JSE. For there to be an equal and just society, everyone needed to play their role, including the private sector.
COSATU agreed with the Chairperson that it was difficult for Parliament to hold the Executive to account for under-expenditure. That was where political leadership was required. Unions had been engaging with their affiliates to start blowing the whistle on these malpractices, because it was workers who suffered at the end of the day.
The Chairperson thanked all presenters and assured them that the meeting was not just a tick-box exercise; the issues would be followed up on. The issues would be in the Committee’s parliamentary report and the Committee would also ask departments to report back on some of the issues raised with them on behalf of the public. He thanked Members for their participation.
The meeting was adjourned.
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