The Committee received comments and suggestions in a virtual meeting from South African labour and advocacy groups on the implications of the 2022/23 budget and the Division of Revenue Bill (DoRB).
The South African Local Government Association (SALGA) said the proposed increase in the allocation to local government over the medium term expenditure framework (MTEF) cycle would gradually bring to reality the promise contained in the White Paper on Local Government of an equitable share of nationally raised revenue. The budget recognised that local government could not be solely responsible for redistribution and that the national government had a critical role to play in this regard, particularly in respect of subsidising the provision of basic services. SALGA also supported measures to get consumers of municipal services, including government departments, to pay for what they consumed. Members were concerned whether SALGA had enough teeth to enforce consequence management in municipalities, and asked if it was happy with the current equitable share formula.
The Congress of South African Trade Unions (COSATU) felt that the central ideas in the budget and the DoRB were not focused on enhancing the labour-absorbing capacity of the economy. The current economic context and growth trajectory required the government to expand its interventions to deal with the structural constraints which had inhibited the economy from producing employment and poverty reduction outcomes. The budget was not daring or sweeping enough to meet the nation’s challenges head-on. Overall, this was an extremely disappointing budget that repeated old promises, continued its austerity trajectory and was devoid of any new policy interventions to solve the problem of economic stagnation. There were no bold plans to rebuild local governments, which were deteriorating at an alarming rate in many provinces. The state-owned entities (SOEs) did not have a funding model, and budget cuts continued to be imposed on rural development and land reform, sabotaging efforts to implement land reform. The DoRB and the budget were another demonstration of the depressing culture of endless dithering, shifting of deadlines, and a fear of taking decisive and bold action.
Section 27 said the basic education and healthcare sectors would experience reductions in funding in real terms over the medium term, and were reflected in reduced baselines for a number of programmes that were critical to the advancement of people’s constitutionally protected rights, and would be felt on the ground most acutely by the most vulnerable. The immediate and medium-term human rights impact of these cuts must be quantified and reversed. Despite numerous policy commitments to gender-responsive budgeting, a feminist analysis of this year’s DoRB revealed a worrying gender blindness. Reversing the impact of gender inequality, patriarchy and gender-based violence (GBV), all urgently needed in South Africa and demanded by civil society, was notably absent from the priorities of the Treasury’s economic vision for the country. There was also a worrying real-term decline in funding allocated to early childhood development (ECD) over the medium term.
The Budget Justice Coalition said that the severe funding cuts to the provincial equitable share and conditional grants were not justified. Government was too focused on a narrowly defined “debt sustainability,” and had lost sight of its broader purpose and mandate. The state had failed to justify its decision to continue implementing budget cuts as the core mechanism to reduce public borrowing, even amidst significant revenue windfalls. The impact of the budget cuts disproportionately affected the most marginalised and poor in society, and thereby increased inequality. The budget also did not reflect the current crisis in the basic education sector. In the health sector, the lack of new funding for primary healthcare services was worrying, given the dire need to address regression in the screening, testing and treatment rates for infectious and non-communicable diseases caused by Covid.
The Rural Health Advocacy Project commented that little clarity was provided in the budget on how ongoing inequalities and inefficiencies in existing health spending were to be addressed. Unless these fault lines were confronted, South Africa’s healthcare system would remain fragile, regardless of resource availability. It was the government’s responsibility to ensure the optimisation of current health spending to secure more equitable access to primary healthcare towards universal health coverage. This required a human rights budgeting framework that more intentionally aligned economic policy with socioeconomic rights. Building resilient rural health systems was inseparable from this aim.
The Healthy Living Alliance told the Committee that South Africa struggled with a double burden of malnutrition, especially seen in children. The reality was that one in four children was chronically malnourished, which was coupled with increasing child and adolescent overweight and obesity. The need to intervene early was vital, and addressing the current issue of childhood hunger must be prioritised. The reality was that 30% of South African children lived in households living below the food poverty line, where adequate nutrition needed for optimum growth and development was out of their reach. The intergenerational transfer of malnutrition must be addressed through the expansion of the child support grant into pregnancy. By directly confronting excess sugar consumption, the health promotion levy currently served as the one key preventative policy against rampant health conditions such as obesity, type 2 diabetes and other diet-related NCDs, but it needed to be strengthened to reverse the trend.
Members welcomed the presentations from various interest groups, saying that they demonstrated the difficulties National Treasury faced in balancing social, moral and economic imperatives. They asked where they thought the money could be found to fund the competing priorities, given the stagnant economy, corruption, debt and declining revenues.
SALGA response to 2022 DoRB
Mr Nceba Mqoqi, Chief Financial Officer, South African Local Government Association (SALGA), presented SALGA's response to the 2022 Budget & Division of Revenue Bill (DoRB).
He said that since 2021, local government allocations had been increased by a total of R30.7 billion – R28.9 billion in the local government equitable share, and R1.8 billion in direct conditional grants. The gross allocation to local government for the 2022/23 financial year had increased by 11.3%, to R150.6 billion.
The neighbourhood development partnership grant was allocated R800 million in 2022/23, and R856 million in 2023/24 to continue with city‐led employment programmes forming part of the presidential employment initiative.
The municipal disaster recovery grant was allocated R26 million in 2022/23 and R321 million in 2023/24 to reconstruct and rehabilitate municipal infrastructure damaged by the floods and storms in KwaZulu‐Natal in 2019 and 2020.
The public transport network grant allocations were reduced by R754 million in 2022/23 and R105 million in 2023/24 and increased by R621 million in 2024/25. These changes were made to align with the revised implementation plan of phase 2 of the MyCiTi project for the City of Cape Town.
To fund a sports project in Polokwane Local Municipality, R10 million in 2022/231 was shifted from the sports component of the municipal infrastructure grant to the integrated urban development grant.
SALGA noted that the fiscal consolidation course plotted to narrow the budget deficit was promising to bear results, notwithstanding the risk factors cited. SALGA had previously supported the fiscal consolidation as being critical to reduce the public debt burden, restore investor confidence and avoid overexposure to global and domestic risks, and continued to support the initiative. It welcomed the adjustment to the local government fiscal framework because it accorded with what the organisation had been lobbying and advocating for at the Budget Forum, Parliament and various other inter-governmental relations (IGR) fora. The proposed increase in the allocation to local government over the medium term expenditure framework (MTEF) cycle would gradually bring to reality the promise contained in the White Paper on Local Government, of an equitable share of nationally raised revenue.
SALGA welcomed the 2022 Budget as presented by the Minister of Finance, in that it recognised that local government could not be solely responsible for redistribution, and national government had a critical role to play in this regard, particularly with respect to subsidising the provision of basic services – per the White Paper on Local Government, 1998. SALGA supported measures of getting consumers of municipal services, including government departments, to pay for what they consume. It welcomed the increase in the allocation of local government equitable share by R28.9 billion over the MTEF to cover shortfalls from bulk services that could not be recovered through charges to poor households, and the additional allocation of R1.8 billion in direct conditional grants.
As the resource allocations to local government were projected to increase over the MTEF, SALGA would continue implementing the National Executive Committee (NEC) resolutions relating to accountability and consequence management at municipalities. It supported the macroeconomic strategy of the government, including fiscal consolidation, to curb additional spending and maintain the expenditure ceiling as well as reduce the budget deficit and debt to gross domestic product (GDP) ratio.
Mr M Moletsane (EFF, Free State) asked SALGA to give examples of a few municipalities where it had implemented consequence management.
Mr D Ryder (DA, Gauteng) said outreaches needed to be done to make SALGA understand the difference between the National Assembly and the National Council of Provinces (NCOP). SALGA should have concentrated on issues where it had problems, rather than talking about the macroeconomic outlook. He asked if SALGA had the teeth to implement consequence management. The purpose of the equitable share was to help people who could not afford services, but the experience on the ground was that it was cross-subsidising everybody. He asked if SALGA was comfortable with the equitable share formula.
Mr Y Carrim (ANC, KwaZulu-Natal) preferred to see a completely independent local government. However, at the same time, national government must not dump all the responsibility for redress and redistribution on local government. Where municipalities faced difficulties, intervention must be the last resort in consultation with affected municipalities, and the intervention must be to strengthen the power and ability of local government.
Mr Z Mkiva (ANC Eastern Cape) said he had not heard anything about traditional leaders including the positive and negative input from traditional councils, and whether SALGA related well with traditional councils. South Africa was a predominantly rural country and the aim must not be to create smart cities only, but smart villages, as they were the spiritual headquarters of many natives in this country.
The Chairperson was concerned about the misuse and redirection of municipal grants. She asked if any support was being given to municipalities owing Eskom.
Mr Mqoqi responded that SALGA did not have executive powers over municipalities. Its role was advocacy and capacity building. It also acted as an employer body. It lobbied National Treasury, government and the Department of Cooperative Governance and Traditional Affairs (COGTA), which had the legislative power to enforce accountability.
SALGA agreed with National Treasury on withholding or deducting funds where they were misused. It supported law enforcement authorities to use their power to enforce accountability. Former Finance Minister Tito Mboweni had established a local government lekgotla where issues of equitable share were discussed. The current census would ensure that the equitable share was cost-reflective. SALGA could not continue to lament, but also appreciated the work being done in the budget forum. The next budget forum would be at the end of April, primarily focusing on the equitable share. The equitable share had been growing by 9% over the past few years, but it was only 5% if inflation was removed. Support must be given to municipalities to realise their constitutional section 152 responsibilities.
Councillor Lesetja Dikgale said SALGA was working well with traditional leaders. All recognised leaders at the district level participated in meetings, and all the necessary support was given. The Amakhosi were part of rural communities. Municipalities also fundraised for traditional events. It was engaging Treasury and COGTA on Eskom debt, and on how Eskom must relate to municipalities, as it was becoming intransigent. SALGA had a programme on small town regeneration. This also included ensuring mining towns did not become ghost towns. As part of capacity building, it was engaging municipalities in skills development and spending grants.
Mr Ryder said that the equitable share was to assist municipalities with costs of refuse, water and electricity. However, Eskom and the water boards were increasing their prices in excess of 9%. The equitable share was not catching up, and service delivery would go backward in many municipalities.
Ms Khomotso Letsatsi, Chief Officer: Municipal Finance, Fiscal Policy and Economic Growth, SALGA, responded that since 2016, SALGA had been pushing for an increase in the vertical allocation of the equitable share. It had seen only a 10% increase, which was nowhere near the responsibilities placed on municipalities.
Mr Mqoqi added that SALGA's work was multifold. It had consistently submitted proposals opposing the astronomical increases requested by the water boards and Eskom.
COSATU's response to 2022 DoRB
Mr Matthew Parks, Deputy Parliamentary Coordinator, Congress of South African Trade Unions (COSATU), said labour noted the 2022/23 Budget, the Division of Revenue Bill and MTEF tabled in Parliament by the Minister for Finance. The Federation felt that the central ideas in the budget and the DoRB were not focused on enhancing the labour-absorbing capacity of the economy. The current economic context and growth trajectory made it necessary for government to expand its interventions to deal with structural constraints which had inhibited the economy from producing employment and poverty reduction outcomes. The Budget was not daring or sweeping enough to meet the nation’s challenges head-on. An anticipated 1.8% GDP growth trajectory over the MTEF would not see any reduction in unemployment.
Overall, this had been an extremely disappointing budget that repeated old promises, continued its austerity trajectory, and was devoid of any new policy interventions to solve the problem of economic stagnation. There was no plan to fix the economy or create jobs, no plan to fight corruption, and no plan to stop the leakages that had led to 10% of the budget being lost to corruption. There did not appear to be any bold plans to rebuild local governments, which were deteriorating at an alarming rate in many provinces. The state-owned entities (SOEs) did not have a funding model, municipalities were still teetering on the brink, and budget cuts had continued to be imposed on rural development and land reform -- which were sabotaging efforts at land reform) -- the Commission for Conciliation, Mediation and Arbitration (CCMA), and the Department of Home Affairs (DHA). The DoRB and the Budget was another demonstration of the depressing culture of endless dithering, shifting of deadlines, and a fear of taking decisive and bold action.
COSATU applauded the excellent work being done to rebuild the South African Revenue Service (SARS). This had provided a welcome space for the government to provide relief for the poor. Tax relief of R5.2 billion would help protect workers from inflation. COSATU was worried that billions were still lost to tax, particularly through customs fraud and evasion. SARS needed to be further resourced to tackle these challenges. This would help generate additional revenue for the state and protect local manufacturing jobs. Government needed to investigate increasing taxes on the wealthy through income, inheritance, estate, and luxury import taxes and duties.
No increase in the fuel levy would help cushion workers and the economy. The fuel price regime needed to be overhauled, and COSATU hoped that the commitment to do so would not be another false mirage.
The silence of the DoRB and the Budget on clear steps to halt the bleeding of the state of billions of rands lost to corruption and wasteful expenditure was depressing. Government had the legal powers under the Audit Amendment Act to hold offending politicians and managers personally financially liable for wrongdoing. Government needed to return to the National Economic Development and Labour Council (NEDLAC) to engage in extending the ban on politicians doing business with the state. SARS needs to be empowered to undertake lifestyle audits of politicians and senior state managers and supply chain officials. The leadership of the National Prosecuting Authority (NPA) and the South African Police Service (SAPS) must be woken up and made to prioritise corruption cases. The Public Procurement Bill needed to be enhanced and expedited to provide for a single online, transparent public procurement system for the entire state, including SOEs and municipalities. This would help reduce corruption and support local procurement.
The DoRB and budget were silent on numerous municipalities failing to pay revenue collected to Eskom, which then placed Eskom and the entire economy and country at risk. Despite repeated interventions by Eskom to collect municipal payments, municipal debt owed to Eskom was rising at a rapid pace.
Section 27's submission on DoRB
Ms Tshidi Lencoasa, Budget Researcher, Section 27, said the basic education and healthcare sectors would experience reductions in funding in real terms over the medium term. These reductions had been applied to the provincial equitable share and various conditional grants, and were reflected in reduced baselines for a number of programmes that were critical to the advancement of people’s constitutionally protected rights, and would be felt on the ground most acutely by the most vulnerable. This would jeopardise government’s ability to provide quality basic education and healthcare services to key populations. The immediate and medium-term human rights impact of these cuts must be quantified and reversed.
Despite numerous policy commitments to gender-responsive budgeting, a feminist analysis of this year’s DoRB reveals a worrying gender blindness. Reversing the impact of gender inequality, patriarchy, and gender-based violence (GBV), all urgently needed in South Africa and demanded by civil society, was notably absent from the priorities – or even the basic text – of Treasury's economic vision for the country. Gender-sensitive budgeting was important for transformation, sustainable development, and the realisation of government's human rights obligations.
Early Childhood Development’s (ECD) shift from the Department of Social Development (DSD) to the Department of Basic Education (DBE) must be accompanied by an adequate allocation to support the provision of quality universal ECD services. At present, Section 27's submissions showed a worrying real-term decline in funding allocated to ECD over the medium term.
The DoRB had allocated R21.3 billion to the provinces towards the health facility revitalisation grant to improve and maintain 200 health facilities around the country over the medium term. While it applauded Treasury’s ambitions in this regard, it was difficult to see how this goal would be achieved. Firstly, the DoRB proposed cuts to the Health Facility Revitalisation Grant allocations in all the provinces in the next year, excluding the Northern Cape and the Western Cape. Secondly, the increases in these two provinces were not aligned with inflation, resulting in real cuts over the medium term. The spike in illness and consequent hospital visitation during the COVID-19 pandemic had placed significant pressure on hospitals and their already crippled infrastructure and equipment. These budget allocations could not be expected to meet the infrastructure backlogs in the provinces, which predated the COVID-19 pandemic, as well as address the rapid deterioration of hospital equipment because of the spike in hospital visitations due to the pandemic.
The proposed budget cuts and reduced allocations for conditional grants would hamper the ability of the provinces to deliver basic education and healthcare services. The government had not undertaken the human rights impact assessments called for by civil society organisations in terms of its proposed budget cuts. Section 27 called on Parliament to request human rights impact assessments on areas of reduced allocations and budget cuts. Such assessments would enable the government to better understand the impact of austerity on people's enjoyment of socio-economic rights, and provide valuable information on how to mitigate the unequal impact of these cuts, particularly in a post-crisis climate.
Section 27 also called on Parliament to request National Treasury to provide evidence of how the DoRB had adhered to section 214 of the Constitution and considered the Financial and Fiscal Commission's (FFC’s) recommendation for gender-sensitive budgeting. Through these spending cuts, government was entrenching gender inequality and poverty, and reversing gains made during the democratic era. Parliament must demand that Treasury undertake an assessment of the short and long-term impacts that the retrogressive budget decisions of recent years had had on human rights
Budget Justice Coalition on DoRB
Mr Bonus Ndlovu, Organiser, Budget Justice Coalition, said the organisation’s submission on the 2022 DoRB was informed by a range of civil society organisations that were members of the Coalition. Severe real term funding cuts to non-interest expenditure and specifically to the provincial equitable share and conditional grants, implemented in recent years and continued in the 2022 budget, were not justified. The government was too focused on a narrowly defined “debt sustainability,” and had lost sight of its broader purpose and mandate. The state had failed to justify its decision to continue implementing budget cuts as the core mechanism to reduce public borrowing, even amidst significant revenue windfalls, since it had failed to demonstrate that the impact of this decision on people’s hard-won rights was being anticipated. The impact of budget cuts disproportionately impacted the most marginalised and poor in society, and thereby increased inequality.
The 2022/23 Budget did not reflect the current crisis in the basic education sector. In the health sector, the lack of new funding for primary healthcare services was worrying, given the dire need to address the regression in screening, testing and treatment rates for infectious and non-communicable diseases caused by Covid. How this would be addressed by provincial departments of health remained to be seen. Without increased funding to hire additional healthcare workers, the freeze on filling critical and vacant posts was set to continue. This curtailed the potential efficiency of outcomes across all health programmes.
Approximately 4.3 million South African households lived below the food poverty line. These were the households that most desperately required a basic service subsidy, and for whom the implications of having to pay for these services were the most serious. Most households had to divert expenditure from food to pay for electricity and water. This had a serious negative impact on household food security in general, and child nutritional status in particular.
Rural Health Advocacy Project on 2022 DoRB
Mr Nathan Taylor, Rural Health Advocacy Project (RHAP), said there was little clarity provided on how ongoing inequalities and inefficiencies in existing health spending were to be addressed. Unless these fault lines were confronted, South Africa’s healthcare system would remain fragile, regardless of resource availability. Where the Covid pandemic had wrought devastation, recovery efforts in its wake presented a vital opportunity to rebuild differently.
RHAP saw government’s responsibility as ensuring the optimisation of current health spending to secure more equitable access to primary healthcare (PHC), towards universal health coverage (UHC). This required a human rights budgeting framework that more intentionally aligned economic policy with socioeconomic rights. Building resilient rural health systems was inseparable from this aim. Rural-proofing the country's current policies challenged core features of persistent inequalities while improving access to health for the majority of underserved or excluded. Such processes were not simple. However, immediate steps towards realising ethical and efficient budget prioritisation could and must be taken.
Despite the multiple pressures faced, substantial grounds existed for progressively realising South Africans’ constitutional right to health within current constraints. However, government's obligation to this right should be understood as prioritising more equitable access to healthcare for the majority. In the local context, this primarily required a greater focus on expanding and/or reconfiguring primary healthcare provision towards universal healthcare coverage. To do so was a complex and long-term project, and was critically dependent on timely and relevant health information that allowed evidence-based approaches, as well as effective governance to take advantage of this. However, to start required making explicit how decision-making was informed by a human rights-based budgeting framework guided by core considerations of ethics and efficiency, representing, at its most simple, an alignment between allocation and need. To this end, it recommended a joint committee of the appropriate governmental bodies and civil society members to call for active review of planned provincial health budget allocations relative to the actual needs faced.
HEALA: 2022 DoRB proposals
Ms Baone Twala, Healthy Living Alliance (HEALA), said South Africa struggled with a double burden of malnutrition, especially seen in children. The reality was that one in four children were stunted (chronically malnourished), which was coupled with increasing child and adolescent overweight and obesity, all increasing the growing burden of non-communicable diseases (NCDs). The need to intervene early was vital. The first 1 000 days, from conception to two years old, was a critical time to address immediate under-nutrition and consequent overweight or obesity later in life. Although this time was vital for long term results, addressing the current issue of childhood hunger must be prioritised. Positive results of good nutrition during early childhood may be reversed by poor nutrition during adolescence. The reality was that 30% of South African children live in households living below the food poverty line – where adequate nutrition needed for optimum growth and development was out of their reach.
To improve the health of all South Africans, there was a need to start helping children thrive to their best potential. As there were limited funds, it was not a possibility to embrace new programmes, but there were existing effective programmes that reached millions of hungry children every day and child support grant. To address the food and nutrition insecurity that these children experience, there was a need to prioritise. Including breakfast in the school nutrition program would allow more children to reach their daily nutritional needs. The intergenerational transfer of malnutrition should be addressed through the expansion of the child support grant into pregnancy, acknowledging that households that include vulnerable children and women need additional resources through basic income support.
By directly confronting excess sugar consumption, the health promotion levy currently serves as one key preventative policy against rampant health conditions such as obesity, type 2 diabetes and other diet-related NCDs. Its ability to create an effective impact was already evident, despite its constraints. Yet without strengthening the levy, along with introducing additional measures, South Africa was unlikely to resist its current trajectory towards an increasingly catastrophic loss of life and crippling economic costs. To do so required not only raising the levy and widening its scope but finding ways to maximise the use of the funds it raises to protect and enhance South Africans’ rights to health, nutritious food and a decent quality of life.
The Black Sash and HEALA demand that government implement a permanent basic income support grant for those aged 18 to 59 years who have no or little income that meets the upper-bound poverty line (R1 335 per month). Unemployed caregivers who receive the Child Support Grant (CSG) must also qualify. Although the extension of the COVID-19 Social Relief of Distress (SRD) grant was welcomed, it must be increased to at least the food poverty line (R624) until social assistance for the unemployed was made permanent.
Pregnancy posed significant health, social and economic challenges for women. Many women working in the informal sector -- which was where the majority of poor women work -- had to give up paid work during pregnancy while incurring additional costs related to the increased volume and variety of food they needed to consume to support pregnancy, travel costs for healthcare and costs of a new child
Mr Ryder said COSATU was right to point to the poor allocation of resources to land reform, corruption and SARS. He welcomed all the presentations, but they also showed that the National Treasury had a difficult task in trying to balance moral and economic imperatives. He asked for an opinion from Section 27 on the migration from the school backlog grant to the school infrastructure grant. He was not happy with the suggestion of COSATU on National Treasury and COGTA playing a role in the appointment of senior municipal managers.
Mr Mkiva was happy to hear from COSATU, and it had to continue its role as a labour federation. It must also represent the unemployed, as COSATU was their only hope.
Mr Carrim said the Committee had heard from the best presentations. He asked what must be done in terms of the budget to satisfy all interests, given the scenario of a stagnant economy, corruption and reduced revenue. He agreed with HEALA that more money must be put into the ECD sector.
The Chairperson also asked for an opinion on the shifting of the school backlog grant to the school infrastructure grant. She asked about ways to improve the expenditure of education grants. She also wanted an opinion on local health revitalisation from the rural health project.
Mr Parks said he valued engagement with Parliament and the executive. Part of their success was the Presidential Stimulus Plan and the R350 basic grant. Land reform and agriculture were underfunded, yet they were key growth sectors of the economy. Law enforcement agents and the NPA must do their best to arrest corruption. The cuts in provincial allocations did not make sense, given the increased local and international migration to urban centres. There was a need for some interventions in the hiring of senior municipal officials, as sometimes the head of infrastructure lacked basic engineering qualifications.
There would be further engagements on comprehensive social security. COSATU would engage with the Presidency and National Treasury to make the R350 grant permanent. Fixing Eskom, Transnet and the Passenger Rail Agency of South Africa (PRASA), and eliminating local government corruption, would help create jobs. Certain compromises must be made by labour, government and business -- for example, enabling regulation 28 so that pension funds could be invested in infrastructure. He asserted that increasing the number of SARS employees by 500 would realise more than R20 billion in tax annually.
Further responses would be provided in writing.
The meeting was adjourned.
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