The Select Committee on Appropriations met on a virtual platform to be briefed by National Treasury on the Appropriation Bill [B7-2022] and Second Adjustments Appropriation Bill [B8-2022].
During discussion, the Committee unanimously agreed that the issue of the debts owed to municipalities by government departments at the national and the provincial levels needed urgent intervention, given the distressing state that many municipalities across the country were facing.
Among other issues, Members expressed their concern about the state of police stations in certain high crime areas in the country, rising fuel prices, the effect of drought and floods on food security, and the devastating impact the recent floods had on the infrastructure in rural areas. Treasury was urged to intensify its investment in infrastructure in rural areas.
Members also enquired about the planning and programmes involved in spending the R900 million designated for the Presidential Employment Initiative, and the measures in place to prevent the misuse of funding; the programmes that would be affected by Treasury’s reprioritisation as a result of the floods in KwaZulu-Natal and the Eastern Cape; Treasury’s plan to deal with its current deficit; zero-based budgeting; the Congress of South African Trade Unions' demand for a ten percent increase in the medium-term expenditure; the financial arrangements made for Parliament’s fire damage repairs; Treasury’s assistance to the agricultural sector; its readiness to disburse the Social Relief of Distress grant, and its sustainability in the next two years.
Members specifically sought clarity on the Presidential Employment Initiative, the purpose of the R500 million appropriating fund for vaccine-related programmes, the R20.5 billion for wage adjustments, and the R25.6 billion budget that was to be allocated to assist public enterprises.
Since the Department of Health and National Treasury presentations were on the same matter, the Chairperson suggested that the presentation needed to be made only by National Treasury.
The Committee had received apologies from the Ministers of Finance and Health. The Minister of Health was attending a Cabinet meeting and the Minister of Finance was in Senegal. The delegation from National Treasury was led by Dr Mampho Modise, Deputy Director-General: Public Finance, and the delegation of the Department of Health was led by Dr Sandile Buthelezi, Director-General of the Department.
Appropriation Bill [B7 – 2022] and Second Adjustments Appropriation (2021/22 Financial Year) Bill [B8 – 2022]: Briefing by National Treasury
Ms Nompumelelo Radebe, Director, National Treasury, provided details on the constitutional requirements for passing the Appropriation Bill.
The 2022 budget consolidated public finances while providing immediate support for the pandemic response, job creation and social protection. Some of the key highlights of the budget in 2022 were:
- Following economic growth of 4.8 per cent in 2021, gross domestic product growth (GDP) growth was expected to average 1. 8 per cent over the next three years.
- Total consolidated government spending would amount to R6.62 trillion over the next three years.
- More than 50 per cent (R3.33 trillion) would go towards the social wage.
- Main budget non-interest spending was increased by a net of R282.3 billion over the medium term expenditure framework (MTEF) period, compared to the 2021 budget.
- The increase was supported by higher than anticipated revenue collections and did not jeopardise the path to deficit reduction.
- Additional allocations of R110.8 billion in 2022/23, R60 billion in 2023/24 and R56.6 billion in 2024/25 had been made for several priorities that could not be funded through reprioritisation.
- A primary surplus would be achieved in 2023/24, and the consolidated budget deficit was projected to narrow to 4.2 per cent of GDP by 2024/25. Gross debt would stabilise in 2024/25.
The total amount of the appropriated funds for the 2022/23 financial year was R1.057 trillion. It consisted of current payments of R260 billion. Compensation of employees was R179 billion and goods and services was R81 billion, transfers and subsidies were R755 billion, payments for capital assets were R16 billion and payments for financial assets were R26 billion. Details of those breakdowns were provided in the presentation slides.
Treasury emphasised that cost pressures were funded through a combination of reallocations, reprioritisation and additional funding. That priority was given to interventions associated with the impact of COVID-19 and to meet urgent service delivery needs.
In the Second Adjustment Appropriation Bill, Treasury explained the additional R500 million adjustment appropriation to the Department of Health to fund COVID-19 vaccines and related logistics costs. The R22 billion equity injection requested by the South African Special Risk Insurance Association (SASRIA).
Dr Buthelezi confirmed that the Department of Health had agreed with National Treasury on the presentation that had just been made. The Department had no further inputs to make and was ready to take questions from Members.
The Chairperson suggested putting forward her questions first, as she was concerned that her unstable network would remove her from the platform before she had a chance to engage with the two departments.
She asked the Department of Health about the distressing state at the Kwamhlanga hospital in Thembisile Hani Local Municipality in Mpumalanga. Comments had been going around on social media that show the hospital's proximity to a mortuary. Patients collecting their medications from its pharmacy always had to endure seeing corpses or a strange odour from the corpses, which affected patients' mental health. She urged the Department of Health to visit to see the situation on the ground.
The Chairperson asked the Department of Health and National Treasury how the R900 million would be rolled out as promised by the Presidential Employment Initiative. She especially wanted to know how National Treasury, with the rest of government departments, would implement this initiative and have funds earmarked for programmes instead of returning the funds unspent. She also wanted to know how National Treasury would ensure that the fund was being well spent for those designated programmes and asked whether there were preventative measures to avoid misusing or misappropriating funds.
She asked only National Treasury the reason behind the provisional allocation -- why it was to be confirmed only in the Medium Term Budget Policy Statement (MTBPS).
The Chairperson asked Treasury to provide a progress update on its interventions to solve the debt of municipalities owed by government departments at the national and the provincial levels.
She drew officials’ attention to the urgent need to improve infrastructural maintenance for many police stations in the country. Accomplishments or improvements must accompany the appropriation that the Committee approved on the ground. She asked whether National Treasury had looked into that issue. She focused on the Manguzi police station, which needed to be completed and start functioning as there was a high crime rate in that community. Her view was that the delay was unnecessary and wanted to know why.
She asked which programmes would be affected by the reprioritisation of resources due to the floods and heavy rainfalls that had destroyed livelihoods in KwaZulu-Natal (KZN) and the Eastern Cape.
Mr M Moletsane (EFF, Free State) emphasised the urgent need for more police stations to be upgraded and built-in some areas. The South Africa Police Service (SAPS) should prioritise that issue because there were places that needed urgent attention. For instance, Botshabelo in the Free State was the second largest township in South Africa with a population 450 000, but there were only two police stations which, in his view, posed a serious issue. Gangsterism was endemic in the area. Hence, he asked Treasury when attention would be given to Botshabelo so that more police stations could be built to tackle the crime issue.
Mr D Ryder (DA, Gauteng) said that he did not like the presentation. He agreed with Mr Moletsane’s point and said that the National Council of Provinces (NCOP) should focus on ensuring that government service delivery gets to the various provinces.
He asked National Treasury about the number of new schools, clinics, and police stations built in this financial year with this appropriation bill.
Treasury seemed to have given an impression that there would be a primary surplus in the distant future. However, he wanted Treasury to explain what would happen to the current deficit.
He noted the absence of the President’s infrastructure-led recovery plan. He also noted that R9 billion had been placed under the presidential appointment fund, which he found confusing. He doubted that all the jobs were related to infrastructure and requested Treasury to explain.
He wanted Treasury to indicate the potential impact on the current year if government agreed to COSATU’s ten percent increase demand for its members.
Mr Ryder enquired about zero-based budgeting, which he noted was absent in the presentation. He was aware of the two pilot projects on zero-based budgeting and requested Treasury give an update.
He asked Treasury which other adjustments were being planned in its Appropriation Bill. He asked this question specifically concerning Parliament’s fire damage and Treasury’s financial plans to address that.
In line with his colleagues, he also noted that governmental departments at the provincial and the national levels owed municipalities hundreds, thousands or even millions of rand. To address that, did National Treasury have a guideline that instructed departments to make prompt and timeous payments to municipalities?
Mr Ryder asked the Department of Health to justify the amount appropriated to them, given that there had been a significant decrease in the number of the population who had got vaccinated. He asked what the R500 million was for. He was critical of the Department’s inability to have foreseen the trend. He had built a vaccine factory which was a waste of money as the newly-established factory had not received a single order.
Mr E Njadu (ANC, Western Cape) urged the national departments to see the distressed state which municipalities were in across the country. He noted in the budget that R111 billion had been earmarked for corporate governance for departments to assist municipalities facing financial distress, adopting unfunded mandates and still owing Eskom.
He agreed with his colleagues' points that departments at the national and the provincial levels owed municipalities a lot of money. He urged Treasury to take practical steps, such as reviewing the national and provincial departments that owed municipalities money every quarter.
Mr Njadu asked National Treasury whether it had come up with an estimated total cost of the storm damage in KZN and the Eastern Cape. Further, he wanted to know when the funding for those disaster victims would be made available to them, as some communities were stranded and were waiting for government’s assistance.
Mr S Du Toit (FF Plus, North West) sought clarity on the R20.5 billion Treasury had set aside for the wage bill adjustment and asked for the average wage increase percentage. It was very likely that there would be increases during this year.
He asked National Treasury if any provision had been made to assist the struggling agricultural sector due to all those disrupting events, such as the drought and fire that had been detrimental to the sector.
Mr Du Toit sought clarity on the R 25.6 billion that was to be appropriated to be spent on public enterprises. He asked the Treasury to indicate whether it was a bail-out and, if so, to explain why.
Mr W Aucamp (DA, Northern Cape) highlighted the widely-spread fuel hike news and asked about its effect on food security in South Africa. The speculation was that should the R1.5 levy fall away at the end of May 2022, there would be a 46 percent increase in diesel, which was the main fuel used by the agricultural industry. In addition, he listed the number of fertilisers and the drastic percentage increases of those fertilisers. In light of that, he asked whether Treasury would subsidise farmers and provide a plan to the Committee accordingly.
He highlighted the negative effect of the prolonged drought in some parts of the country. The drought was hitting small-scale farmers the hardest, negatively impacting food security in the country.
Mr Aucamp remarked that government was way behind in building more schools to keep up with the growth of the population.
Mr Z Mkiva (ANC, Eastern Cape) said that more than nine million of the population had applied for the Social Relief of Distress (SRD) grant and asked if Treasury had set aside sufficient funds. If not, he would like to know what the shortfall would be. How long could this grant scheme be sustained, in Treasury’s opinion?
He drew attention to the damaging impact of the recent flood on infrastructure, and the problem became particularly severe for those roads in rural areas after heavy rainfalls. He therefore wanted Treasury to indicate any interventions, such as funds being appropriated to infrastructural items such as fixing roads in rural areas.
He urged everyone to pay close attention to the poor infrastructural conditions in rural areas. The connectivity in rural areas was a sore point, and children could not connect and do their schoolwork online. He asked government to pay equal attention to the development of rural areas to transform urban spaces into Smart Cities and turn rural areas into Smart Villages.
Mr Y Carrim (ANC, KwaZulu-Natal) noted that the money designated for flood disaster in KZN was being held up and still had not been delivered to affected victims. He therefore requested Treasury to update on the progress of delivering relief aid -- when the funds would be delivered, as well as the conditions attached to the R25 billion earmarked appropriation item.
He recommended to the Chairperson that she should structure Committee's programmes to focus on getting outcomes from the executive, instead of Members keeping on asking questions without being able to get any outcome from them.
Ms Modise responded to the Members' question about zero-based budgeting. She provided the context that the South African government had consulted its peers of the Organisation for Economic Cooperation and Development (OECD) countries to offer advice on the issue. Various workshops had been held and National Treasury had carefully considered how the zero-based budgeting would be carried out in South Africa. The outcome was that fully implementing zero-based budgeting would be too tedious for a country like South Africa because it required abundant administrative capacity that the country lacked. National Treasury’s view was that government departments should be directing all their resources towards service delivery. For instance, should zero-based budgeting be implemented, the Department of Health would have to motivate National Treasury and Parliament to procure even a pencil or paper, deter efficient operation.
National Treasury’s approach had been that it had selectively adopted certain aspects of zero-based budgeting, such as reviewing departments’ programmes for their value for money. So far, it has conducted over 200 spending reviews which would have numerous profound consequences, such as retrenchment, policy or legislative changes. Given its significant impact, Treasury felt that it should present the spending reviews to Cabinet and afterwards share such information with the Committee.
Ms Modise highlighted s30(2) of the Public Finance Management Act (PFMA) -- that the adjustment budget may provide for significant and unforeseeable economic and financial events affecting the fiscal targets. National Treasury utilised this section to make its adjustment appropriation for disaster-related budgets such as flood and drought. Nevertheless, government departments were still required to present a plan to Treasury to resolve that money in the short, medium and long term.
She explained that the repair of Parliament's buildings from the fire damage and the disaster in KZN fell under s16, which formed part of the Medium-Term Budget Policy Statement (MTBPS).
The Presidency closely monitored its spending performance on the presidential employment intervention quarterly. She clarified to Mr Ryder that this budgetary item had never been classified as infrastructural, as the initiative was only to create short-term jobs.
Ms Modise commented on the question around payments which should be made within 30 days. She emphasised that although the Treasury did issue guidelines on the issue, the PFMA actually indicated that it was the responsibility of the accounting officers to ensure that payments were being made within 30 days.
Mr Bothwell Deka, National Treasury, said a budgetary item called the comprehensive agricultural support programme (CASP) under the conditional grant allocated R7 billion to support emerging and subsistence farmers in the MTEF. In addition to that, National Treasury also dealt with disasters such as drought through the disaster management framework. He therefore assured the Committee that Treasury was making sufficient provisions to assist those struggling farmers.
He acknowledged that the skyrocketing cost of fertilisers created a big outcry in the agricultural sector. The Competition Commission undertook extensive research to investigate the rising cost issue. He recommended the Committee look into the Commission’s research, pointing out that it had attributed part of the causes to the under-competent behaviour of agricultural producers.
Ms Julia de Bruyn, Chief Director: Public Finance, National Treasury, said it was the mandate of the provincial departments of basic education to plan for school staff budgets concerning the number of learners and teachers required in a specific area. In addition, the national Department of Basic Education allocated an additional amount of R12.4 billion in the schedule 4 supplementary grant to assist the building of school infrastructure. The infrastructure for basic education involved complex processes, such as negotiation with municipalities on land use and identifying the movements of the population, where people were moving to and where there was land available.
Mr Mark Blecher, Chief Director: Health and Social Development, assured the Committee that Treasury had been very strict and cautious in allocating the vaccination programme. The Department of Health had initially asked for a R2 billion allocation for the programme. Treasury was of the view that since the Department had spent only R500 million on the vaccination programme in the 2021/22 financial year, it would not need R2 billion for this financial year. So far, according to the Treasury's monitoring, its decision to allocate R500 million to the vaccination programme remained a fairly accurate estimate. He said there would be a further allocation on the vaccines in the 2022/23 financial year.
He indicated that the uptake in April for the SRD grant had been 8.1 million, and the uptake in May was 8.9 million. The Treasury had anticipated at least a 10.4 million uptake and had made budgets accordingly, so there was still a R1 billion space in the budget. Also, Treasury would keep an eye on the Department of Social Development and the South African Social Security Agency (SASSA) to monitor the uptake.
Mr Blecher said the testing of income against SRD applicants’ bank accounts was taking place on a more extensive scale. Treasury had also suggested reviewing the potential incomes of the spouses of those SRD applicants, to preclude them from applying. Reviewing spousal income was not currently included in the regulations.
Ms Ulrike Britton, Chief Director: Urban Development Infrastructure, responded to the question about Treasury's response to the disaster in KZN. She explained that the disaster management value chain consisted of four stages -- disaster mitigation plan, preparedness, immediate response and reconstruction. Since the President announced the state of disaster, what would first be activated was humanitarian relief, and then it would deal with stabilisation. The reconstruction phase would usually take much longer. On Treasury’s side, it would require reprioritising the national budgets.
Regarding the R1 billion on which Members sought clarity, she confirmed that Treasury would be able to do the transfer only at the request of the National Transferring Office. The National Transferring Office had to receive the notifications from the National Department of Cooperative Governance and Traditional Affairs (COGTA) and the national Department of Human Settlements. So far, she could confirm that Treasury had received no such instructions about such transfers. She confirmed that other provisions this Committee had been dealing with as part of the Division of Revenue Bill were related to reprioritisation within conditional grants to respond to the disaster. Treasury had received and processed a transfer for the Department of Human Settlements concerning using the human settlement development grant and informal settlement partnership development grant. Treasury had also received and processed a request from the Department of Water and Sanitation (DWS) concerning water tankering services for three months and the water infrastructure processing grant. Treasury was currently processing a request from the Department of Transport concerning the reallocation of the provincial road maintenance grant. Treasury was also aware that provincial and national disaster management centres and the national COGTA had sent through a request for funding to assist the disaster effort.
She said that the equitable share formula determined the allocation to local government as part of the Division of Revenue Bill. She acknowledged that Treasury assisted in compensating municipalities to cover their loss for the fee-based services they offered for those poor households.
Ms Britton indicated that Treasury could not do much on government departments’ debt owed to municipalities, although Treasury set out clear guidelines on the 30-day payment regulation.
Ms Radebe provided details of the R3.6 billion allocation. She explained that of the R3.6 billion underpayments for capital assets, R961 million was budgeted to upgrade, maintain, and refurbish police stations. In the 2022/23 financial year, the SAPS had about 330 projects planned, including other service deliveries tied to police stations such as shooting ranges, forensic labs, etc. Of the 330 projects, 18 projects were for planned maintenance work, ten of the 18 were for the maintenance of police academies, 141 were for the installation of air conditioners, 24 were for the installation of generators, 20 were for the construction of victim-friendly services such as for the victims of gender-based violence (GBV), and 20 were for creating accessibility at police stations for people with disabilities. Only three of the 330 projects were planned to construct new police stations. She confirmed that no police station would be built in Botshabelo, as the Member had specifically enquired.
Ms Radebe attributed the police’s dependence on the Department of Public Works and Infrastructure (DPWI) for most of its infrastructural items for the delay. The Treasury believed that the SAPS was facing challenges such as project management, the non-performance of contractors, etc. In some cases, contractors had simply abandoned project sites. Treasury was trying to assist in building a closer working relationship between the SAPS and the DPWI.
Mr Ravesh Rajlal, Chief Director: State-Owned Enterprises, said that in the 2022/23 financial year, Treasury was providing R21.8 billion to Eskom, R1.8 billion in support to the South African Airways (SAA) -- which was purely to support and help settle government-guaranteed debt -- and R6 billion would be provided to the Land Bank.
Mr Edgar Sishi, Deputy Director-General: Budget Office, referred Members to Chapter 3 of the budget review, which outlined both the fiscal deficit and the projected primary fiscal surplus. In addition, he referred them to the s32 report, which was published on 29 April 2022. The estimated fiscal deficit had been 5.5 percent, whereas the actual outcome was 5.2 percent in the s32 report. The projected fiscal surplus was 0.02 percent of the country’s GDP.
He said the public sector wage bill was still under discussion, and the finalisation date was scheduled for the end of June. He further clarified that the R20.5 billion was the amount that Treasury had set aside for the public sector wages. The amount was the same as the one paid out last year, and this decision had also been the agreement between Treasury and the unions.
Mr Du Toit asked Treasury to indicate whether the additional salary funds would be enclosed in grants, as Members had recently noted that those salary funds were being enclosed in early child development grants and health grants, etc.
Mr Sishi clarified that the scope of the wage negotiation covered only the base remuneration for public servants working in the provincial and the national governments. The issue on which Mr Du Toit sought clarity would be separate from the bargaining council discussion.
Dr Buthelezi noted the Chairperson’s concern about the Kwamhlanga hospital and admitted that he had heard of the issue for only the first time. However, he had communicated with his colleague in the province and would submit a report to the Committee Secretariat on the issue within seven days.
He assured the Committee that the Department of Health was pushing very hard to get more people vaccinated.
Mr Andre Venter, Chief Financial Officer, Department of Health, said that the vaccination programme was initially budgeted at R6.6 billion in the 2021/22 financial year, which was spent on purchasing 59.6 million doses of vaccines. However, the final figure for the purchases had come up to R7.736 billion as of 31 March 2022, resulting in a shortfall of R1.104 billion. Treasury had come up with R637 million from the 2019/20 financial year but still would require R500 million from the appropriation to make up that shortfall.
Adoption of minutes
The draft meeting minutes for 11 May 2022 were considered and adopted.
The meeting was adjourned.
Download as PDF
You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.
See detailed instructions for your browser here.