Public Finance Management Amendment Bills: Motions of Desirability

Meeting report

The Committee met to consider motions of desirability on two Private Members’ Bills sponsored by Mr RA Lees (DA) and Mr GK Cahcahlia (DA).

Adv Charmaine van der Merwe, Senior Legal Advisor to Parliament, stated that at this stage, the Committee has gone through all the processes for considering a motion of desirability. The Committee had considered comments from the public and National Treasury. Both sponsors of the Bill had been given an opportunity to speak to the Bill itself and input from the public and Treasury. All the Committee needed to do now was to deliberate and vote on the motion of desirability. These deliberations were not on a clause-by-clause basis. Instead, the Committee must consider whether the contents of the Bills were desirable or not. This consideration would lead to a vote.

Mr Cachalia requested to make a submission to allow the Committee to consider his concerns. He would like to do that so that the Committee could proceed as it should.

The Chairperson allowed the inputs to be presented.

Mr Cachalia’s inputs were:

1. National Treasury said that they supported the principle of the Bills, but they had proposed that the objectives be achieved through an instruction issued in section 76 of the Public Finance Management Act (PFMA) and not through an amendment of the PFMA. However, the possibility of extending the specified periods for financial reporting, as had been proposed by National Treasury,  would provide the very loopholes that the amendments sought to close. Unforeseeable circumstances of significant proportions could be covered by force majeure provisions, which indeed they referred to in terms of the recent unrest.

2. Going concern issues could be dealt with by tabling financial statements that declared the status quo and included in the audit opinion a section headed, “Material uncertainty related to a going concern”. This was normal practice and should not be a reason for non-disclosure or delay.

3. Delays in tabling should not be a result of the audit progress. That was the auditors’ job, and rigour and timeliness were required.

4. Simply providing instruction about the period within which annual financial statements and audit reports must be submitted would provide National Treasury with an unfettered space to determine the grounds to depart from the proposed 60-day period. The amendments would close loopholes that allowed for lack of transparency in the past and led to state capture in many ways. Given the Zondo Commission’s findings, it was submitted that the amendments were necessary.

The Chairperson asked Mr Cachalia whether his stance was that he was not agreeable to issues raised by National Treasury.

Mr Cachalia confirmed this and replied that he had considered National Treasury’s note in detail and the submissions he had made orally attended to that.

The Chairperson handed the platform to Mr Lees. 

Mr Lees stated that deliberations had been held. What he could ascertain from the Members of Parliament, National Treasury, and legal services was that everyone agreed that some action needed to be taken. What had to be decided in this meeting was whether taction in the form of the two Bills before the Committee was the best option. He submitted that it was. It had been said in a previous meeting that once the stage of deliberations was reached after the Bills had been deemed desirable, there could be input from anyone on what might make the Bills more acceptable and workable. He urged Members to accept the desirability of the Bills as opposed to the methodology suggested by National Treasury, given that there was consensus that action must be taken.

Discussion

Mr A Sarupen (DA) asked whether, if the Committee adopted a motion of desirability, Members would be amenable to letting National Treasury propose amendments to the Bills. Would they be willing to be the originators of those amendments if necessary? He understood the Members’ objective to ensure that lacunae in law were dealt with and codified.

Mr Lees responded that he was open to that. He was always open to taking advice.

Mr Cachalia said that given that National Treasury had stated that they supported the principle, he would be 100 percent open to any considerations and amendments supporting the Bills' principle. Any such amendment could be considered on its merits to make the Bill a more robust legislative proposal.

Mr I Morolong (ANC) said he disagreed with the motion of desirability. Having listened to Treasury and the deliberations in the Committee, he was more convinced that the amendments could be accommodated in delegated instructions. Indemnities and securities were sensitive information that should be dealt with by instructions from National Treasury, not amendments. If the Act was amended to include indemnities and securities, it might open up sensitive information that could lead to litigation. Information regarding guarantees did not necessarily have to be dealt with through amendments because they were included in quarterly reports. They were at liberty to discuss guarantees allowed by Treasury every quarter, not every month. The quarterly reports could give the Committee a sense of why guarantees were granted. He wished to propose that the Bills were undesirable.

Mr G Skosana (ANC) stated that the intentions and spirit of both Bills were good in trying to strengthen accountability. However, the proposed amendments did not consider the practical realities that resulted in delays, particularly where the auditing of an institution was concerned. The amendments proposed by Mr Cachalia would put institutions in a difficult situation where they would transgress not through their own fault, but because of delays in auditing and unforeseeable circumstances beyond their control.

He asked whether Mr Cachalia was agreeable to pausing the amendment of the principal Act and waiting for National Treasury to deal with an overall review of the PFMA. At that point, it could be considered whether the amendments could be accommodated. He did not believe it would be a good move to make amendments to the principal Act. However, he would find it easier to move for a motion of desirability if Mr Cachalia was agreeable that the Bills’ objectives could be accommodated through delegated legislation or instruction from National Treasury. If Mr Cachalia was not agreeable, it would be difficult to support a motion of desirability. Mr Cachalia’s concerns and the intentions of bringing his Private Member’s Bill could still be addressed through delegated legislation or an instruction. He believed that amendment of small parts of the principal legislation might have an effect on other parts.

Mr Sarupen said they had heard from the parliamentary advisors that it was still an open question whether National Treasury issuing instructions would actually accede to the intention of the primary legislation. It was Parliament’s job, and not the Executive’s job, to originate and process legislation. Just because Treasury said it might do something did not mean it would do it, because there was no basis in law to compel them to do it. Lacunae in legislation enabled state capture, and members were trying to ensure that this did not happen again. People felt that Members of Parliament failed them when they failed to address lacunae and problems that led to state capture, corruption and the failure of state-owned enterprises.

If problems in the Bills needed to be addressed, the Committee could always bring amendments to the legislation after a motion of desirability. They could look at the Bill clause by clause and change it where necessary to ensure that it did what was intended: to plug the gaps. He believed that the legislation was extremely desirable. It would be disappointing if the Committee abrogated its responsibility and handed it to National Treasury in the hopes that something got done. That would be typical of what had been heard in the Zondo Commission about Parliament abrogating its responsibility. The Committee should vote in favour of the motion and then it could go through the Bill and change what was necessary. If any unintended consequences spilt over into other parts of the PFMA, the Committee had the authority to make the necessary changes after voting for the motion to turn the Act into the best possible legislation. He urged the Committee to plug the lacunae.

Mr Cachalia said Mr Sarupen had covered the points he would like to make substantially. It was safe to say that delegation, instructions and loopholes had gotten the Committee to its position. This was what the amendments sought to address. He was utterly open to robust amendments from National Treasury and he stood by his previous comments about seeking to address what the Zondo Commission had raised. 

Ms P Abraham (ANC) said Members' motivations were very clear. However, she thought the Committee should make Treasury account to it. It would be wise for the Committee to give Treasury a timeframe instead of being in a race with them to come up with a Bill on something they were already working on. They should rather give National Treasury a timeframe in which the Committee wanted to see changes happen within 30 days. She opposed a motion of desirability.

Mr J De Villiers (DA) said the proposed amendments would strengthen Parliament's ability to perform oversight. There was more than enough opportunity to make more amendments to the proposed Bills to improve them. It would be very short-sighted to dismiss the amendments as not desirable. There was still a process that could be followed to fine-tune the Bills should they be needed. The principle of bringing a Bill that gave Parliament better oversight and not waiting for National Treasury to issue instructions was something that should be encouraged in any parliamentary democracy. He believed that the Bills were desirable.

Ms Abraham asked why Members could not be agreeable to having regulations in legislation that already exists rather than proposing amendments.

Mr Skosana emphasised that regulations were also legally binding. Members were arguing as if regulations were something that could be overlooked and as if there was discretion as to whether they could be followed or not. He did not remember any recommendations from the Zondo Commission that said one could not address issues through regulations or instructions. The fact that Treasury was saying it would agree with the intentions of the Bills if they were accommodated in regulations showed that they were willing on their part to address shortcomings. He did not understand what difficulty Members of the DA had in agreeing with that.

Mr Sarupen replied to Mr Skosana by stating that it was not about whether one was agreeable or not to regulations. They had received legal advice that it was entirely possible that the primary legislation did not enable National Treasury to rely on regulations, because they would be invoking a clause that was never intended to go that far. It was not as simple as saying the objectives should be achieved through regulations. It was important to consider that there were lacunae. The Committee should consider that the legislation was desirable and from there they could panel beat it with the assistance of National Treasury. He believed that the Committee should not outsource its law-making role to National Treasury.

The Committee then considered motions of desirability on the Public Finance Management Amendment Bill [B41 – 2018] and the Public Finance Management Amendment Bill [B13 – 2020]. The motions were rejected by five votes to three.

View motions here: https://pmg.org.za/tabled-committee-reports/

The meeting was adjourned.