Appropriation Bill: National Treasury (NT) response to public submissions; Preliminary spending outcomes as at the end of Q4; NT update on state-owned companies

Standing Committee on Appropriations

30 May 2023
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

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The Standing Committee on Appropriations met virtually with National Treasury for a briefing on its responses to the public submissions on the 2023 Appropriation Bill, and for an update on the state-owned enterprises and the preliminary spending outcomes as at the end of the fourth quarter of the 2022/23 financial year.

National Treasury presentation of its response to the public hearings on the 2023 Appropriations Bill consisted of a detailed table discussion on the cross-cutting issues; justice and protection services; education and related sectors; urban development and infrastructure; administrative services; health and social development and economic services.

Treasury reported under-spending by several departments. The two worst offenders were the Department of Social Development (R6.4b, or 2.6% under-spending) and the Department of Cooperative Governance and Traditional Affairs (R4.3b, or 3.8% under-spending). For the former, the lower-than-projected expenditure was due to the COVID-19 social relief of distress grant, where there had been a lower-than-anticipated uptake of the grant following the implementation of stringent income verification measures intended at improving the targeting of the qualifying population. For the latter, it was due to the offsetting of the local government equitable share against rollover funds that were not approved and not transferred back into the national revenue fund. The Committee was also updated on state-owned entities such as the Land Bank, Eskom, the South African Post Office, Denel, South African Airways and Transnet.

The Committee voiced its concerns about the overspending and under-spending of departments. Questions were raised about the social relief of distress grant and the under-spending of the Department of Social Development. The Committee was also worried about the under-spending by the Department of Water and Sanitation amidst the cholera outbreak. There were concerns raised as to whom the money in the pension fund belong; the business rescue of the South African Airways group; small businesses not being funded; and the Land Bank not being able to process claims. The Committee suggested that there should be an in-depth discussion on the public service restructuring, and welcomed the new strategy of the South African Post Office.

Meeting report

National Treasury response to public hearings on 2023 Appropriations Bill

Officials of the National Treasury (NT) went over its response to the public hearings on the 2023 Appropriations Bill. The presentation consisted of a detailed table discussion on the cross-cutting issues; justice and protection services; education and related sectors; urban development and infrastructure; administrative services; health and social development and economic services. Officials from the different divisions of the National Treasury discussed the factors mentioned previously.

(Please see the presentation attached for details)

National Treasury update on state-owned companies (SOCs)

An official of NT went over the update on the Land Bank, Eskom, South African Post Office (SAPO), Denel, South African Airways (SAA) and Transnet.

Land Bank

The Land Bank has been in default since 1 April 2020, and since then, it has made capital reductions to reduce its debt, and R18.1b has been repaid through capital repayments to date. Following the rejection of three versions of the liability solution by lenders, the Land Bank was still negotiating to conclude a liability solution version in order to cure the default. In 2021, R7b was approved for recapitalisation of the Land Bank. By March 2023, it had received a total of R6b. The remaining R1b of the R7b recapitalisation for 2024 would be used to settle the remaining guaranteed lenders, the balance of which would be transferred to the Land Bank for blended financing.

As at the end of quarter four, 31 March 2023, the Land Bank had recorded a net profit of R695.7m against a budgeted loss of R184m for the year and the prior year's profit of R1.4b. This was mainly due to a net impairment release of R450.2m and a decrease in the non-interest expense driven by a decrease in the service level agreement administration fees, as it had in-sourced that book.

Eskom

Eskom reported a loss before tax of R21.2b for the financial year against a budgeted loss of R13.6b, and a March 2022 loss before tax of R11.9b. Eskom generation continued to experience unreliable performance of its power generating plants, mainly due to delayed and inadequate maintenance, delays in the commissioning of new plants, and faults detected in the new units that had been commissioned. As of 31 March 2023, Eskom had complied with all the conditions -- financial, operational, restructuring and general conditions -- and provided the required information, and where further investigations and approvals were required, Eskom had provided the best available information.

SAPO

The South African Post Office's revenue was R2.6b for the year, which was 46% under budget due to a failure to implement revenue initiatives, increased customer migration to digital alternatives, and the weak financial position of SAPO impacting its ability to pay suppliers. The expenses were R5.1b, which was 24% under budget. However, due to SAPO’s high fixed cost structure, expenses continued to exceed revenue. The staff costs of R3.6b for the year contributed to 70% of the total cost. The poor revenue performance resulted in SAPO forecasting a net loss for the year of R2.1b. SAPO’s financial position continued to be severely constrained, resulting in it being commercially insolvent and illiquid.

Denel

Denel had not been submitting audited annual reports owing to the historical challenges experienced. However, the entity had been regularly submitting quarterly reports. To date, it has received the funds from the Denel Medical Benefit Trust disposal transaction amounting to R992m as part of its turnaround plan. Owing to this, and the receipt of a portion of the appropriation, Denel’s equity was reported at R2.2b and its liquidity stood at R3.7b as of 31 March 2023. This was a significant improvement from the historically negative equity being reported.

South African Airways (SAA)

On 30 September 2020, Cabinet approved that R10.5b be allocated to SAA in the Second Adjustments Appropriation Act 2020 (Act No 21 of 2020) to implement a business rescue plan. However, the Second Adjustments Appropriation Act specifically and exclusively earmarked the entire R10.5b for implementing SAA’s business rescue plan, so the R2.7b could not be transferred to the SAA subsidiaries since the subsidiaries were not under business rescue.

SAA was no longer technically insolvent. The net equity value as of 31 March amounted to R670m. The SAA group ended March with an unaudited year-to-date profit of R500m against a budgeted loss of R740m. This profit was comprised of SAA R31m, an Air Chefs loss of R12.6m, South African Airways Technical R84.4m, a Mango loss of R66m, and consolidation entries of R505m.

Transnet

Ongoing security incidents, locomotive unavailability and the poor state of the rail infrastructure had negatively impacted Transnet Freight Rail operations. Inefficiencies of the Transnet’s freight rail network posed a significant risk to the South African economy and required urgent intervention.

(Please see presentation attached for further details)

National Treasury on 2022/23 fourth quarter spending outcomes

Dr Mampho Modise, Deputy Director-General (DDG): Public Finance, NT, took the Committee through the presentation, which consisted of a detailed summary of the spending outcomes with graphs and tables.

There was under-spending by the Department of Social Development (DSD) under transfers and subsidies which was mainly due to the COVID-19 Social Relief of Distress (SRD) grant. This resulted from the lower-than-anticipated uptake of the grant following the implementation of stringent income verification measures intended to improve the targeting of the qualifying population.

There was under-spending by the Department of Cooperative Governance and Traditional Affairs (COGTA) under transfers and subsidies. This was a result of the offsetting of the local government equitable share against rollovers funds that were not approved and not transferred back into the national revenue fund.

There was under-spending by the Department of Health (DOH) on goods and services. This resulted from COVID-19 vaccines not being procured, and low spending on national health insurance (NHI)-related allocations and capital assets due to a delay in the Limpopo Academic Hospital project.

There was under-spending by the National Treasury (NT) due to various reasons that included goods and services for the renewal of annual licence support and maintenance for the Integrated Financial Management System (IFMS) ,and delays in implementing various projects within the Office of the Chief Procurement Officer (OCPO) that were currently at various stages of the procurement process.

There was under-spending by the Department of Water and Sanitation (DWS) under the payments for capital assets.

There was under-spending by the Department of Human Settlement (DHS) under transfers and subsidies. This was a result of the partial transfer of the Provincial Emergency Housing Grant, which was disbursed only when there were qualifying and approved applications, and goods and services such as consultants and computer services from delays in the recruitment process for appointing professional services, and delays in procuring computer equipment.

There was under-spending in the Department of Transport (DOT) mainly due to the tender cancellation for the S’hamba Sonke development programme, and the road transport legislative review project.

There was under-spending by the Department of Higher Education and Training (DHET) due to compensation of employees. There was also under-spending by the Department of Agriculture, Land Reform and Rural Development (DALRRD).

There was overspending by the Department of Defence (DOD) and Statistics South Africa (StatsSA). The majority of the overspending for StatsSA was incurred under goods and services due to the payment of contract workers, as well as travel and subsistence for the 2022 population census project. This resulted from the extension of the population census project from March 2022 to May 2022. For the DOD, the overspending was incurred under compensation of employees due to the compensation of employees’ ceiling, which did not support the current personnel numbers of the Department.

Under transfers and subsidies, the overspending was mainly due to the higher than anticipated payment to the Government Employees Pension Fund’s (GEPF's) liability for the mobility exit mechanism of South African National Defence Force (SANDF) personnel.

(Please see presentation attached for further details)

Discussion

Mr E Marais (DA) said he had a question of clarity and confirmation. He asked whether it would be correct to state that once National Treasury gave money to the pension fund, the money then belonged to the members of the pension fund. He had spoken to insurance companies, where he had been informed that this was the case. He asked National Treasury to speak about this. In this case, the employer was Parliament and this payment then belonged to the members of the pension fund -- in essence, Members of Parliament.

Mr Z Mlenzana (ANC) said he was interested in the expenditure trends. He asked whether NT was able to follow what had been appropriated to the Land Bank up to the level of beneficiaries. Could it confidently state that transfers in the fourth quarter had been made to the specific beneficiaries? This information did not have to be provided right away, but such information was important. The information should include the beneficiaries for each province and district. This would allow the Committee to follow up with an impact assessment during the constituency period. This would allow the Committee to look at the impact of land use and what agriculture was doing for the people. He was aware that he should not be making allegations, but people in rural areas were suffering because the appropriations ended up in the wrong hands. A big chunk of money ended up in the wrong hands of people who did not intend to follow the process.

He had not listened conclusively to the areas of overspending in some of the departments. He asked whether the overspending was not more on operating expenditure (Opex) than on capital expenditure (Capex). Was overspending not being monitored? There was overspending on operational expenditure, but when it came to the compensation of employees, there was underspending. Many reasons have been provided for this, such as the delay in recruitment processes. He asked if there was a notorious list of departments and entities that continued to under-spend and whether it would warrant oversight by this Committee or some kind of joint constituency work. This was something that should be done, because the under-spending had been happening for some time now. He appreciated the detailed report on the performance of the various departments and entities.

Mr X Qayiso (ANC) said that he was not sure what the intention of the first presentation had been, because the typeface was just too small, and there was an inconsistent use of different fonts. There had been improvements made by the National Treasury, especially around the issue of attempting to fight corruption.

He wanted to link the SRD grant to the challenges in social development. There had been some under-spending, but no breakdown of this. He assumed that the more people there were, there would be some difficulty because they had to be enrolled on to the system and should then receive the SRD grant. This also became difficult when there was some under-spending -- it was not due to natural attrition, so one would not be able to see what the reasons were. The population was over 54m, and there was a need to have a sense of the level of unemployment to understand the readiness or the underspending proportion that the SRD grant was based on. It was difficult for him to see how that number was presented in the SRD system. If one assumed that the explanation was based on a large increase in exit recipients, that would be acceptable for the under-spending. If this was not the case, it could not be acceptable.

There was a significant portion of the percentage that had now found employment. The rate of unemployment in the country was roughly 31%, and he was trying to read this with the report given by National Treasury. There should not been an issue with the Presidential Employment Stimulus Initiative programme to create job opportunities for young people. He did not understand why this was underfunded, and this problem should be addressed. This was there to create job opportunities for young people, so it had to be addressed.

There had to be an in-depth discussion on the issue of public service restructuring. Mr Qayiso asked for clarity on whether the headcount was the same as in 2001. In 2001, the public service restructuring process was referred to as redundancy or supernumerary. It resulted in a number of disputes across the sector and created a lot of impasse situations. Was this a different context, or was it similar to 2001? This process had to be unfolded, so a deep consultation was needed.

He had a problem with the statement that some executives received more. If one said some executives received more than others, it was controversial, so was it “executives” or “some executives”? His mind was saying that there were similar benefits for executives depending on their respective responsibilities, but if there was something that he was not aware of, then he should be informed.

He wanted to link the issue of corruption with the under-spending of R100m by the Department of Justice and Constitutional Development (DOJ&CD), the aim being to shift those amounts to the Special Investigating Unit (SIU). Did this mean that the SIU would now do the work and that the DOJ&CD would not be able to prosecute? Was that what the shift meant? At the end of the day, people would have to go to the DOJ&CD to get prosecuted but on arrival, it would find that the DOJ&CD was short of funds. This would create another problem. He did not understand this movement. The SIU was good and supported, but it was bad if the DOJCD underspends. He asked for clarity on this.

The SAPO had to be supported. One would really encourage others to engage with SAPO in its attempt to implement the new strategy. This would help SAPO to reach out to ordinary people who depended on its service. He welcomed the improvements to the state-owned enterprises, but said that he did not understand why, when there was one movement, there was another problem on the other side. He made an example of Mango. If there was a business rescue process, staff still needed to be paid. What was the understanding of National Treasury around that? When the business rescue took over, there was no retrenchment or downsizing in expenditure or personnel during that period. He had been told that there would be a business rescue, and a lot of money that would be involved. There would be people that had to be paid and people that would lose their jobs. How would this be managed?

Why had there not been any engagement with big retailers so that people could have more and easier access to grants? Some of the banks were really far away from people. It would be better if people could access their grants at supermarkets. This had to be engaged with the Department of Social Development.

National Treasury was not supposed to be appearing as number four for under-spending. This would set a bad precedent. There had to be a drastic improvement as far as the NT was concerned.

There was now this issue around the Department of Water and Sanitation after the previous quarters of under-spending -- the cholera outbreak. The outbreak was a serious matter that had to be eradicated. Despite improvements in the DWS, there was still more that could be done to overcome disasters. As far as the vandalism of infrastructure was concerned, there had to be more collaboration with agents of security. He suggested there should be more collaboration with the Council for Scientific and Industrial Research (CSIR) to help in dealing with the issue of security. If it does not involve such an institution, who else could it involve to find an improved mechanism for infrastructure security? There had to be an engagement with people from different departments.

Resettlement and restitution claims were long outstanding issues. The under-spending in this area was embarrassing -- not being able to simply process restitution and land claims was unacceptable. The cause of the problem should be revealed to the Committee at some stage. One could not accept lack of capacity for the slow processing of claims year on year. It was not an acceptable excuse.

He said StatsSA had previously complained about being underfunded due to population growth and expenditure. There had been growth in the population, but this had to be scientifically justified. There had to be intervention.

He had noted the improvement within the Passenger Rail Agency of South Africa (PRASA). There had to be continued engagement with PRASA, because people wanted to reach out to cheap transport to get to work and provide for their families.

The Chairperson welcomed the issues raised on the 2023 Appropriations Bill and the fourth quarter of the 2022/23 expenditure report. He appreciated the report as far as the improvements in under-spending were concerned. There were numbers, and the numbers did not lie. There should be movement towards an ideal state where there is no under-spending for obvious reasons, and there should be a focus on the quality of the expenditure.

He addressed the issue of funding for small businesses and spoke particularly about the Department of Small Business Development (DSBD). There had been an explanation that a lot was happening at the Industrial Development Corporation (IDC). He did not agree with that, because there were departments and institutions like the Small Enterprise Finance Agency (SEFA) and the Small Enterprise Development Agency (SEDA) which had to be funded, with a focus on small businesses. It was unacceptable that this Committee had been saying that small businesses must be funded, but it was not happening. He wanted to find a softer way to say it, but he had to ask when the last time was that National Treasury had made any effort to fund black businesses. The transformation after 1994 to focus on black empowerment was not happening. He said that SEFA and SEDA had a budget of less than R3b to look after small, micro and medium enterprises (SMMEs). This was not nice. The NT had to make an impact on small businesses in South Africa. It was far away from doing this. There was underspending, and small businesses were not being funded. There was a misalignment from what other economies had done. As far as development and job creation are concerned, and pointing at IDC, this should be changed. There was also a tax incentive for SMMEs. He asked for clarity on how this worked, and about progress on localisation as far as economic growth was concerned.

He raised concerns about the Land Bank. What were the implications for the country in general of the failure of the Land Bank to resolve the liability impasse?

He said during oversight they had noticed the issue of the locomotives from China. It was a big problem and had an impact on the economy. What was the progress so far? The Minister of Public Enterprise had gone to China to try and resolve this matter.

He understood the under-spending of R6b on social development, with the explanation of perfecting the system to ensure that people who deserve it were getting this money. During constituency meetings, Members of the Committee found that a lot of people had been excluded from social development, especially the SRD grant. These people’s situations have not changed since. It had moved from one extreme to another, and this had to be corrected. He asked what the opinion of National Treasury was. He said that the R350 had not been adjusted despite inflation and the pressures of the cost of living.

National Treasury's response

Dr Modise said that when it came to opex v capex, one wanted to encourage spending on capital investment and discourage operational spending. Unfortunately, for both StatsSA and the Department of Defence, there was spending on operational expenditure. The National Treasury had presented before the Portfolio Committee on Defence regarding the spending patterns. The rejuvenation of the Defence Force was even more critical, because the continuous overspending on the compensation of employees erodes the spending on capital investment. As a result, there was not enough money to maintain the machinery. A couple of budgets ago, it was trying to protect infrastructure allocations. It tried to protect the spending of capital when it did budget reductions and budget prioritisation. The more it spends on capital, the more the economy grows. Unfortunately, at this time, the spending was not on capital expenditure but on the compensation of employees. For StatsSA, the spending was on the census programme. This was something that it had to work on and the Committee had trusted the National Treasury to work with the Department of Defence on its compensation budget. In money terms, it was insufficient to cover the head count.

The Committee was right to say that it was better to spend on capital. The National Treasury discourages under-spending on capital projects because it wants to boost the economy. It had not included a list of departments notorious for under-spending, because those that were now in the top ten were not in the top ten last year. Many departments have since improved, especially with implementation times. She gave the example of the Department of Environmental Affairs (DEA) in the forestry and fisheries environment where it would under-spend a significant percentage of its budget --around 14% -- but this year, it did not even feature in the top ten of under-spending departments. According to the accounting officer, it had implemented strategies to help it spend money efficiently. It has improved a lot in terms of capacity, supply chain management and procurement processes.

The notorious departments of the past had improved. The ones with continuous under-spending were COGTA and, to some extent, the Department of Higher Education and Training. For COGTA, it was not the department itself that was under-spending, because most of the applications were transfers to local government, so if decisions were taken such as recouping or rollovers not being approved on the condition of equitable shares, then the department would not transfer the full amount. It was therefore not as if COGTA was unable to spend, but could not because of a government decision that was taken. The list given to the Committee were those departments that were under-spending now, but if one looks closely, the majority of under-spending was basically on the SRD grant and the equitable share not being fully transferred.

Dr Modise said the issue of the SRD grant was a complicated one. The grant was introduced at the time when the economy was closed due to the COVID-19 pandemic. Everyone who was unemployed automatically qualified for the SRD grant. The grant was further extended without changing the criteria. The criteria at the time was unemployment. Time had now passed, and it was able to look at how to implement the SRD grant effectively. It had looked at the criteria from the past to ensure that the grant was given to those who qualified. The decision had been taken to do an income test. Previously, it had used the wrong estimate to allocate money to the Department of Social Development. In the past two to three years, the grant had stopped at some point, and no stringent criteria were in place. It did not want the government to come to Parliament and propose an allocation of the grant that might not be sufficient. There would be some implications if the government was not able to pay the recipients because not enough money was allocated. The decision was taken to look at the past years' allocations and then to allocate something similar while it put the criteria in place. It was an issue of an estimated allocation, rather than the state excluding people who really deserved the grant. The key here was not knowing how many people deserved the grant, and it did not have these criteria before. It had used the previous estimate to deal with the matter.

The issue of National Treasury and the under-spending was a technical one. Two areas had been identified. The first one was based on the fact that when lenders of guaranteed debt came to government to fund them, but the entity then defaulted, it became a direct charge in the national revenue fund. Even if money was allocated to the National Treasury vault, it still came from the national revenue fund. It could not just be transferred to the Land Bank, because those creditors had already been paid through the national revenue fund. This meant that National Treasury’s budget which was supposed to go to the Land Bank, reverted back to the national revenue fund. It was not because National Treasury could not spend the money -- it was because the creditors were paid directly through the national revenue fund. National Treasury therefore did not have to transfer the amount to the Land Bank because the purpose of that amount had already been dealt with through the national revenue fund.

The second area of under-spending was the post-retirement medical scheme, for which the National Treasury was responsible. If there was an increase in the mortality rate, there was going to be a decline in the membership. There was going to be a decline in the number of people that received the benefit. It was not that the National Treasury was not able to spend the money. The people that were supposed to receive the benefit had passed on. These were the two areas of underspending that were not due to the inability of National Treasury to spend, but rather circumstantial factors. These were the ones it had to be careful of, and there had to be maintenance of the Integrated Financial Management System (IFMS) and some programmes in the Office of the Chief Procurement Officer (OCPO). If not for these two areas, National Treasury would not have been on the list of underspending departments.

Mr Marumo Maake, Chief Director: Public Sector Remuneration Analysis and Forecasting, NT, said that the money that was contributed to the pension fund, was contributed on behalf of the employee/member of the pension fund. The money belonged to the employee/member, and was managed by a board of trustees that decided how the funds would be managed and administered. The board of trustees also ensured that it complied with the applicable legislation, but in the end the money belonged to the employee/member.

He said the Committee might have misunderstood him when he spoke about the executive salaries. There had been a question about reducing the packages of politicians and managers, and he had responded to that. In the case of the political office bearers, it meant the Members of Parliament and the executives. The remuneration was governed by section 219 of the Constitution, which required an independent board to determine the salaries and benefits. What he was trying to say was that this Commission made recommendations to the President so that there were no differences in the salaries and benefits of the executive. In some entities, there had been some discussion around the remuneration of some senior managers that was probably exorbitant, and were not paid fairly compared to the rest of the public service. Currently, there is a review to understand this and to come up with a single regulation framework for the public sector, especially for entities that rely on transfers from government. He had made this statement for managers, and not necessarily the executive.

He said that mention had been made about a physical headcount to identify ghost employees. He agreed that an impact could be made with this initiative. This has been done in some provinces, such as Limpopo. There had been a discussion about doing a similar exercise to ensure that verifications were conducted. It had to verify the people on the Personnel Salary System (PERSAL).

Treasury would learn from past experiences with the restructuring of the public service. Whatever plans were in place would be discussed with the stakeholders, and they would implement the plans in a manner which would avoid disputes and outcries from the people who might be affected.

Dr Rendani Randela, Chief Director: Public Finance Division, NT, said that the public service accountability monitor had come with two proposals. The first proposal was that this Committee must compel National Treasury to review the Special Investigating Unit (SIU) funding model so that it was fully funded through appropriation. The second proposal was that given the under-spending of the DOJ&CD, funding should be shifted to the SIU so it could capacitate itself to deal with corruption. In March 2022, NT approved the retention of R921m by the SIU to deal with its cash flow problems. He said that shifting meant shifting funds if there were savings on the justice vote. It was not a function shift, because that would mean that everything associated with that function would migrate to the SIU. It was only speaking about the shifting of funds due to the savings reflected in the justice report. This was an issue that had emanated from the proposals of the public service and accountability monitor. If there were savings, there was a need to capacitate the SIU. There were legal provisions to allow this. It was simply a shifting of funds, and not a function.

Dr Mark Blecher, Chief Director: Health and Social Development, NT, said that the South African Social Security Agency (SASSA) was managing the grants under the Department of Social Development. There was a very detailed process for assessing beneficiaries. Hundreds and thousands of people had gone through the appeal processes. The relevant departments and entities managing programmes should account for the under-spending. The maximum number of people that had received the SRD grant was around 8.2m. The reason why this number peaked at 10.8m was because there was no bank means test. This had now been put in place to check thoroughly whether people had different bank accounts. The test was now done thoroughly to see whether individuals qualified for the SRD grant or not. If the SRD grant was made permanent, about 16-17m people would qualify, and it could reach a total of R130b by 2030.

It was interesting to compare this with other countries such as Spain, where there were about one million on a similar grant. The number could grow strongly over a number of years, from 8m up to 16m people. Currently, there was no limitation on the funding of the grants, so when certain people leave, new people could come in. SASSA assessed every individual on their merits. The individuals must fill in forms. Incomes were checked. The Unemployment Insurance Fund (UIF) and Department of Home Affairs (DHA) databases were also checked. If the SRD grant was raised closer to the poverty line, several billion more would be added to the grant. This must be decided within the fiscal framework. If this did happen, it would already cost R130b and taxes would have to be increased. Currently, with the wage agreement not being funded, there was a shortfall of R37b on personnel. There were many shortfalls in many areas.

Mr Ravesh Rajlal, Chief Director: Sectoral Oversight, NT, said that R819m had been allocated to Mango Airline, where R420m had been earmarked for salaries. It was best to engage with the Department of Public Enterprises regarding the details of employees. National Treasury was not aware of the details because the airline was currently under business rescue.

The questions around Transnet locomotives and the outcomes of the meeting in China could not be responded to, as National Treasury was not aware of them. The conditions of the allocation of the R2.9b special appropriation was that Transnet and the Department of Public Enterprises must report monthly on rehabilitating the longstanding out-of-service locomotives and the impact thereof. There were also quarterly meetings.

Mr Lefentse Radikeledi, Director: Development Finance Institutions, Asset and Liability Division, NT, said that if he was honest, he could not really say that the transfers to the Land Bank really reached the beneficiaries. If one looked at the loan books of the Land Bank, the commercial book, for instance, was far bigger than development book. In essence, the growth of the development book was not on par with how NT expected it to grow. The funding model of the Land Bank was mainly dependent on the debt of the capital market, and that was the reason the portion was so large. The lenders were unwilling to support the development, as they wanted their money to be used commercially. This was the reason the growth of the development book was so slow.

(At this stage, there was a break in the livestreaming)

Ms Lebogang Madiba, Chief Director: Economic Services, NT, said that there was a township and rural entrepreneurship fund where R4.6m would be allocated from the Department of Trade, Industry and Competition (DTIC) and R2.8b from the Department of Small Business Development (DSBD). This would help about 100 000 SMMEs. The SEDA would receive R2.7b over the medium term expenditure framework (MTEF), and this was expected to translate to 50 000 job opportunities in the ecosystem. There was an increase of over R1.3b in the MTEF.

The South African Revenue Service (SARS) also played a role regarding tax incentives. If an SMME’s annual turnover was R83 000, it was not eligible to pay any tax. If an SMME’s annual turnover was R365 000, it would pay only 7% of that turnover. If an SMME's annual turnover was R550 000, it would pay 21% of that turnover. If an SMME’s annual turnover was more than R550 000, it would pay 28% of that turnover. SMMEs were the lifeblood of the economy, and the government had to assist.

Ms T Tobias (ANC) said that she was not going to say anything, but her emotions were growing listening to the responses. She was on the SEFA and SEDA boards, and she could not accept this response from National Treasury. She had been waiting for a response on the injection of funds to help the entities. She had had to reach out to the chairpersons of the boards to lobby the Minister of Small Business Development and National Treasury. National Treasury was not funding these institutions properly. She asked that National Treasury do its homework on the institutions, as it was important. There had to be a discussion on the injection of money into state-owned enterprises. It was through these institutions that it could address social issues in society. The institutions had been fighting for more money and were frustrated. The township and entrepreneurship programme had been imposed with no clear reference to what it must do. She said that that type of answer should not have been given.

The Chairperson asked if Dr Modise had anything to say.

Dr Modise responded that that was all from National Treasury’s side.

The Chairperson said that National Treasury did not respond to the inflation adjustment to the R350 SRD grant.

Dr Modise said that the issue of increasing the amount of the grant was that it was currently looking at the poverty line and inflation. It was looking at options that had to be considered. It was part of the work to reshape the grant itself.

The Chairperson thanked the National Treasury for the presentations and responses that were provided. The Committee could say there had been some improvements, but it still felt that small businesses should be better funded. All other departments should be concerned about what happened with small and black-owned businesses. The Department of Small Business Development and its agencies should look at this issue.

Committee minutes

The Committee considered the minutes of 23 May, which were duly adopted.

The meeting was adjourned.

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