Western Cape Adjustments Appropriation Bill: Provincial Treasury

Meeting report

The Chairperson greeted officials from the Provincial Treasury and indicated that the meeting may commence.

The Committee received no apology from Members.

Minister’s Introductory Remarks on Vote Three

Ms Mireille Wenger, Western Cape Minister of Finance and Economic Opportunities in the Western Cape, provided a summary of Vote Three. The Provincial Treasury had a main budget of R340.7 million. This is being adjusted through this Bill downwards by R24.3 million, which means that it ends up with a total budget of R316.43 million. The reductions result from fiscal consolidation cuts, cost of employment and a few transfers and a few internal shifts which the Department would take the Committee through.

Head of Department (HOD) introductory remarks

Ms Julinda Gantana, Acting HoD, emphasised that the Department has a role in setting the tone for good governance. So when Treasury approached this entire exercise of fiscal consolidation, it needed to be strategic in what can be scaled down on in terms of trying to get within the revised fiscal framework. For the Western Cape government, the key areas it needs to protect are its people because that is how government delivers its services. The Department has also looked at how it could support that through ICT and innovation to continue delivering its mandate.

The Chairperson asked Members to engage on the introductory remarks and ask questions. No questions were asked.

The Chairperson suggested going through the budget document in total instead of the page-by-page approach in the part. She thus asked Members if there were any questions for the Vote.

Discussion

Ms N Nkondlo (ANC) stated that going page-by-page would satisfy Members for clarity-seeking questions. But she had no issue with the Chairperson’s suggestion and asked if there were any restrictions on the number of questions each Member was allowed to ask.

The Chairperson replied that the Committee could do questions in rounds of three.

Mr A Van der Westhuizen (DA) commented that fiscal consolidation is a broad term and requested the Department to expand on some of the measures which it has taken.

He commented on the other term which is also frequently mentioned in the document which is the revised recruitment plan. He asked the Department if that means that certain positions are being deliberately kept open for longer or what. In his view, he always believed that every single worker is essential at every position on the organogram. But if the Department keeps positions open, then he doubted the necessity of those positions on the organogram.

On page 38, he noted quite a significant adjustment on households from R1.5 million to R3.99 million. He asked for justification for this significant adjustment.

On page 39, Mr Van der Westhuizen sought clarity on the payment for financial assets and the provision for theft and losses. He said that this was not something he had noted in the past and asked for clarity on whether that is a provision or money that needs to be spent to replace equipment.

Mr I Sileku (DA) noted that the majority of expenditure items are less than 50% spent on page 45 and asked if the Department is at risk of optimal spending. If there is, what is the Department’s mitigation strategy?

Ms Nkondlo sought clarity on the revised recruitment mentioned in the details of the adjustments provided from page 39 to page 41. What is the revised recruitment plan? She was of the opinion that almost nine sub-programmes would have been impacted with funds shifted or loss of funds. According to her calculation, that would amount to R6.48 billion. She asked the Department to justify how to reconcile her figure and the figure provided on page 49 in terms of the economic classification. She assumed that the details of the totals are all summarised on page 49 in the economic classification.

Second, Ms Nkondlo requested explanations for the adjustments for programmes one, two and three, for which the adjustment amounts were R6.6 million, R7.8 million and R6.9 million. She requested more details on the reductions and which exact programme would be affected by that reduction.

Lastly, she wanted to know which municipalities in the Western Cape would be affected by the R1.71 million in transfers and subsidies which is the financial management capacity grant.

The Chairperson commented that despite big budget cuts, the Provincial Treasury has implemented strong systems, and sound controls are in place in terms of stabilising the force throughout the next few years. She noted the sound financial management system in ensuring that the Western Cape government can keep delivering services despite national government’s financial woes.

Minister Wenger responded that the Department would give the Committee a breakdown by programme on what is being affected by the fiscal consolidation.

Treasury has made a concerted effort to find savings in many different ways. For example, the Provincial Treasury has reviewed the use of government vehicles to ensure efficient use of vehicles. It thus decided to reduce the number of vehicles there. It also included strategies such as reducing printing, etc. The Minister assured the Committee that Treasury is looking at every nook and cranny to see how it can find efficiencies within the system that can be used to deal with the fiscal consolidation.

On the revised recruitment plan, the Minister indicated that it is only filling critical posts. Thus, there has been a slowdown in recruitment to try and manage the wage liability. She reminded the Committee that Treasury received no additional funding for the wage increases on the cost of living adjustments, forcing the Department to look at its recruitment strategy to make up that gap in funding.

On Treasury’s expenditure trends, the Minister replied to Mr Sileku that Treasury had minor expenditure which was less than 1% last year. 

Minister Wenger assured the Committee that the Treasury is working hard to make sure that all the funds allocated are spent where they ought to be spent. Treasury noted Mr Sileku’s comment and acknowledged that the spending on most of the programmes is between 45% to 52% of their total expenditures at the moment. But that is something that she monitors monthly and that the Treasury takes cognisance of.

Ms Gantana explained to Mr Van der Westhuizen that fiscal consolidation is applied to the provincial equitable share as the Provincial Treasury is funded through the provincial equitable share. As a result, Treasury had to respond to the reduced fiscal environment, had to reduce its fiscal framework and review what is available through the provincial equitable share for allocation.

She highlighted that Provincial Treasury did not get any funding for the improvement in conditions of service from the national government because the funding provided only partially covered health and education. As a result, it has to find money within the baseline to cover the improvement in conditions of service for the existing staff which amounted to R12.7 million. Since the government delivers its services through people, it is thus one of the critical areas that Treasury needs to look at.

She reminded the Committee that the Department of Public Service Administration (DPSA) has issued a directive on the process of how it should proceed with recruitment. Unfortunately, due to the delay of the availability of that directive, the pace of recruitment was affected because the Department was not certain what the process would entail. Hence, savings from that delay have been accrued every month. To address the increasing savings, the Department had to look at the cost of compensation upper limit and reduce the number of critical post lists. The Department had started the year with 40 critical posts on the list and ended up having only non-negotiable posts, reducing that number to 16. She pointed out that the Department had to adjust employees’ work responsibilities, which means some of the existing staff members may be taking on additional responsibilities. Despite that, she highlighted that the Department is committed to giving effect to its mandate both on the Public Finance Management Act (PFMA) and Municipal Finance Management ACT (MFMA).

The Department’s bursary programme is one of those that have been adjusted. For instance, interns who were on those programmes in the past would be expected to work back for the same duration that they were funded for, whereas now that duration is halved or reduced. Similarly, the Department has taken the same approach to the honest Chartered Accounting Academy programme.

The Department also streamlines its existing staff complements to continue delivering services to the best of its ability.

She noted the question around a Member’s concern on the underspending. She reassured the Committee that the Department had presented its second quarter outcome the previous day and it was clear from the projected outcome that the money would be spent optimally.

She explained that the transfers to households were due to those employees who are close to retirement and those who are retiring.

Ms Annamarie Smit, Chief Financial Officer, explained to the Committee that the transfers to households were related to employees’ leave days and paid for early retirement. Although the Department does the budget, it cannot predict the number of staff members who leave or resign or the number of leave days they still have left. She reported that, in total, there are now 29 staff members who have left the organisation, which means the Department would still need to pay their capital leave for the remainder of their leaves. Most of the leave is current leave because government changed the policy a few years back, prohibiting officials from taking capital leave, so government employees must take leave within that calendar year. There was also one official who requested to go on early retirement.

In terms of theft and losses, the Department had a few laptops stolen and there was also debt that was written off for government which had incurred loss for the Department. The Department had accounted for that underpayment of financials and on cost to the company. So that value amounts to R110 000. There was also a case of misuse of a government vehicle that caused windscreen damage, and a missing hard drive.

She was confident that the Department would definitely spend the remaining budget in the next six months. All the printing, the major consultant fees, the buyer consulting fees, etc., are all done in the latter part of the financial year. The Department had also planned for a cash flow projection to ensure that its cash flow is according to its actual projected expenditure. She pointed out that the R2.489 million that had been shifted from compensation to transfers to households has been stated on page 30. The other shift for R8.7 million can be referred to on page 42.

She clarified that the R3.5 million on page 42, on programme one, is for the compensation of employees and that is the condition increase in the conditions of service of the 2023 wage agreement.

She informed the Committee of the following strategies:

• Having more online Team meetings.
• Six of the 21 allocated vehicles for official travel were not utilised and were therefore returned to the government garage.
• Review of the municipal training programmes to see which must continue and which can be reduced and which can be done in-house, or use another service provider for the training.
• The reduction in the copies of publications. The Department is considering if it is necessary to print a specific number of budget documents, annual reports, etc. This alone had saved R140 048.
• The Department is in the process of getting additional capacity via a bid process for infrastructure. Although the process is a little bit delayed, it is not reduced in the outer financial years because infrastructure is one of government’s priorities. That amounted to R2 295 million.
• R1 million reduction in the financial management capability grant.
• Reduction in transfers to the Western Cape Gambling and Racing Board. The Board had increased its revenue and that is why the Department is able to reduce its transfer for gambling and research.
• R2 million reduction in information and communication technology. 

Mr Steven Kenyon, Chief Director: Local Government Public Finance, explained to the Committee that Provincial Treasury received two conditional grants from the national Department. In the main budget, it had already allocated funds to most municipalities through the municipal financial management capability grant in the February and March budget. However, there was an unallocated amount that remains, so the headline from this adjustment budget is that provincial treasury allocates funds for the bursary portion of that grant to 24 municipalities which amounted to R4 million.

The other grant that Provincial Treasury manages is the municipal financial recovery services grant. In that grant, Treasury has increased the amount of money available for that grant to R5 million and allocated it to five municipalities so that they can do pilot projects on smart metering. These five municipalities were chosen because they are the five with unfunded budgets in the province so revenue management is important to them, but in particular, four of them are municipalities that have qualified to form part of the municipal debt relief programme to write off Eskom debt over a period of three financial years. The national Minister of Finance announced in February in the national budget that the municipal debt relief programme has extensive conditions which means that they must comply with including demonstrations of how, over those three years, they are moving towards and applying smart meters and installing more smart meters as part of improving their revenue collection from residents on both water and electricity. This is the way the Provincial Treasury gives a contribution to those municipalities to pilot so that they can see what the impact is of installing those smart meters in a targeted number of households.

Mr Kenyon indicated that all the funds for transfer to municipalities are now fully transferred. There are a few small changes within the capability grant. At the time of the main budget in February, there was an unallocated amount of R5.8 million. After the budget had been tabled, the Saldanha Bay Municipality was lucky enough to be awarded that grant for the same project now being funded by the Development Bank of Southern Africa (DBSA) with an even slightly larger grant amount. So the Saldanha Bay Municipality volunteered that it did not want to be double funded for the same project so it asked if Treasury would rather not transfer that amount to them. So there is technically a reduction of R500,000. So that left Treasury with R6.3 million allocated. The R4 million for bursaries was allocated. Treasury also took more than R1.2 million from the capability grant to the financial recovery services grant and added additional money from its savings to further bolster that grant. So that is why what was left in the capability grant was just over R1.07 million which was declared as savings as part of the fiscal consolidation.

Given the time constraint, the Chairperson invited Members to ask one last round of questions.

Mr Van der Westhuizen noted that the expenditure spent on machinery and equipment was far below 50% and on page 45, where it states the leasing of motor vehicles, only 31% of the budget has been spent in the first six months, which means that nearly 70% of the expenditure would have to be spent in the second half of the financial year. He thus asked Treasury why it foresaw the monthly payments of government grants on vehicle leases would increase so sharply.

Given the current financial constraint,  should R5 million be spent on the modernisation of the offices at the Provincial Treasury? He felt that it should be one of the items to be postponed.

He understood that Treasury requires highly specialised skills and that the relatively low remuneration in the public service sector does not attract professionals with such skills. He was concerned now that the responses show that the Department is reducing the period in which those interns would be working for it. In addition, the Department has just told the Committee that more people are reaching retirement age. That means that there is a skills exodus which is difficult to fill. Given that, he questioned whether it still made sense for the Department to prioritise modernising its offices.

Ms Nkondlo was concerned with the Department’s HR approach, as shown in those adjustments. She sought clarity on whether she understood correctly that the critical vacant list had been reduced from 40 to 16. She further questioned the implication of that. Does that mean that the existing staff members are picking up the additional functions of others? If that is yes, she flagged it as a challenge because Members had been informed of the pressure staff members faced that would lead to the lack of productivity during Annual Report presentations. She asked Treasury if it had consulted with staff members on those issues. The 29 employees who left the organisation certainly exacerbated the pressure on the existing employees.

Was the R3.7 million legal fee under goods services on page 70 related to the Gambling Bill?

She asked the CFO to explain the total figure amount which has been reallocated across programmes to the revised recruitment plan versus the COE budget that has been readjusted to meet fiscal consolidation.

Minister Wenger highlighted that the modernisation of the Provincial Treasury office is essential to make sure that staff feel motivated given the difficult circumstances and that Treasury officials really do work above and beyond with absolute professionalism. The price tag for the modernisation was much higher and it has been cut substantially. So what was going to be a nice full refurbishment is now a small and more minor refurbishment of the floors of the Provincial Treasury. The current office space is very old and needs a bit of sprucing up.

Ms Gantana emphasised the important link between modernisation of the office and the COE discussion. For COE, Treasury needed a recurrent source of funding that will continue because once people are employed, it has to be guaranteed that there is funding to continue to pay until retirement or until such time that the post becomes vacant. When Provincial Treasury was confronted with fiscal consolidation, it also had to look at what would work best. If it is going to have fewer employees in the system, then Treasury needs to do everything in its power to create an environment that would be much more conducive to getting the output that is still required. She reminded Members that Provincial Treasury had previously mentioned issues around its culture journey in its quarterly report. Modernisation is part of the culture journey and approach to ensure it still gets the maximum output. It thus becomes important that Treasury creates an environment that will allow for that, such as its efforts to seek a culture that firstly demonstrates values through specific behaviours and greater leadership alignment and then improves staff morale and workplace happiness. 

Ms Smit explained the payments of capital assets and answered why the Department was confident that the budget would be fully spent despite it currently only having spent 35%. The replacement of obsolete computer equipment was only done in the latter part of the financial year and Provincial Treasury only made the payment in October.

Monthly payments for government vehicles are claimed via the government garage. The claim that Treasury gets from the government garage is twofold: One is for the kilometres travelled and that goes into goods and services. The other is the lease for the capital amount, which goes via the capital assets. That is exactly the reason why the Department gave back some of the vehicles because whether the vehicles are used or not, the tariff for that specific type of vehicle is fixed.

Ms Smit explained to Ms Nkondlo that if she calculated all the shifts on pages 39, 40 and 41 from COE between the different programmes and sub-programmes and added the R1 million that was shifted from COE to households, it would balance out. And if the ICS or the improvement of conditions of service are calculated, it was R12.751 million. All the fiscal consolidation on the COE adds up to R21.451 million and the difference is R8.7 million which is the R8.7 million on page 30.

Ms Shirley Robinson, Chief Director: Public Policy Service, answered the question related to the Gambling Board and the consultancy fee. Provincial Treasury made additional provision to ensure additional capacity given the reduced capacity from losses of staff members.

She indicated to Ms Nkondlo that Treasury had received that question on 1 November and provided a response on 14 November with an update. That response states that Treasury is in the final stages of verifying certain costs with legal services as the engagement is done jointly with legal counsel. It is at the final stages of verification and is due to be processed shortly. A written response will be sent through to the Committee on these questions.

Ms Nkondlo questioned if anything prohibits the Department from providing her with the answers in this meeting and is therefore being deferred to a later date.

The Chairperson indicated to Ms Nkondlo that because the time allocated for Members had passed, it was time for the public to ask the Department questions. She requested that the Department respond to Ms Nkondlo’s question in writing.

Ms Robinson replied that because any legal counsel is engaged jointly with legal services, Treasury would need to verify with legal services. The response will be a joint and agreed response between Treasury and legal services and confirmed by both parties. 

The Chairperson thanked the Department, the Minister and other Departmental officials for their leadership. Given the financial cuts that the Department has seen, the extreme pressure that the province is under and the sterling work that is done through its leadership, she sincerely recognised its hard work and thanked them for it. Provincial Treasury was excused.

Consideration and adoption of the draft Committee Report on Vote Three: Provincial Treasury in the Schedule to the Western Cape Adjustments Appropriation Bill, 2023

The Vote was supported by Mr Van der Westhuizen and Mr Sileku.

Ms Nkondlo did not support the Vote. She complained that she could not get a direct response from the Department whilst her question was directly related to the Vote she was voting on.

She also complained about the inconsistent manner in which the Chairperson had chaired the meeting. She felt that Members were deliberately kept from asking questions and getting responses. She thus wanted to register this concern. She felt that the Chairperson had applied the principle differently on different matters.

The Chairperson indicated that Ms Nkondlo’s concern is noted. However, an attack on the Chairperson is not accepted within the Committee. She understood that Ms Nkondlo did not support the Vote and the Committee would register that accordingly. The Chairperson emphasised that the Committee should work together and assured her that the requested information would be sourced for her accordingly.

Ms Nkondlo interrupted the Chairperson and indicated that she was not attacking the Chairperson but stating facts.

Mr G Brinkhuis (Al Jama-ah) did not support the Bill.

The Committee report was duly adopted.

Committee Resolutions

Mr Van der Westhuizen wanted to learn more about the internship programme, such as the number of interns on the bursary programme and how many interns find permanent employment for the Provincial Treasury during their working period.

He highlighted that the Committee should request a response from the Western Cape Gambling Board on how the decrease in its allocation affected its work. Noting the increasing number of illegal gambling sites, he emphasised that the government needed to put in proactive measures to ensure compliance with the requirements set by the Board.

He recommended the Committee do a walkabout to inspect the conditions of the Provincial Treasury office.

Ms Nkondlo requested information on the details of consulting services which amounted to R3.7 million on page 40.

She requested the Department provide information on the totals of the budget reallocated on COE to retention plan vs fiscal consolidation.

She requested the Department to give an indication of the number of posts in the old structure versus its current structure as the revised critical list has been reduced from 40 to 16.

The Chairperson adjourned the meeting.