Western Cape Adjustments Appropriation Bill 2023: Vote 1 Premier

Meeting report

Western Cape Adjustments Appropriation Bill 2023
Western Cape Premier, Alan Winde, said the main appropriation of just over R2 billion had a decrease of R16.293 million in the adjustment. All Members should be aware from the tabling of the Medium Budget Policy Statement that there was huge pressure due to the higher than budgeted for inflation rate and wage agreement for the Department of the Premier which was R36 million. The Department has engaged with national government quite extensively and will have a meeting within the next few days to see if the R1,1 billion Compensation of Employees (CoE) shortfall could be covered to alleviate pressure. With the continuous weakening of the rand, the Department was in the same position the previous year and had to find appropriate external funding due to the rand/dollar exchange rate. Funds had been sourced across the board for Microsoft licensing and cloud computing services. Supply chain management needed to be considered carefully to have all the necessary procurement. Some of the funds for energy projects had to be pushed over to the next financial year. The Department was building a partnership on the PIRP and this process was to secure funding outside of its own budget. There was a delay on demand side management. There was an agreement with the National Minister of Energy to work together on this, but it has still not been finalised.

Director General Dr Harry Malila said he agreed with all the Premier’s comments. The adjustment budget only went up by R6,3 million and we had to find the difference internally. There was also shifting of funds as we offer certain services for Western Cape departments. There has been a shift of R2,7 million to the Department of Infrastructure to move toward more cost-effective accommodation. We learned a very good lesson with our internal audit team where we saved more than R5 million per annum. The roll-over funding of R9,3 million was to deal with the impact of inflation and the rand-dollar exchange rate. R17 million is for unforeseen unavoidable expenditure and the Department goes through this process every year where it budgets using a particular exchange rate and once payment needs to be made, the exchange rate is verified and applied.

What is key is for the continuation of the funding that has been provided to deal with the energy crisis. Given the constrained budget environment, the Department was looking at getting extra support. On the energy packs, this was a major shift as R60 million was allocated in the main budget. The first bid was advertised on 7 July for a 21-day period and 9 bids were received, but all bids had to be cancelled. Six bids were received on 1 September which also had to be cancelled as none of the bidders were compliant. The bid of 20 September closed on 4 October and six bids were received. Three of the bids were unsuccessful and one company indicated that it could provide 11 000 emergency lights, but later said this was not available. This bid was deemed non-compliant as the company misrepresented the facts. Another company indicated in bid documents that it could deliver 8 000 lights, but could not. Market availability and misrepresentation are often the reasons there is not procurement. With the new bid, we anticipate to receive the lights around the end of March 2024, but if things do not improve in the port, this could happen in April 2024.

The Department has requested National Treasury to use the R2 million set aside for Children's Commissioner accommodation and to allocate this in the next financial year when the Department has found appropriate accommodation. The Children’s Commissioner had identified a house in Upper Oranjezicht and people were promised this, but it found that there were already tenants occupying the space. The Department of Infrastructure was in the process of doing formal evictions. An alternative building was identified at 60 Orange Street, which was the former Gambling and Racing Board building. Upon further assessment, it was found that the Department of Infrastructure would have to spend millions to get the building to be suitable and the building would have been shared with other tenants. This would not have been appropriate as the Commissioner clearly indicated a building could not be shared with other tenants considering that children were being dealt with. The building was not suitable for the functions of the Children’s Commissioner and would cost too much money to do all the necessary renovations. The Department's total budget is just over R2 billion and will be reduced by R16,3 million.

Discussion
Ms D Baartman (DA) referred to page 5 of the Vote and page 96 of the Medium-Term Budget Policy Statement 2023. Over three years R10 million more was added to what was originally budgeted for. She asked if the budget would increase for the MTEF loadshedding emergency packs? She asked how many loadshedding packs were bought, if they had been distributed and where? What was the criteria for this?

DG Harry Malila replied that only 4000 lights were procured. Yesterday we began with the distribution and handover of lights. The next day, the Premier would go to Woodstock and Khayelitsha and this would also include safety and GBV campaigns. R70 million was set aside with a R10 million increase. We plan to procure 100 000 lights which cost R700 each and we will procure 90 000 packs which is linked to the original plan. The main target is education and this is to give young people an opportunity to complete their education. In additions, we are targeting those entering the school system and reading is also being encouraged. We are encouraging parents to read with their children despite loadshedding. We want to provide an opportunity for the most vulnerable. We want to enable children and encourage parents to provide the best for their children. He referred to pages 78 and 96.

Mr C Dugmore (ANC) noted the announcement by the Premier that an intergovernmental dispute had been lodged about the public sector wage bill. As far as he understood, this budget adjustment did not result in job losses in the Department of the Premier. Given that there was one public service and one legislative framework for public sector wage bargaining, he asked what the Premier hoped to achieve with an inter-governmental dispute. Did this imply that the Western Cape government did not support the public service framework where different levels of employment are standardised? The process of procuring service providers was problematic but there was now a new process which would be successful introduced by March or April 2024 and this amount would then appear in the new budget. Was the Premier not of the view that these funds could be better utilised by supporting municipalities to acquire extra generation capacity? Public hearings showed that there were certain regions like the Karoo which had underfunding for the generators provided. He asked if the energy packs were being procured or if the Premier thought these funds could be better spent on something like the Municipal Energy Resilience Project?

Premier Winde replied that there were no job losses in the system and what has happened in South Africa has not resulted in retrenchments, but it has resulted in the inability to fill posts. The budgeted salary increases must come from somewhere. We are not disputing the R7 billion, but the dispute is that there is an approved budget for 2023/24. There is a National Bargaining Council agreement that is above what is budgeted for. We are not part of finalising this wage agreement; but are consulted occasionally. We have to carry the costs of this and the national government has tried to cushion some of this, so it provides a portion of cushioning for Health and Education, but we still have to provide the rest of the top up. Every province is struggling with Health and Education and we are under tremendous pressure to get services out there because of population growth and the number of people requiring the service. On top of this, we have to absorb the wage increase which is beyond our control. We have an agreed-upon budget which has been cut for frontline services. We are basically fighting for the citizens of this province to get fair services. We have to find the money within the budget which means we are taking it away from something else and this is from the poorest of the poor. This is unacceptable and we will fight this and hopefully we will have the meeting between now and 6 December 2023.

Premier Winde said that he has been in communication with other provinces and asked them if they would join Western Cape in this fight. However, KZN expressed that it would just be unbudgeted by R10 billion. He did not know what would happen by the 10th month of the year when KZN had an unfunded budget and would run out of money. He was not sure why KZN was not fighting in the same way as the Western Cape was, but hoped the province would join the Western Cape in this process. It could not cut health and education frontline services to citizens – while other things could happen as if there were no tomorrow. We are a constitutional democracy, but within that democracy we have our right to differences which is what this fight is about. The KZN Premier felt this was an election exercise, but there was a multi-year energy budget in place which was not an election exercise. Citizens of the province cannot have electricity and keep the lights on – this is not a provincial service. This is definitely not an election campaign; getting services to the poorest of the poor and the citizens of this province. We have put a big budget aside to get the province energy-resilient. Businesses, SMMEs and middle-class households are all investing in inverters, solar panels and alternative energy sources due to loadshedding but the poorest of the poor are suffering. Our Gini coefficient in South Africa is actually getting worse and worse. Richer people can sort themselves out, but poorer people cannot and this budget is about caring for the vulnerable. When you get to Atlantis, you see an older person who is battling to put food on the table with the grant they receive and they have run out of money for paraffin and candles. This is when crime rates go up. He had been in Atlantis handing out these energy packs to elderly citizens. Just from engaging with them, you know these packs will make a difference in their lives during this era of loadshedding. He could quite categorically deny that this was not an election exercise.

DG Malila said the Department was working with municipalities, district municipalities and the City of Cape Town. Everything we do on the energy plan involves municipalities and goes way beyond energy supply. He asked Mr Dugmore to refer to page 36. Some projects involved the Municipal IPP Procurement process in Saldanha and there is some project preparation support money. In fact, coming Thursday, the Saldanha Municipality will be the first loadshedding-free municipality. There are issues with infrastructure planning and the Just Transition planning within the municipal space. The key is to deal with loadshedding as it relates to waste water treatment works as we approach the festive season and the R1,05 billion over the next few years cuts across all our initiatives.

Mr G Pretorius (DA) said it would have been great if the Committee could discuss austerity measures as opposed to reductions and surrendering of budgets, but this was the reality. He had read the Western Cape Minister's speech and commended everyone who has carried us through this really difficult time. He referred to the R18,75 billion on page 5 and asked how this would impact what was unfolding in the energy space and that it was not looking good. What impact would the surrendered funds or budget cuts have on the province’s efforts in the energy space?

Premier Winde said the energy budget put-aside was because there is a major crisis in South Africa at the moment and this was destroying the economy. Transnet and the Ports Authority has hamstrung the economy. Our out-of-control debt-to-GDP ratio cost billions in debt servicing costs. Looking at the overall picture, we are battling to get procurement right as well as the transfer of funding, but there are no major cuts. We are seeing small cuts on the energy plan – as this is such a critical plan to get the economy going again. National Treasury had a difficult job and was putting pressure on every single province across the country. Western Cape Finance Minister said the previous day that " tough choices such as reprioritisation, implementing hard stops on programmes lacking impact, and identifying areas for downscaling are imperative" and "severe slashing of our budgets". It was very tough to find the extra money. We found the best deal for energy, but this was not a quick fix. Money was availed for generators, but it was not as if the province would step in and pay for every single generator in the municipalities. This was a partnership. Some funding came in from the USA to assist with the Provincial Integrated Resource Plan for R7.5 million. We have received generators from China and a number will be sent to health facilities as some only have partial generation capacity. During the middle of anaesthetic administration, generators would switch off. We are trying to get extra resources from the private sector and we already have Chinese support for the generation system.

Follow-up questions
Mr Pretorius asked about the Provincial Integrated Resource Plan (PIRP) and the possibility of external funding.

Special Advisor on Energy to the Premier, Mr Alwie Lester, replied that it had approached the USA on other projects to get an understanding if it would be willing to assist with the PIRP. In the last two months, the USA provided us with a document which we have sent to Legal Services for an opinion. The USAID Southern Africa Energy Program (SAEP) would then consider assisting the Department with the PIRP and sourcing funding for an entity that would put together the draft PIRP for us. We are trying to engage some of the other donor funders in the industry to understand if they can be involved in some of the programmes such as the World Bank. This was not loan funding, but for feasibility studies. Execution is left to the provincial government and its structures and it hopes to have the contract with the USA finalised within the next few weeks. We also hope to go to the market with our PIRP early in the new year.

Mr Dugmore asked about the wage settlement and if the Premier was opposed to the wage settlement referring to the above-inflation increase? Was the Premier opposed to the increase granted to public servants? Given the statement by the Premier’s party leader that the public service should be reduced by 50%, does the Premier agree with that statement? He asked for an explanation on the reference to "buying in" state legal services to the Department of Education? Where is the legal services located? He asked for a breakdown of those costs allocated to the Department's legal advice?

Premier Winde replied that he believed during these times when citizens are really battling to put food on the table and inflation was going through the roof, it was unacceptable that government received an above inflation salary increase. This was where the negotiation fell flat and this could not be justified when businesses were failing, closing down and people were losing jobs. This cannot be happening when Volkswagen is saying it was leaving if loadshedding could not be fixed. We produce iron ore in this country, but mining companies have announced that 3000 people will lose their jobs because of what’s happening in the ecosystem and the fact that we cannot keep the lights on. People are losing their jobs and he do not think that is right. The President was forging ahead on revitalizing cuts for the ailing economy. The Public Sector Wage Bill should also be trimmed by government. Reforms should be a priority over the next nine months, but the process would take time to complete with South Africa’s unsustainable debt levels. The wage increases still need to be funded. Western Cape has 50% COE to the total budget which is the leanest province in South Africa. On teachers and nurses who work very long hours, he would not say that cut the administration, but there are definitely parts of South Africa where we would need to cut the salary as it was not sustainable. There definitely needs to be a hard look at some of our provinces where the COE takes up the full budget which affects service delivery. These are tough choices.

DG Malila replied that Legal Services is still operated from the Department of the Premier and provided legal services to all departments such as the Western Cape Department of Education. The funding shift was R858 000. The legal advisor works on matters related to law and education.

The Chairperson asked about the Children’s Commissioner and the accommodation for children. He did not think it was adequate for children to go to Waldorf Square and the money should be reappropriated once accommodation has been finalised.

DG Malila said everything was sorted out about the accommodation and the funding will be reallocated.

Further questions
Mr Dugmore referred to page 11 in the Blue Book. He noticed the gifts and donations received. He asked if there was a committee dealing with requests as they came in as he was not aware of a particular fund for sponsorship and donations within the Department of the Premier. He saw R111 000 was allocated. What amount was set aside for donations for the Department? For the donations and sponsorships received, the Committee was informed that the money is managed by the US and that the money does not actually physically come to the Department. He asked about the Apolitical donation headed by the former DA parliamentary leader, Lindiwe Mazibuko, and asked what "1000 seats" meant to participate as part of a cohort experience? How many seats were taken up and could the Department provide the course content of the climate course?

Premier Winde said the Co-Founder and CEO was Robin Scott. He would get more details on this.

DG Malila said there were clear policy guidelines on this. Staff in Programme 1 dealt with any requests that came in. R300 000 was set aside per annum for donations and requests. Given the extent of requests, some were sent to the line departments for support for sports teams, but the ultimate authority sits with the Accounting Officer and documents are available for each of the donations and gifts granted. In relation to gifts and donations, policies dictate the acceptance of this.

On the donation received from Apolitical, we will make this information available to the Committee. We are guided by legislation when we receive donations. The Apolitical donation was approved by the Accounting Officer and is in kind and not cash. There are 1000 opportunities for officials to participate in climate courses. The Policy and Strategy Unit would provide the technical information.

The Chairperson asked if members of the public had questions but there were none.

The Chairperson thanked the Department for the inputs and considered answers.

Committee Report on Vote 1: Premier in Western Cape Adjustments Appropriation Bill
Mr Dugmore said he wanted the Chair to note the ANC’s opposition in terms of Rule 19.

The Chairperson noted this.

Ms Baartman said despite the heavy budget cuts, a lot of thought went into ensuring the safeguarding of MTEF programmes and the reallocation of funding. She supported Vote 1.

Mr Pretorius said he supported Vote 1.

The Chairperson expressed his support for Vote 1.

The Committee Report on the support for Vote 1 was adopted.

Resolutions/Actions
Mr Dugmore requested the Climate Course content offered by Apolitical.

The Committee will receive a breakdown of donations and information on this from the Department.

The minutes of 3 and 22 November 2023 were adopted.

The Chairperson thanked Members for the robust discussion and adjourned the meeting.