Budget (proposed costing and funding) of the Basic Education Laws Amendment Bill

Meeting report

The Chairperson said the Committee would receive a briefing from National Treasury (NT) on the proposed costing and funding of the Basic Education Amendment Laws (BELA) Bill. The meeting originated from previous resolutions of the Committee, stemming from various sections in the Public Finance Management Act (PFMA) and the Constitution relating to unfunded and funded legislative mandates regarding the effective and efficient allocation of funding and the equitable share. The meeting also originated from an indication by Mr James Ndlebe, Director: Education Management and Governance Development, Department of Basic Education (DBE), that NT had committed to funding the respective Bill.

Apologies were received from Mr K Sayed (ANC) and Mr F Christians (ACDP).

National Treasury on BELA Bill funding

Ms Julia de Bruyn, Chief Director of Public Finance, NT, confirmed that no additional funding was proposed to implement the BELA Bill. She acknowledged that although there was funding in the baselines of provincial education departments for Grade R, it was insufficient. She said the presentation would focus on explaining how the budget process works, and reiterated NT's stance on the lack of additional funding for the BELA Bill.

Ms de Bruyn provided an overview of the budget process, highlighting the involvement of various stakeholders such as National Treasury, the Budget Council, and the Ministers Committee on the Budget. She explained the sequence of events in the budget calendar, including the medium-term budget policy statement (MTBPS) in October, and parliamentary hearings on the budget proposals. She also touched upon the allocation of funds to provinces and local government, emphasising the importance of the provincial equitable share (PES) in provincial budget development.

Regarding the BELA Bill, she clarified that once provinces receive their PES, they manage their own budget processes. She explained that the NT did not have the authority to earmark funding within the PES, and reiterated that no additional funding had been proposed for the BELA Bill in the 2024 budget. She provided details on the funding allocated for Grade R in provincial education budgets. She concluded her remarks by presenting additional slides on the Western Cape's allocations over the medium term expenditure framework (MTEF) period.

(See attached presentation)

Discussion

The Chairperson announced the commencement of the question and answer session, but before proceeding, she asked about why the Minister was absent.

Ms De Bruyn responded that she assumed the reason had been included in the apology letter, but she herself was unaware of the specifics.

The Chairperson acknowledged this, and suggested that the Senior Procedural Officer could provide clarification on the matter while she proceeded with the question and answer session.

Mr C Fry (DA) acknowledged the extensive public hearings and consultations conducted regarding the Bill. He sought clarification, as it seemed no money had been allocated or provided for the Bill in the 2024/25 budget cycle. He expressed concern that provinces were being left to their own devices without knowing the actual cost of the Bill. It seemed provinces were required to find funds without a clear budgetary provision. He sought guidance on this matter for information purposes.

The Chairperson stated her intention to pose her questions, which she would not post all at once, as some might become moot depending on previous answers. She mentioned being in a fortunate position as the chair of the Budget Committee, having seen relevant documentation and public documents. She noted that there was nothing in the documentation regarding the BELA Bill or its implementation. She explained that the national budget was essentially a three-year plan updated annually by the national government, with provinces ideally informed about their allocations for the coming years to plan their budgets and programmes accordingly. The budget was a legal document that must be tabled in Parliament for consideration and approval, so the absence of BELA funding in the current budget indicated that the National Treasury did not intend to fund it for the next three financial years, up until the beginning of 2026/27. She then posed her question, asking if the National Treasury had committed to funding the BELA.

Mr C Poole (DA) raised concerns about provinces having already prepared their budgets for the 2024/25 fiscal year. He noted that since the National Treasury had confirmed the absence of funding for the BELA in that period, he was worried about how provinces would secure sufficient funding for the Bill.

Responses

Ms de Bruyn responded that the essence of the questions pertained to government's priorities, which were typically outlined in the main budget document. She reminded the Members that the 2024 budget focused on fiscal consolidation, meaning funding was reduced across national, provincial, and local levels. She clarified that NT did not dictate the budget, but rather made proposals which were then reviewed and potentially amended by Cabinet. Decisions regarding budget allocations were made at the political level, not by the National Treasury. She highlighted the role of Parliament in amending the budget proposals and stated that from a technical standpoint, there were no proposed additional allocations for implementing BELA. She concluded by inviting her colleagues to add any additional comments.

Mr Hubert Mathanzima Mweli, Director-General, Department of Basic Education (DBE), said he aimed to clarify and agree with the presentation made by the national representatives. He pointed out that the proposed BELA bill was not fully funded, as indicated in the presentation. He explained that funding for basic education legislation typically existed on the baseline of provincial departments' equitable share, with some allocated to the DBE. For instance, the DBE provides learning and teaching support materials (LTSM) in the form of workbooks to all 22 000 schools and centres with Grade R. He emphasised that no legislation in basic education received 100% funding, including the BELA bill.

He highlighted challenges in meeting funding norms across provinces due to fiscal consolidation. He disagreed with the notion that the BELA bill must be fully funded, explaining that 70% of funding was available on the provincial department's baseline equitable share, along with allocations for Grade R workbooks. He acknowledged that this did not constitute full funding, but represented what the government could afford at present. The budget could be adjusted during the financial year, and baselines could be amended or adjusted over time. He stressed that the absence of funding now did not necessarily mean there would not be funding for the next three years.

The Chairperson sought clarification from Mr Mweli regarding the funding mechanism for the BELA bill. She asked if he was suggesting that provinces should allocate funding for the BELA from their equitable share. She noted the presence of provincial treasury representatives in the meeting, and speculated that they might be concerned about Mr Mweli's statement, particularly given past experiences where promised funds for public wages were not fully delivered. She sought confirmation on whether Mr Mweli was indeed suggesting that provinces should fund the BELA from their equitable share allocations.

Mr Mweli responded that provinces had been using their equitable share to pay salaries for Grade R practitioners and teachers for years. He said the need for funding for the BELA was not solely tied to the passing of the Bill, but was an ongoing practice. What was required was the additional 30% mentioned by National Treasury, as the baseline currently covers 70%. He emphasised that provinces would need to work out the difference from the available allocation.

The Chairperson sought further clarification, asking if Mr Mweli's response indicated that he indeed wanted provinces to fund the BELA from their equitable share. She requested a straightforward confirmation, stating that the options were either for provinces not to fund it from their equitable share, or to fund it from their equitable share.

Mr Mweli acknowledged and confirmed that augmenting the existing 70% baseline with an additional 30% would indeed come from the equitable share, as stated by the Chairperson.

The Chairperson reiterated Mr Mweli's response, clarifying that he had affirmed the use of the equitable share to fund the BELA, if passed.

She then raised another unanswered question regarding whether the National Treasury had committed to funding the BELA. She emphasised the importance of distinguishing between the current funding status and any prior commitments made by the NT. She requested a direct response from Ms De Bruyn, seeking a simple "yes" or "no" regarding whether the National Treasury had committed to funding the Bill.

Ms De Bruyn responded that the answer to whether National Treasury had committed to funding BELA was "no." She explained that this was not specific to implementing the BELA bill, but applied to all funding allocations. She clarified that Treasury did not allocate funding -- that responsibility lay with the legislature. Only the legislature had the authority to allocate funds, and therefore Treasury could not commit to funding any specific project or initiative.

She elaborated that while discussions had taken place on funding requests, including those related to early childhood development (ECD), infrastructure, additional teachers, and the three streams model, during budget engagements with the national DBE, these discussions did not constitute confirmation of funding commitments. She reiterated that the National Treasury could not confirm funding commitments, as this would exceed its mandate and authority.

Further discussion

The Chairperson asked Mr Ndlebe to clarify his previous statements regarding National Treasury's commitment to funding the BELA. She emphasised the importance of the question, noting that he had repeatedly stated National Treasury's commitment to funding the BELA in various Committee meetings and documented records. She pointed out that this information was not just her observation, but could be verified through Committee recordings, resolutions, minutes and documents on platforms like Parliamentary Monitoring Group (PMG). She asked him to explain the basis for his belief that National Treasury had committed to funding the BELA. Specifically, she inquired if he had received a direct communication, such as a letter or memo, or if someone had verbally communicated the commitment to him.

Mr Ndlebe referred to a previous meeting with the Committee, where a letter from National Treasury addressed to the National Assembly had been presented. The letter indicated that the DBE had fulfilled all the requirements regarding dealing with an unfunded mandate. He said that the process involved in dealing with unfunded mandates included going through a validation process, which was approved, signifying compliance with procedural requirements. He said that if there had been no commitment from the DBE regarding how the Bill should be funded and how to handle unfunded money, the Bill would not currently be in Parliament. The understanding was that Parliament would discuss and approve the Bill, with the awareness that it carried financial implications that had not been budgeted for previously.

Mr Ndlebe further explained that the funding mentioned in documents reflected amounts estimated six years previously, and the situation had since evolved. He commented that the current funding situation for Grade R was operating at 70% coverage. He emphasised that if the Bill were to be passed, Parliament would need to consider budget adjustments. He referred to the ongoing discussions regarding the 2024/25 budget, and said that the timing of the Bill's passage would influence the budgetary process. He concluded by reaffirming that the DBE had followed the required procedures for dealing with unfunded mandates, as confirmed by National Treasury.

The Chairperson thanked the participants and expressed her intention to open the floor for questions from other Members before addressing her remaining questions. Upon noticing no immediate responses, she proceeded to discuss the financial implications of the Bill. She provided context by stating that the Bill required approximately R17.7 billion in funding. Dividing this amount by the nine provinces would amount to around R1.97 billion per province, although the actual amount could be higher due to factors such as uncosted items and the insufficient calculation of one teacher per 40 students.

She acknowledged the presence of provincial treasuries in the meeting, even though they had not been formally invited. She invited the Provincial Treasury to contribute to the discussion or confirm their presence.

Ms Analiese Pick, Chief Director: Public Finance, Western Cape Provincial Treasury, acknowledged their presence in the meeting, despite not being formally invited. She explained that it was protocol for the Western Cape Treasury to attend any standing Committee meeting where National Treasury was invited. Therefore, they were present in the meeting out of interest and adherence to protocol.

The Chairperson elaborated on the provincial budget, stating that it amounted to R84 billion. This budget consisted of R62 billion proposed in the Division of Revenue Act (DORA) from the national government, and an additional R14.8 billion in terms of conditional grants, bringing the total to R76.8 billion. However, this sum did not represent the entirety of the provincial budget, as provinces also possessed their own revenue streams. The remaining R7.2 billion needed to reach the R84 billion provincial budget was not a significant portion, representing less than 10%. She underscored that essentially, all provinces were predominantly funded by National Treasury, with their own revenue streams contributing minimally to their budgets.

Ms Pick responded that during the presentation of the 2024 budget to the Budget Committee, they had not indicated any allocation for the Bill. Regarding the R2 billion mentioned by the Chairperson, Treasury had tabled funds for unforeseen and unavoidable allocations over the medium term expenditure framework (MTEF), which amounted to almost R2 billion. However, this was the extent of available funding within the fiscus.

The Chairperson reiterated the calculation, stating that it amounted to approximately R2 billion.

Ms Pick confirmed the calculation, noting that it was just under R1.8 billion per annum, considering it to be over the MTEF period.

The Chairperson clarified that the amount was not per year, but over the MTEF period.

Ms Pick agreed, confirming that the province did not have R2 billion per year for the Bill, nor did it have R6 billion to cover the Bill over the MTEF.

The Chairperson clarified that they did not have R6 billion in the provincial budget. She then expressed her understanding that the unforeseen and emergency reserves were intended for situations like fires, floods, COVID outbreaks, load shedding, and locust infestations -- events that were unforeseen, unplanned, or emergencies.

Ms Pick affirmed the Chairperson's statement, agreeing that those were indeed the types of events that the unforeseen reserves were planned for.

The Chairperson highlighted that there was no annual allocation of R2 billion for the BELA, even if spread over the MTEF. She stressed that for the next three financial years, there should be no unforeseen events such as fires, floods, locust infestations, COVID outbreaks, or power outages in the Western Cape in order to allocate funds for the BELA, which would still not be sufficient.

She redirected the question, acknowledging Mr Ndlebe's earlier statement about the socio-economic impact assessment (SEIA) process being completed and approved, along with the issuance of a SEIA certificate. She then addressed Ms De Bruyn, seeking clarification on what was meant by "we submitted what was required" regarding the SEIA requirements, and questioning whether there was confirmation from National Treasury regarding funding commitments.

Ms De Bruyn said that the SEIA process was not managed by National Treasury, but rather by the Department of Planning, Monitoring and Evaluation (DPME). She explained that there might be confusion regarding Section 35 of the Public Finance Management Act (PFMA), which states that when a department proposes legislation that will impose obligations on provinces, it must also provide the costing for that legislation.

She stressed that National Treasury did not approve the costing -- it was the responsibility of the department proposing the legislation. The costing accompanies the Bill to the legislature for consideration. She reiterated that National Treasury's role was merely to remind departments of their obligations in this regard.

She clarified that National Treasury could not have given any confirmation regarding a funding commitment for the Bill, as it fell outside of their mandate. Its role was limited to reminding departments of their responsibilities, such as presenting the costing when required. Therefore, it could not confirm matters beyond its mandate.

Mr Mweli clarified that while the Bill was not fully funded, there was funding allocated for the implementation of making Grade R compulsory, which was currently at 70%. He said passing the Bill would align Grade R with other compulsory grades, ensuring it received the same level of attention as Grades one to seven. He acknowledged that there was a gap between the current funding level and what would be required for full implementation of the Bill. However, it was common for bills not to be 100% funded, and he appreciated the concerns the Western Cape Province raised regarding the lack of additional funding to cover the remaining 30%.

The Chairperson referred to previous meetings, and presented factual information provided by the DBE and the Financial and Fiscal Commission (FFC). She highlighted that the Western Cape Provincial Parliament had been the first to call the FCC to address a non-financial, non-legislative matter, emphasising the importance of responsible financing and fiscal implications. Based on various sources, including independent calculations by the FFC and presentations by the DBE, the minimum cost of implementing the Bill would be R17.7 billion. This figure had been confirmed less than three weeks ago and included expenses not covered in the current 70% funding. When divided among the nine provinces, she pointed out that this amount exceeded the available budget, particularly in the Western Cape, which lacked the required R2 billion annually for the next three years.

She pointed out the discrepancy between the calculated cost of implementation and the available budget, emphasising that the Bill's financial implications were inaccurate. She expressed concern that approving the Bill would create financial burdens for provincial education departments without adequate funding. Requesting approval without a clear funding plan shifted the responsibility to national and provincial treasuries, leaving the DBE without accountability. She questioned the fairness of the situation, expressing concern over the implications of approving the Bill without a clear funding plan. She emphasised the burden it would place on national and provincial treasuries to find the required R17.7 billion, suggesting that it would be unfair to expect them to source funds for a bill that lacked adequate financial backing.

Mr Mweli responded that they were not asking for a blank cheque or expecting national and provincial treasuries to bear the burden entirely. He emphasised that Grade R education was already provided in primary schools and ECD centres, funded at 70% through provincial budgets. He expressed the desire for the remaining 30% to be sourced elsewhere to bring Grade R funding in line with Grades 1 to 7. He acknowledged the historical challenges with Grade R funding, and highlighted the importance of equitable funding for Grade R to ensure parity with other grades. He disputed claims that there was virtually no funding for the BELA bill, stating that 70% funding was already available, but it fell short of the full funding required, leaving provinces with a 30% gap to address.

The Chairperson pressed Mr Mweli further, asking whether he believed it was fair for the Western Cape and other provinces to vote on allocating the additional 30% of the required funding, part of the R17.7 billion total. She questioned the fairness of effectively telling National Treasury to find the funding without clarity as to its source.

Mr Mweli refrained from making a judgment on what was fair regarding the funding allocation process. He emphasised the importance of making Grade R compulsory in the best interest of learners. While acknowledging the 30% funding gap, he suggested that even if the funding was not available immediately, it was fair to aim for Grade R to be funded at the same level as Grade 1 over time, which he deemed universally fair.

The Chairperson said there had been no opposition to Grade R in principle, but rather concerns about the costing and funding. She highlighted the importance of having the necessary funds to implement compulsory measures. She then inquired about the Auditor-General's (AG's) obligation to audit matters dictated by law, seeking confirmation from Ms De Bruyn or Ms Pick.

Ms De Bruyn clarified that the AG did not necessarily audit the funding gap, but rather examined whether the allocated funds were being used in accordance with the law.

Ms Pick confirmed this explanation.

The Chairperson countered that if no additional funding was allocated to the BELA Bill, the AG would assess whether the current funding, claimed to be at 70%, was being utilised to implement what was required by the law. However, since the law mandated that Grade R be made compulsory and additional tasks needed to be undertaken to achieve this, it implied that 100% compliance would need to be achieved with only 70% of the necessary funding, if the additional 30% was not provided.

Mr Mweli expressed gratitude for the confirmation the national and provincial treasury provided. He drew parallels with the national norms and standards for school funding, where there was a threshold that all provinces should ideally meet. However, not all provinces were able to meet this threshold, yet they had not been disqualified for it. He said that the 30% funding gap would result in Grade R being funded below the legal requirement, similar to provinces funding below the threshold for school funding.

The Chairperson responded that that was not what she was asking. She was seeking clarification on whether, in the absence of the additional 30% funding, implementing the law would still necessitate carrying out 100% of the requirements with the existing 70% funding.

Ms De Bruyn indicated that it was not expected that 100% of the law would be implemented with only 70% of the funding. She explained that in education and other sectors, implementation was typically, phased in over time. Once the Bill was passed, the DBE would return to the budget process to make further requests. These requests would then go through the usual process involving both the executive and legislative branches, where choices would be made. She suggested that a phased-in approach would likely be taken, similar to how other education initiatives were implemented gradually over time.

Mr Mweli expressed his view that the decision regarding the funding allocation ultimately lay with the Provincial Executive Council, Provincial Legislatures, the National Executive Council, and the National Legislature. He said that historically, funds had been reallocated from education and social sectors to other areas such as road construction. He suggested that if these bodies prioritised Grade R, they could find ways to redirect funds toward its implementation. However, he acknowledged that achieving the full 30% funding within one financial year would be unreasonable. He emphasised that the bulk of the funding would likely go towards infrastructure, as personnel and learning materials were already accounted for in the baseline. He pointed out that even if the funding was provided in the current financial year, the education sector may not have sufficient capacity to utilise it effectively.

The Chairperson reflected on the discussion, and commented that the implementation of laws did not always align precisely with what was written. She expressed concern over what she perceived as inadequate planning for implementing laws, considering it to be “bad lawmaking” practice.

She inquired if there were any further questions from provincial treasury or the Western Cape Education Department (WCED).

Ms Lynn Coleridge-Zils, Director: Policy Coordination, WCED, expressed agreement with the concerns raised by the Chairperson regarding budgeting issues. She highlighted various expenses such as classroom construction, maintenance, municipal costs and staffing, and policy priorities like food, nutrition, learner transport and hostel accommodation. She emphasised the challenge of providing necessary services to learners amidst budget constraints, suggesting that the implementation of Grade R could be done incrementally. She concluded by affirming the need to address budgetary concerns before implementing universal Grade R.

Mr C Poole (DA) expressed his concern about the political implications of the situation, particularly regarding public perception and managing expectations. He highlighted the challenge of communicating to parents, who may be angry or concerned, about the compulsory nature of the Grade R bill despite the budgetary gap. He questioned how the message would be conveyed to parents and stakeholders, emphasising the need for clarity and transparency in public communication.

The Chairperson concluded the meeting by stressing the importance of considering all the information before making decisions on the BELA bill. While some questions were more political and appropriate for the Minister of National Treasury to answer, the Committee needed to move forward with their negotiating mandate the following day. She thanked the respective departments for their participation and assistance in providing important information for the Committee's deliberations.

Committee matters

The Chairperson clarified the process for the negotiating mandate meeting scheduled for the following day. Members would go through the bill clause by clause, and if any of them wished to propose amendments, they should come prepared to do so. She encouraged them to send their proposed amendments to Ms Wasiema Hassen-Moosa, the procedural officer, beforehand. She mentioned that the matrix, a document outlining the proposed amendments and their impact on the Bill, had not yet been sent to the Members.

She asked Mr Ben Daza, Senior Procedural Officer, if there were any other matters to address before concluding the meeting.

Mr Daza informed the Chairperson that Ms Hassen-Moosa had completed the matrix, and should have sent it to the Members.

The Chairperson requested that the matrix be sent to them as soon as possible to allow Members time for review before the negotiating mandate meeting. She also questioned whether they were required to go through all 5 445 submissions individually in the negotiating mandate process, expressing doubts about the feasibility of such a task.

Mr Daza clarified that Members were not necessarily required to go through each submission individually. The matrix and the inputs from the public participation process could serve as reference points for Members when deciding on proposed amendments, or the provincial stance on the Bill. These documents would assist Members during the voting process or when proposing amendments, without the need to address each presenter's submission individually.

The Chairperson outlined her personal process for organising notes on submissions and proposed amendments, indicating that she tended to correlate non-amendment responses and kept submissions proposing amendments separately for further consideration.

Mr Daza added that the Committee could still raise issues during the negotiating mandate process beyond proposing amendments, based on the information gathered after submitting their provisional mandate the previous week.

The Chairperson sought legal opinion on the process being discussed.

Adv Romeo Maasdorp, WCPP Legal Advisor, said that from his perspective, there was nothing specific that required attention at the moment regarding substantive issues. He expressed eagerness to see what proposals for amendments the Members would come up with. He also stated that the Committee had adequately addressed the financial implications aspect of the lawmaking process, ensuring compliance. However, the details of the financial implications were beyond his capacity to assess, but he confirmed that legally and substantively, the requirements appeared to be satisfied.

The Chairperson thanked Adv Maasdorp for his input, and asked if any Members had further inputs or resolutions.

Mr Fry said he would reserve his concerns for the negotiation mandate discussion at the following meeting.

The meeting was adjourned.