Induction Workshop by Parliamentary Budget Office (PBO) and Financial and Fiscal Commission (FFC) on their mandates and support to Parliament

Meeting report

Chairperson’s opening remarks

The Chairperson opened the meeting and indicated that the workshop would be a joint meeting between the Select Committees on Appropriations and Finance to hear the mandates of the Financial and Fiscal Commission (FFC) and the Parliamentary Budget Office (PBO).

Outline and Overview: Parliamentary Budget Office

Dr Dumisani Jantjies, Director, PBO, introduced his team and made apologies for some of his team members who could not join the meeting on that day due to other commitments. He then took the Committee through the presentation on the role and the mandate of the Parliamentary Budget Office (PBO) in providing advice and analysis to Parliament on matters related to the budget and other money bills.

He gave a brief outline of the functions of the PBO, overview of revenue and expenditure performance in provinces and local governments, and brief metropolitan municipal findings.

The PBO was established in terms of the Money Bills Amendment Procedure and Related Matters Act 2009 (amended 2018). He outlined that the PBO’s role was to support all committees in Parliament but it could not because of capacity.

He further noted that within the PBO’s scope of work, its primary function was to see that all the budgets allocated to different spheres of government play a pivotal role in society.

He broke down the presentation in terms of the strategic focus areas and outputs, how budgets were allowed and how they were shared between national and local governments. He indicated that the PBO spent most of the time reviewing budget analysis and mid term budgets and those were the key areas where they spend most of their time, with follow up analysis to the committees, inlcuding tax and revenue analysis, how development policy is doing as well as public finance.

He then handed over a part of the presentation to his colleague to take the Committee through some of their work which included the money bills.

Prof Seeraj Mohamed, Deputy Director: Economics, PBO, took Members through the remainder of the detailed presentation. Members were provided with an overview of the revenue and expenditure performance in provinces and local governments - the NCOP plays an important role in coordinating the proper functioning of these three spheres.

The presentation looked at the PBO findings on conditional grants. They said the two largest grants are the Education Infrastructure Grant and the National School Nutrition Programme. Spending on these has been at the allocated amounts but performance on the outputs has declined over time. Although the number of schools increased between 2021/22 and 2022/23, the number of learners fed, reduced.

The analysis of the information on the performance of Health conditional grants is mixed: In many instances, the outputs have increased faster than the actual expenditure, while in other instances, outputs have increased accompanying decreased spending than in previous years. In some instances, increased performance is accompanied with underspending on the allocated amounts.

The PBO concluded that it was open to coming back to the Committee for continued presentations and updated information regarding its work.

(See attached for full presentation)

FFC: Induction, Enhancing Parliamentary Oversight

Dr Nombeko Patience Mbava, Chairperson, FFC, greeted the Committee and introduced her colleague and Head of Research. She said the Financial and Fiscal Commission is a constitutional institution established under Chapter 13: Finance, Sections 220-222 of the Constitution, which makes recommendations envisaged in this Chapter, specifically in the following sections of the Constitution to Parliament, provincial legislatures and any other authorities determined by national legislation.  

When making its recommendations, the Commission must take into account the following as listed in section 214 (2) (a) to (j) of the Constitution

• National interest
• any provision that must be made in respect of the national debt and other national obligations
• needs and interests of the national government, determined by objective criteria
• the need to ensure that the provinces and municipalities are able to provide basic services and perform the functions allocated to them
• fiscal capacity and efficiency of the provinces and municipalities
• developmental and other needs of provinces, local government and municipalities
• economic disparities within and among the provinces
• obligations of the provinces and municipalities in terms of national legislation
• desirability of stable and predictable allocations of revenue shares
• the need for flexibility in responding to emergencies or other temporary needs, and other factors based on similar objective criteria

Budget Allocation

Mr Chen-Wei Tseng, Head of Research, FFC, took Members through this portion of the presentation. He spoke to the guiding principles and objectives of conditional and unconditional transfers, vertical division of revenue (provincial equitable share), components of the provincial equitable share, local government equitable share and non-discretionary transfers.

Members were taken through the FFC’s views on policy and programme implementation by the Executive.

The FFC remarked on:

• Excessive accumulation of debt – Debt burdens continue to weigh on growth
• Declining fiscal resources compounded by rising demand for services
• Widespread inequality and service delivery failures are fuelling public dissatisfaction and radical political rhetoric
• Unemployment has increased, with the challenge of joblessness, particularly among the youth
• Ineffective and inefficient public sector.
• Over-planning, under-achieving (e.g. RDP, GEAR, ASGISA, New Growth Path etc.)
• Always ask: are we seeing value for money? Despite consistent growth in public spending over the past 30 years, rising allocations not always matched by commensurate improvement in service-delivery outcomes
• Government needs to take palpable steps to ensure efficiency in public spending. Restructure and terminate ineffective programmes to eliminate wastage and root out corruption. Strengthening political accountability through legislative oversight and real-testing

Dr Mbava invited all the Members to join the FFC’s podcast where they discuss more fiscal and policy-related matters, then thanked the Committee for inviting them.

See attached for full presentation

Discussion

The Chairperson said the content was too much for the allocated time but it was very good input. He thanked the organisations and their team and handed over to the Members for the discussion.

Mr D Ryder (DA, Gauteng) asked PBO how it dealt with individual requests.

“Dr Mbava, you said that in terms of the loan, your organisation has not been consulted; how do you suggest that we make sure as the Committee that National Treasury consults you before the loan is finalised?”

He said that he hoped that the Members were aware that the book that would be given to them the following week was a bible for them when they were processing the division of revenue and also informed parliamentary questions.

Mr B Radebe (ANC, Free State) said the presentations were extraordinary. He pointed out that he was worried that nothing had been done about wasteful expenditure, and requested that, as the Minister of COGTA requested, capacity must be created.

He was disappointed at the FFC for not saying anything on the news that broke last week about the money siphoned from the Road Accident Fund. He asked that the Commission does more in addressing the issues that come with public reporting and media engagements. He also pointed out that they need to do something about the money that is always returned back to National Treasury without fulfilling its service delivery duties.

Ms S Nxumalo (ANC, Mpumalanga) said she had questions, comments and concerns. She said government needed to come up with a plan on how to deal with the issue of duplication - more especially on the health department. She asked about the issue of budgets and how the Committee could ask the Minister about accountability measures. Overall, unless people are held accountable, then we are going to continue with this issue.

Mr JS Majola (MK, KZN) said the presentations received were extraordinary. He asked what the Committee's role would be in ensuring He asked if there were control measures in place that guided how grants were managed or utilised and if any input was expected from the Committee Members.

Mr PJ Swart (DA, Western Cape) pointed out that as the Committee, they were responsible for people’s lives out there and should therefore always carry the responsibility of ensuring that they take oversight issues in high regard. He pointed out that things such as wasted grants should be taken into consideration and solutions must be brought about. He asked how they can be equipped as Committee Members to ensure that monies issued to departments are utilised property. How did the PBO prioritise the issues of budgets and expenditure? Members need to know their responsibility as oversight politicians and how they can assist the administration. He asked the PBO if it is possible for them to have an open door where Committee Members are allowed to ask them for assistance.

Mr JHP Britz (DA, Eastern Cape), on the issue of oversight, said that he is of the view that committees should be actively involved in trying to strengthen service delivery measures. He said that the issue of poverty lines, which are growing daily, needs to be looked at every financial year. He asked how the PBO prioritised the issues of budget cuts and underspending. “How can we join hearts and hands in making sure that these issues are changed in the country as the administration?”

He thought the Committee should have direct access to the FFC and PBO so that it is able to consult with them when a need arises. He spoke on the issue of human settlements, especially on upgrading squatter camps.

Ms M Siwisa (EFF, Northern Cape) posed a question to the PBO in terms of the Key Performance Indicators (KPIs) they use to evaluate their work.

She asked the FFC how they reviewed the spending on grants by departments. Is there information sharing that happens during the process of the grant allocation?

She said that the issue that she wanted to talk about was the issue of underspending. She asked if underspending was a problem of capacity. Was it an issue of capacity with the municipalities struggling with implementation? “What can we do to ensure that we know the value of the money spent within various departments?” What was the formula for equitable share? What informed municipalities getting certain amounts of money and for what?

Ms T Legwase (ANC, North West) asked the PBO which KPIs they used for measurement. She asked the FFC how it communicated the work they do to the general public. And how do they ensure it is understood well by the public?

Responses

PBO

Dr Jantjies said that he appreciates the points and questions. He responded that on the PBO’s page, there is a column stipulating how they do their work as the organisation. He said that with correspondence, they do work with committees individually, but it was a difficult task because the PBO was not at full capacity as a team. He said that his team was composed of 14 members, who served all Members of Parliament. 

He gave a brief overview of the issue of budget cuts. He said that structural misalignment was the biggest concern in terms of budgets and plans. Sometimes, government had a development indicator, and wanted to reach equity, and on one side, the budget did not talk to that. Therefore there was a need to ensure better alignment. There was also the issue that the budget framework was broad beyond the expenditure, in that it has the revenue side to it. We should ask, are we able to raise more revenue to make more funds available to realise other indicators. He said that the PBO always makes it a point that if government cuts spending, they should give South Africans and Parliament what the indications of the cuts on service delivery and economic development were. It could not just be a cut. One needs to look at the budget not in isolation but together with the functions of government. For example, the issue of underspending has a lot to do with misalignment because one cannot have underspending when one has deteriorating development indicators. The NCOP has a duty to make sure that there is a better alignment between “what we want to achieve in the Constitution, in the NDP and in the mid term budget.”

In terms of the KPI, the PBO does set itself targets per year and traces its progress by checking if there has been any impact in the work it does.

FFC

Dr Mbava responded to the question of the FFC’s views on matters in the public spotlight concerning the health department and the Road Accident Fund. She said the FFC did publish its findings in the policy briefs where issues are discussed. She thought the FFC was lacking a social media strategy in its communications. The FFC was looking into having a very strong outward-looking public engagement with its stakeholders. She said that in engaging all sectors, the FFC needs to have a strong digital strategy to infuse its recommendations and disseminate them to a broader readership and younger, more agile youth based on social media. She said that the stakeholder engagement platform the FFC had was focused more on its liaison. She said the FFC wanted to be able to take very complex information, unpack it for public consumption.

Regarding following up on the FFC’s recommendations, she said Parliament must assist in this regard and do what it is supposed to do to ensure the Executive accounted for its implementation of these recommendations.

Mr Tseng said that no doing things on time was very expensive as it was not just the costs itself but it could also translate to interests, time, other costs causing delays. That was why it was important for municipal intervention to implement budget oversight. He outlined that some of the issues government departments face are repetitive administration in the procurement space. This was the space he thought National Treasury should be accountable for because inside National Treasury, there was the office of the procurement officer that sat down with practice notes that overlap but this is not very clear. Even the Auditor-General had admitted that it created a lot of confusion across the board. He said that sometimes, some of the procurement samples they are auditing need to go back and consult the central office and National Treasury. The system of supply chain had been developed into this unresponsive, hefty system of bureaucracy and it had an impact on how government could spend and procure.

 He said that poverty issues were a problem, but the root cause was unemployment, because if the entire household was unemployed, you were immediately in a state of poverty, since your income was zero. He noted that in economics, they tend to see unemployment as the driver of all evils which include poverty and inequality.

The Chairperson thanked the PBO and FFC and said that the Committee had learnt a lot from their presentations and wished to get more from continued interactions with them. She acknowledged that this was the first induction workshop Committee meeting, and that as technical as it was, Members would be able to understand for following meetings. She expressed gratitude for the energy and enthusiasm Members had brought to their work.

She acknowledged that the PBO and FFC had quite a voluminous piece of work therefore she wanted to thank them for their hard work and dedication.

The meeting was adjourned.