Division of Revenue Amendment Bill: public hearings

Meeting report

The Chairperson greeted the civil society organisations who were attending the meeting to make submissions on the 2024 Division of Revenue Amendment Bill (DORAB):

• Ilifa Labantwana,
• Amandla.mobi,
• Section 27,
• Equal Education and
• COSATU

Submission by Ilifa Labantwana

Ms Sithembile Dube, Systems Design and Development Specialist, and Mr Daniel McLaren, Public Finance Economist, briefed the Committee.

The organisation pointed out that the current funding for early childhood development (ECD) services was too low to achieve universal access by 2030. It highlighted that the medium term budget policy statement (MTBPS) and Minister Enoch Godongwana’s budget speech did not speak once to the lives or needs of children. In addition, Minister also did not mention ECD in relation to government’s “inclusive growth” agenda.

It appealed to the Committee to prioritise ECD in its medium term development plan (MTDP) and inclusive economic growth agenda, as well as to set ambitious investment, job creation and child outcomes targets to meet by 2030.

Overall, ECD services continued to be impacted by austerity measures. The organisation provided recommendations on early nutrition, an ECD subsidy and the provincial equitable share.

(See attached for full submission)

Submission by amandla.mobi

Ms Thabisile Miya, Amandla.Mobi coordinator, said the organisation’s concern was mainly around the National Treasury's attempt to exclude more people from the Social Relief of Distress (SRD) grant, and its failure to implement the Basic Income Grant (BIG).

The organisation called upon National Treasury to:

• Increase all social grants by R500.
• Expand the range of VAT zero-rated food items.
• Provide additional funding to the Competition Commission to strengthen its capacity to investigate and take action against supermarkets and other big businesses that were profiteering and deepening poverty.
• Increase the R370 SRD grant to match the R796 food poverty line, and maintain it until it transitioned into a BIG of R1 500. National Treasury had previously tried to scrap the SRD grant and replace it with another grant that would exclude even more people. It called on the Committee to ensure that the SRD was not scrapped and that more budget was allocated so that all who needed the grant would get it.
• Increase the sugary drinks tax to 20% in the February 2025 budget, and finally start the long overdue public consultation process to expand the sugary drinks tax to include fruit juice.
• Tax the ultra-rich

(See attached for full submission)

Submission by Section 27

Section 27’s concern on the DORA bill was its continued reliance on austerity, underfunding essential sectors like health and education.

These concerns included:

• Failure to reverse the budget cuts proposed in the main budget threatens access to education and healthcare for vulnerable communities.
• Lack of gender-responsive budgeting (GRB) since 2022/23 exacerbates gender inequalities.

The organisation called for gender-responsive budgeting and climate-responsive budgeting.

Section 27 highlighted that the provincial equitable share (PES), which funds core provincial functions like education and healthcare, had received a nominal 2.6% increase in the 2024/25 DORAB, falling below the 4.3% consumer price index (CPI) inflation rate, exacerbating budget pressures. This had not been reversed.

The organisation proposed a R11 billion early retirement plan, and called for more teachers and doctors to be appointed.

The basic education budget had decreased by 0.4% (R1.2 billion), reducing it to R323.3 billion. These cuts strained provincial resources for scholar transport, stationery and learning materials. It was flagged as a concern.

Challenges involving the Education Infrastructure Grant (EIG) and the School Infrastructure Backlog Grant (SIBG) were identified.

The organisation called on Parliament to leverage fiscal policy to fulfil its commitment to rights realisation and economic justice, laying the groundwork for inclusive growth and equity.

(See attached for full submission)

Submission by Equal Education Law Centre

Mr Daniel Peter Al-Naddaf referred to the unfunded mandates in early education. He said the current PES formula perpetuates historical inequities in education funding through several structural flaws. While purportedly designed to ensure fair distribution of nationally-raised revenue, the education component fails to adequately account for historical disadvantage and varying provincial needs.

The presentation addressed the water sanitation and school infrastructure issues which required additional funding and support from the state.

The issue of learner-educator ratios was highlighted. The problem of overcrowding in South African schools was severe and inequitably distributed. According to 2023 Education Management Information System (EMIS) data, the average learner-educator ratio in Quintile 1-3 schools (serving lower-income communities) stands at 29.9 -- significantly higher than the 25.1 ratio in Quintile 5 schools and the 17.4 ratio in private independent schools.

The importance of private investment in public goods was emphasised. Education, like other public services such as national defence or street lighting, exhibits characteristics of non-rivalry and non-excludability. This meant that it generates positive externalities such that one person's consumption of the good did not reduce its availability to others, and it was difficult to prevent people from accessing it.

(See attached for full submission)

Briefing by COSATU

Mr Matthew Parks, COSATU’s Parliamentary Coordinator, presented the organisation's comments on the DORAB.

He covered the country’s socio-economic context, fiscal framework, the Public Service Wage bill, local government, national departments, economic social relief, revenue and state-owned entities (SOEs). COSATU's proposals were:

Public Service Wage Bill

• Government must table its proposals on early retirement packages for clarification and engagement at the Public Service Coordinating Bargaining Council (PSCBC).
• Frontline vacancies must be prioritised for filling.
• An urgent solution was needed to save Western Cape teachers’ posts.
• Roadmaps were needed to rebuild and modernise frontline public services.
• The headcount of public office bearers and their packages must be reduced.

Local government

• An urgent discussion and roadmap were needed to move the District Development Model (DDM) to a sustainable financial path.
• Parliament must adopt a much more aggressive approach to oversight over the performance of municipalities and provinces towards the implementation of infrastructure programmes, including addressing the horrifying findings of the Auditor-General’s (AG's) reports.

Government departments

• Parliament must hold departments accountable for their failure to meet targets and spend allocated funds.
• Roadmaps were needed to rebuild and modernise frontline public services, including filling critical vacancies, fixing infrastructure backlog, overhauling information technology (IT) systems, removing corrupt elements, and appointing competent management.

Economic and social relief

• Parliament should amend the budget to extend the Presidential Employment Stimulus to accommodate one million participants annually from April 2025, and two million by November 2025.
• Parliament should amend the Revenue Laws Amendment Bill to enable COSATU’s proposals for the second phase of the two-pot pension reforms so they could be implemented by 1 September 2025.
• Treasury should begin discussions on a roadmap for the SRD grant to reach the food poverty line, transform it into a BIG, and link its participants to skills and job opportunities.

Revenue

• Substantially increase allocations to the South African Revenue Service (SARS), with a performance agreement for it to increase tax compliance from 64% to 70% over the next two years.
• Accelerate progressive tax reforms to ensure the wealthy pay their fair share from 2025, including increases for the rich through income, inheritance, estate and luxury import taxes, as well as further tightening existing tax loopholes.

COSATU commended government’s effort in its turnaround strategy by overcoming loadshedding, as well as providing additional support for Transnet to unlock the mining, manufacturing and agricultural sectors, and to Metrorail to boost the urban economy and help protect food and commuters from oil price hikes. 

Other COSATU proposals included:

• Additional support for Eskom to ensure loadshedding does not return, including tackling debt owed to Eskom, easing Eskom’s debt relief conditions, support from law enforcement to tackle corruption and criminal acts, and fast-track the roll-out of 14 000 km of transmission lines.
• Interventions to stabilise and modernise Transnet include easing the debt burden, supporting law enforcement to tackle corruption and other criminal acts, overhauling signals and IT systems, investing in ports, and reviving rural railway lines.
• Accelerating turnaround plans for Metrorail, Denel, the South African Broadcasting Corporation (SABC), the Post Office and Postbank, including debt relief, financial recapitalisation, appointing competent persons, law enforcement support, infrastructure investments and new business models. 
• Compel the Department of Transport to expedite the Road Accident Fund (RAF) and the Road Accident Benefits Scheme Bills, to place the RAF on a sustainable path and ensure its funds are directed to the poor, and not pilfered by lawyers.

(See attached for full submission)

The Chairperson indicated that submissions from the Budget Justice Coalition and the Western Cape Commissioner for Children would be considered by the Select Committee as well.

Discussion

Ms M Siwisa (EFF, Northern Cape) noted the emphasis on education in the presentations among the first four presenters. She concurred with their view. Education played a crucial role in South Africa.

Since Early Childhood Development (ECD) had been moved from private to basic education, this had come with complications. She asked if organisations would go to small-scale standalone ECD institutions that were not on school premises. These institutions barely survived financially to pay their bills, and there was a delay in the Department paying them.

ECD employees were being pushed to study further, which they were reluctant to do. Most of them were over 55 and had started as creche workers. She asked about those organisations’ views on the management of the challenges faced by standalone ECD facilities.

She commended the passion for ECD shown by the presenters.

She asked Mr Parks to comment on the lack of a working relationship between the state and the taxi industry, especially in the Western Cape. Their taxis were being impounded. Those operators had to compete with buses, Uber drivers, etc, and were not being subsidised. How could they assist the taxi industry? Was there a common ground that could be reached between the government and the industry? She pointed out that this industry was the main source of income that supported a large proportion of the black South African population.

Mr J Majola (MK, KwaZulu-Natal) shared the same sentiment as Amandla.mobi on the inequality issue, and said it had not been closed since 1994. It was a serious concern. He called for solutions, and emphasised the critical role of economic growth, which was directly related to job creation.

He agreed with Ilifa Labantwana on the importance of ECD, and asked about the organisation’s involvement with ECD -- did it go beyond the age of five? Did they follow the post-school age?

He welcomed the formalisation of three million taxis in the taxi industry. He recognised the contribution of the sector in job creation and economic growth, and asked COSATU if compliance with labour and tax regulations was adhered to.

Mr J Britz (DA, Eastern Cape) noted the interesting point made by Ilifa Labantwana in its recommendation. He asked why the Department of Basic Education (DBE) had not announced plans yet to spend the R197 million for the early nutrition pilot in 2024/25, and requested that the fund be spent for its allocated purpose.

He explained to the presenters that there had to be a balance on the spending of revenue. What was eating up the revenue was the servicing of debt. Many of the recommendations from presenters could be categorised into social and human matters, which no one could contest.

He commended and welcomed the passion which presenters showed, but also urged them to see the reality of balancing spending against the declining revenues.

He agreed with COSATU’s points on local government. He asked if COSATU had engaged with local municipalities. If so, how often? Had it alerted the South African Local Government Association (SALGA) and local municipalities about the employees who had not been paid? Had it engaged with those dysfunctional municipalities?

He asked for COSATU’s view on progress made on Eskom debt relief, and how municipalities were supposed to leverage from this relief.

He sought COSATU’s view on the District Development Model. Given that SALGA had raised concerns on the DDM, what was the basis that informed its support for the DDM?

Mr P Swart (DA, Western Cape) observed that the expectations from the people out there were that the Government of National Unity (GNU) needed to do better. The current budget had been tabled by the sixth administration. Moving forward, he urged everyone in the country to develop innovative solutions. How could people from outside government create one consolidated list of what needed to be done?

He emphasised the importance of investing in the country's children and ECD.

He highlighted the plight in informal settlements and the poorest of the poor. Did one say South Africans first, or Africans first?

Mr D Ryder (DA, Gauteng) commented that little reference had been made in the presentation to the DORA. He accused civil society of manipulating the opportunity by going into fiscal policy and tax issues, despite the agenda being to discuss the DORA.

He commented that it was difficult to get into how to assist government to spend money effectively on ECD. In his observation, ECD centres performed different functions in different areas. Local government also found it difficult to spend money because of the emerging trend of different types of ECD. He highlighted that a one-size fits all approach would not work, and that there had to be solutions to find a way to protect children, but also to recognise their different circumstances.

He disagreed with Amandla.mobi on health promotion levies, especially on small-scale subsistence farmers in KwaZulu-Natal's (KZN's) rural areas. He questioned if the organisation had been to that region to see for themselves.

He commented that Section 27’s presentation had rushed over its recommendations. Members wanted to see solutions and recommendations, and it did not help to ask for more money, knowing there was a budget constraint.

He disagreed with Section 27 on the infrastructure backlog. In his view, consolidating basic education infrastructure and the infrastructure backlog grant removed the focus of that backlog. Suddenly, the relatively smaller amount allocated to the backlog would be subsumed into the large amount. Non-performance could go unremarked and unspotted. While the grant stood alone, the government could have oversight on how it was doing with the backlog.

He agreed with COSATU on the wage bill, especially that more people should be involved in frontline service delivery. However, he commented that the average remuneration of a state employee exceeded that of those in the private sector. He attributed that to the toxic work environment which had to be addressed.

He agreed that the funding model for local government needed a review. That point was shared by the National Treasury as well. National Treasury agreed that the Eskom debt relief programme was not working, and it would be doing a review. He urged finding a different solution, since municipalities needed their budgets to perform service delivery, and forcing them to pay back legacy debt amounting to billions might not be feasible. It would be silly if the government only intended to bail out Eskom, but not local government -- the correct approach was to bail out Eskom via local government.

Ms S Ndhlovu (ANC, Limpopo) asked COSATU to give its opinion on the performance of the current Presidential Youth Employment (PYE) programme in job creation and absorbing new labour market entrants.

Ms S Nxumalo (ANC, Mpumalanga) highlighted the gap in ECD coordination. Her view was that some employees worked at ECD institutions because they did not have other means of earning a living, so they decided to do creche work to collect children. Recognising the critical role of children in the future of the country, she urged non-governmental organisations (NGOs) to come up with a standardised framework to include such activities, and improve coordination.

She asked COSATU if the two-pot pension system had relieved the distress of workers.

Noting that the presenters had highlighted the vacant positions in most municipalities, she commented that there was also a public sentiment where people complained about the bloated public service. She asked the presenters to juxtapose those two points. The salary bills in most municipalities were more than what they were supposed to be.

She supported the revival of the implementation of the sugar tax.

She called for an improvement in performance at the local government level.

The Chairperson gave each stakeholder three minutes to respond to Members’ comments and questions and make their closing remarks.

Responses

Ilifa Labantwana

Mr McLaren attributed the non-payments of ECD centres to a capacity issue at the provincial level, since the responsibility had been switched from social development to education. There were insufficient human resources to do the financial monitoring, sign service level agreements (SLAs), and manage bigger ECD systems.

There was also a poor data system to record where ECDs were, what contracts they had, how much money they got paid, etc. The budget for that ECD system was estimated to be R181 million over three years, which was currently not funded in the budget.

In KZN, there were more demands for ECD subsidies than what the budget allowed. It resulted in a situation where the department was overwhelmed by the demand and could not pay everyone.

He suggested that the Committee review the provincial equitable share for better and more sustainable funding.

He requested Members to seek amendments to the budget, given that the budget played an important role in providing policy directions.

Recognising the budget constraints, he pointed out that the government had to think about how one could do things better, and then review public investment. There were resources, but they were unequally allocated, pointing out that in Cape Town, one could drive from one of the wealthiest communities in the country to the poorest within 15 minutes.

Ms Dube said that ECD encompassed a broad range of factors that help a child to grow into a productive member of society, which went beyond the learning aspect. However, even for the learning aspect, the system could not afford to accommodate all the children, so it had resulted in the emergence of uncoordinated and informal creches to support the public system. She called for the professionalisation of the sector, arguing that this did not necessarily mean a university education. Most of the issues Ilifa Labantwana had noted among the youth could be attributed to the broken foundational stage. Most of the interventions which the sector needed require some financial investment, and there could not be any further delays. There were already interventions, such as DBE spearheading efforts to assist the registration of more ECD centres and the data management to track and monitor properly informed decisions and planning around some of the issues that she had discussed.

Amandla.Mobi

Ms Miya appreciated the sense of understanding that there were serious issues in the country which needed to be addressed. She hoped that more solutions would come up in their engagement with Committee Members for the betterment of people in South Africa.

Section 27

Section 27 clarified that organisations in civil society formed part of the Budget Justice Coalition. The rationale was that the different organisations in civil society representing different interests and segments of society coming under a common cause for budget and economic justice, would inspire government.

On innovative financial solutions, Section 27 concurred with Members that revenue was directly linked to economic growth. Whilst recognising the slow economic growth, it urged that the fiscal policy needed to work in tandem with the country’s industrial and monetary policies to better position the state to come up with innovative financial measures.

Section 27 expressed concern about the country's debt service costs, because those funds could be spent on education, healthcare, ECD, social grants, etc.

Parliament should put pressure on the government and National Treasury to explore alternative ways to solve some of the problems, such as the debt issue and tax reform. Given that many other African countries, such as Kenya, Zambia and Ghana, were facing the same resource constraints, it was time for those countries to come together and explore alternative solutions. Civil society had made submissions to the finance committee on the revenue side.

Section 27 had, over the years, made various recommendations to this same committee, such as climate financing, human rights impact assessments, etc. However, Treasury had never implemented those recommendations. That was why those recommendations had been rushed over in the presentation, because they were repetitive.

Section 27 urged the Committee to hold National Treasury accountable, and to question Treasury if the School Infrastructure Backlog Grant (SIBG) had been collapsed into the Education Infrastructure Grant (EIG).

Equal Education Law Centre

Mr Al-Naddaf emphasised the moral, ethical and constitutional imperatives of rights, and said rights were also a form of economic investment. The people of the country had called for the country to be turned around during the election. The majority of the people in the country were unable to access government services before the budget cuts, and the cuts were only going to make things worse.

He mentioned the opportunity costs which come with not investing in socio-economic rights. Treasury's legal obligation was to ensure sufficient funding for ECD and Grade R learners. Not investing in that was a debt which was going to be carried over every year. For instance, when one did not invest in socio-economic rights, it would lead to a decrease in health, skills viability, labour viability, and the education of the population.

COSATU

Mr Parks noted that Grade R would now be formally included in the curriculum. He hoped that an allocation for resources would be in place once the programme was being rolled out. He encouraged this Parliament to make the school age to Grade 12 compulsory.

He said the taxi industry should be given more support since it was one of the few industries that was led by coloured and black South Africans who had survived apartheid. The taxi industry was the backbone of the transport in townships and villages. He encouraged the initiation of a dialogue between the industry and the state over the state providing support and requiring the industry to adhere to tax laws, labour laws, and road safety laws.

He said the reason taxi drivers drove the way they did because they were given a target by taxi owners. If they were formalised, the industry could be transformed.

He agreed that the local government sphere was a crisis across municipalities. Some municipalities were too small, which called for consolidation. He agreed on the need to have a discussion about the funding model.

He said the fifth Parliament had facilitated a discussion between labour and industry on a just transition in the sugar industry, which had resulted in sugar master plans. There was a need to strike a balance between the health objective and giving support to emerging farmers in KZN and Mpumalanga, who were predominantly African.

Commenting on the wage bill, he said the wage bill itself had declined in the last two years. For instance, it was no surprise that there was always a long queue outside of Home Affairs because there was a 60% vacancy rate. Philosophically, society benefited from public services. For instance, if an employee had to wait for six days to get an identity document (ID), that was the loss that the company suffered. Ensuring there were sufficient employees in the public sector would address that.

He also pointed out that comparing public and private sectors was difficult.

He commented on the public employment programmes. Some programmes did not provide what one wanted, such as the Expanded Public Works Programme (EPWP), the Community Work Programme (CWP), etc. Some programmes did not make a huge impact. There needed to be a discussion on upskilling and long-term employment.

He called the two-pot pension system a success, and reported that R35 billion rand had reached two million workers by Friday. It was a great relief for workers and boosted savings, ensuring workers who lost their jobs had access to their funds. COSATU was hopeful that it would squeeze Treasury to start another round of reforms.

He agreed that the debt servicing fee was scary, and called for a solution to grow the economy and reduce unemployment. Cutting the wage bill would not solve the country's fundamental economic problems.

He indicated that there was progress from government’s side, as entities such as Eskom, Transnet and Metrorail had been stabilised, the state had appointed competent management and removed corrupt elements, filled critical vacancies, and invested infrastructure. He urged Parliament to give SARS more resources to boost tax compliance.

He expressed the hope that those who had received social grants would be employed so that the 27 million unemployed population would join the 16 million who were employed.

COSATU urged the private sector to pay workers a living wage, and show support for local companies.

The Chairperson highlighted that Parliament was the platform where different parts of society could come together and discuss a way to help the citizens of the country. The Committee did not take public participation for granted, and regarded the process as a meaningful one. She noted issues on the social relief of distress grant, the basic income grant, the support for infrastructure, ECD, the correlation between food prices and the social grant increase, gender-responsive budgeting, and a reduction in the health and conditional grants.

The Committee would meet with stakeholders on 6 December on the Adjustment Appropriation bill.

The meeting was adjourned.