MTBPS; Adjustments Appropriation Bill & Special Appropriation Bill: Committee Reports

Meeting report

The Standing Committee on Appropriations met on a virtual platform to review the draft reports on the Medium Term Budget Policy Statement (MTBPS), the Special Appropriation Bill [B19-2024] and the Adjustments Appropriation Bill [B14-2024].

Key discussions included concerns over the 4.7% wage increase in the public sector, with Members emphasising the need for fiscal prudence and alignment with actual negotiations while maintaining neutrality. The Committee also debated the role of the Public Sector Bargaining Council, and the potential impact of wage increases on the budget. The report also addressed special appropriations for state-owned enterprises (SOEs) during the COVID-19 period, with Members stressing the importance of avoiding habitual bailouts. Finally, there were suggestions for enhanced oversight of fund disbursements, particularly to the Department of Cooperative Governance and Traditional Affairs, with calls for greater involvement by the Auditor-General, and joint committee oversight.

The meeting concluded with the adoption of the reports after several amendments were made for clarity and accuracy.

Meeting Report

Opening Remarks

The Chairperson said he had received a letter from Mr W Douglas (MK), who had bid farewell to the Committee after being redeployed.

He addressed an issue regarding the timeous nature of the reports to be considered today. When looking at the Legacy Report by the sixth administration, the Members would notice that half of the Bills that the sixth administration had passed had gone through the Standing Committee on Appropriations. This meant that by the nature of the work done by the Committee, it was likely to be the busiest Committee in Parliament.

He said that the Committee was governed by the Money Bills Amendment Procedure and Related Matters Act, which prescribes how and when certain things can be done. For example, after the tabling of the Medium Term Budget Policy Statement (MTBPS) and public hearings, this meant that there could be no report of Parliament that could be tabled that does not have consideration of the public’s interests. The reports have to be compiled after the public hearings, and this finished on Sunday, which was why the reports were shared with Members on Monday (2 December). He said that the work of the staff in ensuring that the reports were shared on time was appreciated. He thought it would be important for Members to be sensitised to the nature of the timetable which requires the reports to be produced quickly and effectively, and that he had to ensure that the report reflects what the Committee was working on and what was discussed during the public hearing on Friday (29 November). 

Report of the Standing Committee on Appropriations on the 2024 Medium Term Budget Policy Statement

Dr M Burke (DA) commented on a question put to the Minister in the sitting last week regarding the wage increase budgeted for, and what was currently happening in the public sector wage negotiations. He recommended that the wage negotiation should correspond with the budgeted amount to allow future budgets to foresee where the wage negotiation would end up. The current negotiation offer of 4.7% had been rejected, but the budget had wages stipulated at 4.7% which was an error in the budgeting process. 

The Chairperson said that language-wise, if the Committee was able to state that considering the MTBPS, the budgeted bandwidth for public sector employees’ salary increases was currently sitting at 4.7%, the Minister should ensure the integrity of the amount was maintained and, in the medium-term, that this particular bandwidth was consistent. It could not be said that the increase was in line with inflation, because inflated-related increases were unsustainable, which was why the increases should remain consistent with 4.7% across the medium term.

Dr Burke said that he had added proposed texts to the Chairperson’s discussion.

The Chairperson said that this was a systemic issue. 

Mr Sifiso Magagula, Committee Content Advisor, asked Mr Andries Maubane, Committee Secretary, to note how the phrasing of the 4.7% should be written for the MTBPS to be maintained. 

He said he understood the Chairperson, but it could lead to possible disagreements with the Congress of South African Trade Unions (COSATU). 

The Chairperson said that the 4.7% should be maintained and not increased to 7%, for example, as it could lead to a fiscal crisis. 

Mr N Kwankwa (UDM) said that a common mistake was blaming workers for the increase in inflation, yet workers were victims of government’s failure to manage the economic indicators of the country. He emphasised that it would be beneficial to align inflation with increases, because that reflected the increase in the cost of living. This was where ethics were drawn, since it was important to keep the alignment neutral.

He added that by aligning inflation negotiations with COSATU and labour movements, it could indicate what the country could afford. A starting point was to align inflation increases to the rate at the time, because if it decreased, it favoured the state, and there would be a need to manoeuvre around this to avoid eroding people’s standard of living. 

The Chairperson said that high-income earners’ increases could not be aligned with inflation, whereas someone who earned less might want an increase above inflation. South Africa’s biggest dilemma regarding inflation was linked to input costs, rather than demand. For example, if the price of electricity went up, it was an inflationary burden that citizens could not control and could end up with a public sector wage bill that was above 4.7%. Given that National Treasury (NT) had proposed that it must remain at 4.7% in the medium term, and for the Committee to endorse that proposal, it was important to maintain the link between the increases and inflation.

Mr Kwankwa said it would be more beneficial if the negotiation was ideologically neutral.

Ms N Gcalecka-Mazibuko (ANC) said that the Committee’s recommendation of phrasing should also acknowledge that there was a structure formed by government named the Bargaining Council, which represents the employers, employees and unions involved. It would be beneficial to look at what the Bargaining Council agreed upon regarding further issues over and above the issues of inflation.

Dr Burke agreed with all points made thus far regarding that the report should be politically neutral. He added that the report should not focus on the politics of wage increases, but rather on recommending that the corrections in pencil were more realistic as to where negotiations would end up, otherwise the budgeted amounts were incorrect. 

He added that it was not whether the negotiations were higher or lower, but it was the request from National Treasury (NT) to give an accurate bill point for the budgeted amount, and what support was provided when it was often incorrectly recorded. He emphasised that placing amounts on the budget was not sufficient if they were incorrect, because, in the next few months, when the amount could not be attained, it would result in the need to readjust the budget, which could have been avoided.

Mr M Lekganyane (ANC) said that the debate on workers not being ideological was impossible. He added that to promote how the report was written must not be in a manner that adds more pressure to the budget. It must be within the 4.7% to avoid involving the Committee in matters of the Bargaining Council. He added that if the 4.7% was of concern to financial management, then it could be debated efficiently. 

Mr Magagula said that neutrality was important, because when it was recognised that negotiations had not taken place yet, and if this structure was recognised, the Public Sector Bargaining Council would be deployed to conduct the negotiations on behalf of government. If 5% was approved, there was nothing Parliament would do about it. He added that prescriptions should not be made regarding processes that had not yet been unfolded by Parliament. If a structure was recognised as legitimate, it should be allowed to make its own decisions. If the Committee was stating that it would hold NT accountable for the 4.7%, then it was rendering the structure ineffective. He reiterated Mr Kwankwa’s point that it was important to remain neutral, without pre-empting what the outcome of the negotiations would be. 

The Chairperson said that this was not a matter of neutrality, but the point he was trying to make was that if the budgeted amount was 4.7%, it should be accepted. This needed to be done in a fiscally prudent manner. 

Mr Kwankwa said that the point of the draft was that it reflected what happened factually with the 4.7%, and the Minister of Finance should ensure that the proposed wage increases were as indicated in the MTBPS. This should be more realistic or financially prudent, because the discussion could be ideologically agreed upon yet politically disagreed. 

He cleared the confusion regarding his earlier point by stating that the proposal and recommendation must be neutral and approached ideologically. Using language and terminology such as “future” was neutral, because the Committee did not know the political dynamics that happened in those negotiations and could not be directive to the government regarding what agreements were reached with various stakeholders on specific matters. He emphasised that the Committee wanted the reasoning for the recommendation to be, to hold the government accountable based on what had been presented to the Committee in Parliament. If there was an issue, then the Committee could request an explanation from government, which would promote the integrity of the budget process. 

Dr Burke said he agreed with Mr Kwankwa that the integrity of the budgeting process should be protected. Any budget item that was over budget, and the actual amount was less than that, resulted in a slightly smaller deficit for the fiscus. However, under-budgeting and having the actual amount higher than that, was a negative outcome, as it would grow the deficit during a time when things should be consolidated. He said that this was not concerning the wage issue, but more of a general view. For the integrity of the process, it was important to get closer to the actual number, otherwise it would undermine the integrity of the process. 

With all the pages being considered, the Chairperson said that the Committee would move for the adoption of the report.

Dr Burke and Mr Lekganyane proposed the adoption of the report.

See full report here https://pmg.org.za/tabled-committee-report/6042/

Motion of desirability -- Special Appropriations Bill

Ms Gcalecka-Mazibuko and Mr Kwankwa moved the adoption of the motion of desirability. 

Report of the Standing Committee on Appropriations on the Special Appropriation Bill 

Dr Burke said he required clarity regarding the last sentence in point 4.5.

The Chairperson questioned whether Dr Burke had an idea on how to phrase it in a way that would make it more understandable.

Dr Burke said he would remove the sentence entirely.

Mr Magagula agreed that it could be removed, as it would not affect the content.

The Chairperson agreed. 

Dr Burke said that there was a section in 4.8 that implied that they were saying that they were helping the people by aiding state-owned entities (SOEs), and it was not necessarily what the Committee believed. 

The Chairperson said that his interpretation of the section read by Dr Burke was that some entities during the state of Covid-19 were incapable at the time of generating their own revenue. He added that aid was thus given to sustain those entities throughout the Covid period. 

Mr Magagula said that the phrasing could be changed, as it did not necessarily state that SOEs were bailed out because of Covid-19, but instead, the number of Bills which were raised by the Organisation Undoing Tax Abuse (OUTA), where they adjusted more Bills outside the normal budgeting process. Most of the Bills were directed at government intervention during Covid-19, but it needed to be acknowledged that if government had not intervened with these Bills, such as the Special Appropriation to Eskom and the money sent to South African Airways (SAA) during the height of the Covid-19 pandemic, more damage would have been done which would have affected South Africans negatively. 

The Chairperson said that it needed to be narrowed down to remaining within the South African fiscus, and it was important to ensure that there was not a habit of bailing out SOEs. Regarding the wording, it would be important to stress the point that states that bailouts are intended to balance the tabled budget. 

Mr Kwankwa said this should be reported factually, without judgment regarding what the government had stated in their objectives when it undertook the intervention. He added that this directly addressed what government was doing when they were attempting to do bailouts for SOEs. This was not about the Committee’s interpretation or reflection, but rather a factual response to OUTA on this matter. 

Mr Magagula said that those Bills were in two parts, with one part being related to Covid-19 and the other related to bailing out SOEs. The wording did not indicate that the SOEs had been bailed out because of Covid-19, but rather that the Bills had responded to the threats posed by the fiscus to SOEs failing to meet their debt obligations. 

The Chairperson acknowledged what Mr Magagula said, but questioned how this balanced out with the livelihoods of South Africans. He read the section again and said he did not have a problem with the second point. However, the question of how to quantify the livelihoods of South Africans remains. He accepted the point as it was currently phrased, because he had found that further points in the report required attention. 

Dr Burke said the language should be tightened up in a way that enabled it to be less contentious. 

Mr Magagula suggested that the sentence should be split. 

Ms H Neale-May (ANC) said that the wording was correct and should be left as it was now.

The Chairperson said that the contentious point for him was the quantification of the impact on the livelihood of South Africans, and suggested that the wording should allude to a budget fact, rather than the livelihood of South Africans.

The Committee agreed to the changes suggested by the Chairperson.

See report here https://pmg.org.za/tabled-committee-report/6041/

Motion of desirability-- Adjustments Appropriation Bill

Ms Gcalecka-Mazibuko and Ms Neale-May proposed adoption of the motion of desirability. 

Report of the Standing Committee on Appropriations on the Adjustments Appropriation Bill

Dr Burke stated that the point that he was trying to make in last week’s parliamentary session, which had been missed, was that Maluti-a-Phofung Councillor, Moshe Lefuma, had been murdered for exposing R8 billion, and for three years there were no audited statements. He said that there should be additional oversight on the extra money being sent to the Department of Cooperative Governance and Traditional Affairs (CoGTA), but it would be important to have the Auditor-General (AG) involved at the point of disbursement.  He added that an additional sentence to point 6.3 would be to suggest that additional oversight take place for the additional funds being released. 

The Chairperson questioned what the additional oversight would look like.

Dr Burke said that there were two ways the AG could be involved. It could be looked at retrospectively, or it could be disbursement-based. He said the difficulty with the situation in Maluti-a-Phofung was that they had refused to send statements for three years to be reviewed. An auditor could also be involved on a project-basis release, saying they would release based on reaching milestones. 

The Chairperson requested the views of Members.

Ms H Neale-May (ANC) said it was disappointing that councillors were murdered, but it was important to note that the Standing Committee on Public Accounts (SCOPA) was also involved in looking at these issues, and works closely with the Special Investigating Unit (SIU). She emphasised that it was not just the oversight from the Auditor-General of South Africa (AGSA) that was needed to analyse the matter at hand. 

Dr Burke stated he was not referring to retrospective action, but rather proactive involvement in the disbursement. 

Mr Lekganyane said that joint committee meetings with relevant portfolio committees such as CoGTA and SCOPA, which had immediate oversight, could be useful moving forward. 

The Chairperson said that the broader sentiment was that additional oversight must be conducted, and the AGSA should be involved in the first instance. Regarding Mr Lekganyane’s statement, it would be beneficial to have joint oversight committees between relevant committees, including CoGTA. 

Ms Gcalecka-Mazibuko said that the Committee agreed with the allocation, but Dr Burke had stated that AGSA needed to exercise additional oversight. She suggested that oversight from all committees responsible would be beneficial. 

The Chairperson recommended changes to the phrasing regarding the joint oversight point made at the end of 6.3.

Dr Burke suggested that point 6.9 should be subdivided into three sub-points. 

Dr Burke and Mr Kwankwa proposed adopting the draft report of the Standing Committee on Appropriations on the Adjustments Appropriation Bill [B14-2024], dated 3 December. See full report here https://pmg.org.za/tabled-committee-report/6040/

The meeting was adjourned