Adjustments Appropriation Bill: briefing and adoption

Meeting report

FINANCE PORTFOLIO COMMITTEE
3 November 2004
ADJUSTMENTS APPROPRIATION BILL: BRIEFING AND ADOPTION

Chairperson:

Adjusted Estimates of National Expenditure 2004 PowerPoint presentation
Adjustments Appropriation Bill [B21-2004]

SUMMARY
National Treasury presented a summary of the Adjusted Estimates of National Expenditure. Areas of concern were the escalating social (mainly disability) grant payments, the magnitude of unforseeable and unavoidable expenditure, the non-payment by state departments of municipal rates and services, and the under-expenditure and roll-over of allocated funding. Clarification was sought on the R1 billion "savings " by the Defence Force due to currency exchange rate appreciation, and the adjustment of R500 million for the Pebble Bed Modular Reactor development project. The Adjustments Appropriation Bill was formally considered and accepted.

MINUTES

National Treasury briefing
Mr Taz Chaponda (Chief Director: National Treasury) and Mr Neil Cole (Director: National Treasury) introduced the various elements of the Adjustments Budget which amounted to an additional appropriation of R2.8 billion over and above the main appropriation of R368.9 billion. Over-expenditure amounting to as much as R3.27 billion for unforseeable and unavoidable expenditure on social (especially disability) grants was cause for concern. Other unforseeable and unavoidable expenditure had resulted from, for instance, increased personnel costs; epidemics like the recent avian flu; the (temporary) breakdown in negotiations for a strategic external partner for the nuclear PBMR (Pebble Bed Modular Reactor) electricity generator programme; complex rural land restitution claims, and the municipal services and rates payment backlog. A huge declared saving (R1 billion) had been posted by the Department of Defence on foreign exchange rate appreciation. A slightly higher deficit of 3.2% cent of GDP resulted from the adjustments, compared to 3.1% in the February 2004 budget.

Discussion
Ms R Taljaard (DA) expressed reservations about the excessive use of ballooning contingency reserves as a safety catch for inaccurate budgeting, to which Mr Chaponda replied that a contingency reserve provided a good buffer which obviated the need for additional borrowing.

Mr M Johnson (ANC) was not happy about the over- and under-spending and asked what was done about that. Mr Chaponda replied that Provincial Treasuries intervened in cases of underspending. An early warning system on a monthly and quarterly basis should lead to improvement

Ms B Hogan (ANC) asked whether the R 500 million for the PBMR project would be the final provision; and how the R1 billion "saving" by the Defence Force was calculated. Mr Chaponda explained that the Department of Trade and Industry was looking for strategic partners for the PBMR and that no decision had been taken about the future.

Ms Taljaard criticised the validity of labelling regularly recurring expenses as "unforseeable and unavoidable" to which Mr Cole replied that these were prepared by the National Executive Committee, and Mr Chaponda added that it was difficult to judge. Of R6 billion requested, only R1.2 billion had been awarded.

Ms Taljaard recommended that the Defence Force savings remain in the Defence Force and be dedicated to eventual future losses due to exchange rate fluctuation. Mr Chaponda explained that the saving was in fact a rescheduling of payments to a later date.

Ms J Fubbs (ANC) and Ms Hogan asked why the Department of Public Works liabilities for paying municipal rates and services had still not been met. Mr Chaponda replied that it was proving difficult to track these liabilities. A careful audit was required and would be addressed over the following three years.

Ms Taljaard and Ms Fubbs were concerned about the sky-rocketing social grants, especially for disability. Mr Chaponda replied that there were administrative loopholes and some fraud. Investigations, also into policy matters and an audit were under way. The Western Cape had succeeded in arresting the escalation.

Ms R Joemat (ANC) criticised the provision of "prestige accommodation" as unforseen and unavoidable and suggested that it could be labelled "fruitless and wasteful" to which Mr Chaponda replied that the word "prestige" was unfortunate.

The Chair asked about the levels of and rules for outside sponsorships and/or donations from governments and private bodies, to which Mr Cole replied that there were Treasury regulations and that they were looked at at executive level, for example the United Nations contributions for the South African military effort in Burundi.

Mr Cole explained that legislation did not allow roll-over of unused funding from one financial year to the next except where it was unforeseen and unavoidable (usually for delays in infrastructure projects), but that a second roll-over was not possible. Virement (re-allocation of funds) between main divisions within votes, which did not change the framework, was allowable for up to eight per cent.

The Chair proposed a formal consideration of the Adjustments Appropriation Bill, which was unanimously supported.

The meeting was adjourned.