National Literacy Campaign: briefing

NCOP Finance

09 May 2000
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report


9 May 2000

Documents handed out:
Presentation by the Departments of Finance and State Expenditure

The committee indicated that they want to have a more meaningful role in influencing the budget. The Minister suggested that they should get their input together before August as this was the time when the numbers got ‘’knocked into shape’’. If they did not meet this deadline, he said that they would remain disempowered. The Minister reminded the committee that the NCOP is the custodian of provincial interests.

The committee had earlier strategised as to how to make a more meaningful impact as a committee. At the end of the discussion, members had agreed that the primary areas that needed their involvement were:
- the budgetary process
- the public procurement process

They identified the following as the key functions of the Select Committee:
- maintaining intergovernmental fiscal relations
- facilitating local government financing
- ensuring public participation in decision-making processes
- exercising oversight on public spending and ensuring the financial
management of funds at both national and provincial level.

The Chairperson set out the objectives of the meeting which were to:
- characterise the priorities of the committee
- outline the medium to long-term vision of the committee
- determine the committee's role with regards to the NCOP
- determine that the select committee is not a duplication of the portfolio committee
- identify 3 - 4 key objectives which can be reviewed after their term of office
- define how to deal with Section 75 and 76 matters
- participate in debate and discussion on Section 77 matters
- enhance NCOP'S functionality and to liaise with provincial legislators

The facilitator, Ms Desiree le Roux, stated that this Strategic Planning Meeting was long overdue, and in terms of the Medium Term Expenditure Framework, the committee had to align itself to a long-term vision. Therefore one of the purpose of the meeting was to erect a framework for Budget 2001 proposals.

Committee members' expectations of the workshop were noted:
- Ms Chabaku (ANC) said that she wanted to leave the workshop knowing exactly how the committee is supposed to run; how to interact at provincial level and their role in the budgetary process.
- Mr Makoela (ANC) said he wanted to be able to define the select committee in terms of the NCOP and the National Assembly and how to position themselves to fulfill that role
- Ms Mahlangu (Chairperson) said that at the end of day she wanted to be able to define the role of the select committee in parliament
- Mr Makgatho (ANC) said he wanted to see the co-ordination of provinces which would lead to proper networking. He said he wanted to see the committee playing a meaningful role in the budgetary process adding that the committee was strategically placed to facilitate these objectives
- Mr Marais (ANC) asked how the committee could become more goal-oriented and he wanted to know the role of the committee from a cost-benefit analysis from previous years to future years
- Mr Taabe (ANC) said the committee should devise ways and means to create a dynamic link between provincial and national level structures
- Mr Krum bock (DP) introduced a new perspective to the discussion and stated that one of the problems surrounding the committee was formality. He hoped that the informal atmosphere of the workshop would be able to facilitate an informal dialogue with the Minister regarding his view of opposition parties in the budgetary process
- Mr Theron (DP) said he hoped to get a clearer picture of the budgetary and MTF processes and the link between them. He stated that seemingly the NCOP has a small role to play in the budgetary process and this facet should be improved. He also said that the educational gaps in the make-up of the committee needed to be bridged.
- Dr Conroy (NNP) wanted to establish the relevance of the committee and to ascertain if they were not merely a rubber-stamp. He stated that a report-back system needed to be initiated to account for funds spent. He also expressed the need for constructive engagement with provinces and the need for transparency between structures.

Members broke up into groups to review the current role and functions of the committee and to come up with solutions to any problem areas.

Discussion Feedback
Mr Taabe (AN C) cited the current role of the committee as one of interaction with provincial committees. He further stated their current role as one of interaction with the Financial and Fiscal Commission and the Department of Finance. The committee was engaged in the Medium Term Expenditure Framework process and intergovernmental forum recommendations.
He saw as solutions to the existing problems:
- the strengthening of links between provinces;
- increasing capacity to interact with MINMEC and provincial legislators;
- enhancing capacity to interact with other NCOP committees
- availability of members to serve continuously on committee;
- defining a clearer role to interact with local government;
- promoting financial sustainability of municipal councils.

Mr Theron (DP) stated that the functioning of the committee was unsatisfactory and that the committee's role was limited. Hence there was something fundamentally wrong with the system. He further pointed out that the committee was not fulfilling its oversight role. He saw the solution as being that the committee must play a more participatory role in the budgetary process especially with regard to the annual Division of Revenue Bill and the Auditor-General should liaise with the committee on issues.

Dr Conroy (NNP) said that the instruments to bring about effective change were there but that the methods to apply them were ineffective.

Ms Sithole (ANC) said that the Auditor-General reports should be discussed collectively by the Finance Portfolio, Select and Public Accounts committees.

The Chairperson stated that there had been no proper co-ordination between provinces and that the committee should link policy objectives to budgetary process and not act as "auditors" themselves. She further suggested that the committee be included in the budgetary process at a very early stage. The Chairperson felt that members of the Select Committee were not knowledgeable enough on the Division of Revenue Bill to give meaningful contributions thus research had to be facilitated on the Division of Revenue Bill; The Chairperson felt that the committee was not being included in the budgetary process in its early stages and therefore the committee's
input was not being utilised, especially their input regarding the Medium Term Budget Policy Statement which should incorporate the committee.

Mr Marais (ANC) suggested that the South African Local Government Association should be incorporated into local government decisions and processes.

At the end of the discussion, members agreed that the primary areas that
needed their involvement were:
- the budgetary process
- the public procurement process

They identified the following as the key functions of the Select Committee:
- maintaining intergovernmental fiscal relations
- facilitating local government financing
- ensuring public participation in decision-making processes
- exercising oversight on public spending and ensuring the financial
management of funds at both national and provincial level.

Afternoon session
Ms Maria Ramos made a presentation on Budget Reform. She then showed the proposed structure and functions of the Ministry and Minister respectively after the merging of the Department of Finance and the Department of State Expenditure (see relevant documents). The Minister joined the meeting to answer questions put to him by the committee members.

Mr Theron (DP, Gauteng) commented to the Minister that he did not feel that the Select Committee was playing a big role in influencing the budget. He said that they want to empower themselves and they want to co-ordinate better with the provinces, and asked the Minister how he saw their role, especially in light of the Division of Revenue Bill.

The Minister said that there was a call to people (especially Parliament) to engage about future allocations. When they table a budget it is late in February. Because this is done so late, they cannot amend at that time as it will create havoc. If the committee only tried to get together and send what it found right or wrong with the equitable shares for next year and the year thereafter, then they would have a good platform. During August the numbers get knocked into shape. He said that they must act as custodians of provincial matters and ‘’share with us’’. He added that the NCOP should not desire to be a carbon copy of the Portfolio Committee because the constitution gives it its own sphere as custodian of the provinces.

Mr Krumbock (DP, Mpumalanga), commented on borrowing from the Government Employees Pension Fund (GEPF), and asked if it was still the case that their returns were lower than private companies.

Ms Ramos said that Mr Krumbock seemed to be implying that employees get a lower level of benefits because of the structure of the portfolio. This is not the case because the GPEF is a defined benefit fund. Employees get the level of benefit that has been defined in the agreement/rules. The Minister said that in any institution, the pension fund does not belong to the employer. When money gets transferred to the pension fund, then it is no longer the property of the employer. In this particular instance, the government as the employer cannot treat the pension fund as ‘’a warchest’’ for themselves. PIC takes the investment decisions for GPEF and PIC has a board (the Director General and the deputy minister are on it). In terms of actuarial valuations, there has been a phenomenal growth in portfolio from good investment decisions. The Minister concluded by saying that the point was that once monies have been transferred to the pension fund, then the money belongs to the fund, and not to the employer.

Ms Fubbs (ANC) commented that there should be legislation capacitating them to exercise oversight over the "local PFMA". She noted the R150 government bond increase from 13.5 to 13.7 and asked what the risk implication was for South Africa.

The deputy minister, Mr M Mpahlwa, replied that what governments do is that they erode savings. The SA view is that the government must reduce the extent of the erosion because it is a factor in the interest rate environment. They must get an appropriate mix between borrowing domestic and offshore. South Africa was previously developed solely on borrowing therefore they had to bring a change (as it caused a high interest rate). The PIC are trying ‘’not to put all their eggs in one basket’’ by diversifying investments. Historically, the PIC invests in government bonds because this is safe. However, when compared to equities (when they are doing well) it is not as profitable. At the moment the ratio is 65% (bonds) – 35% (equity). Eventually, they would like to achieve a 50/50 ratio. It is a gradual process.
Ms Ramos added that the R150 government bond is only one instrument and they do not do all their financing through one instrument.

Mr Taabe (ANC, Mpumalanga) said that local government has difficulty with the collection capacity of revenue. Municipalities are going bankrupt because of this. He asked for a comment on reinforcing municipalities to collect revenues.
The Minister said that the Department of Provincial and Local Government need to work through this. There are too many local authorities who should be collecting resources but are not doing so. If someone bails them out then that will only serve to worsen the situation. He said that they must strengthen their capacity to collect.

Mr Conroy (NNP, Gauteng) said that local government owes the Auditor General a lot of money in terms of audit fees. He asked what could be done to pay the Auditor General.
The Minister said that the Auditor General must collect that money. One cannot run a local authority and expect not to pay audit fees. The Auditor General must insist that the office be paid. If you bail out the Auditor General, then henceforth no local authority will pay. It would be wrong in respect of the norms of accountability. Local government must take these elementary steps. The Auditor General must understand that the moral hazard is enormous if someone else picks up the tab.

Ms Fubbs asked about disaggregation, weightings and the baseline figures.
The Minister said that Annexure E of the Budget Review details the weights.

Mr Theron said that it would not be possible for them to go to all the provinces and discuss with them before August. He asked if the provinces would not be able to come to them with a report from each province. They could then discuss this in a plenary.

The Minister said that he was loathe to make a suggestion because ‘’the committee must suggest’’. The basis of empowerment is the time before they make the budget and August is the cut-off for them. The budget will be enriched if they receive the input before August. If not, the committee will remain disempowered.

Before the Minister left, the Chairperson said that the Select Committee appreciates frequent interaction with the Minister. The Committee intends to engage with the FFC recommendations. Public hearings around the division of revenue and equitable shares at NCOP level will be completed by August. They will do their best to play their role.

Strategic Planning Report-back
The facilitator, Ms Desiree le Roux, presented a report-back (prepared by Mr Lucas):

Budget process – The committee wants to make a meaningful input. In this regard the public hearings must guide them. The time frame must follow the budget cycle and the outcomes should reflect the input of the committee.

Intergovernmental fiscal relations – As a committee they must ensure that they are able to adhere to this. There will be a committee briefing on the PFMA. The taxation issue and public procurement are also to be addressed.

Local government finance – They did not deal with this.

Education and training – Capacitate members on financing issues through seminars. The time frame for this is continuous. The output is to empower members to input better.

These and other issues are to be put into a report (which is to be made available to committee members later in the week).

The Chairperson made the following concluding comments:
They have a vision for the committee. The Minister said that the NCOP is the custodian of provincial interests. As the select committee, the question they had to ask themselves was how they could fulfill this role. They are going to consider the FFC recommendations and they are going to make their inputs by August. They will go back to the provinces because ‘’the NCOP is representing the real people’’.


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