Financial and Fiscal Commission Revenue Recommendations: briefing

Meeting report

FINANCE SELECT COMMITTEE AND JOINT BUDGET COMMITTEE
25 May 2005
FINANCIAL AND FISCAL COMMISSION REVENUE RECOMMENDATIONS: BRIEFING

Chairperson: Mr T Ralane (ANC) [Free State]

Documents handed out:
FFC Annual Submission on the Division of Revenue 2006/07
FFC PowerPoint presentation on Division of Revenue
Financial and Fiscal Committee website: www.ffc.co.za

SUMMARY
The Financial and Fiscal Commission submission on the 2006/07 Division of Revenue frameworkoutlined its key work from 2004 on the health conditional grants, the financingl of welfare services and the financing of learner support material, as well as its recommendations on improvement in the provision of those services. It also outlined the new work it had done on the assignment of powers and functions in the intergovernmental framework relations system, the housing funding framework and transport funding issues, and outlined its recommendations on these.

During the discussion, the Committee recognised the need for communication between the line government departments and the provinces in providing services, the debate as to the viability of conditional grants and the reliance of the provinces who received a small portion of the equitable share on the conditional grants. The decision to limit the allocation of the conditional grant to only Level 3 services was questioned, and concern was expressed with the absence or ambiguity of a policy framework when dealing with the provision of conditional grants. The FFC was asked to indicate its proposals in addressing the "brain drain" problem with regard to the health conditional grants. The implication of the shift of social services from the provincial to national government raised concerns with the exact nature of social services in the various provinces, and whether a common basket of services could be offered throughout the country. The creation of a separate executive competency for social services was suggested, and the Committee recognised the lack of data on service providers that were contracted in the provinces.

The FFC was asked to explain whether its recommendations took into account the impact of HIV/AIDS on the provision of welfare services and whether the downscaling of social welfare services had the potential to place a greater burden on social grants. The Committee welcomed the FFC’s recommendation regarding the development of criteria for assessing the capacity of a sphere of government to fulfil a specific function, because far too often they were unable to follow through on projects. Clarity was sought on whether the proposed administration of housing subsidies would be processed at national or provincial level, and how the transfer of the transport function from the provincial to national department would affect the provinces directly. In closing the Committee asked the FFC to explain how its staff could be incentivised to remain with the organisation, and the need for rigorous oversight over the performance, targets and budget of the FFC.

MINUTES
The Chairperson urged Members to take the work done by the Financial and Fiscal Committee (FFC) very seriously as it assisted most of the work done by both the National and Provincial Parliaments. The tendency had been to be rather casual about the work done by the FFC. The Committee would be holding public hearings on these submissions, and there would thus be opportunity for public interaction.

Financial and Fiscal Commission briefing
The FFC was represented by Dr Renosi Mokate: Chairperson; Mr Jaya Josie: Deputy Chairperson; Mr Bongani Khumalo: Manager: Fiscal Policy Analysis; Mr Conrad Van Gaas: Manager: Budget Analysis; Mr Denver Kallis: Assistant Researcher: Local Government Research Programme and Mr Myron Peter: Executive Manager: Commission Co-ordination.

Dr R Mokate, Chairperson, stated that the FFC had done a significant amount of work in reviewing the Provincial Equitable Share (PES) in preparation for the 2004/5 submission and its findings had been carried forward to this year’s submission. The FFC’s main priorities and outstanding work it carried forward this year focused on the Health Professional Training and Development Grant (HPTDG) and the National Tertiary Services Grant (NTSG), the financing of welfare services and learner support material. The new work focused on two issues: the assignment of powers and functions in the Intergovernmental Framework Relations (IGFR) system, the housing funding framework and transport funding issues.

Health conditional grants
Mr B Khumalo, FFC Manager: Fiscal Policy Analysis, outlined the key issues that had arisen from the FFC’s review of the NTSG and HPTDG; problems with the design and implementation of the grant; as well as the FFC’s recommendations on these two grants.

Financing of welfare services
Mr Khumalo outlined the key issues that arose from the FFC’s review of the matter, the challenges to the provision of social services, implications of the shift of social services to the national government, the lack of a clear policy framework and the FFC’s recommendations.

Financing learner support material
Mr J Josie, FFC Deputy Chairperson, outlined the challenges to the provision of satisfactory learner support materials, and its recommendations to improve this.

Housing funding framework
Mr D Kallis, FFC Assistant Researcher: Local Government Research Programme, outlined the problem with the backlog in housing delivery; the additional costs of new housing developments to local government, and outlined the FFC’s recommendations.

Transport funding
Mr Kallis indicated that the under-expenditure on South African transport infrastructure over the last two decades was troubling, but was being addressed. He outlined the FFC recommendations in this respect.

Discussion
The Chairperson stated that there appeared to be no communication between the line government departments and the provinces involved in terms of trade-offs that could be struck in improving service delivery and providing the facilities discussed in the presentation.

Mr Josie replied that the policy framework needed, as referred to in the FFC recommendations, would capture this trade-off. It would then be up to this Committee to ensure that that was captured, as well as the criteria needed and the performance measures. The clear guidelines would also prevent the provinces from using their discretion in deciding how the conditional grants would be spent.

The Chairperson stated that there were provinces calling for an end to conditional grants, but their sole reason was that they did not wish to comply with the conditions.

Dr Mokate responded that she would like to make a broad comment on conditional grants in general. She stated that if one considered international experience, she did not foresee a time when South Africa would not have conditional grants. The challenge was to identify the reason for conditional grants. Historically conditional grants were used both for specific purposes as well as for matters they were not specifically designed for. It was used as a stop-gap measure in cases of a gap in policy or an incomplete understanding of just how much money was needed for a specific initiative such as Early Childhood Development (ECD). There were thus ad hoc conditional grants that did not fall squarely in the rationale for designing conditional grants, and these clearly needed to be reviewed and, where possible, eliminated from the system.

There were however situations were conditional grants were required, such as the case of an uneven distribution of services, especially in Level 2 and Level 3 services, and where it was clear that people from other provinces would utilise a service in the province that had those particular services. Conditional grants were thus necessary in some instances to strike a balance between national funding priorities and the spillover effect.

Ms S Lucas, Chairperson: Northern Cape Provincial Legislature Committee on Finance, stated that the Northern Cape province, which received a small portion of the equitable share, relied on the conditional grants to ensure service delivery. She stated that her province was losing medical professionals to better packages and facilities in other provinces, and the conditional grants were vital to secure such specialist services.

Mr V Xaba, Chairperson: Kwazulu-Natal Provincial Legislature Committee on Finance, questioned the reasoning behind limiting the allocation of the conditional grant to only Level 3 services, and why it was not extended to level 2 health care services as well. He asked whether this concern had been raised by the other provinces.

Mr Khumalo responded that when the NTSG had been introduced, it had only been meant for central hospitals. This occurred before the distinction between different levels of services was made. The modernisation of tertiary services project was run by the Department of Health which aimed to ensure that all the services became available in all the provinces, and not only to the provinces that had central hospitals. Funds were then allocated to those provinces so that they could set up facilities for those types of services.

Thus, if one was mindful of its purpose to deal with Level 3 services spillovers specifically, Level 3 services could not be provided without the presence of Levels 1 and 2. The National Department of Health would in fact decide whether the funds to be allocated to the province were sufficient. It was for that reason that the FFC recommended the establishment of a clear and definite framework for the allocation of the conditional grant, so that it could explain the reasons for the disbursed amount. He stated that the difference between the current amount allocated and what the National Department of Health believed it should receive was more than 100%, and it thus expected the conditional grants to be more than double the actually expenditure at the moment.

The aim was that the conditional grants would provide all provinces with the necessary facilities and services over time, at which point the conditional grants would slowly be phased into the equitable share. Thus there would have to be a plan that was accompanied by the resources needed. The FFC was concerned that if the conditional grants were removed when there were still problems such as spillovers, the problem would not be solved. The purpose and definite framework of the conditional grants must then be decided upon in order to ensure its success.

Mr E Sogoni (ANC) [Gauteng] stated that the planning legacy of Apartheid was still a problem here as facilities were still concentrated in certain areas. He asked how the services would be extended to the areas that needed them most.

Secondly, he asked whether the FFC’s recommendations on expected service levels and human resource requirements took into account that there would be an influx of people from the less advantaged to the capacitated provinces.

The Chairperson asked the South African Local Government Association (SALGA) to reflect on the effect of the old planning, as referred to by Mr Sogoni, on IDPs. Furthermore, he asked the FFC to explain how the IDPs accommodated development in the rural areas, because there appeared to be a bias in favour of urban areas.

Mr D Botha (ANC) [Limpopo] agreed with the Chairperson and Mr Sogoni and expressed concern with the bias in favour of urban areas as far as infrastructure was concerned, whereas no development took place in the rural areas. This must be addressed.

Mr B Mkhaliphi (ANC) [Mpumalanga] expressed his concern with the absence or ambiguity of the policy framework when dealing with this matter. He asked whether a balance could be struck between the absence of a framework and the observation that national government attempted to micro-manage provinces via the conditional grants. He questioned whether the fact of the matter was not that provinces had no say in the allocation of the grant, and that national government disbursed it in the absence of any clear framework. This problem lay at the core of the role of the NCOP.

Dr Mokate replied that in the absence of a clear and definite policy, the inclination of national government would be to micro-manage. The ideal situation was that the design was clear enough that the expectations and requirements were understood, as this would allow the performance of the provinces to be better monitored.

Clearly a balance must be struck when dealing with conditional grants and they must not be so designed so as to undermine the rights and obligations of provinces. The manner in which that balance was struck depended on the nature of the conditional grants. It was not feasible for national government to stipulate the specific services for which the conditional grants would be used, as that would have to remain at the province’s discretion. In the case of the HTPDG there cannot be too much discretion afforded to provinces, because coherence was needed in the output of trained professionals.

Mr Khumalo replied that, as he indicated earlier, conditional grants were a national competence. The purpose of the conditional grant was meant to encourage provinces to begin to prioritise a specific service that they would not otherwise prioritise, should they be left to their own devices. They were thus grants that incentivised a national priority. The HPTDG required a much more stringent approach than the NTSG, as the former required the building of a base of health professionals across the country and was not focused solely on a provincial shortcoming.

Mr Mkhaliphi stated that these were also matters contained in the constitutional principles on co-operative government. He noted his concern at the absence of the FFC in the list of institutions consulted when the Intergovernmental Framework Relations Bill (IGFR Bill), which was currently being processed by Parliament, had been drafted. The NCOP would raise this matter when the Bill was presented to it.

The Chairperson agreed that this was a critical issue that must be raised very clearly, as the Property Rates Bill was challenged because stakeholders were not consulted. The Chairperson of the NCOP Committee must be alerted to this matter.

Mr B Nkosi, Chairperson: Gauteng Provincial Legislature Committee on Finance, sought clarity on the extent to which provinces were abiding by National Treasury’s reporting requirements, if at all.

Mr Khumalo responded that the reporting requirements for each of these grants were actually spelt out in the Division of Revenue Act.

Mr Botha stated that there were problems at the moment with cross-border issues because provinces were shirking responsibility for certain areas. He hoped that this would be cured by the new IGFR Bill.

Secondly, Mr Botha cautioned against the removal of the conditional grants, as he believed the provinces would then use those funds for matters other than what the funds were allocated for. The provinces must submit a business plan before national government allocated the funds.

Health Conditional Grants
Mr Sogoni asked the FFC to indicate the steps it was taking or proposals it had arrived at to address the "brain drain" problem, as these health care professionals were being trained at the taxpayers expense but then left for greener pastures.

Mr Khumalo replied that the FFC had found that the provinces that provided the HPTDG facilities had expressed concern with what the provincial government was providing them with. Institutions in the Western Cape for example were alleging that the manner in which the provincial government was dealing with the HPTDG was not consistent with the guidelines from National Treasury, nor was it consistent with the guidelines issued by the National Department of Health. The impact of the conditional grants was thus felt by the institutions themselves that were supposed to provide the service, and not by the provincial government itself.

Mr Josie added that this problem had always been an issue that the FFC considered important. Short of prescribing how health professionals should take career decisions, it would be difficult for the FFC. The FFC could however, to the extent to which the exodus of health care professionals impacted on the level of the equitable share, make some recommendations. It would be a different matter if the request for comment from the FFC came either from this Committee or from the Department itself.

Dr Mokate added that the pressures that were being exerted as a result of funding issues for both health conditional grants might have a bearing on this. Due to the level of frustration that was being felt by the specialists and people on the ground, many of them at some point simply threw in the towel and left for greener pastures because government was not addressing the problem.

Mr Sogoni asked whether the inconsistencies in the funding for health institutions were attributable to a shortage or oversupply of such professionals.

Mr Khumalo replied that the cuts were arbitrary for the simple reason that if there was no plan on the national Department of Health’s clearly defined parameters then, when there were demands in other areas, this service might not be considered a priority and would be cut.

Mr Sogoni asked the FFC to indicate whether it had come across any bogus institutions that were providing training and, if so, whether it had any recommendations for dealing with those.

Dr Mokate responded that the FFC would not delve into this, as it would be encroaching on the functions of the Department of Education.

Mr Xaba stated that the FFC’s observation that provinces were using the conditional grants for unauthorised purposes indicated that the provinces’ performance measures were not aligned with the objectives of the conditional grant. This was a serious matter. If the two were not aligned, spending of the grant would result in a distortion.

The Chairperson stated that this matter would be considered by the NCOP from 6 June 2005 onwards, and the majority of the "underspending" MEC’s would appear before this Committee.

A new Member (ANC) asked exactly how the grant was disbursed to provinces, because it did not appear to be allocated in terms of the needs of the province.

A new Member (ANC) questioned whether these grants should fall under the Department of Education or the Department of Health.

Mr Khumalo responded that he indicated in the presentation that the academic portion was a national Department of Education function, and when the students completed their academic training they were provided with Department of Health training. Furthermore, medical students were providing a hands-on health care service while receiving training which was also a Department of Health issue. Thus whether it should be placed with the Department of Education or Department of Health was an issue of negotiation at a policy level, which the FFC could not influence.

Financial Social Welfare Services
Mr Nkosi stated that the implication of the shift of social services from the provincial to national government raised concerns with the exact nature of social services in the various provinces. It was clear that there was no common basket of services that were offered throughout the country, and he asked whether this should in fact be provided. This could cure the problem that different social services were provided in different provinces.

Secondly, he stated that the implications of the shift also raised the question whether a separate executive competency for social services was needed. If this were not seriously considered, the discussions on the dwindling provision of social services would remain just an item on the agenda. He questioned whether it was not possible to incorporate some of these services into other line departments.

Ms Lucas stated that if the mistake were made of focusing on the paying out of grants as a core function it would create the impression that the need for a separate ministry for social services was still debatable. This however ignored the importance of the provision of social services in a developmental state such as South Africa, and for that reason she supported the FFC’s proposal that these conditional grants be included in the provincial equitable share.

Dr Mokate replied to these three questions by stating that the FFC was not recommending that the basket of services would be applied uniformly across provinces, as it acknowledged the variations in levels of poverty. The FFC felt it was important to stipulate the minimum services that must be provided by provinces. The fact of the matter was that there was currently so much variation in the kinds of services provided that there were probably many areas that were under-serviced. The variation in service delivery and the manner in which the provinces decided on the choice of service provider was unclear. The FFC thus proposed that the national Department of Social Development provide direction on this in order to ensure that services were not being neglected.

The other problem was that services were being provided through a variety of government departments that related to social welfare, such as the Departments of Education and Health. There was thus a serious need for proper communication between government departments without encroaching on the rights of provinces to use their discretion to provide those services.

Mr Josie added that the research conducted by the FCC had two phases: the first phase was sending questionnaires to provinces and responses were gained from MEC’s, as well as the deliverers of services such as the national Department and NGO’s. The FFC did not want to be prescriptive in its recommendations, as indicated by Dr Mosake, but the Annual Submission indicated the range of social welfare services that must be provided in terms of approximately eight pieces of legislation. The FFC’s concern was how exactly all these statutorily prescribed services would be provided by the provincial and national departments in a co-ordinated manner.

The Chairperson stated that the lack of data on which service providers were contracted in the provinces was problematic. He proposed that the FFC conduct an investigation into this matter.

Mr M Goeieman (ANC) [Northern Cape] stated that the executive summary indicated that norms and standards could only be provided for social welfare services, which contradicted with its previous presentation that norms and standards must be applied to all government departments. He asked whether the broader norms and standards were difficult to implement.
Mr Khumalo replied that the executive summary reflected the fact that social welfare services were a specific issue and the project had not commenced in 2004. The results of the entire review indicated that there had to be norms and standards in the long term. The FFC would be taking its work on social welfare services forward, and it was for that reason that the executive summary focused only on social welfare services.

Mr Sogoni asked whether the FFC’s recommendations took into account the impact of HIV/AIDS on the provision of welfare services as, for example, there were many child-headed families as a result of HIV/AIDS that needed social services.

Mr Khumalo replied that the National Department of Social Development currently administered social grants and the HIV/AIDS conditional grant. He stated that Mr Josie was quite conservative because the pieces of legislation that required provincial social welfare services were much more than eight, and the list provided was not exhaustive. One would have to consider all these pieces of legislation in deciding on the common basket of services to be provided, and this was a large task. There was a realisation within government of the need to work together in providing this service, especially with regard to HIV/AIDS.

In 2002 the FFC evaluated the work done by the various government departments with regard to HIV/AIDS, and how the programmes were interlinked. The incidence of HIV/AIDS and the pieces of legislation that pertained to children needed to be co-ordinated, and it was to this end that the FFC recommended identifying a common basket of services.

Mr Sogoni asked whether there were any guidelines that required provinces to have a minimum standard of services.

Mr Khumalo responded that the Annual Submission listed the kinds of services that provinces provided under each of the pieces of legislation. The provinces would follow the prescripts of those pieces of legislation.

Mr Mkhaliphi asked whether the downscaling of social welfare services had the potential to place a greater strain on social grants.

Mr Khumalo responded that the relationship between social welfare services and social grants was a very important one. The shifting of social security grants to the national sphere, with welfare services remaining in the provinces, needed to take into account the inevitable link between the two.

Mr Josie added that there was not only a technical linkage between the two, but there was also an inference that there must be an exit mechanism for welfare services. Most of the welfare services within the basket did have an exit mechanism, and there was a link between the two because the more welfare services were comprehensively delivered, the smaller the chance that people would fall into the social security net and thereby creating a further burden on society.

Mr Marais sought clarity on the chances that these monies might be applied for non-social welfare related priorities if social welfare services were incorporated into the equitable share. He proposed that funds devolved to provinces for social services should be ring-fenced to ensure that the strategic objectives were met in a systematic way.

Mr Josie replied that it would be difficult for the FFC to be prescriptive with regard to ring-fencing the funds. There would however be serious legal implications if a province diverted funds away from a particular provincial priority. Thus in a sense the legislation that governed the allocation of funds for social welfare services was prescriptive, and provinces would face problems if they did not meet those criteria.

Mr Khumalo added that this was a very difficult issue. The last time the FFC discussed this matter with the National Department of Social Development it was preparing a funding framework that basically looked at funding for NGOs and how its funding would be linked to local government programmes. The final framework was not yet available. The problem was that the current approach was very confused, and thus the kind of duplication referred to was a real possibility.

Mr Marais stated that it appeared that the prioritisation of services was at the province’s discretion. He asked the FFC to indicate whether the priority identified by the province resonated with the need for that specific service within the province.

Mr Khumalo responded that the FFC research indicated that the prioritisation was not commensurate with the need because, frankly, nobody knew what the need was. It was for this reason that the FFC planned to investigate the demand for these services in its future work. He suggested that provinces made allocations based on historical priorities, rather than current needs.

Framework for powers and functions of spheres of government
Ms Lucas welcomed this arrangement because it would address the problem of unfunded mandates that were delegated to municipalities and other local authorities.

The Chairperson stated that the FFC’s recommendation regarding the development of criteria for assessing the capacity of a sphere of government to fulfil a function was important, because they were always claiming full capacity beforehand when in reality they had no such capacity.

Mr Sogoni asked whether FFC’s proposal that the local government sphere take on more responsibility was realistic, and questioned whether that sphere in fact had the required capacity.

Secondly, Mr Sogoni asked whether the provinces were being properly monitored to ensure that they would be able to spend the funds allocated by the DORA.

Mr Marais stated that while the capacity of municipalities was being ascertained there were crucial social welfare services that needed to be provided. He asked the FFC to explain the transitional instrument that needed to be put in place to ensure that service delivery took place.

Secondly, Mr Marais asked whether, with regard to the devolution of functions, it was possible in certain instances for the parent municipalities to perform such functions until the capacity was built into the particular level.

Ms S Kolokane-Machika, SALGA, stated that the actual circumstances of the specific municipality must be known, because there were municipalities that had, for example, one engineer to deal with infrastructure development and housing development. The question was thus whether the provinces had specialised engineers that could perform such tasks. A solution could be found if the three spheres of government worked on this problem together.

Dr Mokate responded to the questions regarding capacity by stating that it should be asked whether national government was play the leading role in the process as it ought to, and whether it had the capacity to do what was needed. There were gaps in the role played by the national government, and in fact the weaknesses in the capacity of provincial and local government spheres might reflect a weakness in the national government.

Mr Josie added that this sequencing issue was important because if functions were allocated then the necessary funds must follow. The practice was for Section 100 of the Constitution to be invoked whenever the provinces suffered from lack of capacity.

Mr P Raedani, SALGA, stated that the FFC had recommended that the national Department of Provincial and Local Government finalise the assignment of powers and functions, but the Committee’s assistance was needed to set the timeframes for the finalisation of this process.

Mr Josie replied that both the Department of Provincial and Local Government framework and the intergovernmental assignment framework were key instruments that needed to be put in place. As Mr Raedani mentioned if these were not put in place there would be continuous periods of uncertainty with regard to responsibility.

The Chairperson agreed with Dr Mosake that a holistic approach to the capacity issue needed to be considered.

Housing delivery
Mr Sogoni stated that it must be ascertained whether the municipalities and provinces had the necessary capacity to provide this service when the audit report was not favourable and did not confirm this capacity.

The Chairperson stated that the DORA had already been passed which accredited municipalities. The issue was no longer whether there was capacity to deliver. He stated that the Committee must interact with the National Department of Housing on the bottlenecks in service delivery, statistics on the number of houses produced and the status of the housing programmes.

Dr Mokate responded that the bottlenecks could be addressed by enabling some of the municipalities that could deliver housing rapidly, to do so. Whether these funds should go directly to municipalities or to the provincial government was not elaborated on, although it was an important issue that needed to be clarified.

Mr Goeieman asked the FFC to explain where exactly it proposed the administration of housing subsidies should reside.

Mr Josie replied that the FFC was of the view that the subsidies were allocated only for the building and construction, whereas no funds were allocated for the administration of the construction by the municipality. This was being addressed by the recommendation.

Dr Mokate added that one of the areas the FFC identified was that implicit unfunded mandates had to be guarded against in all the processes regarding assignment and policies made at national government level that had consequences for implementation at provincial and local government. The FFC was examining the occurrence of these because, by virtue of the manner in which the function would be implemented, it did cause a greater call for funds which might not be provided if focus was placed on the subsidy and not on the impact on the institution.

Mr D Mkhwanazi, Chairperson: Mpumalanga Provincial Legislature Committee on Finance stated that the recommendations did not include a conditional grant aimed at funding housing finance companies. The problem was that some of these institutions were charging the poorest of the poor interest of between 1 and18% per annum, whereas most people paid only 8-10% to commercial banks. This must be addressed.

Dr Mokate replied that this dealt with an issue at micro level, and would thus not be dealt with specifically by the FFC. A gap in the FFC’s studies was that it did not consider the particular institutions and where they fit into the process.

Mr R Tooly, Chairperson: Limpopo Provincial Legislature Committee on Finance, stated that his Committee was currently dealing with an audit report on housing delivery in his province, and the situation was "scary". There were incidences in which people had paid for housing but there was no service delivery at all, and assistance from this Committee might be needed to address this problem.

Mr Marais stated that if the national Department did not have this information readily available, then there would be a gap in the Integrated Development Programme (IDP) because its progress and monitoring mechanisms were supposed to be up to date.

Mr Mkhwanazi stated that the funding of land tenure upgrading must be expedited.

Mr Josie responded to these three questions by stating that the FFC would conduct more work on this.

Mr M Peter, FFC Executive Manager: Commission Co-ordination added that during 2004 the FFC did address the issue of alignment between the three spheres of government. Yet this Committee should discuss the extent to which its recommendations had been implemented by government.

It was pointed out in recent meetings with National Treasury that there was a perception by provinces that issues of education, welfare, health etc. were normal line function issues. However, they believed the issue of the developmental state would be catered for by the creation of provincial development funds. In fact there was enough resources in development funds. A very strong recommendation was made by the President’s Co-ordinating Council (PCC) that funds from the provincial development funds be reallocated to proper provision of some of the services that were underprovided for.

Mr Tooly stated that the Limpopo province Housing Department did not even have a geoscientist who would ensure that the land was suitable for building, with the result that the province had to bring in consultants at a huge cost to perform that function.

Mr Josie responded that this was one of the reasons for the delays that created the bottlenecks. The FFC thus recommended interaction between the relevant government departments to ensure the provision of such professionals.

Mr Tooly noted the absence of any recommendation on rural housing.

Dr Mokate replied that the FFC did not conduct a rigorous dissection of the effect on the rural and urban sections, and it would be considered further.

Mr Marais asked whether the department had the schedule of housing projects that were being rolled out in the provinces readily available.

The Chairperson stated that the Committee would request the information from them again.

Mr Marais asked the FFC to indicate whether it had considered the extent to which housing rental offices had been established.

Mr Kallis responded that the FFC had not come across this in its research, but would look into the matter in future.

Transport funding
Mr Botha asked the FFC to indicate how the transfer of this function from the provincial to national departments would affect the provinces directly, and whether the national Department would have the capacity to maintain roads in all nine provinces.

Mr Josie agreed that this would have serious financial implications.

Mr Nkosi stated that the upgrading of a proper road infrastructure was essential for economic development, and asked whether the inter-modal transport planning system would be implemented soon. This was important for the 2010 World Cup preparations.

Mr Josie replied that this would become a key issue and it would be prioritised so that this matter could be addressed in a holistic manner.

Ms Lucas stated that the problem in her province was that the roads infrastructure was over-utilised and the transfer to the national Department was thus welcomed.

Mr Xaba agreed with Ms Lucas and stated that if there were proper rail infrastructure in place then cargo would have been diverted off the roads onto rail infrastructure. This must be considered urgently.

Mr Josie responded that the FFC had not considered the transport issue in detail, but functioned only on the assignment issue. It would however take the matter further when it had discussions with the Minister of Transport.

Dr Mokate informed Members that the new Minister of Transport had begun to address these issues already, and the FFC would be interacting with the Minister on these issues more vigorously.

Ms Ngulu approved of the recommendation to move taxi and bus services to municipalities.

Mr Marais proposed that all provinces have a programme dedicated to maintenance of infrastructure in general.

Concluding remarks
The Chairperson noted that the FFC just lost its Chairperson, probably to ‘greener pastures’. He asked how FFC staff could be incentivised to remain with the organisation.

Dr Mokate replied that it was a combination of greener pastures and the fact that people wanted to become more involved with the practical aspect of policy implementation, which was not the primary focus of the FFC. Staff remuneration had been identified as an area that must be focused on, together with its Performance and Remuneration Commission and the Minister of Finance.

Mr Josie added that the FFC was engaged in discussions with tertiary institutions to place intergovernmental framework relations (IGFR) courses on the curriculum so that economics and public finance with regard to IGFR could yield skilled personnel in that field. These were scarce resources in South Africa currently.

The Chairperson asked whether the FFC could submit strategic plans to allow proper oversight of its functioning, as funds were appropriated by Parliament.

Secondly, he stated that a means for measuring the FFC targets must be devised, as well as the progress it had made since 1994.

Dr Mokate responded to these two questions by stating that the FFC must provide an MTEF budget framework to National Treasury for consideration, and it followed the same budget process as government departments.

Mr Peter added that two years ago Parliament did investigate the budgetary reporting requirements of Constitutional institutions via the Oversight and Accountability Committee. It had produced a report that dealt with many of the issues raised by the Chairperson. He proposed that this report be revisited and used as a basis.

The Chairperson agreed that this matter be discussed further.

Adoption of minutes
The Chairperson noted that the Committee had adopted the minutes of a previous meeting.

The meeting was adjourned.