Financial & Fiscal Commission Recommendations for Division of Revenue 2007/08: input from Departments of Health, Social Developm

NCOP Finance

25 May 2006
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FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
26 MAY 2006
FINANCIAL AND FISCAL COMMISSION RECOMMENDATIONS FOR DIVISION OF REVENUE 2007/08: INPUT FROM DEPARTMENTS OF HEALTH, SOCIAL DEVELOPMENT AND EDUCATION

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

Documents handed out:
Financial and Fiscal Commission recommendations for 2007/08 (on
FFC website)
Financial and Fiscal Commission recommendations for 2007/08: Executive Summary
Department of Education Presentation
Department of Social Development Presentation
Department of Health Presentation

SUMMARY
The Department of Education said that it had been concerned for sometime about the allocations provincial education departments received. In many cases there was a real struggle to get national priorities fully funded in provinces. For example, two provinces had not allocated funds for no-fee schools in 2006. It then commented on both the general and specific Financial and Fiscal Commission recommendations.

The Department of Social Development welcomed the FFC recommendation to construct an explicit social development component in the equitable share formula. The focus of the Department over the past decade had been predominantly on social security and there was low political prioritisation of welfare service provision in South Africa. Challenges the Department faced were the absence of a retention strategy for social work professionals, limited focused research and benchmarking and a lack of uniform service delivery indicators.

The Department of Health said that that there was concern about the inflexibility of the National Tertiary Services Grant (NTSG) legislative norms. For monitoring, data submission and financial monitoring needed to be undertaken. Conditions needed to be improved to enhance the Department’s ability to apply oversight as there was currently no mechanism to enforce compliance. The plan for tertiary services modernisation had to be seen as important to specialist training and health service delivery. A major challenge was how to fund this plan.

MINUTES
Department of Education Presentation
Mr Firoz Patel, Deputy Director General, said that the Department had been concerned for a while about the allocations provincial education departments received. While education budgets were the largest, it did not mean that they were sufficient. Education expenditure as a percentage of provincial expenditure had been slipping. This was worrying as it signaled a continuing downgrading of provincial education expenditure. This did not augur well for Human Resources Development, the Accelerated Shared Growth Initiative of South Africa (ASGISA) and poverty alleviation. He discussed education backlogs and national priorities and then provided a response to the general and specific FFC recommendations (see document).


In many cases there was a real struggle to get national priorities fully funded in provinces. For example, two provinces had not allocated funds for no-fee schools in 2006. There was also a challenge in ensuring adequate allocations for learning support materials in support of the implementation of the National Curriculum Statement. Other challenges included backlogs in the provision of equipment and supplies to schools, learner transport, school infrastructure, teacher supply and teacher development. The Department believed that it required real and meaningful levers to ensure that national priorities were attended to.

The Financial and Fiscal Commission’s (FFC) review of Conditional Grants had not led to any new recommendations but FFC stood by their assertion that provincial expenditure should take place in the provinces. The FFC only recognised one reason for long-term Conditional Grants and that was provincial spill-overs. This provided an opportunity for the Department of Education to have the whole Further Education and Training (FET) funding, including subsidies to colleges, made into a Conditional Grant.

The FFC believed that Conditional Grants took away provincial autonomy. While this may be true if funds that were due to provinces were diverted to national control, the FFC should have recognised that where the national share of the funds was used to direct education objectives in provinces, the issue of curtailing provincial autonomy did not arise. The FFC should also have looked deeper into the use of national grants to deal with inequality in provinces and the advantages of economies of scale.

The FFC recommendation that national departments with concurrent functions should set national norms and standards and monitor provincial performance, was in line with the pronouncement of the Minister of Education for more rigid and measurable norms and standards.

The FFC had made specific recommendations regarding current grants. With the National School Nutrition Grant (NSNG), the Department found the recommendations useful and they would consider amending the framework conditions. With the HIV/AIDS Life Skills Education Programme Grant, the FFC said that it should continue to be conditional but that it needed to be focused on enrolment as opposed to the current allocation that used education component of the Provincial Equitable Share (PES). The Department was of the view that using enrolment as a basis of provincial division of the grant rather than the equitable share would result in an insignificant shift.

The Department welcomed the recommendation that the Health Professions Training and Development Grant needed to be managed through a national policy framework. The actual costs had to be determined and the grant targeted towards the additional cost burdens faced by provincial health authorities. Also, a proper national basis for allocation had to be established. It had to be made clear that the part of the grant that had to be administered by the Department would be funded separately from the current subsidies to higher education institutions.

Discussion
Mr E Robertson (ANC) (Eastern Cape) wanted to know which two provinces had not allocated funds for no-fee schools. What had happened to the children affected?

The Chairperson asked who funded the no-fee schools, was it national or provincial government? There was evidence of a lack of adequate planning especially as there were still delays in submitting business plans. This led to allocations being withheld, which had happened to five provinces recently. The education component of the FFC formula was based on the ages of five to seventeen. However, some children went to school until the age of eighteen or even older. This led to under-budgeting in education and the NSNG being applied differently across provinces. There had to be more uniformity.

Mr Patel replied that the policy of no-fee schools had been initiated in 2003. The Minister of Finance had made more money available in November 2005 to fund the schools, but some provincial budgets made it difficult as they did not follow the Medium Term Expenditure Framework (MTEF) cycle. The two provinces that had not allocated funds were Gauteng and the Western Cape. Funds were also used for school materials. In 2006, having no-fee schools was voluntary even though they were a national priority.

Mr Jaya Josie, the FFC Deputy Chairperson, said that backlogs in schools were a contentious issue. The Provincial Infrastructure Grants were allocated to four departments including Health and Education. There seemed to be no real prioritisation of the funds by the provinces, evidenced by a lack of planning on how to spend the money in balanced ways. This had to be addressed in the MTEF planning framework.

Department of Social Development Presentation
Adv Vusi Madonzela, the Director-General, said that welfare services had been under-funded for a long time due to the pressure brought to bear by the statutory nature of social grants, backlogs in rural provinces and limited resources including personnel.

The work of constructing an explicit social development component was overdue and welfare had been relegated to non-priority, discretionary funding. In this regard, they agreed with the FFC that there should be a Social Development component in the PES. They also agreed on having a Conditional Grant for statutory services, but the duration of the element had to be debated.

The Department agreed with the FFC that the use of "demand for welfare services" was problematic and that there was evidence of low political prioritisation of welfare service provision in South Africa. In its formula, the FFC chose elements such as population, poverty and institutional capacity. The danger with this approach was that the baseline would be used as a point of departure which would perpetuate under-funding. In this respect, the Department argued for a supply approach as outlined in the bare minimum norms and standards for services such as the maximisation of human potential and on fostering self-reliance and participation in decision-making.

The focus of the Department over the past decade had been predominantly on social security. Challenges they faced were the absence of a retention strategy for social work professionals, limited focused research and benchmarking, no agreed-upon service delivery indicators and limited service norms and standards to guide effective costing.

The Department welcomed the approach of the FFC to start with the progressive phasing in of the social development services component in the equitable share formula. It proposed that a working committee made up of National Department of Social Development, the FFC and Treasury be established to take the matter forward.

Discussion
Ms M Robinson (DA) (Western Cape) said that there was a need for emergency shelters for abused women and children. Many of them had to return to the scenes of their abuse after reporting the matter to the police. They needed places of safety.

The Chairperson said that the Committee needed to focus on the effectiveness of, and how the equitable share was being used by the provinces. Provinces were using their equitable shares as they pleased, for virtually anything and not always for the right things.

Department of Health Presentation
Dr Percy Mahlathi, the Deputy Director-General of Human Resources, spoke about the FFC recommendations with regard to the National Tertiary Services Grant, the modernisation of Tertiary Services and Health Professionals Training and Development (see document).

The Department was concerned about the inflexibility of the National Tertiary Services Grant (NTSG) legislated norms. The Department recommended benchmarking according to the type of hospital.

For monitoring, data submission and financial monitoring needed to be undertaken. Conditions needed to be improved to enhance the Department’s ability to apply oversight as there was currently no mechanism enabling enforcement of compliance. A mechanism for the withholding of funds may also be necessary. There was also a need to tie the grant to some performance indicators and the Department generally agreed with the notion of tighter control. A health service plan was integral to provincial strategic plans. There needed to be appreciated the link between tertiary services and specialist training. A Chief Directorate solely for the NTSG had been created to manage the grant as part of the overall financial management of the Department. The revised organogram had recently been approved.

The modernisation of tertiary services must be seen as important to specialist training and health service delivery. A ten-year plan for the modernisation and reconfiguration of public health sector tertiary and quaternary hospital services had been drawn up. This would provide equitable access that was affordable and sustainable. A major challenge was how to fund this plan. Numerous funding requests had been part of health’s budget bids for the last three years. Last year, the funding for health equipment was channeled through the PES. There was a concern about it not going where it was supposed to go. The Department was continuing to develop provincial implementation for the modernisation plan.

There needed to be clear policy on the education and training of health professionals. The expansion of the teaching platform and its impact on the service platform had to be catered for and an analysis had to be done on the impact of mergers of health education institutions on the provision of health care.

Discussion
Mr M Bafopu, from the Eastern Cape Department of Health, asked what the National Department was doing to retain staff. The National Department had proposed rehiring retired nurses but they were old, and what would happen to their pensions? Were the Cuban doctors they had brought in helping?

Dr Mahlathi replied that the provinces had different conditions and so it was up to the individual provinces to come up with their own plans to attract and retain staff. The National Department could not effectively come up with a national retention strategy. Bringing back nurses was a reaction to the loss of experienced and skilled nurses. The Department was struggling to get nursing teachers as the salaries were "ridiculous." This was a problem across the whole health sector and they were working with Treasury to fix this. The quality of the management also had to be examined. The Cuban doctor programme had its own problems, as some of them left the programme and over the last two years very few doctors had come to South Africa. Meeting adjourned.

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