Double Taxation Agreements with Spain & Tanzania: adoption; First Quarter Provincial Health Spending on Conditional Grants & Cap
NCOP Finance
06 September 2006
Meeting Summary
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Meeting report
FINANCE
SELECT COMMITTEE
06 September 2006
DOUBLE TAXATION AGREEMENTS WITH SPAIN AND TANZANIA: ADOPTION; FIRST QUARTER
PROVINCIAL HEALTH SPENDING ON CONDITIONAL GRANTS AND CAPITAL PROGRAMMES:
PROVINCIAL BRIEFINGS
Chairperson: Mr T
Ralane (ANC) [Free State]
Documents handed out:
Presentation on Double
Taxation
National
Treasury presentation
Gauteng
Department of Health presentation
Kwazulu-Natal
Department of Health presentation
Free State
Department of Health presentation
North West
Department of Health presentation
Limpopo Department
of Health presentation
Eastern Cape
Department of Health presentation
North West
Department of Social Development presentation
Western Cape
Department of Health presentation
Northern Cape
Department of Health presentation
SUMMARY
The Committee was briefed by provincial Health departments on their first
quarter spending of conditional grants and capital expenditure programmes.
Limpopo, North West, Western Cape, Free State, Eastern Cape, Gauteng and the
Northern Cape presented their spending figures for HIV/AIDS, Hospital
Revitalisation and Forensic Pathology. Members were concerned throughout that
spending levels were low and that lack of capacity and departmental infighting
appeared to be the main reasons for this.
In other business, the Committee also unanimously approved double taxation
agreements between SA and Spain and SA and Tanzania.
MINUTES
Presentation by SA Revenue Services (SARS)
Mr Ron Van Der Merwe (Manager: International Treaties) gave a brief
presentation where he outlined the various articles and protocols with regards
to the double taxation convention between the Republic of South Africa, the
Kingdom of Spain, and the United Republic of Tanzania for the avoidance of
double taxation and the prevention of fiscal evasion with respect to dividends
on income. The purpose of the agreements is to remove cross-border trade
barriers and investment. This could be done by the elimination of double
taxation, prevention of fiscal evasion and resolution of tax disputes. With
regards to Spain and Tanzania the Article 5 of the agreement states that there
would be no taxation between the countries unless the 12-month time period has
passed.
Discussion
The Chair put the two conventions to the
Committee. They were unanimously adopted.
Presentation by the National Treasury
Dr Mark Blecher (Director) begun by outlining the fact that spending on
health by the provinces at the end of the first quarter has been fairly low.
Expenditure at the end of the first quarter was at 22.9%, which is just below
the benchmark of around 25%. However many provinces are projecting to overspend
this year by about R1.3 billion with particular problems in Gauteng which has
projected overspending figures of around R880 million. This year however looks
like it is going to be a strong year in Health expenditure with an increase of
15.8% from 2005. The two provinces with the lowest health expenditure at the
end of the first quarter are Limpopo (20.8%) and the North West province
(20.9%). Limpopo was the biggest underspender last year at about R310 million.
The two provinces with the highest expenditure are the Eastern Cape and
Mpumalanga, both with equal expenditure of 24.8%.
With regards to the conditional grants, the biggest concern is the
forensic pathology grant, which is a new grant put in place in order to support
the shift of forensic pathology services from the South African Police Services
(SAPS) to the Provincial Departments of Health. R525 million had been allocated
to support the shift but only 3.9% of it has been spent in the first quarter.
Spending on the HIV/AIDS grant by the provinces has decreased to 15.1% and on
the revitalisation grant spending has also dropped by about 18.4%. Eight
provinces have spent less than 10% on the forensic pathology grant. KwaZulu-Natal
and the Limpopo province have spent less than 10% of the HIV/AIDS grant, and
the Northern Cape has spent less than 10% of the revitalisation grant.
Presentation by the Eastern Cape Department of Health
The presentation was made by Ms L N Jajula (MEC for Health) and Mr M Frasol
(Chief Financial Officer (CFO)). Ms Jajula outlined the main points of the
presentation which dealt with matters such as grants
performance, monitoring capacity and service level agreements. She stated that the Department
spent 19.97% of the total conditional grant in the first quarter. This was
largely due to the fact that there have been improvements in both monitoring
and intervention, and with the finalisation of service level agreements with
the key stakeholders.
Mr Frasol analysed data
trends in allocations, transfers and actual expenditure, and compared
expenditure in the first quarter of 2005/06 to expenditure in the first quarter
of 2006/07.With regards to grants spending the HIV/AIDS grant is improving and
as observed from the 2005/06 financial year the department was able to spend
the total grant. This is due to the fact that the costs involved with regards
to HIV/AIDS are considerably more than the grant. When compared to the National
Transfer, the reason for the over-expenditure in the Health Professional
Training & Development programme was due the fact that payment for the
second quarter was made at the end of June instead of July 2006.
With regards to the forensic pathology grants: the SAPS currently pay the staff
and since no claim has been received from the SAPS for reimbursement, the
expenditure is reflected in the books of the SAPS. The department has
advertised new posts; however the process has not been completed. Another major
item of expenditure has been the establishment of new mortuaries; however
spending on these new projects has not commenced.
With regards to the hospital revitalization grant; there has been a slow
spending start owing to litigation from the previous financial year. However
the contractors were now on site and the expenditure is set to improve during
the 2nd and 3rd quarters. The National Tertiary Services Grant has been
utilised for tertiary services rendered in the East London, Port Elizabeth,
Mthatha Complexes and the Fort England hospital. With regards to service level
agreements, all service level agreements had been signed during the first
quarter.
Discussion
Dr Blecher stated that the spending on forensic
pathology, R680 000 of R180 million, is extraordinarily low. He expressed
concern about the very low spending level.
The Chair argued that since this was a brand new grant improvement should be
expected later in the year. He asked if the mortuaries were new buildings.
Mr D Botha (ANC, Limpopo) asked why most provinces started from scratch on
forensic pathology.
Mr M Robertson (ANC, Eastern Cape) commented that there appears to be a problem
with unnecessary litigation and poorly planned procurement. He asked for more
information about forensic pathology, mortuaries, HIV and tendering processes.
Ms L Mchunu (IFP, KZN) said it was good to see that spending on the HIV/AIDS
grant was improving, but she wanted to know what it had been spent on and if
spending had led to fewer infections.
Mr Z Kolweni (ANC, North West) said a patient that had to be transferred to
another hospital had died because the ambulance service could not get fuel in
time. He asked how such instances could be avoided.
The MEC replied that she was not aware of the patient in question and
encouraged Members to raise such matters so that they are dealt with
immediately. The HIV/AIDS grant is spent on anti-retrovital (ARV) centres, the
provision of personnel and monitoring of how the grant is used. Providing ARVs
however did not lead to a decrease in infections.
Mr L Boya (Head of Department (HOD)) argued that it is not entirely true that
the department is starting from scratch on forensic pathology. The department
took over from the SAPS, but the SAPS are still paying where it should be the
other way around. That was the reason for the low spending. Also, spending on
the employment of professionals will only show in later quarters when
recruitment was complete.
The department was concerned about the slow start to the building of mortuaries
and this accounted for the low expenditure. However, the department was working
closely with the Public Works department to accelerate building. Regarding the
issue of procurement and litigation, the department was happy to have resolved
those cases. It had not been a case of poor legal advice, but because a
contractor had challenged the award of a contract.
The Chair commented that the department has projected that it would overspend
on forensic pathology and capital projects. He asked how credible these
projections were.
Mr Boya stated that their commitments were greater than the budget that was
available; they would therefore easily spend their allocations.
The Chair raised the issue of re-allocation of funds. The Northern Cape was of
great concern. Last year, everyone was convinced that the Northern Cape was
moving in the right direction, but now very poor performance in the hospital
revitalisation programme has come to light. He felt this would have to be
monitored closely in the second quarter.
The MEC stated that there were quite a number of projects in the pipeline in
the Eastern Cape, and that the department was most likely to overspend.
Therefore if the Northern Cape could assist in donating some of their grants to
these projects, the department would be really grateful.
The Chair told the MEC “not to worry” as they would monitor the Northern Cape’s
under spending of the grant.
Presentation by the Western Cape Department of Health
The Western Cape briefing was done by Prof K Hausenhaut (HOD: Health). He
began by giving an outline of the provincial expenditure on Health, HIV/AIDS,
forensic pathology and hospital revitalisation. With regards to the HIV/AIDS
grant, there has been an increase in spending due to the fact that there were
at least 19 000 patients at the end of June. They were currently overspending
on the grant. He argued that the major challenge for the AIDS Conditional Grant
was the growth of the anti-retroviral treatment (ART) programme, and that the
increase in the number of patients was exponential. However the biggest
challenge still remained how to mount an effective prevention strategy.
On the forensic pathology grant it was important to note that the services
transferred from the SAPS with effect from 1 April 2006. In terms of human
resources capacity, 149 posts were advertised in January and June 2006. In
terms of the hospital revitalization grant, the projects under construction
were: George, Vredenburg, Paarl, Worcester and Khayelitsha hospitals. The
projects in planning were: Khayelitsha, Mitchell’s Plain, Valkenburg and Phase
2 of the Vredenburg hospital.
Discussion
Mr Robinson was delighted with progress in the Western Cape but asked if
hospital revitalisation will provide emergency assistance to hospitals that are
unable to cope with large numbers of patients.
Mr M Goeieman (ANC, Northern Cape) asked why only 3% of the YTD has been spent
on infrastructure at the Vredenburg hospital. He also asked for elaboration of
the claim that developments at the Mitchell’s Plain hospital were at an
advanced stage.
Mr Kolweni observed that there was a shortage of artisans and staff in both the
Worcester and Paarl hospitals and asked what strategies had been put in place
in order to prevent this from happening in other hospitals.
Prof Hausenhaut replied that building plans were at an early stage and that
time was available before actual building began on hospitals. On staffing of
new hospitals, he stated that other than the Khayelitsha and Mitchell’s Plain
hospitals, the new hospitals would largely be a replacement of existing
facilities. The second stage of revitalisation at the Vredenburg hospital would
go out on contract soon and spending will thereafter increase dramatically.
With regards to Mitchell’s Plain, the awarding of the contract should follow
very soon after Khayelitsha. The
shortage of artisans was a national problem and there was a need to look at
training of artisans in the building trade.
The Chair asked why a number of forensic pathology appointees had failed to
take up their posts and how credible projections of spending on the TIG were.
Prof Hausenhaut said that they went through a process of selection and that
there were people recommended for posts; however they took posts elsewhere, and
since the department had failed to fill the posts, they had to re-advertise
them. Spending projections on the TIG were credible.
Presentation by the North West Department of Health
The North West briefing was done by Ms L Sebego (HOD: Health). She
apologised on behalf of the MEC who was unable to attend. There were seven
conditional grants managed by the department which constituted 16% of the total
budget; however the allocations for the HIV/AIDS grant (specifically for the
ARV programme) did not meet the increasing demand. She admitted that spending
on the hospital revitalisation and forensic pathology grants were unacceptable.
As at June, spending against allocation amounted to 10.3%
for hospital revitalisation and 2.4% on forensic pathology. With regards to
HIV/AIDS, the department has put in place a comprehensive care management and
treatment programme. One such programme was the ARV programme that was
performing beyond its target of 20 488 patients for the year and was already at
19 350 patients by end of July 2006.
Discussion
The Chair pointed out a contradiction in that the department only spent 14% of
the overall budget and planned to underspend on hospital revitalisation, yet
wanted to ask for more money.
Mr Kolweni stated that during a recent visit to a Mafikeng hospital, it was discovered
that most of the personnel lived in a defective hospital complex. What had been
done to sort out this problem?
Mr Botha asked how many forensic pathology vehicles the department had
procured.
Mr E Sogoni (ANC, Gauteng) asked if the infrastructure challenges were the
problem of the Health or Public Works departments. As for Health department
challenges, when would they be resolved?
The Chair argued that service delivery by the department was slow because of
infighting and asked about the actual state of affairs in the department.
Ms Sebego replied that the department could not relieve poverty when they
underspent. The department was working with Public Works to overcome
infrastructure challenges, but the latter department had its own challenges.
Infighting in the department revolved around management issues. One of the
biggest problems was that officials were not attending scheduled meetings.
Dr A Robinson (Deputy Director-General: Health) claimed that 10 forensic
pathology vehicles had been procured, and that they have been specially
designed for mortuary purposes in line with national specifications.
Presentation by the Limpopo Province Department of Health
The Limpopo Province briefing was done by Ms J Dlamini (HOD: Health), who
apologised on behalf of the MEC who was unable to attend the meeting. She outlined the fact that the
conditional grants have been the major source of the capital expenditure of the
department with an average of 53% of the funds used coming from the conditional
grants and 47% from the Equitable Share. With regards to the HIV/AIDS grant
there was underspending due to the fact that there was a shortage of qualified medical
personnel in posts earmarked for ARV and step-down facilities. On forensic pathology, there was a delay in
delivery of purchased vehicles due to conversions required on some vehicles in
order to suit mortuary specifications. With regards to hospital revitalisation,
the department had spent all available funds.
Discussion
Mr Botha asked how many Iranian doctors and Polish specialists had been
recruited and for elaboration of the problems experienced with the Polish
specialists.
Mr Sogoni asked why the department continued to under spend on the HIV/AIDS
grant. He also wanted to know why most provinces struggled with forensic
pathology services and why the province had a rollover in the hospital
revitalisation grant.
Dr Blecher pointed out that the spending situation in Limpopo, after two years
of improvement, had reverted to the old pattern of serious underspending. If
this continued, the province could underspend by almost R1 billion this
financial year.
The Chair argued that the reason for Limpopo’s underspending was due to the
fact that the Health department was linked to Social Development. The
underspending was a very serious matter and if it did reach R1 billion, it
would be “terrible”.
Ms Dlamini argued that
the Polish specialists were not recruited in the correct manner; therefore national
government could not support the department. The Iranian doctors were part of a
national NGO programme. On the HIV/AIDS grant, mechanisms have been put in
place to implement projects, they were monitoring spending and it was starting
to increase. The problem with forensic pathology was that there was only one
forensic pathology unit in the province, and the department is still
advertising the posts. With regards to hospital revitalisation, the department
made various grants which in the long run will relieve the situation.
Presentation by the Northern Cape Department of Health
The presentation was done by the Northern Cape Health MEC, Ms E Selao and
Dr H Shabir (CFO: Health). The MEC outlined the fact that since the inception
of the hospital revitalisation grant, the province had performed very well; however
during the first quarter of this financial year, the province was the lowest
spender. This was largely due to capacity problems in the Public Works
department. However they were discussing ways to improve their co-ordination.
The Chair asked the MEC to act swiftly to sort out the problems experienced in
the Northern Cape, as they would not want to delay developments in other
provinces such as the Eastern Cape.
Dr Shabir proceeded to outline spending by the Northern Cape during the first
quarter. He stated that the total conditional grant allocation showed annual
growth of 53.5%, and that the province had spent 39% of its total budget in the
first quarter. This clearly showed that the province would overspend on this
grant. With regards to HIV/AIDS, there had been a re-adjustment of the business
plan in May 2006 and personnel costs were journalised late. In terms of Hospital
Revitalisation there has been a delay in the appointment of
contractors. Finally with regards to forensic pathology, personnel costs were
journalised late and there was a delay in the delivery of equipment and
mortuary vehicles.
Discussion
The Chair questioned whether or not the Committee should specially investigate
the slump in spending of what was a good performing body over the past few
quarters.
Mr Goeieman argued that the Committee was indeed given the correct information
and the work that the department said it would do had been completed. According
to the department, the problems mainly deal with the failure of the contractors
to implement certain projects.
Mr Robertson found it hard to believe that there could have been shortages of
skills and capacity to deliver on the part of contractors given the rate of
unemployment experienced by the province. He felt there might have been some
infighting when it came to failure to deliver by the contractors.
Dr Shabir said the biggest project was the mental health project, which is
where most of the grant was going. However the contractor spent 40% of the time
at the site, but only 7% of the budget. The department would welcome an
investigation into the underspending.
Dr Blecher stated that the Northern Cape had clearly over emphasised their
capacity; however rather than blaming the province, the departments should all
work together in order to solve the problem.
Prof Hausenhaut pointed out that all the provinces had service delivery
agreements. Once the contracts had been awarded they became a Public Works
function. There was a general capacity issue in the construction industry and
it was a big challenge for government.
Presentation by the
Gauteng Department of Health
The Gauteng briefing was done by the Acting Health HOD, Mr A Rahman. He stated that the province spent R84
million of the R328 million budget for revitalization by 30 June 2006.
Over-expenditure of at least R300 million was projected on this grant. This was
due to the fact that the propensity to spend on projects increased in 2005/06
and this resulted in fast tracking of delivery. There has also been an increase
in project planning and progress compared to the period prior to 2005/06 that
was attributed to the increased capacity. In terms of provincial infrastructure; 32,
9% of the R82m allocation was spent during the first quarter. Spending on the
forensic pathology grant amounted to R5, 2m which constituted 6,7% of allocated
budget. Finally with regards to the
HIV/AIDS grant spending, the figure of 19, 7% was due to increases towards the
end of the financial year with the roll-out of projects.
Presentation by the
Free State Department of Health
The Free State
briefing was done by Mr R Chapman, the Health HOD. He outlined the fact that
spending on HIV/AIDS was only 12%, largely due to capacity constraints. In
terms of hospital revitalisation expenditure is at 18% as a result of lack
of funding for the 2006/07 financial year. In terms of forensic pathology, the
first quarter spending was only 5% but this increased to 16% at the end of
August 2006 because the grant was only received late in the financial year.
Discussion
Mr Sogoni asked about projected overspending in both the Free State and
Gauteng. In terms of the maintenance of Gauteng hospitals, who was responsible
for the delays?
Mr Botha commented that there had been substantial spending improvement in all provinces,
except the Northern Cape, compared to the same period last year.
Mr Sogoni inquired about the capital expenditure fund that was not transferred
in the Gauteng province. What was being done with that money now?
Mr Rahman stated that the department had launched a number of maintenance
strategies such as delegating and decentralising hospital management to all
resident institutions. Therefore the maintenance that used to be managed by
Public Works has substantially been increased as the local management teams in
the hospitals managed it.
The Gauteng CFO [Peter: this person is not identified above] commented
on the issue of the capital expenditure fund that was not transferred. She
stated that this year they were spending the conditional grants and were not
receiving any transfers.
The Chair stated that it was important to follow up on the unfunded mandates,
and that provincial treasuries should be made accountable for the fact that
there was underspending of funds.
The meeting was adjourned.
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