First Quarter National Expenditure 2006/07 Committee Report

JOINT BUDGET COMMITTEE
6 September 2006
FIRST QUARTER NATIONAL EXPENDITURE 2006/07 COMMITTEE REPORT

Co-Chairperson: Ms L Mabe (ANC)

Documents handed out:
Joint Budget Committee Report on First Quarter National Expenditure: 2006/07
Draft Committee Report on Workshop in Stellenbosch on 02-03 June 2006

SUMMARY

The Committee considered its report on the trends in the national expenditure for the first quarter of the 2006/07 financial year. A report on the workshop that had taken place in June at Stellenbosch was also considered. It was agreed that members would adopt the reports at a later stage as the Committee lacked a quorum.

Members expressed their concerns regarding the implications spending trends held for the achievement of national development targets. The Committee would concentrate on evaluating the extent to which spending patterns influenced the quality of service delivery. Members acknowledged that departments underestimated the level of expenditure necessary to implement their strategic objectives. The Committee had to ensure that spending was in line with the strategic goals of each department

The Committee will conduct a study tour of Germany to learn more about that country’s budget monitoring system.

The Chairperson raised her concerns regarding the impact dual committee membership had on the work of the Committee. Greater communication was needed between itself and the portfolio and select committees to ensure that members could fully perform their oversight duties.

MINUTES
 
Committee Report: First Quarter 2006/07 National Expenditure
Ms J Fubbs (ANC) noted that the Department of Social Development had overspent on its budget within the first two months (April and May) of the current financial year. What could account for this increased expenditure?
 
Ms B Dambuza (ANC) raised similar concerns regarding the expenditure trends of the Department of Education. The department needed to provide clarity on how these funds were utilized.
 
Mr L Dithebe (ANC) commented that members should focus on how this spending affected service delivery. The labour intensive nature of the departments could account for this over expenditure. Learners and teachers had to continually be provided with the necessary teaching and learning support. Ms B Dambuza agreed with Mr Dithebe’s suggestion. She said that the Committee had to assess whether government was receiving value for its money.

The Chairperson proposed that the spending trends of the various departments be assessed in terms of their respective projected expenditure. The Committee had to ensure that trends in expenditure were in line with the strategic plans of each department. Budgets should not simply be exhausted to avoid the consequences of under spending. Moreover, departments sometimes requested additional funding without providing sufficient reasons for this need. Members were encouraged to utilize their copies of the Expenditure Framework as a guide to analyzing departmental spending trends

Mr G Schneeman (ANC) contended that the First Quarter Expenditure Report merely indicated patterns of overspending and underspending. Citing the spending patterns of the Department of Education, he suggested that reasons should be provided for the over or under spending of a department.

The Chairperson suggested that the Public Finance unit within the National Treasury be invited to provide this clarification. However, members had to identify which departments’ spending merited further probing, prior to this briefing.
 
Mr Dithebe commented that the socio-economic rights report released by the Human Rights Commission revealed that levels of national expenditure were in line with international trends. However, service delivery had marginally improved. He added that the Standing Committee on Public Accounts (SCOPA) was to probe the expenditure of the departments of Health, Correctional Services, and Provincial and Local Government. When considering the level of expenditure of the different departments, the impact of the cost of transferring funds from the national to provincial and local spheres of government, had to be kept in mind.

Mr B Mkhaliphi (ANC) said that departments should have spent 25 percent of their budgets to date. The Committee should follow its policy of focusing on those departments that reflected an over and under expenditure on their budgets. The Committee should also be guided by the broader policies and goals of infrastructure development. It should therefore also arrange meetings with those departments (such as Public Works) that should reflect higher levels of capital expenditure.

The Chairperson reminded the Committee that this resolution was made at the recently held workshop at Stellenbosch. Members had to identify those departments it wished to question.

Ms Dambuza suggested that since provincial transfers accounted for a significant proportion of expenditure by national departments, their provincial counterparts should also be held accountable for these spending patterns. National departments may not be able to provide detailed responses to questions raised by members.
 
Mr Dithebe proposed that the Committee focus on those departments that were under spending. South Africa currently had an expanding fiscus that could provide improved services to its citizens. Those departments expected to lead the targeted six percent economic growth rate, should explain the their insufficient spending patterns. Such departments would include the Departments of Trade and Industry, Transport, Land Affairs, and Minerals and Energy.

Mr Dithebe commented that the President, in the last State of the Nation address, viewed under spending by departments as an impediment to advancing the developmental objectives of Government. In this context, the Department of Provincial and Local Government should explain why it had only spent 3% of its budget.

Mr Schneeman (ANC) agreed with Mr Dithebe. He added that the quality of the spending by government departments had to be investigated. The Social-Economic Report released by the Human Rights Commission revealed that the state was lagging behind its obligation to provide adequate housing to its citizens. He said that some departments, such as Housing, may reflect acceptable levels of spending, but the impact of this spending on the delivery of necessary services had to be assessed.

The Chairperson agreed that the Committee had to probe whether funds were utilized for infrastructure development and should identify the pitfalls in this process. She considered the transport problems experienced by learners in Gauteng as unnecessary as sufficient funds were available to provide an efficient transport service.

Ms R Mashigo (ANC) spoke of the lack of coordination of spending and activities between the three spheres of government. She illustrated this by referring to the difficulties the mayor of Thabazimbi Municipality  had experienced in providing the funds for the construction of a school in this area. This school had not yet been constructed. She asked which sphere of government had to be held accountable for a lack of or inadequate spending of funds.

Mr Dithebe believed that the three spheres of government were interrelated and that all were responsible for the successful execution of the Integrated Development Plans (IDPs)

The Chairperson responded that, at the time departments submitted their budget proposals, critical areas of spending had to be identified. This raised questions about the drafting process of these proposals. She reiterated that departments such as the Department of Home Affairs had failed to provide the necessary motivation and documentation when applying for funds. This indicated that departments were providing estimates that were not based on existing needs within communities.

Ms Fubbs said that the First Quarter Expenditure Report had to be analyzed in relation to the   expenditure trends of the previous financial years as well as SCOPA reports. This would provide an indication to which extent expenditure had been in line with the strategic plans of each department. If spending patterns and strategic plans did not concur, closer attention to both these processes had to be drawn. These strategic plans could be problematic as departments did not take into account the cost of the implementation of such plans and costs were sometimes underestimated.

The Chairperson raised her concerns regarding the Department of Correctional Service’s planned construction of four new prisons during the current financial year. Although the construction of these prisons was not yet underway, the Department had already exceeded its capital budget for the first quarter of this year. This Department had to clarify this expenditure.

In the light of this, the Chairperson proposed that members conduct site visits to those departments identified to be inefficient in managing their budgets. This would ensure that specific problem areas were brought to the attention of members. Departments often presented different information to committees such as SCOPA and portfolio committees.
 
Mr Dithebe commented that the Committee should become more robust in probing departments. The information generated would assist ministers to improve the management of their portfolios. However, he cautioned that the Committee should not encroach on the work of the relevant portfolio committee.  The construction of new prisons had been outlined as one of the overarching strategic objectives of Government

The Chairperson requested the committee researcher to provide clarity on the planned construction of these prisons. She stressed that the success of such planned projects was important for public confidence in both the state’s ability to deliver services as well as Parliament’s ability to ensure that government policies and plans were implemented.

The Chairperson said that a working relationship between the Committee and the Chairperson of the Portfolio Committee of Correctional Services should exist. This would assist the Committee in understanding the problems related to the management of expenditure in this Department. She would write a letter to the Chairperson of that committee requesting a closer working relationship.

Ms Fubbs said that the Committee had to focus on the relationship between the spending of departments within specific clusters. Spending patterns of these clustered departments had to convey a uniform commitment to the development goals of the state. The Departments of Safety and Security and Correctional Services - within the security cluster - conveyed conflicting messages concerning this cluster’s levels of commitment to the improvement of safety and security. For example, the Department of Correctional Services had spent money on an inefficient parole system, while its Safety and Security counterpart committed itself financially to a workable firearms control strategy.
 
Ms L Chikunga (ANC), also a member of the Correctional Services Portfolio Committee, commented that the additional prisons would not alleviate overcrowding in prisons. The number of awaiting trial detainees as well as those sentenced prisoners not qualifying for parole, compounded this problem. The prison system had to be transformed.

The Chairperson agreed. She proposed that the Committee invite clusters of departments so that comprehensive information could be obtained concerning the impediments to better spending. Site visits should be conducted prior to these meetings.

While Ms Mashigo expressed her agreement with the Chairperson’s proposal, Ms Chikunga suggested that the Committee identify what the objectives of the visits to different departments would be. Members had to establish which areas of the work of a department had to be investigated.

Mr Dithebe proposed that the expenditure trends of each department be assessed vis-à-vis the goals set by each department. This strategy would be useful in identifying deficiencies specific to a department. Ms Fubbs agreed. She suggested that the Committee meet with the different departments before site visits were conducted. Members would then know which problem areas to prioritize.
 
The Chairperson asked members to identify which clusters would take precedence. She stressed that members should interact with members of the different portfolio committees to ensure that members were sensitized to the problems experienced in different departments.
 
Ms Fubbs suggested that these briefings be held within the next two weeks. A strategic approach was needed to convey the uniformity in the approach commenced within two weeks. A strategic approach was needed to probe departments.

Mr Schneemann requested the Chairperson’s permission to be excused in order to attend another committee meeting. The Chairperson expressed her dismay that members could not remain for the duration of meeting. The Committee could not meet regularly due to members’ commitments to other parliamentary committees. This impacted on the work and commitments of the Committee.

Ms Fubbs commented that it was regrettable that the Committee had to continue its work in the absence of many of its members. A pragmatic approach was needed to manage this dilemma, as members’ obligations to other parliamentary committees had to be appreciated.

Mr Schneeman suggested that a meeting be scheduled to discuss this issue. He reminded the Committee that members had agreed to conduct meetings on Fridays.

The Chairperson accepted the member’s suggestion. However, members expressed a reluctance to attend meetings on Fridays. She excused Mr Schneeman and Ms Dambuza. A meeting would be scheduled to discuss matters of attendance.

The Chairperson said that other stakeholders should also be invited to the departmental hearings to expand the Committee’s knowledge base on problems related to public spending. She asked Members for suggestions.

Mr Dithebe proposed that research institutions dealing with issues of socio-economic rights be invited. He cited a research unit based at the University of the Western Cape’s (UWC) as a possible candidate.

Ms Fubbs said that smaller and newer research institutions should also be invited to brief the committee. These institutions tended to have more progressive visions. Briefings by established institutions such as the Institute for Democracy in South Africa (IDASA) would not be sufficient.

The Chairperson agreed with Mr Dithebe and Ms Fubbs. Spending by government departments should be in line with the goals of a developmental state. She expressed concern that South Africans were not enjoying the services the state could afford to provide. State spending should be analyzed in terms of the extent to which the basic needs of South Africans were met.

Ms Mashigo asked whether the different financial cycles of provincial and local government impacted on the spending patterns of departments.

The Chairperson said that this had a minor impact. Municipalities had the responsibility of issuing grants, a process guided by strict rules to which municipal structures had to adhere. This function should be separated from the costs of transferring funds from provincial to local governments.
 
Ms Fubbs noted that the Department of Arts and Culture had spent zero percent of its capital budget in the first quarter of the current financial year. Moreover, this department had used only two percent of its capital budget the previous financial year. Why was the department not utilizing its budget according to its strategic plan?

The Chairperson noted her suspicion about the projections the Department of Arts and Culture had presented to the Committee. This Department had projected to spend 7% of its budget during the first quarter, but had merely spent 3.8%.

Ms Fubbs commented that the Department of Arts and Culture could utilize its capital budgets to empower musicians. It could increase the spending on its community outreach programme as indicated in its strategic plan.

The Chairperson requested the committee researcher to further investigate the lack of spending by this Department.

Mr Dithebe said that the manner in which departments spent their budgets impacted on the extent to which the goals of the Accelerated and Shared Growth Initiative (ASGISA) would be realized.

Ms Fubbs expressed her concerns over the process of land redistribution. How could the low expenditure of the Department of Land Affairs be explained?

The Chairperson commented that this Department had under spent in the areas of land restitution and compensation. Funds were not utilized to equip those beneficiaries of land restitution to develop pieces of land. As a result, many farms especially in rural provinces had not been properly made use of.

Mr Dithebe commented that the willing buyer-willing seller approach to land restitution may have hampered this process. The recently announced process of land appropriation, subject to the conditions set out by the Constitution, attempted to remedy these delays.

Ms Fubbs agreed that those still in possession of land were deliberately stalling the process of restitution. To avoid such ‘legal maneuvering’, the previous minister clearly stated that disputes be resolved within a six-month period after which a formal process of land appropriation could be initiated.

The Chairperson pronounced that legislation empowered the Minister to act in the interest of South Africans. The Committee had to ensure that the Minister be held accountable for the implementation of state policies and legislation. She asked the committee researcher to investigate the impediments to sufficient spending by this department.
 
Mr A Ganief, the committee researcher, advised the Chairperson to write a letter to the Department of and Affairs, requesting the relevant reasons for this under spending.

The Chairperson acknowledged the politically sensitive nature of the process of land restitution. She reiterated, however, that Members of Parliament had an obligation to ensure that laws and policies of the state were implemented.

The report could not be adopted as the members present did not form a quorum. Members agreed to adopt this report at the following meeting.

Committee Report on Workshop held in Stellenbosch on 02 and 03 June 2006
Members had resolved to undertake a study tour to Germany. The Chairperson informed members that preparation for this trip, including its funding application to Parliament, had be finalized as soon as possible. Funding was provided on a ‘first come – first serve' basis.

Ms Fubbs proposed that the committee be briefed on the legislative framework and process of the German parliament, prior to their tour. The trip had to coincide with important cycles of the German financial year to ensure that members gain as much understanding about the German budget monitoring system.
 
The Chairperson requested the committee secretary to provide members with the necessary background information. This could be obtained from the German embassy. She requested the committee researcher to identify those developing countries to which possible study tours can be conducted.

ChangesThe Chairperson informed members that she and co-chairperson, Mr Mkhaliphi would not be attending MINMEC meetings between the national ministers and their provincial counterparts, as proposed during the workshop. Parliament had a duty to hold the executive to account and participation in such meetings could compromise its monitoring and oversight functions.

Chairperson informed members that the Committee's co-chairpersons would not attend the MINMEC meetings between the national ministers and their provincial counterparts as this could compromise parliament’s monitoring and oversight role.

Mr O Bapela (House Chairperson in the National Assembly) would be invited to brief the Committee on the oversight role of Parliament.

Mr Dithebe commented that the term ‘savings’ was differently understood within the private and public sectors. He requested the term to be placed between inverted commas in the report. Members accepted this proposal.

The Committee could not adopt the Report as the members present did not form a quorum.

Before adjourning the meeting, the Chairperson noted that both reports would be adopted at a later stage.