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FINANCE SELECT COMMITTEE
15 November 2006
INTERGOVERNMENTAL FISCAL REVIEW 2006: INPUT FROM DEPARTMENTS OF EDUCATION, HEALTH, SOCIAL DEVELOPMENT
Chairperson: Mr T Ralane (ANC)
Documents handed out:
Provincial Budgets and Expenditure Review presentation by Department of Social Development
Education priorities and the MTBPS: presentation by Department of Education
Intergovernmental Fiscal Review: presentation by Department of Health
This Committee received feedback about expenditure from the Departments of Social Development, Education and Health. Underspending differences in social development services between provinces called for much concern. The reasons given by the Department, some members complained, had been persisting for years on end. The Department of Social Development highlighted that a new system of monitoring the allocation of services and expenditure on services had been put in place as a means to rectify the problem of inequalities.
The Department of Education was pleased to announce that their budget had grown which enabled them to spend more per student in almost all provinces. The Committee was concerned about the Eastern Cape having the second largest number of students and yet they had one of the highest levels of underspending. Transport for children getting to school was another area of focus and the Department responded that it was not an issue that could be dealt with over night. Increasing the number of boarding schools was a potential solution.
The Department of Health reported that hospital funding showed a negative growth rate but assured the Committee that they were seriously looking into that matter. Expenditure by functional classification in the Department of Health showed a 37% increase in expenditure on HIV/AIDS.
Department of Social Development (DoSD) presentation
Mr Coceko Pakade (CFO Department of Social Development) explained that there has been an institutional reform of the social security system. The Social Security Agency had a fully operational head office and it is now able to function independently of the DoSD. Institutional reform on a sector level was not in line with what they would like to see in terms of norms and standards. To rectify that, the Department was looking at implementing business and monitoring systems that will focus on monitoring, supporting and risk management. This would be done in order to keep track of what happens at provincial level. The Department saw an expansion of welfare and community development programmes that included Victim Empowerment Policy, Family Policy and Disability Policy.
Mr Pakade said that the biggest challenge in the country with respect to social welfare programs was the shortage in the number of social workers that the country has. However the Department has been negotiating with National Treasury that they partner with various universities and offer financial assistance to students studying towards being social workers. Whilst the Department wants to increase the number of social workers, it is also focusing on improving the working conditions for existing social workers as an incentive for them to stay and work in South Africa.
In the second part of the presentation, Mr Pakade focused on the Spending Trends in Social Development Budgets. A large portion of social welfare services is dependent on social workers and thus there was an increase of 12.5% per year in spending on compensation of employees. It increased from R949 million in 2002/03 to R1.4 billion in 2005/6. However there were still spending inequalities across the various provinces. For instance Limpopo spent the lowest at R50 per person in 2005/6 compared to R144 per person in Northern Cape. Provinces collectively underspent by R416 million or 9% of the total budget excluding social security expenditure.
He provided the reasons for some of the underspending. Free State had delays in the finalisation of business plans. Kwa-Zulu Natal underspent as a result of not filling vacant posts because of the scarcity of social workers. Limpopo’s underspending on the Integrated Social Development Conditional Grant was caused by delays in approval of the business plan due to changes within the conditions of the grant. North West province underspent on capital projects.
Department of Education presentation
Mr Philip Benade (CFO Department of Education) pointed out one important thing to take note of was that over the past ten-year period the yield growth in the education budget was about 1%. The projected growth in the budget is approximately 7%. He said that some of the challenges arose with them dealing with funds allocated by the Minister of Finance through equity distribution which led to complaints that some provinces did not receive the funds. He received indication that the MTEF Cycle would be R50 billion. The Department moved to the Macro-Equity system in the early years. This system has adverse effects in that it does not take into account poverty. Mr Benade highlighted that the Eastern Cape was spending just over R500 per month per learner on non-personnel expenditure.
Department of Health (DoH) presentation
Mr Joe Kgatla (Parliamentary Liaison Officer for Department of Health) noted that the budget of the Department of Health should be looked at with the AIDS epidemic in mind. The Committee needed to understand the importance of other diseases because the Department did not deal with HIV only. The Committee needed to know what is killing South Africans and how many were dying, but the problem with that information is that the Department has three institutions that have different statistics. His presentation provided statistics on a number of issues including doctor distribution, capital expenditure, training, hospital admissions and casualty visits, clinic visits, cause of death and comparative health funding.
In general, DoH had had a healthier expenditure trend in the year under review. Looking at the expenditure by functional classification, the death trend in South Africa showed most deaths resulting from lifestyle such as cardio-vascular diseases and injuries. HIV/AIDS had an increase of 37.8% in expenditure which was growing very fast. This was an indication that the Department needed to accelerate their prevention strategies. Gauteng’s primary care visits and unit costs were very high above the national average and the Department would be looking into that.
A particularly pleasing matter for the Department was the World Health Organization (WHO) declaring South Africa a Polio free country. The WHO had looked at regions as opposed to countries and it was thus important for the Department to monitor the immunization coverage rates. The reporting on condom distribution was provided as an indication of how the Department was driving HIV/AIDS prevention and it was not correct to say that that represented the level of effectiveness of the prevention strategies. Hospital funding for sub-acute, step-down and chronic medical hospitals showed a negative growth and the Department needed to look into that. TB and psychiatric hospitals had shown an improvement in funding. One serious concern for the Department was the number of doctors per province. Overall the budget had become healthy but the burden of diseases was increasing. The social determinant of health was poverty which impacted on the efforts of the Health Department.
Discussion with Department of Social Development
Mr D Botha (ANC) asked why the Department was seeking to employ new people in the Free State and also questioned the impact of that on old workers. His main concern was that the old people would be side-lined. He asked why the figures given for spending inequalities between Limpopo being R50 and Northern Cape being R144 did not link up with the total between the two provinces being 2%.
Mr T Ralane (ANC) asked what the Department was doing about the per capita spending as this reflected inequalities across provinces. He also sought clarity on the reasons for underspending of the Integrated Social Development Grant. Lastly he asked whose responsibility the Children’s Bill was.
Mr E Sogoni (ANC) said that the Minister of Finance had indicated that growth of 22% was not sustainable. He asked what the role of the National Social Development Agency was in this respect.
Mr Z Kolweni (ANC) was concerned about the delay on procurement issue that had been going on for years now. He wanted to know what the Department was doing about it.
Mr Pakade (CFO – Department of Social Development) replied that he picked up that in most questions there was a direct relationship between the basket of services that the Department is supposed to be providing with the funding of those services which leads to a question of disparity. The Finance and Fiscal Commission had mentioned this last year when the Equitable Share formula was discussed following the decision to shift the function to national as a social assistance function. There are historical reasons for this and he believed it would be unfair for all to think that they would see change in the first year of implementing the new dispensation. Most provinces had been spending not more than 10% on welfare services and the rest of the money went to social grants. That was also aggravated by overspending on social assistance by provinces in the last three years. This resulted in huge deficits that have accumulated over time. There were provinces that were spending almost 93% on social assistance. Given that and it was also coupled with the problem that the equitable share formula was designed to take into account social assistance as the major welfare component of social development.
He continued that for the last two years the Department has been engaged in developing an integrated model which focuses on where the Department is providing services. More services are provided in the urban areas which has led to the Department looking at what mechanisms to put in place to rectify this. Hence the sector approved the financial awards policy which tries to set core principles for funding welfare services and looks at services provided by the state and those provided by the non-government organisation sector.
Discussion with Department of Education
The Chairperson noted that the Eastern Cape with two million learners, had the second highest number of learners, yet it was one of the largest under-spenders. Whenever the MECs from the various provinces gave a reason for this, they always seemed to argue migration. He asked whether or not the argument raised by MECs was valid. At the level of Grades 8 -12, the Eastern Cape seemed to be the lowest. In Grades 1 – 7 they were the lowest. He referred to the provincial payments on capital assets. This showed a huge problem in the province that there is huge underspending on capital assets. On the issue of school nutrition, Eastern Cape had such a high target and it reached it. Mr Ralane wanted to know how possible that was.
Mr D Botha asked what would happen to the many teachers appointed on a temporary basis.
Mr E Sogoni asked what measures the Department of Education had in place to ensure that the nutrition figures were correct. Were they monitoring that process and were there still schools where the program had not been rolled out? He raised concern about the pass rate in Mathematics in the country saying that the Eastern Cape for example had a low rate 3.8% and Kwa-Zulu Natal 7.1%. Relative to the rest of the world, South Africa rated far below in Maths pass rates. What was the Department doing to combat that? The Department had reported poor literacy and numeracy skills at schools and he wanted to know what it was doing to correct that. He mentioned that the main cost driver in education continues to be payment progression. He then asked what policies the Department had in place to ensure that there is quality in non-capital and non-personnel expenditure. On the issue of teachers that had retired but still had not received pensions, he asked what the Department was doing to address this.
Mr Phel Parkies (ANC) asked whether the Department’s objectivity was to take on board everyone affected by the audit process taking place at tertiary level. He then asked what the Department was doing to rectify the transport problem of students having to travel far distances to go to school in the Free State.
Mr Philip Benade (CFO Department of Education) said that Free State was not the only province experiencing transport problems. In the Free State, the Department agreed to close down smaller schools and bring schools together to form bigger school communities. It made sense to do that but it complicated the transport issue with more students having to travel far. There was no easy solution. Suggestions had been made that some schools be converted into boarding schools.
Mr Benade said that retired teachers struggling and waiting for their pensions had not approached the Department to inform them about it. They found that the biggest problem was giving the right information to the Department of Finance. In a centralised system it may be easy to obtain a person’s correct details but on a provincial level the chain effect complicated the process because if anything is incorrect, it had to go from the Department of Finance to the provincial Department and various other links before the person received it.
In response to the question about audited higher education institutions, Mr Benade said that it is ongoing work that the Minister is doing and that there has been a restructuring.
On the matter of differences occurring in the number of learners per school in each province, he said that the trend was that the number of learners in rural areas was smaller than in large and more urban provinces.
Mr Sogoni (ANC) suggested that in the interest of time Mr Benade provide a written response to the rest of the questions as there were time constraints.
Discussion with Department of Health
Mr Parkies asked for the reasons why regional hospitals were so accessible and yet had fewer beds. He then said that the Western Cape and Gauteng provinces were losing a lot of personnel due to the working conditions that people find themselves in and due to the grading systems of uniforms in the provinces.
The Chairperson suggested that Mr Kgatla provide a written response due to time constraints. On that note he ended the meeting.
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