Financial and Fiscal Commission Report: briefing
Public Works and Infrastructure
10 October 2007
Meeting Summary
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Meeting report
PUBLIC WORKS PORTFOLIO COMMITTEE
10 October 2007
FINANCIAL AND FISCAL COMMISSION REPORT: BRIEFING
Chairperson: Ms T Tobias (ANC)
Documents handed out:
Financial and
Fiscal Commission Report on Division of Revenue (DoR) 2008/2009
Division of Revenue.
2008/09-Implications for Department of Public Works submission
Audio recording
of meeting
SUMMARY
The Financial and Fiscal Commission briefed the committee on its
observations and recommendations on the 2008 Division of Revenue, specifically
in relation to the implications for the Department of Public Works. It noted
that there was a rapid deterioration of the entire network of roads, at the
national, provincial and municipal levels. There was also a problem with the
classification of these roads, and no clarity as to who was responsible for the
management and funding. FFC recommended that all provinces put in place
effective road management systems in order to gather accurate data on road
conditions and infrastructure maintenance requirements. It also recommended
that comprehensive studies be done to obtain information for prioritising
spending. Road maintenance should be included in the Provincial Equitable Share
review. The Commission also made recommendations in relation to financing of
school infrastructure, and said that backlogs in each province be considered
when distributing the grants. There should be better coordination also with
other grants. In relation to the Municipal Infrastructure Grant Local
Government equitable share these should be coordinated, and various options
were put forward. The Municipal
Infrastructure Grant should be wider and must take into account operational and
maintenance costs. It warned that lack of funding would exacerbate the
backlogs. The funding for the FIFA World Cup must examine the sustainability of
built infrastructure, should take escalation of construction costs into
account, and should encourage private sector collaboration. Prudent fiscal
policy should be maintained. Members raised questions on the National
Infrastructure Maintenance Strategy, noted lack of monitoring of the Municipal
Infrastructure Grant, questioned the implementation dates for the
recommendations of the Commission and noted that further investigation needed
to be done into the Expanded Public Works Programme. A follow up meeting would
be arranged.
MINUTES
Financial and Fiscal Commission (FFC): Report on 2008 Division of Revenue
Mr Bongani Khumalo, Manager: Fiscal Policy, FFC,
noted that the Commission was mandated to report and recommend on the Division
of Revenue (DoR), and this particular report would focus on the implications
for the Department of Public Works (DPW). He set out the background to the FFC
and noted that the Review of the FFC was a broad overview of the key focus
areas, but could be broken down to focus on the mandates of specific
departments.
The FFC noted, on the issue of roads and transport infrastructure, that
there was a rapid deterioration of the entire network of roads, at the
national, provincial and municipal levels. It also observed that there was a
problem with the classification of these roads and there was no clarity as to
who was responsible for the management and funding of some of them. In this
regard, the FFC recommended that all provinces put in place effective road
management systems in order to gather accurate data on road conditions and
infrastructure maintenance requirements.
The FFC also recommended that comprehensive studies be undertaken to obtain
information necessary in dealing with identified provincial road spending
priorities. There was need for prioritising on funding at the provincial level
because there was competition for available financial resources between social
services and economic infrastructure. Unless funding for roads at the
provincial level was looked at, there would be continued deterioration. The
Commission therefore recommended that the road maintenance expenditure
component be included in the pending Provincial Equitable Share (PES) review.
On the financing of school infrastructure, Mr Khumalo said that the Provincial
Infrastructure Grant (PIG) for the provinces had received a boost,
therefore the Commission recommended that the backlogs in each province be
considered in distributing the grants. In other words, focus should be on areas
most in need of schools and other infrastructure that was most likely to
improve learner performance and education outcomes. Such other infrastructure
included roads, bridges, and clinics. The infrastructure grants could not be
considered in isolation from other grants for school infrastructure but should
be effectively coordinated.
On the issue of the MIG and the Local Government equitable share (LES), the
Commission observed that a much new legislation was currently being rolled out
at the municipal level. FFC recommended
that there must be focus on how the MIG and LES could be coordinated to impact
on the provision of services and infrastructure. To address the disjuncture
between the formulas for the MIG and the LES, three options were identified.
The FFC had recommended, in respect of the Division of Revenue, that the MIG must
go beyond funding the B (basic residential infrastructure), P (public municipal
service), and E (social institutions and micro enterprise). Also, to achieve
long term sustainability of new infrastructure, there was a need to take into
account operational and maintenance costs. It also recommended that there
should be an explicit link between the MIG and Basic Services (BS) programmes.
At the municipal level, equitable share allocations should be prioritised, and
adequate funds must be set aside for maintaining and operating infrastructure
projects. Lack of funding could have long term negative effects, compounding
already existing backlogs.
Mr Denver Kallis, Researcher, FFC, briefed the Committee on the recommendations
concerning the funding for the 2010 FIFA World Cup. He observed that the
funding was crafted on the basis of requirements to meet FIFA standards of
hosting cities, and that the major challenge faced by the government was the
sustainability of built infrastructure. The Commission recommended that the
escalation of construction costs be budgeted for, and that collaboration with
the private sector should be encouraged. Furthermore, FFC recommended that a
2010 World Cup ‘Legacy Management Policy’ should be introduced, and prudent
fiscal policy should be maintained leading to the World Cup.
Discussion
Mr B Radebe (ANC) noted that the Department of Public Works (DPW) had a
strategy called National Infrastructure Maintenance Strategy (NIMS). He asked
if the Commission supported the Department and Minister in this drive.
Mr Khumalo noted that the FFC had partnered with the University of Cape Town
School Of Economics on a large project that was looking at the issue of
backlogs and lack of maintenance of existing infrastructure. Initial results of
the project were expected around May 2008. He continued that the Commission was
in support of the DPW’s NIMS initiative, and that the problem of
reclassification of roads had to be dealt with first by the transport sector.
Then it would be possible to tackle other related issues such as access roads.
Ms N Ngcengwane (ANC) observed that there was not proper monitoring of the MIG.
She noted that there was a lack of proper accountability and reporting
regarding the grants, probably because they were from the National government.
Ms C Ramotsamai (ANC) observed that many popular buildings were deteriorating
and asked what the Commission’s recommendations were on property management and
maintenance.
Mr S Opperman (DA) asked what the implementation dates were for the recommendations
of the Commission.
Mr Khumalo noted that the implementation period of the recommendations could
sometimes be as long as five years, but that it depended on when government
decided to accept the recommendations.
Mr N Magubane (ANC) observed that access roads in many areas were built and
later neglected. He pointed to Kwazulu Natal examples, and noted that the
relevant authorities should be attending to maintenance of access roads.
The Chairperson asked if the Commission was recommending that the LES be
increased. She also asked if it was recommending that government should go
beyond the 3% deficit on the budget on the legacy management problem of the
World Cup.
Mr Kallis stated that in case the 3% government deficit was exceeded, the
government had other tools like the stabilisation policy, to help alleviate the
impact.
Mr Khumalo concluded that the recommendations covered the potential problems of
the first phase of the reporting period.
Ms C Ramotsamai (ANC) suggested that the Commission should dig deeper into the
affairs of the Expanded Public Works Programme and revert back to the Committee
with their findings.
The Chairperson concluded that there would be a follow up meeting on these
issues.
The meeting was adjourned.
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