Division of Revenue Bill: input by Departments of Agriculture; Arts & Culture; Sport & Recreation

Meeting report

Department of Agriculture briefing
Ms Njabulo Nduli, Department of Agriculture (DoA) Director-General (DG), briefed the Committee on the 2008/9 Implementation and 2009 - 2011 Allocations on the Division of Revenue Bill.
The report was focused on the Comprehensive Agricultural Support Programme (CASP) framework. The CASP framework included the DORA Schedule 4 conditional grant to supplement the equitable share. It covered an initiative to support the Provincial Departments of Agriculture (PDAs) to create a favourable and conducive environment for emerging farmers and to expand provision of support services for agriculture development. CASP accounted for 15% of the farmer support budget.

She reviewed the Farmer Support allocations per province and the 2008/09 CASP provincial allocation. The project performance and targeted beneficiary support to date, progress on recruitment of personnel, the 2008/09 quarter to quarter performance and 2008/9 overall provincial performance to date was also discussed per province. The department also made a visual presentation of successful projects.

The overall performance remarks concerned monthly expenditure by provinces moving slower than expected. There was a gradual improvement due to strengthened monitoring. Overall provinces had spent 62% of their budget and the national performance index indicated that only three provinces (Gauteng, Limpopo and Western Cape) had performed well to date. Implementation performance this year was reasonably on track compared to previous years (51% currently).  Additionally, it was the DoA's view that procurement plans were not finalized in time by provinces, resulting in fiscal dumping.

The Land Care programme overview covered the Land Care Framework 2009/10, the Land Care expenditure pattern from April 2008- January 2009, the MTEF allocations from 2009/10 to 2011/12 and the Land Care Disbursement Schedule 2009/10.

Discussion
Mr E Sogoni (ANC; Gauteng), Acting-Chairperson, referred to a conversation he had heard on radio about land transfer aftercare and asked how they could ensure that arable land transferred to beneficiaries continued to be productive. South Africa was now the net importer of agricultural goods.

The Acting-Chairperson queried the slow spending by provinces under CASP (Comprehensive Agricultural Support Programme) and asked what the monitoring and evaluation arrangement was here.

Mr Z Kolweni (ANC; North-West) stated that his concern was rooted in the apparent lack of harmonisation between the DoA and the Department of Land Affairs. There were communities, ready to embark on small-scale farming. When the Committee had taken Parliament to the people in the North-West, they had invited the DoA and Department of Land Affairs to listen to the communities’ complaints. In the rural areas, people still complained that they did not get assistance from the Departments. Delivery in this regard was very important.

Mr T Ralane (ANC; Free State) found the glamorous reporting problematic. He referred specifically to the slides used as showcases of the success of the DoA. He hoped to see this in the door to door visits the ANC election campaign was currently doing. The Xhariep area in the Free State was one of the most depressed they had seen in oversight visits and this did not match the beautiful pictures in the presentation. One could not see where the money allocated was working; nationally or provincially.

Mr Ralane asked what happened when a national department underspent while other departments were in need. The Committee had the power to amend the Division of Revenue Bill based on performance. He noted that the administration of land claims was one of the hugely underperforming areas. He asked if the Committee should pass the allocations as they were, when the money was not doing what it ought to do, and if they should, the Committee must suggest that the DoA should not get the R 1 billion current allocation or the R 1, 3 billion over the MTEF. The DoA must convince the National Treasury and the Committee that performance would improve in the outer years of the MTEF, otherwise the Committee might want to revise down the allocations. The incoming Committee must deal with this brutally. The DoA and National Treasury must discuss the matter of performance in CASP and land claims and report to the next Parliament on the outcomes of that discussion.

Mr Kolweni queried progress and asked what the targets were in terms of the numbers of personnel. Looking provincially and countrywide, he asked if they really had the reported number of vacancies.

Mr Kolweni pointed out that procurement plans had not been finalised in time by provinces. He asked if there were measures to eliminate this practice, as this impacted on service delivery.  

The Acting Chairperson asked if they had allocated the money to provinces despite the fact that procurement plans were not ready. He thought that the purpose of the MTEF was to assure readiness in planning over the following years. It seemed that departments had not grasped the purpose of MTEF budgeting. When the new government came in, departments had to be ready to roll-out so that they could hit the ground running. He wondered if departments were ready as the Committee had to approve the Division of Revenue Bill, which had to be finalised by 19 March 2009, based of the state of readiness of departments to implement their programmes.

The DG responded that the provinces had had difficulties with procurement. The technical aspects of procurement sometimes proved challenging due to the shortage of service providers and skills. The delay was in the actual procurement, not with the plans. For example, Kwazulu-Natal had decided to do procurement on behalf of beneficiaries. This meant that the province needed additional procurement capacity. The DoA had monitoring teams in place in the provinces to ensure better performance.

Mr Ralane stated that the Committee had discovered the reason why the money was not performing. Agricultural projects were often initiated by the Department of Social Development. He felt it would be a huge indictment on the Committee if they agreed to the allocations as they stood.

The Acting Chairperson referred to the first few slides, which referred to the CASP objectives. In the past anyone could plant crops and now that there was money available and support for this, people were flocking to urban areas and increasing informal settlements. He asked how access to farming could be ensured as CASP did not appear to efficiently address these concerns.

Mr R Seleke, DoA Director, responded that CASP concentrated more on the infrastructure pillar than the others. Providing infrastructure support was vital as this would determine if farmers could get their produce onto the market.

The Acting Chairperson pointed out that there was a lack of infrastructure in most of the places the Committee had visited. People were so frustrated now that they had bypassed their constituencies and called on the provincial permanent delegates in Parliament for help. He asked what was being monitored in the Department’s monitoring and evaluation.

The Acting Chairperson pointed out that according to Division of Revenue Act; the DoA was entitled to infrastructure spending. He asked if irrigation schemes fell into this category. He did not see that in the budget and it was necessary to support agricultural communities. People routinely complained that there was no support of this nature.

The Acting Chairperson commented on project performance and the relatively small allocations to Gauteng. While this was understandable due to the fact that Gauteng was not an agricultural province, there were more beneficiaries noted for this province than more agricultural provinces. He queried the reasons for this incongruity.

The Acting Chairperson asked who benefited from the food security allocation and how the public could access benefit from this.

The DG responded broadly that this was a very limited presentation and related specifically to the Division of Revenue Bill and CASP. This was not a picture of the greater equitable share. She could appreciate that some projects were initiated by other departments but those projects were not part of the discussion.

Mr Ralane replied that the DoA had included the equitable share allocations of the provinces. The Committee’s concern was that they could not see the results of the allocations on the ground. What they saw usually related to the allocations made as a conditional grant.

The DG responded that although the DoA presentation had noted the problems attached to the equitable share allocations, this discussion was limited to a discussion of the Division of Revenue Bill.

In response to the recent media attention and the reported collapse of the land reform programme, the DoA was finalising a turnaround strategy. This strategy was based on a better understanding of the reasons for failure. The beneficiaries entered into a highly skilled area and the rehabilitation of the necessary skills was a challenge they had identified. This had occurred because these people were excluded from agriculture for 50 years. The Department had also undertaken publicity to encourage household food production in an effort to use fallow land. They worked with municipalities on this and targeted 140 000 households. They had received good progress reports on this initiative.

The Acting Chairperson thought this a useful programme and asked where the 140 000 targeted households were. The DoA could report on that in writing.

The DG responded that those projects were ongoing. 

Mr Ralane proposed that they close the discussion as the answers were not adequate. The Committee could not address the issue of performance of money.

The Acting Chairperson asked what they were monitoring. He asked who the Committee could approach to get the kind of information they wanted. Perhaps they should raise these questions with the provincial departments of agriculture.

Mr Ralane stated that the Committee used performance figures to address the issue of underspending. They needed to evaluate how to respond when departments asked for roll-overs. Giving more money to underperforming departments was a serious issue and they could not engage in this discussion with the current information.

The Acting Chairperson asked the National Treasury if the MTEF assisted with planning.

Mr Kenneth Brown, Acting Deputy Director (Inter-Governmental Relations): National Treasury, referred to page 104 of the Division of Revenue Bill. According to this and the current Division of Revenue Act, a lot of this work should have been done by July. It clearly stipulated that the MTEF planning should have already happened. The National Treasury might have to look at the timelines and provide Parliament with a report on how departments have generally complied with reporting timelines. Although there was a need to plan way ahead, it was unclear whether this actually happened. A key question had been raised about whether Parliament should cut the budget. He would have to plead with the Committee not to cut the allocation. He was worried because agricultural allocation to provinces was only 7% of provincial spending. The Committee had raised the issue of taking funds away from rural communities and he feared that a cut would mean taking funds away from rural development. This would have a negative impact on food security. They needed to address the inefficiency in the system and departments needed to fully explain the performance of money. The Committee needed to give the National Treasury clear guidance on how they should proceed, so that they could report back to Parliament in four months.

The Acting Chairperson responded that he appreciated the suggestions from the National Treasury. From slide 4, he gleaned that underspending was at approximately 50% in general.
Mention had repeatedly been made of the review of the Public Finance Management Act (PFMA). This needed to take place to aid the evaluation of the performance of money.

The DG suggested that they should come back with the provincial departments to discuss the challenges they face in implementation on the ground, such as lack of skills. The DoA supported the National Treasury’s view on budget cuts and reporting.

Mr Ralane responded that they should check if the capacity was available for performance on the conditional grant as this was one requirement of a conditional grant. He also wondered why this money was reallocated to underperforming provincial departments.

Sport and Recreation South Africa (SRSA)
Mr Vernie Petersen, Director-General (DG), conducted the briefing on behalf of the SRSA. He stated that conditional grants by their nature required intensive monitoring and planning and by their very nature, they had weaknesses. There had been an average increase, year on year, of about 95% in the Mass Participation Grant. That rapid increase had associated problems with not being able to establish the required capacity in the provinces for implementation and the inability of the national department to effectively monitor. They had been working intensively with the National Treasury to improve planning to improve expenditure. The Mass Participation Grant had many advantages, seen in the fact that communities could now effectively use those facilities for sport and recreation and through mass participation increasing the number of people coming in from the bottom, and promoted building elite sports in the categories South Africa was good at. The SRSA had started to work very well with the Department of Education which was critical to ensure effective roll-out of this conditional grant.

Mr Makota Matlala, SRSA Chief Financial Officer, reported that the purpose of the grant was stated as development of sport in the communities and development of communities through sport and the empowerment of communities to deliver on the programme. The outcomes as per grant framework were discussed, as were the provincial allocations. The provincial allocations for the Participation Programme, Legacy, Schools Mass Participation Programme and Siyadlala grants were presented. The 2010 FIFA World Cup Grant spending was reported according to the various stadia. The provincial spending of conditional grants were also discussed for the period 2008/9, as was the 2010 FIFA World Cup Stadia Development Grant 2008/9.

Discussion
Mr T Ralane (ANC; Free State), Chairperson, queried the exact meaning of legacy and what the contribution of the 2010 World Cup would be to South Africa.

The Chairperson queried what was happening at school level and at community level in Siyadlala programme.

The Chairperson pointed out that there was slow spending due to procurement procedures. Orders were made, paid for and then not delivered on. This needed serious attention as there was a danger of fiscal dumping.

The DG responded that this was a capacity problem in the national and provincial offices. Part of the grant was for the improvement of monitoring capacity. They had not accessed it in the past and had plans to access it in this financial year. There was slow turnaround in appointments. The vetting process was protracted and presented a challenge as positions could not be filled quickly. The purpose of vetting was to ensure that they had the right people but it slowed the process down. He thought that proposal on putting precise timeframes to the undertakings was a good one.

Mr Sogoni asked what the progress on the Nelson Mandela Bay Stadium and sought clarity on its possible exclusion as a venue.

The Chairperson responded that the Nelson Mandela Bay Stadium was excluded as a venue for the 2009 Confederations Cup but was not excluded from the 2010 World Cup.

Mr Sogoni asked who was responsible for implementation under the Mass Participation Grant. He stressed the need to develop from grass roots.

Mr Kolweni stated that when he looked at the programmes, he got the sense that the SRSA should have relationships with all the other departments and if this was not encouraged, the implementation of the programmes would be problematic.

The DG responded that the issues raised were very interesting and would help in refocusing debates. He referred to discussions with colleagues on the question of municipal infrastructure grants and where sport and recreation featured in that. The SRSA was beginning to shape those relationships and debate the issues.

Mr Kolweni asked what would happen to the stadia and recreational facilities after the World Cup. These facilities favoured the urban areas.

The DG responded that they were aware of the risk attached to having recreational facilities in predominately urban areas The Minister was also very clear that they needed to zoom in on this. If they did introduce an infrastructure grant, it would specifically target rural areas.

Mr Kolweni asked what was being done to promote youngsters’ involvement in indigenous games. The SRSA had to tap into intergovernmental forums, tap into the talent in rural areas and not be biased in developing infrastructure. Incentives should be discussed as, a lot needed to be done, specifically on recreational facilities in smaller communities. With the advantage of the World Cup, one would not expect the SRSA to have roll-overs.
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The DG responded that taking talented youngsters through the stages of sport development was a responsibility they shared with South African Sports Confederation and Olympic Committee (SASCOC). The Department would very seldomly take responsibility for some of the talent discovered through their mass participation programme.

The Chairperson asked how budgets were done for school sport. He asked if those allocations were given to the schools and if so, if were they published.

The DG responded that the issue of infrastructure development grants was where the SRSA featured. The development of sport infrastructure in schools was the responsibility of the Department of Education. It was critical to resolve the issues around the municipal infrastructure grant. The allocation to sport and recreation was comparatively small and the Millennium Developments targets were quite explicitly pursued above the development of sport and recreation. The SRSA had engaged with the National Treasury to ensure that sport infrastructure development in communities was accelerated.

The Chairperson asked what had happened to the Club Development Grant. He asked if it had changed into the Legacy grant.

Ms Kelly Mkhonto, Director (Community Sport): The Department of Sport and Recreation, responded that the Club Development Grant had been incorporated as a Key Performance Indicator (KPI). They had never really received that grant.

The Chairperson replied that when the Committee had visited Limpopo, the MEC reported on the development of clubs. The Committee asked for a list of the clubs and was unable to obtain this from the MEC’s office.

The Chairperson asked what kind of programmes formed part of the legacy grant.

Ms Mkontho replied that the projects which formed part of the legacy grant were the previously mentioned club development grant, community capacity building programmes, mass mobilisation of communities and the increase of spectator mobilisation in sports other than soccer, such as athletics.

The Chairperson referred to the FNB Varsity Cup, the SASOL Soccer Scene and Slam Dunk. These were all successful private sector initiatives that produced visible results and increased the pool of professional sportspersons. He asked if there was a link to the SRSA in a Public Private Partnership (PPP) in the interests of producing good quality sportspersons. He added that the same results could not be observed from the SRSA programmes.

The DG responded that there was a tendency to want to be associated with lucrative, well publicised sporting events.  That was something the SRSA had to deliberately contain so that the grant was not used for such purposes.  The Department followed up on club development and community sporting facilities funds being used for such grand occasions. Profiling some of the mass participation left a bit to be desired. There was a need to profile the SRSA events in the communities better.

The Chairperson asked how they dealt with the budgets of the Siyadlala programme and whether there was a link with the municipalities and communities.

Ms Mkontho responded that Siyadlala was aimed at introducing as many people as possible to as many sporting activities as possible. These activities were not structured. When they did the monitoring and evaluation, they realised that the country was teeming with talent. There was a need now for vertical development that left a legacy for communities. This was the idea behind the club development programme. This was linked to the structured Federation Programme. This was a formal participation structure with regular tournaments linked to development. The goal of mass participation was to use sport as a catalyst to address social challenges in communities.

Mr Ralane asked which criteria were used for allocation and how were these linked to municipality programmes for sustainability and accountability – essentially municipalities having budgets for maintenance of sports facilities.

Mr Mkhonto responded that the CFO had mentioned the criteria for allocations. This was controlled by the numbers in the provinces and the equitable share. The SRSA was looking into a possible baseline amount and using the equitable share as an additional amount. This would also include an element of performance. Limpopo for example was still very behind. They had a roll-over of R 3 million previously. In Limpopo, the SRSA had identified capacity as a challenge and could not even appoint people. The SRSA felt that allocating money to similar provinces would be problematic.

Mr Ralane responded that they were the first department to say that a conditional grant was dispersed equitably. An MEC had appeared before Parliament in 2008 and stated that the money was not performing. The SRSA needed to engage in discussions with the National Treasury.
They needed to look at ongoing support for sporting activities – this was why the Committee had asked about the Club Development Grant. Another issue that needed to be addressed was what exactly legacy referred to – did it refer exclusively to the World Cup and therefore soccer or did this include cricket, rugby and other sports. This needed to be clarified.
 
The DG responded that this was a debate the department had had internally. While soccer was the primary beneficiary, they hoped that all sporting codes would take advantage of the development opportunities. The stadia were all designed to be multi purpose – to accommodate a variety of sporting and other activities. They did want to see a revival of netball but saw the character of the World Cup as a way of embracing soccer as a national sport.
 
The Chairperson proposed a small Indaba on how the Legacy conditional grant could benefit all sporting codes. Everyone had been a bit blinkered about the World Cup and it needed to be linked to the broader legacy.
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Department of Arts and Culture

Mr Themba Wakashe, Department of Arts and Culture (DAC) DG, conducted the presentation on behalf of the Deparment. The presentation covered an overview of the 2009 MTEF allocations and the key outcomes envisioned for the 2009 MTEF. These included promoting a culture of reading, the role of libraries in social cohesion, addressing severe disparities between rural and urban communities, how connectivity in rural areas can bridge digital divide (partnered with the Dinaledi Schools Project) and publishing in indigenous languages. The Library Transformation Charter was also discussed.

Their provincial priorities for 2009 were increasing books and reading material for younger readers, upgrading and construction of library buildings, appointment of more staff (or extensions of contracts) and under Information and Communications Technology (ICT), the new integrated library management system.

They also reviewed their priorities for the national department, preparation and planning for 2009/10 and expenditure for the third quarter ending December 2008, where the aggregate spending rate for provinces had been 68, 1%. The achievements of the national and provincial departments were discussed, as were the major challenges and way forward.

Discussion
The Chairperson pointed out that the problem indigenous languages faced was that computers and cell phones were not in indigenous languages.

The Chairperson asked if the DAC supported the Division of Revenue Bill. He asked if they needed more money.

The DG responded that they would love more money. Motivation for this was that if they did not invest in the brains of South Africa, the democratic gains made would be at risk.

The Chairperson responded that they agreed with investing in the South African brain but critical challenges were raised. The issues of spending were also a problem and they could only talk about more money until they were resolved. The Eastern Cape MEC had stated that they could not take more money because they did not have the capacity. Libraries were a critical issue and it was interesting to see that the Eastern Cape spending was higher than that of Free State. Yet he was still concerned about the Eastern Cape.

Mr Sogoni referred to the expenditure figures. In terms of normal spending patterns, one would expect these to be around 70% by the end of the third quarter. Most of the provinces were below 70%. The issue was the role of the national departments when transferring the funds. Did they transfer the funds and walk away? How did this work after the transfer?

Dr Graham Dominy, DAC National Archivist, responded that they did not just transfer the money and walk away. Before the monitoring and evaluation changes, there were quarterly meetings with provinces to check on their expenditure. This was the reason expenditure reported in the presentation only went up to December, as this was the last completed session in the quarterly review process. The DAC had the figures for January but these figures had not yet been evaluated. This could be supplied to the Committee if required. The DAC also visited the provinces regularly to check on progress.

Mr Sogoni referred to the challenge presented by Schedule 5 problems and the Service Level Agreements (SLA) with the municipalities. The Committee had met with local government during the People's Assembly in Mpumalanga. They had expressed gratitude that the province had allocated some money to run the libraries and appeared unaware that they were entitled to a provincial allocation. He asked what the national department was doing to ensure that municipalities were aware. Libraries were still run by municipalities at their own expense. At a glance, this may seem to be small allocations but it could be the source of the underspending.

Dr Dominy responded that the role of municipalities - highlighted at the People's Assembly in Mpumalanga - had been a major challenge. It was not something they had neglected. The Minister had taken an interest in this matter and interacted with the Chairperson and Executive of the South African Local Government Association (SALGA). As members would recall from the Library Transformation Charter, that was going back to SALGA.

In the beginning of the presentation, the DG had stated that libraries played a role in promoting social cohesion. This was something that all of government was engaged in and where they could, should not take Schedule 5’s provincial competence over libraries as an absolute. Most libraries also offered other activities. Their facilities were used for community activities, arts and culture activities and even some sporting activities. That was something very relevant to municipalities; therefore, they could not totally exclude municipalities from the picture. A library was a community facility

Mr Sogoni asked for a response to the issues raised by the Eastern Cape on capacity.

Mr Sogoni referred to the Commission for Information Technology (CITA) problems with the municipalities, as they had not been able to link municipalities. CITA had not been able to explain when they were called to do so in the Eastern Cape. He asked if the DAC had been able to communicate with CITA in terms of the Information and Communication Technology (ICT) system mentioned in the presentation. This will not work unless CITA is involved.

The DG responded that they did offer assistance to provinces to beef up their expenditure of the grants. The challenge faced was a need for closer monitoring by CITA. Even though there was some dissatisfaction, he was of the opinion that CITA was addressing this. They could always increase capacity but the DAC currently focused on addressing the minimum.

Mr Kolweni welcomed the parameters of their vision on the Library Transformation Charter. This was a step in the right direction. He was also appreciative of the initiative to reinstate the use of indigenous languages. The DAC would have to scout around for ex-teachers who were now pensioners as they were a great resource for this.

Mr Kolweni pointed out that the North West province featured under Achievements for the implementation of creative outreach programmes. Generally, he commended the DAC, stating that they were engaged in nation building work.

Dr Dominy responded that he recalled that a few years ago, someone had said that the North West was so bad that it was in the Intensive Care Unit. They were exceptionally proud of that province, as there were some very dedicated people who work extremely hard to implement that programme. The National Treasury's technical assistance had also resulted in a measurable improvement in their performance.

Mr Sogoni referred to appointment of three monitoring and evaluation specialists and asked if this would suffice for the monitoring and evaluation of all nine provinces.

Dr Dominy responded that they wanted to see how they could best intervene and had begun with the three specialists. These specialists would be able to give a deeper report, looking particularly at municipalities. Gauteng and the Western Cape transfer the bulk of their allocation to municipalities, making their books look good. The specialists would look at whether that money was being spent correctly at municipal level. They would also support provinces like the Eastern Cape, where there still procurement problems and the Free State. Mpumalanga's problems were largely due to CITA, with a lot of their expenditure related to the installation of an integrated library management system. They were dependent on CITA' s approval for expenditure. That project was well underway and once completed Mpumalanga should recover its expenditure.

Mr Sogoni suggested that the National Treasury must assist the DAC in preparation and planning for 2009/10. The Division of Revenue Bill should point out when departments should start making preparations. The final business plans were to be submitted to Treasury by 27 March 2009. Parliament had passed the adjustments budget in October as being indicative of what departments would get. There was no finality on this, six months later. He asked why this was left to the last minute.

The DG responded that this was more a matter of the detail. They had already submitted their final MTEF framework the National Treasury.

Dr Dominy added that they might have used the incorrect word by saying "final" business plan. The business plans were done and had been debated. They should have said "approved" business plans, as it could only become a legal document when signed by the accounting officer. The MTEF had been signed but the approved business plan with the signatures of the nine provincial Heads of Department and the National Director-General.

Mr Brown commented that the numbers presented were a misrepresentation of the performance of this programme. The 68% - aggregate of provincial spending up to December 2008 - was based on the money that was transferred, not based on the budget. If this was compared to the budget, spending was ± 58% by the December 2008. The overall picture was quite odd across all the provinces. There was a problem with the performance of this programme. The National Treasury would assist the DAC to deal with that. There was an issue around powers and functions. It was unclear and resulted in municipalities doing a bit of the work, while provinces were shirking their responsibility.

They also had to look at how they should deal with the grants system. What provinces then began to do was to move that money into other areas. It was something they had to address.
When additional money was allocated to a grant, municipalities and provinces could take money earmarked for that purpose and move it into something else. These things needed to the tailored in the proper way. The key issue to be resolved was that of powers and functions.

The DG responded that they welcomed the opportunity to report to the Committee and appreciated their continued guidance.

The Chairperson responded that they needed to go back, as there was a very direct link between education and the libraries. He did not believe the figures reported for the Eastern Cape, in light of the state of matric results in the Eastern Cape. The Free State performed better at the level of matric results but had a lower spending figure. This did not tally when that link was considered.
They needed a big discussion on the construction of libraries and the availability of reading material.

The issue around indigenous languages would have to be viewed in the context of modernisation. He was not sure how they would deal with that due to the English mindset permeating the youth. He was also unsure if the Japanese, Chinese and Americans (manufacturers of information technology) could be persuaded to translate functions into Xhosa.

He stated that libraries were community structures and stressed the importance of ensuring proper access to communities and learners.

They also had to deal with the issue of powers and functions. The Chairperson pleaded with the DAC to engage with national departments, provincial departments and the municipalities. This had to be resolved quickly to ensure that the powers resided appropriately. Municipalities were responsible for Integrated Development Planning (IDP) and these things had to be done in the context of the IDP.

Department of Transport (DoT)Ms Mpumi Mpofu, Director-General (DG): Department of Transport, reported that the additional allocations highlighted in yellow related to the Division of Revenue Bill and the Public Transport Infrastructure System fund (PTIS). Budgets per programme also provided the MTEF baseline figures. Notable allocations here were those to Integrated Planning and Intersphere Co-ordination and Public Transport, as the principle drivers of the transport budget.

Under the breakdown of major budgets, she highlighted the stagnant growth in bus subsidies. If the 2008/9 figure was projected backward, it would be close to a straight line. From 2009/10 onward one could see some increases in the allocation. While the DoT acknowledged the increases over the Medium Term Expenditure Framework (MTEF), it was not 100% of what was required, but it was encouraging that the increases were not inflation-linked. Another notable allocation was the PTIS World Cup allocation.

Gautrain figures were projected over the MTEF to show the conclusion of the project in 2011/12 with a zero allocation for that year. There was a single allocation made for last year – Disaster Fund Grant for provincial roads – in response to last year’s flood damage (mainly, the Western Cape and Kwazulu-Natal). The growth in overall budget showed a budget that was growing (except for a slight dip in 2009/10) with a focus on big projects and capital expenditure.

The bar graphs showed clearly that the single biggest allocation was to Rail. The PTIS funds were allocated on the basis of prioritising the Confederations Cup and the 2010 World Cup infrastructure. In financial year 2011/12 they would revert back to the normal public transport development programme – financing the rapid transport networks. She had indicated the zero allocation signalling the end of expenditure on the Gautrain project. They expected to see revenues generated as of 2012/13. The DoT minor budgets were also presented.

The DoT had had a discussion with the National Treasury about the need to restructure the bus subsidy fund. They had indicated the operational requirements which had exceeded actual allocations. Over the years the DoT had accessed the adjustments budget to bridge the funding gap. This additional allocation request was sometimes granted and at other times refused. The DoT had effectively been running a deficit on bus subsidies. Operations came to a screeching halt in November 2008, when they ran out of money. The reality was that the area not under-budgeted but underfunded.  This resulted in court cases which forced them to meet the legal obligation via the court system. National Treasury had provided the funds for these payments, as it had not been catered for in the DoT budget. That issue had been largely resolved for the current financial year.

The challenge was simple: people needed to be transported and they had agreements with provinces to disperse the funds. The provinces did this via tendered, negotiated and interim contracts. There has recently been a disproportionate amount of interim contracts (renewed on a monthly basis. Tendered and negotiated were safer because there was a more certainty in the kilometre based approach. The interim contracts functioned on the uncertain basis of ticket sales. Provinces did not know what would be claimed on the interim contracts. People needed to be transported and they could not provide the service because they had budgeted for less.

The DoT had resolved the problem by moving forward a new Division of Revenue Act (DORA) basis. This would be managed under the context of a conditional grant. The specified amounts would be clear and guaranteed. The big stick used would be to force provinces to convert all interim contracts to negotiated contracts and ideally tendered contracts by September 2009. The presentation provided detail of the implementation plan and interventions for 2009/10.

It was worth noting that part of the problem was with the bus operators, themselves. They preferred interim contracts as it suited them. This required the DoT to produce a rigid response in the DORA arrangement and a stricter regime with no room for non-compliance. If bus operators did not accept, the only option available was termination. The only challenge here was that termination meant that there would be people out there who will not get to work. They were, therefore, mindful of this in the management of termination. They were now out of the red on bus subsidies and back on track and were negotiating this process with the contractors via South African Bus Operators Association (SABOA) to arrive at a near ideal arrangement to benefit all.

The Gautrain project was slightly behind schedule with the 2010 target. The first phase completed by then would be the section between the OR Tambo Airport and Sandton. This was the result of re-engineering the process as they proceeded.

The first phase was scheduled for completion by September 2010, but they were renegotiating for a June date, subject to the price for an earlier completion.

The 2009/10 allocation for the Roads Overload Control and Rural Transport grants was highlighted. It related to cross border international roads. The DoT was responsible for roads such as Sani Pass, which was a provincial road which crossed the border into Lesotho. Because of this the responsibility shifted to the national department. Overload control and rural transport were also indicated. The purpose and reasons for not incorporating the rural transport grants into the equitable share were discussed

Public Transport and Infrastructure Systems aims and background information was discussed. The challenges faced were largely capacity based. Of the five host cities receiving technical assistance, Rustenburg, Polokwane and Mbombela were now in a better position. There were still big challenges in Tshwane.

The DoT was not overly concerned about the expenditure trends as most of the allocations were assigned to capital projects. Capital projects did not have straight line cash flow expenditure Money was not really spent in the design phases leading up to site establishment. The real expenditure took place upon commencement of construction.

They had intervened in the cities facing challenges and allowed projects to run their course in cities where there were few challenges. Expenditure patterns were monitored. She noted the difference between monitoring the expenditure patterns and delivery patterns, particularly whether cities would meet targets.

Discussion
Mr E Sogoni asked what exactly they were subsidising. He did not think that the new approach to bus subsidies was necessarily a final solution. They needed to clearly state whether they were subsidising the bus operation or the people using the buses. There were also safety aspects such as the overloading of buses that needed to be monitored somehow. More debate was necessary.

The Chairperson asked how overspending on the bus subsidies would be dealt with. He asked if there was a plan for this.

Mr Kenneth Brown, National Treasury Acting Deputy Director: Inter-Governmental Relations, felt that there was a problem in replying on this issue with the limited information at his disposal. He was only brought in because this was a conditional grant and was concerned that he may mislead the Committee. He would take this particular question to the relevant officials at the National Treasury. The response could be provided in writing. He also asked for support from the DoT to provide relevant information.

The DG responded that the DoT was called by the Portfolio Committee on Transport to report on this matter. They could provide the Committee with the comprehensive presentation they had made to the Portfolio Committee. This contained all the detail of what the DoT had requested and what had actually been given, showing how the deficit in funding the bus subsidies developed since 2005/6. People got packed like sardines in the buses because the DoT had been unable to respond to the increased demand. Bus operators cut corners leading to deterioration of the buses, because funding is insufficient. They also cut corners on the type of contracts they entered into – preferring the very problematic, ticket sales driven interim contracts. By definition, this meant subsidisation of the person, rather than the operator. The challenge they presented was means of verification, monitoring and large administrative implications. Interim contracts were highly risky. A decline in bus services in general had been as a result of underfunding of this area. DORA helped them to put a rigid framework around the bus subsidy, providing controls and preventing system leakages. This had to be backed up very quickly by increased allocations to match demand. DORA could not help provide bus services to all the people who needed them.

The Chairperson responded that a further challenge for the country was the bakkies used to transport people in the rural areas. Some of these people would not reach home alive.

Mr Brown thought the point made by the DG was accurate. The problem, however, was how to proceed with limited resources. The Department of Housing reported that the backlog now stood at R 120 billion and including the Municipal Infrastructure Grant, this amount was raised to approximately R 200 billion. He asked how they would find a balance between providing settlements for people and other priorities, like transport. The big issue was how the urban settlements developed. There was a link between the two. If the settlements continue to grow, requests from the DoT would continue because settlements were far away from people’s places of work. Government must think of how to efficiently structure human settlements to minimise costs. Additionally, he did not think they should be too harsh in the current assessment as the grants flowing into public transport now were increasing. They would have to debate the issue of proper integration and also look at where rural areas fitted into the strategy of financing public transport in South Africa. He felt that simple matters of efficiency needed to be addressed and that the current economic conditions would force that kind of efficiency.

The Chairperson asked the DoT and National Treasury to resolve the bus subsidy issues raised to assist the incoming Portfolio Committee to deal with the comprehensive report to which the DG had referred. The problem was that the funding gap would always remain and they had to deal with that deficit. There were departments who continually underspent.

Mr Sogoni responded that he appreciated the approach proposed by the Chairperson, but he feared that if they examined what happened from 2005 to date, they would be opening up government to more problems. He would prefer it if they said that they had recognised the problem, had learnt from mistakes made and would work on what they should do moving forward.

The Chairperson responded that there was the phenomenon of overspending. The one option in this event was to write off the overspending. The other option was to pay to close the funding gap. They could not have a situation where they recognise it. It would simply remain a problem and through discussion, it could be resolved between the two departments and government. Government had to be involved because the provision of public transport was also the responsibility of the wider government. They needed to reprioritise to address this problem.

Mr Dan Pretorius, DoT Chief Financial Officer, elaborated on a way forward. The problem was caused by the interim contracts. The risky interim contracts took up 66% of the subsidy and they ran from month to month. The DoT could have cancelled the contract, but the consequences would have been very severe. Since the court cases, National Treasury had agreed to float the funds to the DoT, but could not provide them with the appropriation. National Treasury also indicated that it was too late for a special adjustment.

They would pay February amounts in March and the March amounts in April.  Those amounts less whatever the DoT could pay, would constitute unauthorised expenditure. National Treasury would report that to Parliament and make recommendations on how it should be dealt with. If Parliament approved the unauthorised expenditure with funding, the DoT would be covered. If it was approved without funding, the total R 1,3 billion would have to be written off against the next financial year budget. That money would have to be taken from elsewhere and the only un-earmarked allocations that were sufficiently large were those to roads and rail.

The Chairperson responded that it did look like it could be resolved.

The DG responded that this would be a straightforward treatment of the challenge that would bring the DoT before SCOPA again. The problem would remain. The MTEF allocation for 2010/11 would have to include the real subsidy figures, the deficit in the bus subsidies and the predicted growth in future allocations. It could be solved if that formula was followed for the future allocation.

The Chairperson responded that they should engage and find each other on those three elements.

Mr Brown thought it a good idea to move right up to the point where the expenditure was authorised and if it was authorised without funding, these points will be put on the agenda.
This would have to be discussed on an ongoing basis.

Mr Sogoni pointed out that the presentation stated: “this subsidy supplements”. He had seen this wording before in the hearings and asked exactly what was being supplemented. If the expectation was that the provinces should provided a portion, it should be borne in mind that the provinces did not have sufficient funds.

The Chairperson responded that this had been raised in discussions on the equitable share. This was another discussion and related to the phenomenon of provinces not budgeting their equitable share properly.

Mr Sogoni responded that his understanding was that the budgets of the provinces never included subsidies. They have always been a national responsibility and this was why provinces now stated that they did not have the money to supplement.

Mr Brown responded that the key question was who was responsible for this function. If this was a provincial function, then surely, the provinces should reprioritise to support this function. The budgets of the Premier’s Office and Legislatures of provinces were growing significantly. This was the reprioritisation was referring to. This money would have to be reprioritised.

The DG responded that there were provincial allocations that related to provision of public transport. However the amount allocated via the national department was, by far, the largest source of funding. There were so many challenges. The DoT had no influence over the prioritisation of the provincial equitable share used for supplementation. Generally, the provincial component would always be reduced because of the national funding, particularly in the face of other priorities. The certainty provided by redefining the bus subsidy according to DORA would compel provinces to confirm their amounts which would be supplemented by the national department. Gauteng was able to supplement and provided service to North West and Mpumalanga. The Eastern Cape had big issues around bus services. The re-engineering of those arrangements was critical to get most people on tendered contracts in the new system.
There would always be a shortfall and this was something we had to recognise.

The Chairperson responded that that incoming president would have a big report on this budget review.  This would also relate to the budgets of municipalities and provinces.

Mr Sogoni asked if it was correct that the Road Accident Fund (RAF) was meant to generate its own resources, because there was no allocation for 2009/10. He pointed out that this was one agency that regularly requested funds.

The DG responded that there were two elements to the RAF. Slide 10 showed normal allocations to the RAF. The capital amount of R 2, 5 billion on slide 5 for 2008/9 was an emergency allocation to mitigate a liquidity crisis. The amount of R 13, 3 million on slide 10 was to help supplement operational activities that would help the RAF to operate efficiently. This was also to address some policy issues. One of the things that the new policy entailed was that lawyers should not be used any longer to process claims. RAF desks would be established at hospitals to facilitate direct applications to the RAF. South Africa’s legal system has used the RAF as a cash cow for some time and had repeatedly taken the DoT to court to prevent the restructuring of the RAF. This restructuring was aimed at delivering the services of the RAF directly to the people with no lawyer in between. The R 13, 3 million would be used to achieve this restructuring, to increase efficiency and avoid any future emergency payments. The RAF component of the fuel levy increase would also provide improved liquidity.

Department of Public Works (DPW)
Ms Cathy Motsisi, Department of Public Works (DPW) Chief Financial Officer: Expanded Public Works Programme, discussed the Expanded Public Works Programme Phase 2 (EPWP 2). This was a new incentive grant included in the Division of Revenue Bill.

Mr Ismail Akhalwaya, DPW Chief Director: Expanded Public Works Programme, stated that the first phase of the EPWP had reached its target of one million jobs ahead of schedule. They had evidence that the programme was working but measured against the scale of unemployment in South Africa, it was not enough.       

The EPWP 2 was designed specifically to increase the number of people who benefitted. R 4, 2 billion was approved to scale up EPWP. This was not a planning based allocation; rather, it was a performance based allocation. Municipalities and provinces could access this incentive if they met a minimum eligibility threshold, such as minimum employment creation targets based on their existing budgets. A change in EPWP 2 is that there would be political endorsement of targets ahead of implementation in provinces and municipalities responsibilities.

The main difference between EPWP and EPWP 2 was the introduction of the Full Time Equivalent (FTE). This was the measure they would use to measure targets.

The Department had been criticised on the basis that there was no way to determine the length of work opportunities. Using a normal working year as a yardstick – 230 working days per year (excluding weekends, public holidays) – they could determine the equivalency of any work opportunity. A full working year of 230 days would be 1 FTE, therefore, a work opportunity lasting 100 days translates into 43% of an FTE (not a full working year, therefore, not a full FTE). Any length of job opportunity (measured in working days) could be calculated to determine its equivalency.

The EPWP 2 was set to show a fourfold increase over its predecessor and was meant to enable government to act as an employer of last resort as part of the Anti-Poverty Strategy. Beside EPWP 2, government had a range of programmes to provide employment to those willing and able to work, but unable to find work.

The critical success factors were discussed. The key components of the EPWP 2 were explained under the sections: targets and accountability across government, the EPWP fiscal incentive, the non-state sector and technical support to spheres, sectors and implementing bodies. The EPWP 2 fiscal incentives to provinces allocations were presented according to 2007/8 performance targets for the province, actual work opportunities reported by the province and allocations arising from these figures.

The baseline targets were determined by the Department of Public Works (DPW) and provinces would get the incentives if they reached the targets.

The new targets were set according to previous performance. Performing provinces (reaching previous targets) had their target set at a 10% increase in the amount of work opportunities created in the previous year. Provinces who had failed to reach targets were given a 20% increase in the amount of work opportunities created in the previous year, as a target.

They had tried to respond to criticism that they had concentrated on the metros by isolating the rural municipalities in the Eastern Cape as an example of municipal allocations. The EPWP 2 incentive was based on paying all public bodies that created work above a minimum threshold, for the EPWP target group, an incentive of R 50 per day for every day of work created. A total of R 4, 1 billion had been allocated over the Medium Term Expenditure Framework (MTEF) to provinces, municipalities, the non-state sector, provision for capacity and the total cost to the intermediary. Eligible public bodies would have to enter into an agreement with the DPW. The basis for measuring EPWP performance was discussed, as were institutional arrangements and the way forward on the EPWP.

The devolution of the Property Rates Funds Grants, introduced in 2008/9 was meant to ensure that provinces take over responsibility of paying property rates and municipal charges on properties that were administered by national government on their behalf.  The devolution of the Property Rates Funds Grants was discussed according to its background, allocations to provincial treasuries, achievements and challenges.

Discussion
The Chairperson asked members to begin with questions on the devolution of the Property Rates Funds Grants.

Mr Sogoni referred to the last slide of the presentation. This also related to the outstanding amounts that National Treasury had not yet paid. In the Committee’s recent meeting with provinces, provinces had complained that even though amounts had been gazetted, National Treasury had not transferred the funds to them. National Treasury had to settle these outstanding balances. The provinces could only pay the municipalities if they received the allocation from the National Treasury.

Mr Z Kolweni (ANC, North West) was pleased that the asset register situation had improved as the list of properties was verified. The incoming Committee would have to monitor the provinces on this. He was also pleased the long standing problem of arrears was being addressed.

Mr Sogoni asked what the devolution of the property rates was intended for.

Mr Sogoni referred to the achievements and asked if the arrears had been cleared yet or not.

The Chairperson asked if the R 667 million of the R 889 million, reported as transferred had been spent or if it was still in a bank account of provinces.

The Chairperson referred to discussions with the provincial Public Works departments. North West province stated that they were given R 58 million. Of that amount, R 30 million was a single allocation to Mafikeng. The province did not know how to deal with the remaining municipalities and were concerned about paying over half the allocation to a single municipality. The allocations to other provinces were similarly problematic.

Ms Motsisi responded that this was based on the information the DPW had had in 2006/7. They had devolved the rates in accordance with the rates they were paying. The provinces would have to carry anything above that. There was an understanding that provinces were supposed to provide for any increases in rates. She was not aware of the Mafikeng case and the DPW could respond to this in writing with the details.

Mr Brown replied that these were properties, formally belonging to the former House of Representatives, House of Delegates and House of Assembly of the former Bophutatswana, now in the Mafikeng municipal area. This was the reason for the higher rates in Mafikeng. When the devolution was set to take place the National Treasury and provincial treasuries had noted the potential for another unfunded mandate. They asked the DPW to cost it. The conditional grant would then be based on that costing, to enable them to see the extent to which it should be funded.

The money that was transferred was shown here and of the total allocation, only 51% had been spent by the end of January 2009. This was a concern. The arrears issue should have been resolved long ago. Given the underspending, he asked why that money could not be used to address the underspending.

The Chairperson pointed out that the remaining R 222 million (R 667 million of the R 889 million had already been transferred) appeared to be underspending. He asked if this was an accurate observation.

Mr Sogoni asked if they had monitoring and evaluation systems on the spending and allocation of the provincial transfers to municipalities. He wanted to know if they transferred the money and walked away.

Ms Motsisi responded that this was not a case of settling the arrears, rather it was a case of verifying information, so that whatever they paid for was credible. The process of validating this was problematic.

The Chairperson responded that the bottom line was that there had been underspending.

The Chairperson stated that the DPW should have dealt with the legacy debt and asked if the DPW had addressed this.

Ms Motsisi responded that they had agreed that the DPW should deal with the legacy debt. Those were funds that never came through from the National Treasury. There was subsequently verification and validation of information from municipalities to enable them to pay the debt. Some of the municipalities did not have systems to calculate the legacy debt. They were now looking at how to best to cap the figure. National Treasury had requested clear evidence to support the total figure to pay out those funds.

The Chairperson asked members to direct questions at the EPWP 2 presented.

Mr Sogoni stated that his understanding of the Minister’s speech was that people would now be able to work for longer terms. He asked for clarity on what Full Time Equivalent (FTE) meant.

Mr Stanley Henderson, DPW Acting Deputy Director-General: Expanded Public Works Programme, responded that one of the biggest criticisms of Phase 1 of EPWP was the variable duration of the work opportunities created and the reporting of the total figures. If a person worked for an entire year, that person would have worked for 230 days. One full year of employment was one full FTE. All the data collected on the length of work opportunities was consequentially divided by 230. Their target was to create at least 2 million FTEs. The 4, 5 million person days of work converted into FTEs should give them at least 2 million FTEs. The National Treasury had insisted on a more fair way of comparing different work opportunities.

The Chairperson asked the delegation to explain this step by step as the Committee did not understand.

Mr Akhalwaya responded that when they introduced the incentive, they wanted to compare the contributions of different entities. They needed to bring it down to a common measure. That common measure was the FTE. This was the number of person days worked divided by 230.

Mr Sogoni replied that the FTE slide was linked to halving unemployment by 2014. He did not understand the link. He asked the delegates to use simpler language.

Mr Akhalwaya responded that the only way government could create full time jobs was to employ more civil servants. The EPWP was a short term intervention which would probably be more important given the global economic crisis. This would give rise to large scale unemployment, more retrenchments and the EPWP was there to provide work opportunities to those willing and able to work but unable to find work. Many of the projects in the EPWP provided work opportunities of a shorter duration than what would conventionally be understood by full time employment. Their intention was to provide more opportunities so that people can move from project to project. Short, medium and long term jobs would co-exist within the EPWP. The only way to measure them on a yardstick would be to put equate them to FTE.

Ms Motsisi replied that they were not implying that one person would work a full FTE (fully employed for 230 days). More than 20 people on short term contracts could comprise one FTE.

Mr Akhalwaya stressed that they aimed for the average employment duration of 100 days per person per year. 100 days was quite substantial as it was almost a half a year of work. Increasing maintenance jobs and community works projects would ensure more sustainable predictable work opportunities.

Mr Kolweni asked if the political heads would take charge of the whole operation.

Mr Henderson responded that during phase 1, they had had some sound political buy-in and support. They had to strengthen this in phase 2 because holding political heads accountable was the only way to reach their stated targets.

Mr Akhalwaya added that they had learnt that the common ingredient in the successful municipalities was political and administrative buy-in. Phase 2 was aimed at getting that buy-in up front, from the Premiers and mayors.

The Chairperson felt that the figures were misleading and that the DPW and National Treasury needed to go back and do an audit for the whole period. The figures needed to be verified appropriately.

The Chairperson asked why they were incentivising municipalities to create jobs when municipalities had to create jobs to generate revenue.

The Chairperson asked what sectors they prioritised in provinces.

Mr Akhalwaya responded that they intended to roll-out in the infrastructure sector in year 1 and social and environmental sectors in year 2. They were working on the criteria and how they would qualify for the incentive. In provinces, this would mainly be through the public works and transport budgets.

The Chairperson referred to huge amounts of the infrastructure grants that went unused by the “messy” provincial public works departments. He was generally concerned about allocations to provinces.

The Chairperson noted a problem with the inclusion of the non-state sector, referring specifically to NGOs. He was of the opinion that NGOs could not really create jobs and it was difficult to get reports from NGOs. There was an inherent tension between NGOs and municipalities. The EPWP jobs in municipalities must be in line with the Integrated Development Plans (IDP). How would they deal with that in light of the inherent tension with NGOs? That money should not go to NGOs and should be transferred directly to municipalities where IDPs were in place. By the same token, provincial allocations were also problematic, as provincial involvement with IDPs was limited.

Mr Akhalwaya replied that there were two programmes here. The first was a community works project, piloted by the Presidency with donor funds. It was aimed at providing regular predictable employment to do things that are socially useful to the community (cutting grass, painting schools, security). The alignment with IDP was critically important.
The second programme was working with nationally based NGOs and providing them with incentives to employ more people to do the work they currently did.

The Chairperson asked the DPW to investigate the extent of alignment with IDP.

Mr Sogoni pointed out that only 45 out of 283 municipalities were targeted. He asked if the failure of some officials to perform in certain municipalities, should disadvantage the people living in those municipal areas. The officials in municipalities had nothing to lose. They received salaries and bonuses regardless of performance on the EPWP. The problem with this approach was that it did not serve the interests of ordinary people.

The Chairperson pointed out that the EPWP was also Municipal Infrastructure Grant (MIG)- dependent – it targeted those municipalities that received MIG. The municipalities not receiving MIG were the most rural and the most poor. He suggested that National Treasury and the DPW should look at a framework to compensate poor municipalities. There were smaller municipalities that had the potential to create jobs through the EPWP incentive. This incentive should ideally target the rural areas. The metros did not need to be incentivised. They also needed to do this in a way that was sustainable.

The Chairperson referred to a report of the Auditor-General indicating that there were 129 low capacity municipalities. The intentions would be better served if they look at those 129 municipalities. They could not compare these with the high capacity metros. The DPW should go back and look at the framework with the National Treasury and the Department of Provincial and Local Government (DPLG) in the context of the 129 low capacity municipalities. This was an opportunity to reach out to the poorest of municipalities.

Mr Akhalwaya responded that the incentive aimed to change behaviour across different municipalities. Every municipality had a budget and made a conscious choice to implement projects in a capital intensive or labour intensive manner. The labour intensive approach held more benefit as more people could be employed. The incentive aimed to change the way municipalities planned their projects and how they implemented them in labour intensive manner.

Mr Brown responded that they should perhaps forget about the metros for the next year. The nature of their budgets provided them with a head start. In the end the rural development which they wanted to stimulate, may be left behind. They might start with the more rural municipalities and roll out gradually to others. He thought this was possible and they should work out the detail.

The Chairperson stated that there were rural municipalities that tried hard to improve and they should not be disadvantaged when assistance could be provided to create some revenue.

Ms Motsisi replied that the DPW understood and agreed to engage as suggested. They understood the Committee wanted to see a focus on low capacity municipalities.
She referred to the roll-out plan schedule for April 2009 and asked if this was a directive to halt the current process and revisit the framework.

The Chairperson responded that they should get involved with rural municipalities immediately. As they proceed, they should find ways of enriching low capacity municipalities and focus less on metros.

Mr Henderson responded that they had noted the comments made. He found the comments on the rural-urban bias useful and would explore a more rural slant further.

The Chairperson stated that he looked forward to a report of the engagement.

Mr Sogoni asked if the Committee would approve the Division of Revenue Bill as it was and if the departments would return to report.

The Chairperson responded that they must engage, as frameworks needed to talk to problems on the ground.

The meeting was adjourned.