Financial and Fiscal Commission briefing on its Role

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Finance Standing Committee

24 June 2007
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Meeting report

FINANCE PORTFOLIO COMMITTEE [PLUS CHAIRPERSONS OF SEVENTEEN OTHER PARLIAMENTARY COMMITTEES]
25 June 2007
FINANCIAL AND FISCAL COMMISSION BRIEFING ON ITS ROLE

Chairpersons
: Mr N Nene (ANC)

Document handed out:
Financial Fiscal Commission Presentation
Financial Fiscal Commission Submission for the Division of Revenue 2008/09


Audio Recording of the Meeting Part1 & Part2

SUMMARY
Chairpersons from
parliamentary committees whose portfolios were relevant to the work and recommendations of the Financial Fiscal Commission met to discuss the latter’s role as an instrument of oversight as well as the recommendations it made on the equitable share formula (for the division of revenue amongst the provinces). The Commission presentation outlined its recommendations. These included areas such as the National School Nutrition Programme, the financing of road and transport infrastructure, the financing of housing delivery, the economic impact of the 2010 FIFA World Cup, and the performance of provincial grants. Discussion looked at the transport infrastructure legacy resulting from South Africa’s hosting of the FIFA World Cup, gender issues at local level, as well as the implementation of the National School Nutrition Programme.

MINUTES
Opening Remarks

The Chairperson of the Finance Portfolio Committee opened with the observation that not all the parliamentary committees had had the opportunity to meet with the FFC which was an organisation with many resources. He hoped that the meeting would be of mutual benefit to everyone present.

The Chairperson of the Finance Select Committee, Mr T Ralane (ANC Free State) added that the FFC performs an annual exercise where they advise the government on the equitable share. Government and provincial departments should look to the FFC for its recommendations on the equitable share formula, as they were well capacitated to make recommendations.


Mr G Doidge (House Chairperson) stated that the sitting was a joint initiative between the NA and the NCOP. Eighteen parliamentary committees had been invited to the sitting including Health, Housing, Social Development, Provincial and Local Government, Finance, Joint Budget, Joint Monitoring Committee on the Status of Women, Transport and Public Works. The invitations were guided by the fact that the Commission’s recommendations affect their portfolios. Parliament had identified 20 instruments or tools for oversight and the FFC was one of them. The joint sitting was significant in that Parliament had identified problems in the referral of instruments, such as the FFC, and it was hoping to find a better way of working with such institutions. It was hoped that there would be regular interactions between the FFC and Parliament.

FFC Presentation
The FFC was represented by Dr Bethuel Setai (Chairperson), Mr Jaya Josie (Deputy Chairperson), Mr Bongani Khumalo (Manager: Fiscal Policy Analysis) and Mr Conrad Van Gass (Manager: Budget Analysis). The presentation outlined the various recommendations made about the NSNP, financing of roads and transport infrastructure, financing of housing delivery, the economic impact of the 2010 Fifa World Cup, and the performance of provincial grants.

The FFC stated that while it was feasible to extend the NSNP from primary schools to secondary schools, provincial education departments would have to employ appropriately skilled personnel in order for it to be implemented on a fulltime basis. The FFC also recommended that all provinces have effective road management systems in place so that they could gather accurate data on road conditions. That information could then be used in the road spending priorities. It was suggested that the owners of capital would benefit more from the 2010 FIFA World Cup than the owners of labour would. According to estimates National Government would receive the bulk of the revenue generated by hosting the event.


Discussion
Mr J Cronin (ANC) felt that the FFC’s views on the 2010 FIFA World Cup legacy were off the mark. Cabinet had decided that an integrated public transport network in the host cities would be the event's key legacy. It seemed as though the FFC had not fully understood the issues that drove infrastructure development towards the 2010 World Cup. Government departments should focus on those issues so that they could become their key drivers.

Mr Ralane commented that the Member raised an interesting point. All Committees dealing with the 2010 World Cup related issues would meet in August for detailed discussion on the host cities and the envisaged 2010 legacy.

Mr Setai predicted that 2010 would be a very positive event for the country. The FFC had looked at whether the various 2010 initiatives would undermine the delivery of services, and had found that that would not be the case.

Mr J Cronin (ANC) stated that the FFC’s views on the 2010 legacy were missing the point. Cabinet had decided that the key legacy for the 2010 Fifa
World Cup was an integrated public transport network in the host cities. The FFC has not fully understood the issues stemming from the World Cup, and the relevant departments should focus on the issues and become the key responsible forces for the legacy.

Mr Ralane commented that Mr Cronin had raised an interesting point. All parliamentary committees that dealt with issues stemming from 2010
World Cup, would meet in August. At the meeting there would be a detailed discussion on the host cities and the legacy that 2010 would leave behind.

Mr Setai responded that 2010 was going to be a very positive event for the country. The FFC had looked at whether the various 2010 initiatives would undermine the delivery of services, and discovered that such a situation would not occur, and was satisfied with the findings.


Mr Doidge stated that the presentation should have been technical and detailed in nature, as oversight needs to happen rigorously. Clarity should also be provided on what would happen after a recommendation has been made.

Mr Josie noted that there was no intention in doing a detailed presentation on the technical report itself, as the reports are meant to support the parliamentary committee. Extensive research had gone into compiling the report and this had been made readily available.


Mr T Godi, (PAC) asked for further clarity on the six submissions that had been made and also how it came about that the scope of the recommendations were limited to the six submissions.

Mr Josie replied that the FFC presents recommendations every year hoping that the parliamentary committees would look at all aspects. The FFC used the Bill of Rights as its focus and the agenda for recommendations were set by the request of Parliament

Mr Bheki Nkosi (Finance Portfolio Committee Chairperson: Gauteng Legislature) stated that on the issue of the extension of the NSNP, one would be tempted to think that the FFC was indirectly calling for an extension of the child support grant. The whole issue that arises from such an extension was that the funds would come from the equitable share, and it may not be practical due to the geographical nature of provinces. With regard to the performance of provincial government, if one states that provinces stabilise their revenue levels, then clarity should be provided on how the stabilisation would be done without provinces going back to Treasury to ask for more money.

Mr Khumalo said that the extension of the NSNP would not necessarily mean an extension of the child support grant. The primary reason for the extension, related to the fact that there were instances where one would find school children from the same family who would usually go to the same school on an empty stomach. In terms of the financial impact and practicality of the extension, the key issue that arose was the resources that were utilised when the provinces implemented the programme.  Some provinces view the programme as an add-on that came from the National Department of Education. The educational budget should be looked at a holistic way, and one should accept the fact that at some stage the conditional grants would be phased into the equitable share.

Mr Van Gaas responded that in terms of the issues surrounding provincial government, the FFC had lost its programme manager, and was in the process of recruiting someone.  With regard to the statbilistaion of provincial budgets, it should be noted that stabilization would be possible in the provinces in that provinces had their own levies and had larger contingency funds.  What FFC found in their research was that most provincial governments gave secondary importance to their budgets for infrastructure and skills training.

Mr B Solo (ANC) stated that there needed to be greater intersectoral collaboration between departments in order to addressing the issues regarding comprehensive holistic welfare services. Social development usually found itself not receiving enough cooperation from other departments. He appreciated the fact that a forum has been created where all relevant committees deal with the FFC.

Mr Van Gaas responded that in terms of comprehensive welfare for social development, a lot of work had been done and extensive recommendations had been made.

Mr Setai said that with regard to the evaluation and monitoring in the provinces, some provinces would argue that the FFC should follow up on their recommendations. The FFC however would argue that it was not in their mandate to perform oversight.

Mr Khumalo added that an audit had been performed on various pieces of legislation, and how they related to welfare services and how they related to the provincial government. In the last set of recommendations an issue was raised on how social services should be catered for in the provincial equitable share. The FFC would be moving towards making concrete recommendations which would tackle the issues relating to welfare services.

Mr Godi said that there were areas of concerns that had been raised about the NSNP, and the FFC’s argument on the extension of the programme was very diplomatic.


Ms M Morutoa (ANC) said that she was concerned about the issue of gender in the provincial and local governments. The gender issues were not being considered the way they should be in local government; therefore there should be a gender budget that focused on the gender issues.

Mr Josie responded that the FFC has tried to incorporate the specific costs for delivering services to women and children in specific areas. It was hoped that in the new formula, some of the issues would be addressed. He noted that the FFC had not been called before the gender parliamentary committee in order to address the issues.

Ms J Masilo (ANC) [North West] stated that she welcomed a separate budget for textbooks, as it would assist the provinces in managing their finances better. With regard to monitoring, there should also be monitoring mechanisms on the delivery of the textbooks. With regard to no-fee schools, it should be noted that parents were removing their children from certain schools and taking them to no-fee schools, leaving some schools empty.

Mr Josie replied that the FFC would look into finding solutions to some of the issues raised.

Mr B Mkhaliphi, (ANC) [Mpumalanga] thanked the FFC for their comprehensive report, and he hoped that provinces that were experiencing issues with the Division of Revenue Act (DORA) were present. It should also be noted that the issues regarding the formula for determining the equitable share were well entrenched.

Mr Josie replied that the FFC was looking at the impact of internal and external migration on the equitable sharing of marginal revenue.

Mr Ralane stated that if the FFC intended engaging in the strategic review, they should hold back on the matter until Parliament had dealt with the matter.

Mr Solo stated that there were still problems in the nutrition programmes, especially in the Northern Cape. Documented information needed to be provided on the performance on the programme in the Northern Cape. With regard to learner support material, there had been a lot of different interpretations of the definition, and it had still not been made clear what local government was doing to address the matter.

Mr Godi said that he was still unclear on the issue of the World Cup legacy and the negative impacts that the Commission had identified.

Mr Josie replied that the comments made by the members had been noted, and some would be useful in the public hearings with the Transport Portfolio Committee. The FFC understood that there would be some risks involved in the management of the building of infrastructure and would try to avoid those risks if possible.

Mr Nkosi added that infrastructure provision is required to spark economic development. There needed to be an improvement of the infrastructure in most host cities.

The Chairperson stated that the inaugural engagement was very useful and that the engagement affected various portfolio committees. The FFC should from now on state which Portfolio Committees were affected by their recommendations, so that when the FFC engaged with the Portfolio Committee on Finance, these committees would be included and would be able to make an input.

The Meeting was adjourned.

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