ATC110406: Report on 2011 Division of Revenue Bill [B4-2011] (reprint)

NCOP Appropriations

Report of the Select Committee on Appropriations on the 2011 Division of Revenue Bill [B4-2011] (reprint), dated 06 April 2011


The Select Committee on Appropriations, having considered the Division of Revenue Bill [B4 – 2011 (reprint)], reports as follows:


1. Introduction and background

In terms of Section 4(4) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (No. 9 of 2009) (the Money Bills Act), a committee on appropriations has the power and functions conferred to it by the Constitution, legislation, the standing rules or a resolution of a House, including considering and reporting on -

  • spending issues;
  • amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriations Bills and the Adjustment Appropriations Bill;
  • recommendations of the Financial and Fiscal Commission, including those referred to in the Intergovernmental Fiscal Relations Act, 1997 (No. 97 of 1997);
  • reports on actual expenditure published by the National Treasury; and
  • any other related matter set out in the Money Bills Act.


According to section 7(3) of the Money Bills Act and section 76(4) of the Constitution, the Minister of Finance must table the Division of Revenue Bill in the National Assembly and thereafter it must be sent to the National Council of Provinces. In accordance with these sections, the Minister of Finance (the Minister), Mr. Pravin Gordhan, tabled the 2011 Division of Revenue Bill (the Bill) in the National Assembly on 23 February 2011. On 10 March 2011, the Bill was transmitted to the National Council of Provinces and referred to the Committee.


 The purpose of the Bill is to provide for the following:

  • the equitable division of revenue raised nationally among the national, provincial and local spheres of government for the 2011/12 financial year;
  • the determination of each province’s equitable share of the provincial share of that revenue; and
  • any other allocations to provinces, local government or municipalities from the national government’s share of that revenue, and any conditions on which those allocations may be made.


Following a briefing by National Treasury, the Committee held public hearings on 22 and 23 March 2011 in line with section 9(5)(b) of the Money Bills Act. The Committee received written and/or oral submissions from the following departments, stakeholders and interested parties: the Department of Health, the Department of Human Settlements, the Department of Public Works, the South African Local Government Association, the Financial and Fiscal Commission, the Cape Bar Council, the uMtshezi Local Municipality and Mr Paul Theron.


This report reflects the main themes emerging from the engagement with the afore-mentioned national departments and stakeholders including National Treasury. This report is in terms of section 9(2) of the Money Bills Act.


The 2011 National Annual Budget (the Budget) sets out a financial framework for addressing job creation challenges, reducing poverty, building infrastructure and expanding the economy of the country. The Budget further addresses government’s medium term (three-year) spending priorities. The implications are that the Budget provides an indication of government’s assumptions and intentions, which should improve both planning and budgeting within line departments as well as overall budget co-ordination, and contribute to the quality of engagement with the budget by civil society and legislatures. This anticipated quality of engagement is expected to strengthen oversight and budgetary efficiency and effectiveness.


2. The 2011 Division of Revenue Bill

The 2011 Division of Revenue Bill was tabled together with the response of the Minister of Finance to the recommendations made by the Committee in the reports on the 2010 budget review and the 2010 Medium Term Budget Policy Statement. National Treasury reported that in keeping with the provisions of the Constitution, monies appropriated from the National Revenue Fund are to be shared, as per section 214 (1) of the Constitution, between national government, provinces and municipalities through the 2011 Division of Revenue.


The Medium Term Expenditure Framework (MTEF) provides for a total of R808.3 billion to be allocated in the 2011/12 financial year, R865.9 billion in the 2012/13 financial year and R925.6 billion in the 2013/14 financial year. The allocation for the 2011/12 financial year excludes a contingency reserve of R38.9 billion for the MTEF period. However, the contingency reserve for the 2011/12 financial year is R4.1 billion. Moreover, provision has been made for debt-service costs that will amount to R77 billion for the year 2012, rising to R104 billion in the 2013/14 financial year. The aggregate expenditure over the next three years includes R94.1 billion in additional non-interest allocations over the baseline projections of the 2010 budget. Of these additional allocations, national government receives R48.8 billion, provinces R40.2 billion and local government R5.1 billion.


2.1 Conditional grants to provinces

With respect to conditional grants for the 2011/12 financial year, provinces receive R69.4 billion, excluding an additional indirect transfer of R700 million for the School Infrastructure Backlogs Grant.


The 2011 Division of Revenue Bill has effected several changes to the conditional grant framework for provinces and municipalities. These changes are as follows:

  • the Infrastructure Grant to Provinces. In order to align planning and implementation with sector needs, and to reduce persistent backlogs, funds for this grant will now be transferred through three conditional grants - the Health Infrastructure Grant, the Education Infrastructure Grant and theProvincial Roads Maintenance Grant - on the votes of the departments of Health, Basic Education and Transport. These departments will work closely with Treasury to strengthen planning and organisational capacity at national and provincial level;
  • a new conditional grant, the School Infrastructure Backlogs Grant, is introduced for eradication of inappropriate school infrastructure; and provision of water, sanitation and electricity to schools. The programme will be completed over three years, after which the grant will be discontinued;
  • at the local government level, the merging of the Municipal Infrastructure Grant for cities and a portion of the Human Settlements Development Grant has resulted in the introduction of the Urban Settlements Development Grant.  This is part of government’s response to the differential operational and funding needs of large cities, small towns and rural areas. This merger will also allow the eight metropolitan municipalities to take a more integrated approach to upgrading urban informal settlements; and
  • in addition, the Provincial Disaster Grant and the Local Government Disaster Grant have been introduced under the National Disaster Management Centre to allow provinces and municipalities to respond more rapidly to disasters.


2.2 Conditional grants to local government

Conditional grants to local government, which aim to eradicate backlogs and build institutional financial capacity, have been revised. The total value of the conditional grants directly transferred to local government, including the water operating subsidy, increases from R27.5 billion in the 2011/12 financial year, to R30.4 billion in 2012/13 and R32.7 billion in the 2013/14 financial year.


Conditional grant allocations to local government are being reconfigured to differentiate between the funding of urban and rural municipalities. The most significant change that the Bill introduces is the creation of a new Urban Settlements Development Grant for metropolitan municipalities to fund the improvement of human settlements. Metropolitan municipalities will no longer receive allocations through the Municipal Infrastructure Grant.


3. Submission by Financial and Fiscal Commission

In compliance with section 214 (2) of the Constitution, section 9 of the Intergovernmental Governmental Fiscal Relations Act No. 97 of 1997 (IGFR) and section 9 (7) (a) of the Money Bill Amendment Procedures and Related Matters Act No 9 of 2009, the Committee is required to consult with the Financial and Fiscal Commission to ensure that all recommendations made by the Commission are being considered before the Division of Revenue Bill is passed.  


The Financial and Fiscal Commission (FFC) generally welcomed the 2011 Division of Revenue Bill but emphasised the following:

  • Soft targets in health and education budgets should be protected;
  • Improvements are needed in quality of service and efficient management;
  • Concern was expressed about the overspending on health and education in the provincial budgets;
  • Government’s decision to directly target the infrastructure backlogs and set time-frames for the process was welcomed, and was in line with their recommendations made in 2002;
  • The continued strengthening and increased taxation powers afforded to municipalities were supported, but they cautioned against a possible situation where municipalities could impose taxes unconstitutionally; and
  • They cautioned against the diversion of resources away from priorities, which may not lead to better output.


4. Submissions by National departments

As per the government’s major budget priorities over the medium term, the Committee invited national departments that would play a critical role in ensuring that these priorities are realised.    


4.1 The Department of Health

The National Department of Health (the DoH) submitted that during the Medium Term Framework budget process it requested additional funding of R19.9 billion, for both national and provincial departments for the three year period. However, it was only allocated R18.0 billion. 


There was an increase in the allocation of conditional grants to provinces. This increase was attributable to the increased allocations for the Comprehensive HIV and AIDS Grant, and the National Tertiary Services Grant. The DoH reported that three Schedule 4 grants would be allocated to provinces to supplement the functions funded from provincial budgets. These are the Health Professional Training and Development Grant and the National Tertiary Services Grant (both of which are nationally assigned functions to the provinces); the Health Infrastructure Grant and the Forensic Pathology Grant. The Forensic Pathology Grant would be phased out in the 2012/13 financial year and would thereafter be included in the Provincial Equitable Share allocations.


The DoH further reported that transfer payments would not be withheld based on non-performance or non-compliance. However, the new Division of Revenue Bill allows that 5 per cent of both the Health Professional Training and Development Grant and the National Tertiary Services Grant allocation can be withheld while interventions are put in place.


4.2 The Department of Human Settlements

The Department of Human Settlements (the DoHS) reported that for the 2011/12 financial year it has been allocated a budget of R22.6 billion.


With regard to conditional grants, the DoHS submitted that it has three grants (Schedules 4, 5, and 7 grants), namely, the Urban Settlements Development Grant, the Human Settlements Development Grant, and the Rural Households Infrastructure Grant. 


The Urban Settlements Development Grant is a newly established grant comprising a mix of funds from the Human Settlements Development Grant, the Department of Cooperative Governance and others. This grant is meant for responding to the urban built environment development needs within metropolitan municipalities. It also allows for the acquisition of well-located land. The DoHS further reported that the funds related to this grant must be used as a supplementary fund to existing municipal and provincial funds for the eradication of poverty and inequality.


4.3 The Department of Public Works

The budget allocation for the 2011/12 financial year shows a 3.3 per cent increase from the previous financial year allocation and it is inadequate as demonstrated by the increased spending as at the end of February 2011.The submission of the Department of Public Works (the DoPW) focused on three grants, namely: the Devolution of Property Rates Grant, the Expanded Public Works Programme Incentive Grant to Provinces and the Expanded Public Works Programme Incentives Grant to Municipalities. The DoPW presented as follows:


4.3.1 The Devolution of Property Rates Grant

An amount of R1.8 billion has been allocated for the Devolution of Property Rates Grant for facilitating the transfer of property rates expenditure responsibility to provinces. This exercise, although helpful in ensuring that the municipalities increase their revenue, does not take into consideration the availability of funds at national and provincial departments of Public Works.


4.3.2          Expanded Public Works Programme (EPWP) Incentive Grant to Provinces

An amount of R267 269 000 has been allocated for the Expanded Public Works Programme Incentive Grant for provinces with a view to incentivise provincial departments to increase job creation efforts in infrastructure, environment and culture programmes through the use of labour intensive methods and the expansion of job creation in line with the EPWP guidelines.  However, it is important to note that the allocation for this grant decreased by R63 735 000 from the R331 004 000 allocated in the 2010/11 financial year. This is noted with great concern since this programme intends to promote job creation, particularly labour intensive methods and full time equivalent jobs.


4.3.3 Expanded Public Works Programme Incentives Grant for municipalities

An amount of R679 583 000 has been allocated for the EPWP Incentive Grant for municipalities in order to incentivise municipalities to increase job creation efforts in infrastructure, environment and cultural programmes through the use of labour intensive methods and expansion of job creation in line with the EPWP guidelines. It is important to note that this grant has increased by R56 587 000 from the R622 996 000 allocated in the 2010/11 financial year.


The Committee welcomes the increase of this grant but is concerned about the low uptake by municipalities.  


5. Submission by South African Local Government Association

The South African Local Government Association (SALGA) submitted that it welcomed the additional funding to local government. However, SALGA argued that there should be a systematic review of baselines to ensure that revenue allocations to local government as a whole are congruent with its full range of developmental and service delivery responsibilities and its vertical share. This should be coupled with efforts to build the capacity of weaker municipalities to spend efficiently and effectively. Allocations to local government are not based on proper studies into the true long term costs of municipal service delivery, which can vary substantially across municipalities in different service delivery contexts.


SALGA further reported that the growth of 8.2 per cent per annum in the Local Government Equitable Share (LGES) over the next three years is less than the increase of 9.3 per cent in Infrastructure transfers. SALGA explained that since LGES is utilised for operating and maintaining infrastructure through which basic services are provided to the poor, its slower growth implies more pressure on municipalities to collect revenue from the poor to provide for repairs and maintenance. Therefore, more technical support should be provided to rural municipalities for planning and execution of infrastructure projects.


5.1 Local government grants

On the Urban Settlements Development Grant, SALGA commented that it welcomed this grant to metropolitan municipalities and the additional funding for the Rural Transport Services and Infrastructure Grant; however noted with concern that the funding for the Rural Household Infrastructure Grant has been reduced due to poor spending. For example, the indicative funding for the 2011/12 financial year was shown as R350.0 million in the 2010 Bill, however the indicative funding for the 2011/12 financial year is now shown as R231.5 in the 2011 Bill.


With respect to reduced allocations and discontinued grants, SALGA reported that the Neighbourhood Development Partnership Grant allocations have been continuously reduced due to under-spending. A specific concern regarding this grant is that smaller municipalities are not provided support to access the grant. Concerns were also raised with respect to the reduction in the allocation for the Municipal Systems Improvement Grant. The extended allocation of the Water Services Operating Subsidy Grant which was scheduled to end in 2010/11 is welcomed. Regarding the Electricity Demand-Side Management (EDSM) grant SALGA proposed that this grant should be continued beyond the 2011/12 financial year.


5.2 Changes proposed to conditional grants allocations

Subsequent to the Committee’s public hearings requests were made directly to National Treasury by the National Department of Cooperative Governance, the National Department of Energy and Mr Philip van Ryneveld that or corrections be made on the conditional grants framework contained in the 2011 Division of Revenue Bill. Upon being made aware of this by National Treasury, the Committee resolved that the above mentioned stakeholders make submissions directly to the Committee. As a result, these subsequent hearings were conducted on 06 April 2011. The submissions related to the following conditional grants:

  • The Electricity Demand Side Management Grant re-allocation from Mutale Local Municipality (LIM342) to Musina Local Municipality (LIM341); re-allocation from the Sedibeng District Municipality (DC42) to the Emfuleni Local Municipality (GT421).
  • The Integrated National Electrification Programme Grant re-allocation from Mookgopong Local Municipality (LIM364) to Modimolle Local Municipality (LIM365).
  • Omission of NW397 from the Municipal Systems Improvement Grant (this new municipality has not been included in the allocation schedule).
  • Public Transport Infrastructure and Systems Grant (local government). The wording in the conditions to be corrected to make it clear that direct operational costs consist only of fuel, labour and vehicle maintenance; and to make provision for National Treasury to approve specific alternative arrangements regarding the ownership of vehicles purchased with this Grant.
  • Public Transport Operations Grant (provincial government) A condition to be included that requires provinces to take reasonable measures to assist with the transition in cases where public transport services are devolved to municipalities.


Mr Philip van Ryneveld submitted that the second and third conditions of Public Transport Infrastructure Systems Grant should read as follows:

·         From the start of operations, Integrated Rapid Public Transport Network (IRPTN) systems must recover all the direct operating costs of contractedvehicle (word inserted) operators from fare revenue, other local funding sources and, if applicable, from any Public Transport Operations Grant contributions.  These direct operational costs [include-be deleted] consist of [be included] fuel, labour and vehicle maintenance. City-wide networks must ultimately also recover the capital costs of vehicles.

·         If buses are brought with grant funds and are used by contracted operators, the

municipality must retain ownership unless National Treasury specifically approves alternative arrangement [inserted words]


 5.3 Response by National Treasury

National Treasury supported the proposed changes to the Electricity Demand Side Management Grant; the Integrated National Electrification Programme Grant; the Public Transport Infrastructure and Systems Grant and the Public Transport Operations Grant. However, they indicated that, in order for an allocation to be made to the new NW397 municipality, money would have to be taken away from other municipalities.   


6. Submission by the Umtshezi Local Municipality                                                                             

The Umtshezi Local Municipality (the Municipality) submitted that based on the municipal services that it provides to its population, its equitable share of R25.8 million is insufficient. This argument was motivated by a comparative study of the population statistics versus the equitable share of all municipalities that fall under the Uthukela District Municipality. The Umtshezi Local Municipality reported that its total population is comprised of 64 418 people (i.e.11. per cent) of the Uthukela District Municipality’s total population of 714, 009. The second smallest municipality, the Indaka LocalMunicipality, services a population of 101, 557 people (i.e.14.2 per cent of the district’s population) but it has been allocated an equitable share of R53.0 million. The Municipality questioned why the difference of 2.4 per cent share of the population is equivalent to an equitable share allocation of an additional R27.2 million.


6.1 Response by National Treasury                                                                                                     

According to the 2007 Community Survey,. the Umtshezi Local Municipality’s population has grown by 40 per cent since 2001, a much higher rate than the national average of 8 per cent. However, the allocation to a municipality is not determined by the size of their population but by the number of poor households with and without access to services. While the number of poor households in the Umtshezi Local Municipality has declined at a lower rate than the national average (-11 per cent versus -18 per cent), progress in expanding service delivery has been slower in the Umtshezi Local Municipalitythan in the country as a whole. The number of poor households with access to services is the most significant determinant of equitable share allocations and the Umtshezi Local Municipality’s progress in this area has been slower than progress in other municipalities. This should provide an incentive to the municipality to increase access to services, poor households in particular.


7. Comments by Mr Paul Theron

Mr Paul Theron was the only member of the general public to make a submission to the Committee. He said the purpose of his comments was to inculcate job creation and skills development in the use of the Provincial Roads Maintenance Grant. He argued that this will further entrench Extended Public Works Programme principles. He also proposed that similar amendments should be made in respect of the frameworks for the Education Infrastructure Grant, the Health Infrastructure Grant, Urban Settlements Development Grant and the Human Settlements Development Grant.


7.1 Committee response

The Committee responded that job creation and skills development are some of the key government priorities and therefore the Bill as a whole has an implicit bias towards furthering the priorities of job creation and skills development.    


8. Cape Bar Council

The Cape Bar Council requested clarity on the following clauses of the Bill which read as follows:

  • Clause 11(2)(a)(i): It is not clear what is meant in  the context by the words “….exclusively appropriates…”; and
  • Clause 25(1)(a): Although the wording in this regard has probably been deliberately chosen – particularly given the safety net and “policing” measures provided by clauses 25(1)(b) and (c) – it is suggested that the words “negatively affected” in clause 25(1)(a) could be seen as bordering on the unacceptably vague. This in turn leaves somewhat in the air the nature and content of the “agreement” to be entered into in such circumstances by the “affected municipalities” as mentioned earlier in the provision.


8.1 Response to the Cape Bar Council’s submission

The use of the term "exclusively appropriates" in clause 11(2)(a)(i) of the Bill refers to funds which are indicated in the Appropriation Bill as only being able to be used for the specific and exclusive purpose that is indicated in the Appropriation Bill.  In terms of section 43(4) of the PFMA, the funds cannot be shifted via a virement to be utilised for any other purpose.


In respect to clause 25(1)(a), the use of the term "negatively affected" is deliberate, as it is intended to convey, that the implications of the shifting of municipal boundaries must be addressed comprehensively in the agreement described, to ensure that absolutely no negative effects result for the affected municipalities in terms of the flows of funding and the provision of services.


9. Negotiating Mandates from Provinces

The following provinces submitted negotiating mandates in support of the Bill. Some raised issues for consideration as follows:


9.1 Eastern Cape

The Province of Eastern Cape supported the Bill, and raised the following issues for consideration:

  • The revenue raising component of the equitable share formulae must be reviewed to address the matter of municipalities that are struggling to generate their own revenue;
  • The equitable share allocations are based on numbers and do not take into account the uniqueness and geographical spread of the province and the different municipalities;
  • The equitable share allocations must also provide an allocation that deals specifically with the old infrastructure backlog due to the decaying infrastructure around the Province; and
  •  Indicative figures of the Municipal Infrastructure Grant (MIG) allocations for the outer years which appeared on the 2010/11 Division of Revenue (DOR) Bill for Cacadu district municipality do not appear in the 2011/12 DOR Bill.


9.2 Free State

The Province of Free State supported the Bill and proposed the following amendment to the Bill:

  • In Clause 16(3), the Province proposes to extend the minimum notice period of 7 days to 14 days in order to provide sufficient time to the receiving officer to provide reasons why an allocation should not be withheld.


9.3 Gauteng

The Province of Gauteng supported the Bill, and recommended the following:

  • the Provincial Equitable Share allocations should be re-examined, taking into account the issue of migration faced by the Province.


9.4 KwaZulu-Natal

The Province of Kwazulu-Natal supported the Bill.


9.5 Limpopo

The Province of Limpopo supported the Bill.


9.6 Mpumalanga

The Province of Mpumalanga supported the Bill, and emphasised the following:

  • The NCOP is urged, in future, to provide Legislatures enough time to consider Section 74 or 76 Bills, so as to ensure sufficient public participation. This timeframe is especially important in terms of the Division of Revenue Bill;
  • When the general budget allocation to health is determined, all relevant conditions and data should be taken into account to ensure that the budget adheres to the burden of disease;
  • The 15 per cent allocation in the Municipal Infrastructure Grant (MIG) to develop sport facilities is not applied consistently by municipalities due to the competing needs that exist in communities. There should either be specific conditions stipulated and included in the MIG to ring fence the allocation; or the 15 per cent should be taken out of the MIG and be introduced as a separate conditional grant;
  •  Although the addition of Schedule 9 that caters for disasters declared at national level is welcomed, the definition should be broadened to provide for minor disasters that occur on a smaller scale and require intervention by provincial government or municipalities; and
  • It is imperative that all applicable and relevant factors be taken into consideration when allocating funding for matters relating to HIV and Aids so as to ensure that the allocated budget can provide adequately for the burden of diseases.


9.7 North West

The Province of North West supported the Bill and made the following observations:

  • Rural areas are not given enough consideration when funds are allocated;
  • Certain municipalities are allocated funds yet there is no development, including youth development projects, to empower them; and
  • Some municipalities fail to prioritise important projects like water, electricity and the upgrading roads and bridges. 


9.8 Northern Cape

The Province of Northern Cape supported the Bill and raised the following concerns:

  • With the re-demarcation and incorporation of the Kgalagadi District Municipality (the John Taole Gaitsewe District Municipality) into the Province ofNorthern Cape, the conditional grants were never adjusted to accommodate the transitional arrangements. This continues to put pressure on the provincial fiscus;
  • The cutting of the equitable share by 0.3 per cent could adversely affect service delivery; and
  • The withholding of funds for non-performing infrastructure projects must be done in proper consultation with provincial governments. The CIDB principles should be reviewed to accommodate the unique conditions present in the Northern Cape Province.


9.9 Western Cape

The Province of Western Cape supported the Bill.


9.10 Response by National Treasury

With regard to the issues raised by provinces, National Treasury responded as follows:

  • The revenue raising capacity component was adjusted in 2011, and will further be reviewed in future.  and should be viewed together with the other components. The intention of this component is to direct more funds towards municipalities that have limited potential to raise own revenue;
  • The Provincial Equitable Share formula does take into account the uniqueness and geographical spread of provinces. Some components, like the institutional and poverty components, actually benefit the more sparsely populated provinces;
  • Decaying infrastructure is a result of poor asset management and support is being given to provinces to improve their capacity to deliver and maintain infrastructure;
  • The re-demarcation between district and local municipalities is dealt with by specific clauses in the Bill;
  • The health component of the Provincial Equitable Share (PES) formula has been completely reworked, addressing some of the concerns raised, including the burden of disease;
  •  The Provincial and Local Government Disaster Grant is subject to the requirements of the Disaster Management Act, which contains very specific definitions. The budget of provinces and municipalities must make provision for any disasters on a smaller scale;
  • A lot of the money going into rural areas is currently not being spent. Nevertheless, they do try to get more funds to the rural municipalities; and
  • The population data used in the Provincial Equitable Share formula is updated using annual mid-year population estimates.


10. Final Mandates

The following provinces submitted Final Mandates supporting the Bill: Eastern Cape, KwaZulu-Natal, Limpopo, Mpumalanga, North West, Northern Capeand Western Cape.


11. Findings

During deliberations and engagement with relevant stakeholders, the following findings were identified: 

11.1 The responsibility of budgeting for the development of sport facilities in schools was not clearly defined between the departments of Basic Education, Cooperative Governance and, Sports and Recreation.


11.2 There is an increase in the expenditure for personnel in some provincial departments of Health and Education without enhancement of the service delivery, particularly in the Eastern Cape and Limpopo provinces. Moreover, the stated 40 per cent of the wage bill in relation to 2010 wage agreements is a cause for concern due to the impact that it will have on the strategic plans of the various departments over the Medium Term Expenditure Framework (MTEF).


11.3 There is a lack of intervention by both provincial and national treasuries to address poor spending on conditional grants in provinces, in terms of section 17 of the Division of Revenue Bill.


11.4 The Expanded Public Works Programme Incentive Grant to Provinces has decreased by R63 735 000 from R331 004 000 to R267 269 000, which is concerning since this programme forms part of the job creation initiative. 


11.5 The existence of the Urban Settlements Development Grant appears to be counter-intuitive to government’s intention of uplifting rural provinces, as it implies a bias towards urban development at the expense of rural development.


11.6 The scholar transport policy has not yet been finalised. The administration of the scholar transport programme is a cause for concern in several provinces.


11.7 Municipalities have adopted different policies with respect to billing periods in relation to the Devolution of Property Rates Grant. Some bill on a monthly basis, others bill quarterly, half-yearly or yearly, which impacts on the spending performance of the Devolution of Property Rates Grant.


11.8 The Committee noted with concern that certain stakeholders had made submissions to National Treasury while the Bill was before the Committee and an opportunity had been given for written and oral submissions to be made to the Committee. The Committee did not agree with the interpretation of clause 14 (3) of the Bill by some departments and stakeholders. That is the submission for request directly to National Treasury to revise or amend the framework before the publication of the Gazette in term of sub-section (1) of the Bill. The Committee ruled that all submissions should be directed to Parliament while the Bill is still before the Committee. It is only after publication of the Gazette in terms of subsection 2 of the Bill that such requests should be directed to the National Treasury.


12. Recommendations


The Committee, having considered the Division of Revenue Bill [B4 – 2011 (Reprint)], reports the Bill and recommends that the House approves the Bill.


The Committee further recommends as follows:

12.1 The Departments of Cooperative Governance, Sport and Recreation, and Education should, within three months after the adoption of this report by the House, clarify the responsibility of budgeting for the development of sports facilities in schools. Furthermore, National Treasury should submit a report on schools whose sports facilities would be constructed through the allocation of the Public Municipal Service Infrastructure component (15 per cent of the Municipal Infrastructure Grant allocation) in the 2011/12 financial year.


12.2 The National Treasury should stipulate specific conditions or regulations within Municipal Infrastructure Grant that would ring-fence the 15 per cent allocation meant for development of sport facilities. Alternatively, the 15 per cent allocation should be taken out of the MIG and be introduced as a separate conditional grant.   


12.3 The Department of Transport and the Department of Basic Education should pay urgent attention to the clarification of the responsibility of scholar transport in order for this programme to be fully implemented in all provinces.


12.4 Municipalities should have a uniform billing system to avoid backlogs, especially with respect to accessing payments from the Devolution of Property Rates Grant. Moreover, the provinces should assist less capacitated municipalities to improve on property management and on their billing systems.


12.5 The Department of Cooperative Governance should locate funds within the Department’s own revenue to allocate to the new municipality NW397.


12.6 National Treasury should, within three months after the adoption of this report by the House, submit a detailed report to the Committee on the performance of all grants that are being phased out. 


12.7 National Treasury should, in future, ensure that Division of Revenue Bill consultation processes are followed properly. Furthermore, clause 14 of the bill should be strengthened to force departments and interested parties to table their submissions to the Committee once the bill has been tabled in Parliament. Thereafter, if there are necessary changes because of errors, National Treasury should table them before the Committee for consideration before they are gazetted.  For this reason clause 14(3) should in future be phrased as follows - The National Treasury may at any time in consultation with Parliament and after consultation with the affected institutions and/or at the written request of a transferring national officer, revise or amend a framework published in terms of subsection (1) or (2), to correct any error or omission.



12.8 National Treasury must effect the agreed correction to the Electricity Demand Side Management Grant; the Integrated National Electrification Programme Grant; the Public Transport Infrastructure and Systems Grant and the Public Transport Operations Grant ; and gazette them in terms of clause 14 of the Bill.




Report to be considered.




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