ATC120606: Report Appropriation Bill [B3-2012] (National Assembly – Section 77), dated 6 June 2012

Standing Committee on Auditor General

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE APPROPRIATION BILL [B3-2012] (NATIONAL ASSEMBLY – SECTION 77), DATED 6 JUNE 2012

 

Having considered the Appropriation Bill [B3 – 2012], referred to in terms of Section 10(a) of the Money Bills Amendment Procedure and Related Matters Act No. 09 of 2009, the Standing Committee on Appropriations reports as follows:

 

1.       Introduction

 

Section 27(1) of the Public Finance Management Act No. 29 of 1999 (PFMA) requires that the Minister of Finance (the Minister) tables the annual budget for a financial year in the National Assembly before the start of that financial year or, in exceptional circumstances, on a date as soon as possible after the start of the financial year, as the Minister may determine. Section 26 of the PFMA requires Parliament and each provincial legislature to appropriate money for each financial year for the requirement of the State and the province, respectively.  In executing this mandate, the Standing Committee on Appropriations, herein after referred to as the Committee, was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009, herein referred to as the Act. In line with section 10(1)(a) of the Act and after the adoption of the Fiscal Framework, the Standing Committee on Appropriations has a responsibility to consider the Appropriation Bill, herein after referred to as the Bill, and report thereon to the National Assembly.  In terms of Sub-sections 10 (5) and 10 (6) of the Act, Parliamentary Committees may advise the Appropriations Committee on the appropriated funding. No formal submissions were received from Committees in terms of Sub-sections 10 (5) and 10 (6) of the Act. The Bill was referred to the Committee on 22 February 2012 for consideration and reporting.

 

The budget for the 2012/13 financial year was tabled by the Minister of Finance in the National Assembly with the Appropriation Bill (the Bill) on 22 February 2012. The Bill was tabled together with the Division of Revenue Bill, Estimates of National Expenditure (ENE), Budget Review and the Budget Speech. Given the fact that Committees on Finance and Appropriations have different mandates derived from the Act, the Appropriation Bill was therefore referred to the Standing Committee on Appropriations.

 

In the process of dealing with the Appropriations Bill, section 9(7) (a) of the Act requires the Committees on Appropriations of both Houses to consult with the Financial and Fiscal Commission (FFC). In addition, on 20 and 22 April 2012, an advertisement was published in national newspapers inviting general public inputs and one submission was received from Mr Frans Reyneke. The stakeholders who were invited by the Committee and that made submissions to the Committee were as follows:

 

·         Public Service Commission (PSC); and

·         Human Science Research Council (HSRC).

 

In addition to the National Treasury which briefed the Committee on the Appropriation Bill in its entirety, the following departments were invited for hearing on their respective budget allocations:

 

·         Department of Water Affairs;

·         Department of Women, Children and People with Disabilities; and

·         Department of Communications.

 

2.       The Review of the Overall Allocations for the 2012/13 Financial Year

 

The national budget for the 2012/13 financial year has allocated R543.6 billion to national government departments. This allocation excluded the direct charge which does not form part of the Appropriation Bill. This showed an increase of R44.1 billion or 8.8 per cent compared to the allocation of R499.5 billion in the 2011/12 financial year.

 

3.       Economic Classifications Allocations

 

Table 1: Economic Classification Budget Allocations for 2011/12 and 2012/13 Financial Years

	Budget Allocations
Economic Classifications	2011/12	2012/13	Rand Change (Increase)	Percentage change (%) Increase
Current Payments	R145.3 billion	R155.7 billion	R10.4 billion	7.2
Transfers and Subsidies	R342.2 billion	R370.9 billion	R28.7 billion	8.4
Capital payments	R11.2 billion	R15.2 billion	R4 billion	35.42
Payments for Financial Assets	R750.1 million	R1.6 billion	R980.6 million	118.7
TOTAL	R499.5 billion	R543.6 billion	R44.1 billion	8.8

Source: National Treasury (2012)

 

As shown in Table 1 (above), an amount of R155.7 billion was allocated for current payments for the 2012/13 financial year. This showed an increase of R10.4 billion or 7.2 per cent compared to the allocation of R145.3 billion in the 2011/12 financial year. For the 2012/13 financial year, the allocation for current payments comprised of:

 

·         An amount of R101 billion or 64.9 per cent for compensation of employees; and

·         An amount of R54.7 billion or 35.1 percent for goods and services

 

For the 2012/13 financial year an amount of R370.9 billion was allocated for transfers and subsidies. This showed an increase of R28.7 billion or 8.4 compared to the allocation of R342.2 billion in the 2011/12 financial year. Capital Payments were allocated an amount of R15.2 billion for the 2012/12 financial year. This showed an increase of R4 billion or 35.4 per cent compared to the allocation of R11.2 billion in the 2011/12 financial year. Payments for financial assets were allocated a budget of R1.6 billion for the 2012/13 financial year. This showed an increase of R980.6 million or 118.7 per cent compared to the allocation of R750.1 million in the 2011/12 financial year.

 

 

 

 

 

4.    The Five Priorities of Government

 

The hearings with invited stakeholders were more focused on the five government policy priorities, which were as follows:

 

• Job creation and infrastructure;
• Education and skills development;
• Improving health care and services;
• Rural development and land reform; and
• Justice, crime prevention and security.

 

The above-mentioned priorities were reflected in the 12 national outcomes adopted by Cabinet. These outcomes were high-quality basic education; improved health and life expectancy; greater public protection and safety; more rapid employment creation and inclusive growth; a skilled and capable workforce; efficient economic infrastructure networks; vibrant rural communities and food security; sustainable human settlements and improved quality of household life; responsive and accountable local government; protection of environmental assets and natural resources; international cooperation for a better and safer world; and a development-oriented public service and inclusive citizenship. The allocations related to the five priorities of Government for the 2012/13 financial year are provided in the sections hereunder.

 

4.1   Allocation for Job Creation

 

An amount of R1.2 billion was set aside for job creation during the 2012/13 financial year and R6.2 billion over the medium term expenditure framework (MTEF). The aforementioned allocation will be spent as follows:

 

• R590 million for the Community Works programme (R3.5 billion over the MTEF) for the creation of over 250 000 jobs;
• R230 million for the Working for Water and Working for Fire programmes (R1.1 billion over the MTEF);
• R50 million for the Mzansi Golden Economy in the Arts and Culture Sector (R300 million over the MTEF);
• R200 million for the national rural youth services corps which forms part of the Economic Competitiveness and Support Package (Rxxxx over the MTEF); and
•  R145 million (R1.1 billion over the MTEF) for the other job-related programmes

 

4.2   Allocation for Investment in Infrastructure

 

An amount of R844.5 billion has been set aside for public-sector infrastructure expenditure over the MTEF. Table 2 (below) depicts how that amount is divided amongst the different sectors:

 

 

 

 

 

 

Table 2: Allocations for Infrastructure for the 2012/13-2014/15 MTEF Period

Sector	Allocation for 2012/13   R billion	2013/14	2014/15	Total (over MTEF period)	Percentage in relation to the total (%)
Economic Services	211.7	228.3	237.1	677.1	80.2
Energy	91.7	100.2	104.3	296.2	35.1
Water and Sanitation	25.5	24.7	25.0	75.2	8.9
Transport and logistics	81.2	88.6	92.3	262.0	31.0
Other economic services	13.3	14.8	15.5	43.6	5.2
Social services	38.5	48.4	53.1	140.2	16.6
Health	8.1	13.1	14.8	36.0	4.3
Education	10.9	14.5	15.3	40.7	4.8
Community facilities	17.7	18.9	21.0	57.6	6.8
Other social services	1.9	1.9	2.0	5.9	0.7
Justice and protection services	3.4	3.5	3.7	10.6	1.3
Central Government and administrative services	7.9	3.5	2.8	14.2	1.7
Financial services	0.7	0.7	0.9	2.4	0.3
Total	262.2	284.5	297.6	844.5	100
Percentage of GDP	7.9	7.9	7.4

Source: National Treasury (2012)

 

Reference was made to the amount allocated towards infrastructure investment and concerns were expressed that there were capacity challenges within South Africa which would limit the effective expenditure of that funding.

 

The Committee noted with concern the disparities in respect of the contents of Programme 1 (Administration) of the budgets of national departments, despite the guidelines that were issued on an annual basis by the National Treasury.  Even more concerning was the fact that this issue has been raised by the Committee with the National Treasury before. There were cases in which Programme 1 (Administration) received higher budgetary allocations relative to programmes that dealt with the department’s core functions.

5. Allocations for Selected National Departments

 

5.1 Department of Water Affairs

 

The Department of Water Affairs (Budget Vote 38) was allocated a total budget of R8.8 billion for the 2012/13 financial year. The budget comprised of six programmes, i.e. Administration (R883.1 million), Water Sector Management (R618.9 million), Water Infrastructure Management (R2.3 billion), Regional Implementation and Support (R4.9 billion), Water Sector Regulation (R114.7 million), and International Water Cooperation (R25.8 million).

 

The Department recorded an expenditure of R8.2 billion or 91 per cent of an adjusted allocation of R 9 billion at the end of the 2011/12 financial year.  One of the reasons for the under expenditure was unfilled vacant posts, including Organisation Specific Dispensation (OSD) posts which represented R169 million or 21 per cent of the R784 million under expenditure. The Committee expressed concerns in this regard. The vacancy rate of the Department stood at 22.4 per cent which was a cause for concern and raised questions on the Department’s ability to effectively perform on its mandate.

 

The Committee expressed concern at the capacity of the Department to deal with water licence applications to which the Department responded that it did not have sufficient capacity to deal with applications. The backlog in respect of the water licence applications stood at 1 085 but the Department was in the process of developing a new model to address the matter.

 

The Committee expressed concern at the ability of the Department of Water Affairs to spend the R230 million allocated towards the Working for Fire and Working for Water programmes. This was due to the fact that the Department had spent zero percent as at the end of the third quarter of the 2011/12 financial year.

 

Clarity was sought in respect of the capacity of the Department to spend its budgetary allocation. In response, the Department indicated the following measures taken by it to improve the situation:

 

·         Budget analysts have been appointed to each programme;

·         Monthly meetings would be held with each programme manager to monitor expenditure trends;

·         A Budget Committee has been established;

·         A demand management planning concept has been introduced; and

·         Contract and project management capabilities would be improved.

 

5.2 The Department of Women, Children and People with Disabilities

 

The Department of Women, Children and people with Disabilities (Budget Vote 8) was allocated a total budget of R172.2 million for the 2012/13 financial year. The budget comprised of four programmes, i.e. Administration (R63.8 million), Women Empowerment and Gender Equality (R79.5 million), Children’s Rights and Responsibilities (R13.5 million), and Rights of People with Disabilities (R15.4 million).

 

Concerns were expressed that the Department employed staff at higher levels than the approved salary structure by the Department of Public Service and Administration (DPSA). The Department responded that no staff member had been appointed outside of the approved DPSA Salary Structure. The Department explained that certain staff members had been appointed on higher notches than the entry level of the salary band due to lateral transfers from other departments. Concern was expressed that the Department made four appointments that were at the Chief Director level which were outside of the approved organogram.  The Department reported that it was in the process of seeking approval from the National Treasury for the shifting of funds from goods and services to compensation of employees. It was reported that the following unfunded critical posts needed to be filled to ensure optimal operation during the 2012/13 financial year and beyond:

 

• Risk Manager;
• Office Manager in Director-General’s Office;
• Deputy Director: Supply Chain Management;
• Deputy Director: Internal Audit;
• Records Manager;
• Web Master;
• Deputy Director: Information Technology;
• Senior Network Controller;
• Senior Legal Admin Officer (MR-6);
• Deputy Director Labour Relations;
• Health & Wellness Manager;
• Deputy Director: International Coordination
• Director: Advocacy and Mainstreaming (WEGE)
• Director: Institutional Support and Capacity Development (WEGE)
• Director: Monitoring and Evaluation (WEGE)
• Chief Director: Institutional Support and Capacity Development (CRR)
• Director: Advocacy and Mainstreaming (CRR)
• Director: Monitoring and Evaluation (CRR)
• Deputy Director: Institutional Support and Capacity Development (CRR)
• Chief Director: Advocacy and Mainstreaming (RPD)
• Director: Institutional Support and Capacity Development (RPD)
• Deputy Director: Monitoring and Evaluation (RPD); and
• Branch Coordinator (RPD).

 

The Department indicated that it needed additional funding of R78 million for the following:

 

• R19 million for Compensation of Employees;
• R58 million for Goods and Services; and
• :R1 million for Capital Expenditure.

 

The National Treasury reported that it was in the process of discussing the matter relating to the Department’s budgetary constraints with a view to negotiating an underlying agreement. It was further reported that the Department needed to define the outputs that were consistent with the additional allocations requested in order to avoid any under expenditure. The approved establishment of the Department is for 195 personnel of which 105 had already been recruited. The Department needed to prove that it had the capacity to spend the additional requested funding efficiently, effectively and economically.

 

The Office of the Minister of Women, Children and People with Disabilities received an allocation of R6 million whereas the Deputy Minister’s Office received an allocation of R12 million. The National Treasury reported that the Deputy Minister’s funds were transferred directly from the budget vote of Public Works.

 

The Department further reported that it had instituted an investigation following allegations of nepotism and financial mismanagement particularly in areas relating to supply chain management.

 

The Committee expressed concern at the quality of engagement by the National Treasury in respect of the departmental budget allocations and stated that ongoing engagements were needed in that regard.

 

5.3 The Department of Communications

 

The Department of Communications (Budget Vote 27) was allocated a total budget of R1.7 billion for the 2012/13 financial year. The budget comprised of six programmes, i.e. Administration (R152.6 million), Information Communication Technology International Affairs and Trade (R38 million), Information Communication Technology Policy Development (R88.7 million), Information Communication Technology Enterprise Development (R1.1 billion), Information Communication Technology Infrastructure Development (R280.2 million), and Presidential National Commission (R30 million).

 

The Committee acknowledged the Department’s Turn-around Strategy, but remained concerned at the performance of the Department in relation to Information Communication and Technology (ICT). It was noted that the Department was underperforming on its ICT function, and that this has led to other government departments having to use service providers for ICT related functions.

 

The ICT Enterprise Development programme was the Department’s largest programme and constituted 65.6 per cent of the total budget allocation for the 2012/13 financial year. Expenditure on consultants increased from R53.1 million in the 2008/09 financial year to R213.3 million in the 2012/13 financial year, at an average annual rate of 58.9 per cent. It was reported that this was due to the fact that consultants had been used for infrastructure planning and for the establishment and operation of the 112 Call Centre project. Expenditure on consultants was however expected to decrease over the medium-term to R117.3 million as the 112 Call Centre project becomes fully capacitated and operational.

 

The largest proportion of the Department’s budget was for transfer and subsidies in the amount of R1.1 billion or 66 per cent out of the total budget allocation of R1.7 billion. The Committee expressed concern at the capacity of the Department to monitor the effective, efficient and economic expenditure of transferred funds to the different State-Owned Entities (SOEs).  The Committee also noted a trend by the Department to transfer high amounts during the fourth quarter of a financial year. The overall expenditure of the Department increased from 46.1 percent as at the end of December 2011 to 89 per cent at the end of March 2012. The main reason advanced by the Department was that the bulk of the entities required funding in the fourth quarter only. The Committee expressed concern in this regard and clarity was sought on how the SOEs could spend the transferred funding in that short space of time and whether that expenditure contributed to service delivery or not. The budget allocation of the Public Entity Oversight sub-programme that dealt with the oversight on SOEs, has received R1.1 billion for the 2012/13 financial year resulting in a reduction of R1.1 million as compared to the 2011/12 financial year.

 

 

6. Summary of submissions by invited stakeholders

 

6.1 The Public Service Commission

 

The Public Service Commission (PSC) was requested to brief the Committee on whether the current skills capacity within national departments would be able to deliver on the five priorities of Government.

 

With regard to the overall skills capacity in national government departments, the Public Service Commission made the following observations:

 

•          High levels of expenditure in a context where performance targets were not reached indicated that resources were being ineffectively used, with the obvious conclusion being that skills shortages were an obvious cause of this situation;

•          High vacancy and turnover rates were indicators that skills retention strategies were not effective;

•          The sustained use of consultants to provide core services was evidence that the need to build internal capacity was not being addressed in government departments; and

•          Skills acquisition and development, while much spoken about, were still not adequately addressed.

 

The PSC observed that there were disparities between budget expenditure and the achievement of predetermined objectives. The PSC identified the lack of skills capacity and the lack of culture of reporting on performance as the major reason for the non-achievement of predetermined objectives. The Committee expressed concern in this regard.

 

With regard to turnover and vacancy rates, it was reported that there was a high turnover rate in respect of professionals and Senior Management Staff in national departments. It was further observed that, although the vacancy rates were high, organograms were not always fully funded. The Committee agreed to the sentiments raised by the PSC that it took long periods of time to fill vacancies and this had negative impacts on service delivery.

 

6.2 The Human Science Research Council

 

The Human Science Resource Council (HSRC) was requested to brief the Committee on whether the Appropriations Bill was in line with the five priorities of Government for 2012. The following inputs were made by the HSRC:

 

• There needed to be an increase in the budget of the health care sector in order to improve the health care and related services. This was due to the fact that since 1997, there has been stagnation in the funding allocations for the public health care sector which together with an increasing disease burden had put the public health care system under severe pressure;
• There was a need to evaluate the quality and impact of training in government; and
• There was a need for better coordination in the manner in which the post-schooling institutions worked with each other in building stronger links between training and the needs of the economy.

 

7. Committee Findings

 

After deliberations with the identified departments and other stakeholders, the Standing Committee on Appropriations made the following findings:

 

7.1 An amount of R230 million for the 2012/13 financial year (R1.1 billion over the MTEF) allocated towards the Working for Fire and Working for Water programmes was a cause for concern given the fact that the Department of Water Affairs has spent zero percent on the said programmes as at the end of the third quarter of the 2011/12 financial year.

 

7.2 The vacancy rate in the Department of Water Affairs stood at 22.4 per cent which raised questions on its ability to perform on its mandate.

 

7.3The Department of Women, Children and People with Disabilities made four appointments that were at the chief director level which were outside its approved organogram. 

 

7.4 The Department of Women, Children and People with Disabilities requested an additional amount of R78 million for compensation of employees (R19 million), goods and services (R58 million) and capital expenditure (R1 million).

 

7.5 The Department of Communications has under performed on its Information, Communication and Technology (ICT) function, and that this has led to other government departments having to use service providers for ICT-related functions.

 

7.6 There were disparities in respect of the contents of Programme 1 (Administration) of the budgets of national departments, despite the guidelines that were issued on an annual basis by the National Treasury.

 

7.7 The high levels of expenditure by national departments did not necessarily result in the predetermined outputs being met.

 

8. Recommendations

 

The Standing Committee on Appropriations, having considered the briefings and comments by departments and invited stakeholders on the Appropriation Bill for the 2012/13 financial year, recommends as follows:

 

8.1That the Minister of Finance should ensure that the National Treasury investigates the necessity for increased funding for the Department Women, Children and People with Disabilities.

 

8.2 That the Minister of Finance should ensure that the National Treasury engages with national departments on an ongoing basis preparation for the Appropriation Bill.

 

8.3 That the Minister of Public Service and Administration should ensure that the Department of Public Service and Administration collaborates with relevant departments and other stakeholders in addressing lack of skills that was reported by the Public Service Commission.

 

Notwithstanding the above recommendations and due to the fact that no formal amendments were proposed by Parliamentary Committees, the Standing Committee on Appropriations further recommends that the National Assembly adopts the 2012 Appropriations Bill for the 2012/13 financial year.

 

 

 

Report to be considered.