ATC121116: Report of the Standing Committee on Appropriations on the Adjustments Appropriation Bill [B32 – 2012] (National Assembly (Section 77)), dated 16 November 2012
REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON
THE ADJUSTMENTS APPROPRIATION BILL [B32 2012] (NATIONAL ASSEMBLY (SECTION
77)), DATED 16 NOVEMBER 2012
Standing Committee on Appropriations having received a briefing from the
National Treasury on the Adjustments Appropriation Bill and engaged with
identified departments, reports as follows:
The Minister of Finance tabled the Medium Term Budget Policy Statement
(MTBPS) on 25 October 2012, outlining the budget priorities of government for
the medium term estimates. The MTBPS was tabled in Parliament together with the
Adjustments Appropriation Bill [B32 - 2012] and the Division of Revenue
Amendment Bill [B33 - 2012].
Section 12 (15) of the
Money Bills Amendment Procedure and Related Matters Act, No. 09 of 2009 (Money
Bills Act) provides that in the event of a revised fiscal framework, an
Adjustments Appropriation Bill must be referred to the Committee on
Appropriations in the National Assembly only after the Division of Revenue Bill
has been passed by Parliament. Accordingly, the 2012 Adjustments Appropriation
Bill was referred to the Standing Committee on Appropriations by the National
Assembly on 1 November 2012, for consideration and report.
The 2012 Adjustments Appropriation Bill (the Bill) was tabled within a
context of declining tax revenues, slow growth in the economy and uncertain global
financial conditions. The
Minister of Finance pointed out to the need to put
in place measures to ensure that government realises value for money in its
expenditure. Critical to enhancing service delivery is the consolidation of
programmes and activities by departments in order to obtain value for money
within the available resource envelope.
The Standing Committee on Appropriations (the Committee) met with
various departments affected by the adjustments in respect of the budget for
the 2012/13 financial year. These were the Departments of Human Settlements,
Water Affairs, Communications and Public Works.
Overview of budget adjustments
The total estimate appropriated expenditure in the 2012/13 budget has
been revised downward from R969.365 billion to R967.463 billion. This amounts
to R1.902 billion less than the 2012 main budget and 8.9 percent more than the
2011/12 outcome. The 2012 adjustment budget makes provision for an additional amount
of R11.523 billion in vote allocations.
The total roll-overs for 2012/13 amount to R1.506 billion, while the provision
for unforeseeable and unavoidable expenditure amounted to R2.273 billion.
An additional allocation for the higher than expected personnel
remuneration costs amounted to R5.480 billion.
Furthermore, there was an
unallocated amount of R30 million for Economic Development, self-financing
expenditure amounting to R440.095 million and additional funding realised from
the skills levy and Sector Education and Training Authority (
) which amounted to R1.794 billion.
A contingency reserve of R5.780 billion has been set aside and an amount
of R3.021 billion has been declared as savings. Declared savings are unspent
amounts that departments explicitly indicate they will not reallocate to fund
other spending. Savings were declared in a number of areas which include,
amongst others, the Employment Creation Facilitation Fund (Jobs Fund) and Rural
Households Infrastructure Grant (RHIG) in the amounts of R408.108 and R138.875
million respectively. Local government repayment into the National Revenue Fund
amounted to R500 million and an unallocated amount of R30 million has been set
aside. A decrease in the States debt costs is projected at R593.586 million
and the projected under spending by departments is estimated at R3.5
In terms of economic classification, additional allocations amounting to
R2.319 billion were provided for Current Payments. This comprised of the
R2.266 billion for
Compensation of Employees;
R777.928 million for Goods
and Services; and
R724.967 million downward
in Interest and Rent on Land.
Transfers and Subsidies were revised upward in the 2012/13 budget adjustments
from R698.713 billion to R705.232 billion. This represented an upward
adjustment of R6.519 billion which comprised of the following:
R4.612 billion for
Provinces and Municipalities;
R1.582 billion for
Departmental agencies and accounts;
R15.368 million for Higher
R28.175 million foreign
governments and international organisations;
R849.687 million downward
adjustment for Public Corporations;
R96.283 million for
Non-Profit Institutions; and
R1.033 billion for
Payments for Capital Assets was revised downward in the 2012/13 budget
adjustments from R15.176 billion to R14.434 billion. This represents a downward
adjustment of R741 million which comprised of the following:
R1.246 billion downward adjustment in
buildings and fixed structures;
R423.098 million for
machinery and equipment;
R500 000 for Heritage
R50 000 for biological
and cultivated assets; and
R81.364 million for
software and other intangible assets.
Committee in its assessment of the 2012/13 budget adjustments established that
some departments contravened the Public Finance Management Act, No 1 of 1999
(PFMA) as amended
by shifting funds from
one programme to another which were beyond the prescribed 8 per cent and by
shifting funds from capital payments to other economic classification items.
Adjustments per identified departments
The following section seeks to discuss the 2012/13 budget adjustments
and the discussions between the Committee and the identified departments below.
Department of Human Settlements
The budget for the Department of Human Settlements has been revised downwards
from R25.263 billion to R25.137 billion following the 2012/13 budget
adjustments. The Department received an additional amount of R13.500 million
for rollovers and declared savings of R138.875 million. This represents a total
downward adjustment of R125.375 million.
The Department declared savings amounting to R138.9 million on the Rural
Household Infrastructure Grant (RHIG). The Department stated that the budget
reduction on RHIG was effected only in those municipalities where there were
limited qualifying beneficiaries.
The Department recorded an expenditure of R10.056 billion or 40 per cent
of the adjusted appropriation of R25.137 billion at the end of September 2012
(second quarter). The Department stated the main reason for the
under-expenditure was the scheduling of payments for the Urban Settlements
Development Grant for which only one payment had been made in the 1st half of
the year with two more payment
The Department indicated that plans were in place to ensure that the remaining
funds under the RHIG would be spent by the end of the 2012/13 financial year. The
Committee expressed concern at the readiness of the Department to utilise the originally
allocated grant funding given the spending performance of the Department with
regard to the grant RHIG. The Department was directed to consult and to draft
an integrated plan to accelerate the implementation of the RHIG.
The Department stated that funds were shifted from funded vacancies to
other priorities which included research projects, interest on financial
leases, transfers to the Human Settlements Scholarship programme, creation of Human
Settlement Chair at the
Department of Water Affairs
The budget for the Department of Water Affairs (the Department) has been
revised upwards from R8.812 billion to R8.993 billion after the 2012/13 budget adjustments.
The Department received an additional amount of
R416.557 million for roll-overs, savings of R227.512 million were declared and there was another downward adjustment of R8.544 million for the forestry function which was shifted to the Department of Agriculture, Forestry and Fisheries. This represented a total upward adjustment of R180.501 million. The rolled-over funds were for the identified areas:
Upgrading of video
conferencing equipment (R7 million);
Business process review
implementation of the enterprise monitoring and evaluation tool (R3.71
Transfers to the Rand Water
Board for infrastructure refurbishment, water losses management and metering
Acquisition of water
drilling equipment (R3.77 million);
Moutse Bulk Water Supply
Construction of the
Construction of the
Acid Mine Drainage (R150 million);
Borehole Project R10 million; and
Validation and verification
processes (R5.600 million).
The Department declared
savings of R227.512 million due to operational efficiencies and cost
optimisation measures implemented in respect of the infrastructure projects of
the water trading entity as well as vacant posts that will not be filled. Cost
saving measures was also implemented on catering, consultants, venues and
facilities, travel and subsistence and machinery and equipment across all
programmes of the Department. The Committee was concerned at the impact of
shifting funds from funded vacant positions on the implementation capacity of
The Department had spent
R2.738 billion or 30.4 per cent of the adjusted appropriation of R8.993 billion
as at end of September 2012.
The Committee was concerned
at the poor expenditure performance of the Department. The Department provided
a number of reasons for the under expenditure and these include delays in the approval
for the Trans
Tunnel Authority (TCTA) to
undertake work with regard to Acid Mine Drainage, lack of project management
capacity in implementing agencies, financial instability of some implementing
agencies and delays in the filling of vacant posts.
regards to non-financial performance, the Department had planned to provide an
additional 746 004 people with access to water but only managed to provide
for 346 000 by end of September 2012, only 1 674 out of the target of
7 000 rainwater harvesting tanks had been distributed, the Department had
provided 180 subsidies to resource poor farmers from a set target of 750 and
only 166 out of a target of 803 water treatment works had been assessed. The Department
indicated that there were budget shortfalls for targets and that the supply of
rainwater harvesting tanks was a support initiative to the Department of Rural
Development and Land Reform. The Committee pointed out targets stated in the
Departments performance plans were the responsibility of the Department and
that budget shortfalls arise due to a lack of alignment between the
Departments Annual Performance Plan and its budget.
Committee was concerned at the slow expenditure of the Department as at the end
of the Second Quarter of the 2012/13 financial year, with specific reference to
the recurring poor performance on the
Hoop Dam projects. The Department stated that delays in the
project were due to the non-performance of a historically disadvantaged (HD) category
contractor. The established contractor was 86 percent complete and litigation
involving the HD contractor was ongoing. With regard to the De Hoop Dam, the
work was being finalised on the completion of the Dam but not on the bulk water
Committee pointed out that the Department needed to utilise the budgeting
framework as provided for in the Medium Term Expenditure Framework (MTEF) so as
to minimise the need for rollovers and improve planning and expenditure
The budget for the Department of Communications (the Department) was
revised downwards from R1.712 billion to R1.655 billion after the 2012/13
budget adjustments. The Department received an additional amount of
R1.642 million for personnel remuneration increases and savings of
R58.957 million were declared.
The declared savings were as a result of delays in the procurement
process for the 112 Emergency Call Centre. The Department indicated that
service providers for the 112 Emergency Call Centres are in the process of
A total amount of R144.413 million has been
defrayed as a virement from Programme 5 (ICT Infrastructure Development) to
Programmes 1 (Administration), 2 (ICT International Affairs and Trade), 4 (ICT
Enterprise Development) and 6 (Presidential National Commission). This virement
amounted to 51.5 percent of the total budget of Programme 5. The breakdown of
this virement is as follows:
reprioritisation from the 112 Call Centre Project to cater for the Digital
Terrestrial Television (DTT) awareness in Programme 1,
million reprioritisation from broadband infrastructure to fund the following:
million to fund Information Communication Technology (ICT) Trade/Partnership in
million to fund Small Medium and Micro Enterprise Development in Programme 4;
million to fund Independent Communication Authority of South Africa (ICASA) and
South African Broadcasting Corporation (SABC) for the 2013 Africa Cup of
Nations (AFCON), the ICASA complaints and compliance committee, and for small
medium and micro enterprise development in programme 4;
million to fund SABC for AFCON 2013 for broadcast rights; and
million to fund the information society and development cluster in Programme 6.
The Departments expenditure in the first six months of 2012/13 was
R763.628 million or 46.1 per cent of the adjusted appropriation of
R1.655 billion. The Minister of Communications (the Minister) indicated that expenditure performance had improved compared to the previous financial year when only 26 percent had been spent by November 2011.
The Committee expressed concern at the credibility of planning in the
Department given that broadband infrastructure was a critical priority of government.
Of more concern to the Committee was the recurring non-delivery on the 112
Emergency Call Centre
which had been rolled
over regularly. The Committee viewed the non-attainment of performance targets
such as the creation of only 150 jobs from a target of 17 322 as a major
concern given that the Department was critical in governments broad
development strategy. The Committee further expressed concern at the delay in
the filling of vacancies, with specific reference to the senior positions such
as the Chief Financial Officer.
The Department presented the Committee with its Turnaround Strategy
which focused on improving overall performance. Key areas for the Turnaround
Strategy were strategic management, organisational culture, leadership management
and development and governance.
The Department stated that whilst there have been slight improvements in
performance compared to previous financial years there were still challenges in
skills capacity with regard to Digital Terrestrial Television (DTT) and the Broadband
project. The Department indicated that it was in the process of developing a
single coherent strategy for the implementation of the Broadband project hence
the reluctance to utilise funding until such a strategy was in place. The process
of finalising appointments of senior personnel, including the Chief Financial
Officer was scheduled for the end of December 2012.
The Department indicated that a new branch has been established to
improve oversight capacity over the Departments public entities. In order to
improve expenditure performance, the Department stated that it had created a
system that links budgets with projects which will track actual expenditure
against budget allocations per project. In terms of broadband infrastructure, the
department stated that the rollout of broadband infrastructure was part of Governments
infrastructure build programme, which is coordinated by the Presidential
Infrastructure Coordinating Commission (PICC).
The budget of the Department of Public Works (the Department) has been
revised downwards from R7.993 billion to R7.891 billion following the 2012/13
budget adjustments which represents a total downward adjustment of R102.458
million. The Department received an additional amount of
R87.095 million for rollovers, R3.753 million was provided for unforeseen and unavoidable expenditure for the establishment of a new office for the newly appointed Deputy Minister of Public Works. An amount of R212.0 million has been declared as savings and there were other adjustments of
R18.604 million for personnel remuneration increases.
The Department had reduced the infrastructure budget by R485 million
from R1.484 billion to R999.742 million. An amount of R212 million has been
declared as savings under which R102 million was for the Land Ports of Entry
and R110 million that was ring-fenced for the Department of Home Affairs
project on the Land Ports of Entry (LPOE). An amount of R273 million was
reprioritised from Programme 2 (Immovable Asset Management) to other
expenditure items within Programmes 1(Administration), 2 (Immovable Asset
Management) and 3 (Expanded Public Works Programme). The Committee was
concerned at the impact of the delays in these infrastructure projects given
their strategic importance in the protection of the countrys borders.
The Department recorded an expenditure of R4.137 billion or 52.4 per
cent of the adjusted appropriation of R7.891 billion at the end of September
2012. The expenditure performance of 52.4 per cent was slightly higher as a
result of the downward adjustment. The Department had exhausted the budget for
Programme 5 (Auxiliary and Associated Services) due to expenditure on state
funerals. The Department indicated that the original allocation for state
funerals was R15 million and thus far had spent R29 million due to the ad hoc
nature of requests for funding The Committee expressed concern at the over
expenditure trends and advised the Department to allocate a contingency budget in
future to accommodate any ad hoc requests that may emanate from Presidential
functions such as State funerals.
The Department indicated that the Expanded Public Works Programme (EPWP)
Phase 2 targets for the five year period were 4 920 000 work opportunities. The
programme has created 2 462 502 (50.05 per cent) work opportunities against
the 5 year target of 4 920 000 to date. It is to be noted that phase
2 of the programme started in 2009 and 2012 is its fourth year.
The Committee was not certain that 50.05 per cent was an acceptable
level of performance given that the programme is in its fourth year of
implementation. The Department stated that the programme was rapidly expanding
in the final stages of implementation but the Committee was of the view that
since budgets were shifted from infrastructure projects, those targets for
phase 2 of the EPWP will be affected. The Committee viewed the non-attainment
of targets for the EPWP as a major concern given that the programme was the
governments promise to the people to deliver job opportunities.
The Committee expressed concerns at the shifting of funds from capital
assets to fund other budget items. This was not in accordance with Section 43
of the Public Finance Management Act, as amended. National Treasury indicated that
the Appropriation Act allows for the shifting of funds from capital provided
approval is sought from the Minister of Finance. The Committees view is that
this is an act of amending the budget which is the exclusive authority of
The Committee expressed concern at the non-attainment of targets with
regard to the percentage of asset register fields populated with data for the
present 209 293 properties. The Department stated that there was an
agreement with the Accountant-General on up-scaling the asset register. The
project was an intergovernmental initiative and therefore was a complex exercise.
An implementing agent has been appointed to assist with the project and the
target date for completion was 2014.
The Standing Committee on Appropriations, having
considered the inputs from the above stakeholders made the following findings:
There is a general tendency
by departments to contravene section 43 of the Public Finance Management Act,
No 1 of 1999 by shifting funds from one programme to another which were beyond
the prescribed 8 per cent. This pervasive shifting of funds negatively affects
the credibility of departmental budgets.
The Committee noted the
declared overall savings which amounted to
R3.021 billion, of particular concern was the amount of
R408.108 million in respect of the Employment Creation Facilitation Fund. This was a cause for concern given the fact that job creation is a priority of Government.
The Committee noted that a
Turnaround Strategy for the Department of Communications has been introduced.
The Department of Public
Works has created 2 462 502 or 50.05 per cent of job opportunities in
year four (2012) against the 5 year (2009 2013) target of 4 920 000 job
opportunities for the Expanded Public Works Programme. This was a cause for
concern given the fact that job creation is a priority of Government.
The Committee expressed concern at the impact
on the administrative capacity of departments to deliver services by shifting
funds from funded vacant posts.
The Committee remains
concerned that the compilation of the asset register by the Department of
Public Works has been going on for years without completion despite multiple
agencies being appointed with no results.
The Committee noted a persistent gap between
the expenditure outcomes and achieved performance targets of departments at the
end of each financial year.
The Standing Committee on Appropriations having engaged with the above stakeholders
recommends as follows:
That the Minister of
Finance ensures that the National Treasury considers incorporating a clause
into the Appropriation Bill to enforce planning as a requirement for
the Minister of Public Works:
Puts measures in place to
ensure that job creation targets set for the Expanded Public Works Programme are
Submits to Parliament
quarterly progress reports on the compilation of the asset register.
That the Minister of Communications:
Ensures that the Department of
Communications expedite the process of finalising the national broadband
strategy and the rollout of broadband infrastructure.
That critical posts such as
that of the Chief Financial Officer are filled expeditiously.
That the Department of
Communications reports on the necessity for introducing the 112 Emergency Call
Centre project given the regular rollover of funds allocated to this project.
That the Department of
Communications report to Parliament quarterly on the implementation of the
Committee on Appropriations, having considered the
Adjustments Appropriation Bill
(National Assembly Section
77) referred to it and classified by the Joint Tagging Mechanism; reports that
it has agreed to the Bill without amendments.
Report to be considered.
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