ATC140723: Report of the Standing Committee on Appropriations on the Appropriation Bill [B4-2014] (National Assembly – Section 77), dated 22 July 2014
REPORT OF THE
STANDING COMMITTEE ON APPROPRIATIONS ON THE APPROPRIATION BILL [B4-2014]
(NATIONAL ASSEMBLY SECTION 77), DATED 22 JULY 2014
considered the Appropriation Bill [B4 2014], referred to in terms of Section
10(a) of the Money Bills Amendment Procedure and Related Matters, Act No. 9 of
2009, the Standing Committee on Appropriations reports as follows:
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
that Parliament and each provincial legislature 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, hereinafter
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, and
ed 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, hereinafter 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
national budget for the 2014/15 financial year was tabled by the Former
Minister of Finance in the National Assembly together with the Appropriation
Bill (the Bill) on 26February 2014. The Bill was tabled together with the
Division of Revenue Bill, Estimates of National Expenditure (ENE), Budget Review
and the Budget Speech.
Bill was referred to the Committee on 12 March 2014 for consideration and
reporting but lapsed at the end of the last sitting of the Fourth Parliament.
The Bill was revived on 18 June 2014 in the National Assembly where it was
agreed that proceedings thereon be resumed from the stage it reached on the
last sitting day of the Fourth Parliament.
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). S
ection 10(8) (a) and
(b) of the Act requires the Committees on Appropriations to hold public
hearings on the Appropriation Bill and proposed amendments and for the
Committee on Appropriations to report to the House on the comments on and
amendments to theAppropriation Bill. To this end,
an advertisement was
published in national and community newspapers from 5 to 12 July 2014 inviting
general public inputs from which no submissions were received. In addition to
the National Treasury which briefed the Committee on the Bill in its entirety,
the following stakeholders were invited for comment:
Fiscal Commission (FFC);
Budget Office (PBO); and
and Overview of the 2014 Appropriation Bill (B4 2014)
for the 2014 Appropriation Bill
2014 Budget was tabled within the framework of the National Development Plan
(NDP) which seeks to give effect to governments policy objectives of
accelerating growth and reducing poverty and inequality.
The NDP includes objectives and actions to
provide for the following outcomes:
Quality basic education;
A long and healthy life for all South
All people in South Africa are and feel safe;
Decent employments through inclusive growth;
Skilled and capable workforce to support an
inclusive growth path;
An efficient, competitive and responsive
economic infrastructure outlook;
Comprehensive rural development;
Sustainable human settlements and improved
quality of household life;
Responsive, accountable, effective and
efficient developmental local government system;
Protect and enhance our environmental assets
and natural resources;
Creating a better South Africa and contributing
to a better and safer Africa in a better world;
An efficient, effective and development
oriented public service;
An inclusive and responsive social protection
Transforming society and uniting the country.
NDPprovides an integrated approach to guide governments allocation of
resources within a sustainable framework. Policy priorities contained in the
NDP that are funded and supported in 2014 budget framework include building on
formal social accords and consultation in the areas related to the minerals
sector, partnerships in education involving teachers, parents and pupils;
allocations for the building, refurbishment and maintenance of health
infrastructure, the rollout of the Community Works Programmein every
municipality, new bus rapid transit systems to be constructed in nine cities
with existing networks expanded; and there will be expanded support for small,
medium and micro enterprises.
fiscal outlook remains under pressure. The 2014 Estimates of National
Expenditure (ENE), which provides detailed information per vote, states that
the government remains committed to the principles of counter-cyclicality, debt
sustainability and intergenerational fairness. In particular, the state remains
committed to maintaining the value of the social wage and improving the quality
of spending and eliminating inefficiencies.
will be underpinned by the provision of public services that prioritise doing
more with less rather than higher expenditure. To maintain the expenditure
ceiling, additional allocations to priority areas and upward adjustments to the
public-sector wage bill have been achieved through reprioritisation across
departments. In the 2009 budget, reprioritisation constituted only 12 per cent
of total revisions made to the budget whilst in the 2014 budget, reprioritisation
constitutes over 51 per cent on the revisions made to the budget. This shows that
additional funds available to be added onto the total budget have declined
consolidated government expenditureis projected to increase by 8.1 per cent a
year, from R1.14 trillion in 2013/14 to R1.45 trillion in 2016/17. The table
below shows trends in the economic classification of payments for consolidated
government expenditure excluding debt service costs for the period 2009/10 to
Expenditure by Economic Classification
Source: National Treasury
the 2014/15 financial year, compensation of employees constitutes 35.2 per cent
of consolidated government expenditure followed by transfers and subsidies at
32.4 per cent and goods and services at 15.2 per cent. Payments for capital
assets and payments for financial assets are 7.3 per cent and 0.3 per cent
the period 2010/11 to 2013/14, transfers and subsidies as a share of
consolidated expenditure have increased from 31.7 per cent to 32 per cent.
Transfers and subsidies are projected to increase marginally from 32.4 per cent
in 2014/15 to 32.8 per cent in 2015/16. The large share of expenditure
allocated to transfers and subsidies represents governments contribution to
poverty reduction and social development.
Social assistance is governments primary mechanism in combating
poverty. The number of social grant beneficiaries has risen from 14.6 million
in 2010/11 to an estimated 16.1 million in 2014/15.
share for compensation of employees of government consolidated expenditure was
35.2 per cent in 2010/11, rising to 36.3 per cent in 2011/12 and declined
slightly to 35.8 per cent in 2013/14. The increase in the percentage share of
the public sector wage bill in 2011/12 was due to higher than anticipated inflation
forecasts. Government reached a multi-year wage settlement in 2012 and this has
served to provide greater certainty in wage settlements. The budget share for
compensation of employees is projected to moderate in the medium term and reach
34.8 per cent in 2016/17. Pressure on the wage bill is being partially offset
by declining headcount growth in national and provincial governments. The 2014
Budget Review states that government intends to maintain employee numbers at a
constant level in the next three years. A new round of wage negotiations will
begin in 2014.
share for goods and services declines in the medium term from 15.2 per cent in
2014/15 to 14.7 per cent in2016/17. The 2014 Budget intends to maintain
controls over core areas of goods and services such as educational materials
and medical supplies. Spending on travel, catering, consultants and other
administrative payments will decline as a share of total goods and services.
Payments for capital assets maintain an average percentage share of
consolidated government expenditure of 7.4 per cent in the Medium Term
Expenditure Framework (MTEF) periodand payments for financial assets decline to
less than 0.3 per centin 2016/17.
2014 fiscal framework makes additional allocations of R14.7 billion for the
2014 MTEF. Budget reprioritisation and spending cuts make available R19.6
billion for MTEF baseline allocations. The drawdown on the contingency reserve
makes available R4.5 billion. Therefore, main budget level non-interest
expenditure provides for baseline additions of R38 billion for the 2014 MTEF.
Out of the R38 billion available, R21.9 billion will be allocated to
compensation of employees to alleviate spending pressures on wage budgets, R5.9
billion for goods and services that prioritise service delivery, R5.5 billion
for infrastructure projects, and R5.5 billion for transfers to households and
2014 Budget allocates MTEF baseline additions to governments policy priorities
in a number of function areas. Education and related functions receives R6.3
billion, Health and Social Protection receives R5.2 billion, Defence, Public
Order and Safety receives R3.8 billion, Economic Infrastructure receives R2.5
billion, Local Government, Housing and Community Assets receives R1.5 billion
and Employment and Social Security receives R700 million. There are baseline
reductions of R5.3 billion in three function areas, namely, General Public
Services, Economic Services; and Science, Technology and Environmental Affairs.
The 2014 ENE states that the budget reductions in the baselines of these three
function areas should not have an adverse impact on service delivery as the
reductions were largely revisions to goods and services expenditure and
realigning spending to institutional capacity.
table below shows expenditure growth by function. Allocated government
expenditure is projected to increase from R1.05 trillion in 2013/14 to R1.29
trillion in 2016/17.
expenditure by function 2013/14 to 2016/17
Source: National Treasury 2014
largest growth will be in employment and social security. This function grows
by 13.1 per cent to reach R69.3 billion in 2016/17. Government launched the
third phase of the Expanded Public Works programme in April 2014 and intends to
create 6 million jobs in the next five years. The Community Work Programme will
constitute the largest component in expanded public works. The state reports
that emphasis will be placed on improving the quality of work in the Community
Work Programme so that participants are better able to move into the formal
economy. Priority will also be linking employment programmes with initiatives
to foster small enterprises and collectives. However, spending performance in
areas such as the Green Fund, Jobs Fund and the Special Economic Zones has not
been as per planned projections.
growth in the medium term will continue in the areas of education, health,
science and technology, and social protection with even higher growth in the
local government and housing functional area. Spending growth in education is
driven largely by compensation of employee costs as a result of higher than
anticipated inflation forecasts and the establishment of
occupation-specific-dispensation for therapists. Allocations in the health
areas aim to strengthen HIV/AIDS treatment and the rollout of new
Expenditure growth in the
local government, housing and community amenities function area will be driven
by resource allocation for the provision of water and sanitation.
2014 Budget outlines a number of initiatives aimed at ensuring improvements in
the delivery of government services within the current constrained budget framework.
Measures to improve public services and eliminate waste and cost inefficiencies
National Treasury and the Department of Performance
Monitoring and Evaluation have launched a programme on expenditure reviews
in the areas of housing, education and industrial policy. Initial findings
are expected in the 2014/15 financial year.
Cost-containment measures were issued for
implementation beginning in January 2014. The measures seek to limit
expenditure on conferences, travel, entertainment and other non-essential
items. Departments will be audited on these measures in the preparation of
annual financial statements.
The Office of the Accountant-General is to strengthen
the control environment of governments financial systems.
There are measures underway aimed at strengthening
procurement practices in order to obtain value for money. The Chief
Procurement Officer is building a national system for the purchase of
high-value goods and services commonly used throughout government. It is
envisaged that reforms will simplify procurement procedures, strengthen
accountability and improve governments ability to detect maladministration
Forthcoming regulations will strengthen the National
Treasurys oversight of public entities by requiring them to comply with stringent
reporting requirements for expenditure, revenue and performance.
of the 2014/15 Appropriation Bill
Votes receive budget baseline additions amounting to R19.8 billion over the
2014 MTEF period. In particular, R5.4 billion is allocated for the 2014/15
R5.6 billion in 2015/16 and R8.8 billion in 2016/17. The table below shows the appropriations per vote which give effect to the states policy objectives.
Main Appropriation per Vote
table above shows allocations per vote as per the 2014 Appropriation Bill (B42014).
The main appropriation for national departments (excludes direct charges
against the National Revenue Fund) increases from a revised estimate of R583.5
billion in 2013/14 to R635.4 billion in 2014/15. The national votes receiving
the largest allocations for the 2014/15 financial year are Social Development,
Police, Cooperative Governance and Traditional Affairs, Transport, Defence and
Military Veterans and Higher Education and Training. Other national votes
receiving significant funding for 2014/15 include Basic Education, Health,
Human Settlements, National Treasury and Correctional Services.
on the 2014 Appropriation Bill
Treasury in its briefing outlined the legislative process relating to the passing
of the Appropriation Bill and highlighted the provisions in the PFMA, in
particular Section 29 that allowed for the expenditure before the Appropriation
Bill is passed. The Bill provides for the appropriation of money from the
National Revenue Fund with spending subject to provisions contained in the PFMA
(as amended). The 2014 Budget will continue with support for economic recovery
within the policy framework of fiscal consolidation.
Treasury reported that the process for giving administrative effect to the
Presidents new Cabinet portfolios i.e. the National Macro Organisation of the
State (NMOS) is expected to be completed by November 2014. Upon the completion
of the organisational structures, changes to votes and programme structures
will be included in the 2014 Adjustments Appropriation Bill and/or the 2015
Appropriation Bill. National Treasury indicated that no funding will be
allocated to the new votes. The new votes and programmes will receive funding
from existing budget votes. For the transition period, the new votes will
co-exist with the current votes and expenditure incurred by a current vote on
behalf of a new vote will be in terms of a memorandum of understanding agreed
to by the two departments.
Committee expressed its concernsregarding the cost of servicing government debt
and the effect thereof on equity and intergenerational fairness. The Committee
emphasised the importance of ensuring that state borrowing was financing
investment in infrastructure and not current expenditure. The Committee views the
shifting of the composition of spending away from consumption and towards
productive investment as critical for sustainable public finances. Emphasis must
be placed on the provision of social infrastructure such as schools, libraries
and clinics so as to ensure improvements in the quality of life of citizens for
the short, medium and long term.
Committee made reference to the interim funding arrangements for the newly
established departments as per the Presidents State of the Nation Address on
17 June 2014. To this end, clarity was sought on whether the interim funding
for those departments from existing departmental budgets would not negatively
affect the existing departments budgets. The National Treasury clarified that
Section 33 of the PFMA provides that the transfer of functions from one
department to another be accompanied by the transfers of funds allocated for
that specific function and that the allocation of additional funds where
required will be accommodated through the budget adjustment process in October
2014. National Treasury indicated that the required additional funds would be
accommodated through a reprioritisation process in an effort to maintain the governments
nominal expenditure ceiling.
Committee enquired whether National Treasury had monitoring mechanisms in place
for the implementation of the cost containment measures which were introduced
in December 2014. The Committee stated that early detection was critical as
opposed to waiting for the audit process. Furthermore, in many instances while
the message for cost containment was emphasised in national and provincial
governments, similar emphasis did not filter through to local government level.
regards to earmarked funds, specifically indirect conditional grants, the
Committee pointed out that this approach may pose challenges in realising the
policy objective of minimising the use consultants as the existing capacity
constraints in local government may not be addressed. In addition, the
implementation of conditional grants such as the Municipal Infrastructure Grant
should be only as per the prescribed grant objectives. The Committee envisages
that skills transfers will remain an important focus area in the rollout of
conditional grants in the provincial and local spheres of government.
the Committee welcomed the approach to a centralised system of procurement, it
was concerned about the effect that a centralised approach would have on provincial
and local service providers. National Treasury reported that the Chief
Procurement Office is in the process of evaluating procurement practices throughout
government. The Committee pointed out that funds misappropriated as a result of
procurement irregularities or corruption should be recovered from those found
to have transgressed regulations. The Committee supports the strengthening and
enhancement of work targeted at ensuring contracts are fair and transparent. It
is stated in the 2014 Budget Review that the Accountant-General has conducted a
number of investigations into fraud, corruption and maladministration resulting
in criminal investigations and disciplinaryhearingswith R503 million in
contracts cancelled and R61 million surrendered back into the fiscus.
regards to value for money in higher education, the Committee highlighted that
the investment made by government in higher education and training has increased
significantly over the past few years though the increase in expenditure has
not been proportionate to the increase in the skills level of the countrys workforce,
especially within the previously disadvantaged communities. The Committee
stated that for the country to accelerate growth and development and realise
the NDPs vision of a vibrant knowledge based economy able to compete successfully
in the global economy, spending on education and training will need to realise
Budget Office briefed the Committee on its mandate as per the Money Bills Act
and on its assessment of the 2014 budget framework. The mandate of the
Parliamentary Budget Office is to provide independent, objective and
professional advice and analysis to Parliament on matters related to the budget
and money bills. The work of the PBO will include monitoring, research,
technical analysis and advice on fiscal and related economic matters.
The PBO in its
submission reported that the economic outlook for the country has changed since
the passing of the 2014 fiscal framework in March 2014. In particular, the
economy has experienced its first contraction since the 2009 financial crises
and declined by 0.6 per cent in the first quarter of 2014. The slower growth is
likely to translate into lower revenue. This may negatively affect projections
for budget estimates of non-interest expenditure and thus reduce the quantum of
funding available for government services.
2014 Budget Review states that the risks to the fiscal outlook include economic
uncertainty and this years round of public-sector wage negotiations.The PBO
highlighted that significant risks exist to the wage bill as projected MTEF
estimates provide for inflation linked salary increases. A wage settlement
above the current annual adjustment of inflation plus 1 per cent will add
pressure to projected budgets.
PBO reported that the inflation outlook poses risks to costs of providing
public service. The concerns raised by the PBOare in line with National
Treasurys indication in the 2014 Budget documents that higher than anticipated
inflation will add to the costs of service delivery through increased costs for
goods and services. The PBO submitted that governments adherence to expenditure
ceilings on goods and services items such as travel and subsistence appeared to
have an impact.
PBO reportedthat possible responses to funding reductions may include the
identification of the root causes of the countrys slow growth, reprioritisation,
efficiency gains and enhanced monitoring of service delivery programmes. In its
submission the PBO indicated that whilst education receives the largest
allocation in the 2014 Budget, there has been no discernible change in the past
11 years in the percentage of persons aged 5 24 attending educational
institutions. The number of persons in the aforementioned bracket attending
educational institutions was at 73 percent in 2013. Trends in other
socio-economic indicators reflectthat in the past 11 years the percentage of
households that live in formal dwellings and whose dwellings were fully owned
increased by 2 per cent from 52.9 per cent to 54.9 per cent.
Committee emphasised that work needs to be undertaken in identifying policy
options available to improve growth and meet the Presidents target growth rate
of 5 per cent per annum as outlined in the post-election 2014 State of the
Nation Address. With regards to value for money, the Committee was concerned about
the effectivenessof monitoring mechanisms in the use of allocated budgets
particularly in the areas of education and healthcare.
the development of quality and sustainable human settlements remains a key
priority for government, the Committee raised concerns around the funding made
available to the provision of housing and basic services relative to the
housing development outcomes. In particular, the Committee was concerned that
in many instances housing beneficiaries did not utilise their properties as
assets and as instruments in creating value. There were examples cited where
occupants of government provided houses preferred to sell or rent these out. An
assessment of the impact of the housing programme relative to funds allocated
to the programme was therefore required.
Committee noted the submissions by the National Treasury and PBO that the wage
bill poses significant risks to the fiscal outlook. The Committee views the
research and investigations into possible funding strategies that may assist in
stabilising compensation budgets as essential. The need to involve all sectors
affected and devise options where all stakeholders may contribute towards
attaining sustainable compensation budgetsis fundamental. There is a need to
strengthen partnerships between public and private stakeholders in creating
capacity and developing growth strategies.
Committee highlighted that the work of the PBO, specifically in relation to
ensuring value for money will need to incorporate the use of the latest data
from Statistics South Africa. The Committee pointed out that statistical data
often indicates slow progress in many policy outcomes areas yet funding
allocated to address these challenges was in place. The Committee raised
concerns regarding the constraints preventing the acceleration of industrial
development with specific reference to strengthening and availing resources to
regulatory entities such as the Competition Commission. The Committee was of the
view that the work of the states regulatory entities will go some way in creating
a conducive environment for small and rural enterprises to compete
and Fiscal Commission
Financial and Fiscal Commission (FFC/Commission) in its submission welcomed the
2014 Appropriation Bill and viewed the Bill as giving effect to the effective
allocation of resources towards priority areas. However, there was an urgent need
for government to improve the impact of spending programmes. The Commission
noted that the continued tight fiscal environment will necessitate trade-offs
between various funded priority areas in order to balance fiscal sustainability
and the need to accelerate socio-economic development.
Commission supports the process followed in giving administrative effect to the
additional cabinet portfolios and views the approach as entrenching the
principles of fiscal consolidation. In its assessment of the composition of
funds in the 2014 Appropriation Bill, the Commission reported that expenditure
performance was low in a number of programmes that are important drivers for
job creation and economic development such as the budget votes of Public Works,
Basic Education and Human Settlements.
regards to education, the Commission submitted that while it supports the
reprioritisation strategy of aligning allocations of the Schools Infrastructure
Backlogs Grant and Education Infrastructure Grant with spending capacity, such
alignment should not compromise school infrastructure delivery. The Commission
reported thatthere is a need for the Department of Basic Educationto strengthen
its support to provinces. In particular, delivery challenges were pronounced in
the Eastern Cape thus capacity support needs to be enhanced in the province so
as to ensure the successful delivery of schools infrastructure. With reference
to the funding for Further Education and Training, the Commission submitted
that systems need to be in place to monitor the financial health of Further
Education and Training Colleges.
Committee emphasised the need for ensuring that Further Education and Training(FET)
programmes were successful levers in the skilling of young people. The main
concern was progress in the transfer of the FET function from the provinces to
the Department of Higher Education and Training. The Committee noted the
indication by National Treasury that a special committee has been established
and will work with the heads of the Education Committee and the Council of
Education Ministers to provide executive stewardship of the full funding shift
of Further Education and Training Colleges by1 April 2015 and adult education and
training functions by1 April 2016.
FFC reported that it is part of theET Special Committee.
regards to health, the Commission reported that there remain challenges in the
implementation of the National Health Insurance (NHI) with slow spending
performance in the NHI grants. However, the Commission was supportive of
efforts by the Department of Health to address challenges of performance. In
particular, the centralisation of medicine procurement and establishment of the
Office of Health Standards were seen as positive developments.
FFC in its submission welcomed employment tax incentives to alleviate youth
unemployment and foster economic growth. The Commission reported that the state
needs to create incentives within the labour market that encourage firms to
substitute capital for labour. While the FFC views state employment programmes
as an important policy lever, it indicated that the coordination of job
creation efforts across departments remains a challenge.
Committee was concerned with the extent to which alternative capital-intensive
methods were being utilised for fast tracking infrastructure and service
delivery. The main concern was the displacement of labour and possible negative
effects this may have on the policy objectives of the EPWP programme. The FFC
indicated that programmes such as the EPWP were transitory in nature and
critical in addressing the significant challenge of high unemployment. Any innovation
that results in additional jobs should be encouraged. The Committee welcomes
efforts aimed at job creation though re-iterates that emphasis should be placed
on value for money and programme effectiveness in funding allocations for
employment creation programmes. The NDP envisages that unemployment rate should
reduce to 14 percent by 2020 and to 6 percent by 2030. Therefore total
employment should rise from 13 million to 24 million.
FFC indicated that there remain capacity challenges in State Owned Entities and
local government to deliver effectively on governments significant infrastructure
investment. The Commission submitted that delays in large-scale infrastructure
projects such as the Medupi Power Plant coupled withthe cost overruns resulting
from such delays pose significant risks to economic growth. The Commission
reported that the maintenance and rehabilitation of existing infrastructure
still remained a challenge. In particular, new infrastructure is funded through
transfers to provinces and local government while the responsibility for
maintenance and rehabilitation lies with the sphere where the infrastructure is
developed.There was a need to find an appropriate balance between funding for
new infrastructure and funding for operations and maintenance. In many
instances maintenance was not adequately budgeted for coupled with
under-spending on the same under-budgeted maintenance projects.
Presidential Infrastructure Coordinating Commission (PICC) will drive governments
infrastructure programme in the medium term. Critical is the realisation that
most of the planned infrastructure projects fall within the ambit of local
government and State Owned Entities. In its submission, the FFC indicated that
the value add of the PICC will be in how it interfaces with the
Intergovernmental Fiscal Relations (IGFR) system. Research findings from the
Commission indicate that the IGFR system supports economic growth but faces
challenges due to the bias of provincial and local government budgets towards
Committee pointed out that systems need to be strengthened to capacitate
municipalities in properly budgeting for operations and maintenance. The
Committee notes with concern the overall poor municipal performance in relation
to infrastructure development and the provision of basic services despite the
wide-range of funded capacity building initiativesbeing directed to
municipalities. The Committee supports the constitutional principle that states
that national government must support and strengthen municipal capacity in
order for municipalities to perform their functions.
its submission, the FFC reported that a focus area in reducing public service
costs was the objective determination for the equitable sharing of resources betweenthe
provinces and local government. The Commission reported that although the
equitable share formula was updated annually, some of the indicators were not
updated timeously so as to be aligned with impacting factors such as migration
at the beginning of a school year.
Committee emphasised that resource allocation needs to respond efficiently to
differences in provincial and local socio-economic conditions. The Committee
highlighted that high density and economically vibrant regional economies such
as Gauteng necessarily lend themselves to different requirements and
interventions compared to other provinces. The Committee raised concerns that
the local government share of nationally raised resources needs to respond
effectively to the needs of rural municipalities. The revenue raising powers of
rural municipalities were limited. The FFC submitted that there remains a
considerable gap between the potential revenue capacity of municipalities and
the actual revenue collected.Improving the collection of revenue in
municipalities will go some way in supplementing their capital budgets. In
addition, the Committee stated that education on fiscal matters is critical to
rural communities so as to increase public participation in the budget process.
FFC outlined a number ofstrategies that the state may consider to stimulate
cost-efficiencies and these include the moderation of the public sector wage
bill through prioritisation of frontline service delivery staff over general
administration staff, the reduction of waste and duplication and accurate cost
estimates for services being delivered. The Commission proposed the development
of norms for frontline staff versus administrative staff to total expenditure
per sector and ensuring that there are consequences for accounting officers who
recruit outside of the approved establishment.
The Commission mentioned that the development of a model for costing
basic services could be a valuable oversight tool for ensuring the efficient
use of public resources. Furthermore, the establishment of precise cost
estimates of norms and standards for concurrent functions will enhance measures
for attaining cost-effectiveness.
Committee sought clarity around the role of standardisation and the elimination
of salary disparities in the public sector as a cost containment measure of the
public service wage bill. The Committee pointed out that the disparities in
remuneration across all government departments and state entities may
negatively affect efforts aimed at improving public service productivity. The
FFC reported that the Public Administration Bill, which aims to build an
effective and efficient public service, may address some of the challenges
relating to disparities in remuneration amongst the disparate state entities
and also establish uniform standards and conditions of service. The FFC is
currently involved in a joint project with the Public Service Commission on
improving public sector productivity.
Public Service Commission (PSC/Commission) stated that the 2014 Appropriation
Bill was responsive to priority areas and efficacious in balancing compensation
and goods and services within the confines of the prevailing economic
conditions. The PSC reported on the linkage between the Bill and the principles
of efficiency, economy, and effectiveness and reported that the outputs
achieved vis-à-vis the percentage of budget spent has become a well-established
indicator in South Africa. However, this indicator did not expatiate in detail
on the issue of effectiveness as outcome data was seldom provided in
departmental annual reports.
reported that the percentage of national departments that managed to achieve
more than 80 per cent of planned targets increased from 5 to 15 per cent from
the 2011/12 to 2012/13 financial year.
Commission reportedthat 2 Heads of Department (HoDs) were evaluated in 2009/10;
8 in 2010/11; 7 in 2011/12; and no HoD was evaluated in the 2012/13 financial
year.The Committee viewed this as a cause for concern given the fact that 65
per cent of performance agreements were submitted by 30 June 2012.
Commission indicated that there were limitations in determining the
cost-benefit linkages of government spending programmes due to misalignment in the
capturing of expenditure and output information. It recommended that
departments should set efficiency indicators. The PSC re-iterated the importance
of thepayment of invoices within 30 days by departments as this was indicative
of administrative efficiency. It was of the view that reasons cited by
departments for late payment of invoices related to internal factors which can
be remedied by proactive action on their part.
PSC highlighted that potential strategies for public sector wage bill
efficiencies depended on the number and grading of posts on the establishment
and post levels. This encompasses up-to-date reviews of departments establishments,
determining whether establishments were based on rational post provisioning
norms and alternative service delivery models that can alter the labour
intensiveness of some public functions. The Commission indicated that the
management of the usage of consultants was also critical and that this should
be guided by service delivery models in order to avoid duplication of skills
and efforts within departments.
Committee expressed concern at the reported disjuncture between budget spent
and outputs achieved by national departments and was of the view that remedial
steps should be taken to improve the situation. The PSC reported that this was
indicative of poor planning within departments and can be remedied through
proper target setting, redesigning of service delivery models and proper
performance management. The Committee noted the lack of a culture of
enforcement and discipline within the public service especially relating to
poor performance by public officials. Of serious concern, was the reported lack
of compliance with regard to the evaluation of Heads of Departments (HOD) as a
result of logistical and timeline challenges. The Committee viewed this as asignificant
deficiency as HoDs should visibly support performance management processes and
ensure that this cascades down to other levels in the Senior Management Service
(SMS), if the principle of accountability is to be achieved in the Public
Committee welcomed the PSCs role in monitoring post establishments to
contribute toward the management of the wage bill. However, the Committee was
concerned about the delays in the filling of funded vacancies and enquired
whether a skills audit has been conducted in departments to ascertain the
relevance of skills employed versus the mandate of the departments. The Committee
emphasised the need for interventions in terms of the development and
submission of service delivery models in order to curb the duplication of
skills in the usage of consultants.
the Committee expressed concern at the reported non-compliance by departments
with payment of invoices within 30 days of receipt and its negative impact on the
sustainability of Small, Medium and Micro Enterprises (SMMEs).
considered all the submissions made by the above stakeholders on
2014Appropriation Bill, the Standing Committee on Appropriations identified the
following findings and areas of concern:
The Department of Public Service and
Administration is leading a process to give administrative effect to the
Presidents new Cabinet portfolios. The new votes and programmes will receive
funding from existing budget votes once functions are fully transferred.
The Committee notes the increase in the countrys
net debt stock over the next three years. The Committees view is that emphasis
should be on fundingallocations that prioritise capital expenditure and
minimise current expenditure so as to effect the fiscal principle of
In the 2009 budget, reprioritisation
constituted only 12 per cent of total revisions made to the budget whilst in
the 2014 budget, reprioritisation constitutes over 51 per cent on the revisions
made to the budget.Budgeting will entail finding efficiency gains and enhancing
the monitoring of service delivery programmes.
Cost-containment measures were introduced in
December 2013 to limit expenditure on conferences, travel, entertainment and
other non-essential items. The establishment and enhancement of monitoring
mechanisms on implementation of the cost-containment measures is critical.
The Committee welcomes work by the Chief
Procurement Officer in building national systems for the purchase of high-value
goods and services commonly used throughout government.However, procurement
reforms should not negatively affect small businesses as they constitute
governments regional and local service providers.
The Committee supports the strengthening and
enhancement of work targeted at ensuring contracts are fair and transparent. In
particular, work underway by the Accountant-General in investigating fraud and
maladministration relating to state contracts is a positive initiative.
Funding allocated to higher education and
training has increased significantly over the past few years though the
increase in expenditure has not been proportionate to the increase in the skills
level of the countrys workforce.
The Committee welcomes efforts aimed at job
creation though re-iterates that emphasis should be placed on value for money
and programme effectiveness in funding allocations for employment creation
The implementation of conditional grants such
as the Municipal Infrastructure Grant should be only as per the prescribed
grant objectives. The Committee envisages that skills transfer will remain an
important focus area in the rollout of conditional grants in the provincial and
local spheres of government.
There is a need to find an appropriate
balance between funding for new infrastructure and funding for operations and
maintenance. In many instances maintenance was not adequately budgeted for and
spending performance on budgets for operations and maintenance was poor.
There remains a considerable gap between the
potential revenue capacity of municipalities and the actual revenue collected.
Improving the collection of revenue in municipalities will go some way in
supplementing their capital budgets.
The formulation of precise cost estimates of
norms and standards for concurrent functions for provinces and municipalities
to implement may minimise the unevenness in access to and quality of services
enjoyed by beneficiaries within the different provinces.
The Committee welcomes governments intention
to maintain employee numbers at a constant level in the next three years. In
addition, the Committee supports research underway by the Financial and Fiscal
Commission and Public Service Commission on enhancing public sector
There remain significant disparities between
departments expenditure and performance against pre-determined targets. The
Committee notes that while departments routinely spend above 90 per cent of
their budgeted funds they perform significantly lower in terms of their
The Committee notes that there were Medium Term
Expenditure Framework baseline reductions effected on the Schools
Infrastructure Backlogs Grant and Education Infrastructure Grant in order to
align spending with institutional capacity. The Committee is of the view that
slow expenditure performance should not compromise the attainment of service
delivery performance targets.
The overall compliance rate for the
submission of Performance Agreements of Heads of Department by the due date of
30 June 2012 was 65 per cent. However, the number of Heads of Departments
evaluated has been less than18 per cent in the past four years with none
evaluated in 2012/13.
Departments need to significantly improve on
ensuring that suppliers that do business with government are paid within 30
days from receipt of an invoice.
Committee views the non-payment of suppliers by government departments as
having adverse effects on the economy specifically on the operations of Small
The Committee welcomes additions by the
National Treasury to the 2014 grant frameworks of specific indirect grants that
set explicit requirements on Skills Transfer and Capacity Building which will
set out how skills transfer and capacity building will be provided by national
departments to province and municipalities.
on Briefings and Comments by invited stakeholders
Standing Committee on Appropriations, having considered the briefings and
comments by invited stakeholders on the 2014 Appropriation Bill, recommends as
That the Minister of Finance should consider
That National Treasury in partnership withthe
Department of Cooperative Governance and Statistics South Africa develop systems
to enhance municipal data and municipal statistics for the appropriate costing
of infrastructure projects and basic services.
That National Treasury in partnership with
the Department of Cooperative Governance develop and implement strategies aimed
at enhancing the revenue generation and debt collection capacity of provincial
and local government; especially small and rural municipalities.
That National Treasury in partnership with
the Department of Higher Education and Training develop and implement
strategiesto link funded municipal capacity building programmes with Further
Education and Training (FET)programmes and position municipalities as employers
of choice for FET graduates.
That National Treasury develop systems and
measures that incentivise departments to find best practice in finding spending
efficiencies and that these are scaled up sufficiently across departments
That National Treasury in partnership with the
Department of Cooperative Governance develop and implement strategies aimed at
ensuring municipalities plan and budget effectively for operations and
maintenance on their infrastructure assets.
That National Treasury in partnership with
the Department of Performance Monitoring and Evaluation ensure that all
suppliers that do business with government are paid within 30 days from receipt
of an invoice.
That National Treasury develop and implement
measures that will encourage and attract the private sector in the
implementation of governments programmes of job creation and infrastructure
That National Treasury develops systems and
strategies to encourage and raise the individual household savings rate and the
overall national savings rate so as to stimulate higher investment rates for
rapid economic growth.
That National Treasury through the Chief
Procurement Office develop and implement strategies aimed at ensuring
government procurement practices which prioritise the purchase of local goods
and supports domestic suppliers.
That the Minister of Public Service and
Administration ensures the following:
That the Department of Public Service and
Administration in consultation with the Public Service Commission develop and implement
systemsand mechanisms that will ensure that all departments and state agencies
appoint officials within approved organisational structures.
To consider developing and establishing norms
and standards relating to the functions of the public service, organisational
structures and establishments of department and other organisational and
governance arrangements in the public service so as to support efforts at
moderating the wage bill.
The Department of Public Service and
Administration in consultation with the Public Service Commission review the
current system of evaluating Heads of Departments and develop alternative
systems and mechanisms that ensure that all Heads of Departments are evaluated
That all funded vacant posts within
government departments should be filled timeously.
That the Minister of Basic Educationshould
ensure that the Department of Basic Education develop measures and strategies
to ensure the establishment of institutional capacity for the successful
implementation of the Schools Infrastructure Backlogs Grant and Education
on the Bill
the recommendations in section 4above and due to the fact that no formal
amendments were proposed by Parliamentary Committees, the Standing Committee on
Appropriations recommends that the National Assembly adopts the 2014
Appropriation Bill, without amendments.
Committee noted that the 2014 Appropriation Bill as tabled on 26 February 2014,
did not take into account the new departments announced by The President of the
Republic of South Africa on 17 June 2014. To this end, National Treasury will
table technical corrections in terms of section 14 of the Act for consideration
by the National Assembly.
Report to be
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