ATC201201: Report of the Standing Committee on Appropriations on the Second Adjustments Appropriations Bill [B25–2020], Dated1 December 2020

Standing Committee on Appropriations

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE SECOND ADJUSTMENTS APPROPRIATIONS BILL [B25–2020], DATED1 DECEMBER 2020

 

The Standing Committee on Appropriations having considered theSecondAdjustments Appropriation Bill [B25-2020] (National Assembly – section 77),referred to in terms of section 12 (15) of the Money Bills and Related Matters Act, 2009 (Act No. 9 of 2009) (as amended), reports as follows:

 

1. Introduction

 

The Minister of Finance tabled the Second Adjustments Appropriations Bill (henceforth referred to as the Bill) in Parliament on 28 October 2020 during the presentation of the 2020Medium Term Budget Policy Statement (MTBPS). The Bill was tabled in Parliament in terms of section 12(1) and (2) of the Money Bills and Related Matters Act as amended by the Money Bills Amendment Procedure and Related Matters Amendment Act, 2018 (Act No. 13 of 2018).Section 12(1) of the Money Bills and Related Matters Act requires the Minister of Finance to table a national adjustments budget as envisaged in section 30 of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (hereafter referred as the PFMA). Section 12(2) of the Money Bills and Related Matters Act requires that “an adjustments appropriation Bill must be tabled with a national adjustments budget”. The Bill was referred to the Committee on 11 November 2020 for consideration and report in terms of section 12(15) of the Money Bills and Related Matters Act.

 

In addition to National Treasury briefing the Committee on the Bill in its entirety, the Financial and Fiscal Commission and Parliamentary Budget Office were also invited to comment on the Bill. Furthermore, to deliberate and understand the possible service delivery implications of the budget adjustments, the Committee invited national government departments who were affected by the budget adjustment to make oral and written submissions on the overall impact of these budget adjustment on their respective legislative mandate. The departments of Water and Sanitation, Basic Education, and Transport were invited to make oral presentations on the Bill.  In addition to the invited stakeholders and departments, the Committee also requested the Departments of Correctional Services, Higher Education and Training, Trade, Industry and Competition as well as the South African National Defence Force to make written submissions on the Bill.

To facilitate public participation and involvement, an advertisement was published in national and community newspapers from 30 October to 6 November 2020 inviting general public and all interested stakeholders to make written submissions and comments on the Bill. The C19 People’s Coalition and the Public Service Accountability Monitor made comments on the Bill in response to the aforementioned advertisement. Public Hearings were held on 27 November 2020 on the Zoom virtual meeting platform.

 

Section 43 (1) of the Public Finance Management Act of 1999 (PFMA) allows Accounting Officers to utilise a saving in the amount appropriated under a main division (programme) within a vote to defray excess expenditure under another main division within the same vote, unless the relevant treasury directs otherwise. However, section 43 (2)states that the amount of savings under a main division of a vote that may be utilised in terms of subsection (1) may not exceed 8 per cent of the amount appropriated under that main division. To this end, the Committee identified the 6 departments that have exceeded the 8 per cent requirement of the PFMA and National Treasury supplied the reasons for these virements and supported these virements. These departments were Basic Education, Police, Trade, Industry and Competition, Employment and Labour, Transport and Defence.Furthermore, section 43(4)does not authorise (a) the utilisation of savings on an amount specifically and exclusively appropriated for purpose mentioned under the a main division within a vote, (b) the utilisation of savings on an amount appropriated for transfer to another institution, and (c) utilisation of savings on an amount appropriated for capital expenditure in order to defray current expenditure.

 

This report focuses on the proposed adjustmentsto the 2020Appropriations Act(Act No 7 of 2020) as tabled by the Minister of Finance and the matters raised during the engagements with the invited stakeholders and the organisations that made submissions in response to the Committee advertisements.

 

1. Overview of the 2020 Second Adjustments Appropriation Bill

 

The Second Adjustments Appropriation Bill provides for increases to allocationsset out in the main Appropriation Act of 2020.In total, the net effect of the Second Adjustment Appropriations is an increaseto vote appropriations by R37.7 billion. A total of R44.3 million has been shifted from the Department of Public Works and Infrastructure to the National School of Government. Furthermore, a total of R1.8 million has been shifted from Department of Environment, Forestry and Fisheries to Government Communication and Information System.

 

Table 1: Reprioritisation of funds between and within votes, and the allocation of funds earmarked in the 2020 Budget speech for the implementation of the SAA rescue plan

		2020/21
		Second adjustments appropriation
Vote number and title (R thousand)		Shifting of funds	Funds earmarked in the 2020 Budget speech	Total
1	The Presidency	6,620		6,620
2	Parliament	24,279		24,279
3	Cooperative Governance	255,352		255,352
4	Government Communication and Information System	5,900		5,900
5	Home Affairs	98,311		98,311
6	International Relations and Cooperation	28,658		28,658
7	National School of Government	2,205		2,205
8	National Treasury	362,282		362,282
10	Public Enterprises	57,168		57,168
11	Public Service and Administration	21,622		21,622
13	Public Works and Infrastructure	234,280		234,280
14	Statistics South Africa	45,046		45,046
15	Traditional Affairs	1,947		1,947
16	Basic Education	275,926		275,926
17	Higher Education and Training	1,132,863		1,132,863
18	Health	694,187		694,187
20	Women, Youth and Persons with Disabilities	7,476		7,476
21	Civilian Secretariat for the Police Service	1,651		1,651
22	Correctional Services	308,166		308,166
25	Justice and Constitutional Development	194,554		194,554
26	Military Veterans	54,227		54,227
28	Police	1,195,622		1,195,622
29	Agriculture, Land Reform and Rural Development	171,534		171,534
30	Communications and Digital Technologies	38,481		38,481
31	Employment and Labour	39,795		39,795
32	Environment, Forestry and Fisheries	95,836		95,836
33	Human Settlements	345,399		345,399
34	Mineral Resources and Energy	91,275		91,275
35	Science and Innovation	87,085		87,085
36	Small Business Development	27,434		27,434
37	Sports, Arts and Culture	55,937		55,937
38	Tourism	17,179		17,179
39	Trade, Industry and Competition	109,512		109,512
40	Transport	681,275		681,275
41	Water and Sanitation	200,919		200,919
Announced in the 2020 Budget speech			3,529,997	3,529,997
Total		6,970,003	3,529,997	10,500,000

 Source: National Treasury (2020) Second Adjustments Appropriation Bill

 

 

Table 2: Unforeseeable and unavoidable expenditure

Vote and description of expenditure		R thousand
3	Cooperative Governance	50,000
	Presidential employment intervention: Improving municipal capabilities in labour intensive municipal infrastructure and maintenance through the Municipal Infrastructure Support Agent
8	National Treasury	7,498,800
	Provincial equitable share: R500 million for direct food relief; and presidential employment intervention: R6 998.8 million for the education employment initiative
13	Public Works and Infrastructure	158,880
	Presidential employment intervention: Hiring of graduates and additional supervisors from an existing database of all unemployed graduates in the built environment sector
16	Basic Education	1,200
	Presidential employment intervention: Oversight of the education employment initiative
18	Health	393,571
	Presidential employment intervention: Recruitment of community health workers and outreach team leaders, and appointment of enrolled nurses and auxiliary nurses
19	Social Development	7,885,624
	Presidential employment intervention: R6 796.896 million for the extension of the social relief of distress grant for three months; R500 million for direct food relief; and R588.728 million to sustain social workers and early childhood development workers, and employ community development practitioners and unemployed youth
29	Agriculture, Land Reform and Rural Development	1,000,000
	Presidential employment intervention: Special COVID-19 Subsistence Producer Relief Fund to subsistence producers to retain self-employment and support food value chains
32	Environment, Forestry and Fisheries	1,983,000
	Presidential employment intervention: Employment in infrastructure maintenance projects, collectors and
	harvesters of indigenous plant species within bioprospecting economy, catchment restoration, and land rehabilitation waste management
35	Science and Innovation	44,999
	Presidential employment intervention: Health promotion agents, enviro-champs, water graduate employment programme, and experiential training programme
37	Sports, Arts and Culture	665,000
	Presidential employment intervention: Return to Play fieldworkers or compliance officers; Banking on Art
	Connecting Lives; artist support through marketing plans and other growth strategies; statue audit; public art development programme; and digitisation of archival records
39	Trade, Industry and Competition	120,000
	Presidential employment intervention: Global business support
40	Transport	630,000
	Presidential employment intervention: Expanding labour intensive projects in provincial roads maintenance
Total		20,431,074

 Source: National Treasury (2020) Second Adjustments Appropriation Bill

 

 

 

 

 

 

 

 

Table 3: Expenditure earmarked in the 2020 Budget speech

 

Source: National Treasury (2020) Second Adjustments Appropriation Bill

 

 

Table 3 above indicates expenditure which were earmarked in the 2020 budget speech. To a larger extent and to the majority of the budget votes, these expenditure adjustments are largely due to compensation of employees adjustments. However, there are other adjustments made per vote as reflected in Table 3 which were not as a results of compensation of employees’ adjustment for each vote, namely;

• Vote 8, National Treasury:R25 253.3 million from the provincial equitable share;
• Vote 10, Public Enterprises: R23 000 million for Eskom; R6 601.9 for  South African Airways debt and interest; and R3 529 for South African Airways business rescue plan; and
• Vote 30, Communications and Digital Technologies: R84.7 million for the Independent Communications Authority of South Africa for the licencing of the high demand spectrum and provision of wireless open access network services.

 

Table 4: Roll-overs

Vote and description of expenditure		R thousand
1	Presidency	13,800
	R13.8 million for the e-Cabinet system
8	National Treasury	25,621
	R25.621 million for subscription to additional shares of the capital stock of the International Bank of Reconstruction and Development allocated under the 2018 general capital increase and selective capital increase resolutions
16	Basic Education	474,901
	R474.901 million for the sanitation appropriate for education initiative
28	Police	252,772
	R1.482 million for maintenance and calibration of laboratory equipment, R2.839 million for laboratory supplies, R11 000 for waste consumables, and R248.44 million for personal protective equipment for COVID-19
33	Human Settlements	390,274
	R 390.274 million for the urban settlements development grant
40	Transport	138,163
	R98.163 million for the public transport network grant and R40 million for COVID-19 disaster response
41	Water and Sanitation	306,534
	R306.534 million for regional bulk infrastructure grant drought and COVID-19 interventions
Total		1,602,065

 Source: National Treasury (2020) Second Adjustments Appropriation Bill

 

 

 

 

 

 

 

 

Table5:Self-financing expenditure

Vote and description of expenditure		R thousand
1	Presidency	9,260
	Donation from the Ford Foundation to address gender-based violence
4	Government Communication and Information System	1,300
	Expenditure to produce Vuk'uzenzele newspaper, which is funded from revenue generated through advertising in the newspaper
5	Home Affairs	621,700
	Expenditure incurred issuing official documents, which is defrayed by revenue generated from issuing the documents
22	Correctional Services	623
	Expenditure for offender gratuities, which is funded from revenue generated from the hiring out of offender labour
23	Defence	809,840
	Expenditure for defence activities, which is defrayed from reimbursements from the United Nations for South Africa’s contribution towards peace support operations, and the sale of equipment and spares procured through the special defence account
39	Trade, Industry and Competition	57,200
	Unitary payment in respect of the public-private partnership for shared campus accommodation, which is funded from unitary payments received from public entities
Total		1,499,923

Source: National Treasury (2020) Second Adjustments Appropriation Bill

 

Table 6: Declared unspent funds and projected underspending

Vote and description of expenditure		R thousand
13	Public Works and Infrastructure	181,023
	Property Management Trading Entity (R161.192 million); Construction Industry Development Board (R5.152 million);
	Council for the Built Environment (R4.651 million); Agreement South Africa (R3.577 million); and machinery and equipment (R6.451 million)
31	Employment and Labour	6,073
	Compensation of employees due to delays in the filling of vacancies as a result of the national lockdown
Total declared unspent funds		187,096
Projected underspending		2,108,558
Total		2,295,654

 Source: National Treasury (2020) Second Adjustments Appropriation Bill

 

The following virements that needs to be approved by Parliament has been reported by the National Treasury:

• Basic Education (Vote 16): A proposed total of R28.6 million is shifted from theSchool Infrastructure Backlog Grantfor the procurement of the teaching toolkits, computers, audit cost and the maintenance of the Fundza Lushaka information management system.
• Defence (Vote 23):A proposed total of R606.4 million is shifted from the special defence account on various programmes to fund extended deployments of the South African National Defence Force members.
• Police (Vote 28): A proposed total of R1 million is shifted within the visible policing programme to pay donations to non-profit institutions.
• Employment and Labour (Vote 31): A proposed total of R350 000 is shifted from compensation of employees to pay various claims against the state.
• Trade, Industry and Competition (Vote 39):A proposed total of R10 million is shifted from goods and services budget of the economic research and coordination to the industrial competitiveness and growth programme to fund infrastructure upgrade of the South African Bureau of Standards.
• Transport (Vote 40): A proposed total of R2.3 billion is shifted from various capital projects within the rail transport programme to pay for financial assets of the Airports Company of South Africa within the civil aviation programme. Furthermore, a proposed total of R155.5 million is shifted from the road transport programme to the South African Civil Aviation Authority.

 

1. Adjustments per identified department

 

The section below outlines the adjustments on budget allocations for the departments, which were identified by the Committee for briefings and written submissions on the Bill.

 

1. Department of Water and Sanitation (Vote 41)

 

The Department of Water and Sanitation’s 2020/21 main appropriation of R17.216 billion was adjusted downwards by R257 million to R16.959 billion in the June 2020 special adjustments budget.  The Department’s adjusted appropriation of R16.959 billion has been adjusted upwards by R35.064 million in the second adjustments to R16.994 billion. Total expenditure as at the end of the second quarter of the 2020/21 financial year was R6.282 billion or 37 per cent of the adjusted appropriation of R16.959 billion. In terms of non-financial performance, as at the end of the second quarter of the 2020/21 financial year, the Department achieved only 43 per cent of its 15 objectives while 19 per cent were partially achieved and 38 per cent were not achieved.

 

 

 

 

 

 

1. Department Basic Education (Vote 16)

 

The Department of Basic Education’s 2020/21 main appropriation of R25.328 billion was adjusted downwards by R2.095 billion to R23.233 billion in the June 2020 adjustments budget. The Department’s adjusted appropriation of R23.233 billion has been adjusted upwards by R161.938 million to R23.394 billion in the second adjustments budget. In terms of actual expenditure, as at the end of the second quarter of the 2020/21 financial year, actual expenditure was at R12.850 billion or 55.3 per cent of the adjusted appropriation of R23.233 billion. In terms of non-financial performance, the Department reported that it had achieved 90 per cent of its targets for the second quarter of the 2020/21 financial year while 10 per cent had not been achieved.

 

1. Department of Transport (Vote 40)

 

The Department of Transport’s 2020/21 main appropriation of R62.047 billion was adjusted downwards by R4.640 billion to R57.407 billion in the June 2020 adjustments budget. The Department’s adjusted appropriation of R57.407 billion has been adjusted downward by R41.093 million to R57.365billion in the second adjustments budget. The Department’s expenditure as at the end of the second quarter of the 2020/21 financial year was R27.601 billion or 48.1 per cent of the adjusted appropriation ofR57.365 billion.

 

1. Department of Police (Vote 28)

 

The Police Department’s 2020/21 main appropriation of R101.771 billion was adjusted upward by R3.700 billion to R105.411billion in the June 2020 adjustments budget. The Department’s adjusted appropriation of R105.411billion has been adjusted downward by R5.850billion to R99.560 billion in the second adjustments budget. The SAPS’s expenditure as at the end of the second quarter of the 2020/21 financial year was R46.388 billion or 46.6 per cent.

 

1. Department of Higher Education and Training (Vote 17)

 

The Department of Higher Education and Training’s main appropriation of R116.856billion was adjusted downward by R9.856 billion in the June 2020 special adjustments budget. The department’s adjusted appropriation has been reduced by R2.730 billion to R104.269 billion in the second adjustment budget. The department’s expenditure as at second quarter of the 2020/21 financial year was R78.427 billion or 75.2 per cent of the adjusted appropriation of R104.269 billion.

 

1. Department of Defence (Vote 23)

The 2020/21 main appropriation of R52.438 billion for the Department of Defence was adjusted upwards by R2.880 billion to R54.201 in the June 2020 special adjustments budget. The department’s adjusted appropriation has been reduced by R1.117 billion in 2020 second adjustment budget. The department’s expenditure as at the second quarter of 2020/21 financial year was R25.350 billion or 46.8 per cent of the adjusted allocation of R54.201 billion. The Department reported that it had achieved 7 of its planned 14 targets for the second quarter of the 2020/21 financial year.

 

1. Department of Correctional Services (Vote 22)

 

The main appropriation of R26.799 billion for the Department of Correctional Services has been adjusted downwards by R1.203 billion during the second adjustment budget to R25.596 billion. The Department’s expenditure as at the end of second quarter of the 2020/21 financial year was R12.095 billion or 47.3 per cent of the second adjusted allocation. In terms of non-financial performance, the Department reported that it had achieved 27 or 61 per cent of its 44 targets for the second quarter of the 2020/21 financial year while 17 or 39 per cent had not been achieved.

 

1. Department of Trade, Industry and Competition (Vote 39)

 

Following the tabling of the Special Adjusted Budget by the Minister of Finance on 24 June 2020, the Department of Trade, Industry and Competition’s main allocation was reduced by R1.771 billion, from R11.082 billion to R9.273 billion.  The department’s adjusted appropriation has been reduced by R37.438 million to R9.273 billion in the second adjustment budget. The department’s expenditure as at the second quarter of the 2020/21 financial year was R4.013 billion or 43.3 per cent of the R9.273 billion. In terms of non-financial performance, the Department reported that it had achieved 31 of its planned 33 targets for the second quarter of the 2020/21 financial year.

 

 

 

1. Comments and hearings on the Bill with identified stakeholders

 

The section below provides an overview of the comments that were made on the Bill by the invited stakeholders.

                                                                                       

1. Financial and Fiscal Commission

 

The Financial and Fiscal Commission (FFC) submitted that government’s Economic Reconstruction and Recovery Plan (ERRP) strengthened the continuity and consistency of the position taken in the 2019 Strategy document: Economic Transformation, Inclusive Growth and Competitiveness.  Whilst it appreciated the aforementioned, consistency should not be confused with repetitions without proof of realreforms, impacts and outcomes, for it may lose even more credibility of policy and that of implementation of government programmes.

 

The FFC submitted that it was in agreement with the thrust of the ERRP and the key elements identified by the President. The expectation was that the 2020 MTBPS would respond to these pillars of recovery and allocate resources appropriately.  The Commission looked at the alignment of budgets with the key elements of the ERRP.

 

The FFC also expressed concerns around the lack of adjustment/decreases to basic education, agriculture, defence and social security funds envisaged for the 2021/22 financial year. It expressed particular concern about the implications of no increases in basic education. The FFC recommended that the implications of budget cuts for the affected departments be detailed as it is important to understand the implications of cuts in order to mitigate any negative effects. It further submitted that the attempt at large fiscal adjustment may impose unsustainable social pressures, impact on the economic recovery and deal a second blow to livelihoods of South Africans on top of the Covid-19 catastrophe.

 

The FFC posited that the economic relief package was unlikely to achieve expected results with the limited budget. The negative and marginal expenditure growth rates in a number of crucial votes for 2021/22, as evidenced in the GDP growth forecasts, implied dire anticipated economic and social conditions ahead.The FFC was of the view that some elements of the economic stimulus, for instance the Bank Loan Guarantee Scheme (BLGS), needed to be extended to the 2021/22 financial year in order to mitigate the effect of the Covid-19 pandemic. According to FFC, the BLGS is one of the interventions that can make a measurable impact on the economy and employment levels. However, business owners are reluctant to incur more debt under uncertain business conditions and weak economic outlook.

 

Regarding the proposed R10.5 billion allocated to SAA to implement its business rescue plan, the FFC recommended the expeditious establishment of the proposed Presidential State Owned Enterprises Council whose task will be to provide strategic oversight of SOEs, ensuring that, their dependence on the fiscus is reduced, by addressing their financial, operational, business model and people challenges and ensure their proper rationalisation.

 

The FFC submitted that average spending by national government departments was 54 per cent of their budgets. The FFC however highlighted departments such as Higher Education, Social Development, Small Business and Basic Education, far exceeded the spending norm of 50 per cent which could be due to Covid-19 related spending pressures.Departments such as Agriculture (43 per cent), Human Settlements (33 per cent), Energy (41 per cent), Science and Innovation (42 per cent), Tourism (22 per cent), Trade and Industry (36 per cent), Public Works (45per cent), Women (43 per cent), Employment (41 per cent), Communication (39 per cent), Health (49 per cent) registered spending below the norm of 50 per cent.In spite of the challenges brought about by the Covid-19 pandemic, the FFC remained concerned about excessive deviations below or above the norm from an expenditure smoothing perspective. Unless a department’s in-year cash management plan explicitly identifies such deviations as a chosen spending profile, departments should be confined to spending performance guidelines.

 

1. Parliamentary Budget Office

 

The Parliamentary Budget Office (PBO) submitted that the Second Adjustments Appropriations Bill proposes an increase in national appropriations by R37.7 billion from R963.1 billion in the 2020 Budget to R1 025.3 billion.It also highlighted the fact that virements and shifts between main divisions/programmes are also allowed during the adjustments appropriations process, of which four i.e. Basic Education, Police, Trade, Industry and Competition, Employment and Labour, Transport and Defencerequired Parliament’s approval. The PBO also highlighted the spending trends vis-a-vis performance and submitted that South Africa’s public spending levels were not matched by high levels of quality or efficiency in the services delivered. Preliminary findings on spending reviews, which form part of the budget system, indicate that:

• Many policies are designed and adopted without considering their total costs and affordability;
• Multiple institutions share overlapping responsibilities or mandates, leading to duplication of work; and
• In several high-spending procurement areas, including information and communications technology, and infrastructure, it appears that government is overpaying for goods and services.

 

1. Public submissions on the Bill

 

The section below provides summaries of the inputs made by organisations and individuals in response to the advertisement calling for submissions from the public on the Bill.

 

1. Public Service Accountability Monitor

 

The submission from the Public Service Accountability Monitor (PSAM) highlighted possible interventions to “build back better” after the Covid-19 pandemic; as well the importance of entrenching the views and needs of those most affected by fiscal and budgetary decisions, in the budgeting process.

 

PSAM made the following recommendations related to the Bill:

• The Committee should request the National Treasury and Cabinet to review and reverse the decision to reduce the budgets of departments such as Heath, Human Settlements and Education to fund the R10.5 billion for the SAA business rescue plan; with a view to avoiding a worsening crisis in the public service in future.
• Illicit financial flows should be addressed by reversing the R 238 million decrease in the budget allocation to the South African Revenue Service (SARS); and by significantly increasing its resources; as allocating sufficient budget to strengthen tax administration is an investment in the long-term financial stability of the country.
• With regard to the net reduction of R120.6 million in the funding for Statistics South Africa (Stats SA); the Committee should consider the calls by various role-players to rather identify alternative, non-strategic programmes to be cut; given that a functional statistical agency is core to developing the capacity to deliver well-targeted public services and to address the high levels of poverty and inequality.
• While zero-based budgeting has the potential to improve the efficient management of public funds while there is a dire need to entrench effective financial management and eliminate wasteful expenditure; a cautionary approach is needed, given key capacity limitations and possible adverse impacts. National Treasury should also outline the efforts to be taken to ensure adequately participatory and transparent processes to meet the demands of zero-based budgeting. This also presents an opportunity to explore what kind of state capacity would be required, and to give effect to key components of the National Development Plan.

 

In addition, PSAM made the following broader recommendations to address corruption in public procurement:

• Ensure transparency in public procurement and the availability of open data about procurement plans, tenders, contracts, bidders and their beneficial owners in order to enable better prevention and detection of corruption risks, improving opportunities to spot abuses.

• Ensure access to high-quality, standardised information about the full cycle of money flows, in line with the globally recognised open data standards, such as Open Contracting Data Standard (OCDS) or Beneficial Ownership Data Standard (BODS) in order to allow for better analysis and detection of corruption risks.
• Incorporate and use high-quality open data in order to empower civil society, journalists, academics and businesses to effectively follow the trail of public resources.

 

In closing, PSAM asserted that budget priorities must be open to public input given that they were intended to serve the developmental needs of the people; and that enabling thorough scrutiny and debate of priorities set in the budget processes was crucial and could not continue in its current form. In order for the potential benefits of transparency to be realised, the executive should release better budget and outcomes data and the legislature and civil society should be able to use that information in a vibrant budget debate.

 

1. C19 People’s Coalition

 

The C19 People’s Coalition (C19) submitted that the 2020 Adjusted Estimates of National Expenditure (AENE) hollowed out national institutions, undermined the social compact, and enabled a growth in illicit financial flows by weakening tax administration. It was of the opinion that the state had failed to protect the most vulnerable members of society during COVID-19; as the number of households experiencing hunger had doubled and inequality had risen as job losses overwhelmingly affected the working poor, black people, and people living in rural areas.

 

C19 gave an overview of the proposed public wage bill cuts and expressed concern that labour was forced to carry the consequences of the elite’s financial mismanagement in both the public and private sector; indicating that this was not compatible with the requirements of a social compact. C19 further expressed concern over the reduction of R238 million in the allocation to the South African Revenue Service (SARS). It highlighted the fact that tax revenue was expected to be R313 billion less than the February 2020 forecast, partly as a result of increasing illicit financial flows; while SARS experienced a capacity gap due to the number of critical vacancies.

C19 expressed serious concern over the R1.9 billion reduction in the Basic Education budget; indicating that the total spend on education had declined year-on-year for the last four years. C19 further indicated that the global pandemic had necessitated careful central planning and increased resources in order to address long-standing water infrastructure backlogs and insufficient textbooks and teachers, in order to reduce the risk of COVID-19 transmission in schools; and to strengthen the school nutrition programme in the face of widespread and growing hunger. C19 did not agree with government that Basic Education was not a frontline department in the fight against the pandemic. C19 was further concerned over the increase in the use consulting services and agency staff; indicating that reducing the budget while increasing reliance on external services, eroded the institutional memory and capacity vital to sound public administration.

 

C19 submitted that a single, national and universal healthcare system was required to ensure that healthcare spending became more efficient, effective and just; and that the National Health Insurance (NHI) was central to this plan. C19 expressed concern over the R390 million cuts in the Health budget, including in the NHI grants (direct and indirect), the HIV, TB, Malaria and Community Outreach Grant, and the Health Facility Revitalisation Grant. C19 indicated that the pandemic had revealed the mounting health threats posed by backlogs in dealing with infectious diseases such as HIV and TB; and that Community Health Workers (CHWs) had been central in supporting health system preparedness during emergencies such as COVID-19 and TB.

 

With regard to Social Development, C19 submitted that the mischaracterisation of social spending as unsustainable or wasted expenditure being provided to an “unproductive” poor at the expense of some other “more important” investment, was extremely harmful. It indicated that, while the economic benefits created by income security were well documented, there was a moral imperative to provide urgent and necessary social assistance to ensure a dignified life for all.

 

C19 made the following recommendations, to which it requested National Treasury to provide a public written and oral response:

• Address illicit financial flows by reversing budget cuts to the South African Revenue Service (SARS) and significantly increasing its resources; as allocating sufficient budget to strengthen tax administration is an investment in the long-term financial stability of the country.

• Deprioritise spending on defence in order to free up funds for deepening social policy and strengthening public administration.
• Significantly reduce the use of consultants and outsourced services while consolidating and investing in a dedicated professional civil service.
• Reverse cuts to the education cluster and reclassify Basic Education as a frontline service.
• Reverse cuts to healthcare; remove medical aid tax credits and prioritise resources for implementing the National Health Insurance (NHI).

• Provide adequate budget for Community Healthcare Worker (CHW) compensation, as legally agreed upon in 2016. Universal healthcare can only be successful if CHWs receive adequate training, infection prevention, protective equipment and remuneration to provide frontline healthcare.
• Move to a guaranteed income for all. Given unprecedented unemployment, instead of taking grants away after January 2021, government must build on these to provide a dignified basic income guarantee (BIG) that is universal, unconditional and redistributive. This should be financed through annual progressive wealth tax and increasing personal income tax for the top 2 percent of earners.
• Initiate a formal enquiry into which conditional grants have been subject to delays in payment and what the reasons for delays are. 
• Members of Parliament must ask suitably rigorous questions about the cost implications of large energy projects. 
• Recognize that OR Tambo District Municipality has been hit by a tornado and nearly 400 people have been left homeless. Disaster relief measures, in line with the attendant enabling budgetary processes, need to be implemented.

 

 

 

1. Committee findings and observations

 

Having deliberated and considered all the submissions made by the above stakeholders on the Second Adjustments Appropriation Bill [B25–2020], the Standing Committee on Appropriations makes the following findings and observations:

 

1. The Committee notesand welcomes the R37.7 billion additional allocation proposed in this Bill on Vote allocations. The Committee views this as crucial in allowing government to continue providing service to all South Africans notwithstanding the negative impact that the Covid-19 pandemic has had to public finances.
2. The Committee noteswith concern the R7 billion proposed reduction in Vote allocationsto provide for the SAA business rescue plan which required R10.5 billion. Even though government had to fund the SAA business rescue plan, the Committee is concerned about the uniform manner in which these Vote allocations are reduced, particularly on departments who are providing critical services like the Police, Home Affairs, Health and Water and Sanitation.
3. The Committee notes that widespread opposition within civil society to allocating R10.5 billion to SAA at the expense of crucial service delivery votes and provincial allocations. Some express a principled opposition to allocating any funds to SAA, while others object to the sources from which this allocation was made. These views also came across persistently in the hearings on the Revised Fiscal Framework, Division of Revenue Second Bill and the 2020 MTBPS.
4. The Committee welcomes the R12.6 billion proposed for the presidential employment interventions to address unemployment, particularly as it affect the youth. The Committee views this as continued commitment by government on its central objectives of job creation, unemployment reduction and subsequently a reduction in the overall inequality levels.
5. The Committee welcomes the R500 million unforeseen and unavoidable expenditure for the provision of food parcels to the most vulnerable. The Committee fully understands and appreciates the impact that Covid-19 has had on livelihoods of many South Africans, the vulnerable groups in particular thereforeitis in support of this expenditure.
6. The Committee welcomes the proposed R1.6 billion in roll-overs. The Committee is particularly encouraged by the R475 million proposed roll-over to the Department of Basic Education for the eradication of inappropriate sanitations at schools. The Committee has emphasised the need for government to eradicate inappropriate sanitations in school and expressed its views and position on this matter in many of its adopted reports.
7. The Committee notes the declared unspent funds of R187 million and the projected under-expenditure of R2.1 billion largely due to the Covid-19 related lockdowns. The Committee encourages the effected government institutions to speed up spending on appropriated funds as the Covid-19 related lockdown are relaxed.
8. The Committee notes with concern the proposed allocation reduction of R1.1 billion on  Defence (Vote 23). This department is tasked with the duty of defending and protecting the Republic of South Africa, its territorial integrity and its people. The Committee is of the view that these reductions on Defence might have a long lasting negative impact on the ability of the South African National Defence Force to defend the country against unwanted elements. The Committee therefore feels there is a need to further engage National Treasury and the Department of Defence on this matter.
9. The Committee notes the submission by the FFC that the Bank Loan Guarantee Scheme (BLGS) needs to be extended to the 2021/22 financial year in order to mitigate the effect of the Covid-19 pandemic. The Committee viewsBLGS as an important lever that can assist business who were affected by the Covid-19 pandemic, small businesses in particular. However, the Committee is concerned about the reported slow uptake of this important government intervention and will engage with National Treasury on the challenges faced by commercial banks in providing this government guaranteed funding to Covid-19 affected businesses.
10. The Committee notes the submission by the FFC that government should speedily establish the proposed Presidential State Owned Enterprises Council to provide strategic oversight of SOEs. However, even though the Committee will welcome such a move by government, it is  of the view that poor management of SOEs are not necessarily a result of poor oversight, but it has more to do with poor management by thosetasked with running these entities of government. Furthermore, the Committee feels that government should focus more on appointing individuals who are fit and proper and who possess the right skill and knowledge to run state owned companies.
11. The Committee notes with concern the submission by the PBO that in several high-spending procurement areas, including information and communications technology, and infrastructure, government was overpaying for goods and services. The Committee views government procurement as critical in proving basic services to the poor, exacerbated by the negative impact of the Covid-19 pandemic. Thus overpaying for services when government faces serious challenges of raising sufficient revenue isunacceptable. To this end, the Committee will engage the National Treasury toensure that there is value for money.
12. The Committee notes the submission by the Public Sector Accountability Monitor (PSAM) that it should request National Treasury and Cabinet to review and reverse the decision to reduce the budgets of departments such as Heath, Human Settlements and Education to fund the R10.5 billion for the SAA business rescue plan.
13. The Committee notes the submission by PSAM that budget priorities must be open to public inputs given that they are intended to serve the developmental needs of the people. The Committee will engage with National Treasury on this matter to ascertain and satisfy itself on the levels of engagements that take place between National Treasury and the general public during the budget process in order to ensure that the views of the public are taken into consideration when allocating government resources. However, the Committee is satisfied with the available Parliamentary processes on public involvement when passing the budget, although the Committee acknowledges the time for engagements is not enough.

 

1. Recommendations

 

The Standing Committee on Appropriations, having considered submissions from various stakeholders on the Second Adjustments Appropriation Bill [B25–2020], recommends as follows:

 

1. That the Minister of Finance ensures that National Treasury reportsto the Committee on the disbursement and utilisation of the R12.6 billion proposed allocation for the presidential employment interventions. The Committee wants exercise its oversight function on this expenditure and the number of employment opportunities it creates for South Africans who have been hit hard by Covid-19 pandemic.
2. That the Minister of Finance ensures that National Treasury provides a detailed report on the uptake of the Government Loan Guarantee Scheme, the banks that have provided loans to businesses and the list of the companies who have benefited from the scheme. The Committee wants to understand the overall framework that governs the loan guarantee scheme and examine whether Small, Medium and Micro Enterprises are benefiting from the scheme.
3. The Minister of Finance ensures that National Treasury provides a socio economic analysis and impact assessment of the R160.6 million proposed allocation reduction on the Statistics South Africa allocations. The Committee wants to understand the long term implications of these budget reductions on the ability of STATSSA to provide credible statistics, which in turn inform government budget decisions.
4. That the Minister of Finance ensures that the Chief Procurement Officer provides a comprehensive report on government high spending areas like infrastructure, information communication and technology. The Committee wants to understand how much government is paying in comparison with the private sector for similar services.
5. That the Minister of Defence provides a comprehensive report on the long term implications of the proposed allocation reduction of the Defence budget on its ability to perform and deliver on its mandate;
6. Considering the high levels of crime in South Africa, particularly crime against women and children, the Minister of Finance should consider allocating more funding to the South African Police Services (SAPS) in the 2021 budget. The Committee is of the view that the proposed R5.9 billion allocation reduction to the Police may negatively impact the ability of the SAPS to deliver on its mandate.
7. That the Minister of Finance should consider allocating additional funding to Council for Scientific and Industrial Research(CSIR) to enable the entity to carry out its important legislative mandate.
8. While reluctantly agreeing to the R10.5 billion allocation to SAA, the Committee strongly recommends that the Minister of Finance ensures that National Treasury reviews in the 2021 Appropriations Bill, the sources from which this money has been drawn and find alternative sources that do not undermine crucial service delivery and development programmes. The Committee will pay very keen attention to this in processing the 2021 Appropriations Bill.

 

 

1. Committee Recommendation on the Bill

 

The Standing Committee on Appropriations, having considered the Adjustments Appropriation Bill [B25–2020], referred to it and classified by the Joint Tagging Mechanism (JTM) as a Section 77 Bill, recommends that the Bill be adopted, without amendments.

 

 

1. Conclusion

 

The responses and implementation plans by the relevant Executive Authorities to the recommendations, as set out in section 7 above, must be sent to Parliament before the tabling of the 2021 national budget by the Minister of Finance.

 

The Committee was struck by the quality and value of the submissions made by the stakeholders in the oral hearings, and the passion and commitment of most of those who spoke on their behalf. The Committee would like to urge them to continue their valuable work. Ideally, the Committee would have liked to accede to many of their proposals, which it agrees with. However, given the perilous state of the country’s economy and finances in this unprecedented Covid-19 era, the Committee cannot, unfortunately, immediately support these proposals.

 

The Committee agrees with many of the stakeholders that there was not enough time for them to engage with the Bill. Understandably, given the unusual complexities this year, the Minister of Finance introduced the 2020 MTBPS a week later than usual, and this also partly reduced the time available for processing it. Providing more time to process the MTBPS and budget would require a significant change to the parliamentary programme as a whole. The Committee believes that this needs to be addressed through engagements between the Speaker of the National Assembly (NA) and Chairperson of the National Council of Provinces (NCOP) and the four Committee Chairperson of the NA and NCOP Finance and Appropriations committees.

 

 

Report to be considered.