ATC201201: Report of the Standing Committee on Appropriations on the 2020 Medium Term Budget Policy Statement, Dated 1 December 2020

Standing Committee on Appropriations



Having heard and considered submissions and comments from identified stakeholders on the 2020 Medium Term Budget Policy Statement, the Standing Committee on Appropriations reports as follows:


  1. Introduction


The Minister of Finance tabled the 2020 Medium Term Budget Policy Statement (MTBPS) on 28 October 2020. The MTBPS was tabled in terms of section 6 (1) of the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009 (the Act) as amended by Act No. 13 of 2018 (the act). The MTPBS is a government policy document that communicates to Parliament and to the country the economic context in which next year’s national budget will be presented, along with government fiscal objectives and spending priorities over the medium term (three-year expenditure period). As required by section 4 (4) (b and c) of the Act, after the tabling of the MTPBS by the Minister of Finance, the Division of Revenue Second Amendment Bill and the Second Adjustment Appropriation Bill were referred to the Committee for considerations and report to the National Assembly (NA). Amongst its responsibilities, as per section 6 (8) of the Act, the Committee is required to consider and report on the following:

  • the spending priorities of national government for the next three years;
  • the proposed division of revenue between the spheres of government and between arms of government within a sphere for the next three years; and
  • the proposed substantial adjustments to conditional grants to provinces and local government, if any.


In an effort to deepen democracy, promote good governance, enhance public participation and involvement, the Committee invited the following stakeholders for submissions and comments on the tabled 2020 MTPBS;

  • Financial and Fiscal Commission; and
  • Parliamentary Budget Office.



In addition to the invited stakeholders, the Committee published an advertisement in national and local newspapers from 30 October to 6 November 2020 inviting the public to make submissions and comments on the 2020 MTPBS. The Committee held public hearings with interested stakeholders on the Zoom virtual meeting platform on 27 November 2020. The following submissions were received in response to the aforementioned advertisement: 

  • Organisation Undoing Tax Abuse;
  • South African National Child Rights Coalition;
  • Centre for Early Childhood Development;
  • Western Cape Commissioner for Children;
  • United Nations International Emergency Fund;
  • Congress of South African Trade Unions;
  • Amandla.Mobi;
  • Mr ChipaneSeloane; and
  • Dear South Africa online poll.


  1. Economic overview and context


The tabling of the 2020 MTBPS was preceded by government’s adoption of economic recovery plan titled the “South African Economic Reconstruction and Recovery Plan”. This economic recovery plan, agreed in partnership among government, business, labour and civil society targets short to medium-term measures to boost the South African economy primarily through boosting energy production, infrastructure investment and public employment with other key reforms that are needed to raise the country’s long term economic growth trajectory. The Plan seeks to pursue an infrastructure led economic reconstruction and recovery with investment in infrastructure that will stimulate the various sectors of the economy. This will result not only in a South African economy that meets the needs of all its citizens but also an economy that creates jobs for all, provide equitable distribution of income, and a better life for all. Furthermore, the South African Economic Reconstruction and Recovery Plan outlines three phases of implementation, namely:

  • Engage and Preserve: which includes a comprehensive health response to save lives and curb the spread of the Covid-19 pandemic;
  • Recovery and Reform: which includes interventions to restore the economy while controlling the health risks; and lastly;
  • Reconstruct and Transform: which entails building a sustainable, resilient and inclusive economy.

The implementation of the Plan will be coordinated by the Presidential Advisory Technical Team and the National Treasury’s Operation Vulindela, while line departments and Ministries will be responsible for the implementation of programmes relevant to their departments. The Plan outlines a range of immediate and short term measures that will be taken to rebuild confidence, kick-start the economy while continuing to mitigate the effects of Covid-19 pandemic. The economic recovery plan highlights structural reforms that are needed to promote faster, more inclusive economic growth, and employment over the medium to long term. The majority of these reforms are drawn from government long term structural reform agenda as outlined in the discussion paper released by National Treasury in 2019 titled “Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa” which was adopted by Parliament in 2019. In the short term, the economic reconstruction and recovery plan focuses on rolling out infrastructure, expanding electricity generation, creating mass public employment opportunities, allocating digital spectrum, and supporting rapid industrialisation. Furthermore, government will implement structural reforms such as the modernisation of network industries, reducing barriers to entry, and increasing regional integration and trade.


The Coronavirus pandemic has led to global recession and economic recovery is expected to be long and uneven. In South Africa, like the rest of the world, Covid-19 pandemic and its associated lockdowns has led to record high levels of unemployment due to many business having been closed. Restrictions on movements and activity due to Covid-19 related lockdowns resulted in a fall in official unemployment rate from 30.1 per cent to 23.3 per cent in the as at the end of the second quarter of 2020. Although Statistics South Africa (STATSSA) reported that 2.2 million fewer people were working as at the end of the second quarter, millions of South African were classified as economically inactive or outside the labour market because they were unable to look for jobs due to lock down regulations. However, the expanded unemployment rate, which also include those out of work who were not looking for work increased by 2.3 percentage point in the second quarter of 2020 to 42 per cent. This was the highest recorded expanded unemployment level in South Africa since the introduction of the Quarterly Labour Force Survey in 2008.  Due to the negative impact of the Covid-19 pandemic, National Treasury projects the South African economy to contract by 7.8 per cent in 2020, rebounding to 3.3 per cent in 2021, 1.7 in 2022, while averaging 2.1 per cent over the medium term. However, National Treasury has emphasised that the main risk to South African domestic growth outlook are weaker than expected growth, continued deterioration in the public finances and failure to implement needed structural reforms.


The International Monetary Fund (IMF) expects global growth to contract by 4.4 per cent in 2020, rebounding from a low base to grow by 5.2 per cent in 2021. While growth is expected to recover in many countries, the resurgent in Covid-19 infections and additional lockdown, as well as rapid debt accumulation are a serious risks to the outlook. The IMF projects that growth in advanced economies is expected to contract by 5.8 per cent in 2020, rebounding to 3.9 per cent in 2020. The sharp decline in 2020 for advanced economies is led by the United Kingdom, Euro Area, Japan and the United States which are projected to contract by 9.8 per cent, 8.3 per cent, 5.3 per cent and 4.3 per cent respectively. Within the South African BRICS partners, only China is projected by the IMF to have a positive growth in 2020, at 1.9 per cent while India, Brazil, and the Russian outputs are projected to contract by 10.3 per cent, 5.8 per cent and 4.1 per cent respectively. However, in 2021, the IMF projects that China, India, Brazil and Russia’s output to grow by 8.2 per cent, 8.8 per cent, 2.8 per cent and 2.8 per cent respectively. The containment of the Covid-19 pandemic is expected to support the improved growth outlook both in emerging and advanced economies.


It was against this background that the Committee decided to invite and have engagements with identified stakeholders on the 2020 Medium Term Budget Policy Statement.


  1. Medium Term Expenditure Framework


The 2020 MTBPS proposes steps to reduce the fiscal deficit and stabilise the debt to GDP ratio over a five year period, narrowing the budget deficit to 7.3 per cent over the medium-term expenditure framework (MTEF), while narrowing it by an additional 1.8 percent over the subsequent two year. The 2020 MTBPS aims to reach a government budget surplus by 2025/26 while this is projected to results in government debt stabilising at 95.3 per cent in the same year. Consolidated government spending is projected to grow below inflation at 1.6 per cent, increasing from R2.04 trillion in 2020/21 to R2.14 trillion in 2023/24.


Government proposes downward adjustment to the main budget spending plans over the MTEF period. Relative to the 2020 budget, total main budget non-interest expenditure is projected to decrease by R62.9 billion in 2021/22, R92.9 billion in 2022/23 and R150.9 billion in 2023/24.


These proposed downward adjustments reflect:

  • Reductions of R60 billion in 2021/22, R90 billion in 2022/23 and R150 billion in 2023/24, mostly falling on public sector compensation of employees;
  • Lower estimated spending by the National Skills Fund and the Sector Education and Training Authorities of R2.8 billion in 2021/22, R2.7 billion in 2022/23, and R0.9 billion in 2023/24, reflecting a decline in the skills development levy projections; and
  • Early retirement savings anticipated in national departments of R109 million in 2021/22 and R118 million in 2022/23 financial years respectively. 


The main budget non-interest expenditure is projected to contract in real terms in each year of the MTEF. As a share of GDP, non-interest expenditure will moderate from a peak of 32.4 per cent in 2021/22 to 26.4 per cent in 2023/24. This includes a contingency reserve of R5 billion per year over the medium term, while debt service costs will continue to rise over the medium term due to wider deficits, weaker currency, and higher interest rates.


In terms of functions, provinces are responsible for basic education, health services, roads, housing, social development and agriculture, while municipalities provide basic services such as water, sanitation, electricity reticulations, roads and community services. Over the medium term, government proposes to allocate 48.2 per cent of available non-interest expenditure to national department, 42.2 per cent to provinces and 9.6 per cent to local government (see table 1 below). Over the same period, national government resources decline at an annual average of 3 per cent, provincial resource allocation increase an annual average of 0.1 per cent and local government resource allocations increase at an annual average of 2.1 per cent.








Table 1: Division of revenue framework

Source: National Treasury (2020) Medium Term Budget Policy Statement


The medium-term spending priorities reflect government’s policy of stabilising debt while supporting economic recovery, with a notable shift in the composition of spending from consumption towards growth-enhancing investments. Over the medium term, the learning and culture function continue to receive the largest allocation of funds, mainly for basic and post school education and training (See Table 2 below). Over the medium-term, the economic development and the community development functions are the fastest-growing functions at 4.6 per cent and 4.3 per cent respectively, mainly due to above-inflation growth in road infrastructure and expanded access to basic services in line with the economic reconstruction and recovery plan.








Table 2: Consolidated expenditure by function1

  1. Consisting of national and provincial departments, social security funds and public entities
  2. 2020/21 excludes June 2020 budget adjustment

Source: National treasury (2020 MTBPS)




The 2020 MTBPS categorises consolidated government expenditure by “spending priorities per function group” namely:


  • Learning and culture: Over the medium term, this function will focus on ensuring that planned infrastructure projects in basic education, universities and technical and vocational education and training (TVET) colleges, as well as in the sports, arts and culture sector are delivered in time and within the available budget.


  • Health: Over the medium-term, greater efficiency and prioritisation is required to protect service delivery in areas such as primary health care, immunisation, and HIV prevention and treatment. Large spending reductions in the provincial equitable share formula, which is the main funding instrument for health, will require significant restructuring of the provincial health services, with a focus on efficiency savings. Provisional funding has been made available from 2021/22 to build Tygerberg Regional Hospital and the Klipfontein Hospital in the Western Cape, subject to certain conditions. The hospitals will alleviate pressure on existing health facilities in these areas with rapid population growth.


  • Social development: This function includes programmes aimed at income protection and social welfare, addressing the challenges of job losses and increasing poverty. To mitigate food insecurity and poverty, an additional R6.8 billion is allocated to the Department of Social Development to extend the special Covid-19 social relief of distress grant for three months until 31 January 2021. In addition, R1 billion is allocated for food relief to vulnerable households. In total, short-term social grant-based relief amounts to R48 billion in 2020/21.


  • Community development: This function funds access to services such as water, electricity, sanitation, housing and public transport. Government will review programmes related to the provision of mass housing, public transport standards and the levels of free basic services. The introduction of the informal settlement upgrading partnership grant in 2021 for provinces and metropolitan municipalities empowers communities to improve their living conditions. Furthermore, government is reviewing the operating model for the Passenger Rail Agency of South Africa to return the agency to sustainability.


  • Economic development: This function group supports job creation, industrial development, and inclusive and sustainable economic growth, driven mainly by transfers and subsidies for incentive programmes which are part of the economic recovery plan. Over the medium-term, this function will prioritise areas such as finalising outstanding restitution claims and supporting resettled farmers to sustain productivity, create jobs and reduce poverty. Government and the tourism sector will collaborate to maintain tourism assets while extending the short-term tourism relief fund to mid-2021 to assist eligible small, medium and micro enterprises with working capital. Over the medium term, government has set aside about R540 million for a tourism equity fund to support black-owned and commercially viable enterprises to acquire shares in tourism enterprises.


  • Peace and security: Over the medium-term, this function group will prioritise the fight against crime and ensure territorial integrity. The South African Police Services is allocated a rollover of R252.8 million, mainly the procurement of personal protective equipment procured in 2019/20 but delivered in 2021/22. The State Capture Commission of Enquiry is allocated an additional R63 million from the Department of Justice and Constitutional Development to finalise investigations and produce a report. Over the medium-term, funds have been set aside for the establishment of the Border Management Authority which will consolidate border management functions.


  • General public services:  This function group aims to build a professional state to develop and transform the public service. The Department of Public Service and Administration will reprioritise funds for personnel expenditure reviews in national, provincial and local governments, public entities and state owned companies over the next two years, in order to develop measures to manage the public service wage bill. The Department of Public Enterprises will reprioritise funds to support the Presidential State-Owned Enterprises Council. The Department of Planning Monitoring and Evaluation will reprioritise funds to enhance public service reporting on planning and performance. 


  1. Managing the effects of reductions in planned expenditure


Relative to the 2020 budget, the provincial equitable share will be reduced by R60 billion in 2021/22, R85 billion in 2022/23 and R64.1 billion in 2023/24. These reductions include the compensation reductions announced in the 2020 budget and the 2020 MTBPS which account for approximately 85 per cent of the total budget reductions, and reductions in conditional grants of R12.1 billion. Rural provinces which are more dependent on transfers from national government are more likely to be affected than urban provinces with additional revenue sources. All provinces will have to reprioritise and increase efficiency in order to respond and cope with the planned adjustments.


Transfers to local government will be reduced by R17.7 billion, including R14.5 billion reduction from the local government equitable share, R2.7 billion from the general fuel levy and R569 million in direct conditional grants. Underperforming programmes will be reviewed. Over the MTEF, at least two more poorly performing cities on the public transport network grant will be suspended while the remaining cities will be required to reduce costs and demonstrate their effectiveness to remain funded through this grant.


  1. Presidential employment interventions


A provisional allocation of R19.6 billion was set aside in the June 2020 special adjustment budget, mainly for job creation and protection. Out of this, a total of R6.8 billion is allocated to the Department of Social Development to fund the extension of the special Covid-19 social relief of distress grant for three months until 31 January 2021. A total of R12.6 billion is allocated for the presidential employment interventions to address unemployment, especially as it affects the youth. The Minister of Finance approves the allocation of the funds in terms of section 6(1)(a) of the Appropriations Act (2020) as amended by section 8 of the Adjustments Appropriations Act (2020).


  1. Fiscal Risks


In engaging with government’s proposed spending over the MTEF, the Committee notes the following medium to long-term risks to public finances and outlook as reported in the 2020 fiscal risk statement:

  • Macroeconomic risks: These risks include lower nominal GDP and revenue growth over the medium term and debt sustainability under different macroeconomic scenarios;
  • Debt management risks: These risks include large debt redemptions falling due over the medium-term, growth in debt-service costs, and domestic banks exposure to public sector debt;
  • Sub-national government risks: These risks include medico-legal claims, unpaid provincial invoices, and the financial conditions of municipalities; and
  • Contingent and accrued liability risks: These risks include state owned companies’ guarantee exposure, public-private partnership and the financial position of the Road Accident Fund. 


  1. Submissions on the 2020 MTBPS


This section provides an overview and summary of all the submissions from identified and interested stakeholders on the 2020 MTBPS.


  1. Financial and Fiscal Commission


The Financial and Fiscal Commission (FFC) submitted that the Covid-19 pandemic has exacerbated existing structural and fiscal fragilities. On the social front, it has amplified the existing inequalities and pushed many people into poverty and unemployment. The economic and fiscal outlook is uncertain and likely to undermine the credibility of the overall fiscal framework, given the outstanding wage bargaining agreement and deteriorating SOEs’ fiscal position. Core spending functions are facing stagnant and declining budgets in 2020/21 likely to affect service delivery and overall development targets.


The FFC also noted that government’s macro-economic forecasts were generally over-optimistic which had significant consequences for the credibility of MTEF forward estimates and fiscal levers for informing and achieving fiscal sustainability through fiscal prudence (i.e. managing the deficit). The FFC further noted that real economic recovery can only be achieved through actual implementation of reform plans as opposed to subjective sentiments of optimism/pessimism, or otherwise in macroeconomic projections. Instead of taking an overly ambitious fiscal policy position (i.e. zero-based budgeting) the FFC argue that what would be more practical in terms of public finance management is the approach of costing and pricing of functions to align public finance and outcomes.


With regard to assessing allocations between Special Adjustment Budget as tabled in June 2020 relative to MTBPS, the FFC noted the following:

  • MTBPS revenue projections for 2021/22 were lower by R4.6 billion;
  • Slight easing of consolidation path set out in June – evident in additions to main budget expenditure with R37 billion added in 2021/22 and R66 billion in 2022/23;
  • Bulk of the additions go to non-interest expenditure (R29 billion in 2021/22 and R49 billion in 2022/23); and
  • Debt service costs are also higher and continue to crowd out other forms of spending, and the burden of this is being pushed to provinces and municipalities.


Regarding local government, the FFC noted that reductions in local government equitable share in 2021/22 and perennial cuts in conditional grants will compound local government challenges.Local government is set to contribute R440 million to the R10.5 billion for SAA to implement its business rescue plan. Conditional grants carry a disproportionate burden of the SAA reprioritisation. The local government equitable share will decline by 9 per cent in the 2021/22 financial year and it is unclear how the local government will maintain the provision of services to poor households. The FFC implored government to prioritise local government and by implication, the poor households.  On the part of local government, the FFCimplored the sector to utilise available resources more efficiently; improve on revenue collection; strike a balance between core and administrative staffing; institutionalise consequence management; strengthen the capabilities of oversight institutions in municipalities to ensure quality and effective spending; and manage procurement processes prudently.


The FFC submitted that the District Development Model (DDM) was meant to improve service delivery by fixing perennial planning and coordination challenges and it requires adequate resourcing. However, the FFC highlighted that the MTBPS was silent on how the DDM will be resourced. For this initiative to be effective and catalyse local economic development and support the economic recovery plan, it is important that government provides clarity on its operational modalities and provides the initiative with the necessary resources. 


Regarding national and provincial wage agreements, the FFC submitted that the 2020 budget reduced the Public Sector Wage Bill (PSWB) of national and provincial departments by R160.2 billion over the 2021 MTEF period thus reducing the average annual growth from 6.8 per cent over the 2020 MTEF period to 3.5 per cent over the 2021 MTEF period.  The 2020 MTBPS announced additional reductions in the PSWB of national and provincial departments in 2020/21 and over the 2021 MTEF period amounting to R311 billion. This decelerate the growth of the PSWB from 1.8 per cent in the current year to an average annual growth of 0.8 per cent over the 2021 MTEF period. The massive cuts and declining growth of the wage bill represents huge risks in the services delivered by provinces as their compensation budgets account for a large share of their total expenditure. 


The FFC also submitted that the 2020/21 last leg of the multi-year wage agreement has not been implemented and has been subjected to litigation at the Labour Court, presenting uncertainty for provincial budgets.  The lack of an agreement on the wage freeze means it could fail to materialise thus triggering potential increases in the provincial wage bill that would have a proportionally bigger impact on overall provincial expenditure given the larger share of compensation of employees’ budget to total provincial expenditure.  Provinces could therefore be forced to shift spending from productive sectors to cater for the potential increases in the wage bill, if the wage freeze was not implemented.  The FFC submitted that there was no credible plan on how the risks from the potential wage freeze fallout would be mitigated, particularly at provincial level.


The FFC stated that government guarantees to SOEs increased from R470 billion in 2017/18 to R484 billion in 2019/20, due to SOE underperformance, in particular Eskom, and this represented risk to debt sustainability and public finances. Most SOEs were experiencing severe financial and operational challenges resulting from corruption and lack of accountability and were unable to generate meaningful positive returns thus triggering government bailouts. Guarantees to SOEs amount to 10.5 per cent of the GDP. 


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 it 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.


Regarding the alignment of the budget to economic policy interventions, the FFC expressed concerns about the spending performance of certain departments i.e. Agriculture, Communications, Science and Innovation, Trade and Industry, Women, Youth and persons with Disabilities, Water and Sanitation, and Public Works. To improve the effectiveness and quality of budget spending, the FFC underscored the importance of:

  • Putting in place/institutionalisation of expenditure tracking systems to ensure effective expenditure targeting and quality spending;
  • Government should intensify efforts to carry out expenditure reviews aimed at increasing efficiency of spending and combating waste. In-house reviews should be complemented by independent expenditure reviews; and
  • Strengthening oversight institutions to ensure effective and timeous spending.


  1. Parliamentary Budget Office    


The Parliamentary Budget Office (PBO) submitted that new waves of Covid-19 createdmore uncertainty about implications for the global economy and when an economic recovery from the pandemic will begin. The PBO highlighted that there is a global consensus that public sector actions in the form of fiscal and monetary stimulus remain vital to avert further economic collapse. The 2020 MTBPS proposes steps to reduce the fiscal deficit and stabilise the debt to GDP ratio over a five year period. This will be done by the rebuilding of the economy through the implementation of the Economic Reconstruction and Recovery Plan (ERRP)and improving the efficiency and composition of spending.


The PBO stated that it was important to note that the 2020 MTBPS’ proposals were affected and dependent on uncertainties including; (i) further negotiations related to public sector wage bill (ii) government performance reviews; and (iii) further reviews on conditional grants to provincial and local government sphere.


Regarding the fiscus, the PBO submitted that government’s fiscal objective was focused on quick rapid debt reduction however it questioned whether these spending cuts in critical developmental areas will reverse socio economic gains. It stated that during times of crises:

  • uncertainties are high and aggregate demand is weak, and
  • the private sector is generally unable to drive recovery and prefers to keep its assets liquid rather than sink it in fixed investments


Regarding the efficiency and composition of spending, the PBO stated 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.


The PBO submitted that in order to ensure sustainability, high-level policy discussions are still needed on the following:

  • The number and size of departments, ministries and public entities in national and provincial governments;
  • Management of the functions assigned to the three spheres of government;
  • Containing the public-service wage bill;
  • The approaches to providing financial support to students in post-school education;
  • The subsidy mix for urban transport systems;
  • The structure of the human settlements delivery programme; and
  • Measures to strengthen the social protection system for the most vulnerable.


Regarding Compensation of Employees, the PBO submitted that government should take cognisance of the potential impact that reductions will have on service delivery, government’s ability to attract highly skilled professionals, and the overall unemployment rate. The PBO stated that the public sector workers account for a relatively larger portion of the personal income tax (PIT) base. Consequently, the PIT tax base is potentially more sensitive to public sector pay policy decisions or level of employment. In times of public spending growth, it is generally recognized that public sector tends to offer greater job security than the private sector, yielding a steady stream of PIT revenue. However, in times of austerity, the tendency to impose policies directly aimed at reducing the public sector workforce size or capping pay can have a disproportionate effect on the PIT tax base.


The PBO also underscored that in the 2020 MTBPS, the Minister of Finance noted that there is a sharp drop in public infrastructure investment which is mostly driven by declines in spending by state-owned companies. Between 2016/17 and 2019/20, total public infrastructure spending fell from R250 billion to R183 billion, or from 5.7 to 4 per cent of GDP. Over the decade, the government will aim to protect funding for infrastructure investment


Regarding the PSWB, the PBO submitted that large reductions in compensations of public employees was justified by the explanation that expenditure on compensation has increased. It is argued that the increase in compensation of employees crowded out investment expenditure. However, the share of compensation of employees in total expenditure has declined from 38 per cent in 2000/01 to 33.9 per cent in the 2019/20 financial year.


The PBO submitted that over the MTEF period, all departments will be required to control wages and headcounts. Much of these changes will take place at provincial departmental level which means they will have to source other means of financing their expenditure. Government proposes growth in the public-service wage bill of 1.8 per cent in the current year and average annual growth of 0.8 per cent over the 2021 MTEF period. To achieve these targets, which are proposed as essential for fiscal sustainability, government has not implemented the third year of the 2018 wage agreement. Furthermore, the Budget Guidelines propose a wage freeze for the next three years to support fiscal consolidation. In light of this, the PBO has cautioned that broad sweeping reductions toe PSWB may lead to clashes with public sector unions, affecting the current wage agreement and upcoming wage talks.


  1. Organisation Undoing Tax Abuse


The Organisation Undoing Tax Abuse made the following recommendations in terms of the 2020 MTBPS:

  • The increase of remuneration in the public service beyond what is necessary or justified in terms of labour productivity and performance outcomes is a fundamental flaw that

should be fixed;

  • An investigation be conducted into the hiring practices at departments that were restructured as state capture manoeuvres. The DPSA should deal with officials who are doing business with the state;
  • Professionalise the public service;
  • Improve allocative and productive efficiency;
  • Implement zero-based budgeting at the local government level too;
  • Ensure that the National Prosecuting Authority (NPA), South African Revenue Service (SARS), Special Investigative Unit (SIU), Independent Police Investigative Directorate (IPID) and Statistics South Africa (StatsSA) are properly funded;
  • Parliamentary Committees should improve the quality of their oversight role;
  • The Committee should review and improve the quality, inclusiveness and impact of budgetary public participation mechanisms in Parliament. OUTA would like to see mandatory public hearings in September each year as part of MP preparation for the BRRR process;
  • OUTA is concerned that currently Parliament’s public participation system is not satisfactory, and, to our knowledge, there are no effective indicators of constituency office performance. OUTA would like to see Parliament improving its performance in this regard;
  • Committees should seek input from the FFC, PBO, Collaborative Africa Budget Reform Initiative and other experts on improved management of contingent liabilities;
  • That FFC and PBO should undertake research on option for local government revenue model and that this research should be presented in Parliament, followed by a Parliamentary debate about the revenue model of municipalitiesand the state of their finances; and
  • That the Appropriations Committees should conduct oversight visits to Provincial Treasuries to ascertain what they are doing to remedy the issues of worseningaudit outcomes emanating from municipalities.


  1. South African National Child Rights Coalition


The South African National Child Rights Coalition (SANCRC) is a coalition of 112 civil society organisations united in collective pursuit of their common goal of strengthening the national child rights governance system to ensure the realisation of the rights of every child in South Africa, especially its historically and chronically marginalised populations.


The SANCRC submitted that it recognised and appreciated the resources that were allocated through the Covid-19 response and in the MTBPS that benefited children. These include the following investments:

  • Improvements in the supply of electricity;
  • Infrastructure development at local levels;
  • Increased investments in the Social Housing Programme through subsidies to the amount of R2.2 billion for poor families;
  • Children in low income families will benefit from the tax deductions their working caregivers can make against provident fund contributions;
  • The extension of the Social Relief of Distress Grant to end January 2021;
  • An additional R1 billion to be allocated to food aid to address the hunger crises in South Africa;
  • Significant investments in increasing job opportunities for young teaching assistants in public fee-paying schools and government-subsidised private schools; and
  • The R600 million allocated for the employment of early childhood development and social workers.


Notwithstanding the above, SANCRC expressed concerns about the following deficits and challenges in the MTBPS and the resulting implications:

  • The reduction of provincial equitable shares by 4 per cent over the next 3 years, alongside the historical provincial inequities and inefficiencies are of grave concern. This is likely to impact negatively on the provision of critical services for the realisation of children’s rights, notably in the poorer provinces where the need is so much higher;
  • The reductions in the provincial equitable shares are especially worrying when viewed against the decline, in real terms, in the budgets annually for the next three years for education (3,5 per cent), health (1,5 per cent), and social development (2,2 per cent). The combination is likely to see a contraction in availability and quality of these key services;
  • Historically there has been inadequate allocations to promotion and preventative services for children. For example, the health sector is duty bound to provide a package of comprehensive support for development in the first 100 days of a child’s life. Historically it has focused on services preventing avoidable deaths and development services have been neglected. We have not seen shifts in budget allocations in health to fulfil its critical delivery role as per the National ECD Policy. These further budget reductions create a risk of even less focus on these core services;
  • Material support for caregivers is a proven developmental intervention. In this regard, the temporary increases in the child support and other grants during COVID 19 were most welcome developments. However, we are concerned that these will no longer continue in a context of extremely high levels of unemployment;
  • The trend of increasing allocations in high-intensity statutory services to provide therapeutic, responsive services once children are already in trouble continues. The Social Development budget is increased to increase the number of social workers – a workforce that provides statutory services that are already under strain. There is no comparable increase in budgets for promotion, prevention and early intervention services such as the increased child support grant, parenting support programmes, and programmes for improving nutrition and reducing stunting. Thus, whilst the budget allocates more money for early education practitioners – this is not likely to yield returns without improving the earlier development years, by for example, improving responsive caregiving practices and reducing stunting – both of which impact on the cognitive development of children which will limit the benefit of early education through formal centres later on;
  • In addition, the increased investments in human resources without improving other elements of the protection system will yield limited returns. It is well-known that social development services cannot be provided to children in need because, not just too few social workers, but inadequate infrastructure to enable them to do their work, and systems to enable planning, identification and provision of services to vulnerable children. There is an urgent need to invest in strengthening the whole system, not just parts of it;and
  • Securing system’s strengthening investments, the prioritisation of children, and improved equity across provincial and local planning and budgeting requires strong national leadership and coordination of the child rights agenda. In this regard we welcome the National Plan of Action for Children and the establishment of the Office on the Rights of the Child (ORC). However, what is of concern is the small budget allocated to the ORC to fulfil its central rights-based development mandate. The ORC budget is much smaller than the budget allocated for institutions supporting other vulnerable groups, such as women and people with disabilities.


In closing, SANCRC urged the Committee to consider the above gaps that are fatal to South Africa’s recovery and long term development, and urge that measures be put in place to secure the prioritisation of developmental budgeting for the realisation of the rights of children. In this regard, SANCRC welcomed the introduction of Zero-Based Budgeting in the 2021 to 2023 financial years. It raises several significant risks, however it also has opportunities if the risks are managed.

  1. Centre for Early Childhood Development


The Centre for Early Childhood Development (CEDC) made reference to the National Integrated Early Childhood Development Policy as adopted by Cabinet in December 2015 and expressed concerns at the lack of government resources to fulfil the commitments made in the said document. CEDC further submitted that the ECD sector has been significantly under-funded for decades which resulted in the majority of young, vulnerable children in South Africa being denied access to quality and holistic ECD services. To this end, CEDC recommended that Parliament and National Treasury allocate adequate public funding towards ECD services. This should be done in terms of an ECD-specific budget irrespective of whether the ECD fell under the Department of Social Development or the Department of Basic Education.


CEDC also expressed concerns at the impact of the reprioritisation of funds from basic education and higher education and training for the implementation of SAA’s business rescue plan. It made reference to a Sunday Times article which highlighted that funds initially earmarked for school libraries and laboratories, eradication of pit latrine toilets, and the schools infrastructure backlogs grant would be redirected thus resulting in delays or prevention of crucial service delivery projects in the education sector. To this end, the CEDC recommended that Parliament and National Treasury reverse the said spending cuts and find alternative sources to fund SAA’s business rescue plan.


  1. Western Cape Commissioner for Children


The Western Cape Commissioner for Children submitted that The South African government is obliged to ensure children’s rights are realised, in accordance with the Bill of Rights in the Constitution. The South African fiscus must confirm our commitment to the rights and wellbeing of children. Fiscal austerity measures cannot be regressive. The WCCC was of the view that investments in socio-economic rights such as education, health and social welfare especially for children, cannot be decreased.


The WCCC suggested that an oversight mechanism for the realisation of child rights is needed that cuts across all sectors and spheres of government. Furthermore, it suggested that technical support could be provided by the Parliamentary Budget Office to prepare an independent technical submission to the Appropriations Committees on the impact of the MTBPS and the Budget on children’s rights on a regular basis.


The WCCC was of the view that especially during and after the Covid-19 pandemic, social welfare services should be bolstered as the most vulnerable in society are worst affected by the negative consequences of a national lockdown. It recommended that caregiver grant be extended to February 2021 and the Child Support Grant be increased to R581 from March 2021, in order to be on par with the food poverty line.


The WCCC also submitted that ECD requires the collaboration of the key departments: Health, Education and Social Development and that budget policy must reflect this joint commitment to children in the earliest years of their lives. The five components of the essential care package are: 1) maternal and child health services, 2) nutritional support, 3) support for primary caregivers, 4) social services, and 5) stimulation for early learning. The WCCC recommended that government continue allocating budgets in all three key departments as the Department of Basic Education cannot fulfil the entire essential care package for ECD.


The point was also made that disadvantaged learners need the most financial commitment if South Africa is to decrease poverty and inequality in the longer term. To this end, the WCCC recommended that the decision to reprioritise the funds for school infrastructure to the SAA business rescue plan be reviewed.


  1. United Nations International Children’s Emergency Fund


The United Nations International Children’s Emergency Fund (UNICEF) commented that as far as the MTBPS 2020 is concerned, there are a number of really encouraging developments for children.These include the following:

  • The continued provision of adequate personal protective equipment for educators and a strong commitment to ensure that schools remain safe places (regular cleaning and sanitization);
  • The imminent introduction of school assistants intended to alleviate the administrative burden on educators, thus increasing the actual teaching contact time;
  • The extension of the COVID-19 grant until the end of January 2021, providing further relief to distressed families;
  • The continued provision of food relief to families in need; and
  • The continued investment in community health workers as one of the most efficient and equitable ways to expand access to primary healthcare.


UNICEF further stated that the 2020 MTBPS also presented stark spending choices and proposed to reduce overall non-interest expenditure by more than R300 billion over the next three financial years. However, of concern to UNICEF was that provinces, which delivered key services in basic education, health and social development, were hard hit and have their unconditional share of national revenue reduced by 4 per cent in real terms on average over the next three financial years.UNICEF also submitted that the “social wage” for children will therefore come under severe pressure over the next three years, thus further reducing the fiscal space needed to realise children’s social and economic rights. The introduction of zero-based budgeting practices could potentially help to facilitate some of the trade-offs within and between functions that would arise as a result of limited resources. UNICEF made the following recommendations in terms of the 2020 MTBPS:

  • Government should expedite the work on the reform to the provincial equitable shares formula so that rural provinces’ needs are taken into account in the distribution of provincial funding;
  • The Appropriations Committee should consider the possible extension of the Special Relief of Distress Grant (or Covid-19 grant) based on new information that emerges about employment and the country’s economic growth;
  • The national and provincial executives should accelerate the implementation and monitoring of work on unpaid provincial invoices and National Treasury should report back to Parliament on progress in reducing unpaid provincial invoices in basic education, health and social development;
  • The national and provincial governments should arrest declines in spending on social infrastructure in basic education and health due to their poverty-inducing effects; and
  • National and provincial government should use the zero-budgeting approach in both its technical and democratic senses so that reasonable spending decisions are made with the full input of various stakeholders in and outside of government.





  1. Congress of South African Trade Unions


The Congress of South African Trade Unions (COSATU) submitted that whilst appreciating the current fiscal crisis and welcoming some aspects of the MTBPS, there were issues which government failed to address. COSATU submitted that the focus of the MTBPS was on reducing expenditure and doing so by implementing an unprecedented wage freeze amongst public servants. Government approached the fiscal crisis by outsourcing the responsibility to workers and not addressing the four fundamental root causes, i.e. wasteful expenditure and corruption, loss of revenue, distressed SOEs, and a stagnant economy.


COSATU submitted that none of the fundamental reasons for the fiscal crises were addressed and it made the following comments and proposals with regard to the 2020 MTBPS.


Infrastructure Programme

  • A clear timeframe and road map for amending Regulation 28 to open up infrastructure investment opportunities to come into effect by February 2021;
  • Clear anti-corruption safeguards for the infrastructure programme; and
  • A more detailed infrastructure programme with clear timeframes and targets that Parliament and the nation can monitor effectively.

Structural Reforms

  • A clear timeframe and road map for the various structural reforms committed to by government in the Economic Reconstruction and Recovery Plan so that Parliament and the nation can effectively monitor its implementation; and
  • A specific intervention by Parliament to ensure government adheres to the December 2020 deadline for the releasing of additional digital spectrum.

Other Economic Interventions

  • A clear timeframe and road map to ramp up local procurement in the public and private sector and amongst consumers;
  • A clear commitment for the Public Procurement Bill to be enacted by the end of 2021;
  • A package of interventions by National Treasury and the banks to address the problems encountered by the Loan Guarantee Scheme by the end of November; and
  • Additional sustainable financial relief that could be provided for to companies by the UIF, government and the banks by end November.

Eskom Social Compact

  • Eskom Social Compact to be signed off by the President and social partners at Nedlac by no later than the end of November; and
  • Fast track the implementation of the Eskom Social Compact and its Implementation Plan.

Distressed SOEs

  • A clear timeframe and road map for each key distressed SOE to be drafted by government, labour and business by February 2021; and
  • Alternatives to retrenchments for workers whose jobs are at risk.

R350 Social Relief

  • COSATU welcomes the extension of the R350 long term unemployment grant for an additional three months.  It is welcome relief for recipients, albeit at a low level; and
  • It needs to be extended beyond December as the recipients are unlikely to find jobs in a battered economy within 2 months.

UIF Covid-19 TERS

  • Government must extend the UIF Covid-19 TERS for the periods October 16 to November 15 as well as 16 November and 16 December in tandem with the disaster management restrictions;
  • Engagements at Nedlac need to take place on a new more sustainable model beyond January to see what the UIF, SARS, Treasury and the banks could all contribute to saving jobs and businesses; and
  • Government must extend the R350 unemployment grant beyond January.

Pension Fund proposals

  • Tabling of the pension funds withdrawal bill at Parliament by February 2021 or utilising Dr. D. George (MP)’s Private Member’s Bill; and
  • Parliamentary passage, Presidential assent and government enactment of this Bill by October 2021.


  • The immediate implementation of COSATU’s anti-corruption proposals:
  • The banning of politically exposed persons as per the FIC Act and their spouses and children from doing business with the state;
  • Rapid response anti-corruption courts;
  • Utilising the Auditing Amendment Act to hold offending political office bearers and management personally financially liable for corruption and wasteful expenditure;
  • Removal of all compromised political office bearers and managers from the state;
  • An open online procurement system for the entire state, including entities and SOEs and municipalities that can always be viewed by the public; and
  • The central procurement of large-scale items to reduce the scope for corruption and achieve lower costs.

South African Revenue Service

Further capacitation of SARS to deal with tax evasion and to ensure 100 per cent of imports are inspected for customs duties.


  • Government must go to the Public Service Co-ordinating Bargaining Council (PSCBC) to engage with workers in good faith; and
  • Honour the 2020 wage agreement and fast track the next three wage agreement.
  • Measures that can address the fiscal sustainability of the state in the next three wage agreement include:
  • A single collective agreement for the entire state not only the public service;
  • Slashing the exorbitant packages paid to political office bearers by 30 per cent;
  • Scrapping the Ministerial Handbook;
  • Slashing future overseas trips and cancelling all travel allowances and business class tickets;
  • Reducing management packages in the public service;
  • Placing the salary caps that exist in the public service on managers at all entities and SOEs;
  • Ensuring that public servants, especially lower- and middle-income earners are protected from inflation; and
  • Identifying additional financial relief for lower- and middle-income public servants that the GEPF could provide e.g. affordable home loans and bursaries.

Expenditure Reprioritisation

An orderly reprioritisation of the budget from less critical expenditure items towards ones that will re-capacitate the state to provide quality public services and in economic and infrastructure that will boost economic growth.


  1. Amandla.Mobi


Amandla.Mobi made a submission on behalf of over 500 000 members - primarily low-income black women, who signed their campaign demanding that the government increases the Child Support Grant and pensioners grant. submitted that it was deeply disappointed that all top-ups have come to an end.  In the weeks leading up to the Medium-Term Budget Policy Statement, many of the Amandla.Mobi members have also sent messages to representatives in the offices of President Cyril Ramaphosa and Finance Minister Tito Mboweni asking that the grant top-ups are made permanent. Upon the announcement that the top-ups are ending, many of their members told them that they do not know how they will make ends meet.


The lockdown, in response to the Covid-19 pandemic, resulted in job losses and has placed many families on the brink of hunger. An analysis of the NIDS-CRAM data show that the top-ups and the newly introduced grants were pro-poor and curbed hunger. Over 30 million people living in households primarily led by women will be adversely impacted. The said top-ups have made a huge difference in helping support many families, including women and children, in South Africa to get through the pandemic. submitted that its members will keep pushing for grant increases.


  1. Mr ChipaneSeloane


Mr. ChipaneSeloane is a young person who, through a number of other organisations, work with other young people with the aim of reducing unemployment to 10 per cent or lower by 2030. His submission on the 2020 MTBPS focused on interventions to reduce the high unemployment rate especially relating to youth unemployment. He submitted that government should fill all vacant government positions and hire youth at entry level positions to reduce unemployment and eradicate poverty. According to Mr Seloane, this is what the ERRP seeks to achieve.

ChipaneSeloane made the following proposals:

  • For the entry level and administrative posts, government should ensure that young people are employed into those posts and that the process is fast tracked;
  • The vacant entry level management posts should equally be filled swiftly. The necessary skills already exist in South Africa, however, those with qualifications and experience remain jobless;
  • The vacancy rate in all departments should be reduced to 5 per cent or less by July 2021; and
  • There must be a salary adjustment for executives and senior management. This must be adjusted downward in order to reflect the realities of what government can afford to pay.



  1. Dear South Africa Online Poll


Dear South Africa, is a network of online platforms designed to facilitate and encourage the public to participate in government decision-making processes or policy formulation. The non-profit organisation hosted a project on its mobile and online platforms for the public to comment on the MTBPS (please see A total of 602 comments were received on the online poll. The table below provides summary of responses received and the concerns received per subject area.







Yes, I do support the MTBPS



No, I do not support the MTBPS



I do not fully support the MTBPS




The respondents also listed their top concerns with regard to the MTBPS as follows:


Number of respondents



238 selected


State Owned Enterprises

195 selected


Budget Deficit

7 selected


Fiscal Relief Package

9 selected


Fiscal Strategy

16 selected



16 selected


Economic Context

22 selected



38 selected



61 selected




  1.        Committee observations and findings on the 2020 MTBPS


The Standing Committee on Appropriations, having considered the 2020 Medium Term Budget Policy Statement, and having engaged with the various stakeholders, makes the following findings and observations:


The overall thrust of the 2020 MTBPS


  1. The Committee notes and welcomes that the 2020 MTBPS highlights government’s commitments to fiscal consolidation with clear steps to reduce the fiscal deficit and stabilise the debt to GDP ratio over a five-year period.  The Committee is of the view that even though there is a need for government to spend, particularly on social services and health, the stock of government debt should remain at sustainable and manageable levels and should never be allowed to reach levels where the future generations will be compromised by current consumption.
  2. The Committee notes and welcomes that the 2020 MTBPS priorities reflect government’s policy of stabilising debt while supporting economic recovery and there is a considerable shift in the composition of spending from consumption towards growth-enhancing investments.
  3. The Committee notes and welcomes the 2020 MTBPS’ response to government adopted Economic Reconstruction and Recovery Plan (ERRP). The Committee is of the view that this government-led plan, agreed between government, business, labour and civil society will take South Africa back to the economic growth trajectory that is needed to eradicate unemployment, poverty and inequality. The Committee is encouraged by the overall acceptance of the ERRP by social partners as the Committee is of the view that now is the time for all South Africans to unite and fight against our two most immediate enemies of Covid-19 and stagnant economy.
  4. The Committee notes and welcomes that, notwithstanding the crippling negative impact of the Covid-19 pandemic, government moved swiftly to try and understand the impact of Covid-19, responded with the economic reconstruction and recovery plan which to a large extent, informed government responses through the 2020 MTBPS.


Economic growth forecast, investment and trade


  1. The Committee notes that due to the negative impact of Covid-19 pandemic, the South African economy is projected to contract by 7.8 per cent in 2020, rebounding to 3.3 per cent in 2021, 1.7 in 2022, while averaging 2.1 per cent over the medium term. The Committee is mindful of the negative effects this pandemic has had on the levels of unemployment (expanded definition) in the country, which reach the highest levels in the second quarter of 2020, the highest levels since the Quarterly Labour Force Survey was introduced in 2008. However, the Committee is of the view that if government allocated resources are used more efficiently, if the economic recovery plan is implemented effectively, and collaboration between government and the social partners is maintained, the South African economy will begin to rebound to pre-Covid-19 levels.






Budget principles of fairness, efficiency, effectiveness and economy


  1. The Committee notes and welcomes government’s continued efforts of helping the most vulnerable groups whose livelihoods were negatively impacted by Covid-19 pandemic. The Committee welcomes the proposed additional allocation of R6.8 billion allocated to the Department of Social Development to extendCovid-19 social relief of distress grant until 31 January 2021. Furthermore, the Committee welcomes the proposed additional allocation of R1 billion to provide food parcels to the most vulnerable groups. However, the Committee still emphasises the need for National Treasury to ensure that there are sufficient and effective checks and balance to prevent any form of corruption in the distribution of food parcels that will further disadvantage the most vulnerable groups.
  2. The Committee notes and welcomes the proposed introduction of the informal settlement upgrading partnership grant in 2021 for provinces and metropolitan municipalities which isintended to empower communities to improve their living conditions. The Committee is however concerned about development of rural areas. Whist it might be imperative to develop the economic nodes of the country, the Committee cautions government against neglecting rural areas which results in uneven investments and forced migrations from rural to urban areas. The Committee urges government to ensure a balanced approached when investing both the urban centres and rural areas of the country.
  3. The Committee notes the submission by UNICEF that government should expedite the work on the reform to the provincial equitable share formula so that rural provinces’ needs are taken into account in the distribution of provincial funding.
  4. The Committee notes with concern the submission from the PBO that South Africa’s public spending levels were not matched by high levels of quality or efficiency in the services delivered. The Committee is of the view that during these difficult times of Covid-19 coupled with government policy of fiscal consolidation, the need to align government spending with efficiency and effectiveness in the provision of public goods cannot be over emphasised.
  5. The Committee notes the submission by UNICEF that the national and provincial executives should accelerate the implementation and monitoring of work on unpaid provincial invoices and that National Treasury should report back to Parliament on progress made in reducing unpaid provincial invoices in basic education, health and social development. The Committee has always held a view that, the payment of invoices on time, particularly to SMMEs was crucial to the sustainability of small business. Furthermore, the Committee urges National Treasury to intervene on this matter because according to National Treasury’s own admission, these unpaid provincial invoices pose a serious risk to the fiscal outlook.


Education, job creation and skills development


  1. Notwithstanding the negative impact of Covid-19 on government’s ability to raise revenue and fund critical services, the Committee notes and welcomesthe fact thatthe learning and culture function still receives the largest allocation over the MTEF. This is to ensure that planned infrastructure projects in basic education, universities and technical and vocational education and training (TVET) colleges are completed and delivered on time. The Committee is still of the view that education is one of the driving forces that can significantly reduce poverty and inequality in South Africa;
  2. The Committee is encouraged and welcomes the proposed R12.6 billion allocated for the presidential employment interventions to address unemployment, especially as it effects the youth. The Committee views this as continued commitment by government on its central objectives of job creation, unemployment reduction and subsequently reduction of overall inequality levels.


Improving health care services


  1. Even though the Committee fully supports government fiscal consolidation policy, the Committee is concerned and cautions against reducing health expenditure. Large spending reductions on the provincial equitable share which is main funding instrument for health is worrisome and unacceptable to the Committee. The Committee is of the view that Covid-19 has exposed the South African health system to more risks and challenges. The Committee is of the view that the South African health system needs serious restructuring and investments, particularly public health where the majority of the poor South Africans are dependent. The Committee acknowledges and understands that government has competing priorities which must be funded through limited resources but compromising public health for fiscal consolidation is unacceptable.Efficiency savings should be found elsewhere withoutcompromising public health.
  2. The Committee notes with concern the slow progress on the National Health Insurance (NHI) implementation and is of the view that this is largely attributable to the delays in capacity building within the department of health. The Committee is concerned that government might not be able to meet its target of fully implementing NHI by 2024 and this will continue to have a negative impact on the poor, the black majority in particular who are largely dependent in public health.
  3. The Committee notes and welcomes the provisional funding that has been set aside to build the Tygerberg Regional Hospital and Klipfontein Hospital in the Western Cape Province in 2021. However, the Committee is concerned that these provisions are conditional and feels there is a need for the Minister of Finance and the Minister of Health to jointly appear before the Committee and explain these conditions and provide a detailed plan on how they will both ensure that these conditions are met to ensure uninterrupted commencement of these health related projects in 2021/22.



On developing a capable and effective public service


  1. The Committee highlights its reservations on the proposed public sector personnel expenditure reduction over the MTEF. The Committee is not convinced that this is the best approach considering that the negotiations on public service salary increases have not been concluded at the PSCBC and there is already litigation on this matter. The Committee is of the view that this approach by National Treasury is pre-emptive and should have waited for the courts and the negotiations with public sector labour representative to be concluded. This is particularly concerning because according to National Treasury’s own admission, one of the major risks to the fiscal outlook is “the legal process associated with public-service compensation and the forthcoming wage negotiations”.
  2. The Committee notes and welcomes the submission by the FFC that government should accelerate the establishment of the proposed Presidential State Owned Enterprises Council to provide strategic oversight of SOEs, reducing their dependency on fiscus, by addressing their financial, operational, business model and ensure their proper rationalisation.




Peace and Security


  1. The Committee notes with concern the reduction of the Defence budget over the MTEF. The Committee is of the view that the Defence function is very important in keeping the sovereignty of the country intact while defending the citizens and South African territories. 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;
  2. The Committee notes with concern the reduction of the Home Affairs budget over the MTEF. The Committee is of the view that Home Affairs plays a crucial role in both maintaining the country’s population register and the National Identification System as well as its crucial role in all the South African Ports of Entry. Therefore, the Committee is of the view that reducing budget allocation for Home Affairs might have a long term negative impact on both the country’s ability to monitor and maintain credible and reliable ports of entry, maintaining a reliable identification system for the country and on the ability of SARS to collect due taxes in our ports of entry.


On State Owned Entities and the overall fiscal risks


  1. The Committee remains concerned about the overall fiscal risks, particularly those that relate to state owned companies’ guarantee exposure and the financial position of the Road Accident Fund.The Committee urges government to speed-up reforms and interventions in SOE’s so that these institutions will deliver on their respective mandates in an efficient and economic manner, thereby allowing government to refocus government finances on other urgent needs of the country.



  1. Recommendations


The Standing Committee on Appropriations having considered the 2020 Medium Term Budget Policy Statement, recommends as follows:


  1. That the Minister of Finance ensures that National Treasury provide a comprehensive analysis and details of all outstanding invoices per province and national government departments, as well as their maturity profile. This will allow the Committee to consider all the information before it and report to the National Assembly in terms of section 4 (4) (a) of the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009. National Treasury admits in the 2020 MTBPS that these unpaid invoices present a serious risk to government finances, therefore the Committee cannot allow this situation to escalate to the levels where Eskom finds itself in regarding the municipal debt. The Committee is also of the view that if this problem is not addressed, it has a potential to compromise the credibility of government budget.
  2. That the Minister of Health ensures that the Department of Health provides a comprehensive report on the delays in capacitating the department for NHI purposes. The Committee is concerned that further delays in capacitating the department will compromise and delay the full roll-out of the NHI.
  3. That the Minister of Health ensures that the Department of Health provides a comprehensive report on the impact of the reduction of the Provincial Equitable Share on the ability of the provinces to deliver in this critical services. The Committee is concerned about the status of public health and is seriously concerned about the allocation reductions to provinces, even though the Committee is also mindful of government fiscal consolidation policy.
  4. The Minister of Finance ensures that National Treasury provides the Committee with the set of conditions that must be met for the provisional funding to be made available in 2021/22 to build the Tygerberg Regional Hospital and Klipfontein Hospital in the Western Cape; and
  5. The Minister of Health ensures that the Department of Health provides a detailed plan on how the department will meet the set of conditions to ensure that funding for building the Tygerberg Regional hospital and Klipfontein hospital is made available in 2021/22.
  6. The Committee understand the need for budget cuts to ensure that the fiscal framework is protected. However, it calls on all departments to present their own plans to their respective Portfolio Committees about how they will contribute to the realisation of the objectives of the ERRP. This is particularly important because the budget reductions are not sustainable in the medium to long term. The solution is to grow the economy, so that revenue can increase, debt decrease and ultimately decrease the fiscal deficit. A growing economy can create jobs that are sustainable.



  1. Conclusion


The responses and implementation plans by the relevant Executive Authorities to the recommendations, as set out in section 9 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.



Report to be considered.


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