ATC201208: Report of the Select Committee on Appropriations on the Proposed Division of Revenue and Conditional Grant Allocations to Provinces and Municipalities as Contained in the 2020 Medium Term Budget Policy Statement, Dated 08 December 2020

NCOP Appropriations



Having considered the 2020 Medium Term Budget Policy Statement, the Select Committee on Appropriations reports as follows:

1. Introduction

The Minister of Finance (the Minister) tabled the Medium Term Budget Policy Statement (MTBPS) on 28 October 2020, outlining the budget priorities of government for the medium term estimates. According to Section 6(10) of the Money Bills and Related Matters Act No 9 of 2009 [as amended], committees on appropriations must, within 30 days after the tabling of the MTBPS or as soon as reasonably possible thereafter, report on the proposed division of revenue and conditional grant allocations to provincial and local government as contained in the MTBPS. This report of the Select Committee on Appropriations must contain the following, as referred to it in terms of Section 6(18):

  • The spending priorities of national government for the next three years;
  • The proposed division of revenue between the different 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.


Upon tabling of the 2020 MTBPS, the Committee received presentations from the Minister and the National Treasury, and in compliance with section 214(2) of the Constitution of the Republic of South Africa, the Committee consulted with the Financial and Fiscal Commission (FFC) and the South African Local Government Association (Salga). Further consultations will continue after the tabling of the 2021 Division of Revenue Bill by the Minister. In order to facilitate public participation, newspaper advertisements were placed in all 11 official languages, calling for public comment. In response, written submissions were received from the Organisation Undoing Tax Abuse (OUTA); the Congress of South African Trade Unions (COSATU); the United Nations International Children’s Emergency Fund (UNICEF); the Western Cape Commissioner for Children (WCCC); the Centre for Early Childhood Development; the South African National Child Rights Coalition (SANCRC); Amandla.Mobi; Mr C Seloane; and Dear South Africa. During a joint public hearing on 27 November 2020, oral submissions were also made by OUTA; COSATU; UNICEF; the WCCC and the Centre for Early Childhood Development.

The 2020 MTBPS proposes a fiscal consolidation to stabilise debt and promote economic growth. The spending reductions will lower the budget deficit and are weighted towards the wage bill to shift the composition of spending from consumption to investment. At the same time, reductions will require both improvements in efficiency and high-level decisions on government priorities. Finally, government will implement the principles of zero-based budgeting to address the negative impact of waste and unsustainable incremental increases to spending.


  1. Medium-term spending priorities and risks to expenditure outlook

The medium-term spending plans have been developed in the context of slow growth, rising public debt and large revenue reductions. Government indicated that a range of policy decisions in a variety of sectors such as learning and culture, health, social development, community development, economic development, peace and security and general public services were required in order to align spending with available resources.

Over the medium term, learning and culture 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 on time and within the available budgets. Moreover, to ensure sustainability of the post-school education and training sector, changes in the pace of enrolment at universities and TVET colleges, as well as the coverage of the National Student Financial Aid Scheme (NSFAS) bursaries are likely to be introduced.

In the health sector, greater efficiency and prioritisation is required to protect service delivery in areas such as primary healthcare, immunisation, and HIV prevention and treatment. However, large reductions in the provincial equitable share (PES), which is the main funding instrument for health, will require significant restructuring of provincial health services, with a focus on efficiency savings.  Provisional funding, subject to certain conditions, has been made available from the 2021/22 financial year to build the Tygerberg Regional Hospital and Klipfontein Hospital in the Western Cape.

The social development priority function includes programmes aimed at income protection and social welfare, addressing the challenges of job losses and increasing poverty. To continue mitigating food insecurity and poverty, this sector will be supported until March 2021. Over the MTEF period, responsibility for early childhood development will be transferred to the basic education sector.

Government will also prioritise 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 Settlements Upgrading Partnership Grant in 2021 for provinces and metropolitan municipalities empowers communities to improve their living conditions. Since the deteriorating water services and electricity distribution infrastructure affects the ability of municipalities to provide reliable services. This is exacerbated by weak technical skills and inadequate spending on repairs and maintenance. To mitigate this, government is considering a programmatic approach to asset management, while relevant departments undertake institutional reviews. The Municipal Infrastructure Grant (MIG) will be adjusted to facilitate this work. Government is also reviewing the operating model of the Passenger Rail Agency of South Africa (Prasa) to return the agency to sustainability. The Department of Transport is also exploring ways to integrate public transport funding.

The economic development function will prioritise areas such as finalising outstanding restitution claims and supporting resettled farmers to sustain productivity, job creation and poverty reduction. Government and the tourism sector will collaborate to maintain tourism assets. Government will extend 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.

The medium term priorities for the peace and security sector are to fight crime and ensure territorial integrity. Because most departments in this function are labour intensive, spending reductions will mainly affect staff. Funds have been set aside over the medium term to establish the Border Management Authority, which will consolidate border management functions. The bulk of its financing and staff will be shifted, over time, from the government departments currently performing this function. Moreover, funds will be reprioritised to capacitate the Information Regulator, which monitors and enforces compliance with the Protection of Personal Information Act (2013) and Promotion of Access to Information Act (2000).

Lastly, the general public services under the Department of Public Service and Administration will reprioritise funds for personnel expenditure reviews in national, provincial and local government, public entities and state-owned companies (SOEs) over the next two years. These will assist in developing measures to manage the public-service wage bill sustainably. Furthermore, the Department of Public Enterprises will reprioritise funds to support the Presidential State-Owned Enterprises Council, an advisory body to assist with strengthening SOEs. The Department of Planning, Monitoring and Evaluation will reprioritise funds to enhance public-service reporting on planning and performance. On the negative side, the reductions to departmental baselines may delay the introduction of efficiency-enhancing initiatives such as e-Cabinet, and the full operationalisation of new units such as the project management office in the Presidency.


  1. Proposed division of revenue

Provinces are responsible for the basic education and health services, roads, housing, social development and agriculture functions. Municipalities provide basic services such as water, sanitation, electricity, roads and community services. Combined, provincial and municipal governments face multiple pressures over the medium term as government reduces expenditure growth and poor economic performance affects other revenue and funding sources. During the 2021 MTEF period, transfers to provinces and municipalities are growing below inflation or contracting.


As indicated in Table 1 below, over the medium term, government proposes to allocate 48.2 percent of available non-interest expenditure to national departments, 42.2 percent to provinces and 9.6 percent to local government. Over this period, national government resources will decline at an annual average of 3 percent, provincial resources will increase by 0.9 percent and local government resources will increase by 2.1 percent.


Table 1: Proposed Division of Revenue Framework

Division of Revenue

2021 Medium Term Estimates




R billion

R billion

R billion

National allocations








Equitable share




Conditional grants




Local governments




Equitable share




General fuel levy sharing with metropolitan municipalities




Conditional grants



R 50.0

Provisional allocations not assigned to votes



R 34.9


1 524.3

1 552.2

1 566.5

Percentage shares




National departments








Local government




(Source: National Treasury, 2020)


  1. Changes to the structure of provincial allocations

Several changes are proposed to the structure of conditional human settlements grants over the medium term. The Title Deeds Restoration Grant will end in the 2020/21 financial year. The grant established mechanisms, processes and capacity within each province to help eradicate the backlog in providing title deeds to subsidised houses delivered before 2014. The funds from this grant will be shifted back into the Human Settlements Development Grant from the 2021/22 financial year, which will fund these initiatives. Once a province has cleared its backlog, it can allocate the remaining funds to other projects within the grant. From the 2021/22 financial year, a new Informal Settlements Upgrading Partnership Grantwill be introduced for provinces and metropolitan municipalities. The design of this grant incorporates the lessons learnt, including requirements for informal settlement upgrading strategies and planning individual upgrading projects with communities.

To ensure fair funding allocations to each province, the provincial equitable share formula is updated annually to reflect demographic changes. Government reported that the formula was under review, in collaboration with provincial treasuries, although no chances were proposed this year. Table 2 below shows the proposed provincial equitable share allocation for the 2021 MTEF period. 


Table 2: Proposed provincial equitable share allocations



R million


R million


R million

Eastern Cape

66 799

67 158

66 620

Free State

28 516

28 891

28 885


109 360

112 109

113 395


105 139

106 499

106 449


58 915

59 382

59 058


42 034

42 627

42 656

Northern cape

13 662

13 873

13 901

North West

36 111

36 791

36 989

Western Cape

53 438

54 656

55 159


513 973

521 988

523 111

(Source: National Treasury, 2020)


  1. Changes to the structure of local government allocations

Government reported that the local government equitable share (LGES) formula had been updated to account for projected household growth, inflation and estimated increases in bulk water and electricity costs over the 2021 MTEF period. To help municipalities improve their asset management practices, an indirect component of the MIG will be introduced in the 2021/22 financial year, and funded from the direct component.

Over and above infrastructure grants, municipalities can also access other instruments to finance the development of infrastructure that boosts economic growth. Municipalities earn revenue from charging developers to connect new developments to municipal services. The draft Municipal Fiscal Powers and Functions Amendment Bill, to be submitted to Parliament in 2021 for consideration, proposes new, uniform regulations for these development charges, strengthening the revenue-raising framework for municipalities. Creditworthy municipalities can also borrow in capital markets. The National Treasury has updated the original municipal borrowing policy framework, which guides this borrowing, and will shortly submit it to Cabinet for approval. The proposed changes aim to increase the term maturity of borrowing, improve the secondary market for the trade of municipal debt instruments and define the role of development finance institutions to avoid crowding out the private sector.

  1. Reviewing the structure of local government fiscal framework

Attempts are being made by government to address the local government problems of unfunded budgets, municipal sustainability, and structural and operational challenges impacting the effective functioning of municipalities.


  1. Comments by stakeholders and members of the public
    1. Financial and Fiscal Commission (FFC)

The FFC submitted that the COVID-19 pandemic had exacerbated existing structural and fiscal fragilities. On the social front, it had amplified the existing inequalities and pushed many people into poverty and unemployment.  The economic and fiscal outlook was uncertain and likely to undermine the credibility of the overall fiscal framework, given the outstanding wage bargaining agreement and the deteriorating fiscal position of SOEs. Core spending functions faced stagnant and declining budgets in 2020/21, which was 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 the 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 could only be achieved through actual implementation of reform plans as opposed to subjective sentiments of optimism or pessimismin macroeconomic projections. Instead of taking an overly ambitious fiscal policy position, such as zero-based budgeting, the FFC argued that it would be more practical in terms of public finance management, to cost and price functions to align public finance and outputs with outcomes.


With regard to assessing allocations in the June special adjustments budget, relative to the MTBPS, the FFC noted the following:

  • The MTBPS revenue projections for 2021/22 are lower by R4.6 billion.
  • There is a slight easing of the consolidation path set out in June; evident in additions to main budget expenditure amounting to R37 billionin 2021/22 and R66 billion in 2022/23.
  • The bulk of the additions go to non-interest expenditure (R29 billion in 2021/22 and R49 billion in 2022/23).
  • Debt service costs are 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 the local government equitable share (LGES) in 2021/22 and perennial cuts in conditional grants would compound challenges in the sphere. Local government was set to contribute R440 million to the R10.5 billion for SAA to implement its business rescue plan; and conditional grants carried a disproportionate burden of this reprioritisation. The LGES would decline by 9 percent in the 2021/22 financial year and it was unclear how the municipalities would maintain the provision of services to poor households. The FFC implored government to prioritise local government and by implication, the poor households; and further implored the local government 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 addressing perennial planning and coordination challenges, and it required adequate resourcing. However, the MTBPS was silent on how the DDM would be resourced. For this initiative to be effective and catalyse local economic development and support the economic recovery plan, it was important that government provided clarity on its operational modalities and provided the initiative with the necessary resources. 


Regarding national and provincial wage agreements, the FFC submitted that the 2020 Budget had reduced the wage bill of national and provincial departments by R160.2 billion over the 2021 MTEF period; thus reducing the average annual growth from 6.8 percent over the 2020 MTEF period to 3.5 percent over the 2021 MTEF period.  The MTBPS announced additional reductions in the wage bill of national and provincial departments in 2020/21 and over the 2021 MTEF period, amounting to R311 billion. This decelerated the growth of the public service wage bill from 1.8 percent in the current year to an average annual growth of 0.8 percent over the 2021 MTEF period. The massive cuts and declining growth of the wage bill represented huge risks for the services delivered by provinces, as their compensation budgets accounted for a large share of their total expenditure. 


The FFC also submitted that the litigation at the Labour Court, about the lack of implementation of the 2020/21 leg of the multi-year wage agreement, presented uncertainty for provincial budgets.  The lack of an agreement on the wage freeze meantthat 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 large share of the compensation of employeesbudget 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.  According to the FFC, there was no credible plan to mitigate the risks from the potential wage freeze fall-out, particularly at provincial level.


The FFC stated that government guarantees to SOEs had increased from R470 billion in 2017/18 to R484 billion in 2019/20, due under-performance, particularly by Eskom, and this represented a 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 bail-outs. Guarantees to SOEs amounted to 10.5 percent of the GDP. 


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


The FFC expressed concern over the spending performance of certain departments, in regard to the alignment of the budget to economic policy interventions. These included the departments of Agriculture; Communications; Science and Innovation; Trade, Industry and Competition; Women, Youth and Persons with Disabilities; Water and Sanitation; and Public Works. In order to improve the effectiveness and quality of spending, the FFC underscored the importance of -

  • Putting in placeexpenditure tracking systems to ensure effective expenditure targeting and quality spending;
  • Government intensifying its 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           (PBO)

The Parliamentary Budget Office (PBO) submitted that new waves of COVID-19 had created more uncertainty about the implications for the global economy and when an economic recovery from the pandemic would begin. The PBO highlighted that there was a global consensus that public sector actions in the form of fiscal and monetary stimulus remained vital to avert further economic collapse. The MTBPS proposed steps to reduce the fiscal deficit and stabilise the debt to GDP ratio over a five-year period. This would be done by the rebuilding 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 proposals in the MTBPS were affected by, and dependent on, uncertainties including(i) further negotiations related to the public sector wage bill; (ii) government performance reviews; and (iii) further reviews of conditional grants to provincial and local government.


The PBO submitted that government’s fiscal objective was focused on rapid debt reduction, but questioned whether these spending cuts in critical developmental areas wouldnot reverse socio-economic gains. It stated that during times of crises, uncertainties were high and aggregate demand weak, andthe private sector was generally unable to drive recovery, preferring to keep its assets liquid rather than sink it in fixed investments.


The PBO highlighted the spending trends compared to 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 formed part of the budget system, indicated the following:

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


The PBO further submitted that, in order to ensure sustainability, high-level policy discussions were needed on -

  • The number and size of departments, ministries and public entities in national and provincial government;
  • Management of the functions assigned to the three spheres of government;
  • Containing the publicservice 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 of reductions on service delivery; government’s ability to attract highly skilled professionals; and the overall unemployment rate. According to the PBO, public sector workers accounted for a relatively large portion of the personal income tax (PIT) base, making it potentially more sensitive to public sector wage policy decisions or levels of employment. In times of public spending growth, it was generally recognised that the public sector tended 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,could have a disproportionate effect on the PIT tax base. The PBO further submitted that, while large reductions in compensation of public employees had been justified by the explanation that expenditure on compensation had increased and was crowding out investment expenditure; the share of compensation of employees in total expenditure had declined from 38 percent in 2000/01 to 33.9 percent in the 2019/20 financial year.


The PBO reported that, over the MTEF period, all departments would be required to control wages and headcounts. Much of this would take place at provincial departmental level which meant they would have to source other means of financing their expenditure. Government proposed growth in the publicservice wage bill of 1.8 percent in the current year and average annual growth of 0.8 percent over the 2021 MTEF period. To achieve these targets, which were proposed as essential for fiscal sustainability, government did not implement the third year of the 2018 multi-year wage agreement; and the Budget Guidelines proposed a wage freeze for the next three years to support fiscal consolidation. However, the PBO cautioned that broad sweeping reductions to the public service wage bill may lead to clashes with public sector unions, affecting the current wage agreement and upcoming wage talks.


The PBO also underscored the sharp drop in public infrastructure investment in the MTPBS, which was mostly driven by a decline in spending by SOEs. Between 2016/17 and 2019/20, total public infrastructure spending had fallen from R250 billion to R183 billion, or from 5.7 to 4 percent of GDP. Over the decade, the government would aim to protect funding for infrastructure investment.


  1. Organisation Undoing Tax Abuse (OUTA)

The Organisation Undoing Tax Abuse (OUTA) made the following recommendations related to the 2020 MTBPS:


  • The public wage bill needs to be addressed; as remuneration in the public service is beyond what is necessary or justified in terms of labour productivity and performance outcomes.
  • An investigation should be conducted into the hiring practices at departments that were restructured as part of the state capture project; and the Department of Public Service and Administration should deal with officials doing business with the state;
  • The public service should be professionalised.
  • Allocative and productive efficiency should be improved.
  • Zero-based budgeting should be implemented at the local government level too.
  • The National Prosecuting Authority (NPA), South African Revenue Service (SARS), Special Investigative Unit (SIU), Independent Police Investigative Directorate (IPID) and Statistics South Africa (StatsSA) should be properly funded.
  • Parliamentary committees should improve the quality of their oversight role.
  • Committees 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 preparation for the Budgetary Review and Recommendations Report (BRRR) process.
  • Parliament should establish effective indicators of constituency office performance.
  • Committees should seek input from the FFC, PBO, Collaborative Africa Budget Reform Initiative and other experts on improved management of contingent liabilities.
  • The FFC and PBO should undertake research on options for the local government revenue model andthis research should be presented in Parliament, followed by a Parliamentary debate on the revenue model of municipalities and the state of their finances.
  • The appropriations committees should conduct oversight visits to provincial treasuries to ascertain what they are doing to remedy the issue of worsening municipal audit outcomes.


  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 following resources allocated through the COVID-19 response and in the MTBPS, benefiting children:

  • Improvements in the supply of electricity;
  • Infrastructure development at local level;
  • Increased investment in the Social Housing Programme through subsidies in the amount of R2.2 billion for poor families;
  • Children in low income families benefiting from the tax deductions their working caregivers can make against provident fund contributions;
  • The extension of the Social Relief of Distress Grant to the end of January 2021;
  • The additional R1 billion to be allocated for food aid to address the hunger crisis 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 (ECD) and social workers.


Notwithstanding the above, the SANCRC expressed concern over the following deficits and challenges in the MTBPS and the resulting implications:

  • The reduction in the provincial equitable share (PES) by 4 percent over the next three 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 bigger.
  • The reduction in the PES is especially worrying when viewed against the annual decline, in real terms, in the budgets for the next three years for Education (3.5 percent), Health (1.5 percent), and Social Development (2.2 percent). 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; but historically it has focused on services preventing avoidable deaths, and development services have been neglected. There have not been shifts in budget allocations in health to fulfil its critical delivery role as per the National ECD Policy and the further budget reductions create a risk of even less focus on these core services.
  • Material support for caregivers is a proven developmental intervention, and the SANCRC welcomed the temporary increases in the child support and other grants during the COVID-19 pandemic. However, it was concerned that these would 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 adjusted 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 results 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, limiting the benefit of early education through formal centres later on.
  • In addition, the increased investment 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 only are there just too few social workers, but also 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.
  • Securing system-strengthening investments; prioritising children; and improving equity across provincial and local planning and budgeting; requires strong national leadership and coordination of the child rights agenda. In this regard the SANCRCwelcomed the National Plan of Action for Children and the establishment of the Office on the Rights of the Child (ORC). However, it expressed concern over the small budget allocated to the ORC to fulfil its central rights-based development mandate; as it was much smaller than the budget allocated for institutions supporting other vulnerable groups, such as women and people with disabilities.


In closing, the SANCRC urged the Committee to consider the above gaps that it considered to be fatal to South Africa’s recovery and long term development, and urged that measures be put in place to secure the prioritisation of developmental budgeting for the realisation of the rights of children. In this regard, the SANCRC welcomed the introduction of zero-based budgeting in the 2021 to 2023 financial years, as it presented opportunities if the potential risks were 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 concern over the lack of government resources to fulfil the commitments made in that document. The CEDC further submitted that the ECD sector had been significantly under-funded for decades, resulting in the majority of young, vulnerable children in South Africa being denied access to quality and holistic ECD services. To this end, the 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.


The CEDC also expressed concern over the impact of the reprioritisation of funds from basic education and higher education and training for the implementation of the 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 School Infrastructure Backlogs Grant would be redirected, 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 these spending cuts and find alternative sources to fund SAA’s business rescue plan.


  1. Western Cape Commissioner for Children (WCCC)

The Western Cape Commissioner for Children (WCCC) submitted that the government was obliged to ensure children’s rights were realised, in accordance with the Bill of Rights in the Constitution; and the fiscus must confirm the commitment to the rights and wellbeing of children. The WCCC was of the view that fiscal austerity measures should not be regressive, and that investments in socio-economic rights such as education, health and social welfare, especially for children, should not be decreased.


The WCCC proposed the establishment of an oversight mechanism for the realisation of children’s rights, cutting across all sectors and spheres of government. Furthermore, it suggested that technical support be provided by the Parliamentary Budget Office (PBO)in preparing an independent technical submission to the appropriations committees on a regular basis, on the impact of the MTBPS and the Budget on children’s rights.


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 were worst affected by the negative consequences of the national lockdown. It recommended that the 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 required the collaboration of the key departments of Health, Education and Social Development, and that budget policy should reflect this joint commitment to children in the earliest years of their lives. The WCCC recommended that government continue to allocate sufficient funds to all three key departments as the Department of Basic Education could not provide the entire essential care package for ECD, which comprised of maternal and child health services; nutritional support; support for primary caregivers; social services; and stimulation for early learning.


The WCCC pointed out that disadvantaged learners were the most in need of afinancial commitment, if South Africa was to reduce 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 (UNICEF)

The United Nations International Children’s Emergency Fund (UNICEF) commented that there were a number of really encouraging developments for children in the MTBPS, including -

  • The continued provision of adequate personal protective equipment (PPE) for educators and a strong commitment to ensure that schools remain safe places (regular cleaning and sanitisation);
  • 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 Social Relief of Distress (SRD) 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 presented stark spending choices and proposed to reduce overall non-interest expenditure by more than R300 billion over the next three financial years. However, UNICEF was concerned that provinces, who delivered key services in basic education, health and social development, were hard hit and had their unconditional share of national revenue reduced by 4 percent in real terms on average over the next three financial years.UNICEF submitted that the “social wage” for children would therefore come under severe pressure over the next three years, 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:


  • Government should expedite the work on the reform of the provincial equitable share (PES) formula so that rural provinces’ needs are taken into account in the distribution of provincial funding.
  • The Committee should consider the possible extension of the SRD 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.
  • National and provincial government should use the zero-budgeting approach in both the technical and democratic sense, 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 (COSATU)

The Congress of South African Trade Unions (COSATU) submitted that, whilst appreciating the current fiscal crises and welcoming some aspects of the MTBPS, there were a broad thrust of issues which government had failed to address. COSATU submitted that the focus of the MTBPS was on reducing expenditure and doing so by implementing an unprecedented wage freeze for public servants. Government approached the fiscal crisis by outsourcing the responsibility to workers and not addressing the four fundamental root causes, which were 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 releasing 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 to companies by the UIF, government and the banks by the end of November.

Eskom Social Compact

  • The 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 two months.


  • Government must extend the UIF COVID-19 TERS for the periods 16 October to 15 November 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 the following anti-corruption proposals from COSATU:

  • 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 Public Audit 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, 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 (SARS)

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

Public service wage bill

Government must go to the Public Service Co-ordinating Bargaining Council (PSCBC) to engage with workers in good faith, honour the 2020 wage agreement and fast- track the next three-year wage agreement.

Measures that can address the fiscal sustainability of the state in the next three-year 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 percent;
  • 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, such as 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 towards those that will boost economic growth.




  1. Amandla.Mobi

Amandla.Mobi made a submission on behalf of over 500 000 of its members - primarily low-income black women, who signed its campaigns demanding that the government increase the Child Support Grant and pensioners grant. Amandla.Mobi expressed deep disappointment that all top-ups had come to an end.  In the weeks leading up to the tabling of the MTBPS, many of the Amandla.Mobi members had also sent messages to representatives in the offices of the President and the Minister of Finance asking that the grant top-ups be made permanent. Upon the announcement that the top-ups were ending, many members had told Amandla.Mobi that they did not know how they would make ends meet.


The lockdown, in response to the COVID-19 pandemic, had resulted in job losses and had placed many families on the brink of hunger. An analysis of the data showed that the top-ups and the newly introduced grants had been pro-poor and had curbed hunger. Over 30 million people living in households primarily led by women would be adversely impacted. The said top-ups had made a huge difference in helping to support many families to get through the pandemic. Amandla.Mobi indicated its members would continue pushing for grant increases.


  1. Mr C Seloane

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

Mr Seloane made the following proposals:

  • Government should ensure that young people are employed in entry level and administrative posts, and that the process is fast-tracked.
  • Vacant entry level management posts should also be filled swiftly. While the necessary skills already exist in South Africa, those with qualifications and experience remain jobless.
  • The vacancy rate in all departments should be reduced to 5 percent or less by July 2021.
  • There should be a downwards salary adjustment for executives and senior management, 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 public participation in government decision-making processes or policy formulation. The non-profit organisation had hosted a project on its mobile and online platforms for the public to comment on the MTBPS (see A total of 602 comments had been received on the online poll. The table below provides a summary of responses received and the concerns 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. Observations and Findings

While considering and deliberating on the proposed division of revenue and conditional grant allocations to provinces and municipalities as contained in the 2020 MTBPS, the Select Committee on Appropriations observed the following:

  1. The Committee notes that, relative to the 2020 budget, the provincial equitable share (PES) allocation will be reduced by R60 billion in 2021/22, R85 billion in 2022/23 and R64.1 billion in 2023/24, which includes compensation reductions announced in the 2020 budget and the 2020 MTBPS, as well as a reduction of R12.1 billion in conditional grants. The Committee is concerned about the effects of these reductions on the core business andfrontline service delivery to the poor communities in the long term.  The Committee notes the current review of the PES formula to refine it to assist in addressing the costs associated with service delivery in rural and urban locations; but the Committee is concerned about the effect of PES reductions on the most rural provinces who do not have any additional revenue sources and solely rely on national government transfers.


  1. The Committee notes that the Title Deeds Restoration Grant will be shifted to the Human Settlements Development Grant from 2021/22,and that once a province has cleared the backlog, it can reallocate the remaining funds to other projects within the grant. However, the Committee is concerned whether the portion of the Title Deeds Restoration Grant will continue to achieve its intended objectives without being swallowed up by the inefficiencies and cost of backlogs in theHuman Settlements Development Grantprojects.


  1. Given the influx to informal settlements in urban areas as a result of people seeking economic and educational opportunities, the Committee welcomes the introduction of a new Informal Settlements Upgrading Partnership Grant in 2021/22, the design ofwhich incorporates lessons learnt in the previous grants; including the requirements for informal settlements upgrading strategies and planning individual upgrading projects together with communities. However, the Committee is concerned about the slow pace of changing the apartheid-era spatial frameworkto ensure that people can accessequal opportunities wherever they are in South Africa.


  1. The Committee is concerned about the effect of the R17.7 billion proposed reductions in local government funding on basic service delivery to the poor and most vulnerable households. These reductions include R14.5 billion from the local government equitable share (LGES), R2.7 billion from the general fuel levy and R569 million in direct conditional grants. These reductions are further concerning in light of the recent increase of 6.3 percent in municipal wages as part of the multi-year wage agreement. The Committee is greatly concerned about the fact that funding to local government was reduced in order to bail out state-owned entities (SOEs); while municipalities, who are at the coal face of service delivery, experience serious challenges; including backlogs in maintenance of infrastructureand other critical projects meant to stimulate the economy.


  1. The Committee welcomes the intention to revisit under-performing programmes,such as the Integrated Public Transport Network (IPTN),and the fact that cities will be required to reduce costs and demonstrate their effectiveness, in order to remain funded. However, the Committeeis concerned about the slow paceoflaunching and implementing the IPTN programme in some cities, which hasimplications forgrant expenditure.


  1. Whilst the Committee welcomes the proposed introduction in 2021/22 of an indirect component to the Municipal Infrastructure Grant (MIG) to assist municipalities to improve their asset management practices; the Committee is concerned that the fact that this will be funded from the direct grant component, may result in the reduction of the direct component allocation and eventually affect the completion of planned projects and those already in the implementation phase or near completion.


  1. The Committee notes the progress made with the draft Municipal Fiscal Powers and Functions Amendment Bill, which will be submitted to Parliament for consideration in 2021/22; andwhich proposes new, uniform regulations for development charges with the intention to enhance the revenue-raising framework for municipalities.


  1. The Committee welcomes the initiative to update the original municipal borrowing policy framework in order to increase the term maturity of borrowing; improve the secondary market for trade of municipal debt instruments; and further define the role of development finance institutions (DFIs) to avoid crowding out the private sector. However, the Committee is concerned about the challenges around municipal financial management capacity andthe ability to manage municipal debts, especially in rural municipalities.


  1. The Committee is concernedthat there is no funding allocation in the MTBPS for the implementation of thedistrict-development model; which is crucial for improved service delivery; as moving away from silo-type development will mean economies of scale can be exploited and government’s coherence in terms of planning, infrastructure and service delivery will be improved.The Committee also notes the several blockages to the implementation of this model, including politics and proper coordination, that require intervention.


  1. The Committee notes the submissions from various stakeholders, including Amandla.Mobi, who made a submission on behalf of more than 500 000 of its members - primarily low-income black women - who signed a campaign demanding an increase in the Child Support Grant and pensioners grant; and the fact that its members had also sent messages to representatives in the offices of the President and the Minister of Finance asking that the grant top-ups be made permanent in the MTEF budget allocations.



  1. Recommendations

After considering and deliberating on the proposed division of revenue and conditional grant allocations to provinces and municipalities, as contained in the 2020 MTBPS, and submissions by stakeholders, the Select Committee on Appropriations recommends as follows:

  1. National Treasury and the Department of Cooperative Governance,together with their provincial counterparts, should ensure that concrete measures are put in place to reduce the adverse impactof the reduced provincial and municipal equitable share and conditional grant allocations, proposed for the 2021/22 MTEF, on the core business and frontline service delivery. The current review of the provincial equitable share (PES) formula,to refine it to assist in addressing the costs associated with service delivery in rural and urban locations, is long overdue and should be expedited. A differential approach should be adopted, taking into account different provincial and municipal circumstances while addressing the gap between the most rural areas, that solely rely on national government transfers, and those with additional revenue sources.The proposed reductions should not affect the recent increase of 6.3 percent in municipal wages as part of the multi-year wage agreement.Parliament and provincial legislatures should continue to monitor progress over the 2021/22 MTEF period.


  1. National Treasury and the Department of Human Settlements, Water and Sanitation, shouldtake steps to ensure that the title deeds restoration component within the Human Settlements Development Grant continues to achieve its intended objective - to eradicate the backlog in providing title deeds to subsidised houses delivered before 2014 - after the conditional grant reconfiguration.Both departments should ensure that the portion meant for title deeds restoration is not swallowed up by inefficiencies and the cost of backlogs in the Human SettlementsDevelopment Grant projects


  1. Whilst the Committee welcomes the new Informal Settlements Upgrading Partnership Grant, it recommends that National Treasury and the Department of Human Settlements, Water and Sanitation, provincial treasuries and metropolitan municipalities ensure that proper grant management systems and the requisite capacity to implement the new grant are put in place, in compliance with the grant framework; and thatinformal settlements continue to be upgraded in major cities. Furthermore, government should expedite the process of addressing the spatial framework of apartheid to ensure that people are able to access equal opportunities wherever they are in South Africa. Parliament and provincial legislatures, through their various human settlements portfolio and select committees, should enhance their in-year monitoring of the grant to ensure better service delivery and value for money. 


  1. The National Treasury and the Department of Transport, together with provincial transport departments and the affected municipalities, should ensure that the launching and implementation of the Integrated Public Transport Network programme is enhanced and expedited, to ensure cost-effective and reliable public transport tocommuters, particularly those who rely on public transport to go to work. National Treasury, the Department of Transport and its provincial counterparts,should ensure that intergovernmental mechanisms are utilised to provide adequate support to those cities still struggling to implement the programme, before taking any drastic decisions, such as the stoppage of funds, as this may continue to perpetuate inequalities.


  1. Whilst the Committee welcomes the proposed introduction in 2021/22 of an indirect component, funded from the direct component to the Municipal Infrastructure Grant (MIG) to assist municipalities to improve their asset management practices; steps should be taken to ensure that this does not impact negatively on the completion of planned projects already budgeted for,and those in the implementation phase or near completion,funded through the MIG allocation.


  1. While the Committee notes the progress made with the draft Municipal Fiscal Powers and Functions Amendment Bill, planned to be submitted to Parliament in 2021/22; and which proposes new, uniform regulations for development charges with the intention to enhance the revenue-raising framework for municipalities; the Bill should be expedited and submitted to Parliament for consideration as soon as possible, to improve municipal revenue, given the economic impact of COVID-19.Parliament should continue to monitor progress in this regard.


  1. Whilst the Committee welcomes the initiative to update the original municipal borrowing policy framework in order to increase the term maturity of borrowing; improve the secondary market for trade of municipal debt instruments; and further define the role of development finance institutions (DFIs) to avoid crowding out the private sector; steps should be taken to put in place proper municipal debt management systems, and to improve revenue collection; in order to improvefinancial sustainability, management of municipal debts and avoid over-indebtedness.


9.8 National Treasury should ensure that the district-development model is adequately funded, in order to contribute to local economic recovery; and both National Treasury and the Department of Cooperative Governance and Traditional Affairs, should provide clarity regarding operational modalities and howit will impact on existing intergovernmental relations reforms at local government level.




The Democratic Alliance (DA), the Economic Freedom Fighters (EFF) and the Freedom Front Plus (FF+) objected to the 2020 Medium Term Budget Policy Statement and the Report.


Report to be considered.




No related documents