ATC211117: Report of the Select Committee on Appropriations on the Second Special Appropriation Bill [B17-2021] (National Assembly – Section 77), Dated 17 November 2021

NCOP Appropriations

Report of the Select Committee on Appropriations on the Second Special Appropriation Bill [B17-2021] (National Assembly – Section 77), Dated 17 November 2021

 

Having considered the Second Special Appropriation Bill [B17 – 2021], referred to it in terms of Section 13 of the Money Bills and Related Matters, Act No. 9 of 2009, the Select Committee on Appropriations reports as follows:

 

1. Introduction

Section 213(2) of the Constitution of the Republic of South Africa provides that money may be withdrawn from the National Revenue Fund (NRF) only in terms of an appropriation by an Act of Parliament. The Appropriation Act sets out to appropriate money from the NRF for the requirements of the State and to prescribe conditions for the spending of funds withdrawn. In executing this mandate, the Select Committee on Appropriations (the Committee) was established in terms of section 4(3) of the Money Bills and Related Matters Act, No. 9 of 2009. The Second Special Appropriation Bill [B17 – 2021] was tabled by the Minister of Finance on 23 August 2021 and immediately referred to the Committee for information. After having been considered and adopted by the National Assembly, the Bill was referred to the Committee, for concurrence, on Tuesday, 16 November 2021.

 

1. Provisions of the Bill

The Bill proposes additional amounts to the following votes:

• An amount of R3.9 billion to Vote 8: National Treasury, to provide for a required capital injection for the South African Special Risk Insurance Association (SASRIA) SOC Ltd;
• An amount of R26.7 billion, including R10 billion authorised by the Minister of Finance in terms of section 16 of the Public Finance Management Act, No. 1 of 1999 (PFMA), to Vote 19: Social Development, for the reintroduction of the Social Relief of Distress (SRD) Grant;
• An amount of R700 million to Vote 23: Defence, for the purpose of domestic and regional deployment of soldiers;
• An amount of R250 million to Vote 28: Police, for the purpose of deployment of police; and
• An amount of R1.3 billion to Vote 39; Trade, Industry and Competition for the purpose of small business support. The allocation was authorised by the Minister of Finance in terms of section 16 of the PFMA.

 

1. Consultation and public participation process

On Wednesday, 15 September 2021, the Committee was briefed by National Treasury on the Bill. National Treasury submitted to the Committee that the purpose of the Bill was to propose an additional urgent funding allocation of R32.85 billion to address the impact of the July 2021 unrest and the COVID-19 pandemic. National Treasury added that these allocations included amounts totalling R11.3 billion authorised in terms of section 16 of the PFMA.

 

Furthermore, the Committee consulted with the Financial and Fiscal Commission (FFC) and the Parliamentary Budget Office (PBO). The FFC commented that the proposed adjustments in the Bill were essentially addressing the unanticipated implications of domestic and regional unrest and were therefore supported by the Commission as these largely constituted non-discretional spending. On the other hand, the PBO provided preliminary budget outcomes for the 2020/21 financial year; showing over-collection of revenue and under-spending on appropriated budgets. The PBO stated that the first quarter outcomes for 2021/22 showed higher than expected revenue collection and slower spending against the 25 percent national benchmark. The PBO commented that the Bill was expected to increase the main budget balance if all other amounts remained the same; and indicated that the Committee should consider the following questions: (i) whether this Bill may have been avoidable if government had reassessed its fiscal consolidation stance; and (ii) whether reassessment would have allowed government to take into account warnings about the fragile social fabric and the impact of the third wave of COVID-19 infections. In response to an invitation for the public to make submissions, only the Congress of South African Trade Union (COSATU) made an oral submission, supporting the Bill, during a hearing held on 17 September 2021.

 

1. Findings and observations

 

During consideration of the Second Special Appropriation Bill [B17 – 2021], the Select Committee on Appropriations made the following findings and observations:

 

1.  The Committee welcomed the tabling of the Bill, intending to urgently address the impact of the July 2021 unrest and the COVID-19 pandemic by introducing an additional R32.8 billion; which will be financed through the R70 billion by which the revenue collection target had been exceeded in the first five months of the current financial year. However, the Committee remained concerned about the increase in the government debt service cost of up to R100 billion per year over the past four years and welcomed the fact that the remainder of the R70 billion will be used to settle current government debt.
2. The Committee noted the allocation of R3.9 billion to National Treasury, to provide for the much needed capital injection for the South African Special Risk Insurance Association (SASRIA) SOC Ltd, as well as the fact that the original estimated cost of damage had been based on 14 July 2021 projections, but that more claims had been received by 09 September 2021, which might impact on SASRIA’s solvency ratio. 

 

1.  In line with its recommendation on the 2020 Appropriation Bill, the Committee welcomed the continued allocation of R26.7 billion to the Department of Social Development, for the reintroduction of the Social Relief of Distress (SRD) Grant. However, the Committee remained concerned about the lack of proper systems and controls to ensure that funds are only paid to the intended and deserving beneficiaries, which required urgent attention to ensure effective and efficient disbursement of the Grant payments.

 

1. The Committee noted the allocation of R700 million to South African National Defence Force (SANDF) for the purpose of domestic and regional deployment of soldiers and the R250 million earmarked for the South African Police Service (SAPS), for the purpose of deployment of police. However, it remained concerned about the issues around weak supply chain management, poor expenditure reports and top heavy organograms for these departments, which remained unresolved.

 

1. The Committee noted and welcomed the allocation of R1.3 billion to the Department of Trade, Industry and Competition for the purpose of small business support. However, it remained concerned about the rigid bureaucratic processes, which might make it difficult for small business owners, who may not be conversant with government policies and procedures, to access this kind of support. The Committee also expressed concern over the lack of the same support for the informal traders who may have been affected the same way as formal businesses during the July unrest.   

 

1. Recommendations

 

Having considered the Second Special Appropriation Bill [B17 – 2021], the Select Committee on Appropriations recommends as follows:

 

1. The Minister of Finance should ensure that the South African Special Risk Insurance Association (SASRIA) SOC Ltd expedites the process of verifying and validating additional claims, as well as sharing its revenue model with government and employing clear measures to cover for all additional claims and to address any possible negative impact on its solvency ratio.   

 

1. The Minister of Social Development, together with the South African Post Office (SAPO), should ensure that proper systems and controls are put in place for the Social Relief of Distress (SRD) Grant to be effectively and efficiently administered and paid only to the intended and deserving beneficiaries.  

 

1. The Minister of Social Development should explore the implementation of card payment systems for the payment of the Social Relief of Distress Grant to beneficiaries, similar to the normal social grants payment system, to avoid corrupt elements at pay points stealing from the poor and vulnerable citizens. Through its sector committees, Parliament will monitor the expenditure of these funds and ensure that value for money is achieved.

 

1. The Minister of Social Development should ensure that, in addition to criminal cases being investigated against officials of government and the South African Post Office (SAPO), who may have unduly benefitted from the Social Relief of Distress Grant; internal disciplinary measures are also instituted against the perpetrators.

 

1. Given the rising levels of unemployment and the negative impact of COVID-19 throughout the country, the Committee implores government to expedite its efforts to establish a long term and sustainable strategic intervention to provide poverty relief to the most vulnerable citizens, even beyond the COVID-19 pandemic.    

 

1. The Minister of Finance should put clear conditions in place for the additional allocation of R700 million to the South African National Defence Force (SANDF) as well as the R250 million to the South African Police Service (SAPS). These conditions should include the following: Ensuring that issues such as supply chain management challenges, top heavy organograms, clear restructuring processes and under-expenditure are urgently addressed before the end of the current financial year.

 

1. The National Treasury and the Department of Trade, Industry and Competition (DTIC), together with the Department of Small Business Development, should reconsider and address rigid bureaucratic processes for SMMEs to access government support relief funds and develop adequate communication mechanisms to ensure that all businesses in townships and rural areas, which were affected by the unrest, are part of the government relief support.  

 

1. The Minister of Small Business Development, together with the Minister of Trade, Industry and Competition, should ensure that systems and proper reporting mechanisms are put in place for the expenditure of the additional allocated funds; and that small business owners are assisted with the application processes for the relief funds earmarked for small businesses, where necessary. Parliament will continue to monitor the disbursement and expenditure of these funds to ensure fairness.  

 

1. There is a need to strengthen the working relationship and partnerships between communities, private security companies and the South African Police Service through dialogue and the discussion of policy issues, coordination and cooperation; in order to arrest the scourge of damage to property and criminality during protests; as such partnerships played a significant role during the July 2021 unrest.

 

5.10 The Minister of Finance, together with the Ministers of Social Development, Trade, Industry and Competition, Police and Defence, should ensure that all additional funds earmarked for their respective departments are spent according to the approved departmental plans and within the ambit of the Second Special Appropriation Act 2021; and further ensure that clear internal controls and financial management systems are put in place to prevent poor performance and wasteful and fruitless expenditure, and that consequence management is enforced and implemented, where necessary, to deal with issues of financial misconduct and corruption.  Parliament will continue to monitor the implementation and expenditure of such allocations through regular in-year monitoring by sector committees and section 32 reports of the Public Finance Management Act No.1 of 1999.  

 

1. Committee Resolution on the Bill

 

The Select Committee on Appropriations, having considered the Second Special Appropriation Bill [B17 – 2021], referred to it for concurrence, and classified by the Joint Tagging Mechanism as a section 77 Bill, reports that it has agreed to the Bill without any proposed amendments.

 

The Democratic Alliance (DA), the Economic Freedom Fighters (EFF) and the Freedom Front Plus (FF+) reserved their positions on the Bill.

 

 

Report to be considered.