ATC220615: Report of Standing Committee on Finance on the Public Finance Management Amendment Bill [B 41 – 2018], dated 15 June 2022.

Finance Standing Committee

Report of Standing Committee on Finance on the Public Finance Management Amendment Bill [B 41 – 2018], dated 15 June 2022.

 

Motion of Desirability on the Public Finance Management Amendment Bill [B 41 – 2018]

 

1. INTRODUCTION AND BACKGROUND
   1. Mr RA Lees, MP (The Sponsor), introduced the Public Finance Management Amendment Bill [B41 – 2018] to amend section 70 of the Public Finance Management Act, Act No 1 of 1999 (“the Act”). The proposed amendment seeks to ensure that there is proactive parliamentary oversight over the issuing of guarantees, indemnities and securities.
   2. Currently the Act only makes provision for Cabinet members to report any circumstances that result in a payment being made under a guarantee, indemnity or security (or financial instruments) to the National Assembly, but not when such instruments are issued. The proposed amendment seeks to ensure that the issuing of such financial instruments are subjected to public scrutiny from the outset in order to manage or eliminate risks that they pose to the fiscus.
   3. The Bill Sponsor highlighted that these financial instruments may have a significant impact on the economy which may affect the country’s credit ratings by the ratings agencies and by creating risk to Parliament’s constitutional imperatives of ensuring that when disbursing funds from the National Revenue Fund, it must comply with the Bill of Rights, promote the progressive realization of socio-economic rights, and ensure the independence of Chapter 9 institutions and the Courts.  

 

1. OBJECTS OF THE BILL
   1. The purpose of the Bill is to extend Parliament’s oversight capacity in relation to the granting or refusal of government guarantees, indemnities and securities in the terms of the Act. The proposed amendment makes provision for the Minister of Finance to table a report in Parliament which sets out a decision to approve or reject the issuing of a guarantee, indemnity or security no less than 30 days after such an instrument has been approved or rejected in terms of section 70(1) of the Act, providing reasons for such a decision.

 

1. PROCESS
   1. The Bill was introduced on 31 October 2018, during the 5th Parliament. In terms of Rule 333(2) of the National Assembly Rules, the Bill lapsed 07 May 2019 when Parliament rose for the 2019 elections. The Bill was revived on 26 November 2019.
   2. On 17 May 2022, Mr Lees briefed the Committee on the Bill. A call for public comments was made and on 07 June 2022, public hearings were conducted. Only one public submission was received but did not discuss the proposed amendment contained in this Bill.
   3. The Bill is tagged as a section 76 of the Constitution with no bearing on customary law.

 

 

 

 

1. SUBMISSION BY NATIONAL TREASURY
   1. In light of no submissions received on the Bill, the Committee requested the National Treasury to make a submission on the proposal in this Bill. Following the Committee’s request, the National Treasury made a submission on 13 June 2022 and said that it supported the principle of extended oversight proposed by the Bill. It however submitted that there is no need for the Act to be amended in order to achieve this. It proposed instead that this oversight be done through a regulatory instruction issued in terms of section 76 of the Act. It said that this “instruction should (i) apply to all guarantees envisaged in section 70(1) of the PFMA, (ii) require quarterly report to Parliament on requests for guarantees dealt with by the Minister of Finance in the previous quarter and (iii) set out the details to be reported.”
   2. In respect of indemnities and securities, National Treasury submitted that the extent to which the instruction, proposed above, should apply to indemnities and securities should be considered in view of the general concurrence the Minister of Finance may grant for these, for example, in the case of indemnities and securities in contracts concluded by PFMA institutions for the rendering of services and delivery of goods. 
   3. The National Treasury further estimated that such an instruction could be issued by August 2022.

 

1. RESPONSE TO THE SUBMISSIONS
   1. The Sponsor, and the Parliamentary drafters, responded to the submissions made by the National Treasury on 14 June 2022.
   2. The legal Drafter emphasised the legislative role of Parliament, which includes the initiation of Private Members Bills. She noted that the proposals made by the National Treasury in respect of issuing instructions in terms of section 76(4)(g) constituted secondary legislation or delegated power. Citing case law, she warned that delegated power in terms of such an “omnibus provision” should be exercised cautiously.
   3. She cautioned that since there is no provision in the Act which provides for the oversight proposed in this Bill, the issuing of regulatory instructions could be viewed as an amendment of the Act, which would interfere with Parliament’s plenary powers.  
   4. The Drafter further noted that section 70(1) provides for reports on the financial instruments. She argued that the legislature appeared to have intended to regulate the submission of the reports in the Act, not through delegation to be done by way of regulatory instructions.
   5. She further argued that considering that the purpose of the Bill is to ensure enhanced oversight by Parliament, allowing the Minister to prescribe how Parliament may do such oversight through regulatory instructions could compromise the principles of delegating plenary power. 
   6. The Sponsor added that leaving this to the Executive to determine could create further problems where in the future, a Minister decides not to issue instructions or withdraws them. He firmly emphasized the need to proceed with the amendment in the Bill through primary legislation as opposed to secondary legislation.

 

 

 

 

1. COMMITTEE DELIBERATIONS
   1. The majority in the Committee agreed that the mischief which the Bill sought to remedy should be dealt with through a regulatory instruction issued by the Minister of Finance in terms of section 76 of the PFMA.
   2. The majority in the Committee further urged Minister of Finance to issue this instruction as soon as possible or within a month of the adoption of this report by Parliament. 

 

1. MOTION OF DESIRABILITY
   1. The Committee decided to reject (or not to support) the motion of desirability referred to in Rule 286(4)(i) of the National Assembly Rules.

 

Report to be considered.