ATC130613: Report of the Standing Committee on Appropriations on the Appropriation Bill [B1-2013] (National Assembly – Section 77), dated 12 June 2013
Standing Committee on Appropriations
REPORT OF THE STANDING COMMITTEE ON
APPROPRIATIONS ON THE APPROPRIATION BILL [B1-2013] (NATIONAL ASSEMBLY SECTION
77), DATED 12 JUNE 2013
Having considered the
Appropriation Bill [B1 2013], referred to in terms of Section 10(1)(a) of the
Money Bills Amendment Procedure and Related Matters, Act No. 9 of 2009, the
Standing Committee on Appropriations reports as follows:
1.
Introduction
Section 27(1) of the
Public Finance Management Act No. 1 of 1999 (as amended) (PFMA) requires that
the Minister of Finance (the Minister) table the annual budget for a financial
year in the National Assembly before the start of that financial year or, in
exceptional circumstances, on a date as soon as possible after the start of the
financial year, as the Minister may determine. Section 26 of the PFMA requires
Parliament and each provincial legislature to appropriate money for each
financial year for the requirement of the State and the province,
respectively.
In executing this mandate,
the Standing Committee on Appropriations, hereinafter referred to as the
Committee, was established in terms of section 4(3) of the Money Bills
Amendment Procedure and Related Matters Act, No. 9 of 2009, and herein referred
to as the Act. In line with section 10(1)(a) of the Act and after the adoption
of the Fiscal Framework, the Standing Committee on Appropriations has a
responsibility to consider the Appropriation Bill, and report thereon to the
National Assembly.
In terms of sections
10(5) and 10(6) of the Act, Parliamentary Committees may advise the
Appropriations Committee on the appropriated funding. No formal submissions
were received from Committees in terms of sections 10(5) and 10(6) of the Act.
The Bill was referred to the Committee on 13 March 2013 for consideration and
reporting.
The budget for the
2013/14 financial year was tabled by the Minister of Finance in the National
Assembly with the Appropriation Bill (B1 -2013), hereinafter referred to as the
Bill, on 27 February 2013. The Bill was tabled together with the Division of Revenue
Bill, Estimates of National Expenditure (ENE), Budget Review and the Budget
Speech. Given the fact that Committees on Finance and Appropriations have
different mandates derived from the Act, the Appropriation Bill was therefore
referred to the Standing Committee on Appropriations.
In the process of dealing
with the Appropriations Bill, section 9(7)(a) of the Act requires the
Committees on Appropriations of both Houses to consult with the Financial and
Fiscal Commission (FFC). S
ection 10(8)(a) and 10(8)(b) of the Act requires
the Committees on Appropriations to hold public hearings on the Appropriation
Bill and proposed amendments and for the Committee on Appropriations to report
to the House on the comments on and amendments to the Appropriation Bill. In
addition,
an
advertisement was published in national and community newspapers from 22 to 28
April 2013 inviting general public comments and one submission was received
from Earth Life Africa -
·
Financial and Fiscal Commission (FFC); and
·
Public Service Commission (PSC).
In addition to the
National Treasury which briefed the Committee on the Appropriation Bill in its
entirety, the following departments were invited for hearings on their
respective budget allocations:
·
Department of Public Works;
·
Department of Water Affairs;
·
Department of Rural Development and Land Reform; and
·
Department of Cooperative Governance and Traditional
Affairs.
2.
Context and Overview of
the 2013 Appropriation Bill (B1 2013)
2.1
Context for the 2013/14
Appropriation Bill
The 2013 Budget was
tabled within the framework of the National Development Plan (NDP). The
National Development Plan contains proposals for an integrated strategy for
accelerating growth, eliminating poverty and reducing inequality. The 2013
budget appropriation provides for spending that supports improvements in
service delivery, expansions in infrastructure investment, economic support and
development, job creation and enhancements in local government capacity.
In order to create the
fiscal space to fund investment in these key areas, government at all levels
has contributed to making funds available through reprioritization.
This entailed all provincial and national
departments and public entities being asked to identify areas where
inefficiencies exist and effecting budget reprioritization in lower priority
programmes. The 2013 budget framework makes available funding
allocation
of R117.2 billion over the medium term. The R117.2 billion funding made
available comprises of R52.1 billion which has been identified
for reprioritisation
through
expenditure
reductions
, R37.2 billion has been made available to compensate
primarily
for
inflationary effects, and R27.9 billion
is the drawdown from the contingency reserve.
The 2013 budget framework
provides for average annual real growth in consolidated government spending of
2.3 percent over the MTEF period. The consolidated government expenditure is
budgeted to increase by 7.9 per cent a year, from R1.1 trillion in 2012/13 to
R1.3 trillion in 2015/16. The table below shows trends in the economic
classification of payments for consolidated government expenditure for the
period 2009/10 to 2015/16.
Table 1: Consolidated Expenditure by Economic Classification
Source: National Treasury 2013
In the 2013/14 financial
year, compensation of employees constituted 35.3 per cent of consolidated
government expenditure followed by transfers and subsidies at 32.7 per cent and
goods and services at 15.3 per cent. Payments for capital assets and payments
for financial assets were 6.8 per cent and 0.3 per cent respectively.
During the period 2009/10
to 2012/13, transfers and subsidies as a share of consolidated expenditure have
increased from 32.0 per cent to 32.8 per cent. Transfers and subsidies are
projected to increase marginally from 32.7 per cent in 2013/14 to 32.8 per cent
in 2015/16. The large share of expenditure allocated to transfers and subsidies
represents governments significant contribution to poverty reduction and
social development.
More than half of
all South African households benefit from social assistance. In particular,
average annual growth in the number of recipients is projected to moderate in
the medium term to 17.1 million recipients in 2015/16.
The share for
compensation of employees of government consolidated expenditure has increased
from 33.3 per cent in 2009/10 to 35.3 per cent in 2013/14. The rapid growth in
compensation of employees in the past five years has been driven largely by
increases in government employment, salary increases and several
occupation-specific dispensations. The budget share for compensation of
employees is projected to moderate in the medium term and reach 34.5 per cent
in 2015/16. The share for goods and services remains stable at an average
percentage share of 15.3 per cent in the medium term. Payments for capital
assets and payments for financial assets maintain an average percentage share
of consolidated government expenditure of 6.9 per cent and 0.3 per cent
respectively in the medium term. The management of the public sector wage bill
is critical in ensuring a balanced and a priority focused government
expenditure framework.
The 2013 Budget review
states that the value of major infrastructure projects in progress or under
consideration in general government totals R3.6 trillion. It is envisaged that
the NDP will guide decisions on the implementation of proposed projects. The
table below shows public sector infrastructure delivery for the period 2011/12
to 2015/16.
Table
2: Public Sector Infrastructure 2011/12 to 2015/16
Total investment in
infrastructure by the public sector has shown steady growth over the years
increasing from R208.3 billion in 2011/12 to R262.8 billion in 2013/14. The
public sectors investment in infrastructure is projected to amount to R827.1
billion over the 2013 MTEF. A significant share of the funding allocation for
infrastructure investment within General Government will be rolled out by
provincial departments and local government. Infrastructure projects that
address social needs thus not resulting in revenue streams will be financed by
the fiscus and undertaken by national, provincial and local government. While
many infrastructure projects are characterised by poor planning, lack of
project management capacity and inadequate oversight, the strengthening of
regulations and planning requirements should lead to improvements in
infrastructure delivery.
2.2
Overview of the 2013/14
Appropriation Bill
Key national budget
baselines additions amount to R52.6 billion over the 2013 MTEF period. In
particular, R8.9 billion is allocated for the 2013/14 financial year, R11.6
billion in 2014/15 and R32.1 billion in 2015/16. National departments will
receive R2.6 billion for compensation of employees to cover the costs of the
improved conditions of service. The 2013/14 national baseline additions strive
to give effect to governments key policy priorities which include investment in
infrastructure, social services and job creation.
Table 3: 2013/14 Main Appropriation per Vote
Source: National Treasury 2013
The table above shows
allocations per vote as per the 2013 Appropriation Bill (B1 2013). The main
appropriation for national departments (excludes direct charges against the
National Revenue Fund) increases from R546.4 billion in 2012/13 to R588.7
billion in 2013/14. The national votes receiving the largest allocations for
the 2013/14 financial year are Social Development, Police, Cooperative
Governance and Traditional Affairs, Transport, Defence and Military Veterans
and Higher Education and Training. Other national votes receiving significant
funding for 2013/14 include Basic Education, Health, Human Settlements,
National Treasury and Correctional Services.
Table 4: Economic Classification for 2013/14 Main
Appropriation
Economic Classifications
|
2012/13 Adjusted Appropriation
R000
|
2013/14 Main Appropriation
R000
|
2013/14 Main Appropriation %
share
|
Current Payments
|
158812
|
168968
|
29%
|
Compensation of Employees
|
103301
|
111916
|
19%
|
Goods and Services
|
55429
|
56964
|
10%
|
Other
|
82
|
88
|
0.01%
|
Transfers and Subsidies
|
371681
|
402550
|
68%
|
Capital payments
|
14435
|
14258
|
2%
|
Payments for Financial Assets
|
1451
|
2905
|
0.5%
|
TOTAL
|
546379
|
588682
|
100%
|
Source: National Treasury 2013
The table above shows the
2013 Appropriation Bill (B1- 2013) classified per economic classification. In
2013/14, current payments are allocated R168.9 billion or 29 per cent of the
total main appropriation. The allocation for current payments is comprised of
compensation of employees which is allocated R111.9 billion or 19 per cent,
goods and services which is allocated R56.9 billion and other which is
allocated R0.08 billion or 0.01 per cent. The largest allocation of the 2013/14
appropriation is for transfers and subsidies. A significant share of national
transfers and subsidies include transfers to households and conditional grants.
Capital payments is allocated R14.2 billion or 2 per cent and payments for
financial assets is allocated R2.9 billion or 0.5 per cent in the 2013/14
appropriation for national government.
3.
Hearings on the 2013
Appropriation Bill (B1 2013)
3.1
National Treasury
National Treasury briefed
the Committee on the 2013 Appropriation Bill. National Treasury stated that the
Bill provides for appropriation of money from the National Revenue Fund with
spending subject to provisions contained in the Public Finance Management Act
No. 1 of 1999 (as amended). In addition, transfers to sub-national government
were subject to provisions contained in the Division of Revenue Act of
2013.
The Committee was
concerned with the significant allocations for infrastructure investment
allocated to provincial and local spheres of government in relation to the
successful completion of long term development projects. In particular, many
infrastructure projects at local government level had not been completed per
specifications. The Committee pointed out to the need to distinguish between
funding earmarked for refurbishments and maintenance; and funding for long term
developmental infrastructure projects. National Treasury indicated that most
infrastructure spending was for replacement of existing infrastructure.
With regards to the
maintenance of infrastructure, the Committee pointed out to the need to enhance
the monitoring of maintenance and replacement budgets of departments and
entities. The Committee was of the view that it was easy for departments to
neglect the proper maintenance of existing infrastructure and thus rather opt
to request additional funding for new infrastructure developments. For example,
there was a need to track if infrastructure developments earmarked for a
lifespan of 20 years were not poorly maintained thus reducing their useful
lifespan to much less than that planned for.
The Committee welcomed
governments commitment to infrastructure investment of R827.1 billion over the
MTEF. However, there was a need for an explicit differentiation of funding
allocated from the fiscus and funding raised by state enterprises.
The Committee was
concerned with the consistent poor performance in the provision of water
services. In addition, the Committee pointed out to the lack of alignment and
integration in the implementation and rollout of water services by various
state institutions. In particular, the Committee was concerned about the
rollout of water services in the local government sphere. National Treasury noted
that there were challenges in the broad water sector which includes the
national department, the water trading entity, the 12 water boards, water
services authorities and municipalities.
The Committee pointed out
that it had recommended that specific clauses be explicitly incorporated in the
Appropriation Bill on the enforcing of planning as a requirement for
infrastructure programmes. The Committee noted the response by the Minister of
Finance on the incorporation of planning requirements for infrastructure in
current revisions to the Treasury Regulations. However, given the persistent
underperformance in national transfers on infrastructure to provinces and local
government, the Committee viewed it as imperative that the clause be explicit
in the Appropriation Bill.
3.2
Financial and Fiscal
Commission
The Financial and Fiscal
Commission (FFC) in its submission welcomed the 2013 Appropriation Bill and
commended the current allocation of resources to designated priority areas.
However, the FFC was concerned with the limited development impact of increased
government expenditure. The FFC stated that challenges in general public
service delivery lay not in technical financial management but in the
political-administration interface, human resources management, organisational
systems and capacity. In addition, negative sentiments on the countrys fiscal
governance and fiscal prospects were borne out by the consistent lack of
improvements in audit outcomes.
The FFC noted that while
there is the tightening of regulations at local government level such as
amendments to the Municipal Systems Act prescribing competency criteria and
other regulations relating to conditions of employment of Section 57 managers;
there was no similar tightening of the regulatory framework at provincial
level. A key consideration was an assessment on whether provincial financial
governance instruments such as the PFMA were attaining their intended outcomes.
The current dominant
discourse in fiscal policy is sustainability. The FFC indicated that central to
efforts to achieve fiscal sustainability will be the composition of budget
expenditure. In addition, fiscal consolidation will remain under pressure in
the medium term as the countrys economic growth remains vulnerable to the slow
global economic recovery and domestic factors such as labour instability and
service delivery protests. The FFC indicated that positive economic growth may
still be attained provided that reductions of projected government expenditure
(i.e. wage bill consequently consumer spending) are counterbalanced by
increased infrastructure investment.
With reference to
spending that promotes economic development, the FFC supported the emphasis on
funding for education, infrastructure, energy, competition policy, economic
regulation of utilities, trading standards and others. However, critical was
the need to improve the quality of spending in provinces as they have
significant levers to shape the outcome of policy programmes. In addition,
national departments have yet to establish norms and standards for concurrent
functions that are implemented by provinces. Therefore, the access and quality
of services differs markedly between provinces.
With regards to
investment in infrastructure, the Presidential Infrastructure Coordinating
Commission has identified and prioritised 18 Strategic Infrastructure Projects
(SIPs). The FFC indicated that a significant share of identified infrastructure
projects falls within the ambit of local government. This includes plans to
expand electricity distribution networks, develop national capacity to assist
at least 23 least resourced districts to develop infrastructure for the
delivery of basic services, and coordinating the planning and implementation of
public transport and quality human settlements.
South African
unemployment has remained consistently high for the past two decades. The high
levels of unemployment place significant pressure on government budgets. The
FFCs assessment of governments main pillars of economic policy such as the
National Development Plan, New Growth Path, Industrial Policy Action Plan are
anchored in significant expansion in government capital expenditure as a way of
meeting governments job creation target of 5 million jobs in 2020 (NGP) or 11
million jobs in 2030 (NDP). The FFC found that fiscal expansions (i.e.
increasing infrastructure investment and current expenditure) have minimal
impact on employment growth and must be accompanied by policy instruments that
place emphasis on skills development and support to Small Micro and Medium
Enterprises (SMMEs).
The FFC reported that
skills and capacity are often a key challenge hindering the successful
completion of service delivery projects at local government level.
The 2013/14 Appropriation Bill allocates R763.6
million for local government capacity improvements which include Municipal
Systems Improvement Grant (R240.3 million), Infrastructure Skills Development
Grant (R98.5 million) and the Local Government Financial Management Grant
(R424.8 million). The FFC highlighted that conditions for local government
capacity grants should be verifiable and fully adhered to so as to ensure the
achievement of desired outcomes.
The Committee pointed out
that skills development need to be a central tenet of the Expanded Public Works
Programme (EPWP), i.e. project leaders and facilitators should be competent and
skilled in their respective roles. The FFC indicated that the EPWP programme
needed to be significantly scaled up. However, the Committee was concerned that
the envisaged improvement in skills was not being realised in the EPWP
programme.
The Committee welcomed
the positive initiatives by government with regards to economic support and
development. In addition, the Committee noted the emphasis placed on Small Medium
and Micro Enterprises (SMME) by the FFC and sought clarity on governments
provision of training for entrepreneurs. The Committee pointed out that there
was a need to develop visible mentorship programmes through partnerships
between government and the private sector.
The FFC agreed that in
some instances national policy objectives were not prioritised by provinces and
local government. In addition, whilst local government capacity remains one of
the main bottlenecks in implementing many government programmes, there is no
collective ownership of the consistent lack of capacity within local
government.
3.3
Public Service Commission
The Public Service Commission (PSC)
was invited to comment on the 2013 Appropriation Bill (B1-2013).
In its submission it addressed the following
issues, namely:
·
Governance;
·
Efficient, economic and effective use of appropriated funds,
especially the disjuncture between the alignment of departments pre-determined
objectives and actual expenditure;
·
An assessment of skills and capacity levels of departments
to deliver on key infrastructure programmes;
·
An assessment on the use of consultants in National
Government.
In its submission, the
Public Service Commission (hereinafter referred to as the Commission) focused
its presentation on national departments that were directly or directly
involved in infrastructure programmes, namely; Education, Energy, Health, Human
Settlements, Public Enterprises, Public Works, Transport and Water Affairs. The
Commission assessed financial disclosures of Senior Management Service (SMS)
members and found that only 84 out of 154 national and provincial departments
complied fully with the financial disclosure framework. The departments not
complying fully with the financial disclosure framework include Basic
Education, Health, Public Works and Water Affairs.
The Commission manages
the National Anti-Corruption Hotline and refers cases to departments. Less than
half of corruption cases referred were closed in 83 per cent of national and
provincial departments. Furthermore, the number of referred cases closed as at
end of May 2013 is zero in Basic education, 17 per cent in Energy, 4 per cent
in Health, 1 per cent Human Settlements, 100 per cent in Public Enterprises, 27
per cent in Public Works, 59 per cent in Transport and 43 per cent in Water
Affairs.
The Commission reported
that while departments incurred significant amounts of irregular and
unauthorised expenditure, only marginal amounts were reported for financial
misconduct thus suggesting under-reporting by departments on cases of financial
misconduct. The Committee viewed the involvement of the Forum of South African
Director Generals as critical in elevating the need to thoroughly deal with
cases of financial misconduct.
In many instances, discipline
is not managed effectively due to inadequate capacity to chair disciplinary
hearings and represent departments. The Commissions analysis of the 2010/11
and 2011/12 annual reports of 77 national and provincial departments shows that
the number of departments that suspend employees for periods exceeding 60 days
is increasing.
The Committee sought
clarity on possible interventions in cases where suspensions exceeded 60 days.
The Committee was concerned at increased litigation costs that may arise out of
extended periods of suspensions. The Commission indicated that the management
of discipline was a function of individual departments but that the Department
of Public Service and Administration was looking into setting up a structure to
manage disciplinary functions.
The Commission indicated
that whilst most departments spend 90 per cent and above of their allocated
budgets, the percentage share of national and provincial departments that
managed to achieve more than 80 per cent of their predetermined objectives
declined from 9 per cent in the 2010/11 financial year to 4 per cent in the
2011/12 financial year. The table below shows trends in
spending versus performance
for the main departments responsible
for infrastructure delivery.
Table 5:
Performance vs. Budget Spend
Departments
|
Expenditure
|
Performance
|
Audit Opinion
|
|||
2010/11
|
2011/12
|
2010/11
|
2011/12
|
2010/11'
|
2011/12
|
|
Basic Education
|
89.4%
|
91.4%
|
47.0%
|
53.0%
|
Unqualified
|
Unqualified
|
Energy
|
97.9%
|
99.6%
|
47.0%
|
57.0%
|
Unqualified
|
Unqualified
|
Health
|
96.6%
|
99.0%
|
37.0%
|
No appropriate evidence
|
Qualified
|
Unqualified
|
Human Settlements
|
98.0%
|
99.0%
|
67.4%
|
77.0%
|
Unqualified
|
Unqualified
|
Public Enterprises
|
97.0%
|
98.0%
|
61.8%
|
not indicated
|
Clean
|
Clean
|
Public Works
|
89.9%
|
88.9%
|
44.0%
|
46.0%
|
Disclaimer
|
Disclaimer
|
Transport
|
99.2%
|
99.2%
|
67.0%
|
74.0%
|
Unqualified
|
Unqualified
|
Water Affairs
|
96.0%
|
90.4%
|
65.8%
|
8.0%
|
Qualified
|
Qualified
|
Source: Public Service Commission 2013
The Committee expressed
serious concerns at the continual non-attainment of predetermined objectives while
departments manage to regularly exhaust budget allocations. In particular, the
Committee has found in its assessment of national departments financial
performance that departments struggle to spend budgets as per spending
projections throughout the year, in some instances only 50 per cent of
appropriated funds had been spent by the end of the third quarter, yet a large
share of the budget is spent within the last quarter of financial year. The
Committee views this phenomenon as a clear case of fiscal dumping and a
fundamental reason on why planned performance targets are not attained.
The Committee views the
support of Executive Authorities (EAs) and Heads of Departments (HoDs) in
departments performance management systems as critical for the entrenchment of
accountability systems in government. The Commission indicated that there has
been a steady decline in the number of HoDs evaluated over the past five years.
In particular, HoDs in the Public Service are required to enter into
Performance Agreements (PAs) with their EAs and these filed with the PSC by
June of each year. However, the overall compliance rate for the submission of
Performance Agreements (PAs) of HoDs by the due date of 30 June 2012 was 65 per
cent.
With regards to vacancy rates, the
Commission reported that as at 30 June 2012, almost 80 per cent of departments
had a vacancy rate of above 10 per cent in respect of professionals and senior
managers. The average length of time to fill posts in more than 70 per cent of
national and provincial departments was more than 9 months.
The Committee sought
clarity on reasons that led departments to appoint staff that is additional to
the approved staff establishment. The Commission indicated that Chapter 1, Part
3 (g) of the Public Service Regulations provides for such practice but that it
would investigate possible cases of abuse. Furthermore, the Commission reported
that it may be a cost effective alternative to appointing consultants by
departments as remuneration will be within government personnel grading
systems. The Committee expressed concerns at the consistent high vacancies in
technical and professional job categories. The Committee indicated that its
expectation was that as more posts were filled in the public service there will
be a simultaneous decline in the use of consultants.
The Commission in its
submission reported that preliminary findings on its current study on the role
of outsourcing in the public service show that, although 23 per cent of the
sampled departments indicated that they had service delivery models in place,
copies could not be obtained and departments could not explain what the models
entailed. A major concern emanating from this finding is that the use of
consultants without such guiding models may lead to possible duplication of
skills and effort. Furthermore, the Commissions analysis shows that the
largest share of the departments budgets for consultants, contractors &
agencies was spent on the rollout of infrastructure (i.e. Departments of Public
Works, Roads and Transport combined).
4.
Interactions with
Selected National Departments
4.1
Department of Public
Works
The Department of Public
Works (DPW) has been allocated an amount of R6.2 billion for the 2013/14
financial year. The budget comprises of
R2.8
billion for current payments, R2.5 billion for transfers and subsidies and
R778.4 million for payment of capital assets.
The Department is comprised of the following
programmes, namely; Administration (R1.1 billion), Immovable Assets Management
(R3.0 billion), Expanded Public Works Programme (EPWP) (R1.9 billion), Property
and Construction Industry Policy Regulation (R39.2 million), and Auxiliary and
Associated Services (R50.7 million).
The Department reported
that its key priority for the medium-term was the implementation of the
turnaround strategy which aims to return the Department to a state of full
functionality. Although the turnaround strategy consists of 23 discrete
projects , the Departments key focus will be on six areas, namely; developing
a credible and compliant register of state immovable assets; conducting a
comprehensive audit of leases and the establishment of a Lease Management
Framework; ensuring the progressive improvement of audit outcomes for the
Department with particular attention to processes, systems, controls and better
supply chain management; actively reducing fraud and corruption in the
Department, meeting the needs of Prestige clients and operationalising the
Property Management Trading Entity (PMTE) in terms of the Departments mandate.
The Committee welcomed
the focused approach in the implementation of the turnaround strategy. However
the Committee was concerned that the Department does not have the necessary
technical skills to deliver on its mandate and was instead reliant on
consultants for critical skills such as engineers, quantity surveyors and
contract managers.
In addition, there
were concerns at the extended period of time it takes to fill vacancies. The
Department acknowledged that over the years there has been a gradual loss of
critical skills within the department and that this was being addressed as part
of the Turnaround Strategy.
The Committee expressed
concerns regarding poor planning and weak contract management for
infrastructure projects. The Department indicated that it is currently
investigating measures to implement the Infrastructure Delivery Management
System (IDMS) to address constraints and challenges on infrastructure delivery.
With regard to contract management, the Department indicated that it was in the
process of developing a capability model to re-establish this function to
effectively support the Departments operating requirements.
The Committee was
concerned at the continual non-attainment of targets as stated in the
Departments annual performance plan. The Department reported that the
non-attainment of targets is being addressed through the Departments three
phased Turn-Around Strategy. The Department indicated that the percentage of
targets achieved for 2010/11 were not been recorded by the Office of the
Auditor-General (AG) on the Management Letter. The Committee views the
management of performance as a core function of management and not dependent on
the audit process.
The Committee was also
concerned with overall progress and success of the Expanded Public Works
Programme (EPWP). The Department indicated that the EPWP Programme has created
3,054,027 work opportunities for the period April 2009 to March 2013. This
constituted 68 per cent of the five year target of 4,500,000 work opportunities.
For the 2012/13 financial year, three provinces over-performed against their
work opportunity targets, i.e.,
In terms of financial
performance for the Social Sector Grant, six provinces (GP, KZN, MP, NC, NW and
WC) had spent more that 95 per cent of their allocations in the 2012/13
financial year while EC, FS and LP had spent less than 80 per cent of their
allocations. With reference to the EPWP Integrated Grant to Provinces, full
expenditure was not achieved in GP, FS, NC, NW and WC. In terms of EPWP Grant
to Municipalities, only 53 per cent had been spent as at 31 March 2013.
The Committee expressed
concerns with regards to payment of suppliers within the prescribed period of
30 days. Furthermore, the Committee sought clarity on payments made by other
government departments for lease and building contracts under the Departments
management. The Department indicated that ensuring payments to suppliers are
settled within 30 is a high priority and measures instituted to ensure
compliance include addressing backlogs, improving the current invoice
processing system and the implementation an invoice management system. The
Department indicated that past trends show that client departments pay within
60 to 90 days.
The Committee sought
clarity on the completion of the asset register and the quantification of the
states immovable assets. The Department indicated that it is currently
finalising the development of the software for physical verification and that
the physical verification exercise is envisaged to be completed by July 2014
and the vesting will be completed by March 2016. Furthermore, the Departments
Immovable Assets Register Enhancement Programme will be finalized by 31 March
2016.
4.2
Department of Water
Affairs
The Department of Water
Affairs (Budget Vote 38) was allocated a total budget of R10.2 billion for the
2013/14 financial year. The budget comprised of six programmes, i.e.
Administration (R978.6 million), Water Sector Management (R516.4 million),
Water Infrastructure Management (R2.6 billion), Regional Implementation and
Support (R5.9 billion), Water Sector Regulation (R118.7 million), and
International Water Cooperation (R25.4 million).
The Department reported
that in the process of implementing its Mega Projects for the 2013/14 financial
year it will strive to ensure that s
pending is according to demand plans
and employ quantity surveyors and cost estimators to improve on overall project
costing. Below is a summary of Mega Projects to be undertaken by the Department
in the 2013 MTEF, namely:
·
·
·
Groot Letaba River Water Development Project (GLeWaP)
Construction of Nwamitwa Dam Project cost to completion (R1.7 billion). 12
per cent of the project to be completed in 2013/14.
·
Nationwide Dam safety rehabilitation Project to cost R200
million in 2013/14. In the
2013/14 financial year the Department will
complete the Elandsdrift Dam (EC), Stompdrift Dam (WC), Cata (EC) and Mnyameni
(EC).
·
·
Mokolo and
(MCWAP-1) Project cost to completion (R2.1 billion). 95 per cent of the
projected to be completed in 2013/14.
·
Groot Letaba Water Augmentation Project (GLeWAP)
Tzaneen Dam Raising - Project cost to completion (R125 million). 25 per cent of
the project to be completed in 2013/14.
·
·
The
Committee was concerned at the levels and adequacy of capacity on projects
where the Department is collaborating with the Water Boards and Water Service
Authorities (WSA). Furthermore, the Committee pointed out at the need for
adequate planning and management capacity to monitor and evaluate projects. The
Department indicated that in the past there has been adequate capacity from
Water Boards in assisting
WSA
to implement
infrastructure projects. However, the introduction of the
Municipal
Water Infrastructure Grant (MWIG)
will
require that Water Boards develop additional capacity. In dealing with Mega
Projects, the department indicated that a Project Management Unit (PMU) has
been initiated which has access to expertise such as civil electrical,
mechanical and structural as well as environmental, quantity surveying etc.
The
Committee was concerned at the levels of internal capacity and readiness to
implement water projects for the 2013/14 financial year. In particular, the
Committee expressed concerns at the existing high vacancy rate for skilled
professionals.
The Department indicated
that the vacancy rate was at 10.5 per cent which was 849 posts. The Department
has advertised 702 posts for the 2013/14 financial year.
The
Committee pointed out that in many instances a significant share of funding
earmarked for projects is accrued to consultants and sought clarity on measures
undertaken by the Department in maximising value for money through the
utilisation of internal capacity in the implementation of projects. The
Department indicated that it only
appoints the category of consultants (i.e. technical
engineering and construction related) as required by Construction Industry
Development Board (CIDB) and those required to assist warm bodies with
specialized skills.
The
Committee was concerned at the diverting of infrastructure funds from one municipality
to another. In particular, the Committee stated that often it is the poorest
municipalities that had principal need for infrastructure investment and
capacity support. The Department indicated that the diverting of funds in some
instances was due to external reasons beyond the control of the recipient
municipalities such as the slow responses to tender advertisements thus
impacting on the project life cycle.
The
Department indicated that it offers limited support to municipalities through
regional offices and most capacity support to municipalities were carried out
by the Municipal Infrastructure Support Agency (MISA).
4.3
Department of Rural
Development and Land Reform
The Department is
allocated R9.5 billion for the 2013/14 financial year. This includes R1.7
billion for compensation of employees, R1.4 billion for goods and services,
R6.4 billion for transfers and subsidies and R16.3 million for capital
payments. It is important to note that a large part of this allocation goes to
transfers and subsidies under the Land Restitution Programme and the Land
Reform Programme. The spending focus will be on settling restitution claims to
increase access to and the productive use of land; and the implementation of
the comprehensive rural development programme (CRDP).
The Department indicated
that it has developed operational plans per programme on how the budget
allocations would be spent. The Director-General reported that performance
agreements had been signed with the Deputy Directors-General within the Department
to ensure that there was no deviation from operational plans. The department
further indicated that only 14 per cent of the Departments overall budget will
be spent on the support function with the remainder being allocated towards the
priority areas.
The Department reported
that Restitution, Land reform, and Rural Development were its key priorities
for the 2013/14 financial year. With regards to
Restitution,
the following priority areas were identified:
·
Re-opening of the lodgment date for land claims to
accommodate those communities or individual who missed the 31 December 1998
cut-off date and to also provide for the exceptions to the 1913 cut-off date to
accommodate historical landmarks, heritage sites and descendants of the Khoi
and San who lost their land long before 1913; and
·
Settling 230 land claims and
finalising
208 backlog
land claims.
With regards to Land Reform, the following priority areas were
identified:
·
Recapitalisation
of 730 land
reform farms to improve productivity;
·
Acquisition and allocation of 311, 917 hectares of
strategically located land; and
·
Tenure reform policy.
Under Rural Development, the following priority areas were identified:
·
Continue with the CRDP roll-out in 23 prioritized
poorest districts;
·
Increase job creation through infrastructural projects
and rural enterprises; and
·
Progress with Phase 2 and Phase 3 of CRDP (enterprise
and industrial development).
The
Department reported that it has identified the following focus areas in order
to promote effective budget expenditure and improvements in service delivery:
·
Improved Budget & Programme Planning: Extensive
Consultation during Target Setting;
·
Focus on Improving Supply Chain Processes;
·
Internal Monthly Expenditure Monitoring as an Early Warning
Mechanism;
·
Use of the Available Government Budget Monitoring
Instruments;
·
Improving Internal Governance & Planning Structures for
Improved Service Delivery;
·
Portfolio Prioritisation Framework; and
·
Institutionalisation of a Project Management Framework.
The Committee made
reference to the re-opening of the lodgement of land claims and expressed
concerns at the Departments existing capacity to successfully redress
challenges experienced during the initial land claims process. In addition, the
Committee was concerned at the readiness of the Department to effectively and
efficiently process the additional land claims that are to be submitted during
the re-lodgement period as it was envisaged that more claims would be
submitted. The Committee also sought clarity on the estimated cost implications
of the re-lodgement process. The Department indicated that it could not, at
present, quantify the rand value of outstanding land claims to be settled.
The Department indicated
that legislation on land reform has been prepared and submitted to Cabinet and
undergoing public consultations. In 2010, the department had undertaken broad
consultations with beneficiaries on land reform programme and it found that
many were in favour of an overhaul of the programme. While 7.5 million had been
affected through past land legislation, only approximately 90 000 had
lodged claims and 95 per cent of these have been settled. The department
envisaged that a significant number of new claims were likely to be on already
settled claims.
The Committee was
concerned at the litigation costs incurred in the process of finalising land
claims and their impact on the overall funding allocation for restitution. The
Department indicated that in the past Provincial Commissioners had undertaken commitments
without conducting through due diligence consequently the Department has
resolved to centralise its legal office so as to streamline all litigation
matters.
The Committee expressed
concerns regarding delays in the successful implementation of the Comprehensive
Rural Development Programme (CRDP) and clarity was sought on whether this was
as a result of a lack of capacity. In particular, the Committee pointed out to
the negative impact that the use of unqualified extension officers has on the success
of the rural development programme; and the need to link the activities of the
Department of Agriculture, Forestry and Fisheries; and the activities of DRDLR.
The Department reported
that new branches have been established to assist in the roll-out of the CRDP
and these included Post-Settlement, Rural Infrastructure and Enterprise
Development. The Department indicated that the Land Commission is to be
re-engineered to focus only on claims. Furthermore, the Department will seek to
expand the capacity of the state in mapping and cadastral systems through
linking various internal branches with the Land Commission, Deeds Office and
other research institutions such as the Human Sciences Research Council and the
The Committee sought
clarity on whether there were collaborative consultations between the
Department and other relevant stakeholders such as local municipalities,
provincial departments and national departments in the implementation of the
land restitution programme. The Department indicated that there were instances
where a specific land claim was successful on a particular piece of land but
that the identified land was already being utilised for other purposes. For
example, in one instance mining rights had been awarded on a piece of land
which was to be later successfully claimed. The Department indicated that the
lack of strategic partnerships between relevant stakeholders delayed the land
restitution programme.
The Committee was
concerned at the Departments prevailing vacancy rate and pointed out that the
Chief Financial Officers (CFO) position has not been filled for the past three
years. The Committee emphasised the importance of adhering to legislative
prescripts with regards to the filling of funded vacant posts, i.e. the Public
Finance Management Act No 1 of 1999 (as amended), Public Service Act of 1994
(as amended) and the Public Service Regulations of 2001 (as amended). While the
Committee welcomes the Departments stated interventions aimed at effective
budget spending for the 2013/14 financial year, the omission of the filling of
funded vacant positions as a key pillar in the Departments strategy to
promote
effective budget expenditure and improve service delivery was cause for
concern. The Committee pointed out that there were 698 vacant posts in the
staff establishment that still had be filled. In particular, there were around
350 vacancies in critical priority functions such as Rural Infrastructure and
Rural Enterprises.
The
Committee pointed out that there has been a regression in audit outcomes since
the 2010/11 financial year with the AG finding that the lack of improvement in
the audit outcomes of DRDLR is as a result of the inadequate preparation,
implementation and monitoring of the action plans. The Department indicated
that it envisages reductions in irregular and fruitless and wasteful
expenditure following the withdrawal of delegations from Regional Offices.
4.4
Department of Cooperative
Governance and Traditional Affairs
The Department of
Co-operative Governance and Traditional Affairs is allocated
a budget of R58.3 billion for the 2013/14 financial year, this includes R277.7
million for compensation of employees, R2.1 billion for goods and services,
R55.8 billion for transfers and subsidies and R12.2 million capital payments. A
large portion of the Departments allocation is earmarked for transfers for the
local government equitable share which will be used to cover municipalities
operational costs and further expand the provision of basic services.
The Department recorded
an under expenditure of R1.412 billion at the end of the 2012/13 financial
year. The Committee expressed concern about this significant under expenditure.
Of particular concern was that the under expenditure related to the withholding
of the Local Government Equitable Share from those municipalities that had
performed poorly on their conditional grants allocations.
The Committee was of the view that any
decision to withhold funds from municipalities should be preceded by extensive
support and interventions from the Department. The Committee emphasised that
section 154 of the Constitution provides that national and provincial
government must support and strengthen the capacity of municipalities to manage
their own affairs, to exercise their powers and to perform their functions. In
addition, t
he Committee sought clarity
on reasons underlying the directive by the Department to withhold the transfer
of Municipal Infrastructure Grant funding allocations and Local Government (LG)
Equitable Share funds to various municipalities.
The
Department reported that MIG funds had been withheld from 141 municipalities
that had been performing poorly in terms of the MIGs performance projections
and that funds were later released to the affected municipalities. The
Department indicated that municipalities had responded positively to
withholding letters and support sessions were conducted with various
municipalities. There were three core challenges identified in the support sessions
conducted by the Department, namely, institutional (vacancy rates, high
turnover of staff, commitment), planning and procurement (failure to prioritise
projects and finalise necessary documents), Project and Financial Management
(poor management oversight).
With
regards to the withholding of the LG equitable share, National Treasury
reported that funds withheld from the LG Equitable Share (R725.6 million) was
to refund conditional grant amounts not actually spent in previous financial
years, which should have been returned to the National Revenue Fund in
accordance with the relevant Division of Revenue Acts. The Committee remains
concerned at the implication the with-holding of funds has on the planning and
operations of vulnerable municipalities.
The Committee was
concerned with overall efforts by national government at improving and
enhancing local government capacity. In particular, the Committee stated that
previous programmes aimed at enhancing local government such as the Siyenza
Manje programme had not yielded the desired outcomes. Furthermore, it was not
clear if there were clear synergies and strategic linkages amongst the various
units offering local government capacity support such as the Technical
Assistance Unit in National Treasury, MISA and other support packages within
the Department of Cooperative Governance and Traditional Affairs. Moreover, the
Committee expressed concerns about MISAs capacity to provide support to
municipalities while it had a significant number of vacancies.
The
Committee expressed concerns regarding the levels of under expenditure in the
Disaster Relief Grants. The Division of Revenue Grant Framework allows for the
immediate release of funds for disaster relief following the declaration of a
disaster. For the 2012/13 financial year, only R74.2 million out of R510.4
million had been spent as there were no further disasters declared for which
financial assistance was requested. For the 2013/14 financial year, R534.6
million has been made available for disaster relief of which R121.9 million has
been transferred to repairs to damaged infrastructure following the December
2012 disasters. The Committee pointed out that the need to support poor
municipalities in easing access to disaster funds is critical.
The
Committee was concerned at the effectiveness of measures instituted by COGTA in
ensuring that vacant posts in municipalities are filled. Furthermore, the
Committee was concerned at the continual reliance on consultants to implement
infrastructure projects. The Department indicated that it has developed a
compliance monitoring tool in order to ensure that municipalities comply with
the Municipal Systems Act and employ critical skilled staff. Furthermore, the
Department indicated funding allocations such as the Municipal Infrastructure
Grant do not prescribe conditions on the use of consultants.
The
Committee was concerned at the utilisation of consultants for the most basic
job categories in carrying out the Community Works Programme (CWP). The
Department reported that it had utilised and spent funds on Non Governmental
Organisations (NGOs) in the CWP programme for the management of more than 100
sites and the distribution of wages to participants. The Committee was of the
view that the bolstering of internal capacity was critical in carrying out the
core mandate of the Department with regards to ensuring that basic
infrastructure development; refurbishment and maintenance functions at
municipalities are supported and effectively implemented.
4.5
Earth Life Africa
EarthLife
·
The cost estimates of the nuclear build programme by the
Department of Energy (DoE) as set out in the Integrated Resource Plan 2010-2030
are inadequate as a basis of decision-making and budgeting because the
estimates are incomplete. The nuclear expansion programmes full costs, risks
and benefits for the economy have not been adequately determined .i.e.
insufficient or inaccurate estimates of the true cost of proposed future
nuclear power.
·
A fleet of nuclear power stations will involve a level of
investment unprecedented in
·
The electricity demand estimates used in Integrated Resource
Plan 2010-2030 are inaccurate and too high because of negative changes in the
economic outlook. Overstatement of the electricity demand, together with
incorrect nuclear and renewable energy costs estimates is likely to mean that
the current Integrated Resource Plan is not optimal and might result in
non-optimal allocation of State resources.
·
Regardless of the current cost of nuclear energy,
procurement of a fleet rather than single nuclear reactors violates the
requirements of cost-effectiveness and effective financial management.
·
Concerns regarding the degree of transparency in the
procurement process of large scale infrastructure investment such as nuclear
energy. Lessons from the Arms Deal were cited and findings by the Standing
Committee on Public Accounts (SCOPA) on the Arms Deal were referred to.
With regard to the above concerns,
EarthLlife-JHB made the following recommendations to the Committee:
1)
The Provision for R1.6
billion allocated to NECSA should not be approved and no long term nuclear
power related commitments should be entered into until the Integrated Resource
Plan (IRP) has been revised so as to address the shortcomings of the IRP 2010
relating to the costing of the nuclear program.
2)
The Department of Energy to
complete an accurate cost analysis of proposed future nuclear energy that takes
account of all relevant information.
3)
The Department of Energy should be required to act in a more transparent
manner, providing adequate information to the public and Parliament as to its
intentions and the decisions being taken regarding this proposed procurement
and allowing consultation and debate to take place;
4)
Any money budgeted for large-scale energy procurement should be
conditional on greater Parliamentary oversight.
The Committee deliberated
on the presentation and was of the view that EarthLife-JHB had not presented a
firm case with clear and quantifiable alternatives for consideration. The
Committee indicated that there was a need for a detailed cost analysis and
projections on future energy sourcing alternatives.
The Committee together
with the Portfolio Committee on Energy (PCE) deliberated on the status of the
Nuclear Energy Programme. PCE indicated that there were ongoing discussions
regarding the Nuclear Build Programme and that no policy decision has been
taken in this regard. It was further reported that the
Integrated Resource Plan (IRP) is subject to review every 2 years and
that the current IRP 2010 is currently due for review. However the review
thereof was still under consideration given that a broader plan, namely the
Integrated Energy Plan (IEP) which encompasses all the energy needs of the
country including nuclear energy was in the process of being developed. Given
that the IEP was still under development, no decision has yet been finalized on
the review of the IRP 2010.
In its submission, NECSA reported that the governments grant allocation
of R1.6 billion in the 2013 MTEF is to be
utilised
for the following:
·
Normal operational and
mandated institutional activities;
·
Some specific programmes
relating to, for example, the conversion of SAFARI-1 to low enriched uranium
fuel and the decommissioning and decontamination of facilities from historic
strategic fuel cycle activities; and
·
Delegations conferred on
NECSA by the Minister of Energy.
NECSA indicated that although the grant transfer forms part of the
Nuclear Energy Programme in the DoEs budget, this does not mean that the
foreseen R1.6 billion MTEF allocation to NECSA is due to be spent on the
planned nuclear power procurement programme.
In addition, NECSA stated that it currently does not spend any funds on
work that can be directly linked to the Nuclear Build Programme.
In its submission, NECSA indicated that a small share of the entitys
operational funding is allocated to continued pre-feasibility studies relating
to a future South African nuclear fuel cycle (NFC) programme, as mandated to
NECSA in the Nuclear Energy Policy.
NECSA
reported that these are all general research studies since the Minister of
Energy has not authorized the entity to perform any experimental or development
work on the NFC.
5.
Findings and Observations
5.1
The mechanisms for support to provincial and local
government to carry out infrastructure programmes still require significant
improvement. There is also a need to enhance the monitoring of funds earmarked
for infrastructure maintenance and refurbishment.
5.2
Due to limited support capacity by the Department of
Cooperative Governance and Traditional Affairs, poor and under-resourced
municipalities are unable to readily respond to incidents of disaster.
5.3
National departments lack the requisite capacity in managing
the discipline function which results in extended delays in the finalisation of
disciplinary cases. This in turn has a knock-on effect on service delivery and
has significant cost implications.
5.4
While most departments had spent above 90 percent of their
allocated budgets, the percentage share of departments that managed to achieve
more than 80 per cent of their planned targets was less than 5 per cent during
the 2011/12 financial year.
5.5
National priorities are not always prioritised by the
provincial and local government spheres.
5.6
There is a high number of departments that have high vacancy
rates for skilled professionals and senior managers. Furthermore, there is a
high prevalence of the utilisation of consultants in departments.
5.7
There is a need for alignment in the roles and
responsibilities of the various stakeholders such as national and provincial
departments, local and district municipalities, water service authorities and
water boards in the water services sector for the successful delivery of basic
water services.
5.8
National Treasury had withheld
funding from the local government equitable share (R725.6 million) to refund
conditional grant amounts not spent in previous financial years, which should
have been returned to the National Revenue Fund as per the relevant Division of
Revenue Acts.
5.9
The Department of Rural Development and Land Reform
indicated that the need for enhanced strategic partnerships between relevant
stakeholders such as the Departments of Public Works and Mineral Resources; and
District and Local Municipalities was critical to the effective implementation
of the land restitution programme.
5.10
The Nuclear Energy
Corporation of South Africas (NECSA) R1.6 budget allocation for the 2013 MTEF
is for operational and mandated institutional activities (including research
and development as per the Nuclear Energy Act) and delegations conferred on
NECSA by the Minister of Energy.
6.
Recommendations
The Standing Committee on
Appropriations, having considered the briefings and comments by departments and
invited stakeholders on the 2013 Appropriation Bill, recommends as follows:
6.1
That the Department of
Public Service and Administration ensures that the filling of funded vacancies
is prioritised by all departments in line with the prescripts contained in the
Public Service Regulations of 2001 (as amended) and as per the directive of the
President in the 2013 State of the Nation Address.
6.2
That the Department of
Public Service and Administration expedites the process of doing away with the
5 year time bound performance contracts for top management and link contracts
to performance.
6.3
That the Department of
Public Works develops a framework for long term skills transfer and skills
development in partnership with institutions of higher learning, industry
professionals and other stakeholders in the roll-out of infrastructure
programmes.
6.4
That the National
Treasury and the Department of Cooperatives Governance and Traditional Affairs
ensure that the prescripts of Section 216 of the Constitution and Section 39 of
the Municipal Financial Management Act (MFMA) are adhered to in any
consideration to withhold funds from municipalities.
6.5
That the Department of
Cooperative Governance and Traditional Affairs expedites the payments of
disaster grant funding to ensure that the poorest and most vulnerable of
municipalities are not prejudiced by unnecessary red tape in the application
for Disaster Grant Funding.
6.6
That the Department of
Public Service and Administration ensure that all national departments minimise
the use of consultants and have service delivery models in place that
prioritise the utilisation of internal capacity.
7. Conclusion
The Standing Committee on
Appropriations recommends that the National Assembly adopts the 2013
Appropriation Bill without amendments.
Report to be considered.
Documents
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