Committee Report on 2013 Appropriation Bill [B1-2013]: discussion

Meeting report

Committee Report on 2013 Appropriation Bill [B1-2013]
The Chairperson said that due to lack of quorum, the report was not going to be adopted, but the Committee had to go through the report to make comments and suggestions

Mr Tshepo Masoeu, Content Advisor: Standing Committee on Appropriations, read through the report from introduction to section 3. 3.3 Public Service Commission.

Section 27(1) of the Public Finance Management Act (No. 1 of 1999) (PFMA) required that the Minister of Finance table the annual budget for a financial year in the National Assembly before the start of the financial year. Section 26 of the PFMA required Parliament to appropriate money for each financial year for the requirement of the State. In executing this mandate, the Standing Committee on Appropriations, herein after 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 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 had a responsibility to consider the Appropriation Bill, and report thereon to the National Assembly. In terms of sub-sections 10 (5) and (6) of the Act, Parliamentary Committees might advise the Appropriations Committee on the appropriated funding. No formal submissions were received from Committees in terms of sub-Sections 10 (5) and 10 (6) of the Act. The Bill was referred to the Committee on 13 March 2013 for consideration and reporting.

Mr Masoeu said that the budget for the 2013/14 financial year was tabled in the National Assembly by the Minister of Finance 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 the Committees on Finance and Appropriations had different mandates derived from the Act, the Appropriations Bill was therefore referred to the Standing Committee on Appropriations.

Mr Masoeu said that in the process of dealing with the Appropriation Bill, Section 9 (7) (a) of the Act required the Committees on Appropriations of both Houses to consult with the Financial and Fiscal Commission (FFC). Section 10(8) (a) and (b) of the Act required the Committees on Appropriations to hold public hearings on the Appropriation Bill and proposed comments on and amendments to Appropriation Bill. In addition, an advertisement was published in national and community newspapers from 22 to 28 April 2013 inviting general public inputs, and one submission was received from Earth Life Africa. The stakeholders, who made submissions, and  who were invited by the Committee were, namely, the Financial and Fiscal Commission (FFC) and Public Service Commission (PSC). The Departments of Public Works, Communications, Water Affairs, Rural Development and Land Reform, and Cooperative governance and Traditional Affairs were invited to the briefing by National Treasury on the Appropriation Bill.

Mr Masoeu read the context and overview of the 2013 Appropriation Bill (B1-2013). Under the context, the 2013 budget was tabled within the framework of the national Development Plan (NDP). The NPD contained proposals for an integrated strategy for acceleration growth, eliminating poverty and reducing inequality. The 2013 budget appropriation provided for spending that supported the improvements in service delivery, expansions in infrastructure investment, economic support and development, job creation and enhancements in local government capacity.

The report mentioned that in order to create the fiscal space to fund investment in these key areas, government at all levels had to contribute in making funds available through reprioritisation. That entailed all provincial and national departments and public entities being asked to identify areas where inefficiencies existed and effecting budget reprioritisation in lower priority programmes. The 2013 budget framework made available a funding allocation of R117.2 billion over the medium term. The available R117.2 billion funding comprised of R52.1 billion which had been identified for reprioritisation through expenditure reductions; R37.2 billion had been made available to compensate primarily for inflationary effects, and R27.9 billion was the drawdown from the contingency reserve.

The 2013 budget framework provided annual real growth in consolidated government spending of 2.3% over the medium term expenditure framework (MTEF) period. The consolidated government expenditure was budgeted to increase by 8.1% a year, from R1.1 trillion in 2013/13 to R1.3 trillion in 2015/16. The report showed the table that showed trends in the economic classification of payments for consolidated government expenditure for the period 2009/10 to 2015/16. In the 2013/14 financial year, compensation of employees constituted 35.3% of the consolidated government expenditure followed by transfers and subsidies at 32.7% and goods and services at 15.3%. Payments for capital assets and payments for financial assets were 6.8% and 0.3% respectively.

During the period 2009/10 to 2012/13, transfers and subsidies as a share of consolidated expenditure had increased from 32.0% to 32.8%. Transfers and subsidies were projected to increase marginally from 32.7% in 2013/14 to 32.8% in 2015/16. The large share of expenditure allocated to transfers and subsidies represented government's significant contribution to poverty reduction and social development. More than half of all South African households benefited from social assistance. In particular, average annual growth in the number of recipients was projected to moderate in the medium term to17.1 million recipients in 2015/16.

The share for compensation of employees of government consolidated expenditure had increased from 33.3% in 2009/10 to 35.3% in 2013/14. The rapid growth in compensation of employees in the past five years had been driven largely by increase in government employment, salary increase and several occupation-specific dispensations. The budget share for compensation of employees was projected to moderate in the medium term and reach 34.5% in 2015/16. The share for goods and services remained stable at the average percentage share of 15.3% in the medium term. Payments for capital assets and payments for financial assets maintained an average percentage share of consolidated government expenditure of 6.9% and 0.3% respectively in the medium term. The management of the public sector wage bill was important in ensuring a balanced and policy priority focused Government expenditure framework.

The 2013 budget review stated that the value of major infrastructure projects in progress or under consideration in the general government totalled R3.6 trillion. It was envisaged that the NDP would guide decisions on the implementation of proposed projects. The draft report showed the table that indicated public sector infrastructure delivery for the period 2011/12 to 2015/16. The total investment in infrastructure by the public sector had shown steady growth over the years, increasing from R208.2 billion in 2011/12 to R262.8 billion in 2013/14. The public sector’s investment in infrastructure was projected to amount to R827.1 billion over the 2013 MTEF. A significant share of the funding allocation for infrastructure investment within general government would be rolled out by provincial departments and local government. Infrastructure projects that addressed social needs.  Many infrastructure projects were 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.

The overview of the 2013/14 Appropriation Bill stated that the national budget baselines additions amounted to R52.6 billion over the 2013 MTEF period. In particular, R8.9 billion was allocated for the 2013/14 financial year, R11.6 billion in 2014/15 and R32.1 billion in 2015/16. National departments would receive R2.6 billion for compensation of employees to cover the costs of the improved conditions of service. The 2013/14 national baseline additions strived to give effect to governments key policy priorities which included investment in infrastructure, social services and job creation.

Mr Masoeu said that table 3 showed allocations per vote as per the 2013 Appropriation Bill (B1-2013). The main appropriation for national departments had increased 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 were 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 included Basic Education, Health, Human Settlements, National Treasury, and Correctional Services.

Mr Masoeu said that table 4 of economic classification for 2013/14 Main Appropriation showed the 2013 Appropriation Bill (B1-2013) classified per economic classification. In 2013/14, current payments were allocated R168.9 billion or 29% of the total main appropriation. The allocation for current payments comprised of compensation of employees which was allocated R111.9 billion or 19%, goods and services which was allocated R56.9 billion and other was allocated R0.08 billion or 0.01%. The largest allocation of the 2013/14 appropriation was for transfers and subsidies. A significant share of national transfers and subsidies included transfers to households and conditions grants. Capital payments were allocated R14.2 billion or 2% and payments for financial assets were allocated R2.9 billion or 0.5% in the 2013/14 appropriation for national government.

As to hearings on the Appropriation Bill (B1-2013), the National Treasury briefed the Committee on the Bill. The National Treasury stated that the Bill provided for appropriation of money from the National Revenue Fund with spending subject to provisions contained in the Public Finance Management Act 1999 (as amended). In addition, transfers to sub-national government were subjected to provisions contained in the Division of Revenue Act 2013.

Mr Masoeu said that 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. Many infrastructure projects at local government level had not been completed per specifications. The Committee pointed out to the need to differentiate between funding earmarked for refurbishments and maintenance; and funding for long term developmental infrastructure projects. The National Treasury indicated that most infrastructure spending was for replacement of existing infrastructure.

The Committee welcomed the moderation in budget allocations for compensation of employees and government’s commitment to infrastructure investment. However, the Committee was concerned with poor performance in the provision of water services. 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 Financial and Fiscal Commission (FFC) in its submission welcomed the 2013 Appropriation Bill. However, the FFC was concerned with the limited development impact of increased government expenditure. The FFC noted that there was 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. The FFC indicated that positive economic growth could be attained provided that reductions of projected government expenditure were counterbalanced by increased infrastructure investment. The FFC supported the funding for education, infrastructure, energy, competition policy, trade standards and economic regulation utilities.

Unemployment had remained high for the past two decades in South Africa. The high unemployment rate placed pressure on government's budget. The FFC’s assessment of government’s main pillars of economic policy such as National Development Plan, New Growth Path, and Industrial Policy Action Plan were anchored in significant expansion in government capital expenditure as a way of meeting government’s job creation target of 5 million jobs in 2020 or 11 million jobs in 2030. The FFC reported that skills and capacity were often key challenges hindering the successful delivery of projects services at local government level. The Committee pointed out that skills development needed to be a central tenet of the Expanded Public Works Programmes (EPWP). The Committee welcomed the positive government initiatives with regards to economic support and development.

The Public Service Commission (PSC) was invited to comment on the 2013 Appropriation Bill (B1-2013). In its submission, the PSC addressed the following issues, namely, governance and efficient, economic and effective use of appropriate funds, especially the disjuncture between the alignment of department’s predetermined objectives and actual expenditure. Other issues addressed by PSC included an assessment of skills and capacity levels of departments to deliver on key infrastructure programmes, and an assessment on the use of consultants in national government. The PSC focused its presentation on departments that were directly or indirectly involved in infrastructure programmes, namely, Basic Education, Energy, Health, Human Settlements, Public Enterprises, Public Works, Transport, and Water Affairs. The Commission managed the anti-corruption hotline and referred cases to departments.

Discussion
Mr L Ramatlakane (COPE) referred to section 1, introduction, paragraph 3, and suggested that the words “general public inputs” be replaced by “general public comments”. He then referred to section 2. 2.1, paragraph 8, and suggested that the word “moreover” be removed from the sentence that started with “Moreover, the public sector’s investment in infrastructure is projected to amount”.

The Chairperson commented that the word “moreover” was trying to connect the second sentence with the first sentence, and if the word “moreover” was to be removed, then the first sentence would be meaningless.

Dr S Van Dyk (DA) referred to table 2 in section 2, and wanted clarity on MTEF 'total of 429 832'.

The Chairperson said that the research team would report on that figure. He suggested that table 2 could have been coloured in order for Members to understand it more clearly. He then referred to section 2. 2.2, and wanted clarity on “excluded direct charges against the National Revenue fund”.

Mr Masoeu replied that direct charges included skills levy, and salaries of Members of Parliament and magistrates.

Mr Ramatlakane referred to section 3. 3.1 National Treasury, paragraph 4, and suggested that the sentence that started with “the committee welcomed the moderation in budget allocations for compensation of employees” should be rephrased or removed.

Mr M Swart (DA) agreed with Mr Ramatlakane that the sentence be removed.

Mr Ramatlakane referred to section 3. 3.2 Financial and Fiscal Commission, paragraph 2, and wanted clarity on “similar process at provincial level”.

Mr Swart referred to section 3. 3.2 Financial and Fiscal Commission, last sentence of paragraph 8, and wanted clarity on the sentence “however, the committee was concerned at the long term skills impact of the EPWP programme”.

Mr G Snell (ANC) referred to section 3. 3.2 Financial and Fiscal Commission, paragraph 10, and suggested that the word “superstructure” was confusing and should be removed.

Mr Swart referred to section 3. 3.2 Financial and Fiscal Commission, paragraph 10, and suggested that the sentence “the Committee pointed out to the need for an assessment of an overall governance superstructure in so far as to the successful attainment of an effective unitary state” be changed to “the Committee pointed out to the need for an investigation into the coordination of an assessment of overall governance superstructure in so far as to the successful attainment of an effective unitary state”. He maintained that the Committee had a problem with the report, and he suggested that the report should reflect what was presented to Members.

Mr Ramatlakane referred to section 3. 3.3 Public Service Commission, paragraph 2 on page 10, and asked who were those departments that suspended employees for periods exceeding 60 days and whose number was increasing. He emphasised that the report should name those departments.

In conclusion, Members made changes to some words, and other words were removed. Due to time constraints, the Committee did not go through the whole report and agreed that the Committee would meet on 12 June 2013 to finish the report.

The Chairperson requested the research team to look into the report. He then requested Members to meet at 9:00am on 12 June 2013.

The meeting was adjourned.