Appropriation Bill: adoption; Finance and Fiscal Commission Recommendations: hearings

Meeting report

FINANCE SELECT COMMITTEE
1 June 2005
APPROPRIATION BILL: ADOPTION; FINANCE AND FISCAL COMMISSION RECOMMENDATIONS: HEARINGS

Chairperson: Mr T Ralane (ANC)

Documents handed out:
Appropriation Bill [B7-2005]
Treasury PowerPoint presentation on Appropriation Bill
SA Local Government Association submission on FFC Recommendations
FFC Annual Submission on the Division of Revenue 2006/07

SUMMARY
National Treasury briefed the Committee on the Appropriation Bill B7-2005. The presentation outlined the purpose of the Bill, detailed the exclusions and explained the format of its contents. It also focussed on conditional grants and specific and exclusive grants included in the Bill. Members focussed on provisions for housing delivery and concerns over the capacity of municipalities to access conditional grants in this regard. The Committee adopted the Bill without objections.

The SA Local Government Association (SALGA) then commented on the Financial and Fiscal Commission’s recommendations for 2006/07. It challenged the Commission’s recommendations on health conditional grants, the financing of social welfare services, the assignment of the powers and functions of local government, the funding framework for housing delivery and transport funding. Members raised a number of questions with regards to road maintenance and the division of responsibilities between the different levels of government.

MINUTES

Treasury briefing on Appropriation Bill
Mr Neil Cole (Treasury Chief Director: Expenditure Planning) explained that the purpose of the Appropriation Bill was to legislate the spending of 34 votes over the period 1 April 2005 to 31 March 2006. It gave legal effect to policy commitments and to the Public Financial Management Act (PFMA) provisions. It did, however, not include state debt costs, the provincial equitable share, the skills development programme, judges’ and magistrates’ salaries, the salaries of Members of Parliament and the salaries of the President and the Deputy President.

The Bill detailed current payments including the compensation of employees, goods and services and interest on rent and land. It featured transfers and subsidies including those made to provinces and municipalities, departmental agencies and accounts, universities and technikons, public corporations and private enterprises and foreign governments and international organisations. In addition, it specified payments and capital assets including buildings and other fixed assets and, machinery and equipment. Finally, it also registered specific and exclusive allocations, solely intended for purposes mentioned under the main division within a vote.

Possible future reforms included measurable objectives per main division, conditions pertaining to each of the transfers to institutions and clear timeframes for capital projects.

Discussion
Mr Z Kolweni (ANC, North West) required clarification on the specific and exclusive allocation made to the Department of Correctional Services for capital works.

Mr Cole explained that if a department were erecting new buildings, the funds required for such projects would be allocated to their budget for the year in which the project was to commence. To this end, R982 million would be made available to Correctional Services for 2005/06. Thus far, the budget for the maintenance and repair of government buildings had been allocated to the Department of Public Works. It was possible that this arrangement might change and that each department would, in future, be tasked with the responsibility and armed with the budget to maintain its own buildings.

Mr D Botha (ANC, Limpopo) required further clarity on the allocation for land reform. He also asked why there was an allocation for the Land Bank if it was to operate as a commercial institution.

Mr Cole replied that the allocation for land reform was made to the Department of Land Affairs in the amount of R6 billion over the medium-term. It was the second highest new amount that was added to the Medium-term Expenditure Framework (MTEF) after social grants. The Land Bank administered the Land Reform for Agricultural Development Programme. This justified the amount of R2.3 million allocated to the Bank.

Mr E Sogoni (ANC, Gauteng) enquired about allocations for the improvement of work conditions for teachers and for infrastructure development for education.

Mr M Robertson (ANC, Eastern Cape) requested elaboration of the allocation made for disaster relief under Social Development in the Appropriation Bill.

Mr Sogoni asked whether the budget allocation for Social Services took into account the Social Security Grant.

Mr Kolweni (ANC, North West) expressed concern over the maintenance of school and court buildings, in particular, and the ability and efficiency of the Department of Public Works to fulfil its responsibility in this regard.

Mr M Goeieman (ANC, Northern Cape) was concerned over ‘blockhouses’ housing projects, with specific reference to cases where contractors did not finish their projects. He asked what measures were in place to deal with such cases where money was paid out, but projects were not completed.

Mr Cole responded that the relevant chapter in the Estimates of National Expenditure (ENE) dealt with the Comprehensive Plan for the Development of Human Settlements in the Department of Land Affairs. He pointed to it as a recognition by government that it could not just build ‘blockhouses’ and provide nothing further to facilitate the growth of human settlements. Part of the broad objectives of this plan was to speed up the delivery of housing and improve the quality of life of the people who were to inhabit these new settlements by making the new homes financial assets.

Where there were cases of contractors that reneged on their responsibilities it would be the responsibility of the department that put out the contract to deal with them. Options that were open to departments included laying criminal charges against renegade contractors.

Mr Cole also explained that the ENE provided for the support of municipalities in receiving accreditation for the execution of housing projects to the tune of R180 million.

Mr Ralane reminded Members that when the Division of Revenue Act was passed, they were quite vociferous in opposing the withholding of funds from under-performing municipalities.

Mr Robertson related that in the Eastern Cape an attempt to sue some of the renegade contractors was made, but that it many instances they did not exist anymore.

Mr Sogoni required further information on the Human Settlement Grant, and how this related to the responsibility of local governments and provincial governments and the devolvement of powers from the latter to the former with respect to housing.

Mr Cole pointed out to the Members that under the Minerals and Energy allocation there was a conditional grant to local government for the Integrated National Electrification Programme.

Mr Sogoni required further clarity on the funds allocated to Eskom in light of the fact that the parastatal exported electricity to neighbouring countries.

Mr Cole said that the Treasury recognised the importance of the Department of Home Affairs in supporting the services rendered by other departments. He mentioned the example of social grants, which required that applicants have valid identity documents. In the Department of Home Affairs’ estimates of national expenditure chapter, there was an amount indicated of R71 million to support the department in getting its services out to areas where it was not represented. Included in the Department’s strategy was the employment of mobile units, revamping its regional offices and a commitment to dispense its services through multi-purpose community centres along with other government departments.

Mr Kolweni asked when the transfers of funds legislated for in the Appropriation Bill would be done given that the financial year already commenced in April.

Mr Cole replied that this matter was provided for by the PFMA under Section 29(1). It said that funds that were drawn from the National Revenue Fund before the Appropriation Bill was passed could be utilised only for services that was provided for in the previous budget, or the adjustments budget. It also provided percentages linked to time-periods. During the first four months of the year this expenditure could not exceed forty-five percent of the amount stipulated in the previous annual budget or the adjustments budget.

Mr Ralane and Mr Sogoni both noted their concern over the tendency of local governments to use funds from their equitable allocation rather than to pursue the option of conditional grants on the basis that the process for the latter was too complicated. Mr Sogoni argued that the Committee should co-operate and co-ordinate with other parliamentary committees and institutions in order to solve this problem.

Mr Botha moved the adoption of the Appropriation Bill. Mr Robertson seconded the proposal. The Committee adopted the Bill.

Financial and Fiscal Commission Recommendations

SA Local Government Association submission
SALGA National Executive Committee (NEC) member, Ms Molokoeane, emphasised that the Constitution committed government to take reasonable measures within its available resources for the delivery of services to citizens. It premised its comments on local government being uniquely placed to understand communities and to prevent marginalisation and promote equal participation for all.

SALGA supported the recommendations of the Financial and Fiscal Commission (FFC) with regards to the conditional grants on environmental health services (EHS). It also put forward some recommendations for the financing of social welfare services and the assignment of powers and functions to municipal governments.

Some of the more far-reaching proposals by SALGA included that, with regards to the funding framework for housing delivery, government should consider transferring allocated funds to accredited municipalities in periodic instalments which had to be reflected in the Division of Revenue Act for each year. In addition, it also proposed that a percentage of the fuel levy be assigned to municipalities to fund the construction and maintenance of municipal roads.

Discussion
Mr Sogoni, Mr Kolweni and Mr Robertson required further elaboration on SALGA’s proposals with regards to road maintenance, and in particular, how the roads were demarcated in terms of whether they were a municipal or provincial responsibility. Mr Sogoni asked whether local government could apply to have roads reclassified as part of provincial- of national government’s responsibility. He also noted that Gauteng had a fund to assist local governments with road maintenance.

Mr Botha noted that the National Roads Act specified that numbered roads were the responsibility of provinces. Municipalities could apply to have roads reclassified. He asked whether SALGA proposed that the fuel levy be raised, or merely wished that a portion of the current levy be assigned to municipalities.

Ms Molokoeane acknowledged that there was a lack of proper planning with regards to the maintenance of roads. SALGA believed that a large part of the problem with road maintenance in the provinces lay with provincial road strategies. The maintenance of municipal roads consumed much of the funds of local government. It was for this reason that SALGA proposed the assignment of a portion of the fuel levy to municipalities. SALGA did, however, not propose an increase in the fuel levy per se, nor had it specified what portion of the fuel levy it would like to see assigned to local governments.

Ms Molokoeane stated that if there was confusion about precisely which road fell under the responsibility of which level of government, there was also the Roads Forum that could be appealed to for guidance.

Mr Ralane asked whether SALGA’s opinion that EHS was underfunded was substantiated by audited cases. He also asked for further elaboration on the determination of the indigent threshold and how it worked in the implementation of the indigent programmes of municipalities.

Ms Molokoeane replied that the processes for the determination and the implementation of the indigent threshold in the execution of social welfare services were different for each municipality. However, most municipalities made use of the categorisation of citizens according to whether they were disabled or pensioners in addition to making use of income figures.

Mr Goeieman and Mr Ralane requested further clarification on SALGA’s proposals regarding the funding framework for housing delivery.

Mr Robertson and Mr Goeieman asked for an explanation of SALGA’s latest position with regards to the accreditation of municipalities for the execution of housing projects.

Ms Mnculu (ANC, KwaZulu-Natal) expressed her concern over the provision of temporary housing after people have been left homeless after natural disasters, in particularly, with regards to the quality of the structures.

There was concerns over the capacity of municipalities to deliver housing to the poor and it was acknowledged that the national Department of Housing had set aside R50 million to support local governments in this respect.

SALGA supported the accreditation process as it stood, but felt that it should be subject to the procedures for assignment as they were outlined in Section 78 of the Municipal Structures Act (MSA). In addition, where municipalities were accredited the way in which funds were transferred needed to be reviewed. SALGA felt that a system of periodic transfers would be an improvement on the current situation. Much of the current problems in the provision of housing could also be ascribed to the provision of funds versus quality management. It was not to say that quality would automatically increase if there were more funding for projects. However, the combination of more funds and the application of the increased funds for quality management would definitely have improved results.

Ms Molokoeane replied that municipalities and provincial departments normally collaborated in responding to the temporary housing needs of citizens after natural disasters. She concurred that the quality of temporary housing would be better if the affected community was involved in the construction of temporary housing.

Mr Sogoni asked for more detail on the division of responsibilities between the various levels of government with regards to the provision of social and welfare services. He also asked SALGA to explain its proposal that the inclusion of EHS in the national definition of basic services might compromise the latter. He also required further clarification on the constitutional powers of municipalities to provide childcare facilities.

Mr Goeieman asked whether it was standard practise for the regulation of pet ownership to be included in EHS planning. Mr Ralane continued that it could be a valuable source of revenue generation.

Ms Molokoeane responded that different municipalities had different bylaws in this respect. Due to insufficient time in that venue, there was not time to answer all questions.

The meeting was adjourned.