The Minister of Finance, the Honourable Trevor Manuel, tabled the Medium Term

Budget Policy Statement (MTBPS) before Parliament on 25 October 2005. Sitting as

the Joint Budget Committee, the Portfolio and Select Committees on Finance were

briefed on the MTBPS by the Minister of Finance and the Director-General of the

National Treasury.

The Joint Budget Committee also heard submissions from selected economists, National

Departments, non-profit and research organisations from 27 October to 02 November

2005 under the following themes:

Rural Development and Urban Renewal

Justice and Protection Services.

Employment and Economic Growth.

Social Services.

International Trade.

The report is divided into broad sections. Section 1 outlines the presentation of the

National Treasury, as well as submissions of economists on the MTBPS. Section 2

outlines submissions of departments and other organisations on the MTBPS. Section 3

lists the general concerns and recommendations of the Joint Budget Committee on the

MTBPS.

The Committee’s mandate regarding the MTBPS requires it to consider the distribution

of available expenditure against government policy priorities. This mandate is separate

from that of the Portfolio and Select Committees on Finance, which respectively

deliberate on the macro-economic, fiscal and intergovernmental aspects of the MTBPS.

The Committee has interpreted its mandate to mean that it should consider the

following:

The likely impact of expenditure allocations in the MTBPS on the effectiveness

and efficiency with which departments can respond to government’s stated policy

priorities,

Whether departments are making the tough choices required, tailoring their

planned expenditures to priorities, choosing effective strategies and seeking

efficiency in implementation.

The hearings aim at addressing these issues, and preparing the Committee and

Parliament for its deliberations and vote on the Budget itself.

The Minister of Finance, the Deputy Minister and the Director General of Treasury

briefed the Committee. The Minister opened with the statement that "No country can

The key themes of the 2005 Medium-term Budget Policy Statement (MTBPS) were

targeting of new funding in line with the Accelerated and Shared Growth Initiative

(ASGI), while maintaining standing budget priorities. The ASGI prioritises

infrastructure development, education and skills and second economy interventions,

while standing priorities are housing/the built environment, the progressive social

security net and developing the capacity of the state. The growth forecast was strongly

positive despite a high current account deficit and oil price pressures, and inflation is

expected to stay within the target band. Fiscal expansion continued, growing by R78

billion or 6.3%, due to a strong economic performance and there were significant

increases in allocations for each sphere of government. Public sector capital formation

increases, while debt service costs continue to decline.

Additional allocations and conditional grants over the MTEF period include"

R20 billion for investment in the built environment – housing, community and

physical infrastructure;

R12 billion for education, health libraries social grants, cultural institutions and

sports participation;

R9 billion for economic services including science and technology and

development and industrial policy initiatives;

R7 billion for improved courts, policing and Defence equipment and access to

justice services;

R8 billion for improved public administration.

The provincial budget saw R46 billion added, R30 billion to the provincial equitable

share, R15 billion added to conditional grants and a further R15 to be spent on the

provincial infrastructure grant. The Director General noted that the MTEF includes an

allocation of R24 billion to municipalities to compensate for the terminated RSC levies.

Local government receives an additional R2 billion over the MTEF period in addition to

the RSC replacement.

Investment in human resource development, institutional capacity and skills

development in all spheres of government were a major focus of Committee concern. It

raised the questions of whether a skills audit been done. The recurring problem of

municipal-level capacity and skills deficits, and particularly whether there was

sustainable skills transfer by Project Consolidate, came under focus. Underspending by

and fiscal dumping on municipalities were also questioned, and why under-performing

and underspending departments and institutions continued to be compensated.

Concerning the impact of skills deficits on underspending, the Treasury team

highlighted poor planning systems as a cause of underspending, not merely poor

financial management. The decreased budget deficit reflected limited viable expenditure

possibilities, according to Treasury. Quality of proposed expenditure programmes had

to be taken into consideration when allocating budget resources. In tracking

performance, there needs to be measurement of outcomes for effective oversight, not

merely the inputs.

Independent economist Noelani King Conradie warned that the current consumer-led

boom cannot achieve 6% a year growth unless matched by export-led growth in

production capacity. Tax cuts would help create jobs, and she believed that there was

enough room in the budget to cut taxes without cutting spending or driving up the

deficit.

Equally important were steps to make it easier, simpler and cheaper to do business in

South Africa, and introducing more innovative and generous incentives to stimulate

small business.

Nazeema Moola of Merrill Lynch agreed that the regulatory burden on business should

be lifted to stimulate business development. While the infrastructure development

programme envisaged by government would encourage some small business

development, more could be done to help small business by lowering company taxes

and deregulating the labour market.

Riefdah Ajam of the Federation of Unions of SA said the Reserve Bank's recent

inflation projections were too negative. She believed inflation would peak in February

2006 at about 5.5 percent as oil prices moved down to about $50 (R338.50) a barrel and

telecommunications costs continued to fall.

Cecil Mlatsheni of UCT focused on youth unemployment, and measures required to

bring it down. Skills training initiatives have limits, given a lack of aggregate labour

market demand. However, lack of skills in turn limits growth. Schooling efficacy is a

major cause of concern and FET colleges an important intervention, but more

information on the effect of education mechanisms on growth and employment is

required.

3.: Theme 1 (Rural Development and Urban Renewal)

The DPLG briefed the committee on the Integrated Sustainable Rural Development

Programme (ISRDP) and the Urban Renewal Programme (URP), noting that their main

focus was on the second economy. Rural and urban Nodal areas were defined and

identified. Both these programmes of the department were said to be at the centre of

fighting poverty and underdevelopment, and building economic growth in communities.

The department stated that currently the nodal areas were growing at 1,8 % per annum,

and that it had already begun mainstreaming programmes of Project Consolidate in

nodal areas. There had been economic profiling of the nodal areas in order to structure

economic programmes for them. In conclusion, the department added that their priority

areas and programmes were concurrent/consistent with the current MTBPS.

The department agreed with the Committee that co-operation between the DPLG,

Treasury and DBSA was of importance. In response to a query about a skills audit, the

department noted that its capacity to identify specific needs requires to be addressed.

The department added that there were systems being put in place to measure success or

the extent of Project Consolidate

The department stressed the importance of its three core programmes; water resource

management, water services, and forestry, noting that its business was to address social,

economic and environmental problems, as well as managing the economic assets of

water resources, and forestry. The department presentation concluded by noting that

their core principles were in line with the MTBPS, and in terms of issues of improving

quality of life. The department also added that it had limited financial inputs for water

for economic growth and development.

The Committee enquired about the recent typhoid outbreak and moves to prevent

another such occurrence, and the DWAF replied that it had established a task team. On

the Limpopo drought crisis, the department had done projects to build dams and that 6

dams have been completed. A feasibility study was currently under way for building a

dam in Tzaneen. There was also a plan to look at sourcing water from elsewhere, and

one such place identified was Gauteng. The department also noted that its water crisis

could not be looked at in isolation to the other two countries (Zimbabwe and

Mozambique) with which it worked and used water.

NAFU started by stating the challenges that it faced, which were the absolute levels of

spending in agriculture, and also the cumbersome and slow government programmes.

However, it noted that the share of money to agriculture had in fact increased.

Weaknesses highlighted were slow processes and limited finance. It recommended that

government review its funding, and address the problem of lack of clarity as to

AgriBEE programmes. The organisation urged that the department stop creating

complex solutions to simple problems. Lastly, the organisation noted the lack of access

of black farmers as of major concern.

Members engaged with the issue of NAFU members being unable to access relief funds,

and asked about issues of profitability and market access of emerging farmers. NAFU

proposed one-stop shops so that people could access these programmes at a less cost.

However, NAFU raised the issue of Agriculture Department officials managing

members’ farms on their behalf. Its also stressed the need for government to coordinate

service to the people, noting that while the budget was adequate, the manner in which

delivery of services was coordinated limited delivery, which resulted in the need for

more funds. A Department of Agriculture official then added that it was essential that its

stop creating new structures to solve problems. She said that structures were in place

and needed to be used. In terms of NAFU's recommendation that implementation be

driven by communities, she was concerned about issues of accountability, and capacity.

The presentation was short, and the department was asked not to continue with the

presentation, as it did not address the issues in relation to the MTBPS.

Members wanted to know what measures had been put in place to address the issues

raised by NAFU and wanted clarity on the weakness of delivery. Land Use

Management coordination within district municipalities was raised. The Committee

enquired how many beneficiaries requesting assistance from MAFISA received it, and

in terms of underspending on CASP, one member wanted to know if a performance

audit had been conducted in order to assess the impact of MAFISA on intended

beneficiaries

The department noted that it was working together with the Department of Land Affairs.

Its then noted that MAFISA was launched in 3 nodal areas, and in terms of progress, its

said that its were currently screening applications. In relation to the criteria used to

determine allocation of funds to provinces for CASP, the department said that it

considers the number of land in province to the number of land already distributed. On

the issue of land use and the coordination of municipalities, the department said that it

was working closely with municipalities and that municipalities were encouraged to

identify land that could be used for agricultural purposes.

The Department noted that with a cumulative 1.827 million hectares already

redistributed, against the 2014 target of 25 million hectares, there was cause for

concern, and this was one of the main reasons for the recent land summit.

In response to a Committee question on meeting the 2008 objective of settling all land

claims, the department noted that performance was not that good and that there were

many challenges. The challenges ranged from a lack of financial management skills to

the fact that its were now dealing with rural land claims, which were more complex. In

terms of state land being distributed, the department noted that state land was negligible

and that its were dealing with capacity issues. About funding for land reform, the

department said focus on the medium term would be on restitution and that more money

for land reform will be made available through the medium term.

One member requested a follow-up on the Spatial Development Framework, and

wanted to know what measures were in place to ensure compliance by the

municipalities. Capacity constraints were given as the reason.

4. Theme 2 (Security and Justice)

The Department noted that the SAPS operational priorities are in line with the

MTBPS, as well as those of the Justice, Crime Prevention and Security Cluster.

Additional funding enables capital expenditure on facilities and capacity building for

border control, additional personnel and the revised reservist system to take over the

SANDF commandos.

The department responded to Committee enquiry that all spending priorities

identified in the previous year had been achieved. In relation to Scarce Skills

Indicators, the department confirmed that it had developed a model, and that the

process was currently being refined. The department stated that reduction in crime

by 3, 4, and 5% in the past few years was an indication of the seriousness with

which its officers took crime. To address crime prevention the department noted that

it was important to co-operate with other clusters. On the above point the department

added that it was working with other clusters, in such programmes as the Nodes,

Project Consolidate, and the Urban and Rural Renewal programme.

Questioned about Commandos, and regarding the relationship between the SAPS

and the SANDF, the department noted that there was equipment that was being

transferred to the SAPS from the SANDF.

The Committee enquired about vehicle management; the department responded saying

that its did make provision for vehicles per annum, and that the vehicle fleet grew by

3000-4000 units/year. The department added that this process also included

replacement. In terms of resourcing, the department noted that it needed to sustain these

vehicles. When looking at the vehicle (process) model, the department felt that its

model was sufficient.

The Committee recommended that current priorities be linked with last year’s, and

stressed the importance of integration and the need for greater co-operation within

the cluster. The department took note of this and added that maybe there needed to

be greater involved of the other units in its cluster, in this budget hearing.

The department outlined its budget history since 1994 and set out its nine priorities

for the 2006 MTEF. Key areas are equipment modernisation; military skills

development; information and communication systems; Defence infrastructure and

ARV rollout.

The committee wanted to know whether the department’s concern, raised in last

year’s presentation, about expectations that were not reflected in the MTEF, notably

peacekeeping, had been addressed. The department replied that last years

presentation was still an ongoing issue, and that the National Treasury was indeed

helping them. The funds allocated the department noted as being insufficient, and

was considering topping-up the allocation from its internal budget

On bad conditions in military hospitals, the department noted that maintenance was

the key and that it was working with Public Works and that there was progress. In

terms of personnel in Burundi, the department said that it could not scale-down on

personnel due to elections. The department submitted that there were a total of 1287

members currently deployed in that operation.

On the issue of land restitution, which the department addressed in its presentation,

the Committee wanted to know why this matter was not transferred to Land Affairs,

as it concerned state land. He also noted that department had said last year that

Treasury had approved partial funding for some of its initiatives and wanted to know

how much this partial funding was.

On the issue of land restitution, the department noted that it was in constant

communication with Land Affairs, and that its had gone before the Land Affairs

Portfolio Committee. In terms of other funding to address shortfalls, the department

said that it had a total of R821 million, R500 million from the budget, R300 million

from internal budget, and R21 from external funding, which would be used for

deployment. The department said that there was a shortfall in the amount that it had

requested in the previous year. The priorities that the department stated were still in

the process of being processed, according to the department

The Committee was concerned about the R1 million which the department had

underspent, and the way departments pleaded poverty, yet were underspending. The

Committee said that departments had to be monitored carefully during the move to

the end of the financial year. On the issue of Land Restitution, the Committee

proposed that the department be given 6 months to sort out and hand over this issue

to Land Affairs, and focus on Defence issues. The proposal was accepted.

In terms of the MTEF allocations, the department provided additional funding to its

Information and Communication Technology programme. The budget allocation

saw an increase of 10,2% from the 2005 to 2006. For its spending proposals, the

department mentioned its ‘Centre of Excellence’ initiative. The department also

signed a contract with an employment agency to assist in its recruitment drive. The

department noted that it needed 8000 additional personnel to kick-start its 7-day

establishment initiative by March 2007. It argued that it contributed to job creation,

to the second economy and to the African agenda, but faced challenges regarding

anti-corruption measures, overcrowding and detention of children

The Committee’s concern was again the lack of integration within the cluster. He

noted that the department had stated in the previous year that the MTBPS favoured

other departments in the cluster and wanted to know what the department had done

to address this. The next question was on the financial implications of a 7-day week,

whether this initiative had been costed, whether it was more economical than a 5-day

week with overtime. Members put a series of additional questions.

On the issue of recruitment numbers, the department noted that in terms of its White

Paper, costing and planning costs were huge, and that the White Paper was a 20-year

vision. On the issue of immediate recruitment, it was added that pay for overtime in

the 2002-03 financial was in excess of R200 – R300 million, which showed the

overtime system was not affordable. Since the phasing in of the 7-day Establishment

there had been direct cost savings, which were being used to increase recruitment

and to deal with backlogs. With regard to possible continued corruption despite use

of employment agencies, the department noted that it had delegated to 3 agencies

since a about 6 million people applied for 1000 posts at a time, making this volume

was impractical for the department to deal with. The department did however note

that corruption was a possible concern, and that its needed to speak to the agencies

in order to monitor what was currently happening.

In relation to the question about its medical aid, the department said that it had a

fully funded non-contributory medical aid scheme in place, and like all other state

employees, correctional service workers were contributing 1,5%.

On the issue of restructuring salaries, the department said that it was finding it very

difficult to restructure salaries/income levels, since salary increases had to be looked

at in terms of what work was done by the personnel/correctional service officials.

Asked about a possible discrepancy between numbers of personnel the department

wanted to recruit, and the number of personnel already recruited, the department

noted that its intended to recruit 8000 over the MTEF period, and up to 3000 were

being recruited per year. The estimated cost for this initiative over the MTEF was

R750 million. In relation to a question on the cost implications of the change from

the overtime system, the department could not respond.

The department responded to a question about management of awaiting trial

prisoners that this was due to the slow processing and low conviction rates. The

department suggested that integrated planning occur between departments. Even

with the remissions which were granted earlier this year, only 32 000 awaiting trial

prisoners were released, leaving a further 51 000. While the department noted that

this 51 000 was still in its care, it said that there were initiatives between

departments to address this.

One of the initiatives was participation between departments, even at a local level.

Another measure was the possible release of prisoners who were granted but could

not afford bail of R1000 and less. While the long duration of awaiting trial prisoners

was acknowledged as a problem, other contributing factors were mentioned such as,

persons being arrested with insufficient evidence.

The difficulty was also said to lie with the judiciary not fully implementing

alternatives to sentencing. The department noted that it continued to raise these

concerns with the Judiciary, and that there was agreement (in a meeting in

September) amongst all departments that there needs to be improvement.

Another measure taken by the department was to put together a proposal, which

would be addressed to the government Legkotla next January about the detention of

awaiting trial prisoners. In terms of the Inmate Tracking initiative, the department

noted that it did encounter problems, and therefore the projects were not fully

implemented yet.

The department added that a Task Team was established to report on the

effectiveness (and cost) of an Inmate Tracking System. The idea of the new

correctional service (‘New Generation’) facilities was to have smaller units of no

more than 60 offenders grouped by age and programmes etc. In terms of their

design, consultation was done with Public Works, in order to ensure that these

facilities would be escape-proof. The department said that it was in the process of

getting tender bids, which was done with Public Works. It became apparent that the

bidders had very high prices, and almost doubled what the department had budgeted

for. The department had then submitted the bid offers to an independent quantity

surveyor, and will reconsider alternatives once the quantity surveyor’s report is

available. The process would also be put on hold until then. In terms of the 2 private

prisons, the department noted that an investigation was done of the two contracts,

and that the department was advised that there was no value for money in these two

initiatives. The department added that this was realised after it had already signed

the contracts. What the department said it would and could still negotiate was the

money in terms of insurance, as cost of buying out of the contract was too high. In

response to the question of capital underspending, the department said that it was

due to the delay of building.

The department identified capacity building, and especially prosecutorial capacity

building, in leading to reduction in awaiting trial prisoners. The department

acknowledged underspending in some respects, and mentioned that it was

addressing the capital budget underspending as well.

The department’s report was commended for taking into consideration the cluster

approach. On the issue of capital underspending, the Committee urged that

something be done. Referring back to the department’s presentation from the

previous year, the Committee noted that the department had said that it would

increase access to the justice system for all, particularly vulnerable groups. On this

issue the Committee wanted to know how far the department was in terms of dealing

with these issues.

Questioned about underspending on capital items, the department responded that it

was also concerned. However, by dealing with issues of personnel, it was dealing

with infrastructural capacity, and that its were filling posts. In terms of improving

access and building infrastructure, the department said that courts had been built.

Responding to concern about lack of financial statements, the department said it was

undertaking an advertising bid for a consortium to handle money and trust funds.

In terms of personnel expenditure, the department noted that there were areas with

insufficient personnel, and a process was being embraced that separated judicial and

administrative functions so that judicial officers could perform only those functions

directly relating to their jobs, which the department believes will increase efficiency.

The department highlighted the commitment made by Treasury to assist it by

increasing the number of police and prosecutors.

About the current status of awaiting trial prisoners and diversion alternatives, the

department said that its were addressing and exploring mediation and arbitration

alternatives, and increasing the capacity of advocates. The department also said that

it was working on improving court efficiency by working on details for the rollout of

their Reagoboso programme. In terms of providing access and service to vulnerable

groups, the department said it had already rolled out secure-care facilities in some

provinces, and that these would be rolled out in the others.

The department noted that there was improvement in the dealing with sexual

offences but that there still needed to be further strengthening of capacity. In its

interaction with Public Works the department noted that there was still room for

improvement, and that as soon as its were able to address their infrastructural issues

its would be better able to interact with Public Works.

The ISS made a written submission. It viewed the MTBPS positively, and endorses the

emphasis of government on the need to find an appropriate balance between personnel

numbers and salary levels, and between support and front-line delivery staff in the

Defense sector. It supports South Africa’s growing role in African peacekeeping, but is

concerned about the reduction of landward defense, and urges the SA Army’s need for

modernization of main equipment.

The ISS welcomed the paid reservist system for the SAPS, but again urges

reconsideration of the phasing out of the territorial reserve, arguing for its role in coping

with natural disasters, as well as its rear area protection role.

Transport services and infrastructure are the veins and arteries of economic growth,

according to the Department of Transport. The department stated that in terms of its

priorities, it aimed to with economic growth and job creation, and bridging the gap

between the first and second economies.

Also as a department it stated that it wanted to improve access to public transport,

starting with rail, which carries 2,2, million passengers daily. There has been a 31,9%

growth in rail passengers, and that the ‘Gautrain’ would be integrated with the existing

rail network. The department mentioned that 58 contracts had already been awarded for

bus subsidies and that R7 billion would be spent on the taxi recapitilisation process.

Some 100,000 taxis would be recapitalised and at a cost of R50 000 each. This R7

billion was said to include that training of traffic officers. The conversion of taxi

permits to route based licenses was seen as a way to reduce inter-taxi association

conflict. The department stated that Eastern and Western corridors would be rolled out

at all the provinces. The department noted that the restructuring of the Road accident

Fund was underway. SANRA was aid to have taken over provincial roads. In

preparation for the 2010 World Cup the department noted that an additional R241,7

million had been allocated to the department in adjusted allocations, and an additional

R3,5 million was allocated for infrastructure. For rural transport, the department noted

that R90 million was allocated, which the department, amongst other things, was going

to use for the rollout of bicycles in rural areas.

The Committee was concerned about the 25% rise in vehicle purchase (car sales), which

was causing huge congestion in national road networks, infrastructure, and

maintenance. Underspending in provinces was also a concern. On the issue of the 2010

World Cup, the member wanted to know how sure the department was that its

programmes would be done by 2010.

Responding to a question on bus subsidies, the department stated that in all countries,

public transport was subsidised, and that this was value for money reduced the cost of

public transport to commuters. The department also noted that subsidies to smaller

vehicles would drive subsidies to second economy.

On the issue of conversion of taxi permits to operating licenses, the deadline remained

and taxis were expected to comply. Those taxi drivers who did not meet the deadline

would not be included in the taxi recapitalisation process. The department confirmed

that its 2010 programmes would be finished on time. On the ‘Gautrain’ though, the

department was not sure that the project would meet the deadline. It noted that the

national government would be assisting the provincial government.

On Basic Management Plans, the department noted that it was still rolling out bicycles.

The department also acknowledged the issue of bad roads, and the need to provide

infrastructure and said that its was providing alternatives. One option that was being

considered was that of animal drawn carts. On access to public transport, the department

admitted that it was facing difficulties: not all public transport was being subsidised, and

that there were fiscal constraints. The department hoped that taxi recapitalisation would

help in this regard. The department said that it was aware of the rollover of R30,9

million and said that a number of factors contributed to this.

On the issue of train accidents, the department mentioned that it had set up a railway

safety regulator to investigate the causes of the accidents and to devise safety

regulations. Rail infrastructure would be upgraded also. On taxi recapitalisation, the

department said that R250 million was allocated although not one single taxi had been

recapitalised. The department reassured members that systems were in place, and that

agreements have been concluded with manufacturers in this regard. The department said

that the manufacturers would only be able to provide vehicles from June 2006, and that

the department was still helping provinces prepare for recapitalisation. On the issue of

Limpopo being unable to provide license renewal notices, the department said that the

province’s problems were due to administrative shortfalls, which fell outside of the

national department’s operations.

The department emphasized that housing development is one of the most important

economic indicators in South Africa, and the NdoH is the most important constructor of

residential property, producing on average 200,000 subsidised housing units, worth

R4,5 billion, and 40,000 in the private sector per annum. Labour intensive housing

programmes create jobs and investment opportunities, while the department prioritises

women and youth empowerment.

Concerning issues raised in 2004, the Committee wanted to know what had been done

to ensure effective monitoring of fund transfers to the provinces. The department had

responded in the previous year that there was limited monitoring. In line with the

Human Settlement Strategy, the Committee wanted to know what the department had

done to ensure interaction between all relevant government departments and regarding

accreditation to municipalities, in terms of capacity issues.

The department responded that there had been discussions but no conclusions in terms

of integration and alignment of resources with other departments. On the issue of

accreditation of municipalities, a framework had been developed and finalised by

MinMec, but at the end of the day it is the provinces that drive accreditation. On this the

department also noted that that the MinMec and SALGA came to an agreement as to

housing delivery. The Housing Sector Plan in the IDP was also said to assist with

planning and getting information from communities to help the department plan and

respond appropriately.

On the issue of unfinished or blocked projects, the department said that MinMec was

working on the unblocking of projects, and that guidelines would be provided to

emphasise that those who are accountable should account. With regards to the

monitoring function, the department stated that a Chief directorate was in place and was

efficiently capacitated. On the question of the previous year’s prioritisation, the

department said that it was in interaction with other departments. It had noted the

importance of capacity building, and had established a unit and directorate in this

regard. Unintended consequences were those of the constant influx of people from rural

to urban areas in search of jobs. The department said that it had now recognised the

need to consider quality. For this department added that it had a rectification process in

place, which was designed to improve poorly built houses.

Questioned about unfinished or blocked housing projects, the department said that

MinMec was working on unblocking of projects, and that guidelines would be provided.

These would emphasise that those who are accountable should account. With regards to

monitoring of performance of housing institutions, the department stated that a chief

directorate was in place for this purpose, and was efficiently capacitated. It also noted

that that MinMec and SALGA came to an agreement as to housing delivery. The

Housing Sector Plan in the IDP was in place to assist with planning and getting

information from communities to help Housing plan and respond appropriately.

Questioned about the exact number of houses built, the department said that it was not

sure and that some of these houses included in this number may still be under

construction. Whether under construction meant already transferred, the department said

that it did not know. On the issue of monitoring, the department said that it was dealing

with this. The department said that it was aware of the local authorities’ lack of capacity

and that its were taking this into account. On the issue of rural housing the department

said that policy was being formulated and that its hoped that its would have a rural

housing policy. On the issue of bursaries the department said that it was in constant

contact with the universities in Gauteng, the Western Cape and KZN.

At the end of the presentation the Committee gave the department 7 days in which to

provide a proper indication of how many houses had been built in each province.

The department’s presentation summarised highlights from the MTBPS.

The Committee enquired whether the department had considered the MTEF before its

came to this hearing. The Committee wanted to know what interaction the department

had with business and other government departments and asked how the department

intended to deal with the obstacles to service delivery in some provinces.

The Committee also questioned the department about its devolving budgets, including

service budgets, to clients. The department explained that the responsibility of paying

for services had been with Public Works for all government departments, but because

this led to inefficient or wasteful use of services, responsibility for paying for services

is now devolved to departments and provinces in the hope of assigning more

responsibility in the use of services.

Also by devolving budgets to client departments via service agreements, the department

argued that this gave the client department the option of choosing another agency

should it feel the department of Public Works was not performing well.

The department noted that there was a general concern about its performance across the

board, and added that there needed to be greater co-operation and joint planning

between Public Works, Health, and Education. The department added that unless it

improved its service, other departments would lose faith in it. When building, the

department noted that it dealt with the department concerned but not with public, which

could be problematic if department had not fully considered the public in its planning.

The department was also asked whether it would not be useful to create its MTIP

(medium term infrastructure plan) sooner. It responded that there was still on-going

discussion on the MTIP, and that it was not finalised yet.

The department noted that its priorities and programmes directly affected the second

economy. These priorities are Sentech’s infrastructure investments, the SA Post Office

network expansion, rollout of regional television broadcasting services, strengthening of

ICASA, uncapping the Universal Services Fund, operationalising the Meraka Institute

and restructuring itself.

The Committee posed a number of questions regarding institutions. The department

noted that it had been following up issues of SAPO providing social grants. The

department noted that R750 million was allocated to the SAPO in 2003. On the question

of the department requesting more funding yet underspending, the department said that

the money underspent was committed. The department said that it was fighting

underspending by aligning its planning and implementation processes, and hoped to

reduce it. The department noted that the issue of compliance to ICASA was important

and that in terms of new legislation, the plan would be to register licenses speedily, and

for this ICASA would require more money.

On costly telephony in rural areas, the department suggested that wireless technology

was the way forward, and that its did note the challenges when it came to the rural

areas. The department said that it had been speaking to SALGA, and had noted that in

district municipalities’ concern was more for things such as water and housing provision

and not for communication. There was a ‘battle between food and telephones’ meaning

that people did not see a direct gain in such communication technologies. The

department also acknowledged that there was potential for link up between departments.

On the issue of huge spending towards the end of the financial year, the department said

that it was on target with its spending.

The Federated Unions of South Africa (FEDUSA) focused on employment and skills

issues in its presentation. A major constraint noted was the lack of skills in the public

sector. The organisation suggested that public sector salaries be addressed and

professions such as teaching and city planning be promoted. There should be more

spending on infrastructure programmes in order to enhance the ability to deliver and

business should be brought on board. FEDUSA added that Public Works programmes

needed to reconsider their wages and allow for sustainability of people. It also proposed

more spending on child and old age grants better salaries for police, nurses, and doctors

etc.

With regard to SETAs, when asked about FEDUSA’s contribution to skills

development, FEDUSA said that it was undertaking initiatives, such as learnerships,

together with SETAs and National Boards, and had an input into other sectors as well.

On the issue of Public Works wages, FEDUSA noted that there was some progress but

found that people were using up their wages just to get to work.

BUSA endorsed the target of a 6% growth rate, and emphasised the importance of

enterprise development in attaining this. Small and Medium Enterprises in particular

should be encouraged, especially by cutting red tape. In ascending order, regulatory

burdens were RSC levies and SETA levies; PAYE and UIF deductions; SARS tax

administration; labour laws; CCMA cases; bargaining councils; and VAT. BUSA urges

adoption of a regulatory impact assessment strategy by government. It noted that

although the broad outlook is optimistic, local level partnerships are required for service

delivery, as well as increased savings and foreign direct investment.

Asked about the issue of CEOs’ pay and accountability, BUSA added that CEOs were

accountable to shareholders and board members. Concerning skills deficits, BUSA said

that there was not enough skilled decision-making. Price-setting too had to be looked at

in context as a percentage of investment. When considering the ideal corporate tax rate,

BUSA suggested that the issue was how South Africa compares with other countries.

BUSA noted that there was a case for bringing rates down further. When looking at

assistance to small businesses, BUSA said that it was important to look at where the

responsibility lies for slow delivery. Its noted that meetings were often held at national

level, and asked why there were no meetings at a local level. BUSA noted many gaps

and suggested that a joint initiative was needed. BUSA also suggested that the political

sphere at the local level have an open door, noting that the local level is not always as

open as the provincial and national levels.

The department is made up of two core services, namely civic service and immigration.

In immigration the department hopes to attract scarce skills to the country, in order to

contribute to overall economic growth. The department is in alignment with the

government’s plan of action, and of the 7 points highlighted in the State of the Nation

Address, the department said that its core focus was on number 4; that of enhancement

of social security. The department sees itself as playing a fundamental role in the Social

Cluster by providing essential documents. On its impact on Social Cluster issues, the

department said that it was in partnership with other departments in the provision of

social services.

The Committee was concerned about the department’s budget adequacy to serve rural

areas, especially with identity documents, The Committee noted that the department

underspent by R388 million in the previous year and therefore wanted to know how the

department would ensure that this year’s budget would be spent. Another question was

raised on the issue of scarce skills and what a he department was planning on doing

about South Africans living abroad that had these relevant skills.

Concerning the adequacy of its budget for identity document campaigns in rural areas,

the department responded that the expenditure trend in the department had been low, as

it was mainly allocated to capital/IT related programmes, which were important for

service provision. But now the department said that it was looking to the future and

servicing of rural areas, and mobile units activities will be extended to December.

It was important to enhance human capital through staff recruitment rather than merely

requesting additional resources. On the question of underspending, the department noted

that it was currently standing at 41% expenditure of this current budget. In comparison

to the previous year’s expenditure of 34% by September, the department felt that it was

doing well. It was also noted that there were currently on-going projects, which would

be receiving further funding in the next 6 months. On facilitation of recruitment of

South Africans in other countries, the department said that this was a catch 22, in that it

could not do much about those who were not patriotic, and could not force people to

move back. The department noted that through the Immigration Act, its were trying to

import scarce skills, and together with the Department of Trade and Industry, its were

trying to build those skills capacity within the country.

Questioned about the influx of illegal immigrants, the department said that it did

acknowledge this as a challenge and that the BCOCC was created in order to address

this problem, and to ensure co-ordination between departments (such as SAPS) to deal

with this issue. The department added that it was also involved in deportation, noting

that another problem was that of people who come into the country with legitimate

documents, and then disappear once in the country. On the issue of capacity building,

the department clarified that it was talking about the capacity to fill posts, and strategic

capacity, such as IT systems and infrastructure (offices in certain areas). On the issue of

utilizing youth structures, the department assured the committee that the department was

part of internship programmes, and that some of these interns go on to fill posts in the

department. On some initiatives the department interacted with uMsobomvu, who

funded the programmes. The challenges of duplicated IDs the department hoped to

address with the introduction of the ID smart cards, which it said would be implemented

by September of the following year. The problem of children having more than one

birth certificate the department said was sometimes due to mothers registering their

children more than once. The other problem here is that the department does not take

the fingerprints of children, and is therefore unable to trace this.

The Department’s presentation said that it promotes opportunities for marginalised

communities in economic activity to improve the quality of life of the poor. It maintains

a progressive social security net, and invests in community services and human

development. It significantly improves the capacity and effectiveness of the state by

promoting service oriented public administration. Consolidated social development

spending grew by 28,8% in the three-year period to 2005/06, and will grow at an annual

rate of 11,6% in the coming MTEF. The largest portion spent is on social assistance,

which consumes 92% of the total budget.

The Committee raised the issue of eligibility for social grants and skewed allocation.

The department responded that there were different grants, the eligibility for which

differed. On the issue of delays in processing of grants, the department answered that it

had set up agencies to do this: a grant application should ideally take 2 days, but that

there were delays, which were mostly caused by the skewed staff to beneficiary ratio,

which in some provinces was at 1: 1800. The department acknowledged the fact that it

did not have enough staff on the ground level, but said that there were some

improvements and that even more were underway. On the question of using the SAPO

to distribute social grants, the department said that the SAPO would be the service

provider of choice but that it would have to demonstrate that it could provide this

service at a cost effective and efficient manner.

Altogether 6,3 million children are at present receiving grants, and for those children

whose documents were still being processed, the department said that provision was

made for them and its could still obtain grants. Research done showed that a significant

number of people were living above the poverty line because of the social grants

provision by the department. The department stated that it did have a plan/strategy in

place to retain and recruit social workers and is looking at salary issues, and the working

conditions of social workers. It is working with the Department of Public Works to

ensure an increase in the stipend for volunteers/ care-givers, from R500 to R1000.

The department’s key initiatives are upgrading and revitalisation of hospitals, additional

funding for medical equipment and information systems, and consolidation of primary

health care services under provincial administrations.

The Committee commented that in the training of health professionals, the department

had to interact with health councils. The issue of accountability of managers was also

raised. On this issue, the department stated that there were strategic obstacles and

management capacity problems. Clinics in the rural areas face challenges and upgrading

them to medical centres was not possible for lack of doctors. This reiterates the Human

Resource question yet again. The department said that it was considering a strategy to

expand the mid-level workers pool; therefore focusing on increasing the number of

pharmacists, medical assistants, and training medical aides for nursing work. It noted

that emphasis on numbers might also undervalue quality. As part of its retention

strategies for nurses it was looking at reviewing structure of training.

On the issue of training colleges, the department said that most of the tutors for these

were by now in the UK, and were discouraged by the fact that its would have to start at

the lowest level, as per Nursing Regulations.

The department said that it was on track with its malaria reduction targets. Similarly

with the ARV roll out, the department said it was on track. On its competence to do

DNA forensic analysis at hospitals, the department said that this was a very specialised

field and could not be provided at all hospitals, though it being done in Pretoria. The

department is trying to decentralise this to the hospitals in provinces. In the case of

suspected rape, especially of children, testing has to be done through the police, who

had more competence in this regard.

The department summarised the increases to the national baseline, and to the provincial

Equitable Share as set out in the MTEF.

Responding to questions, in terms of higher education the department noted that there

was a throughput problem, and that the minister contemplated an enrollment planning

initiative. On the issue of its difficulty in retaining temporary and substitute teachers,

the department agreed that their conditions were unacceptable, and said that some

provinces were moving speedily to ensure sure that temporary and substitute teachers

were absorbed permanently.

The department noted the importance of FET and technical skills, adding that this was

not only a South Africa problem. The department assured the committee that once good

FET colleges were set up a considerable improvement would be seen. On the issue of

teacher shortages, and especially schools with no mathematics teachers, this was said

most probably to be a problem of the management systems, with the School Governing

Bodies having the final say on who gets appointed. In relation to the Early Childhood

Development, 600 000 children in rural areas were said to be on this programme, and

that it was still expanding.

On the issue of no-fees schools, the department said that this would not happen this

year, but that no-fees schools would be formally declared by 2007. It also noted that not

all schools would be no-fees schools. On school transport, the department said that this

was a provincial competency, although the department acknowledged the challenges.

On the issue of safety at schools, the department said that it did have initiatives in place,

but also stressed that it encouraged community involvement and participation in this

regard.

The People’s Budget approved the expansionary fiscal policy of the MTBPS, and awaits

the Accelerated Shared Growth Initiative to see if increased spending will translate into

benefits for the majority of South Africans. Relatively high housing expenditure is

good, though current programmes are inefficient and replicated apartheid settlement

programmes. There is a concern that Treasury does not review the ARV rollout in the

MTBPS. The People’s Budget is concerned about the low budget deficit, and questions

expenditure trends within the period of reducing the deficit.

With regard to fiscal discipline, the People’s Budget argued that, compared to other

countries, the deficit could have been relaxed more in order to allow for spending. On

the issue of expenditure trends, the organisation noted that there were capacity

constraints,

SALGA endorsed the MTBPS measures to boost socio-economic activities and expand

social services and income support. It noted that some needs were not addressed, such

as the next phase of the National Skills Development Strategy, the expansion of the

Child Support Grant and allocations on environmental health services. Clarity is needed

on devolution of bus and taxi subsidies to municipalities.

The Committee noted that SALGA raised challenges, and wanted to know whether

SALGA had any plans of overcoming these obstacles. SALGA was also asked what it

thought about the lack of skills, and whether it thought that the budget would address

this issue. SALGA was asked to comment on the issue of skills and the competence of

municipal managers in relation to the level of service provided. One member added that

SALGA needed to look at training of councilors rather than leaving problem articulation

to the community.

SALGA mentioned that even in the apartheid era, skills deficits at the local level were a

factor, but that together with the DPLG its were addressing this issue. On the

competence of municipal mangers, SALGA noted that a performance contract has now

to be signed by these managers, and that there were key performance measures and

indicators. SALGA said it was aware of the issues of capacity at local level and also

noted that most of the local government service challenges lay in the provision of

Housing. On the issue of youth involvement in the IDPs, SALGA mentioned that it had

a roll out plan for youth programmes. On the question of child-headed families, SALGA

said that there were initiatives in place to help in this regard, such as the provision of

food parcels to the children, through the social workers, and that its did have other

alternatives.

IDASA submitted its review of spending in the MTBPS, noting that the

redistributionary effects of social spending do show effective targeting towards the

poor. Inter-group inequality is falling, but there is a net increase in inequality within

groups.

IDASA argues that more spending is possible by increasing the deficit. It reviews

infrastructural spending implications and the need to improve effectiveness of public

spending. It reviewed the MTBPS in the light of its consideration of HIV/AIDS and the

rights of children.

The DTI’s presentation focused on its foreign trade interventions. The DTI’s key policy

initiatives for the year are the launch of the Angola and DRC strategic development

initiatives; preparation for and participation in the African Peer Review mechanism;

further development of bilateral relations with key African countries; continue with US

FTA negotiations and the launching of China and India negotiations.

The department mentioned that it wanted to build structures for greater regulation and

interaction. The department mentioned that the role of the International Trade was to

open up markets for South Africa, Although it was noted that South Africa has some

competitive advantage, the department mentioned that there were other elements that

influenced trade issues; such as import duties in other countries, multi-lateral and bilateral

barriers. The department said that it was looking at securing preferential

agreements through bilateral agreements. The department said that it did not

differentiate between FDI and portfolio flows, but that their main focus was on services

and trade.

When questioned about the accessibility of the department to rural areas, the department

responded that there was an initiative for rolling out to provinces and municipalities, so

that products of the department could be made available at municipalities. There was a

close co-operation between DTI and local government on the issue. The department also

noted the difficulty of accessibility to markets and said that it was looking into it.

The Committee recommends as follows:

1. The Committee recommends that Parliament enhance its effectiveness in

monitoring the capacity of departments to implement progressive policies.

2. The Committee recommends that Parliament pay particular attention over the

medium term to the effectiveness of facilitating policies regarding the key MTBPS

priorities of human and institutional capacity development and infrastructure

investment, as well as the focus on growth, macroeconomic stability, raising the

employment capacity of the economy, and reducing the gap between the first and

second economies.

3. In considering the Budget documentation of key departments such as the

Departments of Home Affairs and Social Development, Parliament should satisfy

itself that such Departments have monitoring systems in place, ensuring that their

implementation supports their policies and that their policies have the required

outcomes. This will enable timely policy adjustments.

4. The Committee recommends that Parliament strengthen monitoring and oversight

of expenditure trends between National MTBPS functional allocations and

Provincial budget allocations to the smaller spenders supportive of social and rural

development and job creation (i.e. housing, land affairs, tourism and agriculture) to

address concerns of adequate financing at provincial level.

5. Parliament should explore ways to influence cooperation and complementarity

rather than competition between departments, particularly coordination of planning

between departments in the same cluster.

7. The Committee should carry out oversight visits, in particular to development

nodes.

Report to be considered."