JOINT BUDGET COMMITTEE REPORT ON THE MEDIUM TERM BUDGET POLICY STATEMENT (MTBPS) 2006

Introduction

The MTBPS is guided by the obligations of government embodied in legislation and oversight by Parliament, and by the policy direction and political mandate as expressed in the State of the Nation Address. In that address earlier this year, President Mbeki declared “
South Africa has entered its Age of Hope.” The President placed the accelerated and shared growth initiative – AsgiSA – at the centre of our national expectations of a higher, shared growth path (Foreword, MTBPS 2006).

The Joint Budget Committee reports as follows:
The Minister of Finance, the Honourable Trevor Manuel, tabled the Medium Term Budget Policy Statement (MTBPS) before Parliament on
25 October 2006.  The Joint Budget Committee (henceforth ‘Committee’) planned to hear submissions from National Departments, non-profit and research organisations from 26 October to 02 November 2006.

The report is divided into three broad sections.  Section 1 outlines the presentation of the National Treasury on the MTBPS.  Section 2 outlines submissions of departments and other organisations.  Section 3 lists the general concerns and recommendations of the Joint Budget Committee on the MTBPS.  Note that no submissions were received from economists, although the Committee had extended invitations.


The following departments did not make any submissions to the Committee:
Department of Communications;
Department of Defence; and
Department of Labour.

The delegations of the following departments made submissions to the Committee, but did not have either the executive authority or accounting officer present:
Department of Correctional Services;
Department of Justice and Constitutional Development;
Department of Safety and Security; and
Department of Sports and Recreation.

The following indicated written submissions
Department of Provincial and Local Government;
Department of Trade and Industry;
Department of Transport; and
SALGA

The Committee appeals to the departments that their accounting officers or the executive authority should present to the committee in future MTBPS hearings.

Joint Budget Committee Mandate
The Committee’s mandate regarding the MTBPS requires it to consider the distribution of available financial resources for expenditure against government policy priorities. This mandate is distinct from that of the Portfolio and Select Committees on Finance, which deliberate on the macro-economic, fiscal and intergovernmental dimensions of the MTBPS respectively.

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; and

 

·         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 and the MTBPS over the MTEF period.

Section 1:  Briefing by the National Treasury
Sitting as the Joint Budget Committee, the Portfolio and Select Committees on Finance, the Committee was briefed on the MTBPS by the Minister of Finance and the Director-General (DG) of the National Treasury on
26 October 2006.

The Minister outlined the substantial increase in broad expenditure trends over the past decade, although strong revenue trends facilitated tight fiscal deficits.  The economic outlook for the medium term was described as a continuation of the recent strong growth rates and commodity prices that are largely due to international demand factors, emanating from particularly
China and India.  The National Treasury believes that the country’s economic growth is sustainable and is in line with ASGISA growth targets.  The risk that the United States’ twin deficit situation poses to South Africa should be monitored closely, as capital flows to developing countries are very sensitive to exchange rate changes in the United States.

The National Treasury highlighted the following:

·         Considerable short-term challenges, namely managing the fiscal-monetary policy mix;

 

·         Long-term challenges, namely reducing poverty and inequality;

 

·         Poor agriculture sectoral performance in the economy; and

 

·         Vibrant construction industry output growth.

·        
The widening trade deficit since 2004 is a matter of concern.  The widening current account deficit due to increasing reliance on imports is of concern, and the situation is exacerbated by the current negative government and household savings.  Over the medium term, government savings are projected to turn positive.  Prudent management of the demand factors for oil and related fuel imports is necessary, as these factors pose a continuing threat for inflation outlooks, although oil prices are projected to be in a decline over the medium term.

Key issues in terms of the medium term budget trends noted by the Minister are listed below.

The national budget is broadly in balance over the MTEF period, and is projected to be in surplus in 2007/08.

Section 32 (of the PFMA) reports should report expenditure trends of all national and provincial departments.  These reports are useful documents that may aid oversight bodies to interrogate departments’ expenditure track records and possible remedial actions.  Savings could be identified early on and unspent funds have to be returned to the National Treasury so that they can but re-applied elsewhere.

Government’s focus on infrastructure as key to development is demonstrated by the additional R28 billion for public infrastructure over the MTEF.

Social services remain the major spending area of the 2007 MTEF with 57% of total allocations.

Other specific key spending areas are the strengthening of criminal justice system and public administration to improve the quality of social services, such as education, health, and welfare.

The Provincial equitable share grows by 7% in real terms over the MTEF and additional conditional grant allocations will be made.  The new provincial boundaries present significant challenges for provincial fiscal management.

The Local Government equitable share grows by 11% in real terms over the MTEF and additional conditional grant allocations will be made.

Considerable (R45.7 billion) capital expenditure transfers to municipalities’ over the MTEF, with the most (R24.7 billion) destined for infrastructure to roll out basic municipal services.

Capacity building in municipalities is a priority matter for the National Treasury.

The 2006 MTBPS noted the following key public spending priorities identified at the start of the 2007 medium-term expenditure framework (MTEF).

“Investment in stadiums and public transport to ensure a successful 2010 FIFA World Cup.

Strengthening the criminal justice sector, with particular emphasis on visible policing and improving court case flow.

Stepping up investment in the built environment in the form of housing, roads, water, sanitation and community facilities.

Contributing to improved economic efficiency through investment in roads, rail, electricity generation and supply, dam construction and skills development.”

Some examples highlighted in the National Treasury’s submission to the Committee are matters of concern.

Savings by Correctional Services of R800 million.

Savings by Land Affairs of R1 billion.

Members of Parliament engaged the Minister and the DG of the National Treasury on a number of issues, which are listed below together with the responses.

The need to ensure stable and sustainable international capital inflows in order to create healthy balance of payments.   A suggestion was made that the National Treasury should renew efforts for the country to become more export-oriented to minimise the current account deficit.  The National Treasury’s response gave acknowledgement to the need to become more export-oriented, but emphasised the need to be globally competitive – this would mean a mind shift away from old trade thinking which focused on making money towards governments creating incentives for business to manage their time and labour creatively (“self-discovery”).  The effect of oil import inflation and a myriad of other factors playing themselves out on global markets all impact on a worsening current account situation, which makes government intervention quite difficult.  Further to its response, the National Treasury explained policy options in curbing current account deficits, among others through constraining domestic expenditure through either monetary policy (interest rate hikes) or fiscal policy (tax increases, less government expenditure).  As government would like to play a significant role in creating the public goods necessary for employment creation and poverty alleviation, it most probably should concentrate on capital expenditure and/or save where possible in order reduce interest rate pressures that would lead to greater investment expenditure by the private sector.

The additional R80 billion over the MTEF may be too expansionary and government capacity constraints may hamper the effective spending of funds.  The National Treasury in its response agued that the it was not a too liberal allocation in the light of critical service delivery needs and increasing government monitoring, evaluation and oversight mechanisms.  Section 32 (of the PFMA) reports are examples where government could track expenditure trends and provide remedies once significant deviations, especially in terms of under-expenditure, are detected.  The National Treasury also argued that the powers that it and legislatures have in re-allocating unspent funds from underachievers to performing entities would prevent the under-spending or wasteful expenditure of public funds.

Tax policies.

A strategic approach to skills development is needed that transcends mere funding of skills development initiatives.  The National Treasury in its response argued that it is not empowered by law to be responsible for skills development initiatives.  Mathematics pass rates are for example key indicators of a skilled labour force and the National Treasury is not responsible for attaining associated targets.  This example illustrates the interrelatedness of skills development, as critical shortages of teachers of mathematics and science are cluster performance areas.  The National Treasury however argued that it facilitates financial support programmes by the relevant departments and entities, such as bursaries for further education and training (FET) institutions, which target essential skills such as quantitative and artisan skills.

Section 2:  Briefings by other national departments and organisations
Theme 1:  Rural Development and Urban Renewal

Department of Agriculture

The Committee inquired about the various savings incurred by the department, most notably savings as a result to vacant posts.  Written submissions should be provided to substantiate the reasons for these various savings. 

The Committee inquired about the reason for a number of vacancies not being filled.  The department acknowledged a significant staff turnaround figure.  A staff retention strategy is in place, although the strategy is only successful in so far as public sector frameworks.  There is for example no minimum stay period.  The Committee expressed its concern for the need for continuity in skills transfer in the department, in the wake of persisting vacancies.  The Committee requests that the department submit a written response on how the department would deal with this issue. 

The Committee inquired about the progress on the One-Stop-Shop programme.  The Department argued that better leadership alignment between itself and Land Affairs is necessary to ensure the success of the programme.

The Committee inquired about specific budget items that saw chronic under-expenditure and what the department is doing to remedy the situation.  The Department should submit a written explanation on this issue to the Committee.

The Committee inquired about the absence of a dedicated programme for food security.  The department responded that there was a move away from providing farmers with food parcels.  The department observed that poverty is more effectively reduced by the distribution of social grants.  The Department of Agriculture informed the Committee that it was a leading department in the area of poverty reduction through targeted conditional grants to the other spheres of government.

According to the assurances given to the Committee by the DG, the Committee observed that that the Department of Agriculture might have the necessary resources and capacity to implement its programmes.  However, before this can be conclusively stated, the Committee stated that further analysis was needed.

The Committee noted at the end of the submission of the Department of Agriculture that some questions have not adequately responded to.  The Department must submit further written submissions on the issue of the One-Stop-Shop, items that saw chronic under-expenditure, poverty reduction strategies, credibility of some of the statistics presented, and grants issued to certain beneficiaries, among others.  The Committee requested the department to report in writing on the issues that were not adequately answered.  The DG responded that such a response would be received within seven days of the request.   The department should also submit a written submission on strategies for skills transfer continuity in the department.

The Department of Agriculture did not make any proposals for the 2007 MTEF to the Committee.  It is the Committee’s observation that there needs to be closer cooperation and coordination between the Departments of Agriculture and Land Affairs.

Department of Land Affairs (DLA)
The submission of DLA highlighted the work the department does in rural development and the degree to which issues of land restitution are being address according to government priorities.

The Committee inquired about the extent of housing and land availability coordination.  The department responded that municipalities identify land need.  The department only makes land available and does not manage housing provision.  The department stressed the importance of municipal IDPs to identify the various housing backlogs. 

The Committee inquired about the appropriateness of the willing-buyer-willing-seller concept to reach targets set out for 2014.  The Committee expressed its concern that the concept was hampering the progress of reaching these targets.  The Committee was not satisfied with DLA’s answer to its question.  A written response to explain how it will reach the 2014 targets is required.  DLA needs to explain in this submission on what processes and systems it will or has established to speed up the efforts to reach the 2014 targets.  Added to this, DLA needs to explain how these processes and systems may impact on the department’s funding allocations for the outer years.

The DG responded to various questions on under-expenditure by arguing that under-expenditure during the first two quarters of the financial years is a common feature of the department.  To a large extent, under-expenditure on land restitution is due to the slow pace at which claimants came forward.  The DG assured the Committee that expenditure would pick up from the third quarter.  The DG is of the opinion that the operations of DLA are adequately funded over the MTEF.

The department stated that its under-expenditure on compensation for employees is due to persistent vacancies.  The department noted that it has a problem in absorbing interns that graduate from its internship programme.

The Committee inquired about the delays in the deeds office that appear to be curbing service delivery.  The DLA responded by arguing that the recent property boom presents serious challenges to its efforts and if more registration needs to be done, then the department will need more capacity.  A systems upgrade will therefore be necessary.  The Committee took note of these restraints, but urged DLA to fast track its programmes despite of these challenges.

The Committee inquired about the capacity of municipalities that facilitate the delivery of DLA functions.  It was agreed in the session that when the Department of Provincial and Local Government makes it submission, the issue of local government capacity would be addressed.  The Committee commented that area based planning may be superfluous in the light of known local government capacity constraints.  The DLA argued that business process re-engineering might prove to be the answer.  This entails assisting municipalities with target setting and the necessary training and support, such as decentralising officials to local centres.  DLA must submit a written response to the Committee that motivates why the department sees the decentralisation of its officials to local centres as an appropriate strategy.

It is the observation of the Committee that DLA might have adequate access to financial resources over the 2007 MTEF to reach its targets, taking into account the information that was displayed by the department.  However, before this can be conclusively stated, the Committee stated that further analysis was needed.   The department has to increase its capacity to implement its programmes in the light of key challenges, such as the exploding property boom and high staff turnover.

The department must provide a written submission to the Committee, detailing the following issues that have been mentioned above:

Detailing the processes and systems to speed up the efforts to reach the 2014 targets and how these processes and systems may impact on the department’s funding allocations for the outer years;

Reasons and remedial actions for under-expenditure in all the programmes;

Reasons and remedial actions for persistent vacancies;

Details of the department’s retention strategies, especially for interns; and

Motivation for the decentralisation of officials to local centres as an appropriate strategy for supporting local government in delivering agriculture-related services.

The department did not make any proposals for the 2007 MTEF to the Committee.  It is again the Committee’s observation that there needs to be closer cooperation and coordination between the Departments of Agriculture and Land Affairs.

Department of Water Affairs and Forestry (DWAF)

The Committee expressed its concern about global warming and the need to re-circulate water for domestic use.  DWAF acknowledged to the concern and remarked that
South Africa is a water scarce country. The department have 25-year projections that guide the objectives of its programmes.

With regards to intergovernmental coordination, DWAF undertook to renew efforts to assist with setting up the One-Stop-Shops with stakeholder line departments.

The Department commented on the concern about the pace of eradication of the bucket system.   A targeted number of backlogs to be eradicated had been set by DWAF for end of 2007.  The Committee confirmed that DWAF had committed itself to achieving these targets.  It was not clear from DWAF’s response that it is on track with the eradication of bucket system backlogs.  This issue requires a further written response from the department to the Committee, whereby the department should highlight what constraints and risk factors it may face in trying to achieve the 2007 targets.

The Committee expressed its concerned that retired engineers returning, as consultants may be an expensive option for the DWAF.  DWAF remarked that it is only temporary solution.  A longer-term solution will be to set up a learning academy for engineers.  Over the medium term the supply of qualified engineers should be sustainable.

The Committee expressed its concern that money allocated and used for disaster management purposes should be put to the correct use and yield value for money.  The Department undertook to where necessary provide a detailed breakdown of geographical expenditure trends.  The Committee requires that DWAF submit these detailed breakdowns in writing.

The Committee inquired from DWAF about the reasons for available relief funds for disaster relief not being used.  DWAF responded with saying that at least every district municipality should have a disaster management response team and centre.  The problem is that funds are sometimes tied up in contingency reserves, which means that these funds cannot be proactively used for long-term disaster management.

The Committee expressed its concern that the restructuring process of water boards is not clear.  The Committee requires DWAF to provide a written submission on the restructuring process within three (3) months or if possible in its third quarterly report.  The submission provide detailed information on, among other things, the progress of the restructuring process, associated timelines, targets, and constraints faced, how DWAF would assess the capacity of water boards, and DWAF’s plans to assist municipalities in the process.

DWAF explained the reason for a R50 million rollover destined for commercial forestry activities – the department still farms 70 to 80 million hectares of plantations.  Some designated areas (‘Categories A’) were sold off to the Department of Public Enterprise.  DWAF was paid through the exchequer account and is accounted for as revenue.  The rollover facilitated the inclusion of the amount in the adjustment estimates.

It is the observation of the Committee that DWAF has the necessary resources to implement its programmes, but the recruitment and retention of highly skilled personnel, especially engineers, is a matter of concern.

DWAF must provide a written submission to the Committee, detailing the following issues that have been mentioned above:

Describing its progress with the eradication of bucket system backlogs;

Providing a detailed breakdown of geographical expenditure trends; and

Describing the restructuring of water boards;

The Committee recommends that DWAF undertake to cooperate and coordinate with other line department stakeholders when developing service units such as schools and clinics.  The department did not make any proposals for the 2007 MTEF to the Committee.

Agri-SA

The Committee expressed its interest in Agri-SA’s commitment to the land reform process.  Agri-SA responded and stated that its members support land reform support the 30% national government target.  Agri-SA is also committed to assist with capacity-building effort after legal expatriation processes.

Agri-SA stated that provincial governments need to play bigger role in road infrastructure investments and maintenance in order to assist agricultural activities.  Agri-SA requested additional allocations through national government structures in terms of assisting farmers with the effects of avian flue, as well as coping with broad-based black economic empowerment issues.

The Committee expressed its concern about the need for more women and landless residents to be more involved in the agricultural sector.  Agri-SA responded by stating that it is committed to the sector plan on gender transformation together with NAFU.  Agri- SA stressed the need for expropriation to be market related and that farmers should not alone bear the cost of national programmes such as land restitution.

The organisation did not make any proposals for the 2007 MTEF to the Committee.

Theme 2:  Justice and Protection Services
Department of Correctional Services
The department did not make a presentation to the Committee, although a written submission was received.  The Committee noted that information provided in the written submission was essential but insufficient for the purposes of the 2006 MTBPS hearings.

The department’s submission highlighted key policy priorities that informed its proposals to the National Treasury.  These are investments in various IT systems for streamlining and improving both internal and external services, investments in security equipment, which include complying with minimum security standards, and the management of remand detainees (MRD) project, which aims to address inadequacies in the management of remand detention.

The department did not make any proposals for the 2007 MTEF to the Committee.

Department of Justice and Constitutional Development
The department did not make a presentation to the Committee, although a written submission was received.  The Committee noted that information provided in the written submission was essential but insufficient for the purposes of the 2006 MTBPS hearings.

The key policy priority areas of the department are:

 

·         Investing in its expanded capital works programme;

 

·         Increasing its capacity and enhance efficiency;

 

·         Increasing the capacity of SIU and LAB; and

 

·         Reducing criminal case backlogs.


The department highlighted the following matters raised in the 2006 MTBPS that may inform decision-makers in terms of the department’s funding proposals:

 

·         “Strengthening the criminal justice sector, …especially court case flow;

 

·         Improving the capacity of the state to deliver in the fight against crime;

 

·         Skills development;

 

·         Additional allocations are under consideration to improve administration of justice, including funds to retain staff and increase personnel in LAB, SIU, the judiciary, and magistracy;

 

·         Emphasis on Justice College programme;

 

·         Funding is proposed for the construction of the new HC Mpumalanga and Limpopo; and

 

·         Management of monies in trust.”

 

The department did not make any proposals for the 2007 MTEF to the Committee.

Department of Safety and Security
The department did not make a presentation to the Committee, although a written submission was received.  The Committee noted that information provided in the written submission was essential but insufficient for the purposes of the 2006 MTBPS hearings.

The key policy priority areas of the department are:

 

·         Crime prevention and public safety;

 

·         Actions against organised crime syndicates;

 

·         Improving effectiveness of the criminal justice system

 

·         Upholding national security; and

 

·         Safety at big events.

 

The department highlighted the following matters raised in the 2006 MTBPS that may inform decision-makers in terms of the department’s funding proposals:

 

·         “Strengthening the criminal justice sector, with particular emphasis on visible policing… and

 

·         Provision for costs associated with policing and border control…”

Additional funding was requested for the 2007 MTEF period for the following areas:

 

·         Investments in capital infrastructure (facilities);

 

·         Further enhancement of policing capacity, vehicle fleet management, and deployment system; and

 

·         Security arrangements during 2010 Soccer World Cup.


The department did not make any proposals for the 2007 MTEF to the Committee.

Theme 3:  Employment and Economic Development
Department of Minerals and Energy (DME)
A R10 million rollover was due to the late arrival and payment of capital goods ordered in the previous financial year.

The Committee raised its concern about the trend with some municipalities to rather pursue private sector loans than accessing grants administered by departments.  The DME noted in response that this might be a problem of the architecture of government.  The constitution does grant municipalities’ considerable powers to raise money through external loans.  The incentive is therefore created to rather raise unconditional loans through private sector funding for through other entities such as DBSA, than accessing grants that are tightly controlled and monitored by other spheres of government.  The DG added that he is obliged by the PFMA to withhold transfers to municipalities if those municipalities do not have the required systems and management capacity to administer the funds.

The Committee enquired about the nature of electricity provision backlogs and how the department see the alleviation of these.  The DME’s response took into consideration that rural areas pose particularly big challenges.  Local government communication flows or the lack of it result in unrealistic expectations.  The DME acknowledged that it should be more robust in its communication strategy to local government.  The DME is creating capacity at regional offices in provinces.

The DME explained that there is no link between energy failures and rollovers.   The DME has plans that will enable them to improve on the bulk infrastructure in the country.  The department is busy with a process for new generation energy supply and infrastructure is being invested, either new or refurbishing of existing infrastructure.

In terms of value for money concerns, the DME acknowledges that there is weak electricity delivery in some areas.  However the department is focussing on household connections and not on other related electrical infrastructure.  Fortunately, the National Treasury has assigned additional allocation for bulk electrical expansion.  Technical Audits are done to give credibility to the value for money principle once municipalities or Eskom has completed projects.

The Committee enquired about the department’s commitment to developing skills in this sector and filling current vacancies.  The DG explained the knowledge-intensiveness of the sector and that scarce skills, such as scientists and geologists, are required.  Affirmative action laws exert pressure on private sector firms to keep a pool of these scarce skills.  DME relies on the services of consultants in the areas where key vacancies exist.  Additionally, private sector firms offer strong competition in terms of salaries.  The DME’s internship programme is relatively successful as part of the broader scarce skills and retention strategy to retain skills.

The Committee expressed its concern with the alleged lack of capacity at many municipalities to submit the required business plans in order to access grant funding.  The Committee argued that provincial and national departments should through their monitoring and evaluation roles are able to assist municipalities with targeted capacity building.  The DG suggested that too close compliance of the PFMA in terms of assessing municipal capacity to spend grant funding might inhibit service delivery.  The DG assured the Committee that provincial departments are increasingly being capacitated in monitoring and evaluation of municipalities, as well as in assisting municipalities with accessing and spending grant funding.

The DME highlighted a matter of grave concern, namely that information and statistics on schools and clinics is invariably unreliable and that effective communication and coordination between other line departments, such as DWAF, is crucial for the effective functioning of these service units.   In terms of municipal-wide planning, the DME is guided by the inputs of the community as contained in IDPs to guide their planning efforts.

DME need to ensure that Eskom plans are in line with development by getting as closely involved as is necessary in IDP formulation.  For this to happen, solid institutional arrangements to work with local authorities should be in place.   Eskom is currently doing a pilot that looks at large capacity energy provision in
Northern Cape as an avenue for alternative and sustainable energy alternatives. 

The Committee enquired about the extent of integrated planning by different line departments on broad range of development issues.  The DME remarked that there is an infrastructure joint plan from the coast to the interior that is in line with national economic growth.  The integrated human settlement paradigm presents a challenge to joint planning efforts.   The DME needs to submit further explanations in terms of integrating planning initiatives to the Committee.

The DG is in general satisfied with the current and medium-term allocations, especially in terms of the electrification programmes.

It is the observation of the Committee that DME has the necessary financial resources to implement its programmes, but the recruitment and retention of highly skilled personnel is a matter of concern for its capacity to implement its programmes.  The DME needs to submit its integrating planning initiatives to the Committee in writing.  The department did not make any proposals for the 2007 MTEF to the Committee.

Dept of Environmental Affairs and Tourism (DEAT)


A question to the department inquired about the reason for the frequency of virements in the past financial year, considering the transparent nature of annual budget planning processes.  This question requires a written explanation by the department.

The committee inquired about what can be done to improve local government’s capacity to implement service delivery programmes that require DEAT support.  The DG’s response mentioned that DEAT had done an audit of bottlenecks after the adoption of ASGISA.  Serious backlogs were identified around the fast tracking of environmental impact assessments (EIAs) in the local government sphere.  Provincial governments unfortunately cannot earmark additional funds for EIA-related capacity building.  The Committee requires the department to stipulate the exact steps it will take to speed up the EIAs and capacitation of municipalities. This must be submitted in writing. 

A question to the department inquired about the usefulness of the SETA initiatives for the attainment of the department’s objectives.  The DG responded that the design of the SETA system lends itself effectiveness only for the capacity-building medium and larger firms, whereas tourism industry-related firms are predominantly (at least 70%) small and micro enterprises.

A question to the department inquired about the completion date of the
Marion Island base, as rollovers destined for this project keep on recurring over the last two financial years.  It was heard that the anticipated completion date is June 2007, although the DEAT acknowledged that the Department of Public Works is responsible for construction.  DEAT will try its utmost best to avoid future rollovers.  The Committee noted this statement.

A question to the department inquired about the adequacy of current budget allocations to DET.  The DG replied that the department had demonstrated that it could manage public monies well and that with additional allocations it would be better able to target and promote tourism in
South Africa in order to achieve even larger amounts of annual tourist flows.

It is the observation of the Committee that DEAT might have adequate access to financial resources over the 2007 MTEF to reach its targets, taking into account the information that was displayed by the department.  However, before this can be conclusively stated, the Committee stated that further analysis was needed.  The Committee express its concern that DEAT’s submission was particularly focused on tourism.

DEAT must provide a written submission to the Committee, detailing the following issues that have been mentioned above:

 

Detailing the reasons for the frequency of virements in the past financial year; and

 

The impact of vacancies on service delivery in the programmes, and in which functional areas these vacancies occur.

 

The department did not make any proposals for the 2007 MTEF to the Committee.

Dept of Public Service and Administration (DPSA)

The Committee expressed concern over the existence of ghost posts and what the DPSA is doing about it. The DPSA explained that “creative management” by corrupt employees account for the existence of these ghost posts.  An example is the shifting of vacancies from one area of need to another unit.  DPSA acknowledged that there are weaknesses in the whole human resources planning framework.  DPSA recommended tighter and centralised oversight mechanisms over how posts are created and utilised, backed-up by clearly communicated and agreed upon norms and standards.  Committee noted these recommendations and requires that the DPSA outline how the department would implement these recommendations in a written submission to the Committee.

The DPSA noted that there are thousands of vacant posts, with every single government department contributing to the figure.  A total vacancy figure of 24 000 for public sector institutions was mentioned; however this may need to be confirmed for correctness.

Furthermore, the control over delegation flows and abolishment of surplus posts need to be highly centralised.  In the wake of misconduct, disciplinary actions necessarily follow.  DPSA acknowledged that despite its efforts, weaknesses exist in disparate planning in creation of and abolishment posts at various government departments.

It is the observation of the Committee that DPSA has the necessary financial resources to implement its programmes.

DPSA need to prepare a written submission to the Committee on the following issues:

 

Implementation of department recommendations to improve the human resource planning framework;

 

What DPSA will be doing to curb the remuneration disparities between civil servants in rural and urban areas;

 

·         Public sector personnel expenditure projections in the light that the department will soon be starting with salary and wage negotiations;

 

·         Strategies to employ and fill vacant posts in the public sector; 

 

·         Latest strategies for determining bonuses in the public sector;

 

·         Strategies to employ former civil servants; and

 

·         What DPSA will be doing to fast-tracking employment in the department?

The department did not make any proposals for the 2007 MTEF to the Committee with regards to its own departmental budget.

Dept of Public Enterprises (DPE)
The DPE presentation highlighted the relatively small budget and large transfer components, and how this should be interpreted in terms of its mandate.  The DPE sees only minor changes over the MTEF period, with the only significant changes with transfers and subsidies.   The Minister briefly sketched the outline of the various enterprises under the auspices of the DPE.

The DPE welcomes last year’s and this year’s increased allocations to the Pebble Bed Modular Reactor (PBMR).  The department is still looking for strategic investment partners.  Some technical difficulties prevented the timeous conclusion of the project, such as the procurement of scare capital equipment

Denel and Alexkor also will receive additional funding over the MTEF. Denel is in a process of recapitalisation, while Alexkor will see a capital infusion as well as a separation of non-mining activities.

The Minister explained that there were delays in the construction of two more gas-powered power stations, due to the delays in the procurement of the required scare scarce capital equipment on international markets and the delivery of the equipment.

Questions to the Minister related among others to the timeframes attached to the completion of the PBMR.  The Minister replied that the 2007 deadline for the start of the project is on track, although an EIA process first needs to be completed.  Due to other associated arrangements, the PBMR will only be connected to the national grid in 2013.

It is the observation of the Committee that DPE has the necessary financial resources and capacity to implement its programmes.  However, a question to DPE inquired about the impact of vacancies on service delivery in the programmes where these vacancies occur.  This question requires a written explanation by the department to the Committee.  The Minister indicated that he is reasonably satisfied with the MTEF allocations and did not make any proposals.

Federation of Unions of
South Africa (FEDUSA)
FEDUSA presented its economic outlook and noted its concern about the inflation outlook as presented by the National Treasury.  In the light of recent exchange rate developments, FEDUSA feels that inflationary pressures would mount, with oil price increases further impeding economic growth.  FEDUSA is concerned about low foreign direct investment, which it argues is an important driver for employment.  Slower international growth is risk factor that should be monitored closely.

FEDUSA urged Minister of Finance to promote export growth over the MTEF, and the SARB to continue keeping a watchful eye on inflationary pressures.   Government’s fiscal and macroeconomic policies facilitated progress in business confidence, successful inflation-targeting, a gradual rise of productivity, increased black and women economic empowerment, higher real growth figures, etc.  Public infrastructure spending allocations are generally good news, although FEDUSA argues that the money use for the Gautrain project could be better spent in upgrading the entire rail system.

FEDUSA indicated that daily allowance paid to participants in EPWP is too low.  This was also the stance in its 2005 MTPBS submission

The following summarises FEDUSA’s recommendations.

 

·         More expenditure should be diverted to current public infrastructure, especially public train and rail infrastructure.

 

·         Serious investment in public sector human capital formation.

 

·         More fixed investment projects, such as harbours and transport systems.

 

·         Municipalities to improve capacity to spend and deliver.

 

·         Crime prevention strategies should drastically improve.

 

·         Higher child care and old age grants.

 

·         More allocations for training, education, and health, especially to benefit hospitals and for HIV and Aids alleviation and caretaking.

 

·         Abolish retirement fund tax.

 

·         Carefully risk management current account of balance of payments impact on inflation rate.

 

·         Land reform should be finalised as it is critical for job creation and housing projects.

 

For the outer years of the MTEF, FEDUSA proposes significantly more allocations for the transport sector.  Various maintenance backlogs as well as supply chain blockages should get immediate attention, especially rail and train related infrastructure. FEDUSA stated that it is liaising with various chambers of commerce to encourage them to invest in large-scale projects.

 

·         The Committee felt that some issues that FEDUSA recommended on should be communicated to the relevant portfolio committees.

FEDUSA argues that care should be taken with tax rebates, as it may encourage unsustainable credit growth driven by consumption expenditure.  Basic financial training for citizens should help to avoid unsustainable credit growth.

FEDUSA stated that it is involved in various workshops and social dialogue forums that would help to overall quality of public service delivery.  FEDUSA argued that the SETAs are not well-organized and not functioning at full steam.

Department of Transport (DOT)
The department did not make a presentation to the Committee, although a written submission was received.

Two key priorities for DOT are investments in road and rail to contribute to economic efficiency and the investment in stadiums and public transport to support the 2010 Soccer World Cup.   To this end, DOT made proposals to the National Treasury for additional funding over the 2007 MTEF for the following areas:

South African Rail Commuter Corporation Ltd for upgrades: R1.1 billion;

 

·         Maintenance and rehabilitation of national roads: R1.1 billion;

 

·         Earmarked allocations for provinces for rural access roads;

 

·         Transfers to local government for public transport investments: R5.5 billion; and

 

·         Supporting infrastructure for 2010 Soccer World Cup: R4.75 billion.

 

The Committee requires DOT need to send a detailed written report on the department’s expenditure details of the outer years of the 2007 MTEF.

The department did not make any proposals for the 2007 MTEF to the Committee.

Theme 4:  Social Services
Department of Education (DOE)

The department stated that it was very optimistic and confident about additional allocations that it received over the MTEF.

The DG noted that invariably national priorities translate into the spending of rands and cents at provincial level.  He referred to the example of the recapitalisation of FET funding.  Some provinces are however cutting their own FET allocations, which is not quite the correct interpretation of the national department’s action.  In terms of the department’s overall performance, coverage and access to education is almost equal to developed nations.  However, the department receives weak evaluations on the quality of service delivery, in that numeracy and literacy standards are poor.

The DG noted that DOE’s budget continues to grow in real terms, while learner numbers have stabilised.  Encouraging is that per learner expenditure between provinces is levelling out.  Personnel expenditure continues to decline as proportion of budgets in favour of other inputs.

The DG summarised DOE’s main challenges.

 

·         Previous bids such as no-fee schools were under-funded.

 

·         Backlogs in most basic services areas, such as sanitation and water, occur at too many schools.

 

Although aggregate expenditure is on track, some provinces such as Mpumalanga experiences too low expenditure midway into the financial year.

The DG argued that DOE’s proposals for new funding over the MTEF were based on the importance of distinguishing between national and provincial departmental funding areas.  An important observation by the DG is that in some areas of expenditure, funds should flow through the national department to the provincial department in order to increase the quality of monitoring of funds.

In response to the Committee’s inquiry about the extent of interaction and communication with other departments when planning new schools, the DG felt that they have close cooperation with DWAF and DME, in terms of basic services areas.

The committee showed interest in how DOE will tackle backlogs in school formation.  The DG stated that the planning may be and still is inadequate, although realistic in terms of the revenue envelope.  The DG emphasised that there definitely is neither under-budgeting nor under-spending on the programme responsible for building schools.  Data on backlogs is actually becoming better and through regular provincial reporting on the matter, infrastructure delivery is speeding up.

The Committee inquired about the monitoring of funding of schools.  The DG responded by explaining how each province has the discretion to change the rankings of a school, i.e. move them up or down the quintiles.

The department expanded on its ‘Qidsup’ project in response to a question.  This project aimed to assist the poorest schools.  A basic resource package is sent to the identified school to assist with the improvement of quality of learning.

In response to a question on the ‘Morkel Model’, the DG explain that this model merely assigns the available funds in a province for education to the optimal number of teachers that can be employed by the state in that province.  The DG acknowledged that the model cannot be blamed for the real problem in the country: there are too few schools and the assignment of teachers to the available class space and numbers of learners is not operationally efficient.  The Committee noted that this may be the situation on aggregate, but that various disparities exist between provinces and areas within.

The Committee inquired about the efforts of DOE to ensure that “no learner will learn under a tree.”  The DG explained that achieving this target is problematic in the light of migration and the zoning of schools.  Another target mentioned by the DG is that each learner should have one textbook per subject.

The Committee probed the efficiency and value for money for some food provision programmes at school.  The DG conceded that to avoid an inefficient practice, tight monitoring is necessary.  DOE increasingly aims to encourage school gardens and local parent involvement in its food provision programmes, either voluntary or through a co-op arrangement.

The Committee inquired about the reasons for rollovers in three separate programmes of the department from the last financial year.  In response the DG remarked that the business units at regional level had seen the rejection of some business plans and therefore unspent funds.
The Committee wanted to know how the situation of temporary teacher posts is being handled, and in his response the DG explained that temporary posts could only evolve into permanent posts if teachers are suitably qualified.

The Committee announced its apprehension about the abilities of some provincial education departments to spend all monies allocated to them.  The DG acknowledged that provincial treasuries would have to commit themselves to the expenditure commitments of provincial departments vis-a-vis the national department.

The Committee inquired about the value of the FET system for the whole country, upon which the DG suggested that the current outcomes of FET are successful.  The matric pass rate is however a matter of concern; the pass rate worsened over the last year, although in defence it should be mentioned that there were 40 000 more matriculants last year.

On FETs, the Committee stated that the provinces should regulate the distribution of funds to it, and if these funds are not used, it should be clear where the funds are re-allocated.  The DG remarked in turn that DOE has full control over such monies; provincial departments are not allowed to touch it.  The DG alluded to the proposal of FET institutions to be situated at a national level, although he acknowledged this is a political question.

The Committee expressed its concerns over current mathematics and science competency levels.  The DG acknowledged the problem and explained that the current undertaking is that mathematics or at least mathematical literacy is compulsory for all learners.  Teachers are increasingly capacitated by comprehensive feedback when their learners are not doing well in especially these subjects.  

The Committee’s question about the appropriateness of the various provincial budgets for FET and related institutions should be noted by the department.  Separate written submissions to the Committee by the department need to be submitted.   The Committee request that DOE supply to the Committee the name of the province that did not absorb temporary teachers.

Although the department indicated that it had sufficient resources to deal with its budgetary obligations within the 2007 MTEF, the Committee could not confirm this as a fact.  Further engagement with the department is necessary.

Payment of capital assets was to finance the building of its head-quarters.  The department will have to provide feedback.

Department of Public Works (DPW)
DPW’s presentation commenced with highlighting the key MTBPS implications for the sector, amongst other things the substantial increases in public infrastructure spending, especially in terms of basic services.  DPW’s key role in the R370 billion set aside for ASGISA related projects were highlighted.  DPW’s contribution to expenditure and economic impact was contextualised.  The Expanded Public Works Programme (EPWP) was also briefly discussed. 

DPW acknowledged that the pool of skills relevant for achieving EPWP targets is a major constraint.  Associated with scarcity of skills, under-expenditure of Municipal Infrastructure Grant (MIG), provincial capital under-expenditure, and equitable share under-expenditure by both spheres, are also negatively influencing EPWP targets.   The acting-DG assured the Committee that DPW is reviewing the above-mentioned problem areas and processes.  As an initial measure, the number of EPWP offices has been rationalised.  Municipalities are encouraged to use their equitable share grants for the implementation of the EPWP.  Direct support by DPW is provided to the 138 Project Consolidate municipalities.  Provincial departments are faring much better in spending provincial infrastructure grants with EPWP objectives in mind.

The Committee inquired about what should be done to capacitate provincial departments to facilitate DPW objectives, such as EPWP.  In response, the acting-DG argued that regional DPW offices are capacitated to improve performance monitoring

In response to a question on the reason for the recent R32.5 million rollovers, the acting-DG explained that the rollovers could not be seen as under-expenditure, as some components of the 2005/06 budget did not pass the criteria for supplementary appropriation.  The DPW should provide further written explanation on the matter.

The Committee asked the DPW to respond to FEDUSA’s opinion that the minimum daily wage in term of EPWP projects is too low.  In its response, the DPW highlighted the urban and rural disparities of the daily rates, and the fact that some municipalities have the discretion to pay more than the minimum rate.

As at
31 March 2006, there were 900 vacant posts in the department.  The Committee inquired whether savings due to vacancies not filled had an effect on service delivery in the department.  The acting-DG replied that DPW possesses a plan that should address this issue.  The details of this plan were not clear.  The department should to provide further written explanation to the Committee.

In response to a question about its asset register, DPW responded by saying that the department does have an asset register and that enhancements to the electronic system are being made.

In response to a question on the department’s maintenance strategy, DPW responded by saying that the department has a holistic approach on the maintenance of public infrastructure.  For DPW it is quite important to source the minimum charge-out rates to other departments in order to cost appropriately for maintenance budgets.

The Committee commented that the construction industry may not be geared for particular large-scale government projects and that DPW may need to interact with the private sector on this matter.  The acting-DG explained that there is a stakeholder’s forum where sector participants engage with DPW.  Following from deliberations, and action plan will be drawn up.

DPW need to confirm in writing to the Committee that it does have an asset register and describe the degree of completion.

The Committee noted the fact that DPW does not have a DG and this matter should be addressed urgently. The department needs to report quarterly on the progress.

Although the department indicated that it had sufficient resources to deal with its budgetary obligations within the 2007 MTEF, the Committee could not confirm this as a fact.  Further engagement with the department is necessary.

The Committee inquired about DPW’s specific requests for changes in its 2007 MTEF budget allocations that may be needed for the department to achieve its output targets, but did not receive an adequate answer.

People’s Budget Coalition (PBC)
The combined PBC presentation welcomed the main expenditure priorities defined in the MTBS.  PBC is however concerned that public infrastructure expenditure on service delivery improvement should extend well beyond the 2010 point.  PBC’s main other concern is that urban areas is attracting far more resources than rural areas.

PBC argues for even more pronounced expansionary budget in context of developmental state objectives.  VAT is seen as a regressive tax system to the detriment of the poor.  Local government capacity constraints are recognised.  PBC argued for a more extensive social security network.
PBC was not satisfied with allocations for the Pebble Bed Modular Reactor (PBMR), due to massive capital intensiveness of the project and unanswered questions regarding nuclear waste disposal.  Private capital sources should be exploited to fund the PBMR.  PBC argued that Alexkor and particularly Denel could not furnish adequate business plans and should therefore not have qualified for additional MTEF allocations.  The coalition argued that money used for these two enterprises could be re-directed towards social policy objectives and that technologies inherent to these specific industries could be utilised for peaceful and commercial aims in the country.

PBC did however welcome the additional funding allocated to Infraco.  PBC also welcomed the additional allocations for the N2 Gateway housing project.  The coalition is satisfied about the integration of Metrorail into the SA Rail Commuter Corporation.

PBC noted that revenue constraints show up in the country’s high VAT: GDP ratios.  The PBC urges the Minister to review this situation and to give priority to reducing VAT through a reduction in the general rate and / or through the introduction of a tiered VAT system.  PBC announced that is was bemused by the continuous announcements on under estimations of revenue.

PBC emphasised the implication of being a developmental state and this only mirrored marginally in the MTBPS.   PBC argue that the state should be active in employment creation and capital formation, especially through state enterprises.  PBC is not satisfied with the current direction of economic growth as it exacerbates income disparities. 

The Committee urged the PBC to provide meaningful inputs for changes in allocations in the outer years of the 2007 MTEF.  The PBC’s publication does not critique the current year.  It gives forecasts for the following 2008 MTEF, but these may be interpreted as proposals for allocation adjustments for the outer years of the 2007 MTEF.

PBC, in response to a question on the topic by the Committee, acknowledged the existence of the Integrated Sustainable Rural Development Plan, but insisted that the direction of investments may be an area of debate.

PBC stated that the Section 77(3) of the Constitution calls for Parliament to put in place legislation that would enable amendment of the national budget by Parliament.  This has still not been done after 12 years.

The Committee noted that PBC was not forthcoming with recommendations in terms of skills development and did not allude to any improvements in the SETA system.  Also the PBC did not comment on the impact of HIV and Aids on public servants and on service delivery.

In response PBC acknowledged that it cannot change government capacity, but government institutional capacity building and training is crucial.  Something should be done about low morale and poor staffing in the public service and holistic answers should be sourced.

Department of Health (DOH)
The DOH noted that the health-related priorities areas defined in the MTBPS are line with the DOH’s priority areas submitted in previous years.  These areas are explained below in terms of the activities associated with these priority areas.

 

·         Proper remuneration structures for health professionals;

 

·         Improvements to emergency services in terms of turnaround times and fleet replacements;

 

·         General upgrading of skills pool, but specifically mid-level workers called clinical associates;

 

·         Equipment stock for technical procedures;

 

·         Formulation of a Comprehensive Plan on the Prevention, Care, Treatment, and Support for HIV and Aids;

 

·         Hospital revitalization

 

·         Investments in key programmes such as TB.

 

DOH indicated that it experiences a specific challenge in the pace of revitalisation of hospitals; the R1billion allocated over the next three years will not be sufficient for existing projects.  The Committee noted that there are four (4) unfinished hospital revitalisation projects.  The DG needs to submit a written report that elaborates on the reasons for the slow pace of the hospital revitalisation programme and remedial actions.

DOH stated that in 2010 the department would see a general competition for funds on construction as opposed to social health related infrastructure.  A crucial problem experience at provincial level is the tracing of expenditure from equitable share on especially medical equipment.  DOH noted that additional Comprehensive Plan on Prevention, Care, Treatment, and Support for HIV and Aids allocations are necessary to improve effectiveness.

The Committee enquired about the strategies of DOH to alleviate HIV and Aids through sharing best practices and if funds are adequate for its efforts.  The department’s response was not satisfactory and a written submission needs to be sent to the Committee.

DOH shared its concern with the monitoring of transfers, especially health-related conditional grants, to provincial health departments.  The department noted that the Auditor-General often comments that accounting officers of national departments are not monitoring provincial expenditure of grants.  The DG alluded that provincial departments feel burdened by conditional grants and that they would rather concentrate on spending unconditional equitable share grants.  The DG concluded that it is in a difficult situation with regards to monitoring provincial expenditure, but undertook to assist provincial health departments to spend their conditional grants.

The Committee inquired about the perceptions of slow delivery associated with mortuaries, which is now a health function, and of the delays in forensic investigations.  The DG noted these concerns and stated that substantial infrastructure upgrading of mortuaries has already take place, as well as improvements in financial management of mortuaries.  A problem area is attracting and retaining scarce forensic investigative skills.  An amount (R36 million) for funding the upgrading of mortuaries was transferred to the SAPS, but was unspent and transferred back again to DOH.  SAPS still needs to invoice DOH for services rendered at mortuaries.

The Committee inquired about the supposedly linear relation ship between increasing DOH budgets and improving service standards.  In his response, the DG that many service standards problems are related to human resource problems, for example inadequate numbers of pharmacists at hospitals, which result in longer than anticipated hospital stays. The DG argued that remuneration packages should improve for all health professionals and this is a key priority area that the department wants to address.  The DG did not respond to a question on the adequacy of current health budgets to significantly improve service standards and the department needs to submit a written response.

The Committee noted a ground-level concern from health workers that their lives are often in danger, for example a trend in ambulance hijackings.  It was not clear that DOH responded adequately to this query and the department needs to submit a written response.  Another question on the adequacy of current health budgets to address the backlogs within the hospital revitalisation programme.
The Committee inquired about the reasons for the difficulties experience by health institutions to obtain donor funding when it appeared that all the necessary paperwork has been done.  The DG said in this response that the particular application criteria of donor agencies may inhibit the fast-tracking of applications.  The DG undertook to assist with assessing the adequacy of applications for donor funding in specific cases.

DOH did not make any proposals for the 2007 MTEF period to the Committee.  The Committee inquired about DOH’s specific requests for changes in its MTEF budget allocations that may be needed for the department to achieve its output targets, but did not receive an adequate answer.  A written submission needs to be sent to the Committee.

DOH must provide written submissions to the Committee on the following issues that were highlighted above:

 

·         The adequacy of current funding to curb HIV and Aids;

 

·         Sharing best practices in curbing HIV and Aids;

 

·         Ensuring the safety of health workers at ground-level;

 

·         Adequacy of current health budgets in improving service standards and address hospital revitalisation backlogs.

 

·         Four hospitals that must be or have been constructed.

 

·         The Committee noted DOH’s concern about the need to improve the remuneration packages for all health professionals, and especially in those areas where bottlenecks have been identified.

Department of Housing
The Department of Housing introduced the key challenges of the sector.  The department explained that the housing backlogs are partially the result of various income and household settlement formations.  Migration trends also put a strain on government to deliver housing and associated basic services in the major cities. Lastly, housing backlogs in informal settlements are erratic in that they are more susceptible to pressures from natural disasters.

The Department of Housing’s strategy to address the key challenges of the sector is contained in its ‘Comprehensive Plan.’  Amongst other the following service delivery areas are priorities:

 

·         Informal settlement upgrading;

 

·         Speeding up service delivery mechanisms and construction projects;

 

·         Engaging with banking industry within the context of Financial Services Charter to ensure access to property finance by historically disadvantaged individuals;

 

·         Alignment of intergovernmental and inter-departmental funding streams to enable municipal structures to deliver basic services associated with housing projects; and

 

·         The accreditation of municipalities to effectively deliver housing projects.

 

The department submitted funding proposals to the National Treasury to assist with fast tracking of housing pilot projects and general housing backlog alleviation.

The department’s unforeseeable and unavoidable expenditure items for the current fiscal year relate to funds released in response to several natural disasters, affecting especially informal settlements.
The Committee raised its concern about the constant reports of inferior quality of housing, and the cost estimations of this for the National fiscus.  In response the DG explained that the post-1999 withdrawal of major contractors left a void that was filled by poorly skilled contractors.  The DG assured the Committee that quality inspections are currently the order of the day.  The question relating to the cost of inferior quality of housing was not answered and the department should submit a written response to the Committee.

The Committee raised its concern that civil servants in rural areas are unable to borrow from banks and inquired what the department can do about the situation.  The Department did not address this question and a written response needs to be submitted to the Committee.

The department explained the reasons for not achieving housing delivery targets in some provinces.  Amongst others the difficulty of provinces to procure the required resources for projects, such as timber, cement, as well as the necessary skills.  The department acknowledged that there are problems that prohibit the effective expenditure of all funds it receives from the fiscus.  It said backlog estimation models are beginning to explain particular trends in specific locations.  It was not clear how these models will help the department to plan and spend better and a written submission on this topic has to be provided to the Committee.

The DG noted the Committee’s concern that the average delivery period for a housing project is up to three (3) years, as well as the slow pace of the rolling out of housing pilot projects.  The department should provide the Committee with written explanations and remedial actions for these concerns as they impact negatively on the National fiscus.

The Committee noted that the absolute numbers of houses delivered by the department has slowed down over the last couple of years and that contrasted with the increase in its departmental budgets for the same period.  The Committee therefore inquired about the capacity constraints that face the department.  The DG explained that it has been a major challenge for the department to budget in conjunction with the basic delivery planning tools, i.e. municipal IDPs.  As a response the department has started process to develop a human settlement protocol, which aims to direct the delivery of different social services at provincial level.  As part of such a protocol, MECs should be consulted to identify funds earmarked for specific projects and that would help to inform IDPs.  This protocol is in line with the broader principle of intergovernmental relations.  The Department also explained that the huge human flows associated with migration are a major challenge for delivery.  The scarcity of well-located land for settlement and
South Africa’s spatial development disparities present additional challenges.

The Committee inquired about the reasons for the numerous vacancies in the department, and more specifically why basic positions such as clerks are vacant.  The DG explained the situation by referring to the late finalisation of the human resources divisional structure.  The DG assured the Committee that the situation of clerical vacancies would never occur again.

The Department did not respond to the Committees inquiry about the department’s plans for future hostel upgrading and a written response should be sent to the Committee.

The department did not make any proposals for the 2007 MTEF period to the Committee. 

The Committee requests that the Department of Housing respond in writing to the following issues that have been highlighted above:

The cost of inferior quality of housing for the fiscus;

How the department intends to plan and spend better in order to effectively address housing backlogs;

The long duration of housing projects;

The slow pace of housing pilot projects; and

The department’s plans for future hostel upgrading.

Department of Home Affairs (DHA)
The department, in response to its below norm (as it stated) mid-year expenditure percentage of total adjusted budget, explained that due to government’s cash based accounting system, payments for invoices received will only be captured once payments have been generated.  In terms of commitments and associated expenditure, the department is therefore on target at the end of the first six months of the fiscal year.

In response to a query why money destined for issuing ‘smart IDs’ has not been thoroughly spent, the acting-DG replied that the appropriate IT infrastructure was not in place, for example a database of all fingerprints.  Amounts frozen by the National Treasury have been released in the wake of the introduction of other required systems, such as the electronic document management system (EDMS) and the Electronic fingerprints identification system (EFIS).   The department argued that control for these systems are secure as fingerprint identification (called the ‘biometric logon system’) is used instead of usernames and passwords.   The department did not respond to a question as to the time frames for the start of smart ID issuances and the electronic birth and death certificates database and therefore the department needs to submit its answer in writing to the Committee.

In terms of the visibility of Multi-Purpose Community Centres (MPCCs), the department stated that the challenge is to fill vacant positions at these centres.  In the
Free State, MPCs are open full time five days a week and this will be extended to all provinces.

The Committee noted that the 2008/09 allocations to DHA are lower than the previous year and inquired whether this meant that the department’s major functional challenges would have been reduced by then.  The CFO explained that this allocation projects that many capital expenditure projects may have been realised prior to 2008/09.  The CFO noted that additional funding over the MTEF has been requested from the National Treasury and if approved, would see an increase in the outer year’s allocation.   The additional funding is for major projects aimed at improving services, including investments in IT systems such as EDMS.

In response to the effectiveness of the department’s mobile units, the CFO explained that these units are equipped with the necessary technology to reach almost all remote areas and deep rural areas.  The number per province will increase, with more populous provinces receiving proportionately more.

The Committee inquired about the reasons for not filling vacancies, and also about the amount of current vacancies that were advertised in the previous (2005/06) fiscal year.  DHA stated that it will have sorted out all vacancy-related problems by the end of 2006/07, and most or all vacancies should be filled by then.  In terms of its internship programme, the department informed the Committee that it had lost a couple of interns, but overall the programme is quite successful.  The Committee requires the department to make written report on the reasons and remedial actions to address the problem of recurring vacancies.

The Committee inquired about the relationship between its management and its audit committee and the effectiveness of the committee in detecting and reacting to corruption and fraudulent practices.  The CFO stated that the audit committee meets four times a year.

In response to queries on the nature and implications of virements between programmes through the year, the CFO stated that savings that were realised, for example due to delays in filling vacancies, were used to fund other priority programme areas, such as assisting refugees in their applications. 
The department, in response to the comments on the disclaimer by the Auditor-General on the financial statements of the department in 2004/05, stated that it went through considerable effort to improve upon management capacity and systems.   The department received a qualified Auditor-General opinion in its 2005/06 annual report.

In terms of its incentives to avoid corruption, especially with 2010 in sight, the department is rolling out the whistle blowing policy out to all its offices.  A toll free whistle blower number exists to report fraudulent practices.  DHA has a fraud prevention plan in place.  A key limitation for successful fraud prevention, is finding the appropriate investigators.  DHA has a counter-corruption chief directorate.  The department declared that officials have been and will be immediately suspended when fount out.  The department concluded that corruption is a bigger national challenge and is not only confined to DHA.   The Committee requires the department to report on the effectiveness of its fraud prevention plan to root out fraud.

The department did not answer a query on why its expenditure trends normally peak towards the end of the financial year and a written response should be submitted to the Committee.

The Committee inquired about the impact of the extended hours of business of DHA offices on the operations and specifically personnel management on the department. DHA did not address this question and should submit a written response to the Committee.

On a question about the integrity of the national population register, the department said the appropriate IT and security system were being put in place to improve the integrity of the system.

The Committee expressed it concerns over allegations that the department’s systems are ineffective and inaccurate.  Notably are allegations about the loss of integrity of the ID database.  The DG explained that there are limitations to the current legislative framework that exacerbates social problems, for example government is not allowed to take the fingerprints of children, hence creating incentives for manipulation of and errors in the ID database.  The DG agreed that without IDs, the problems of child-headed families would be exacerbated.  The DG argued that members of the public should be educated on population administrative issues.

The Committee suggests that DHA come up with mechanisms to ensure that acts of corruption are deterred, and if once caught, perpetrators are dealt with efficiently to deter further acts of financial losses to the report.

The observation of the Committee is that should DHA be allocated additional funding as there needs to be considerable capacity-building efforts at the department to ensure that funds are effectively and efficiently spent.  The Committee noted the problem area of vacancies.

The department did not make any proposals for the 2007 MTEF period to the Committee.  The department did not adequately respond to a question on whether the department is confident about the allocation in the outer years, in the light of the completion of capital expenditure projects and the upcoming 2009 general elections.

The Committee requests that DHA respond in writing to the following issues that have been highlighted above:

Deadlines for the start of smart ID issuances and the electronic birth and death certificates database

Reasons for peaking of expenditure trends the end of the financial year;

Whether the department is confident about the allocation in the outer years, in the light of the completion of capital expenditure projects and the upcoming 2009 general elections;

The impact of the extended hours of business of DHA offices on the operations and specifically personnel management on the department;  

The reasons and remedial actions to solve problem of recurring vacancies; and

A report on the effectiveness of its fraud prevention plan to root out fraud.

Finally, the Committee requires the Department to submit in writing what measures it would put in place to assure that the department will not receive a qualified report.

Department of Social Development (DSD)
DSD highlighted the medium term budget priority areas and these are listed below.

Institutional reform of the social security service delivery system.  The main enabler of policy in this regard is the newly established Social Security Agency.

Institutional reform of the department itself in the areas of strategy formulation, oversight, and monitoring and evaluation.  In this regards, the National Treasury has been approached and is assisting.

The expansion and consolidation of welfare and community development programmes ands services.

Human capital development, both within department in stakeholders and partners.

Assisting with the coordination of the EPWP.

The review of the Social Assistance Act.

DSD’s key challenges for meeting the above-mentioned priorities are listed below.

The substantial disparities in service provision and expenditure per capita among provinces, for example in terms of subsidies paid to children’s and older persons’ institutions.

A general lack of human resource capacity in the department.

Effective capacity building at key service delivery stakeholders, such as social workers and NGOs.

The degree of success of future provincial expenditure, with the main areas being the implementation of new legislation, such as Children’s Act, Older Persons’ Act and Child Justice Bill, an the subsequent expansion of other Social Welfare Services.

The under-expenditure from provincial Social Development departments is a worrying situation.  Under-expenditure is largely on conditional grants, specifically on the integrated social development grant.  The main reasons for this have been the late introduction of this grant and capacity constrains in provinces, such as staff shortages.  The Committee noted that the department has reported to the Committee on the problem of staff shortages last year and inquired about the progress in this regard.  The DG explained that although the department has been awaiting the ministerial approval of a restructuring process, it will not wait for final approval and will commence with a much-needed recruitment drive. As part of the enabler for the recruitment drive the DG created an office of the COO.   The department is going through significant efforts to recruit for the Social Security Agency.

On this matter, the Committee further inquired about the department’s previous commitment to recruit and retain social workers.  The DG explained that the department has adopted a recruitment and retention strategy.  It is however a considerable challenge to source the desired number of social workers in
South Africa, as there are few university graduates each year in this field and social workers in rural areas tend to migrate to urban areas.  Awareness needs to be created in learners and scholarships, over and above existing bursaries, should be awarded, although the effects would only be visible in the medium to long term.  As a measure, the department increased the salaries of social workers.  Already a number of social workers participe and trained within the health and welfare SETA programmes.

The department acknowledged that an important aspect of its human resource capacity is the volunteer.  Once all volunteers are registered and paid stipends, some form of equalisation of stipends would occur in order to attract more volunteers.

The department acknowledged that vacancies impacted to an extent negatively on its ability to effectively deliver its functions.  It was not clear from the department’s response how and by when the vacancy situation will be addressed and a written explanation needs to be sent to the Committee.

DSD acknowledged that it should monitor the effectiveness of transferred funds to provincial departments and other institutions and that there are major risks involved as these are substantial amounts of money.  To this end, the department established a Monitoring and Evaluation unit at chief directorate level and replicated this unit at provincial level in order to capture relevant information at the lowest possible level.  DSD adopted a strategy on how to monitor and evaluate effectively and this include site visits to implementing institutions.  The department acknowledged that due to the challenges inherent in the current intergovernmental relations system, monitoring and evaluation is still a big challenge.   To this end, DSD has produced guidelines for grant implementation and reporting that has been provided to its provincial departments.  DSD alluded to the challenge of dealing with the various accounting officers.

DSD detailed the reasons for under delivery at provincial level, among others the lack of knowledge by provincial departments and implementing institutions on how to deal with tendering processes.

DSD did not respond to a specific question on the stage of completion and challenges experienced with capital expenditure.  The example was given of the building of some departmental office buildings and the targeted date of completion for this specific project was 2004.

The DSD acknowledged that the misuse of the department’s vehicles by its employees is a problem, but contextualise the problem in terms of the government-wide phenomenon.  Part of the solution is a proper asset management system, with which the National Treasury is assisting departments.  The Auditor-General will qualify any department that does not have a proper asset management system.

The Committee inquired about DSD’s strategy to avoid the re-occurrence of considerable under- expenditure.  The department did not sufficiently address this question and needs to submit a written response to the Committee.

The Committee inquired about when the department will start implementing the Older Persons Act and how communities will be made aware of the impact of the act on them.  DSD explained that one of the challenges to implementation is to accurately identify older persons’ needs, and to first come up with norms and standards for old age homes.

The Committee inquired about the availability of data on projects in rural areas, such as on services provided by NGOs, the monitoring thereof, and the accountability implications for these services rendered.  DSD explained that it is relying to a large degree on community development workers to ensure that communities in the area aware of all services that are provided.  The department acknowledged that it is difficult to effectively monitor the vast amount of NGOs that render service on its behalf, as well as other social development-related services.  The assessment and registration of NOG and services are constraint by time and staff shortages.  DSD explained that there have been delays of fund transfers to NGOs in many cases due the lack of capacity in these NGOs, for example in terms of producing appropriate business plans.

The Committee inquired about aspects of the court decisions on the shift of functions of DSD to the Social Security Agency and how loopholes could be closed in future to avoid unnecessary litigation.  The Committee also inquired about the reasons for the need to contest certain issues in court.  The department explained that the legal capacity constraint is a considerable challenge in government.  Corrupt and fraudulent officials and their outside networks use a tactic whereby they litigate in volumes and the Department of Justice simply cannot cope with this.  Sometimes already finished cases are resubmitted, thereby increasing the administrative burden on the defence and resulting in increasing turnaround times of cases.  The problem is that if some cases go unopposed, the DSD need to pay up unnecessarily.  The Law Society of South Africa will be approached to assist in rooting out fraudulent lawyers.  The Committee noted that certain aspects of the recent litigation cases highlighted by DSD appear to be related to other cases in the department.  The department explained the ensuing forensic investigation should determine the degree of collusion.  A database of findings will be forwarded to the Committee by
10 November 2006.

The department, in response to a query on its progress in utilising SAPO for points of payments, explained that various payment preferences are being evaluated.  The ideal is bank transfers, but too few people have bank accounts.  There are arrangements with contractors to pay out grants on behalf of DSD.  Of essence is the element of dignity that should always be associated to the handling and paying out of social grants.

The department, in response to its efforts to capacitate NGOs in rural areas, explained that NGOs are typically better capacitated than community and faith based organisations.  DSD has about 35 capacity programmes in the country to train and capacitate the latter.  Key learning areas are compliance with government legislation and procedures, and basic project management skills.

In response to a question on DSD’s efforts to incorporate farming communities in the social grant distribution network, the DSD acknowledged that accessibility to social grants by all eligible citizens is a priority.  The department requested the details the particular cases mentioned by the Committee and will follow up.  The department will also follow-up on a request of the Committee to report on the building of a DSD office in a specified town worth R7 million.

The Committee noted that at regional level some posts in the Social Security Agency are not filled and inquired about the operational readiness of the Agency to fulfil its mandate.  The department explained that the situation is under control in that the necessary arrangements are currently in place between the relevant provincial departments and the Agency, which enables the smooth administration of social grants.  These arrangements are expected to last until the end of 2006/07, whereupon the Agency should be fully operational.

The Committee inquired about the reasons for the considerable increase in the administration programme of DSD.  It was not clear that the department answered this question adequately and it needs to submit a written response to the Committee.

The department did not make any proposals for the 2007 MTEF period to the Committee. 

The Committee requests that DSD respond in writing to the following issues that have been highlighted above:

How and by when the vacancy situation will be addressed;

The department’s strategy to avoid the re-occurrence of considerable under- expenditure and the success of this strategy;

The database of forensic investigative findings to be forwarded to the Committee by 10 November 2006;

To indicate that the forensic investigative findings are in relation with litigations from external parties to the department; and

The reasons for the considerable increase in the administration programme of DSD.

Capital projects progress

Additionally, the department is requested to provide detailed information in writing of its capital expenditure programmes for the 2007 MTEF and past capital expenditure trends.

Department of Sports and Recreation
The department only submitted a written submission.

The department’s additional funding proposals amounted to R491 million for 2007/08 and R494 million for 2008/09.  Funding increase proposals are for the following projects:

·         2010 Match stadiums

 

·         2010 Team preparation support;

 

·         Training of volunteers;

 

·         Funding of stadia (legacy facilities);

 

·         Mobilisation of South Africans; and

 

·         “Leaving a legacy for the Youth”-project.


The department did not make any proposals for the 2007 MTEF to the Committee.

South African Local Government Association (SALGA)

The association only submitted a written submission.

SALGA noted that governments spending priorities generally are aimed at assisting the poor. Priority areas are health, social welfare services, education, the building of state capacity, and housing, municipal and community services.  In general SALGA is satisfied with additional allocations in the adjustment budgets of departments.  However one or two issues were highlighted and these are listed below. SALGA expected:

That a specific allocation be made to address the shortage of social workers.

That additional allocations are made to establish salary parity between employees of government and NGOs.

That 2006 MTBPS to announce the extension of the child support grant and an extensive school nutrition programme to also cover children between ages 14 and 18.

Proposed the funding of a structured approach to building the capacity of the local government workforce in programmes such as Siyenza Manje.  SALGA also proposed a structured approach to building capacity such as a second phase to the National Skills Development Strategy.  It is the Committees recommendation that this programme should not only target grade 12 learners.

Allocations for neighbourhood development partnerships to further fund improvements to settlements for sustainable communities should grow.

That there will be specific allocations for funding of electricity distribution restructuring.

That local government would receive allocations to assist with the establishing of transport authorities al local level to reduce public transport challenges.

Proposed additional funds for municipalities hosting the 2010 Soccer World Cup, especially those neighbouring hosting cities, for public transport infrastructure and system improvement.

Theme 4:  International Trade
Department of Trade and Industry (DTI)

The department only submitted a written submission.  No additional funding has been allocated to trade initiatives for the 2006/07 year.

In its submission, DTI noted that the promotion of trade should be balance with structural adjustments in the broad economy.  Supportive policies for especially labour market adjustment should therefore become a priority area.  These policies should focus on safety nets and training for labourers.

The department did not make any proposals for the 2007 MTEF to the Committee.

Section 3: Committee observations and recommendations

3.1            Committee concerns and comments
Some delegations did not include the DG of a department, in which case the delegation was excused from presenting until such time that the DG or acting-DG was present.  These departments are listed in the introduction of this report.  The Committee emphasises the PFMA requirement that the DG, as the accounting officer of a national department, should account for expenditure, among other things.  Accountability cannot be delegated, although responsibilities can be delegated in writing.

The Committee expressed its concern that most departments and organisations that made submissions did not clearly articulate their submissions in terms of their priority expenditure challenges and needs for the outlying years of the 2007 MTEF.  Many departments also did not address the appropriateness of the MTBPS comments with regards to their respective service delivery areas as well as the appropriateness of additional allocations in the 2007 MTEF.

In the 2005 Joint Budget Committee Report on the MTBPS hearings, the Committee noted that the coordination between clusters needed to be strengthened, as this would facilitate better understanding of other departments within the cluster.  The Committee noted during various submissions during the 2006 hearings that it seemed that departments that provide the various basic services for the effective functioning of service delivery units, such as schools and clinics, were not effectively engaging with each other.  Examples of schools without water and sanitation or clinics without electricity were matters of grave concern for the members of the Committee.

Again, the management of transfers, especially conditional grants to provinces and local government, and the ability to monitor these effectively were highlighted as concerns.

3.2            Recommendations 2006



The Joint Budget Committee after its deliberations made the following recommendations:

The JBC wishes to re-emphasise the expediting of resolution 1 of 2005 (See annexure 1). The committee requires competent and financially skilled research staff plus additional human resources. Committee also require appropriate ongoing training in budget analyses to conduct more effective oversight.

The time period for oversight on the MTBPS be increased to conduct effective oversight and have more interaction with various stake holders.

The human resource capacity within National Departments should be improved noting the high vacancy rate witch necessitated the need to shift funds. Departments should take appropriate measures to recruit and retain skilled personnel. The present high turnover rate impacts negatively on service delivery. The DPSA should report back in the current state of the existence of “ghost posts” and develop measures and strategies to eliminate this problem as it drains financial resources from the national fiscus. The DPSA should report within 10 days on its proposal of the public service salary bill.

National departments should more robustly monitor the implementation of conditional grants to Provincial and Local government. The internal monitoring and evaluation of structures should be effectively implemented by all National departments.

The equitable share be reviewed to ensure its objectives are not lost at Provincial level.

Departments should in the following MTBPS take into cognisance, not only of the current financial year, but also the two outer years when budgets and programmes are developed as well as when presenting to the Committee. The employment of the three-year medium term Expenditure framework for effective strategic planning, budgeting, and service delivery is an imperative policy tool for national departments.

DPW should report back to the committee on its progress of the national asset register and the areas they have covered.

3.3            Review of the 2005 recommendations (see Annexure 1)
The JBC also reviewed the progress on its recommendations made and passed by Parliament in 2005 and is of the opinion that there has been limited progress as detailed below.

Recommendation 1 was done to a certain degree and the implementation should be expedited.

Recommendation 2 Parliament has gone a long way at looking at legislation but needs more progress

The JBC found that more departments such as Correctional Services and Defence have been qualified by the AG. The JBC was disappointed to learn that more departments are now receiving qualified reports, which underpins the need for increased institutional and human recourse capacity

The continued focus on Recommendation 4 receive further coverage in this years recommendations. 

The observations of the committee on recommendation 5 is that it has not been vigorously implemented as yet.

With respect to Resolution 6 on all committees of parliament should implement a tracking process as soon as possible.
The JBC has now sifted its focus to identify departments and clusters were significant under and over expenditure exist in relation to outputs.

Conclusion
The JBC expresses the hope that the report will contribute to a more effective and efficient MPBPS and budget oversight process by all role players. The JBC hopes that its constructive critical oversight will be welcomed in the spirit of accelerated transformation of our institutions and structures and deepening of our democracy. We wish to thank all those who made submissions, members of the committee, and resource support especially those that came better prepared to participate.

Report to be considered.
Co-chairpersons

The Hon. LL Mabe
The Hon. B Mkhaliphi

Annexure 1

Recommendations 2005

For information purposes, the Committee’s recommendations contained in the 2005 Joint Budget Committee Report on the MTBPS hearings are included below.

The Committee recommended as follows:

The Committee recommends that Parliament enhance its effectiveness in monitoring the capacity of departments to implement progressive policies.

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.

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.

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.

Parliament should explore ways to influence cooperation and complementarities rather than competition between departments, particularly coordination of planning between departments in the same cluster.

Parliament should follow up on the amendment of strategic plans in order to align them with the MTBPS.

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