Report of the Standing Committee on Appropriations
(SCOA) on the 2009 Medium Term Budget Policy Statement (MTBPS), dated 9
November 2009
1.
Introduction
The Minister of Finance tabled the Medium Term Budget Policy Statement (MTBPS)
on 27 October 2009, outlining the budget priorities of government for the medium
term. The MTBPS was tabled together with the Adjustments Appropriation Bill [B13
- 2009]. The Adjustments Appropriation Bill was referred to the Standing
Committee on Appropriations for consideration and report while the MTBPS was referred
to the Standing Committee on Finance and the
Standing Committee on Appropriations to consider, in accordance with their
respective mandates as outlined in the Money Bills Amendment Procedure and Related Matters
Act No 9 of 2009. Among its responsibilities in respect of the MTBPS, the
Committee is required to consider and report on the following issues:
Section 6(11) of
Act No 9 of 2009 provides that the report may include a recommendation to amend
the division of revenue should it remain materially unchanged in the Division
of Revenue Bill.
The Committee
invited the national departments of Education, Health, Rural Development and
Land Reform, Public Works, Water and Environmental Affairs as well as
Cooperative Governance and Traditional Affairs as they were considered strategic
in the implementation of policy priorities. These were required to account for
their budget plans. Furthermore, the Human Sciences Research Council, the Financial
and Fiscal Commission, independent economists and the Peoples Budget Coalition were
invited to comment on the MTBPS. All the invited organisations and individuals
attended except the People’s Budget Coalition.
The Committee
acknowledges that the MTBPS is tabled during a time when world economies,
including
2.
Budget
priorities for the medium-term
The budget
priorities over the medium-term support policy priorities of government. In
line with the State-of-the-Nation Address (SONA), government prioritises its
resources in the following areas:
These priorities
are supported by a government strategy which includes the shifting of resources
to labour intensive sectors of the economy. Furthermore, government will strive
to improve State performance with specific regard to the delivery of services
to the poor. In the light of the current budget pressures, the Committee is of the
view that limited resources should be utilised to produce maximum output,
without compromising the quality of services.
The fiscal framework makes an addition of R78 billion to the baseline
budget. A substantial share of this budget is allocated to provinces for health
and education. This increase in provincial baselines is intended to finance health
and education for salary increases as well as the Occupational Specific Dispensation
(OSD). Further resources are allocated for antiretroviral treatment, workbooks
for early phases of schooling and housing programmes. Infrastructure programmes
including the Municipal Infrastructure Grant (MIG) received an additional
allocation. The additional budget to national departments will finance the child
support grant, rural development, the criminal justice sector as well as
industrial development and job creation. The consolidated expenditure of
government is expected to increase from R841.4 billion in 2009/10 to R1 052.8
billion in the 2012/13 financial year.
3.
Overview of the
Budget Adjustments
The down turn in the global
economy and various domestic constraints have affected millions of South
Africans where the economy has contracted by 2 per cent in the first quarter of
2009 which was eventually estimated to 1.9 per cent for 2009 as a whole.
However an estimate of 1.5 per cent economic growth in 2010 has been projected
in the domestic economy as a result of an increase in government spending on
transport projects and soccer stadiums for the 2010 FIFA World Cup. This is
also driven by a strong investment growth and continuous investment in the
economic infrastructure to provide an important support to the economic recovery,
reduce infrastructure backlogs and attract more private investors. The
International Monetary Fund (IMF) expects the rest of the world to grow by
almost 3.1 per cent in 2010. The
additional R14 billion that has been proposed in the Adjustments Appropriation
Bill is welcome, which includes R5 billion on the higher interest costs and R9
billion in higher non interest spending. It is noted that the overall budget
was R738.5 billion and during the adjustment period this has been adjusted to
R752.5 billion. While the departments have only managed to spend R368 billion
in the first six months of the 2009/10 fiscal year, the MTBPS allocates an
additional budget of R14 billion.
The Committee supports the
proposed increased lending capabilities of the Development Bank of Southern
Africa (DBSA) by about R102 billion over the next five years to focus and
contribute to development. The Committee further supports an additional
funding of R1 billion a year in the provincial equitable share for spending in
frontline services particularly in education and health in order to accommodate
higher salaries for teachers and doctors and to strengthen good governance and
oversight in provinces and municipalities.
Public infrastructure
receives R872 billion over the medium term to invest in school buildings,
public transport, water and sanitation. The Committee welcomes this allocation,
as infrastructure development is much needed to boost the recovery of the
economy. More planning and monitoring of infrastructure projects is essential
to wave the risk of costs escalation.
An amount of R1.5 billion
which emanated from the rollovers arising from commitments related to unspent
funds in the 2008/09 budget has been noted. The non payment and non completion
of projects within specific timeframes result in unspent funds which eventually
become rollovers. This state of affairs remains a cause for concern to the
Committee as most of these projects are regarded as essential projects which are
associated with job creation as well as with the 2010 FIFA World Cup. This is indicative
of poor planning and non compliance with certain supply chain management and
finance legislative frameworks.
The Committee welcomes the
additional funding of R12 billion in order to cover for the higher increase in the
public service’s compensation of employees particularly with regard to the
Occupational Specific Dispensation (OSD) agreements; this will assist in retaining
scarce skills in the public sector such as those of doctors, civil engineers,
architects etc.
The Committee supports the additional
allocation of R509 million to compensate municipalities for the escalating
costs of providing free basic services such as water and electricity to those
people that qualify to be exempted under the indigent policy of municipalities.
This will assist in reducing the level of pressure imposed by the costs of free
basic services to municipal budgets which need to be provided to indigent
households and to keep up with the Bill of Rights as stipulated in chapter 2 of
the Constitution of the Republic of South Africa, 1996.
The 2009 MTBPS proposes a
culture of savings rather than under spending. It was indicated that there is a
need for the government to identify areas of savings through rearrangement of
government priorities and reduction of spending in non core functions. This can
also be achieved through reduction in irregularities, corruption and fraud by
civil servants as well as reduction of fruitless and wasteful expenditure and creating
a culture of doing more with less.
4.
Budget Estimates
for the 2009/10 Mid-Year
National
departments were allocated R399.6 billion in the 2009/10 financial year,
excluding the direct charge. The Adjustments Appropriation Bill proposes an
additional spending of R9.2 billion for national departments in the 2009/10
financial year. Of these funds, R1.9 billion was rolled over from the previous
year’s budget. It was indicated to the Committee during public hearings that
rollover funds have already been committed by the departments. Among the Committee’s
concerns was a lack of spending on infrastructure budgets by various departments.
This pattern was also evident in respect of the MIG projects, which reported a
rollover of R287.8 million.
The budget
adjustments propose a shift of R2.3 million from the Department of Cooperative
Governance and Traditional Affairs (CoGTA) to the
Department of Rural Development and Land Reform. This shift was necessitated by
the transfer of the rural development programme in line with the reconfigured
government structure. The Department of Cooperative Governance and Traditional
Affairs (CoGTA) indicated that the lack of spending
in MIG was due to 33 municipalities that could not spend their allocations. The
Department indicated its intention to withhold funds and request National Treasury
to redirect them to spending municipalities. It is determined that of the 33 municipalities
that did not spend on the MIG, three were affected by the recent service
delivery protests. These were the
The lack of
spending on the MIG is a matter of concern, particularly in view of the recent
service delivery protests in some of the under-spending municipalities. The
Committee notes that the shifting of fund from under-spending to spending municipalities
would be problematic as it could create infrastructure backlogs for the
affected municipalities. This intervention might therefore have undesired
political outcomes. Needless to say, its constitutionality and legality might also
be questionable.
The Department
of Public Works is allocated an additional amount of R524.9 million for unforeseen
and unavoidable expenditure. This includes funds for the offices and residences
of new Ministers and Deputy Ministers, the Devolution of Property Rates Grant
and salary increases. Some of these funds are for the creation of new jobs through
the Expanded Public Works Programmes to meet the targets announced by the
Minister during the debate on the State-of-the-Nation Address. The Department
rolled over R116.7 million for infrastructure projects from the previous
financial year. These include funds for Re Kgabisa Tshwane projects, upgrading of some buildings in
The Committee
understands the purpose of the Re Kgabisa Tshwane project to be the refurbishment and provision of
office space for national departments. It also understands its operations to be
limited to the City of
The Adjustments Appropriation
Bill proposes a shift of functions from the Department of Water Affairs and
Forestry due to the reconfiguration of government structure. This shift of
functions resulted in R487.6 million originally allocated to this Department
being shifted to the Department of Agriculture, Forestry and Fisheries. The
shift of the sanitation function to the Department of Human Settlements has not
been fully implemented and no funds have been shifted for this purpose. The Department
rolled over R232.3 million of the funds for capital projects from the previous
financial year. These include funds for the construction of the De Hoop Dam and
the Regional Bulk Infrastructure grant. The funds for the De Hoop Dam have been
rolled over since the 2007/08 financial year. The Department has indicated that
delays in finalising a memorandum of agreement with 23 mines contributed to the
slow spending in the 2008/09 financial year. Furthermore, high rainfalls
delayed the projects. The late submission of invoices delayed spending in the
Regional Bulk Infrastructure.
The Department of Rural Development and Land Reform
indicated that it had requested an additional budget of R4.4 billion for the
2009/10 budget adjustment to fund rural development, new offices of the
Ministry as well as the Restitution and Deeds Trading Entity. Due to the
prevailing economic conditions, the Department revised its request to R1.7
billion. An additional budget of R292 million was allocated to rural
development, R9 million to the Ministry and R31 million for general salary
adjustments. Of the R3.5 billion
requested for the Restitution programme, only an additional budget of R1.1
billion was granted. The Department indicated that it might be difficult to
meet the objectives of rural development due to budget constraints. Shifting of
funds will need to be done to finance the restitution programme.
The Committee agrees with the Department that the budget
allocation to the Restitution programme is not sufficient to support the
development needs of the country. The Restitution programme had already spent
91 per cent of its budget by the end of the second quarter and the lack of
sufficient funding in this area compromises the rural development agenda of
government. This problem is worsened by the attitude of land owners who inflate
their prices when dealing with government. The cost of land at three times more
than the market price is not assisting the already struggling fiscus and quick intervention is required in this regard. Land
is central to the implementation of the government’s comprehensive rural
strategy and if resources are not prioritised for land reform programmes, the
objectives of this strategy might not be achieved.
The
Department of Education received a total
Adjustment of R561.686 million. The Department rolled over R8.6 million
for operations, R3.5 million for HIV/Aids conditional grant (Limpopo) and R9
million for new functions of the Council on Higher Education (CHE). The
Department further received an additional budget of R8 million for the new
ministry of Higher Education. This will go towards sustaining the ministerial
offices and those of the Director-General. In future more funds will be required
for the running of the new Department. A substantial amount of R524.1 million was
allocated for workbooks for literacy and numeracy for
grades 1 to 6 learners in quintiles 1 to 3 schools. A further R8.5 million was
allocated for increase in improvement of conditions of service.
The
Department indicated that R94.4 million was requested for examination and
assessment, and R291.7 million for the National School Nutrition Programme was requested but funding was not provided for
these. The Department further noted that the Occupational Specific Dispensation
for Educators was not fully funded.
The Committee expresses is concerned about the lack of sufficient funding in
the National School Nutrition Programme.
5.
Medium Term Spending
Priorities
The Minister of Finance indicated to a joint meeting of the Finance and
Appropriations committees that ambitions of government are curtailed due to the
financial pressures. He noted that borrowings will burden some parts of future
generations and that savings will be made in government spending. The Minister
called upon the business sector to commit and outline its role in the government
savings programme. He indicated that employment is not as fast as expected and
that it was necessary to improve training programmes and basic education in
The Financial and
Fiscal Commission (FFC) noted that, the national proportion of the Division of
Revenue continues to decline over the Medium Term Expenditure Framework (MTEF)
from 50.1 per cent in 2009/10 financial year to 46.9 per cent in the 2012/13
financial year. On the other hand the provincial and local proportions are
increasing over the MTEF (see table 1 below). It furthers investments which are
key to long term growth. It added that it would be
critical to ensure that such projects stayed within budget and that they resulted
in value for money. The Commission was particularly concerned about the
unanticipated wage bill. It suggested that there should be a deliberate
attempt to synchronise the centralized bargaining
process of the public sector with the budget process to reduce undue burden to
sub-nationals by decisions over which they have no direct control. The high
wage bill led to immense pressure on provincial budgets. Of
the R39 billion added to the provincial fiscus, R32.7
billion is transferred in the form of equitable share while R7.1 billion is
transferred in the form of conditional grants over the MTEF. The Commission
highlighted the need to identify which conditional grants were impacted by the
increase.
Table 1: Division of nationally collected
revenue
|
|
2009/10 revised |
20010/11 |
2011/12 |
2012/13 |
|
|
Medium-term
estimates |
|||
|
National |
50.1 |
48.3 |
47 |
46.9 |
|
Provincial |
42.6 |
43.6 |
44.4 |
44 |
|
Local |
7.3 |
8 |
8.7 |
9.1 |
Source: FFC
presentation
Expanding
employment and safeguard social security
The MTBPS proposes a shifting of resources towards labour intensive
sectors and the creation of jobs in the delivery of public services. While
government expects all its prioritised programmes to contribute to job creation,
its main target for expanding employment is skills development and training,
infrastructure development and the expanded public works programme. Government
intends to create 4.5 million jobs over the next five years. An amount of
R114.5 million is provided for community works programme in the budget adjustments
in the current financial year. This programme is expected to create 180 000
full time jobs by 2014. New incentives to
encourage government departments and municipalities to use their budgets for
labour intensive programmes in the infrastructure sector are also proposed.
These incentives will be extended to the environmental, cultural and social
sectors.
Government anticipates spending R7 billion a year in the next three years
due to the extension of the child support grant for poor children to their 18th
birthday.
The Human
Sciences Research Council welcomed the government’s commitment to generate
sustainable employment. It noted however that it was not always easy to
make the connection between the need to create employment and the budget.
It was critical for the country not to compete purely on price but to also
explore product development, venture capital and market access. Continued
infrastructure spending is critical in creating jobs.
The HSRC highlighted
a need to prioritise the youth over the next four years of the current
administration. More than 50 per cent of the youth leaving school are
unemployed. About 65 per cent of black youth leaving school is reported to be
unemployed. To this end the provincial
grant aimed at sport and recreation was seen to be inadequate. The HSRC noted
that this grant could be critical pre-labour market
intervention in the context where youth was marginalised
from most social organisations. In addition, the HSRC recommended the
introduction of a youth transitional jobs scheme. Commitment to further
education and training is also critical however the budget set a target of 350
000 enrolments by 2014 which was a third of the HSRC’s
expectations.
The Department of Public Works (DPW) plays a leading role in the job
creation initiatives through the EPWP and other infrastructure projects. It has
received an additional budget of R9.7 billion over the Medium Term Expenditure
Framework (MTEF) period. This includes
R3.5 billion for EPWP and R4.4 billion for infrastructure budget. The
Department has been allocated additional allocation of R835.8 million in the
2010/11 financial year to strengthen the EPWP incentive scheme. This scheme
will be extended to such sectors as the social sector, environmental sector and
community work programmes. Labour intensive methods are enforced through this
scheme with ongoing monitoring done to ensure that empowerment is attained. Of
the additional budget for infrastructure, R451.1 million is allocated for the
2010/11 financial year. This goes to Border Control Operational Coordinating
Committee (BCOCC). The DPW is the custodian of immovable assets at 54 land
ports of entry. This budget goes for infrastructural
development at the land ports of entry by 2010 and beyond. The implementation of
this programme is expected to be labour intensive and pro-Black Economic
Empowerment (BEE).
An additional budget also provides for R771.6 million in 2010/11 for the
construction of new a Parliamentary precinct, construction of parking bays and a
multipurpose centre. This project is expected to cost R2 billion and the
feasibility study has been completed.
The budget further provides for additional R16.2 million in 2010/11 for
accessibility to State-owned buildings and R214.8 to address the problem of old
and inefficient water works systems in State-owned buildings. The Department
indicated its challenges in attracting strategic and technical skills, and the
budget constraints make it more difficult to retain skills and create the
necessary capacity needed to maintain and manage immovable property.
The Department indicated that it is still enhancing the asset register and
the valuation of State-owned buildings will not be done in the current
financial year. It further indicated that the chief directorate was established
within the Department to focus on the asset register. However, the Committee is
concerned about the slow progress in the development of the asset register. The
department continuously receives qualified audit outcomes as a result of the outstanding
asset register. The Committee calls upon this department to capacitate itself
in this respect in view of the fact that it is responsible for all other
departments’ asset registers.
The Department of Water and Environmental Affairs plays a crucial role in
the job creation initiatives of government. For the period ahead the Department
will contribute in job creation, particularly in rural areas, through its
construction programmes. It intends to fill vacant positions in its regional
offices and to be less dependant on consultants. The
Department values the role of the Small Medium and Macro Enterprises (SMMEs) in creating jobs and stimulating economic growth,
and as such will appoint SMMEs for its work. The
Department contributes to the EPWP through the Working for Fire and Working for
Water programmes. The Working for Fire programme is allocated R184.4 million in
2010/11 which increases to R254.6 million in 2012/13. The Working for Water
programme is allocated R579.9 million in 2010/11, which increases to R855.5
million in 2012/13. The Department proposed an additional budget of R4.8
billion for its capital expenditure in 2010/11. It proposes an addition of
R10.9 billion in 2011/12 and R8.1 billion in 2012/13. The proposed additional
budget was scaled down to R2.4 billion in 2010/11, R4.1 billion in 2011/12 and
R8.4 billion in 2012/13. The Department indicated that no allocation was made
for other projects after the scaling down. These include Mooi
– Mngeni Transfer Scheme, Komati
Water Augmentation Project and Mokolo and Crocodile
River Water Augmentation Project. The Department indicated that the National
Treasury was of a view that these projects can be funded off-budget through the
Trans-Caledon Tunnel Authority (TCTA). Part of the
mandate of the TCTA is to fundraise for bulk water infrastructure through loans
from the commercial water users that benefit from these projects.
The Committee views rural development as one of the urgent priorities of
government, and notes that some of the water scheme projects, mentioned above, that
are not funded through fiscus are in rural areas.
Their funding from the fiscus would support
government’s commitment to develop rural areas, since farming activities are
expected to be at the centre of rural development. These farming activities
would create self employment and create more job opportunities that are much
needed by rural youth. It is the Committee’s belief that funds should
have been directed to these programmes in support of government priorities and to
ensure participation of rural communities in the country’s economic activities.
Furthermore, in interacting with the Department, it became evident that
additional funding for the refurbishment of water infrastructure might not
adequately cover the maintenance needs of infrastructure. The lack of sufficient
funding in this area introduces new risks of collapse in infrastructure. If
funds are not made available for the maintenance of water infrastructure this
might lead to challenges similar to those experienced during the electricity crisis.
The Department of Cooperative Governance and Traditional Affairs recognises
that the role of municipalities is important in job creation through programmes
aimed at building infrastructure. Its role in this regard is to provide support
to municipalities to ensure prudent management of funds earmarked for
infrastructure development and ensure that they achieve the desired objectives.
It undertook to increase its monitoring to ensure value for money.
Improving the
Quality of Education and Skills Development
Over the next three years, government intends to improve literacy and numeracy by providing workbooks to children in poor
schools. The target of learners who will benefit from workbooks will increase
from 3.5 million in 2010/11 to 5.5 million in 2011/12. Improving access and quality of education
will be prioritised and additional funds are allocated to building of schools
and teacher training. Furthermore, a new conditional grant will be introduced
to provide additional resources for the improvement of the education system.
Government intends to increase the coverage of the national schools nutrition
programme to reach more learners and to improve the quality of meals. The budget introduces a shift of funding of
further education and training colleges to national government.
A study
conducted by the HSRC showed that there are structures aimed at improving
governance in schools, however these are not being fully utilised. Further, the
criterion used for promoting teachers was not known among teachers. Government
needs to be more transparent in this respect. According to the HSRC, there is a
need for universal access to the Early Childhood Development (ECD) programme
and the number of 0-4 year old children in the ECD should doubled by 2014. This
will reduce the number of grade 1 learners who start school without adequate
foundation and preparation at ECD level.
There is a need to ensure that the FET colleges are properly utilised to
address skills shortages and they should enjoy the same status and prominence
as universities do.
The
Fiscal and Financial Commission (FFC) noted the revision in the Provincial
Equitable Share (PES) baseline due to the shifting of the Further Education
Training (FET) colleges funding to national government, and it has cautioned
that such shift should not disrupt the budgets of provinces and service
delivery in general.
The Committee supports the prioritisation of resources to improve the
quality of education and the development of skills. The education system is an important
factor in producing skills that are much needed by the economy. Many government
departments have always under-spent over the years in personnel budget as a
result of lack of skills, particularly in the engineering sector. The
Department of Public Works indicated during the public hearings that, technical
skills remain a challenge that impedes the execution of its projects. The national education system coupled with skills
development play a crucial role in providing social cohesion and skilled human
resources in the developmental state. The requirements of the economy always
play a central part in determining the output of the education and training
systems. In order for government to deliver appropriate skills to the workplace,
strong controls over the institutions responsible for education and training
and investment of resources to education are important.
In the case
of the East Asian developmental states, the national education systems expanded
rapidly during the processes of state formation. Rapid educational advance was
a part of the developmental process. It has been stated that emphasis on skill
formation is one of the distinctive features of the East Asian national
education systems (Cummings, 1997; Green, 1998; Morris, 1996). Efficient human
capital was vital for the developmental states in the process of state
formation. To produce skilled human resources, these states carried out
detailed human capital strategies, especially in
The Committee is of a view that lessons can be learned from
the Asian model on skills development for the support of a developmental state.
This is one of the areas to which government should prioritise allocation of
resources. During the public hearings, the Department of Education
was requested to attend to the concerns raised about the moral of teachers at
schools with a view to address the causes thereof. Notwithstanding the fact that the Further Education
and Training colleges now resided with the newly established Department of
Higher Education, the Department was requested to ensure that service delivery
is not compromised in the process of restructuring the Education Department and
the transfer of functions in this regard. The
Department was further asked to ensure the improvement of the quality of
education, the provision of adequate Learner Teacher Support Material (LTSM)
and adequate provision of the National School Nutrition Programme
to all the relevant beneficiaries as well as ensure that the workbooks
distributed by the Department reached all the targeted quintiles.
Enhancing the
Quality of Heath Care
It was reported that the Department of Health has developed
a 10-point plan to improve the quality of health services. This plan includes
overhauling the management and operation of public hospitals, improving human
resource planning, enhancing staffing levels and ensuring more efficient
procurement of drugs. These are seen as initiatives that lay foundation for a
national health insurance system. Government will intensify its fight against
communicable diseases in the next three years. The Department of Health plans a
mass vaccination campaign during 2010/11 to reduce incidences of measles.
The fight against HIV and Aids is a key priority and the
target for new entrants to the treatment intake is expected to be more than 300
000 a year and more than 900 000 people are expected to receive antiretroviral
treatment by 2011/12. Additional funds were made available over the medium-term
period for expansion of the programme to accommodate higher numbers of people
on antiretroviral treatment. New salary
scales for doctors, dentists, pharmacists and emergency medical personnel will
be phased in over the two years. A new quality insurance system will monitor
both the quality of care and compliance with norms and standards.
The HSRC noted that according to a study conducted by the
The HSRC indicated that there has always been an under-funding of the health
sector and this resulted in the poor quality of health services. The 8.6 per
cent increase of the health budget is insufficient given the under-funding that
has happened over a long time. In order to establish the extent to which the public health sector is improving, the HSRC
proposes the introduction of a National Health and Nutrition Examination Survey
within the ten point plan is required. This research programme would give
information about the health status of the population. From an oversight
perspective, it would be a tool used to monitor the extent to which value for
money is attained in the public health sector. A further increase in the budget
of the Health Department would be critical to attain this.
The Department
of Health received a total increase of R1.4 billion. Of the R1.4 billion,
an amount of R231.1 million is for roll over funds for the 2008/09 financial
year resulting in an increase of 17 per cent. An amount of R160 million is
earmarked for the H1N1 Influenza pandemic. A further R900 million has been
allocated for the comprehensive HIV/AIDS care, R20 million for countrywide
measles and polio immunization campaign and R30 million for the 2010 World Cup
Health Preparation Strategy Grant. In order to stabilize the health sector and
to ensure the implementation of the ten-point plan a resolution was taken to:
While
it seems as if no provision was made in the MTBPS for the National Health
Insurance (NHI), the Department indicated that the ten-point plan relates to
the NHI. The funds for various programmes within the
ten-point plan, therefore, are funds for the NHI. The details of the NHI would
be made available once the Minister has gone through the relevant processes at
Cabinet level. R400 million was requested
for the OSD of doctors for the respective financial years over the MTEF. The
different categories of health professionals were being dealt with in phases.
It was reported that the doctors and pharmacists have been catered for and a
review of their OSD would be reviewed in 2010.
Rolling out a
Comprehensive Rural Development Strategy
The comprehensive rural development programme aims to raise
rural income, increase food production, improve the viability of small farms
and draw on the economic potential of rural areas. A two-year pilot project was
launched in
The HSRC is of the view that rural areas have been neglected for many
years. Poor conditions in respect of water and land are among the challenges
experienced in these areas. About 40 per cent of the South African population
still lives in rural areas and less than 10 per cent are economically active,
mostly in agricultural activities. This was noted as a sign of lack of support
and channelling of resources. Growing spending on rural development from R6
billion to R8 billion by 2012/13 was noted to be a large increase but still
very small relative to the challenge and levels of neglect in rural areas. The
HSRC noted that critical attention is required to:
•
Improve water management,
water reticulation, water retention schemes.
•
Land management and care,
and environmental services.
•
Agricultural support and
extension to both commercial and household production.
•
Research and development
for both commercial farming and household production.
•
Expanded processing nearer
to agricultural producers were economically justified.
•
Attention to input costs,
such as fertiliser and equipment.
•
More forceful export market
development.
•
Meaningful expansion of
agricultural training colleges, and
•
Investment in
agro-industrial logistics platform – such as rural roads and ability to export
time-sensitive products.
While the HSRC appreciates the dramatic effect of social grants in
reducing poverty and hunger, it noted that approximately 50 per cent of
households still experienced hunger and under-nutrition. Furthermore, 50 to 80
per cent of households could not afford minimum nutrition at current prices.
Rural households spend 9 to 15 per cent more than urban households for the same
basic food basket. According to the HSRC 51 per cent of all severely hungry
households qualified for grants but did not receive them. To this end, the HSRC
recommended that a policy was needed to guide the urgent rolling out of grants
in a more comprehensive way while also expanding the household food production
in the form of food gardening. It added that budgets aimed at improving food
security should be ring-fenced and monitored stating that it is expensive to be
poor, but more expensive to be hungry.
The HSRC was of
a view that, the budget as outlined in the MTBPS is constraining given the
amount of work that the department had to embark upon. Out of
the 18 Land Redistribution for Agricultural Development (LRAD) projects that
had been initiated by the former Department of Land Affairs, only two
are still in place. Others have collapsed and the land was sold back to its
original white owners. The HSRC noted that for the Department of Rural
Development to successfully carry out its mandate, more finance and human
resources were required. The Intergovernmental Relations Framework also needed
to be strengthened in order for the department to discharge its
responsibilities.
The programmatic budget structure of the Department of
Rural Development and Land Reform has been condensed from 7 to 5 programmes to
reflect the new rural development mandate. The Department requested an
additional budget of R18.3 billion over the medium term. Rural Development and
Restitution programmes together requested R16.5 billion (90 per cent) of the
Departments total request. There is no baseline budget over the medium term for
the rural development programme and the department indicated that the indicative
baseline for the Restitution over the MTEF (R2.2 billion) is less than the
2007/08 level.
The Department of Water Affairs (DWA) indicated that it
will support rural development through investing in water resource
infrastructure in rural areas to make water available for economic growth and
development. It further committed to procure from the rural emerging businesses
in order to encourage their contribution to economic growth. Furthermore, the
Department of Water Affairs intends giving employment preferences to the people
from rural areas where DWA project exists.
The Committee is of the view that one of the key priorities
of government is rural development, which the country cannot afford to postpone
any longer. Rural communities have been marginalised and
neglected over the years through the uneven distribution of resources between
rural and urban areas. This resulted in an absolute lack of economic activities
in rural areas, thus migrating people to seek jobs in urban areas. A serious
burden was put on government’s social programmes, particularly housing as a
result of this phenomenon. The Committee notes the underdevelopment of rural
areas in
Another concern of the Committee is a lack of sufficient
funding in the Restitution programme. The lack of sufficient funding in this
area compromises the rural development agenda of government. This problem is
worsened by the attitude of land owners who inflate their prices to be three
times more than the market price. This is not assisting the already struggling fiscus and quick intervention is required in this regard.
Land is central to the implementation of the government’s comprehensive rural
strategy and if resources are not prioritised for the Land Reform programmes,
the objectives of this strategy might not be achieved.
Creating a
Built Environment to Support Economic Growth
Infrastructure and the service delivery function need to
complement each other to promote efficiency, employment and integrated
development. Government continues to prioritise spending on housing with a goal
to eradicate informal settlements. The budget makes provision for an increase
in subsidy and for additional houses to be built. Furthermore, as a way of
investing in infrastructure, the Municipal Infrastructure Grant (MIG) received
an additional budget of R2.5 billion, increasing to R45.9 billion over the
medium term. The Neighbourhood Development Partnership Grant will receive
additional resources over the three-year period. These are for regeneration of
townships projects. Furthermore, a total of R8.2 billion is added to local
government equitable share over the MTEF period to cater for the increased
costs of bulk services.
The
FFC reiterated its previous recommendation that there should be a link between the
Municipal Infrastructure Grant and the Local Government Equitable Shares (LES).
This is such that, as infrastructure is rolled out through the MIG allocations
to municipalities, and those from the LES reflect the need associated with the
infrastructure that is been rolled out. This would eliminate the current
challenge where municipalities roll out infrastructure without having the
necessary funding to maintain it. Moreover, the performance of the Neighborhood
Development Grant needs to be reviewed given its poor spending over the years.
The Department
of Cooperative Governance and Traditional Affairs (CoGTA)
initiated alternatives to augment and complement the management of additional
budget over the MTEF period. In striving to achieve clean audits and good
financial management in municipalities by 2014, the department has launched
Operation Clean Audit. A key objective of this project will be that of building
and ensuring prudent financial management of public resources in our
municipalities. The Department will also launch a programme aimed at improving
revenue enhancement in municipalities. Presently, municipalities are owed
between R50bn - R53bn by residents, businesses and government. This programme
of revenue enhancement will assist municipalities to become more financially
viable as they seek to accelerate the roll-out of their service delivery
programmes. The Department is also establishing a programme that will allow close
monitoring of funds that are allocated to municipalities for infrastructure
development. The main objective is to ascertain if government is deriving
value-for-money in the monies that it transfers to municipalities.
CoGTA indicated that the MIG faces some challenges. These include MIG funds
being consumed by bank overdrafts of certain municipalities, some legislative
impediments, poor and weak capacity in
planning, project management and financial management in some municipalities,
and lack of continuity and sustainability in municipal management. Furthermore,
the role of provincial departments was reduced by the National Treasury. This
curtailing of the involvement of provinces by the National Treasure is a matter
that warrants investigating by the Committee.
The Committee commends
the initiatives that are provided by CoGTA to
increase capacity in municipalities, particularly the Operation Clean Audit
2014. However, more intervention is needed in the implementation of the MIG
projects. The ability to spend funds that are allocated to the MIG is a matter
of concern to the Committee. The Committee views the role played by the MIG in
the development of infrastructure as critical, particularly for those
municipalities who do not have revenue base. The lack of spending in this regard
is a cause for concern since some of the service delivery aspects, particularly
infrastructure, are linked to this grant. The Committee recognises the role of CoGTA to be to give support to municipalities without
capacity. Such intervention from CoGTA, National
Treasury, Provinces and
A Broad-Based Approach to Fighting Crime
Government has committed
to curbing the high level of crime. The government understands the fight
against crime to be including enhanced partnerships, strengthened social
security and job creation. The aim of government is to recruit an additional 22
447 police personnel by 2012/13 to strengthen detective services and crime
intelligence. The fight against crime will be boosted by a proposed allocation
for the Directorate of Priority Crime Investigation, which will increase its investigators
to 2 400 by 2012/13. The additional budget also supports the implementation of
the Children’s Act of 2005, the Child Justice Act of 2008 and the Sexual
Offences and Related Matters Act of 2007.
The HSRC is of the
view that commendable work has been done in the fight against crime, however there has been a lot of emphasis in the use
of force and less emphasis on working with communities and raising awareness
among communities. The Committee supports any initiative that seeks to curb
crime in our society.
6.
Conclusion
While the
priorities of government have been consistent, the fiscal environment has
changed as a result of the global economic decline. This makes the attainment
of these priorities more difficult. As a result of the economic downturn, the
budget deficit is expected to increase from 1 per cent in 2008/09 to
approximately 7.6 per cent of the Gross Domestic Product (GDP) in 2009/10, with
public sector borrowings expected to increase to R175.8 billion. The Committee
welcomes the government’s interventions to counter the impact of the economic
downturn, particularly government’s emphasis on prudent spending. The
government’s approach of reducing wastage and inefficiency, elimination of
corruption and ensuring value for money in government spending is supported by
the Committee. However, the Committee is of the view that due
to the economic turmoil, the budget does not adequately finance all government
priorities, and that more oversight is required in ensuring that
resources are utilised for the intended purposes. Having considered the presentations during
the public hearings and understanding the challenges faced by government, the
Committee concurs with the Minister of Finance that government departments must
seek to achieve more with the available resources.
The government savings
initiative is considered progressive, particularly in reducing dependency on
consultants and curbing spending on unnecessary items. This
initiative should be supported by Parliament and all parliamentary committees should
increase their oversight in this regard to ensure that the departments do not
waste. While this initiative is welcome, the Committee is concerned that it
might be confused with under-spending. This necessitates more oversight from
parliamentary committees to ensure that service delivery is not compromised
under the guise of savings. Increased monitoring of infrastructure projects and
increased oversight over State Owned Enterprises (SOEs)
and development institutions is required. These SOEs should
indicate their role in the saving initiative of government.
Overall,
the Committee commends the provisions made in the MTBPS for the OSD. It
committed to monitor the savings that departments have been urged to effect.
This notwithstanding, the departments were urged to ensure that service
delivery is not compromised.
Findings:
Having engaged
extensively with government departments and relevant stakeholders, the Standing
Committee on Appropriations made the following findings:
Recommendations
The Standing
Committee on Appropriations, having considered and deliberated on the MTBPS
referred to it in terms of section 6(8) of the Money Bills Amendment Procedure
and Related Matters Act, makes the following recommendations:
Report to be
considered