Report of
the Standing Committee on Appropriations on the 2010 Adjustments Appropriation
Bill [B 34 – 2010] (National Assembly – section 77), dated 16 November 2010
Having considered and heard evidence
on the Adjustments Appropriation Bill referred to it in terms of section 12(15)
of the Money Bills Amendment procedure and Related Matters Act 9 of 2009, the
Standing Committee on Appropriations reports as follows:
1.
Introduction
The Minister of Finance tabled the
Medium Term Budget Policy Statement (MTBPS) on 27 October 2010, outlining the
budget priorities of government for the medium term estimates. The MTBPS was
tabled together with the Adjustments Appropriation Bill [B34 - 2010] and the
Division of Revenue Amendment Bill [B35 - 2010] in Parliament. The Adjustments
Appropriation Bill [B34 – 2010] was referred to the Standing Committee on
Appropriations and the Standing Committee on Finance to
consider and report, in accordance with their respective mandates
as outlined in the Money Bills Amendment Procedure and Related Matters Act 9 of
2009.
In
preparing for the Adjustments Appropriation Bill report the Committee invited
identified Departments (see below) to make submission before the Committee:
.
2. Overview
of the Budget Adjustments
According to National Treasury the
spending for the first six months this year has increased by R26.4 billion when
compared to previous year’s expenditure in the same period. The adjusted amount of R6.2 billion was for salaries and
housing allowances. An amount of R2.33 billion was adjusted for national
government while R3.81 billion was adjusted for provincial government. Even though the 2010/11
national expenditure has improved for the first six months when compared to the
2009/10 financial year in the same period, some departments have spent less
than 50 per cent of their budgets for the first six months and have submitted requests
for their budgets to be adjusted due to unforeseeable and unavoidable
expenditures and roll-overs. Although
the Committee supports these adjustments it has noted that most of the
unavoidable and unforeseeable expenditure was mainly due to the salary
adjustments and housing allowances instead of policy priorities both at the
national and provincial government spheres. Affected departments in this regard
include Health (48.9 per cent), Water Affairs (37.7 per cent), Statistics South
Africa (30.4 per cent), Trade and Industry (36.8 per cent), Rural Development (38.0
per cent), Home Affairs (35.4 per cent), Public Works (37.7 per cent), Communication
(26.2 per cent) and Art and culture (44.3 per cent). The Committee is concerned
about this state of affairs which is an indication of poor planning. Some of
these Departments are the key pillars of the Medium Term Strategic Framework of
government Priorities.
3. The
adjustment on policy priorities for the next three years
The Medium Term Budget Policy
Statement indicated that the revised baseline allocations have been prepared
taking into account the carry through costs of the 2010 salary improvements,
higher costs of municipal rates and service charges, identified savings and
reprioritisation proposals. In the 2010/11
financial year the overall increase amounts to R7.3 billion while a R67 billion
increase can be seen over the Medium Term Expenditure Framework. The table below shows that an amount of R22.1
billion has been set aside for policy priorities over the MTEF period, proposed
wage bill of R26.3 billion as well as adjustment to baseline of R40.8 billion. The
Committee supports the adjustment allocations, however it has noted that the proposed wage bill over
the MTEF is much higher than the amount allocated for policy reserves due to
the inflationary wage settlement. This is a cause for concern. The Committee
has noted that some of the departments have not yet filled their vacant
positions, but have instead shifted the funds that were budgeted for vacant
posts to other programmes. The proposed wage bill seems to be escalating when
compared to the allocation for policy priorities. This means that fewer funds
are being allocated for development and implementation of programmes, and will
thus have a negative impact on the quality and completion of capital projects.
Table 1:
Adjustment Allocation for MTEF
|
Policy Reserves |
R22.1 billion |
|
Adjustment to Baseline |
R40.8 billion |
|
Proposed Wage Bill |
R26.3 billion |
Source:
National Treasury (2010)
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
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 Medium Term Budget Policy
Statement for 2010 has outlined the macroeconomic assumptions, fiscal and
public expenditure dimensions of proposed development path. It emphasised the need for the increased
infrastructure investment spending to faster growth and to reduce budget
deficit over the next period. The estimated reduction of 4.1 per cent of the
budget deficit for the 2010/11 which is projected to improve to 3 per cent of
the GDP by 2013/14 financial year is noted. The government’s outcome approach
which provides framework for enhanced monitoring of service delivery including
guidelines for results driven performance that forms part of the basis of
ministerial performance agreements as well as related service delivery
agreements is a step in the right direction.
It was noted that the expenditure has increased by R67 billion relative
to baseline over the Medium Term Expenditure Framework which is informed by the
12 outcome policy priorities which include education, health, infrastructure,
and job creation.
The Committee believes that capital
projects are the backbones of job creation which is part of policy priorities.
However, the Committee remains concerned that the unspent funds amounted to
R12.4 billion which was budgeted for capital projects in 2009/10 financial
year. The Committee has noted, nonetheless, the new approach adopted by
government which seeks to address weaknesses in budgeting and planning in such
projects. The Committee identified a number of weaknesses and challenges in the
area of procurement and supply chain management, and has since made
recommendations in regards to this. Therefore, the interdepartmental team and
proposed scrutiny of non governmental agencies and other accounts which is
informed by these findings is one step in the right direction. In support of
the job creation process, the Committee believes that such areas in government
need to be monitored and evaluated since these are the key drivers of the
capital projects procurement. The delays
and termination of tenders due to irregularities is completely unacceptable as
it hampers the levels of job creation and service delivery.
The Department of Water Affairs
reported that to date it has created about 26 331 job opportunities through the
Working for Water Programme. While the Departmental budget has been adjusted
from R7.9 billion to R8.2 billion the Department has only spent 37. 7 per cent
in the first six months, part of the adjustment was R35.6 million received from
other adjustments. The Committee was concerned about the level of virements and
shiftings of 36.7 per cent which exceeded the 8 per cent permitted by the Public
Finance Management Act. As provided for in the PFMA, virements exceeding this
threshold have to be approved by
Parliament. Failure to attain Parliamentary approval will lead to the Auditor General reporting this as an
unauthorised expenditure. The Department has reported an under expenditure in
the first six months of 37.7 per cent. The
Department of Water Affairs indicated that the under expenditure was due to the
late submission of invoices by the Department of Public Works (DPW), unspent
funds of Change Journey and Master Systems Plan (MSP),
unspent funds allocated to replace Masibambane,
regional bulk infrastructure: legal issues around Nandoni
Dam project, delay in signing of Memorandum of Agreement by Municipalities,
delay in submission of invoices by service providers.
The budget of the Department of Arts
and Culture has been slightly adjusted from R2.40 billion to R2.44 billion. The
Department has only spent 44.3 per cent in the first six months of 2010/11. Part
of the adjustment was a R12 million roll over for 2010 FIFA World Cup and R18.6
million for Investing in Culture projects. The Department indicated that some
2010 World Cup projects were not finalised in March 2010 due to the fact that
the event was in June 2010. Therefore the Department had to utilise its 2010/11
budget to finance these projects. The R12 million roll over will be utilised to
supplement the budget for operational costs, legal fees, machinery rental,
audit fees and SITA account which has been inadequately funded. An amount of R3.9
million was added for higher personnel remuneration increase which includes
housing allowances.
The Committee was concerned about
the lack of spending in the Investor to Culture project hence it is the view of
the Committee that such projects are instrumental in the creation of jobs and
poverty alleviation. The Department also indicated that an amount of R18.6
million could not be spent due to the investigation that was still being conducted
in the Investor to Culture project which was aimed at verifying the legitimacy
of various projects. The Committee needed more clarity on the R100 million
expenditure which was used to maintain playhouses. The Department reported that
it is responsible for all the playhouses which are located in various
provinces. The Committee acknowledged the progress made thus far and also
indicated that programmes such as EPWP, Working for Water, Working for Energy
incentives need to be well supported and ensure that all provinces are spending
their allocations according to planned targets in order to expand the levels of
job creation.
The expenditure of the Department of
Trade and Industry at end September was 36.8 of the adjustment appropriation of
R6.2 million for the year as a whole. In comparison to the mid-year expenditure
in 2009/10, the expenditure in the first six months of 2010/11 decreased by
25.2 percent. The Department of Trade and Industry also reported on a number of
enterprise investment project that were supposed to create jobs such as the
East London industrial development zone which created higher than the estimate
for the year. Due to the economic crisis some projects slowed down in this
regard than estimated such as the
The Department of Communication was
also invited to be part of the MTBPS process due to its under expenditure of 26
per cent in the first six months of the 2010/11 financial year. The Committee
was concerned at the lack of cooperation and unprofessionalism showed by the
Department upon being invited to appear before it. This was seen as a clear
indication that the Department undermines Parliament and its processes. The
Committee invited the Department to a public hearing on the Adjustments
Appropriation Bill but the Department could not honour the invitation. When the
Acting Chief Financial Officer (CFO) appeared before the Committee, the
Committee expressed it’s displeasure at the appearance of the CFO instead of
the Acting Directors General as the Accounting Officer of the Department. The
Committee indicated that this would limit its engagement in seeking clarity on
crucial issues which the Acting CFO might not be able to account on as he is
not the Accounting Officer. No letter of apology was received from the Acting
DG for not being able to attend the hearing.
The expenditure of the Department as
at end September was at a concerning figure of 26 per cent In comparison with
the mid-year expenditure in 2009/10, the Department had spent 31 per cent which
was also an under expenditure. In the current financial year this became even
worse since it has decreased by 5 percent when compared to the previous
financial year. According to the department the reasons that led to under
spending were mainly due to capacity constraints, delays in the implementation
of certain projects, reshuffling and backlogs in the Department. However, the
Department is convinced that with the reconstitution of the Department and the
appointment of the Acting General-Director things are going to improve.
During its oversight the Committee
discovered that more jobs can be created in the EPWP, through innovativeness
and making sure that labour intensive programme is a condition of the contract
between the Department in question and the contractor. The Committee also welcomes a new economic
growth path which is aimed to create job opportunities particularly for young
people. The Committee welcomes the
proposed assessment for youth employment projects and incentive scheme which
will be operating through tax system which aims to encourage the employment of
youth in businesses as well as in the non governmental sectors. The MTBPS
outlined the allocation of R1 billion for 2011/12 and R2 billion for 2012/13 and
R3 billion for 2013/14 which is aimed at supporting projects that demonstrate a
potential of cost effective job creation over the MTEF.
Despite the number of jobs that have
been created in various areas, the Committee remains concern about the level of
virements and shifting of funds which could have contributed towards creating
more job opportunities.
The Health Sector Delivery Agreement
aims to reduce infant and maternal mortality rate, reduce child mortality to 30-40
per 1000 births over the medium term and also make further progress in
preventing and controlling HIV/AIDS. However, the mid term report of the Department
of Health indicated that severe staff shortages in forensic chemistry
laboratories have led to backlogs and targets not being met in this regard.
Furthermore the Department acknowledged that the delays in the filling of
vacant posts in the National Department of Health have lowered the
accreditation process, though the audits tools have been completed and piloted.
However the Department must have a programme in place to respond to this
challenge as well as to meet the targets and Millennium Development Goals by
2014.
While the Millennium Development
Goal (MDG) 5 reported that there has been an improvement in the antenatal care
coverage and usage of modern contraceptive method maternal mortality is still
amongst the challenges. The MDG6 reported that HIV prevalence has been stable
and there seems to be a decline between the ages of 15- 24 years old from 10 to
8.5 per cent in 2008. Millennium Development Goals 4 acknowledges the fact that
the infant and child mortality rate is unacceptably high in
However, when the Committee raised
concerns about the increase in the impact of HIV on infant and child mortality.
The Department indicated that there has been a high level of inaccurate
reporting on such matters done by different organisations which brings a lot of
confusion in the society. Furthermore, the Department indicated that the infant
and child mortality cannot be treated in the isolation of morbidity. While the
Committee was concerned about this level of inconsistency and inaccurate
information, it advised the Department to bring all of these organisations
under one roof to come up with the most relevant and accurate statistics. The Committee supports the initiative taken
by provincial health departments to remedy and improve their financial
management. The Committee welcomes the
agreement on the Occupation Specific Dispensation (OSD) reached between the
Department and 40 health therapeutic groups to retain most critical and skilled
health staff and the prioritisation of filling important vacant posts.
It is noted that though the
department has under-spent in the first six months, the budget of the
department has been adjusted from R21.4 billion to R21.6 billion an amount of
R146 million was adjusted to its budget which includes R49.6 million from roll-overs
and R105 million from unforeseeable and unavoidable expenditure. This also
includes an amount of R9.7 million which was adjusted for increased
remuneration on personnel and housing subsidies for certain programmes. The Department made virements and shifting of
R6.1 million or 1.4 per cent, this movement of funds was mainly done in order
to strengthen service delivery on programmes 1 and 3. The Department and
treasury indicated that most of the shifting and virements were done from the
savings made due to the reduction on consultants and special services in the
2010 FIFA World Cup expenditure. While
the Committee has noted the movement of funds and under spending of the
department in the first six months, during its oversight the Committee
identified a number of challenges this include the non availability of mobile
or immobile clinics in some areas, usage of mud structures as clinics, prepaid
electricity and solar panels of which some of these require maintenance and
repairs yet it was not clear whose responsibility it is to maintain this
facility.
The Committee welcomes the additional
amount of R1.5 billion to Comprehensive HIV and Aids programme as well as R7.3
billion which was added to the provincial equitable share to address the
priority issues in 2010/11. The Committee supports the introduction of Health
National Insurance Scheme (NHI) which is going to be phased in by 2012/13
financial year. This programmes aims to
improve and bring about the universal access to health facilities for all
Most of the challenges facing the education
system include substantial backlogs in buildings and facilities, insufficient
number of qualified teachers, poor school management and high absenteeism among
students. The funding of R40 billion to provinces in the baseline to eradicate
unsafe school buildings is welcomed and the committee will monitor the performance
of such allocations. During its oversight visit undertaken in August 2010, the
Committee found that, some provinces were under spending on certain conditional
grants particularly those that are earmarked for school infrastructure. The
under-spending persisted despite the high level of inappropriate structures
including mud schools.
The Committee’s concern is that this
culture compromises the dignity and safety of the learners and hampers the
delivery of basic services such as water and electricity. The proposed national
assessment in literacy and numeracy for all grade 3 and 6 learners which will
be conducted as part of the long term exercise to benchmark and raise educational
level is a step in the right direction. While the learner work books and
teacher lesson plans for literacy and numeracy for grade R to grade 6 will be
provided in the beginning of 2011, the Committee is still concerned whether or
not appropriate measures have been taken by the Department of Basic Education
to avoid delays in the distribution of workbooks which occurred in the current
financial year resulting in the cancellation of the tender.
The proposed partnership between the
Department of Basic Education and the Development Bank of
The Committee noted that the
Department has received a R1 million roll over and an adjustment amount of R4.7
million which was divided almost to all programmes. An additional R6.9 million
was for the higher personnel remuneration and housing subsidy allowance and an
amount of R1.9 million was transferred for the function shifted to the
Department of Higher Education and Training for an annual contribution to the
Common Wealth of Learning. The Department has spent 45.9 per cent in the first
six months of 2010/11 financial year.
The mid-year performance report of
the Department of Basic Education indicated that the Department has exceeded
its target of new 6000 learners enrolled for Kha Ri Gude mass literacy campaign
in the first six months. The Kha Ri Gude campaign aims to improve the basic
literacy and numeracy levels of adults. The Department managed to achieve 2000
more new learners; this was due to savings made in the production of learner
and educator support materials and the costs of stationery which allowed more
learners to be accommodated in the programme. The report also indicated that
the number of learners had exceeded the yearly estimate which ranged between 480
000 and 486 000 as a results of more learners being enrolled.
The proposed improvement and
expansion of University and Further Education and Training enrolment is a step in
the right direction. This will assist in
addressing the misalignment between the needs of the labour market and the
education provided by institutions. Even though the Department has spent 72.3
per cent in the first six months, the Committee noted that the majority of this
expenditure went to the transfer budget which was earmarked for NSFAS, Further
Education and Training (FET) colleges and funds for the establishment of the
new Department. The Committee’s view is
that there is need to ensure that the FET colleges are properly utilised and enjoy
the same kind of prominence as universities do.
Land Reform and Agricultural
Development have a considerable potential to contribute to rural development,
job creation, poverty alleviation, food production and redressing the past
dispossession of land. It is the
Committees view that the Department of Rural Development is not the only department
which can fast track rural development. The complexity of rural development
requires a number of Departments to come on board such as Agriculture, Energy,
Public works, Water Affairs, Social Development, Cooperative Governance and
Traditional Affairs, Trade and Industry, Economic Development, Education,
Health and Transport. The role of Department of Rural Development is to
coordinate such programmes.
The Committee has noted the
additional funding to address the 7000 outstanding land claims. It also noted
the new model which is going to be piloted aimed at supporting emerging farmers
in partnership with the Land Bank. The Committee supports the proposed
additional funding for provinces to improve the quality of extension services
which is offered to newly settled farmers. While the Committee supports all
these interventions, it is its view that a lot still need to be done to drive a
more comprehensive rural development programme. While the 2010/11 MTBPS has
made a number of interventions, it seemed not to be suggesting an intervention
relating to challenges identified during the implementation of Land Assistance
Act in the land reform programme.
The Land Assistance Act No 126 of
1993, makes provision for emerging farmers to be assisted in order to further
their agricultural aspirations as well as change land ownership in the country
through Land Redistribution Programme by Government. The Act is often misused
for corrupt purposes by way of sub-divisions and the resale of subdivided land
and illegal evictions.
The Annual Performance Plan (APP)
indicates that the strategic priorities of the Department of Police are to
combat crime to ensure that all people are safe. Whilst there has been a
decrease in crime in general in the first quarter 2010/11 in some areas such as
contact related crime, property related crime, and detection, the rate of crime
has increased. Irrespective of the progress made to reduce the crime rate in
certain areas, levels of crime are still unacceptably high in
It is the view of the Committee that
the reduction of crime mainly depends on members of the Police response and visibility
together with the involvement of society at large. In its annual report, the
Department of Police indicated that part of the challenges the Department is
facing include the court case backlog, prisons overcrowding, high proportion of
violent crime, as well as high rate of recidivism. The Committee supports an
additional funding over the MTEF which seeks to expand detective services,
crime intelligence and crime prevention particularly in local stations and the
proposed increase of Police members from 200 660 to 203 025 by 2014/15. Part of
the capacity expansion over the MTEF, will be to increase the Special
Investigation Unit (SIU) to 650 members by 2013/14 to fight corruption. The Committees welcomes this move since the fight
against crime and corruption is one of the government priorities for five
years.
The budget of the South African
Police Service (SAPS) has been adjusted from R52.5 billion to R53.5 billion for
the 2010/11 financial year. Therefore the total additional budget amounts to
R973 million from other adjustments. This amount has been added precisely to
address the issue of increase in remuneration packages and housing subsidy for
various programmes, visible policing being the highest. Even though the
Committee supports the adjustment but it is still concerned that the department
had only spent 46 per cent in the first six months of 2010/11. This level of
under expenditure is attributed to the slow spending on Information Technology
Service which is rendered by SITA.
Furthermore, the slow spending was also
attributed to delays in procurement processes such as the awarding of six
tenders by the SITA for Integrated Justice Services Programme (IJSP) in the
first six months. The 2009/10 Annual Report of the Department of Police has
highlighted some of the challenges that the Department is faced with. These
include the lack of control systems within the area of supply chain management,
especially the management and controls of assets. The Committee is concerned
about this state of affairs since the larger portion of the budget is largely
dominated by current payments which accounts for R49.3 billion. Part of this figure
goes to goods and services and to capital assets. To this end the Committee is
of the view that urgent action needs to be taken by the Department to address
these supply chain management issues.
Although the Committee did not
engage with the Department of Police, the Annual Report of the Department
indicates a high level of expenditure under goods and services which is
dominated by consultants, contractors, agencies or outsourced services. This is
indicative of the lack of capacity. This level of expenditure has increased
from R1.22 billion in 2008/09 to R1.44 billion in 2009/10. Of note is that the
largest portion of this amount was for contractors (R622 million in 2008/09 to
R816 million in 2009/10). The second largest expenditure was for agencies and
other outsourced services which increased from R497 million in 2008/09 to R516
million in 2009/10. Payments for infrastructure and planning consultants
increased from R3.4 million in 2008/09 to R5.3 million in 2009/10. The
Committee is concerned about the utilisation of financial resources on
consultants instead of the Department building its own internal capacity thereby
creating more job opportunities. This higher level of expenditure on
consultants is an indication that consultants are used both for policy work and
even for functions which SAPS is supposed to have in its in-house capacity.
The Committee remained concerned
about the capital work project which took longer than expected particularly the
building of Inanda and Esikhawini police stations. According to the Annual
Report of the South African Police Service, the Department of Public Works was
responsible for these projects and the costs of these projects ended up
escalating higher than the projected budgets. It is the view of the Committee
that in order for the priorities of government to be achieved, these priorities
need to be clarified and prioritised by all stakeholders during the budgeting
and planning stage. It is also the view of the Committee that planning for the priority
areas of government should be taken more seriously and can not be treated in
the same manner as none prioritised areas. Reporting, transparency and
accountability in these areas should be enhanced at all spheres of government
so that problems and challenges are identified and addressed accordingly.
5. Findings:
·
The under expenditure in the Department of Health was due to
delays in finalising wage agreements, accruals amounts still to be paid,
Capital expenditure funding being reviewed to address the turnaround strategy
and the lack of spending on the Hospital Revitalisation programme in some provinces
such as Mpumalanga, KwaZulu-Natal, Free State and Eastern Cape.
6. Committee Recommendations
The
Standing Committee on Appropriations, having considered the adjustments
Appropriations and heard comments from identified stakeholders, recommends the
House approves the adjustments Appropriation Bill [B34 –
2010] (National Assembly - section 77) without
amendments. The Committee further recommends the following:
The
Standing Committee on Appropriations agrees to the Adjustments Appropriations
Bill [B34 – 2010] (National Assembly - section 77) without amendments.
Report to be considered.