ATC240424: Report of the Select Committee on Appropriations on the Second Adjustments Appropriation (2023/24 Financial Year) Bill [B6 – 2024] (National Assembly – Section 77), Dated 24 April 2024

NCOP Appropriations

Report of the Select Committee on Appropriations on the Second Adjustments Appropriation (2023/24 Financial Year) Bill [B6 – 2024] (National Assembly – Section 77), Dated 24 April 2024

 

Having considered the Second Adjustments Appropriation (2023/24 financial year) Bill [B6 – 2024], referred to it in terms of Section 12 of the Money Bills and Related Matters Act No. 9 of 2009 (as amended by the Money Bills and Related Matters Amendment Act No. 13 of 2018) (the Money Bills Act), the Select Committee on Appropriations reports as follows:

 

1. Introduction

The Minister of Finance tabled the 2024 Budget on 21 February 2024, together with a number of instruments. Among them was the Second Adjustments Appropriation (2023/24 financial year) Bill [B6 – 2024]. Section 12 (15A) of the Money Bills Act provides that, “after the National Assembly (NA) passed the Adjustments Appropriation Bill, the Bill must be referred to the National Council of Provinces (NCOP) and referred to the Select Committee on Appropriations.” Accordingly, the NA passed and transmitted this Bill, for concurrence, to the NCOP on 26 March 2024. In addition to the National Treasury briefing the Committee on the contents of the Bill on 06 March 2024, the Committee also consulted with the Financial and Fiscal Commission (FFC) and the Parliamentary Budget Office (PBO) on 20 March 2024 and 27 March 2024, respectively.

 

2. Public participation process

To facilitate public participation and involvement, and in compliance with section 72 of the Constitution of the Republic of South Africa, an advertisement was published on Parliament’s website and social media accounts inviting the general public and all interested stakeholders to make submissions and comments on the Bill. In response, written submissions were received from the Congress of South African Trade Unions (COSATU) and the Public Service Accountability Monitor (PSAM). Both stakeholders also made oral submissions during a virtual public hearing, held jointly with the Standing Committee on Appropriations, on 13 March 2024.

 

3. National Treasury

The Appropriation Act, 2023 (Act No. 8 of 2023), provides for the appropriation of money from the National Revenue Fund (NRF) to provide for the requirements of the State in respect of the 2023/24 financial year. Whereas the Adjustments Appropriation Act, 2023 (Act No. 21 of 2023), effected adjustments to the appropriation of money provided for in the Appropriation Act, 2023, further adjustments were required to authorise expenditure approved in terms of section 6 of the Act and section 30 of the Public Finance Management Act, 1999 (Act No. 1 of 1999).

 

This Bill provides for a net movement of R290 million across functions and economic classifications. In terms of functions, the Bill proposes adjustments of allocations in the peace and security cluster and public service administration using savings and under-spending identified mainly from the community development and economic development functions to absorb the 2023/24 wage agreement increases. In terms of economic classification, R190 million is for transfers and subsidies, while R99 million provides for increases under compensation of employees, and R1 million for payment of capital assets. The bulk of the funds are from goods and services. The Bill further proposes a downward adjustment of R400 million from the Department of Cooperative Governance (Vote 3). These are reductions in allocations for the Community Work Programme (CWP) realised as a result of the contract with new implementing agents for the CWP not being finalised on time. A further downward adjustment of R70 million is made from the Department of Public Works and Infrastructure (Vote 13).

 

The Bill proposes adjustments to the following Votes:

 

• Vote 1: Presidency

A proposed additional allocation of R70 million to cover the cost of the Ministry of Electricity for the 2023/2024 financial year. The new Ministry will oversee the electricity crisis response, with the appointed Minister having political responsibility and control over all critical aspects of the Energy Action Plan. This is aimed at helping to address the challenge of fragmentation of responsibility across various departments and Ministers. The Minister of Electricity will facilitate coordination of departments involved in the crisis response, work with Eskom leadership to improve power station performance, and accelerate the procurement of new generation capacity.

 

• Vote 3: Department of Cooperative Governance

A proposal is made to reduce the allocation by R400 million. The proposed reduction is to the Community Work Programme (CWP), for the reason stated above.

 

• Vote 5: Department of Home Affairs

A proposed additional allocation of R200 million to increase Political Party Funding allocations. The Independent Electoral Commission (IEC) established the Party Funding Unit to ensure adequate capacity for implementing the Public Funding of Represented Political Parties Act. Funds are provided annually from the NRF and distributed to political parties in the National Assembly and provincial legislatures. The IEC pays the allocated amounts quarterly.

 

• Vote 6: Department of International Relations and Cooperation

A proposed additional allocation of R80 million for the hosting of the BRICS Summit in 2023/24. Owing to existing budget pressures and depreciation of the rand, the Department was unable to accommodate the costs of the Summit without the additional allocations.

 

• Vote 12: Public Service Commission

A proposed additional allocation of R12 million to augment existing allocations for compensation of employees due to the higher-than budgeted for 2023/24 public service wage agreement and to fund vacancies.

 

• Vote 13: Department of Public Works and Infrastructure

A proposed downward adjustment of R70 million due to savings. The funding will be shifted to the Presidency for the Ministry of Electricity and the e-Cabinet system. The under-spending was identified in three programmes: Administration for employee compensation due to funded vacant posts (R12 million), Expanded Public Works Programme (EPWP) (R8 million), and Property and Construction Industry Policy and Research (R50 million), due to delays in appointing consultants for project preparation services by Infrastructure South Africa.

 

• Vote 20: Department of Women, Youth and Persons with Disabilities

A proposed additional allocation of R13 million for general administration and allocations to the Commission for Gender Equality (CGE). Of this total, R8 million is to alleviate pressure on goods and services and R5 million is to enable the CGE to implement various plans such as research in thematic areas in gender-based violence and femicide; and other projects planned for 2023/24.

 

• Vote 25: Department of Justice and Constitutional Development

A proposed additional allocation of R50 million to cover the 2023/24 public service wage agreement increases for Court Services and the National Prosecuting Authority (NPA).

 

• Vote 27: Office of the Chief Justice

A proposed additional allocation of R45 million to cover increases related to the 2023/24 public service wage agreement, these adjustments are for Superior Court Services and Judicial Education and Support.

 

4. Stakeholder submissions

 

4.1 Financial and Fiscal Commission (FFC)

The Financial and Fiscal Commission (FFC) gave an overview of the Bill, noting that there was a total addition of R470 million with similar-sized reductions; with the largest addition of R200 million allocated to Home Affairs for the Represented Political Parties Fund in preparation for the general elections in May 2024. The FFC noted that the reductions related to two public employment programmes, namely, the Community Work Programme (CWP) and the Expanded Public Works Programme (EPWP), with proposed reductions of R400 million and R8 million, respectively. The FFC recommended that adjustments should be guided by a comprehensive evaluation of the performance of these important interventions.

 

The FFC supported the proposed additional allocations in the safety and security cluster aimed at improving the efficiency and productivity of judicial and prosecution services. It further noted that 15 percent of the total adjustments were in respect of administration and recommended that government should limit the allocation of resources to non-core/non-service delivery programmes, especially in the current constrained fiscal environment.

 

4.2 Parliamentary Budget Office

The Parliamentary Budget Office (PBO) gave an overview of the proposed allocations and reductions contained in the Bill, noting that the proposed reprioritisation of funds was primarily implemented from equitable shares and conditional grants in the community and economic development functions towards other group functions for compensation of employees. The PBO submitted that government’s stated priority over the 2024 MTEF was to enhance spending quality and to minimize inefficiencies within all budget items, whilst ensuring the sustainability of public finances. The PBO asserted that despite this, some of the reprioritisation of funding within the Bill showed little evidence of enhancing spending quality.

 

The PBO expressed concern over government’s ability to achieve the National Development Plan (NDP) targets set for 2030, given the changes to function budgets over the 2024 MTEF and the decline in real per capita expenditure.

 

4.3 Congress of South African Trade Unions (COSATU)

The Congress of South African Trade Unions (COSATU) expressed concern over the proposed cut of R400 million to the Community Work Programme (CWP) under the Cooperative Governance Vote. It stated there were 12 million unemployed persons and a deterioration in municipal and other community services, which the CWP was meant to address, both by creating employment and delivering much needed community services. COSATU further expressed concern over the proposed addition of R80 million for Public Diplomacy and Protocol Services under the International Relations and Cooperation Vote, especially in light of the severe budget cuts to other more critical service delivery departments. It felt that this funding could have been diverted to the Commission for Conciliation, Mediation and Arbitration (CCMA), which had experienced budget cuts for several years; while having to cope with a 24 percent increase in cases being filed by workers.

 

COSATU supported the proposed addition of R200 million to the Home Affairs Vote for the funding of political parties in the run-up to the 2024 national and provincial elections. According to COSATU, political parties were an essential component of a constitutional democracy and required assistance to reach voters. It also welcomed the proposed addition of R30 million for Court Services and R20 million for the National Prosecuting Authority (NPA) under the Justice and Constitutional Development Vote. However, it cautioned that these additions were not enough and that a drastic increase in funding for the NPA and the judiciary was urgently needed if the country was to win the war against crime and corruption. COSATU also welcomed the addition of R45 million to the Office of the Chief Justice Vote.

 

4.4 Public Service Accountability Monitor (PSAM)

The Public Service Accountability Monitor (PSAM) indicated that additional adjustments were being tabled with increasing frequency. Whereas in the past, the additional or second appropriation bills were for specific adjustments, with the purpose clearly discernible from the Bill itself, it noted more extensive adjustments taking place, with limited or no explanations provided with the information tabled.

 

PSAM noted that the Bill contained significant and concerning proposed adjustments, the majority of which were to accommodate wage increases emanating from the 2023/24 public sector wage agreement as well as the R200 million allocated to the Represented Political Party Fund. PSAM expressed concern over the implications of the adjustments themselves, in particular the reduction to funds for the Community Works Programme (CWP) and infrastructure planning. PSAM’s main concern was related to the transparency and credibility of the budget process; and it contended that additional adjustments should not become the norm for the budget process, and that steps must be taken to improve forecasts and planning, so that additional adjustments were only required when truly significant and unforeseen events occurred.

 

PSAM recommended that the Committee should compel the National Treasury to provide a detailed explanation of the Bill. Where additional adjustments were required outside of the Medium Term Budget Policy Statement (MTBPS), which was a well-established process and included detailed information on proposed adjustments, these should be accompanied by an explanatory note which included the reasons for the adjustments to enable proper oversight.

 

5. Observations and Findings

Having considered all the submissions made by stakeholders on the Second Adjustments Appropriation (2023/24 financial year) Bill [B6 – 2024], the Select Committee on Appropriations made the following findings and observations:

1. The Committee welcomed the Second Adjustment Appropriation (2023/24 financial year) Bill [B6 – 2024], which provides for a net movement of R290 million across functions and economic classifications, It further noted that the Bill proposes adjustments of allocations in the Peace and Security Cluster and Public Service Administration, using savings and under-spending identified from various functions, to absorb the 2023/24 wage agreement increases in the Education, Health, and Security sectors.

 

1. The Committee noted that Section 30 of the PFMA provides that (1) the Minister may table an adjustments budget in the National Assembly as and when necessary. (2) A national adjustments budget may only provide for— (a) adjustments required due to significant and unforeseeable economic and financial events affecting the fiscal targets set by the annual budget; (b) unforeseeable and unavoidable expenditure recommended by the national executive or any committee of Cabinet members to whom this task has been assigned; (c) any expenditure in terms of section 16; 33 (d) money to be appropriated for expenditure already announced by the Minister during the tabling of the annual budget; (e) the shifting of funds between and within votes or to follow the transfer of functions in terms of section 42; ( f ) the utilisation of savings under a main division of a vote for the defrayment of excess expenditure under another main division of the same vote in terms of section 43; and (g) the roll-over of unspent funds from the preceding financial year.

 

1. The Committee remained concerned about the service delivery impact of these downward adjustments, which were due to inefficiencies, unfilled funded vacancies, and delays in appointing new service providers for the Community Works Programme (CWP). These included a downward adjustment of R400 million from the Department of Cooperative Governance as well as R70 million from the Department of Public Works and Infrastructure.

 

1. Whilst noting that the R200 million earmarked for the Represented Political Party Fund was an in-year addition to the existing baseline to assist political parties with additional costs associated with the upcoming national and provincial elections, the Committee remained concerned about such allocation and it was of the view that these funds could have been used to improve service delivery for the neediest.   

 

1. The Committee welcomed the proposed additional allocation of R70 million to cover the cost of the Ministry of Electricity for the 2023/24 financial year to oversee the electricity crisis response; to ensure the Minister has a clear responsibility to facilitate and control all critical aspects of the Energy Action Plan; and to address the challenge of fragmentation of energy responsibility across various departments and Ministers.

 

1. The Committee agreed with the FFC’s view that adjustments should be guided by a comprehensive evaluation and evidence of the performance of these important interventions, and with the FFC’s support of the proposed additional allocations in the Safety and Security Cluster aimed at improving the efficiency and productivity of judicial and prosecution services.

 

1. The Committee noted the PBO’s view that government’s stated priority over the 2024 MTEF was to enhance spending quality and to minimise inefficiencies within all budget items, whilst ensuring the sustainability of public finances; and the fact that some of the reprioritisation of funding within the Bill showed little evidence of enhancing spending quality.

 

1. The Committee noted COSATU’s concern over the proposed additional R80 million for Public Diplomacy and Protocol Services under the Department of International Relations and Cooperation in light of the severe budget cuts to more critical service delivery programmes, and that this funding could have been diverted to the Commission for Conciliation, Mediation and Arbitration (CCMA), which has experienced budget cuts for several years while needing to cope with a 24 percent increase in cases from workers.

 

1. The Committee noted PSAM’s concerns over the implications of adjustments, in particular the reduction to the Community Works Programme (CWP) and Public Works and Infrastructure budgets; and concerns around transparency and credibility of the budget process; and its recommendation that clear steps should be taken to improve forecasts and planning, so that additional adjustments will only be required when truly significant and unforeseen events occur. Moreover, the Committee noted PSAM’s suggestion that the National Treasury needed to do more to improve its level of transparency when it comes to budget matters.

6. Recommendations

The Select Committee on Appropriations, having considered the briefings and comments by stakeholders on the Second Adjustments Appropriation (2023/24 financial year) Bill [B6 - 2024], recommends as follows:

 

1. Upon approval by the President, the Minister of Finance should gazette the Second Adjustment Appropriation (2023/24 financial year) Bill [B6 – 2024], which provides for a net adjustment of R290 million across functions and economic classifications to absorb the 2023/24 wage agreement increases in the Education, Health, and Security sectors.

 

1. The National Treasury, together with the Departments of Basic Education, Health and the Security cluster and their provincial counterparts should, within 60 days after the adoption of this Report by the House, develop clear plans to ensure that additional funds are properly utilised for the intended purpose, which is to implement the 2023/24 wage agreement without delays and ensure that frontline service delivery personnel are prioritised. Parliament will continue to monitor the implementation through relevant sector committees.

 

1. The Department of Cooperative Governance should, within 60 days after the adoption of this Report by the House, develop clear measures to address delays in the appointment of service providers for the Community Works Programme (CWP), and further develop plans to mitigate the service delivery impact of the R400 million reduction from this programme. The Committee is of the view that under-spending due to inefficiencies has the potential to undermine the important fight against unemployment, poverty, and inequality.

 

1. The Department of Public Works and Infrastructure should, within 60 days after the adoption of this Report by the House, develop clear measures to address unfilled funded vacancies and other inefficiencies impacting negatively on service delivery, and which led to R70 million budget reduction. The Committee finds this unacceptable, as it potentially undermines the important fight against unemployment, poverty, and inequality.   

 

1. The National Treasury should, within 60 days after the adoption of this Report by the House, develop measures to ensure that there is continuous improvement in the level of transparency when it comes to national budget matters, particularly the explanation of budget adjustments, which have the potential to impact negatively on service delivery programmes.     

 

7. Conclusion

 After having complied with section 12 of the Money Bills and Related Matters Act No 9 of 2009 (as amended), the Select Committee on Appropriations, having considered the Second Adjustments Appropriation (2023/24 Financial Year) Bill [B6 – 2024], referred to it, and classified by the Joint Tagging Mechanism as a section 77 Bill, reports that it has agreed to the Bill, without proposed amendments.  

The Democratic Alliance (DA) rejected the Report and the Economic Freedom Fighters (EFF) and the Freedom Front Plus (FF+) reserved their positions on the Report.

 

Report to be considered.