ATC151110: Report of the Standing Committee on Appropriations on the 2015 Division of Revenue Amendment Bill [B27 – 2015], dated 10 November 2015

Standing Committee on Appropriations

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE 2015 DIVISION OF REVENUE AMENDMENT BILL [B27 – 2015], DATED 10 NOVEMBER 2015

 

The Standing Committee on Appropriations having considered the 2015 Division of Revenue Amendment Bill [B27 - 2015], reports as follows:

 

1. Introduction

 

The Division of Revenue Amendment Bill (henceforth referred to as the Bill) was tabled in Parliament on 21 October 2015 by the Minister of Finance during the presentation of the 2015 Medium Term Budget Policy Statement (MTBPS). The Bill, referred to the Committee in November 2015, addresses the following matters:

 

• Changes in the equitable division of nationally raised revenue among the spheres of government;
• Adjustments to Provincial Allocations;
• Adjustments to Local Government Allocations;
• Function Shifts; and
• Changes to gazetted frameworks and allocations (i.e. technical corrections).

 

This report focuses on amendments proposed in the Bill tabled by the Minister.

 

1. Equitable division of revenue raised nationally among the spheres of government

 

Table 1 hereunder outlines the equitable division of revenue raised nationally among the three spheres of government.

 

Table 1: Schedule 1

 

Spheres of Government R’000	2015/16 Main Allocation	Adjustment	2015/16 Adjusted Allocation
National	789 463 526	23 459 963	812 923 489
Provincial	382 673 477	3 826 532	386 500 009
Local	50 207 698	1 498 818	51 706 516
TOTAL	1 222 344 701	28 785 313	1 251 130 014

Source: National Treasury (2015)

 

The net effect of the 2015 adjustments is a budget adjustment on the 2015/16 main allocation from R 1.222 trillion to R1.251 trillion. The national allocation has been adjusted upwards by R23.5 billion from R789.463 billion to R812.923 billion. The provincial equitable share allocation has been adjusted upwards by R3.827 billion from R382.673 billion to R386.5 billion. The local government equitable share allocation has been adjusted upwards by R1.499 billion from R50.208 billion to R51.707 billion.

 

1. Adjustments to the provincial equitable share and conditional grants

 

Table 2 (hereunder) outlines each province’s equitable share of the provincial share of nationally raised revenue.

 

 

Table 2: Schedule 2

 

Province	2015/16 Main Allocation	Adjustment	2015/16 Adjusted Allocation
R’000
Eastern Cape	54 311 819	555 160	54 866 979
Free State	21 757 298	238 794	21 996 092
Gauteng	73 413 414	686 829	74 100 243
KwaZulu-Natal	82 253 946	877 619	83 131 565
Limpopo	45 377 444	488 758	45 866 202
Mpumalanga	31 029 509	307 134	31 336 643
Northern Cape	10 137 746	87 899	10 225 645
North West	26 150 635	246 412	26 397 047
Western Cape	38 241 666	337 927	38 579 593
Total	382 673 477	3 826 532	386 500 009

Source: National Treasury (2015)

 

Funding amounting to R3.827 billion is added to the provincial equitable share to assist provinces with the cost of the public sector wage agreement. The wage agreement resulted in a higher cost of employment than had been budgeted for in the 2015 Budget. The funds will be shared amongst the 9 provinces on the basis of need. This means that provinces with the largest personnel intensive departments (i.e. education and health) will receive the largest allocations.

 

The following lists adjustments with regards to provincial conditional grants: 

 

• There is an additional amount of R100 million which was shifted from the Social Housing Regulatory Agency and will be added to the human settlements development grant to accelerate the delivery of housing in the Nelson Mandela Bay Metropolitan Municipality in the Eastern Cape.

 

• An amount of R193 million will be converted from an indirect grant allocation in the health facility revitalisation component of the national health grant to direct allocations in the health facility revitalisation grant.

 

• An amount of R7.7 million has been converted from the national health insurance component of the national health grant (indirect grant) to the national health insurance grant (direct grant) for the Western Cape as the province will be the implementing agent for these projects.

 

• The Health Facility Revitalisation component of the indirect National Health Grant will be reduced by R62.5 million due to projected underspending, and R44.9m will be shifted to the national department’s vote for the South African Demographic and Health Survey, the Forensic Chemistry Laboratories and the Medicines Control Council.

 

 

• R7.4 million will be reduced from the HIV and Aids Life Skills Grant due to anticipated underspending.

 

• Provincial conditional grants will be reduced by R510.6 million as a result of offsetting against unspent grants from the 2014/15 financial year. These are funds that were transferred to provinces in 2014/15 for conditional grants but not spent in that financial year and not approved for a roll-over to be spent in 2015/16. Because provinces already have the funds for these grants that were transferred in 2014/15 but not spent, these reductions in 2015/16 transfers should not impact the implementation of these grants in 2015/16.  

 

1. Adjustments to the local government equitable share and conditional grants

 

With regards to the roll-over of local government equitable share funds, an amount of
R1.5 billion will be rolled-over on the local government equitable share as a result of funds not transferred in 2014/15 due to the withholding of equitable share allocations. Funds have been released to municipalities as they agreed to payment plans to settle these debts. All municipalities have now met these requirements and their equitable share allocations for 2014/15 have been transferred in full. Government submitted work is underway to ensure that all 3 spheres pay monies that they owe. National and provincial departments have been instructed to pay property rates and service charges they owe to municipalities

 

The allocation for the indirect regional bulk infrastructure grant will be reduced by R64 million and the allocation for the indirect municipal water infrastructure grant will be reduced by R200 million. 

 

Both grants were underspent in 2014/15 and while spending is expected to improve in 2015/16 they will not be able to spend their full allocations. These reductions will be made without impacting on the completion of any projects in 2015/16 as the municipalities would not have been able to spend these amounts in 2015/16.

 

An amount of R339 million has been reprioritised within the regional bulk infrastructure grant to support the upgrading of bulk sanitation infrastructure so as to support the bucket eradication programme.

 

1. Recommendations

 

5.1     That the Minister of Finance should ensure that National Treasury effect the following corrections to the conditional framework of the National Health Grant: Health Facility Revitalisation Component:

 

• The addition of conditions that allow a portion of the grant to be used to expand the new information system to PHC facilities outside the NHI districts.
• The conditions of the grant reflect that no more than R50 million of the grant may be used for the patient information system rollout.
• The outcome statements and outputs of the grant are also corrected to include the rollout of integrated patient-based primary health care information systems to other PHC facilities.

 

 

 

5.2     The Standing Committee on Appropriations, having considered the Division of Revenue Amendment Bill [B 27 - 2015] (National Assembly) referred to it and classified by the Joint Tagging Mechanism (JTM) as a Section 76(1) bill, recommends that the Bill be adopted, without amendments.

 

 

Democratic Alliance (DA) reserves its right not to support the Bill.

 

 

Report to be considered.