Provincial Treasury Briefing: Western Cape Adjustments Appropriation Bill

Meeting report

Opening remarks by the Chairperson
The Chairperson opened the virtual meeting and asked the attendants to introduce themselves, including the Members, the Minister and his team. After the discussion that would be based on the presentation, the Committee would consider the draft vote.

She handed over to the Minister for introductory remarks.

Introductory remarks by the MEC
Western Cape MEC or Finance and Economic Opportunities, Mr David Maynier, said that the Department was operating in an extremely challenging environment as it was expected to, like other departments, find savings. This Vote was based on the absorption of a 3.3% reduction (a decrease of R11.6 million) from the appropriation, which was on top of the cut in the previous round. He added that the Western Cape Treasury’s allocation was less than half of the Treasuries in Gauteng and KwaZulu-Natal. Despite this, the team had adapted well and quickly to the new environment, and it was on track to deliver.

Presentation by the Department
The Head of the Provincial Department of Treasury, Mr David Savage, said that the Department had a few slides to present to the Committee. He asked the Chairperson if he could display them.

The Chairperson agreed to this. She indicated that this was the first time that an adjustment budget was being deliberated on a digital platform.

Mr Savage began by mentioning that this adjustment budget brought to the Provincial Treasury a three percent net decrease in its appropriation from the main budget (tabled in March) of R356.9bn. This had decreased the budget by R11.6 million, placing the current budget at R345.3 million. The net decrease was made up of a R12.9 million reduction in the baseline as part of the contribution to the Covid-19 provincial response. There had also been a R1.27 million increase in operational costs that were largely associated with occupational health and safety requirements and the Department’s sighting operations during this period.

Through the main budget, the Department tried to demonstrate its commitment to fiscal discipline.  The Department received a minor decrease from the previous 2018-19 financial year. This was a significant reduction for the Provincial Treasury. The R12.9 million baseline reduction had been drawn from the money allocated to the compensation of employees (CoE), down by R5.6 million, and goods and services (down by R5.7 million). The CoE expenditure had been reduced due to revised projections for the filling of critical vacancies. The Department was currently prioritising the filling of some of the critical vacancies and was also undertaking a further review of the criticality of each post. He indicated that paid interns who had been accepted in the Department would only join in September; whereas the graduate intern intakes would only join in March 2021. This was due to the compromised operational ability of the Department during this pandemic, to provide mentoring to interns by the staff.

The Department would limit the use of external venues for critical provincial systems. Spending on goods and services had been reduced to increase the savings for the Department. There were also reductions in transfers and subsidies, such as bursaries awarded that had not been taken up by students.

Increased occupational health and safety costs to meet regulatory requirements comprised the additional operating costs. This included the purchasing of cloth masks and sanitisers for the staff. This was to ensure that the Department met the Covid-19 regulatory requirements set out by National.

The Department had provided R1 million for data allowance for non-sms officials that were working from home. This was calculated on a 600 per rata basis. It was to ensure that the Department was effectively operating offsite.

After reviewing its APP, the Department believed that it was not destabilised, even with the expenditure reduction. Both its indicators and targets were still on target. Additional activities had been introduced to the Department in order to coordinate its overall response to Covid-19. These included logistics support for the management of donations, and direct support for emergency procurement in provinces and municipalities. A programme, which would provide support to municipalities during this period, had been created. Economical modelling had been rolled at a sub-provincial level to assist them; this would be followed up with financial modelling. The Department had re-looked the vulnerability criteria on liquidity challenges that each municipality was facing. The Department had previously mentioned that it was taking a study review on grants and agency payments to municipalities, and that it intended to conclude in August; this was still underway.

The Chairperson indicated to the Committee that VoteThree could be found on pages 45-53. She opened the floor for discussion.

Discussion
Ms N Makhamba-Botya (EFF) referred to the reduction in the compensation of employees. She asked if this had had an impact on existing employees, and whether this was an adjusted budget that was meant to fill in vacancies.

Mr A Van Der Westhuizen (DA) asked the Department to expand on what it planned to do with its bursaries and the interns. He added that there should not be cuts to programmes that provided opportunities for the youth to gain work experience.

He said that within the bigger budget vote, the Department should look towards finding areas where it could increase savings. He asked if there were no other items in this vote where the same savings could have been enacted.

Ms N Nkondlo (ANC) referred to the baseline reduction. She said that there was a 50/50 split in the bulk amount in the CoE’s and goods & services. Whilst she understood that the pandemic had slowed down the entire operations of both the private sector and the public sector, it was important to gain an understanding on what this meant for the Department. Since 50% of the baseline reduction was based on the CoE’s, she asked for clarification on what this meant.

She also mentioned that she was concerned about bursaries and internships. She asked what issues the Department had with these programmes. With the pressures of working at home, and the strain on human capital resources, how does the government intend to attend to this?

Referring to programme four, she asked how the reduction was impacting on the support that was needed by municipalities. It was important that there was an improvement on the predicament that municipalities within the province found themselves. She asked which activities within this programme were affected by the reduction. Also, what was the impact on the Treasury’s ability to provide financial support and management required in municipalities?

The Chairperson said that she was concerned by the R11m reduction and the fact that the reduction was made up of the R12.9 million budget cut, which was due to the equitable share from National government not increasing. Given the fact that National government had placed emphasis on accountability within local government, it was concerning that programme four was only bolstered by R217 000.  How will this ensure that municipalities are sustainable in the long run?

She noted that there had been a decrease in funding in computer services. With Covid-19 pandemic, the government had an opportunity to move many of its services online. She used Estonia as an example, stating that it had been able to improve its ICT sector incredibly since its independence in 1994. It was first in start-up friendliness, entrepreneurial activity and in digital health. They were also the leading nation in cybersecurity. These achievements could be attributed to their government’s decision to earmark one percent of the GDP to the ICT sector. This enabled them to then roll out the required infrastructure and they also made computer skills a priority at schools. She said that government services should be placed online and it should ensure access to the digital platforms. She asked what the decrease was for and why it was done.

Responses
Mr Savage said that the reductions in CoE’s were around existing vacancies and did not relate to cutting back on staffing positions. Some of the positions had not been filled because of the Department’s inability to attract the right candidates. But the Department would fill the critical vacancies in due course.

He agreed that the Department’s staff was under severe pressure. Whilst the staff component was small by comparable standards, the Department was efficient. Having moved its operations off-site and online, the Department had been able to discover significant deficiencies in its workflow arrangements and work culture. The Department believed that active execution and a coordinated manner in implementation of strategy was more important than additional funding. Numerous online surveys had been conducted by the Department and management was in regular contact with its staff. Top management was also responsive to its subordinates. Currently the Department was undertaking a culture journey. This was a leadership strengthening exercise.

Referring to the question on bursaries and interns, he said that the Department was not looking to cut these programmes. Rather, the Department intended to continue both, as it was pivotal in its vision to increase the number of talented individuals within the Treasury. Currently, the Department was looking to align all aspects of talent management and there was work underway to clarify its plan on this.

With the bursaries offered to both external and internal candidates, the Department had found that it was not always competitive. Whilst the Department granted bursaries, some of them were not taken up by the awarded individuals. The bursaries not taken up constituted the bulk of the funding that the Department was surrendering. He added that the internship programme was very successful (including paid interns and graduate interns). Each graduate intern was managed through the Chartered Accountants Academy, which deployed across the provincial government. Both of the internship programmes worked because each intern was provided hands on mentoring, on an on-going basis.  All interns were also given guided work experience. The Department’s challenge at the moment was to continue this in an offsite environment, hence the delays in taking on the paid interns. But he assured the Committee that the Department intended to scale up the programmes and integrate them with the broader talent management pipeline, going forward.

Responding to the question on programme four and the reductions of local government, he mentioned that local government was addressed by the Treasury through all four of its programmes and not just one. Programme four was one element of the Department’s initiatives, and it dealt with the financial governance and accounting issues in local government. Supply chain issues were dealt with in programme three. Budget, oversight and strategy matters were dealt with in programme two. He indicated that the Department was not abandoning its commitment to programme four. The Department coordinated its programmes through an executive level structure, the MFMA Committee. This Committee had refined the support programme to be responsive to the Covid-19 environment. The Department was also working with the Provincial Health Department to also provide better forecasting capabilities around what some of the shocks would look like in their respective jurisdictions. Monitoring had also been scaled up on vulnerable municipalities, which were being monitored on a monthly basis – particularly on their liquidity challenges. There were several municipalities facing these challenges, and the Department was regularly communicating with them.

The Department was responsible for the management of mandatory interventions in the affairs of municipalities where they were in financial emergencies. Currently, there were two underway. The first was in Kannaland Municipality and the other was in Oudtshoorn. Intervention would not be taken lightly by the Department as this was a constitutional directive. Having had to work online, the Department had found that there had been both a reduction in costs and an improvement in the staff’s ability to manage issues in municipalities effectively. An example of this was the strategic, integrated municipal engagements that were held during the lockdown. Usually these engagements were held at municipalities. Multiple sessions that culminated to one main session were conducted.

On the decrease in expenditure on computer assets, he said that this related to the Department’s replacement schedule of its assets. New equipment had been bought and the Department was content with expanding the use of existing equipment without disrupting operational capacity. He said that he was also particularly interested in how Estonia used the cross-road system to create the data layers necessary for taking large parts of government online. Provincial Treasury also worked with the centre for e-innovation on large scale government systems. Funding would not be withdrawn from either support from big government legacy systems and from the expansion of the Department’s own systems. The e-procurement solution would be expanded this year. Provincial government would be assisted to shift to an e-pay system; this was trial-run a few months ago and the department was currently waiting for approval from the National Treasury to roll this out. An e-leave situation was also currently being developed within the Department. A senior manager in the Provincial Treasury was dealing with all of these projects.

The Chairperson thanked the Department for the presentation and mentioned that the Committee recognised the hard work that the Department had done. She excused the Department so that the Committee could deliberate on the Vote.

Committee deliberations
Ms Nkondlo said that the pandemic environment had brought pressure on the Committee’s ability to conduct its work. She suggested that when dealing with budget the Committee must consider the limited time it had to respond to qualitative matters, which were technical in nature. She also said that the IT environment should be made easily accessible so that the Committee could make the requisite inputs. For instance, there was a delay in the provision of the hard copies of the Bill. With these difficulties, the effectiveness of the Committee might be affected.

The Chairperson indicated that the reason that the respective sittings and Votes were so close to each other was because the rules of the Western Cape Parliament mentioned that the Bill must be finalised in one week.

Referring to the time constraints, she said that it was indicated previously that the Rules Committee had concluded its research on the resolution taken in the Budget Committee. The Standing Committee was currently waiting for the Speaker to present the findings to the Rules Committee. Only then would the Rules Committee give guidance on a possible money bill procedure.

Responding to the point on the delay of hard copies of the Bills, she said that this matter was raised in the previous sitting to the Speaker of the Provincial Parliament. Given that the office of the Clerk of Papers fell under the Speaker’s mandate and not of the Committee, she recommended that Ms Nkondlo take the matter up with the Speaker’s office.

All Members were welcome to ask questions to the Department; it simply depended on the format that the respective Member would choose – either verbal or written.

Regarding the IT environment, she said that the information on Bills was also available on the Western Cape Parliament site. She mentioned that this Bill was advertised to the public beforehand, and details were given as to where the Bill could be accessed once published.

She asked that Members put further questions in writing.

Ms Nkondlo said that she had raised her concern on the changing environment due to the Covid-19 pandemic. She asked if she could make follow-up submissions on the questions she raised during the meeting.

The Chairperson asked if her questions should be placed in the resolution before the deliberation on the Vote.

Ms Nkondlo said that she would submit her written questions later in the day.

Mr Van der Westhuizen proposed that Members be permitted to submit questions (via the procedural officer) to the Department on the revised budget. He also proposed that the Committee now consider the report and that the procedural officer then present the report to Members afterwards.

Deliberations on the Committee Report
The Chairperson asked Members for their views on this Vote, so that the procedural officer could add them to the draft document before she presented it.

Mr D Mitchell (DA) proposed that the Committee support the Vote.

Mr Van der Westhuizen seconded the proposal.

Ms Nkondlo proposed, in terms of Standing Rule 90, that the ANC reserve its right on its view of the Vote and deliberate it in the House.

The Chairperson asked the procedural officer to record this.

Mr Mitchell indicated that standing rule 90 did not permit for one to express their view in the House. It only spoke to the expression of a minority view. He suggested that the minority view was expressed per standing rule 90 of the standing rules of Parliament. There was no need for a justification in the House by Ms Nkondlo.

The Chairperson read out the draft Committee Vote to the Members. She asked if Members were in agreement with the draft.

The Members were all in agreement of the draft vote.

The meeting was adjourned.