2021 Revised Fiscal Framework & MTBPS: public hearings

Meeting report

Co-Chairperson Maswanganyi welcomed everyone and indicated there would be seven presentations as part of the public hearings on the Revised Fiscal Framework. The first four presenters would present and then the Committee would have discussions, in which Members would have an opportunity to engage with the presentations. After that, the remaining three submissions would be presented and then Members would engage with those presentations. Presenters were allocated ten minutes each to present.

SMME Industry Council (SMMEIC) submission

Mr Howard Johnson, CEO: SA Small, Medium Enterprises Association (SASMEA) and Chairperson:  of SMME Industry Council (SMMEIC), explained that the SMMEIC comprised of 12 business associations representing more than 15 000 SMMEs that banded together to be a truly representative voice of small business. The aim was to change the landscape whereby SMMEs could thrive, create employment and make a meaningful change to the socio-economic conditions of communities in which they operate with the goal to create sustainable jobs, alleviate poverty thereby creating more taxable revenue. Their belief had always been that SMMEs were the backbone of the country but yet the SMMEs felt that there was little support from government. The SMMEIC wanted every government Department to be geared to offer assistance to SMMEs. The SMMEIC wanted every corporate to come on board and include SMMEs in their supply chains. The SMMEIC also wanted to encourage very citizen to buy locally made products.

The SMMEIC noted that SMMEs were not simply looking for grants but rather wanted easily accessible loans with lower barriers and interest rates. Another big issue was suretyship. Suretyship held the entrepreneur liable for all debts for factors very often beyond their control and was damaging to livelihoods and put business owners’ assets at risk. A new suretyship insurance or guarantee scheme funded by SMMEs was needed. The budget allocated to SMMEs needed to be spent in a manner that was more closely aligned with what SMMEs daily realities were. Government guarantees during 2020 were channelled through instruments, like banks, that had high qualification barriers and were generally risk averse. The SMMEIC wanted associations to be consulted in the design of instruments in the disbursement of loans. The Department of Small Business Development needed to be a one-stop shop where SMME needs could be channelled to various departments for quicker responses.

The SMMEIC noted three important needs of SMMEs. SMMEs needed access to markets. Government should consult with associations when planning budgets, carrying out needs assessments and focus areas when drawing up plans that affected SMMEs. Finally, there needed to be a strong focus on SMMEs in all Departments.

Amandla.mobi submission

Ms Tlou Seopa, Social Activist: Amandla.mobi, highlighted that the reduction of public spending budgets, particularly on social services such as healthcare, education, and job creation negatively impacted many lives. The rising food prices had ultimately made the cost of living too high; and for unemployed people, surviving was hard. Many have shared stories about how anti-poor budgets were affecting them. Unemployed mothers said that it was hard to take care of their children, especially now that the Child Support Grant amount is below the food poverty line. Some unemployed individuals’ applications for the R350 SRD grant had been rejected. Also,  with the Old Age Grant at its current level, pensioners could barely cover all their basic needs.

Ms Seopa played a video submission which told the stories of caregivers, grandmothers and grandfathers who were all reliant on various social relief grants. The purpose of the video was so that Members could hear directly from those who were most impacted by the decisions made by the Minister of Finance, National Treasury and Parliament. In their stories it was noted that the money they received was barely enough to carry them through the month and to cover all of their expenses. Many of them were caregivers and had children reliant on them. The expenses of food, electricity, rent and transport were too much and there needed to be an increase in the grants.

Amandla.mobi demanded that Treasury implement the following:

• Increase and keep the R350 Social Relief of Distress grant until it is turned into permanent Basic Income Support, valued at the upper-bound poverty line (currently R1335 per person per month) for people aged 18 to 59 with little to no income.
• Caregivers receiving the Child Support Grant must receive Basic Income Support, as well as refugees, permanent residents, asylum seekers and migrant workers. These campaign demands were part of a petition we are running with Black Sash, who have been working for years on this issue.
• Increase the Child Support Grant to R950 per child.
• Increase the Old Age grant to R 2150 per month.
• Expand Child Support Grant to include pregnant mothers.
• Increase all other grants by no less than R300.

Healthy Living Alliance (HEALA) submission

Ms Zimbini Madikiza, Health Equity Advocate: Healthy Living Alliance (HEALA) said that HEALA was a coalition of civil society organisations who advocated for equitable access to affordable and nutritious food for all who lived in South Africa. Its key policy priorities included stronger regulation of the food environment so that healthy food was accessible and affordable to poor households and ensuring that sustained investments in social support grants to help alleviate poverty, address hunger and the health impacts of poor nutrition. The COVID-19 pandemic illustrated the vulnerability of the food system to economic shocks. Nearly 1 in 5 households reported hunger in the last week. 2.8 million children experienced hunger weekly in South Africa in 2021.

South Africans more than doubled the volume of sugary drinks they consumed from 2001 to 2015. Research found that industry depended on reaching the poorest to increase their profits, targeting those earning less than R3000 per month. The prevalence of undernutrition, obesity and non-communicable diseases (NCDs) were greatly influenced by the food environment. The incidences of hypertension, diabetes and heart diseases were increasing while undernutrition was not decreasing. HEALA noted that access to nutritious, affordable food was a right as stated by Sections 27(1)(b) and 28(1)(c) of the South African Constitution. Government had a responsibility to build a healthier food environment for the most vulnerable. HEALA noted that health taxes work. The Health Promotion Levy (HPL) has been shown to reduce sugar intake, and over time, this would contribute to a reduction in the prevalence of risk factors for chronic health conditions such as diabetes, high blood pressure and obesity. There would also be no impact on employment despite industry claims.

HEALA recommended that the HPL be doubled to the original proposed 20%. Effective legal, regulatory, and policy interventions to address diet related NCDs needed to be implemented. These must include, but are not limited to, fiscal measures, unhealthy food labelling, advertising and marketing restrictions, and school environments.

South African Breweries (SAB) submission

Ms Fatsani Banda, SAB, in briefing the Committee said the 2021 MTBPS charts a course that will enable South Africa to continue the difficult task set out in last year’s MTBPS, of economic recovery. Government’s central policy goals over the next three years are to position the economy for faster, broad-based economic growth, and to return the public finances to a sustainable position.

The beer industry had been particularly hard-hit during the COVID-19 pandemic. The beer industry was still grappling with the economic impact of the COVID-19 pandemic that had led to 161 of days of no trade and multiple restrictions. The excise policy certainty was critical to its business. If Treasury decided to keep excise adjustments at or below inflation in line with policy, the beer value chain can start to grow again. If the beer value chain is rebuilt, the industry could continue to contribute to the fiscus through taxes. National Treasury had repeatedly stated that excise policy was only implemented as a policy guideline, meaning that the beer industry has no transparency or certainty to plan its business costs or future investments with regards to excise.

All major tax categories had grown above 2019/20 levels, except for specific excise duties. The fact that excise duties had not recovered was a direct reflection of the reality that the beer industry was still reeling from the effects of the pandemic and had not yet entered the path of economic recovery.

The beer industry has not received specific economic and tax relief from government in order to continue to sustain businesses throughout the length of the pandemic. SAB requested that National Treasury grant a below or no inflation increase in excise in the medium-term, to allow for the sector to recover.

SAB continued to seek both economic and excise tax relief from government to enable the beer industry to get back to a place where it could once again be a significant driver of investments and job growth. SAB was currently at a stage in its business where it was putting together plans as to where it wanted to place future investments, and assessing whether South Africa had a business enabling environment.

Discussion

Mr D Ryder (DA, Gauteng) directed his first question to Mr Johnson. He agreed with a lot of what was said. He challenged Mr Johnson on his comments around the take-up of the loan funding from the formal institutions that were part of the recovery package put forward by government over the past year. Mr Johnson said had said there was not significant take-up of those loans because the banks were risk averse. He challenged that. When government saw the low numbers that were coming through in terms of the bank sponsored funding and financing it was not due to the banks turning down applications but it was more a case of a low number of applications. The SMMEs were saying the problem was from the banks side and the banks were saying they did not receive applications. He wanted Mr Johnson to provide some examples where people did approach the banks and were turned down for that funding. He thought that a lot of responsibility for this fell on the SMMEs. He did not think that there were a lot of people making applications. It might be a case of people resigning themselves to the thought that banks always wanted lots of documentation. That was not the case with that portion of the stimulus package. People were not willing to come forward and make the applications. He wanted to hear Mr Johnson’s response on the matter.

On Amandla.mobi’s presentation, Mr Ryder agreed that the reliance on grants was a sad indictment of where South Africa was as a country. The biggest export in South Africa was taxpayers. There needed to be a different or better way of funding additional grant funding other than taxing the rich. There was a shrinking post of taxpayers in this country and not only because of people leaving the country. It was also because even those who were earning salaries before COVID were no longer earning salaries. He shared the concerns of many of the voices that were heard through the presentation. He appreciated the video presentation as its message, although not perfect, came across well. He strongly supported the sentiments of the presentation. He wanted to know more about the school feeding schemes. It was not mentioned how well those were doing in the presentation. Were they having an impact? Many provinces had spent quite a lot of money on school feeding schemes. On the ground, how was that working? The targeting of sugary drinks was a lazy response and was a case of taking the easy way out. Sugary drinks got a bad rap because they are an easy target. He noted the prevalence of pap in South African diets. He thought that was one of the bigger issues and the fact that in many feeding schemes pap was the default. Pap was a bigger cause of diabetes than sugary drinks. He wanted HEALA to comment on that. Or was that too unpopular a subject to discuss?

Mr Ryder discussed the submission from SAB. SAB’s presentation would have been much better received if they had brought a few samples to the meeting. He agreed with SAB’s call for planning and consistency from Treasury. He agreed with the request for acknowledgement of the alcohol industry generally. Ms Banda did not only have to speak on behalf of beer, she could have spoken about the entire alcohol industry. The entire alcohol industry had suffered tremendously during the past almost two years. Treasury needed to take cognisance of that fact and take it into account with the excise duties. Treasury needed to have more open communication when it came to the planning and to ensure that there was more certainty to some of the big investors. These included SAB, Heineken, Distell, wine farmers and a lot of other industries. SAB was in a market that was evolving. There were a lot more craft brewers coming to the fore and even some of those were starting to export now. Ms Banda’s points were well-made.

Mr M Moletsane (EFF, Free State) commented on the Amandla.mobi submission. This was his third year of listening to Amandla.mobi. This group of ‘gogos’ had been sacrificing a lot to come to Parliament and put their plea to Treasury. Sometimes they would travel to Cape Town and struggle to get a place to sleep. They had also travelled to the Union Buildings with one mission- for government to give them attention and increase their grants. It was high time that Treasury took the ‘gogos’ seriously. They had tried for years now to forward their plea. These ‘gogos’ had contributed to this country during their days of working and paying taxes. He did not understand why Treasury was ignoring them. Treasury should have at least tried to get some funding in order to attend to their grievance. He asked Treasury to take the ‘gogos’ seriously. It had been some years of them saying the same thing. Could the ‘gogos’ be given attention?

Ms P Abraham (ANC) appreciated Government’s generosity for allowing each person to express themselves so that the challenges that were facing people were made known. She agreed with Mr Moletsane that the ‘gogos’ had been coming to Parliament consistently. She expressed her disappointment. She was not sure what the people who brought the ‘gogos’ to Parliament said to them in terms of promises. There needed to be sensitivity in that regard. No one was ever certain what the public purse would be able to do. She noted that when there was an increment it did seem to be a minute increment but it needed to be remembered that the individual was not the only one getting it. The R350 grant was below the living wage but it is received from government by millions of South Africans. It multiplied and became a lot of money. She understood that the plea was for an increment, and that was appreciated. However, she did not want to water down the fact that when the country was faced with a pandemic, the governing party, through the President, came up with an unemployment benefit. This was a clear indication that government cared about the ordinary people of South Africa and did not want to see them suffering. This was not a government that simply ignored its people. Members hoped that having listened to the people, government, through National Treasury, would see what to do in the various areas. She did not want anyone to despair if very little happened. A lot had already been done.

Co-Chairperson Carrim said that everyone, in different ways and in different degrees, agreed with the need for a basic income grant. It was also agreed with R350 was not enough. There was no moral or principled objection to it. Earlier this year the Committee had adopted its fiscal framework report. It noted that recognising the economic, financial and other challenges the Committee recommends that in view of the COVID-related huge job losses, increasing poverty and inequality, National Treasury and government feasibly consider a basic income grant after necessary consultation with relevant stakeholders. The report was referred to the Appropriations Committee for further consideration as it was an appropriations matter, not a fiscal framework matter. Civil society did not draw the distinction between what belongs to the fiscal framework and to appropriations. The Committee understood that. In the Committee’s processing of the matter, it needed to bear in mind what the law said. He gave assurance that the Committee did have a standing commitment to it. It was a view that the Committee would retain since it had adopted the fiscal framework report in March of this year. Some 46% of the population was getting a social grant. This was by all accounts the highest percentage of any country’s population. It was sad that that was the case because ideally people should have jobs. It was not their fault that they were not. The issue was not that government disagreed nor did it think that R350 was enough. It was simply what government could do. It was not a decision for Treasury alone to make. It was a government-wide decision. Treasury could have its point of view but ultimately the decision was government’s. It was also the decision of the ANC as the majority party in government. It was also Parliament’s view. Parliament did support it and the Committee did have a standing position. The Minister had said that if people wanted a basic income grant, something would have to give somewhere else. That was where the Appropriations and Finance Committees needed to make proposals concretely where the money could be found. He did not want to get controversial but one area that the Committees could look more carefully at was DIRCO and Foreign Affairs. How many people did it have? How many missions did it have? How necessary were they? This was one example. It was something the Appropriations Committee could look at because that Committee knew more about where money went and how money could be moved around. The people needed to know that the Committees were not opposed to this idea.

Co-Chairperson Maswanganyi said that the presentations highlighted serious matters that needed the attention of Cabinet. Treasury alone could not make decisions. Treasury could take the views to Cabinet after having checked where it could possibly intervene. She shared the sentiment of Ms Abraham that it might not be possible to make additional allocations and government was not dismissive. The Committee agreed with the stakeholders who had made submissions. They had raised valid points but the economic status of the country would not allow government to take up all of these proposals. These matters needed to be elevated to Cabinet. She wanted Treasury to also comment on the issues raised.

Mr Johnson responded to the comments and questions from Mr Ryder. On why there was low uptake of people applying for the assistance, he would get the examples if needed of where people were actually refused financial assistance. The issue of low uptake all started with the perception and confidence in whether the business owners qualified or not. He provided an example- if a business owner missed a debit order or missed overdraft repayments the individual was unable to qualify automatically, the bank would look at and ask for personal information and surety. The bank looked past the registered entity and went straight to the business owner. Whether the business was in good standing or not was irrelevant. The bank looked at the business owner too. That would be the deciding factor for the bank. When the bank started with the assistance to help people with their bonds during the COVID pandemic last year there was a list of qualifying criteria that the banks posted on their websites. This was to assist people with bond repayments. One of the first qualifying criteria was that the bond had to be up-to-date at time of application. This meant that if a person missed a month or two during the pandemic, the bond was not up to date therefore the person did not qualify automatically. When someone read that there was no need to even go further and apply and get assistance. The people knew that they would be stopped. Many SMMEs were constantly refused financial assistance because they did not qualify. Was it right or wrong that they did not want to apply again? The SMMEs felt like why should they go through all the effort and heartache to get the potential assistance. When they looked at their personal profile they knew that they would be refused whether that entity was in good standing or not.

Mr Johnson noted that no CEO or board member of any large corporation signed personal surety for their company’s actions. Yet, for a small business it was immediately personal surety that needed to be signed even if the company was in good standing and showed a track record of growth. That was where many SMMEs feared that it was a waste of time. SMMEs felt like they were not being assisted with the access to the loans that they needed. The criteria and risks were far too high and that hindered SMME growth.

Ms Seopa responded to Mr Ryder’s comments on the reliance on grants. This was a common idea that a lot of people held that asking the government for grants would create some form of reliance. That was an ignorant and irresponsible thing to say. Currently, the majority of people in South Africa lived in poor conditions. South Africa was in a very bad economic state. Many people were unemployed and starving. If people had other places to go and ‘rely on’ then she did not think so many people would be asking for grants to be increased. Imagine going to an 85-year-old ‘gogo’ relying on the grant to support her family and telling her that wanting to increase grants was not going to work and that they needed to come up with other measures. She wanted to know what other measures were being referred to. Nobody wanted to survive on a social grant, nobody wanted to survive on R350, but they did because people did not have a choice. Parliament was the only place to make their demands and ask leaders and Government for help. Amandla.mobi did not like that sentiment. It was an unkind thing to say.

Ms Seopa added there were many occasions where the ‘gogos’ came to Parliament to plead for the grant to be increased and the response was that they should show government where the money would come from. The Amandla.mobi community then told government to tax the rich. Organisations had tabled concrete plans of how that could work but still it was not happening. Billions of monies were lost to tax havens and illicit financial flows. The country was being held ransom by the rich. There were over 300 000 multimillionaires in the country who if they were taxed more would not starve for even a day. She addressed Ms Abraham’s comment about people who felt that promises were being made. The ‘gogos’ listened to what was said in Parliament and felt as if promises were being made by specific Members, and their hopes were raised. Amandla.mobi was not saying that Treasury made all the decisions. It was saying that Treasury had the power to address these issues. Treasury had the power to consult those who were hit hardest by the budget. Treasury had the power to find the money and increase the grants and allow people to live in dignity. Oftentimes it was said that other measures needed to be found to help people. She did not want to discuss the issue of jobs because it could be very controversial. The view of Amandla.mobi was that while people still waited for those measures to be implemented, they should be allowed to live like human beings.

Ms Madikiza responded to the question about the school nutrition programme. The school nutrition programmes were doing an amazing job. There were many children who were fed by the school nutrition programme, more than nine million but more could be done. The food baskets needed to be monitored. Were they really healthy foods? Was it food that would support the growth and development of children? School nutrition had to be healthy nutritious food. She discussed the impact of pap causing diabetes. There was nothing wrong with having pap as long as it was part of a well-balanced diet. She handed over to her colleague to make a contribution.

HEALA noted that individual family food choices should not be stigmatised. This was a systemic issue and there needed to be a supportive mechanism so that people could be supported to afford so that healthy food was available and accessible. Systemic issues needed to be highlighted and families living below the poverty line needed to be supported to access healthy foods. Availability and accessibility of food was not an individual choice, it was a systemic issue. That was why HEALA was proposing different interventions to support families and support people who were living below the poverty line to access and afford healthy food. He noted that pap had protein and starch and if it was eaten in the correct portions with a combination of other nutritious food then it was actually not a bad product on its own. There needed to be a supportive environment for people to access and afford healthy food. There should be no individualising and stigmatising the decisions of individuals in terms of what people ate.

Ms Banda thanked Mr Ryder for supporting SAB’s proposals and its stance that National Treasury provide greater certainty and transparency around the excise policy framework. SAB should be included in setting excises per year. The industry was still in economic recovery and would like a proposal including in line with inflation excise adjustment in the medium term to allow it to recover across its value chain. The industry did not receive the kind of economic and tax relief afforded to various industries and private sector players. An excise break or economic relief in the MTBPS or as long as the knock-on effects of the pandemic still existed the industry wanted to receive room to recover. The industry wanted to be included in the creation of jobs and investment that Treasury, in general, were driving in the structural reforms message.

Organisation Undoing Tax Abuse (OUTA) submission

Mr Matt Johnston, OUTA, in presentation, outlined the challenges facing South Africa which included state capture, Covid-19, uncontrolled spending and maladministration. OUTA agreed with the statement that ‘reforms should focus on improving competitiveness, productivity, investment and employment’. However, it was concerned by continued guarantees for failures like South African Airways despite it being outcompeted, low productivity due to unqualified people in positions of authority and digital platforms were costly and ineffective. There was nothing new in the MTBPS which stood out to attract investment or build confidence. Increased spending primarily goes to public sector wages but for what performance? Deep, long-term trade-offs were needed for Budget 2022 to achieve stated goals.

On the state of local government, extreme measures were required to contain collapse. Many rural municipalities were intermittently without water and/or electricity, outside loadshedding. The lack of universal access to water and sanitation was fast becoming a threat to South Africa’s fragile socioeconomic stability. There were 23 municipalities not honouring Eskom debt agreements. The Standing Committee on Public Accounts had intervened intensively because provincial COGTAs and Treasuries failed to effectively implement Section 139. There was R3.47 billion in fruitless and wasteful expenditure in 2019/20. OUTA wanted budgets to be opened to detailed public scrutiny.

Mr Johnston highlighted the major fiscal risks posed by SOEs. There was R787 billion worth of SOE debt guaranteed by government and Road Accident Fund liabilities, and R73.4 billion in SOE loans maturing in next three years for entities like Eskom, SAA, RAF, SANRAL, Denel. The moves made to allow more private investment to productively use public infrastructure were welcome. On SANRAL and e-tolls, only 15% of motorists pay e-Tolls but government was holding onto that failure. R9.7 billion in unpaid e-Tolls had accrued over time. Since 2011/12, OUTA calculated that R23 billion has been dedicated to SANRAL to provide for Gauteng Freeway Improvement Project costs and debt that escalated, and continues to escalate, over time. This was enough to have paid for the entire project budget. There was lack of transparency in how this scheme is being reactively financed.

OUTA recommended that on debt and deficit, reforms should focus on improving competitiveness, productivity, investment and employment. Local government and municipalities needed to show examples of best practice, including by consistently produce clean audit outcomes. All funding for SOEs should be transparent. De-regulation of Energy & Transport sectors was welcome. A National Water Resources Infrastructure Agency was supported but OUTA also proposed an Independent Water Regulator. Cabinet was urged to take a decision on the future of e-Tolls. Avoiding this major policy decision was not best practice, more debt accrues as a result. Capital expenditure should be prioritized over increasing current expenditure such as public sector remuneration.

South African Institute of Chartered Accountants (SAICA) submission

Dr Sharon Smulders, Project Director: Tax Advocacy, SAICA, detailed the persistent problems facing South Africa’s economy, the unkept promises of government and the illusive necessities. On the problems facing South Africa, revenue was not the problem, expenditure was. Expenditure increased on average 8.8% which was significantly higher than inflation. The main reason for growth in expenditure was the public-service wage bill. Expenditure was not efficient or effective. The consequences of these problems were that business was constrained through electricity shortages, inefficient and high cost of transport and other factors. Unemployment in South Africa was one of the highest in the world. The 18.3 million count of beneficiaries of social grants in 2020/21 was expected to grow to 22.6 million in 2040/41. South Africa was also second last in the world for quality of education and aging workforce. Crime also continued to increase.

SAICA supported crime prevention funding. It supported the additional funding for police while calling for review of the budgets and spending by the police and other organs in law enforcement. It wanted accountability for budgets and spend. Government needed to introduce proper consequence management for non-reporting, inappropriate budgeting and improper spending. There needed to be a review of the workforce and to enhance productivity. Government needed to introduce and enforce productivity criteria.

Further, the financial positions of local municipalities were so dire that there was significant doubt if they would meet their obligations. There was a cash shortfall of R50.7 billion. The budget allocation over the medium term was R17.8 billion. The illusive necessities were accountability and an action plan. There needed to be an action plan that was subject to appropriate monitoring and oversight. In order to achieve the strong economic growth that the country desperately needed, government and Parliament needed to stick to their promises. Effective oversight required the political will on the part of each individual member of Parliament to use the oversight mechanisms and array of tools at their disposal optimally. SAICA urged Members to use their oversight power to stop the inefficient and ineffective spending so that economic growth can happen. Money was not being spent where it was meant to be spent, and that needed to be stopped.

Congress of South African Trade Unions (COSATU) submission

Mr Matthew Parks, Parliamentary Coordinator, COSATU, said that COSATU took a holistic approach to the MTBPS. He detailed COSATU’s proposals on areas such as the Presidential Employment Stimulus Programme (PESP), economic and social relief, Pension Funds withdrawals, the R350 Covid-19 SRD Grant, infrastructure programme, Public Service Wage Bill, corruption and wasteful expenditure, public procurement, revenue, state-owned enterprises, local government and departmental appropriations.  

The South African economy was badly in need of stimuli. The unemployment stood at 44% and the levels of unemployment continued to rise. Millions were dependent on State relief. There were 1000s of companies collapsing. The fiscus was bleeding billions to corruption, wasteful expenditure, tax evasion, mismanaged SOEs and municipalities. SOEs were collapsing and there was an unreliable energy supply. South Africa was on a dangerous debt trajectory. The public and workers were exhausted with the state of governance.

The budget was silent on need for a mass stimulus plan. There was a focus on budget cuts through wage bill freeze and across the board departmental budget cuts. There was the danger of austerity at all costs compared to plugging the holes and stimulating the economy. COSATU proposed a mass stimulus programme to kick-start economic growth, in particular key growth sectors, including funding from the Development Finance Institutions and private sector. COSATU was pleased with the R11 billion for PESP which created over 550 000 jobs and provided young people with a salary and experienced. The increase allocation of R74 billion over the MTEF was welcomed. COSATU proposed that the PESP should be expanded further over the MTEF.

On the economic and social relief front, COSATU believed that there had been an absence of support for struggling actors. Main relief had been R63 billion from the UIF. COSATU welcomed the R32 billion for those affected by KZN & Gauteng violence. Need to accelerate ERRP implementation and ramp up local procurement. COSATU proposed that intervention needed to modernise UIF systems and ensure workers received monies timeously. There needed to be package of support for embattled businesses and sectors of the economy from the State & banks.

On the R350 Covid-19 SRD Grant COSATU believed that it provided relief to millions of the unemployed. However, the recipients were not going to miraculously find work when it ended in March 2022. COSATU proposed to extend the R350 SRD Grant beyond March 2022 and raise it to the food poverty line. Payments needed to move to electronic for all recipients. This could also be the foundation for basic income grant.

In conclusion, COSATU hoped Government would table a 2022 budget that would stimulate economy and support job creation. The budget needed to provide relief to the unemployed, tackle corruption and wasteful expenditure, rebuild SOEs and the State and respect collective bargaining. Workers and voters were losing faith in Government’s policies and commitments. The ANC and Government needed to wake up fast as they were running out of time.

Discussion

Mr W Aucamp (DA, Northern Cape) thanked OUTA and SAICA for their presentations and the honest manner in which they described what the problems were. Through these submissions the Committee learned again about the importance of oversight and consequence management. South Africa had a bloated State Department and a lot of employees earning a large amount of salary every month. There needed to be consequence management. Looking at the Auditor-General’s report that came out every year, it painted a bleak picture of the state of affairs. Yet, every year nothing was done to those people. Government was doing the same things and expecting different results. Government departments are expected to fully implement consequence management mechanism. Without it, government would not achieve what it had set out to do. Without consequence management, government would not be able to get a budget that would reach its targets and get service delivery to the people. Without consequence management, South Africa would not achieve anything.

Mr Ryder appreciated the inputs from all the presenters. The effort that went into all of the presentations was appreciated. He wished that these organisations were more appreciated by the general population for the time and effort that was put into these analyses. On OUTA’s comments about local government, particularly on Section 139 and provinces having a bigger role in trying to fix a broken system of local government, he challenged OUTA on Section 139. Provinces were not the silver bullet. In the North West where Section 139 was enforced substantially, it had not had any impact. In Gauteng, for example in Emfuleni, the municipality had regressed under provincial administration. The NCOP had long discussions about Section 139 at the beginning of this year. The biggest finding that it made was that there was no supporting legislation which was called for in terms of Section 139 and that legislation had never been finalised. OUTA could respond to his comments about provinces being a part of the problem as much as being part of the solution. He noted OUTA did not mention national COGTA as being part of the problem. The Committee had the Deputy Minister of COGTA on record, just before the local government elections, saying that she was surprised to hear that 62% of councillors could not use a computer. He could understand if that was the case at the beginning of a term that had been elected by their communities to represent their communities would not know how to use a computer. However, it was a failure of COGTA that by the end of the term those councillors were still not computer literate. The Deputy Minister went on record saying that she was surprised and disgusted, when it was her own Department that was the failure. COGTA should be shielding the responsibility for the election results because they had not managed to bring local government into a space where it was actually starting to function. He did not see much mention of that. He had spoken last night about the risks that had not been identified by the Financial & Fiscal Commission (FFC) and by the Parliamentary Budget Office (PBO). He highlighted the substantial risk that the failure of local government posed to South Africa and the economy. This had been highlighted again by the submission of OUTA when they spoke of the number of municipalities that were not paying their Eskom bills. On e-Tolls, he thanked OUTA for continuing on that fight. He had almost given up on getting a resolution on e-Tolls. Parliament was promised an answer by Minister Fikile Mbalula in a presentation to the NCOP. Minister Mbalula had promised an answer within two weeks and that was in March. Parliament still did not have any clarity on that. He applauded OUTA for continuing to follow up on that matter.

Mr Ryder commented on the presentation by SAICA. He emphasised that policing resources needed to find their way down to the frontline of crime fighting and not necessarily be spent on propping up the top-heavy structure of SAPS. Investment in detectives was long overdue to act as a means of making sure that people were brought to book and receive the appropriate consequence management that was often spoken about. He agreed to having expenditure ceilings. Parliament often looked to see which Departments were spending 95% plus of their budgets, and those able to spend all of their money were commended. However, what Parliament consistently failed to do, and something that he had said for quite some time, was the fact that a Department spending its budget was not good enough on its own. What was needed were departments spending their budget and also meeting targets- that was what Parliament needed to start evaluating. If departments do not meet targets, then why on earth would they spend their full budgets. SAICA had also highlighted water and sewage systems, and this was of particular interest to him. There was a massive amount of R11 billion required to fix the system but it was just not coming. He wondered whether government had the capacity to spend that money effectively if that amount was to be availed

Mr Ryder, in commenting on COSATU’s submission, agreed with most of the conclusions but did not agree with how COSATU got to those conclusions. He thought that Mr Parks held a slightly outdated view of the difference between government salaries and private sector salaries. He suggested Mr Parks do homework on that matter. Government employees were paid much better than private sector employees at this stage. He disagreed with targeting the head count of SAPS and teachers. Those were the groups that should be growing. Bringing down crime and improving the education system were the things that were going to lead to growing the economy going forward.

Ms Smulders said that Mr Ryder was spot-on with the issue of accountability. That was absolutely critical going forward. The only way that would ensure improvements was if these sorts of engagements happened more regularly. Six months down the line was too late- ensuring targets were met on a quarterly basis was needed. That might not be this Committee’s role but it needed to push that to happen effectively. On compensation, SAICA wanted a review of the compensation framework because people needed to be on the ground. There were not enough sufficiently trained people on the ground to perform the services that the country needed. Of huge concern was that the Police Department had lost over 5000 people between last year and this year. That might have been one of the contributing factors of the riots. That needed to be fixed urgently. Water was absolutely critical, and that entire ecosystem needed to be fixed. The Post Office had reached six out of 17 of their targets according to their annual report- it was not the only one. This was all highlighted in the Auditor-General report. These people needed to be held accountable and there had to be reasons why these targets had not been met. Her request was that government start with working on the financial side of the equation because if the finances were not in place then nothing else would work. There needed to be expertise but if there was no money to pay for the expertise then South Africa would lose the expertise. On local government, it needed to be ensured that the people tasked with managing the budgets were suitably qualified and had the appropriate skills. That was the cornerstone and starting point for any of the Departments meeting their targets. Government needed to ensure that the Finance Departments were suitably qualified and had the necessary expertise to guide the Department with the funds that had been allocated to them. From there flowed the consequence management for the targets.

Mr Parks said that both Mr Aucamp and Mr Ryder raised concerns on the wage bill. He responded to the question of whether the wage bill was bloated. In 1994 there were about 34 million South Africans and about one million public servants. Today there were about 60 million South Africans and there were about 1.3 million public servants. In Health, Education and other sectors that ratio was declining at alarming levels. In schools it was causing a higher teacher-learner ratio. In the police force, the budget was going to cut it by 6000 police officers. Yet, the population was rising and the crime level was significantly high. COSATU did not support a growth at management level and policy level. That needed to be shifted to frontline service delivery level. At Home Affairs there were queues not because civil servants were slow but because there was an insufficient amount of staff on duty. Instead of having six staff on duty they might only have two. There was also the issue of the IT systems not working properly. He noted that in the public service there were largely professionals. There were more than 70 000 nurses and about 30 000 doctors. There were about 350 000 teachers, and these are people with degrees and other qualifications. This was above the average workforce who would not have as many professionals. If the public service was to be compared to the private sector, then the amount a doctor made in the public service needed to be compared to what a doctor made in the private sector. The public sector fell behind the private sector in the case of those professionals. That was why there was a constant brain drain of public servants going to the private sector or going to other countries to work. That was causing a huge problem. In the private sector the number included domestic workers, farm workers, construction workers, mine workers and these were professions that were not included in the public service. He thought that apples needed to be compared with apples. A police constable earned under R200 000 a year. Throughout the police ranks the pay was quite low whilst government expected them to compete against criminals who were well-resourced and easily able to tempt the police with bribes. The same applied to Correctional Services. There needed to be a much more nuanced approach to the public sector wage bill. There also needed to be a broader discussion around the wage gap. In the public service it was about 13:1 between a cleaner earned at the bottom and what a Director General earned on top. In the private sector it was about three times that. There needed to be a discussion if it was correct for publicly listed companies, like in the retail sector and the mining sector, where the CEOs earned R100 million a year and a cleaner earned R60 000 a year. There was a Companies Bill that COSATU hoped the DA would support which would require large-listed companies to begin to disclose the wage gap as a way to address this apartheid legacy.

Mr Parks said COSATU was very sensitive to government’s fiscal constraints. If government was forced to default and go to the International Monetary Fund, it would be workers, including the public service, who would pay a very heavy price. There were some ways to assist government. Government needed to way a single wage regime for the entire State. A single collective bargaining process for the entire State could curb what management earned at SOEs where it was often higher than what the President earned. Staff needed to be redeployed to frontline posts. How could Government consolidate duplicate entities or duplicate SOEs or even municipalities? There were ways to assist but it required Government to engage with labour to see how it could protect middle- and low-income workers from inflation and how it could stabilise and save the State. How could Government assist SARS? How could it tackle corruption? How could it grow the economy? All of these issues required nuanced and holistic approaches. People should not think that if Government paid nurses less it would resolve the myriad of problems because it would not. It might make it worse.

Mr Johnston responded to the comments made about oversight and consequence management. OUTA agreed with the need for oversight and consequence management. He noted the silence of Members and  the very few questions and comments. Before when OUTA came to these forums there would be lots of disagreement with some of the things it said. As there was not so much disagreement on this occasion, he took that as tacit agreement. OUTA hoped to see reflected in the Committee’s report, from this public hearing, the comments that had been made and that the agreement he saw was real. OUTA hoped to see a substantive response from National Treasury as well. He discussed oversight and consequence management. OUTA did see a big role for National Treasury to play. There were certain provisions in the MFMA and PFMA that were not being implemented. Blacklisting was one example. There were various ways according to the legislation when money that was misspent, wasted or stolen as a result of the wrong being in charge of procurement and decision making that that money could be recovered. Those things were not being implemented. There was also an important role for civil society to play.

Mr Johnston responded to Mr Ryder’s comments about local government. He agreed Section 139 was not a silver bullet and the North West was a good example. His family lived there and basic service delivery did not happen. People were struggling and businesses were struggling. It was an enormous challenge. Provinces that had taken control of certain municipalities were not doing what they were supposed to be doing. Civil society was trying to invest in solutions where communities could help themselves. There was a lot of despair and despondency about government’s inability to fix the problems that it had to a large extent allowed to happen. Matters were being taken into communities’ own hands. That was seen in response to the unrest. This was why when more money was allocated to the police and the Defence Department it had to be questioned. If more money was allocated to healthcare and education, then it had to be questioned. Would that additional allocation really make a difference? Would it really translate to more service delivery that people could see and experience? At the moment it did not seem as if that would happen. He agreed that national COGTA had not played its role. OUTA believed that in general government had not played its role. Parliament had not played its role. There was a big role for Parliament to play in the various Committees. OUTA had previously recommended that there be more collaboration between Portfolio Committees, Standing Committees and Select Committees to deal with these problems in a way that SCOPA really had. That was one Committee and it had limitations but it had intervened in certain places where local government had absolutely collapsed, and that was welcomed.

OUTA wanted civil society to be a part of that solution. That was why it recommended that the budgets, how money was spent at local government be more transparent and inclusive. The members of local communities did have some expertise to bring to the table. These members could participate, inform and enrich the budgeting process which currently was not changing in reaction to the fact that expenditure was not equating to service delivery outcomes. He agreed that many promises had been made on the issue of e-Tolls. It was only Cabinet that was not willing to make a decision and accept the sum costs of a failed scheme. He did not think that the praise should come to OUTA or any organisation. The praise should go to the people of Gauteng and the motorists on that road who refused to submit themselves to a system that they did not agree to. Government needed to accept this. SANRAL seemed to be accepting this. It was incumbent on this Committee, who had heard several times from OUTA that this was a failed scheme, to resolve the matter. This Committee could go to Cabinet and make recommendations to Treasury that plans for alternative funding policy be urgently put forward.

Mr Hennie Swanepoel, Chief Director of Data Analysis: Budget Office, National Treasury, said that Treasury did not usually respond in detail to the presentations during the sessions on the day. Treasury had a scheduled timeframe on Friday where they would respond to all of the issues. He assured the Committee that Treasury had taken note of all the issue raised and would respond in detail. On social grants, this was a discussion that needed to be taken to a higher level. The grants issue was very emotive and close to the heart of every South African. It needed to be acknowledged that changes in spending would result in very large increases in total expenditure numbers. That had to be considered in a sensible way. Grants needed to be thought of in the context of broader social spending and the total social wage. This currently formed a very large portion of government spending. That also needed to be considered in light of the size of government debt and how that was going to be dealt with going forward. He did not want to into detail on those issue at this point in time. There needed to be a discussion that dealt with the grants issue specifically. Treasury would respond to all of the issues that were in its purview in its timeslot on Friday.

Ms Abraham noted that stakeholders agreed in some broad areas. For example, consequence management was cross-cutting and could be dealt with sufficiently as had been raised by all the stakeholders. There was also the issue of the participation of other government departments. The Committee noted the role the Department of Planning, Monitoring and Evaluation had to play. National Treasury was a Department that was transversal and would affect all other departments. Having been to local government elections recently and there were many service delivery protests, and challenges at Home Affairs had also been raised. It was a critical Department but always seemed understaffed. There were small towns that did not even have a Home Affairs office. People had to travel to other towns ,and when they travelled to other towns for services they found that servers were down for the entire day or people found that there was just one official serving thousands of people from the surrounding towns. Leaders had to be responsible as they took decisions. In the public sector, decisions were taken for the majority of the people of this country. When a decision was made to change something the leaders needed to be cognisant of the fact that the change was not for a few but for the majority of the people.

Co-Chairperson Maswanganyi appreciated all of the presentations and welcomed the comments from Treasury. There was a session on Friday for Treasury to respond to issues raised. The responses would be informed by the presentations, the concerns as presented, the recommendations and the proposals. Hopefully the stakeholders would follow the responses of Treasury. She assured the stakeholders that the Committees heard what they had to say. The Committees understood their concerns and these were shared by the Committees.

Co-Chairperson Carrim said that it was good people were coming to the Committee. He knew it was an immensely frustrating thing for them because they raised the same issues every year and Parliament did not act on them in the way that the stakeholders wanted. It was difficult because it reflected that Parliament, government and the ANC were not moving fast enough on dealing with the issues. South Africa was in an unreal situation. There were no easy answers. It was tiresome that the civil society activists kept coming to Parliament, kept repeating the same things and Parliament was not able to act on those things and persuade the executive to do so. Many of the things said today, regrettably, had been said before. Parliament needed to get out of this impasse. Soon the few people who were appearing before the Committee would shrink away. As things stood there were key stakeholders who were not present. South Africa needed civil society participation. Everyone was part of this together regardless of differences. Without a civil society Parliament was meaningless. What could Parliament do to avoid these repeated situations? He suggested that this issue be put on the agenda for the respective study groups and for the Committee to process. It was currently the same old but in slightly different form. He reminded Members that Treasury would give a more considered reply after having looked at the written and oral submissions, next Friday. Civil society would then be asked to respond and Treasury would then be given a chance to reply. Both sides would be thoroughly heard. It was only then that the Committee would engage with the stakeholders and process their thoughts over the weekend. It would life easier for the Chairpersons and research staff if the stakeholders did the initial drafts. He asked the stakeholders to summarise their submissions to between a half a page and one page, the key points that the stakeholders wanted the Committee to put into the report. Usually, the staff presented what the stakeholders said and just edited it. It would be good if at 10am on Friday all of the stakeholders made submissions. Present between half a page and one page of what they wanted to be included in the report.

Co-Chairperson Maswanganyi agreed with what Co-Chairperson Carrim had said. He noted that Treasury would be coming to present on Friday to respond to what the stakeholders and members had raised. He agreed with the observations of the Chairpersons.

The meeting was adjourned.