Division of Revenue Bill: Negotiating Mandates

Meeting report

The Chairperson greeted Members of the Select Committee, officials from National Treasury and media on the platform. She indicated that this meeting was to consider and adopt provincial negotiating mandates on the Division of Revenue Bill [B6-2022].

The Chairperson asked officials from National Treasury to give a briefing on responses raised during public hearings held on 23 March 2022.

Before Treasury could make its presentation, Mr D Ryder (DA, Gauteng) raised a point of concern. He asked the Chairperson how Treasury could respond to the provinces’ negotiating mandates before the Committee was presented with those mandates. He questioned whether this process was being subsumed by paper stamp type of work now.

The Chairperson responded that she had informed Members that provinces’ negotiating mandates had been sent to Treasury already which was also part of the Committee’s engagement process with Treasury. However, if Mr Ryder wanted to make changes to the agenda, he is allowed to do so as the Chairperson would not want to undermine Committee Members’ role.

The Committee Secretariat clarified to Mr Ryder that National Treasury was responding to the issues which had been raised during the public hearing and not on provinces’ negotiating mandates.

Mr Ryder thanked the Secretariat for the explanation and understood the situation now. He said that he would have otherwise objected if this process was only done as a paper stamp style process without Treasury responding to those negotiating mandates.

Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, indicated that Treasury’s intention was to respond to public submissions before responding to provinces’ negotiating mandates. She apologised if this sequence had caused confusion among Members.

Mr Y Carrim (ANC, KZN) concurred with Mr Ryder’s point that the Committee must adhere to the appropriate process.

Treasury response to public submissions on Division of Revenue Bill 2022

Mr Bongani Daka, Intergovernmental Policy and Planning, National Treasury, then began the presentation on the Treasury’s responses to the public hearings on the Division of Revenue Bill.

Ms Elellwang Matlali and Ms Mathapelo Maphangela delivered the presentation.  

The presentation covered public comments made by the following organisations:
• Budget Justice Coalition and Rural Health Advocacy Project raised the concern about the moving of the mental health and oncology services to the National Health Insurance (NHI) grant and the reduction in funding for the District Health Programmes Grant.

• COSATU raised the concern about the 2022 Medium Term Expenditure Framework (MTEF) Provincial Equitable Share (PES) allocations.

• The Health Living Alliance (HEALA) suggested key proposals for the utilisation of the Health Promotion Levy, aka sugar tax as well as indicated its support to the National School Nutrition Programme.

• Section 27 highlighted gender-sensitive allocations in its submission and asked Treasury to explain how the Division of Revenue Bill adheres to section 214 of the Constitution and considered the FFC’s recommendation for gender-sensitive budgeting.

Ms Mathapelo took the Committee through the submissions made by civil society in relation to the Local Government Fiscal Framework.

• COSATU recommended a new and sustainable funding model that included consolidating unsustainable municipalities and moving towards the District Development Model. It further recommended that Treasury and Cooperative Governance and Traditional Affairs (COGTA) need to play a hand on the appointment of municipal managers, financial, supply chain, engineering and other senior managers.

• HEALA recommended making changes to direct conditional grants and proposed factoring in rapid disbursements of grant.

The Chairperson indicated to Treasury officials that the Select Committee expected officials to respond to the issues raised in this meeting in writing by Friday this week. Treasury officials may submit their responses to the Committee Secretariat.

Mr Z Mkiva (ANC, Eastern Cape) suggested that the Committee may move to its next agenda and Members can deliberate and ask Treasury questions all together. The Committee agreed with that suggestion.

Negotiating mandates

Eastern Cape
Mr Z Mkiva (ANC, Eastern Cape) indicated that the Eastern Cape Provincial Legislature supported the Division of Revenue Bill [B6-2022] and mandates the Eastern Cape Permanent Delegate to NCOP to vote in favour of the Bill.

Mr Mkiva read out the comments submitted by the Eastern Cape Legislature

Free State
Mr M Moletsane (EFF, Free State) indicated that the Free State Provincial Legislature voted in favour of the Bill but with considerations submitted.

Mr Moletsane read those issues of concern to the Select Committee.

Gauteng
Mr Ryder read the recommendations made by the Gauteng Provincial Finance Committee.

Mr Ryder indicated that the Gauteng Provincial Legislature supports the principle and detail and therefore votes in favour of the Division of Revenue Bill.

KwaZulu-Natal
Mr Carrim indicated that the Portfolio Committee on Finance in the KZN Provincial Legislature met on Wednesday, 20 April 2022, and agreed to mandate the KwaZulu-Natal delegation to support the Division of Revenue Bill [B6-2022].

Limpopo
Ms M Mamaregane (ANC, Limpopo) indicated that the Mpumalanga Provincial Legislature mandated its Provincial NCOP Permanent Delegates to negotiate in favour of the Bill.

Mpumalanga
The Chairperson, as the permanent Mpumalanga NCOP permanent delegate, voted in favour of the Bill.

Northern Cape
Mr W Aucamp (DA, Northern Cape) read out the proposed amendments and inputs made by the provincial legislature and the public.

Mr Aucamp indicated the Northern Cape Provincial Legislature voted in favour of the Bill subjected to consideration of the proposed amendments.

North West
Mr F Du Toit (FF+, North West) indicated that the North West Provincial Legislature voted in favour of the Division of Revenue Bill with proposed amendments.

Western Cape
Mr E Njadu (ANC, Western Cape) indicated that the Budget Committee in the Western Cape Provincial Parliament, having considered the subject of the Division of Revenue Bill [B 6-2022] referred to it in accordance with Standing Rule 217, conferred on the Western Cape’s delegation in the NCOP the authority to not support the Bill.

Discussion

Mr Mkiva expressed his appreciation for Treasury’s detailed responses. He told the Committee that he had attended those Eastern Cape finance meetings and confirmed with the Committee that consultation process with stakeholders took place. However, he raised the concern that the same inputs were being raised year after year without being taken into consideration. this explained why little was done to improve the current situation in the Eastern Cape province.

Mr Mkiva highlighted and commended the bottom up approach which underpinned those consultations. He recommended the Select Committee should consider monitoring government’s progress in implementing their important inputs when approving budgets.

Mr Mkiva urged Treasury to take note of the unique situation in the Eastern Cape and appealed to Treasury to review its infrastructural formula to boost investment in this poor province. Otherwise, it is very unlikely to see a transformed landscape in the province.

Mr Ryder put forward the observation of the disconnection between inter-governmental relations (IGR) and the vital role of communicating back to the affected legislatures and councils. Budget forums and budget council both take place to discuss the Division of Revenue Bill at the provincial and the municipal level respectively. His observation was that Members of the Mayoral Committees (MMCs), Members of the Executive Councils (MECs) and the South African Local Government Association (SALGA) all had made substantial inputs into the budget council and the budget forum. The disconnection is between those MECs and the committee chairpersons where there was a lack of information flowing from the budget council and the budget forum to their oversight committees. The lack of communication between them has led to neglect of the Committee’s repeated demands to review the equitable share formulae. Mr Ryder highlighted that government must look at the IGR engagements and specifically communicate back to those affected legislatures and councils.

Mr Moletsane emphasised the importance of increasing the allocation to local government for the next three years. the percentage or amount increase should be significant in order to equip municipalities with sufficient resources to deal with their service delivery challenges.

The Chairperson agreed with Mr Ryder’s important point that the Select Committee needed to find a way to facilitate intergovernmental relations and to ensure effective communication between the Chairpersons of Committees, the budget council and the budget forum.

Although the Chairperson fully understood and supported Mr Ryder’s view, she cautioned against being too condescending or “being a big brother” style of approach to instruct the committees on what to do. She emphasised the Select Committee’s responsibilities to ensure there are functional provinces in the country and be mindful of the public’s interest in that working relationship. The Chairperson agreed that the Committee can include that as part of its recommendations to the House.

The Chairperson indicated that eight out of the nine provinces expressed their support of the Bill with one province indicating its objection.

Mr Ryder reminded the Chairperson that Members should be hearing the responses from National Treasury now on the negotiating mandates.

The Chairperson responded that as indicated earlier, she had instructed National Treasury to submit its responses to the mandates by Friday this week.

Mr Carrim said that some of those issues, such as those raised by the Eastern Cape, were bigger issues that would involve multiple governmental stakeholders. Hence, it is unreasonable to expect Treasury officials to respond at this meeting.

Mr Carrim also indicated that there is a limit to how much legislatures can intervene in the executive structure. The matters raised by provinces are broader issues that need to be discussed by political parties and raised to the level of the Constitution. He remained doubtful if there would be any response of substance coming from Treasury.

Mr Du Toit sought clarity on the permission of reallocating funds amongst provinces since the President suggested that other provinces should assist the North West, the Eastern Cape and the KZN provinces. Normally, the reallocation of funds amongst provinces is not allowed after Treasury has allocated budgets to each province.

The Chairperson explained that Mr Du Toit’s question should be discussed when Members deliberate on the Appropriation Bill.

The negotiating mandates were adopted.

Committee minutes dated 23 March 2022 were adopted.

The meeting was adjourned.