Division of Revenue Amendment Bill: Negotiating Mandates

Meeting report

Presentation of negotiating mandates

Eastern Cape

Mr Z Mkiva (ANC, Eastern Cape) said the Eastern Cape was in favour of the Bill, but had two concerns, namely that the downward revision of direct conditional transfers by R1.03 billion may result in the cancellation or scaling back of projects in the 2020/21 financial year which may delay economic recovery and secondly, it appears that the upper limits in the procurement of Covid-19 related materials or the delivery of Social Relief of Distress(SRDs) parcels to deserving indigent citizens are not adhered to.

Gauteng

Mr D Ryder (DA, Gauteng) requested that a letter of condolences from the Committee be sent to Mr J Mpisi (ANC, Gauteng Legislature) on the passing of his mother. He said Gauteng supported the Bill and its recommendations were that:

• Treasury ensure accountability in the utilisation of funds earmarked for the COVID-19 pandemic;
• Treasury should note that the balance in the budget appears to be in favour of providing social safety nets at the expense of the economy;

• Treasury should be circumspect of the intergenerational transfer of government debt;
• Treasury should reconsider the allocation of more funds to the equitable share to local government as it was at the coalface of service delivery; and
• Treasury should ensure that fiscal policy was not expansionary and led to dependence on international financial institutions threatening the sovereignty of the country

The Chairperson said the request of the letter on the passing away of Mr Mpisi’s father-in-law and mother would be taken up.

KZN

Mr Y Carrim (ANC, KZN) said that the KZN province supported the Bill.   

Mpumlanaga

The Chairperson read out the Mpumalanga province negotiating mandate which was in support of the Bill with no amendments.

Northern Cape                                                           

Mr S Aucamp (DA, Northern Cape) said the Northern Cape supported the Bill subject to the consideration and agreement of the following proposed amendments:                        

• Drought relief for the agricultural sector was not sufficient and a clause be inserted requiring role-players to align plans and coordination to realise the impact of disaster management grants.
• Uniform criteria for reprioritising the R20b from provinces must be clearly determined and departments must report to the provincial legislature on the reprioritised criteria.
• The adjustments between the 2020 budget and the adjustment budget of some grants were quite severe and these allocations must be revisited.
• Rural municipalities have massive revenue losses and their allocations from the R11b would not suffice and they should be adequately resourced.
• The Bill should include a clause that prevented the R11b allocated to the Local Government Equitable Share being misappropriated.
• The Bill should prioritise infrastructure rehabilitation and maintenance in the outer years of the 2020 Medium Term Expenditure Framework (MTEF).
• It recommended that the focus within each sphere of government must be on reprioritisation and that the equitable share be protected and conditional grants be repurposed to allow funds to be spent in response to Covid-19.

North West

Mr S Du Toit (FF+, North West) said the North West province supported the Bill. The mandate also included a list of proposed amendments (see attachment)                                   

Western Cape

Mr E Njadu (ANC, Western Cape) said the Western Cape did not support the Bill and the reasons were given in the attached report (see attachment)

Limpopo

Mr Carrim read out on behalf of Ms M Mamaregane (ANC, Limpopo), the Limpopo mandate which was in favour of the Bill with the following recommendations:

• National and provincial treasuries should put measures in place to deal with procurement irregularities that might arise from spending on COVID-19 pandemic.
• Legal frameworks within municipalities should be tightened to provide for stringent monitoring mechanisms on all COVID-19 related expenditures.
• Spending on conditional grants meant for COVID-19 response should be strictly monitored in all spheres of government.                                                                               

Free State

Mr Carrim also read out, on behalf of Mr M Moletsane (EFF, Free State) who was experiencing network problems, the Free State mandate which was that the Free State votes in favour of the Bill and had the following concerns:  

• That the withholding of conditional grants was inappropriate as the unemployed and the indigent suffered a lack of service delivery.
• There should be an allocation to long standing challenges such as drought relief and a lack of water supply in some areas that Covid-19 has exposed.
• Municipal allocations should be increased to ensure they were functional.
• DORAB should be amended to provide for the drought disaster plaguing the Free State for the past few years.
• The review of the Provincial Equitable Share Formula must be expedited.
• The allocation for district municipalities should be reviewed in light of the district model approach.
• A Special Purpose Grant focussed on strengthening District Services Model Municipalities should be considered to ensure the sustainability of Category C municipalities.
• The administrative model of local government funding to deal with municipalities placed under section 139 should be reconsidered.
• Oversight agencies at different levels of governance must ensure enforcement of non-compliance of relevant and applicable legislations.

The Chairperson said that Treasury would respond in writing by Monday to the provinces’ inputs.            

On the Eastern Cape’s comment on the impact on economic recovery, Mr Steven Kenyon, Director: Local Government and Budget, National Treasury, said that the Division of Revenue Act covered only the first two out of three phases the country had, namely preserving and responding. The third phase would cover growth and structural reform changes. It was not looking at the medium term at this stage.

On adherence to SCM processes, he said non-adherence was not acceptable and any issues that were noted should be reported for appropriate action to be taken.

On measures to deal with procurement irregularities, he said Circular 103 of 27 May 2020 provided extensive preventative measures for this period and municipalities could be more responsive and flexible.

On drought relief and the need for greater coordination within the agricultural sector, he said Treasury was always working with national departments so that agricultural and land care grants and provincial grants through the national disaster management grants were engaged directly by the departments to ensure there was coordination.

He noted the request of provinces for more funding and there would always be requests for more funding but that would not be possible but they noted the additional pressures.

Another aspect that was raised was the extent of the reductions and reprioritisation. Treasury had already had extensive discussions with the Committee on the matter and was also as shocked at the scale of the crisis arising from the pandemic. Treasury was as equally shocked by the numbers and had been working hard to find funding for this unprecedented scale for the pandemic and also the economic implications of the pandemic. Treasury had never seen a R300b reduction in revenue in one year and was trying to manage this impact.

On uniform criteria for provincial treasuries to reprioritise the equitable share, Ms Wendy Fanoe, Chief Director: Intergovernmental Policy and Planning, National Treasury, said Treasury had given guidance to provincial treasuries and indicated the areas where they could do reprioritisation. The Covid related responses for each province however would be different and provinces were autonomous in determining how to redirect the funding.

On the requests for increases in the Local Government Equitable Share, she said that R11b was allocated as an additional allocation to municipalities and funds had been reprioritised through the conditional grants. Not only national, but provinces and municipalities needed to reprioritise its existing budgets because there would have been expenditure that would not have occurred in the lockdown period.

Mr Du Toit asked that he be allowed to read out the proposed amendments of his province

They were:

(a) That the Department of Social Development (DSD) provide vouchers instead of food parcels.

(b) The DSD budget be increased to assist needy parents buy school uniforms for disadvantaged children.

(c) That government establish co-operatives for young people instead of giving R350 in social relief.

(d) The Health budget be increased to enable disadvantaged groups to test for Corona Virus for free. 

(e) Since the corona virus pandemic began, food prices had increased with the disadvantaged community being unable to afford the price of food.

(f) The transport industry increased their fares and there was no social distancing in taxis, impacting the spread of Corona-19 virus in the community.

(g) The budget for the Department of Education be increased to enable the Department to offer bursaries to learners from Grade 10 to Grade12 and to remove bottlenecks in bursary applications and allow applicants who are at least 40 years to apply and not only up to 35 years.

(h) Human Settlement Grant: underspending of infrastructure grant whereas there are many infrastructure projects that are incomplete

(i)  CASP1 has been reduced by R36 million, and the North West is predominantly a rural province dependant on farming therefore the proposal to review the budget allocated.

(j) Emerging farmers in the province were issued with vouchers from the Department of Land Reform which were due to expire at the end of June 2020, and were later informed to return such vouchers. It proposed that this process be reviewed as they were meant to assist small-hold farmers.

Mr Ryder said that as it was the last meeting of the Committee, he would like to acknowledge the exceptional service rendered by Mr Kenyon and thank him for the work done for the Committee in light of his imminent departure from Treasury.

Mr Carrim added that his departure was a matter of considerable regret. 

Mr Njadu, on behalf of the Committee, thanked Mr Kenyon for his good work and wished him well.                                                                               

The Committee Secretary noted that the Committee still had one more meeting on the following Tuesday.

The minutes of meetings held between 10 June and 10 July 2020 were adopted.

The meeting adjourned