Division of Revenue Bill: Negotiating Mandates; Changes to conditional grant frameworks to support COVID-19 response: National Treasury briefing

NCOP Appropriations

20 May 2020
Chairperson: Ms D Mahlangu (ANC, Mpumalanga)
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Meeting Summary

AUDIO: Division of Revenue Bill [B3-2020]; Negotiating Mandates

The Committee met to receive negotiating mandates on the Division of Revenue Bill [B3-2020]. National Treasury gave a presentation on proposed changes to the grant framework to support the COVID-19 response.

National Treasury reminded the Committee that during a previous meeting on the Division of Revenue Bill, it was highlighted that engagements were currently underway with sector departments, provinces and the South African Local Government Association (SALGA) on how conditional grants can best be used to assist the response to the COVID-19 pandemic. This was in addition to the funds provinces and municipalities are reprioritising in their own budgets. Many grants already fund activities that assist, and in these cases those activities will be prioritised within the grant. A few grants will need small changes to grant frameworks to accommodate spending on additional activities (for example the purchasing of personal protective equipment).

Members asked about the school infrastructure backlogs grant. It was well and good to add trucking of water to fill tanks as a grant output, but there was need for timelines or horizon so that the output does not save as a replacement to ultimately having a long-term solution to the water challenge in schools. While the project is great as a temporary measure, there certainly has to be a permanent solution. They expressed concern about implementation of school feeding schemes. How was the scheme going to reach learners who are at home, if parents decide not to send them back to school so early? Was there no way of feeding the learners at home? Did Treasury believe the allocations were enough to enable the return of learners to schools? Was Treasury going to put in place a rigorous system to monitor use of the allocated funds by municipalities?

Eight provinces were in favour of the Bill. The Western Cape Provincial Parliament conferred its permanent delegate to abstain from voting on the Bill.

The Committee will meet for consolidation of final mandates the following Wednesday. Treasury will give a full response to concerns from Members and provinces in writing. 

Meeting report

The Chairperson welcomed everyone to the first phase of the consideration of negotiating mandates on the Division of Revenue Bill. He asked Members to confirm whether they had all received mandates from their respective provinces.

Members confirmed they did.

The Chairperson invited a presentation from National Treasury on proposed changes to the grant framework to support the COVID-19 response.

Briefing by National Treasury
Mr Steve Kenyon Treasury, Director: Local Government and Budget Framework, National Treasury, took the Committee through a presentation on changes to conditional grant frameworks to support the COVID-19 response. During a previous meeting on the Division of Revenue Bill, Treasury had highlighted that it was currently engaging with sector departments, provinces and the South African Local Government Association (SALGA) on how conditional grants can best be used to assist the response to the COVID-19 pandemic. This was in addition to the funds provinces and municipalities are reprioritising in their own budgets. Many grants already fund activities that assist, and in these cases those activities will be prioritised within the grant.  A few grants will need small changes to grant frameworks to accommodate spending on additional activities (for example the purchasing of personal protective equipment).

There are sometimes small changes to conditional grant frameworks between what is tabled as annexures to the Bill and what is gazetted. These are usually corrections to small errors, but Treasury was proposing to use this same approach to make the necessary changes to assist in the COVID-19 response. The details of these changes were still being finalised with departments. Parliament will be informed of all of the proposed changes before the Committee finalises its report on the Division of Revenue Bill. Some of the proposed changes to the grant framework were as follows:

School Infrastructure Backlogs Grant
Trucking of water to fill tanks as a grant output was added and conditions were changed to allow for submission of an amended business plan to National Treasury.

Education Infrastructure Grant
Output and condition to allow the grant to fund the costs to connect to local water supplies or drill and equip boreholes was added together with a condition to allow the grant to be used to truck water to schools for a limited period of time, subject to approval by the Department of Basic Education National School Nutrition Programme Grant. Further, a condition that personal protective equipment (PPE) and sanitisation equipment may be funded from the grant was added together with a condition that if schools are closed due to a declared state of disaster, funds from the grant that would have been spent on providing meals in schools may instead be used to provide meals to learners through alternative means.

Public Transport Operations Grant
Outputs for the number of vehicles and public transport facilities sanitised and personal protective equipment provided for drivers and other employees was added together with a condition that provinces may use funds form this grant to pay for the sanitizing of busses and public transport facilities and the provision of personal protective equipment for staff of the bus operators and provision for hand washing and sanitisers for passengers.

Urban Settlements Development Grant
The framework was amended by adding: outputs and conditions to allow the grant to fund operational costs for increased services in informal settlements; conditions to allow the grant to fund temporary relocation assistance; and output and conditions to allow municipal infrastructure grant (MIG) funds to be used for sanitisation and physical distancing in public transport and other public facilities in metros that do not receive the Public Transport Network Grant.

Municipal Infrastructure Grant
Amendments were made to incorporate conditions: to allow non-water service authorities to spend on water infrastructure; and to allow MIG funds to be used for sanitisation and physical distancing in public transport and other public facilities.

Water Services Infrastructure Grant
Conditions were added to allow grant funds to be used for trucking of water to refill tanks (subject to additional reporting requirements and time limits to be set by National Treasury).

Regional Bulk Infrastructure Grant
Conditions were added to allow: grant funds to be used for trucking of water to refill tanks (subject to additional reporting requirements and time limits to be set by National Treasury); and funding of local source development for areas served by water trucking.

Municipal Disaster Relief Grant
Conditions were added to clarify that the grant may be used to reimburse cities for spending on food and shelter for homeless persons during a disaster.

Mr Kenyon closed by saying it would be appreciated if Parliament could recommend that National Treasury include the proposed conditions in gazetted grant frameworks that enable grant funds to be used more effectively to respond to the COVID-19.

Discussion
Mr D Ryder (DA, Gauteng) appreciated the presentation and asked about the school infrastructure backlogs grant. It was well and good to add trucking of water to fill tanks as a grant output, but there was need for timelines or horizon so that the output does not serve as a replacement to ultimately having a long-term solution to the water challenge in schools. While the project is great as a temporary measure, there certainly has to be a permanent solution.

Mr S du Toit (FF+, Northern Cape) commented on the school infrastructure backlogs grant. The Minister of Basic Education had indicated the grant would be used to repair schools that had been vandalised. If this was the case, will there be any funds left to facilitate an efficient water supply to identified schools after the repairs are complete. Was there any cost estimate for said repairs? Secondly, what measures have been put in place by Treasury to prevent departmental overspending and instances of projects not being finalised and contracts not being honoured. Why was there no provision for drought relief in the various provinces such as the Free State?

Mr Z Mkiva (ANC, Eastern Cape) asked Treasury to speak to access to online learning and internet connectivity in rural schools. Schools in remote areas had to be pulled to par with urban schools.

Mr E Njandu (ANC, Western Cape) welcomed the presentation and commended Treasury’s transparency in processing adjustments to the grant framework. Communities wanted an indication of the timelines on when these projects with adjusted allocations would be realised.  

Ms M Latchminarain (ANC, Mpumalanga Provincial Legislature) expressed concern about implementation of school feeding schemes. How was the scheme going to reach learners who are at home, if parents decide not to send them back to school so early? Was there no way of feeding the learners at home?

Mr Y Carrim (ANC, KwaZulu-Natal) highlighted concerns raised by parents as well as the South African Democratic Teachers Union in relation to school feeding schemes. Obviously, managing the return of learners to schools is a complex matter. Did Treasury believe the allocations were enough to enable the return of learners to schools? Was Treasury going to put in place a rigorous system to monitor use of the allocated funds by municipalities?

The Chairperson asked about the costing of baseline reductions in some of the grants. She invited responses from Treasury.

Mr Kenyon, in response, clarified why the presented amendments did not include amounts. Changes to the amounts could only be done in the adjustment budget and will only come into effect two months from now, tentatively. He agreed there should be timelines to the school infrastructure grant as relating to water supplies and Treasury was working with the Department of Basic Education to spearhead this. The priority is water and sanitisation in schools as the first step. If schools do not meet these benchmarks they would not be able to open. Drought relief provisions would be funded through the provincial disaster relief fund- the rules do not need to be changed there. Treasury was not requiring that feeding schemes be undertaken in a different way- this is a decision the Department of Basic Education could take. Similarly, the timing for reopening is Basic Education’s competence. Monitoring of municipal spending, will be done for COVID-related spending. Treasury will give detailed responses to the concerns raised from Members together with submissions from provinces in writing.

Presentation of negotiating mandates

Eastern Cape  
Mr Mkiva, in presenting the Eastern Cape’s negotiating mandate, said the provincial legislature supports the Bill and mandates the Eastern Cape delegate to negotiate in favour of the adoption of the Bill. The province, has the following concerns: The Division of Revenue Bill makes use of an equitable share formula to allocate funds; much as equity is sought through population, education, health and other data, the formula still fails to respond to historic backlogs in the Eastern Cape, more so, the infrastructure related backlogs. Further, Treasury should review its decision to suspend Buffalo City Metropolitan Municipality (BCMM) from the Public Transport Network Grant but instead consider capacitation of the Metro with regard to this grant. The suspension of the BCMM from the grant will ultimately have adverse consequences on struggling communities in the metro that are already suffering from what the National Treasury has itself identified as lack of progress in delivering services.

Free State
Mr M Moletsane (EFF, Free State) said the provincial legislature voted in favour of the Bill despite concerns that withholding of the conditional grant is inappropriate as the victims are the intended beneficiaries - the unemployed, the poorest of the poor - who suffer from the lack of service delivery due to the withheld funds.
In certain cases, municipalities are expected to perform underfunded mandates and this results in financial constraints and sometimes failure to deliver on these mandates.

Gauteng
Mr Ryder said the provincial legislature supports the principle and detail of the Bill and therefore votes in favour of the Division of Revenue Bill.

KwaZulu-Natal
Mr Carrim said the provincial legislature met and agreed to mandate the KZN delegation to support the Bill.

Mpumalanga
Ms Latchminarain said the provincial legislature supports the Bill without any proposed amendments.

Northern Cape
Mr W Aucamp (DA, Northern Cape) said the provincial legislature votes in favour of the Bill.

North West
Mr du Toit said the North-West Legislature votes in favour of the Bill with proposed amendments.  

Western Cape
Mr Njandu said the Western Cape Provincial Parliament conferred the permanent delegate to abstain from voting on the Bill.

Limpopo
Ms M Mamarehane (ANC) said the provincial legislature conferred the permanent delegate to negotiate in favour of the Bill.

The Chairperson noted the negotiating mandates as presented and indicated the Committee will meet for consolidation of final mandates next Wednesday. Treasury will give a full response to concerns from Members and provinces in writing.
 
Adoption of minutes
The Chairperson put the minutes of the 13 May 2020 meeting up for adoption.

Mr Carrim moved.

Mr Mkiva seconded.

The meeting was adjourned.

 

Audio

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