Appropriation Bill & Eskom Debt Relief Bill: public hearings

Meeting report

The Chairperson welcomed attendees and began the meeting.

Submissions on Appropriation Bill [B3-2023]

Equal Education Submission

Elizabeth Biney, Head of Research, Equal Education (EE), presented on: (1) the right to basic education; (2) the current context of basic education; (3) funding basic education; (4) expenditure issues; and (5) the role of the Appropriations Committee.

EE said the sector is plagued a poly crisis (learning, infrastructure, spending & governance challenges. Ending the #EducationBlackout & realising quality schooling cannot be achieved without adequate funding for the DBE, PEDs, and schools themselves. Adequate funding to the sector must address increasing inflation & increasing learner enrollment. NB: 2023/24 allocation to sector does not meet this criteria despite nearly being a billion rand added to the 2022/23 MTEF projection.

Funding allocation is only part of the current crisis in schooling. The sector, from the Department of Basic Education (DBE) to school level, suffers from endemic spending issues: underspending, irregular spending and fruitless and wasteful expenditure. The state of our schools would be drastically improved if education departments spent judiciously.

EE calls on:

• The Committee to reject the 2023/24 Budget and call for a budget for schooling that grows in line with inflation and learner enrollment.
• The Committee should take its oversight responsibilities seriously by actively engaging the department on how it spends monies and applying proper consequence management.  
• The Committee to ensure that proper oversight is provided if and when the Norms and standards get brought to Parliament for amendment.

Please see submission attached for details

Public Service Accountability Monitor Submission

Ms Lisa Higginson, Budget and Advocacy Coordinator, Public Service Accountability Monitor (PSAM), presented: (1) overview of key frameworks; (2) performance and resourcing of key institutions and departments; and (3) coordination matters.

The submission presented the budget trends of departments and entities in the criminal justice portfolio. PSAM said corruption impacts democracy, service delivery, social and economic development, investor confidence and public trust. Efforts to address corruption, including procurement reform, should be a priority. Frameworks have been developed, and institutions established, however these need to be adequately resourced to be effective. While additional resources are welcome, more needs to be done to coordinate across entities to improve outcomes.

The organisation presented detailed findings and recommendations for the Committee to consider as it deals with the Appropriation Bill.

Please see submission attached for details

Organisation Undoing Tax Abuse Submission

Ms Rachel Fischer, Parliamentary Engagement and Research Manager, Organisation Undoing Tax Abuse (OUTA), presented OUTA’s submission which covered the concerns about the Represented Political Parties’ Fund (RPPF) and funding provisions to the Independent Electoral Commission (IEC).

Under “Transfers and Subsidies”, OUTA notices the appropriation of R350 345 000 to the RPPF. Treasury’s contribution to RPPF has increased significantly: R149m (2018/19), R158m (2019/20), R163m (2020/21), R167m (2021/22) and a massive R342m in 2022/23, which was more than double that of the previous year has received which now receives an extra R350m taking it to nearly R700m for this year. 

OUTA is concerned about this additional increase to the RPPF, which is run by the Electoral Commission, especially in light of the recent budget cuts experienced by the IEC itself. Based on research conducted by studying the IEC’s Annual Reports, the IEC has experienced budget adjustments of:

• R278 501 000 for 2022/23

• R240 24 000 for 2023/24 

• R251 007 000 for 2024/25

 • Total: R769 749 000

These figures are supported by the IEC’s presentations to the PC on Home Affairs on 28 February 2023 and 22 May 2022. The IEC is integral to ensuring free and fair elections, safeguarding the principles of security and safety within the electoral lifecycle, as well as promoting voter awareness and encouraging the public to register and vote. The IEC should get more funding allocations, not political parties.

Please see submission attached for details

Congress of South African Trade Unions Submission

Mr Matthew Parks, Parliamentary Coordinator, Congress of South African Trade Unions (COSATU), presented COSATU’s contribution for the Appropriation Bill which covered: (1) key challenges facing South Africa; (2) the fiscal framework; (3) the public service wage bill; (4) revenue; (5) economic and social relief; (6) state-owned enterprises (SOEs); (7) infrastructure; (8) local government; (9) corruption and wasteful expenditure; and (10) appropriations.

COSATU said the President & Parliament need to hold Ministers & Departments accountable for the implementation of the respective commitments. We cannot afford to see billions rolled over, targets missed, monies lost to corruption & wasteful expenditure & commitments forgotten. Reverse callous budget cuts, especially to the SRD Grants & Presidential Employment Initiative. Elections are in 14 months. Voters will watch government over the next few months as they prepare to hand in their judgements at the ballot box.

Please see submission attached for details

Discussions

Mr W Aucamp (DA, Northern Cape) thanked the presenters. It was encouraging to see stakeholders participating in the debate over the Appropriations Bill.

He shared the concern raised by OUTA about political party funding. He stated that the ANC saw their funding depleting, allegedly unable to pay salaries, PAYE or all of their expenses. Election funding could be the only avenue for the ANC as an organisation to acquire more funding. Citizens got “nothing” from excessive political party funding in South Africa. He urged investigation into the current state of party funding in South Africa.

He agreed with the concerns raised by COSATU about the gross domestic product (GDP) figures and the unemployment rate. With an unemployment rate of 42.4% and GDP growth rate of 0.9%, it was unlikely that unemployment figures would be reduced in the near future. Government needed to create and facilitate an environment that was conducive to investment in order to improve GDP growth. Until such measures were implemented, the unemployment rate could not be adequately addressed. This would, in turn, have an effect on grants paid by government.

South Africa was experiencing a negative “snowball effect”. The government needed to start “doing the right things”, such as combatting crime and corruption, and avoiding discouraging foreign investment in the country through inconsistent or damaging statements and policies. If this was not done, the problem of high (and rising) unemployment would persist.

He agreed with COSATU that the country needed to fight corruption. The Committee dealt with the Appropriation Bill and matters of how and where funds were allocated. However, based on past experience, it was clear that most allocated funds were not correctly spent, at the expense of service delivery. Emphasis was needed on combatting corruption. Concerningly, police force numbers have been declining in recent years despite the high crime rate and corruption. It was critical to populate the police force with special investigating officers to fight corruption. 

It was concerning that the Department of Basic Education, crucial for developing reading, writing, and mathematical skills, was severely underfunded compared to the Department of Higher Education and Training’s budget. The higher education budget was three times higher than basic education. This is because the Department is currently bearing the brunt of the previous President’s promises about free education. Basic education is important for developing reading, writing, and mathematical skills. He argued that it is wrong because kids ought to have a good foundational education to prepare them for the future.

In the presentation, it had been stated that 175 out of 259 municipalities were not performing. The Committee returned to the same discussion every year – the fact that consequence management needed to be implemented to deal with these non-performing municipalities. However, the statistics consistently showed that there was no effective consequence management in place, as the non-performance persisted. It was concerning that those unfit to hold positions in the municipalities were not dealt with.

The DA opposed the National Health Insurance (NHI) - the NHI’s implementation would be a “grave error”.

There was a need for more specialist prosecutors and a budget increase for the Directorate of Prosecution Services to enable the hiring of specialist prosecutors, including the private sector, to assist in prosecuting corruption cases. In the current environment, it took too long for action to be taken in court and sometimes, when action did occur, it was not properly investigated. It was clear that more support was required.

Mr S Du Toit (FF+, North West) acknowledged the lack of funding for basic education and expressed concern about the fact that the budget for higher education was three times higher. Basic education was intended to lay the groundwork for future learning. It was regrettable that there was such a low proportion of grade four pupils that were able to read and write with meaning. It was more regrettable that the issue could not be solved. South Africa was struggling with a failed educational system, as evidenced by the thousands of students unable to find employment, even after graduating from matric. Basic education needed to be given a larger budget and the funds needed to be used appropriately.

More concerningly, the population growth in South Africa was outpacing economic growth. This had a negative impact on several issues, most notably the widening socioeconomic divide. He was concerned that the Expanded Public Works Programme (EPWP) and the Presidential Employment Initiatives did not provide value for money or return on investment for taxpayers. He stated that he does not believe having individuals dropped off with grass cutters is worthwhile because grass cutting does not qualify as intensive labour that should be compensated.

Funding for government departments was shrinking. The social component of the country’s budget was too large. While people required social assistance from government due to the high unemployment rate, the social budget was excessive. That was a political issue that needed to be dealt with. The focus needed to be on stimulating and facilitating an environment that was conducive to economic growth, rather than the government’s current approach of attempting to be the “largest employer in the country”, rather than allowing the public and private sectors to grow the economy and create jobs.

Mr M Moletsane (EFF, Free State) said Equal Education had raised a serious issue about the high percentage of learners unable to read and write for meaning. Did the Department of Basic Education, in fact, receive adequate funding but fail to use it correctly to support early childhood development (ECD) to address the challenges and equip pupils with necessary skills? What was Equal Education’s recommendation to resolve the issue?

The Chairperson thanked the presenters and noted the proposals that had been made.

She felt from the presentations and discussions that the budgets allocated to government agencies were insufficient. However, she urged the attendees to place themselves in the position of the Minister of Finance and the Administration. Whilst acknowledging that more funding was required, she questioned the Committee and presenters about where such funding could be found in light of the country’s economic position. How would the Members advise National Treasury on where to find the funds to assist the nation’s population?

She had a different perspective on the EPWP and the Presidential Employment Initiatives. While employees of both initiatives also paid taxes, they also gained from the initiatives because they were paid wages, helping them put food on tables. She questioned whether these salaries were sufficient. There was a purpose behind the EPWP’s work. She urged Members to refrain from claiming money was being poorly distributed and instead focus on how EPWP employees could carry out their duties most effectively to help the taxpayer.

She recognised the point highlighted by certain Members that some departments were allotted funds but failed to use them despite the budget being allotted to ensure a quality supply of services. This was lamentable. The Committee needed to focus on the departments’ outcomes and their levels of service delivery. The Committee needed to help the government and citizens to benefit from government funds and taxpayers’ money.

Responses and Further Inputs

Ms Biney said it was undeniable that higher education received a larger budget than basic education. Equal Education did not, however, advocate for “robbing Paul to pay Peter”. The organisation strongly believed that education in its entirety was a necessary social good. Therefore, both basic and higher education were significant and essential to fund properly because they served two distinct purposes that ultimately enabled and prepared citizens to lead productive lives. While Equal Education recognised that much thought and consideration went into the budget allocation and did not support funds intended for higher education being taken for basic education, the budget for the overall education sector was insufficient to address its numerous challenges. This meant it was not a matter of “either or”, but rather a matter of “and” because the funds were insufficient to enable educators to eliminate the issue of students being unable to read and write with meaning or for a purpose. After accounting for inflation, insufficient funding was available to pay for educational infrastructure or resources, train teachers, or pay them. The Department of Education had a terrible record of financial management, either underspending allocated funds or, when they were spent, not using the funding for the intended purposes. Therefore, Equal Education supported providing the sector with sufficient funding, but additionally, she urged the Committee and other stakeholders to check their oversight responsibilities to ensure the funding was being correctly used and going to the proper locations, products, and services. Equal Education was asking the Committee to “repair the pockets”, rather than asking Treasury to “pour money into the holes”. Therefore, in addition to more funding being made available, effective oversight and consequence management were required to prevent abuse.

The Chairperson said that the more money invested by government into basic education and ECD, the higher the public sector wage bill would be. This was because it was a personnel issue – teachers would need to be fairly paid.

Ms Fischer noted that the President’s salary had been increased by approximately 45% per year in the budget for Vote 1, from R2.9 million to R4.2 million. This was significantly higher than public sector wage growth. Similarly, the Deputy President’s salary had increased from R2.8 million to R 3.5 million, approximately a 25% increase. She wondered whose interests were being prioritised. While OUTA acknowledged that the function of the President and Deputy President was crucial, so too was ensuring free and fair elections and a stronger IEC.

OUTA was concerned about Vote 13 on Public Works and Infrastructure, particularly the items listed as “prestige accommodation” and state functions that funded activities of parliamentarians, ministers, deputy ministers, the deputy president, and the President. The programme’s funding has been approximately R 400 million for the past seven years. If calculated for 400 MPs and 90 National Council of Provinces meetings, this equated to nearly R790 000 per person over the time period. A story was published in City Press on 21 May 2023, with the headline, “Taxpayers pay R93 million to upgrade ministers’ kitchens, install generators, and kill cockroaches”. The article highlighted OUTA’s concerns about the manner in which public servants were using funding, including spending R1.4 million on kitchen upgrades and R240 000 to eradicate cockroaches in their homes. The fact that such figures had been certified by the Minister of Public Works and Infrastructure raised suspicions of impropriety. The integrity of democracy and the capacity of the IEC suffered at the expense of these exorbitant amounts spent on various ministerial privileges. OUTA suggested that government reconsider the amounts allocated in this category when receiving the budget appropriation.

The Chairperson was concerned about the public’s perception of the remuneration and work ethic of parliamentarians and public servants. She believed the public was misinformed about the compensation. However, a commitment to a lifestyle audit aimed at eradicating corruption has been made in this regard.

Mr Parks said that while there had been much debate over political party funding, it had many advantages and disadvantages, particularly given South Africa’s fiscal situation. COSATU had lobbied for more support for political parties in terms of funding as COSATU believed that political parties “ruled” the state, despite the fact that criminal groups sought to use access to political parties to make use of this funding. It was no longer only the ANC and DA involved in managing the state, but increasingly a wider range of parties. “Practically all” political parties were active in administering the state. The rationale for increased funding, especially during the election period, which was highly expensive, was to assist and defend smaller parties, or expose corruption. This allowed the protection of the political environment, thereby serving society by elimination corruption. According to COSATU, it was crucial to encourage increased political finance through the IEC. Nevertheless, political parties needed to report their donations received to the IEC and could not avoid doing so. While there would be “teething problems”, COSATU believed that doing so would “snowball” into additional public financing being available if all party funding was declared and made visible in a timely manner. COSATU was confident that this was how a contribution could be made to reducing corruption.

The solution to all fiscal concerns ultimately lies in building the economy. This could only be accomplished by removing fundamental hurdles to growth, such as load-shedding, the dismantling of Transnet and Metrorail, the backlog at ports, the backlog in money rate applications, and the challenges presented by crime and corruption. Young people needed to be assisted in gaining skills. “Political clumsiness”, observed across political parties at times, needed to be avoided as it did not benefit anyone. 

Another issue was police. Two-thirds of the country’s police force was stationed in headquarters, provincial offices, and desk positions, when they needed to be sent to community policing and specialised units. The majority of police vehicles were out of commission. Additionally, there was a significant backlog in investigations, which demotivated police officers and detectives.

Regarding basic education, COSATU was concerned that there were many dropouts due to numerous issues in public schools. There needed to be a discussion regarding Technical And Vocational Education And Training (TVETS) and Sector Education Training Authorities (SETAs) training. Not every young person in South Africa could attend university and thus there needed to be more artisan skill training made available. This could be advantageous for economic growth.

Consequence management was required in government departments. Towns were experiencing deteriorating infrastructure that they were unable to repair due to a lack of workers with the necessary competence and skill.

The Presidential Employment Initiative intervention was working. There had been favourable feedback.

The simplest and most effective way for the government to obtain funding was through the South African Revenue Service (SARS), being able to undertake effective tax collection from businesses and citizens.

Submissions on the Eskom Debt Relief Bill [B5-3023]

COSATU Debt Relief Bill

Mr Parks presented COSATU’s contribution on the Eskom Debt Relief Bill, which covered: (1) support for Eskom debt relief; (2) debt conditionality concerns; (3) municipal debt; (4) Eskom tariffs; and (5) additional support for Eskom.

COSATU welcomes Eskom Debt Relief Bill overall & supports its passage by Parliament.   COSATU has long championed the need for fiscus to take over Eskom’s unsustainable debt levels as part of a package of measures to enable Eskom to be stabilised, rebuilt & play the role it is meant to in the economy. Whilst COSATU welcomes Eskom Debt Relief Bill, we are concerned about some of its underpinnings. The Bill correctly highlights the need for measures to tackle the ever-rising debts owed to Eskom by many municipalities.   Yet there does not appear to be a correct programme of action to arrest this threat to Eskom’s survival. COSATU is deeply concerned about some of the conditions attached to the Eskom Debt Relief Bill, particularly a prohibition on investing in new generation capacity.

COSATU welcomes the positive aspects of the Eskom Debt Relief Bill & hopes that it will provide the support Eskom needs to ramp up maintenance & end loadshedding. However, COSATU is concerned about the attached debt relief conditions, particularly the prohibition on Eskom investing in new generation capacity. COSATU agrees with the Bill’s highlighting the need to tackle rising municipal debt levels. However, government needs to develop a comprehensive plan to tackle this fiscal threat to Eskom’s sustainability. Treasury needs to work with Eskom to deal with its fiscal leakages & develop an accurate cost-reflective regime that does not budget for corruption & wasteful expenditure and expects the public to subsidise this. The law enforcement organs need to play their role in supporting Eskom to tackle the criminality & corruption crippling it. 

See submission attached for full details

Dear South Africa Eskom Debt Relief Bill

Rob Hutchinson, Director: Dear South Africa, presented their submission for Eskom Debt Relief Bill which covered: (1) participation campaign; (2) campaign data; and (3) demographics.

Dear SA facilitated public participation on the Bill. A total of 9 298 comments were received by the set closing of 21 April 2023. Comments originated from all provinces, with the greatest input from Gauteng, followed by Western Cape and KZN.

Dear SA concluded that there is an overwhelming objection to the Eskom Debt Relief Bill, however, an understanding of the need to keep the lights on. Concerns over mismanagement, accountability, transparency and corruption. Will throwing money at Eskom solve the problems? Suggestions include privatisation, meaningful independent oversight, and skilled employees and management, free from political interference. 4. Public trust and confidence in Eskom’s ability and government oversight has eroded. 5. Negative impact of Climate Goals on private investment in coal-fired power stations. 6. Immediate and affordable solutions are required. Twenty-year Karpowership deal must be revisited

See submission attached for full details

Discussion

Mr Aucamp said that the privatisation of Eskom was the only solution to its issues. As long as corruption persisted, government would continue to bail out Eskom and pay the necessary sums.

What requirements did COSATU and Dear South Africa think Eskom should adhere to achieve further debt relief?

Despite COSATU’s belief that Eskom was too large to collapse, it actually had, and, as a result, all South Africans were suffering. What did COSATU think were the best generation choices for Eskom to consider?

Eskom needed to focus on improving its infrastructure. Some plants were incorrectly designed, while in others, equipment had not been adequately maintained.

Eskom needed to receive any payments owed by municipalities for power. Treasury needed to collaborate with Eskom to identify financial leakages and inform the public. Leaks would not be halted until Eskom tackled and eradicated corruption. Corruption was rampant at Eskom because there was no consequence management.

He disagreed with the claim that the legal trade in scrap metals had contributed to Eskom’s demise. He argued that shutting down the market would have been a grave error given how large it was and how little it had to do with Eskom’s issues. It needed to be made crystal clear that corruption was the reason for Eskom’s failure.

Mr Moletsane asked COSATU and Dear South Africa about their positions on the R70 billion in municipal debt owed to Eskom and how repayment could be made without having a negative effect on impoverished households and those unable to pay due to unemployment and poverty.

The Chairperson welcomed and appreciated the presentations from COSATU and Dear South Africa. She did not agree that privatising Eskom would solve the load-shedding and corruption problems. What alternatives to privatisation could the government use to address the problems at Eskom?

Responses

Mr Parks agreed that maintenance needed to be prioritised because it was the quickest and most efficient approach to cease loadshedding. COSATU could not endure an ongoing collapse of half the electricity grid’s capacity. Eskom needed to shift to a more modern and efficient generation capability and capacity. However, COSATU disagreed with National Treasury that this needed to happen immediately. Mr Parks did not understand why this should be permitted to happen immediately. COSATU opposed this immediate action because Eskom first needs to fight wasteful spending to avoid corruption. Wasteful spending through corruption had crippled Eskom, and another level of criminality had established itself across all levels at Eskom. In some cases, it would take criminal prosecution to remove these elements, otherwise the situation would remain unchanged.

COSATU advised that the nation should treat Eskom " better " because some stolen funds had been recovered from some of the businesses that owed Eskom. They must prosecute, yet Eskom is unable to as this is the reasonability of law enforcement/prosecution.

Municipal debt collection needs attention. Prepaid meters need to be looked at together with more affordable tariffs based on “clean costs” – corruption and incompetence could not be considered and accommodated.

To help Eskom cut maintenance costs, COSATU agreed that Eskom needed to transition to new forms of generation that addressed the challenges of climate change. Newer plants would be more effective, simple to operate, and quicker to implement.

Eskom required assistance expanding its transmission network, as some regions, such as the Northern Cape, were already at capacity. This led to new issues as the province had to import more generation capacity. According to COSATU, it was a perfect time to argue that the private sector should not be the only one to enter this market. Community-owned generation capacity needed to be encouraged and self-sufficient generation capacity needed to be developed. COSATU wanted Eskom to enter the market as an “owner”, rather than a “supplier”.

Ringfencing of energy bills should not be a problem, but there were other side effects and many moving parts that needed to be managed as many municipalities cross-subsidised other municipal services using Eskom or electricity tariffs.

As many of the municipalities in question, especially those that owed money to Eskom, had poor rates bases, shifting to a system of direct payment of power would force the state to find new means to subsidise municipalities. This indicated that the funding paradigm needed to be changed. The state did not need to combine parts of these municipalities, because the state could not support 259 mayors, mayoral committees, and municipal managers, amongst others. The Department of Cooperative Governance and Traditional Affairs (COGTA) and National Treasury had not taken the issues seriously enough – some towns were too small to “remain viable”. 

COSATU did not call for a permanent ban on scrap metals, only a temporary one. The goal was to provide “breathing room”, crack down on cable theft from the perspective of law enforcement, and for government to consult with metals traders on how to regulate the sector. There were legitimate companies that offered services for recycling metals, however, there needs to be a regime where the people that brought in the metals disclose and verify the source of origin - criminals cannot be allowed the strip metals from public infrastructure at huge cost to lives and the economy and the scrap metal dealers were asked no questions. The fact that South Africa exported more copper than the mines produced in a year defied logic. There were good examples, such as the City of Cape Town, where law enforcement had a copper head unit that had performed admirably in terms of combatting criminal elements in the field. South Africa needed to be in a position to start regulating the trade.

Regarding the issue of debts due to Eskom, it was incorrect to believe that only the poor were responsible. Numerous businesses, hotels, the Nigerian Consulate in Johannesburg, government agencies, and SOEs all owed Eskom sizable sums of money. There was a need to look at the debt and identify what was recoverable. Where it was recoverable, those responsible needed to be pursued, and what remained be written off. Those who could afford to pay and had the money needed to be dealt with “extremely brutally” and needed to pay quickly. Thereafter, a switch to prepaid was needed since government could not afford to pay R254 billion in bailouts annually. This was money that might be used to build hospitals, pay the police, fix schools and roads etc. For poor homes, a discussion with COGTA and the South African Local Government Association (SALGA) was required to register all indigent households. With prepaid, free electricity provision can be increased to legitimate indigent households. If everyone pays, it gives more space to help the poor. Often poor households do pay but the problem was with the municipalities. If we fix these holes, there will be a positive cascading effect.

Mr Parks said everyone had a part to play in saving Eskom which was the lifeline of the SA economy. Everyone must contribute solutions because government on its own did not have all the answers. Everyone is part of the problem – if we do not pay –and everyone is part of the solution.

Mr Hutchinson said that Dear South Africa supported the premise of privatisation. It had generated results in other companies such as Telkom and had transformed failing businesses into viable and investor-friendly enterprises. He suggested that a form of privatisation within Eskom was implemented by allowing businesses to generate their own power capacities. This was a good step towards privatisation. It would create healthy competition and encourage investments that could be beneficial for the economy.

Private auditing of the distribution and use of the funds was one of the conditions that should be attached to further Eskom debt relief. Additionally, the money needed to be used for power plant maintenance and repairs, loan repayment, and future debt payments. The private sector needed to be involved in the auditing of maintenance estimates, the auditing of receipts and bills, and the management of maintenance and repair activities. The Zondo Commission report and others show there will be continued corruption and misappropriation of funds if the private sector is not involved in oversight. Overcharging was easily done in sectors of maintenance and repairs if the competent staff was lacking. The private sector had many competent individuals which could play an oversight role and this should be a major condition attached to the Eskom Debt Relief Bill.

The Chairperson thanked the presenters and stakeholders for their time and contributions.

The minutes for the meeting held on 17 May 2023 were adopted by Mr Aucamp and seconded by Ms L Moss (ANC, Western Cape).

The meeting was adjourned.