Financial and Fiscal Commission Amendment Bill: Negotiating Mandates; Special Pensions

Meeting report

FINANCE SELECT COMMITTEE
19 August 2003
FINANCIAL AND FISCAL COMMISSION AMENDMENT BILL: NEGOTIATING MANDATES; SPECIAL PENSIONS

Chairperson: Ms Q Mahlangu

Documents:
Financial and Fiscal Commission Amendment Bill [B21B-2003]
Special Pensions Amendment Bill presentation
Special Pension Administration Bill B35-2002
Provincial Negotiating Mandates (see Appendix 1)
Response to Questions raised about FFC Amendment Bill on 5/8 (Appendix 2)
NCOP Proposed Amendments on the FFC Amendment Bill (see Appendix 3)

SUMMARY
The Special Pensions Amendment Bill seeks to introduce provisions that will allow for the condonation of late application and appeals. It also deals with the issue of the quorum for the meetings of the Special Pensions Board as well as the dissolution of the Board. The Bill furthermore seeks to make some technical corrections to the Act.

MINUTES
Special Pensions Amendment Bill
Mr T Magwaza (CEO of Special Pensions) said that the purpose of his briefing was to present the proposed amendments to the Special Pensions Act, 1996. He said that the Bill deals exclusively with administrative matters so as to facilitate the ongoing implementation of the Act. Policy issues would be addressed through a separate Amendment Bill in the near future. He then handed over to Mr M Lesufi to address the Committee.

Mr Lesufi noted that the Bill had been passed by the National Assembly. He then went through the Bill clause by clause:

Clause 1
The clause seeks to amend the Act so as to allow the Special Pensions Board to condone applications received after the closing date prescribed by the Act (01 December 1997).

Clause 2
This clause clarifies the powers of the Special Pensions Review Board to condone late appeals submitted after 60 days from the date of the decisions of the Special Pensions Board. This is necessary given the fact that there is confusion regarding the current wording of the section dealing with this issue.

Clause 3
This is a technical correction to section 14 of the Act regarding reference to the Military Pensions Act of 1976 - and not 1973 as stated in the Act.

Clause 4
The issue of the quorum for the meetings of the Board is problematic. As the Act stands it requires the Board must have five members but does not prescribe a quorum for the meetings. Clause 4 seeks to set the quorum at three members of the Board.

Clause 5
Under current arrangements the Board must dissolve after four years. Clause 5 seeks to amend the Act so as to extend the existence of the Board beyond four years.

Clause 6
The purpose of this amendment is to remove the requirement that one of the members of the Review Board must be an actuary. It has since been realised that it is expensive to require an actuary to sit in the meetings of the Board whilst some of the meetings do not need an actuary expertise.

Clause 7
The amendment seeks to provide for the validation of the late applications condoned by the Review Board following a misinterpretation of section 8 of the Act and the operations of the Board for the period after the date of dissolution of the Board as contemplated by the Act.

Clause 8
This clause seeks to amend the definition of military service so as to include Non Statutory Forces members access to benefits under the Military Pensions Act, 1976.

Clause 9
The purpose of this clause is to provide for the retrospective effect in respect of Clauses 5 (dissolution of the board) and 6 (members of the Review Board) to the commencement date of the Act (1December 1996).

Discussion
The Chairperson asked if dependants of people who died during the struggle would be covered by the proposed amendments.

Mr Magwaza said that one should look at two aspects: people who were killed or maimed whilst involved in streets battles such as members of the UDF on the one hand and those who were killed or maimed whilst sent on missions by their organisations. Only those who died in combat or service (e.g. MK and APLA soldiers) were catered for. He said that it was suggested that the TRC reparations should cover dependants of those who are not covered.

The Chairperson also asked if people who are not in the TRC report or records of the Special Pensions would be covered. Mr Magwaza said that he was not so sure as to the coverage of people who do not fall within the scope of the Act. If people who fall within the ambit of the Act are found, they would be referred to the relevant authorities as directed for by the Act. He also requested political parties and NGOs to forward names of people they think qualify for the benefits in terms of the Act.

Mr Xaba (KZN) noted that Clause 1 of the Bill excluded some people from making applications for benefits because they were under 35 years. He was concerned that the suggested condonation says nothing about this issue and the age restriction remains.

The Chairperson together with Mr Magwaza said that a second Bill is underway and would address the issue of age restriction.

Financial and Fiscal Commission Amendment Bill: negotiating mandates
The provinces presented their negotiating mandates (see Appendix). Mr M Makoela (ANC, Limpopo Province) withdrew the negotiating mandate of the Limpopo Province. Mr Z Kolweni (ANC, North West Province) said that there were delays on the side of the North West administration concerning their mandate.

Ms J Fubbs (Gauteng Province) said that no response had been given by Treasury in respect to a question raised regarding the timeframe for the Minister to give notice of vacancies to the Premiers. It had been promised that they would get the response within a week but the answers had been received only on 18 August 2003.

Mr I Momoniat (Deputy Director General- Intergovernmental Relations) apologised for the delay in answering some of the questions raised. The reason for the delay is that the person who was dealing with the issues has since joined Standard Bank of South Africa.

Mr Momoniat proposed the following amendments:
Clause 1
On page 2 after line 12 insert the following subsections

(2C) If the Commission fails to respond to any request within 90 days from the date of receipt of the notification and request contemplated in section 2(A) (a) or such period agreed with the relevant organ of state, the Commission must provide reasons to Parliament and any appropriate legislature for such failure

(2D) Before requesting the recommendation or advice of the Commission, the organ of state seeking to assign such power or function must seek the written approval of the Treasury in the relevant sphere of government.

With regard to the proposed (2C) Mr Momoniat said that he had no problem with changing 90 days to 180 days if members so wish.

2. On page 2 at line 21 insert the following subsections after "has taken account"-

the impact of the assignment on the future division of revenue between the sphere of government including the Act and criteria required in terms of section 214 of the Constitution;
the impact of the assignment on fiscal powers, capacity and efficiency of the provinces and municipalities receiving the new power and or function;
the impact of the assignment on the transfer of assets and liabilities; and
the measures established in terms of national legislation to promote and enforce transparency and effective financial and fiscal management.

Mr Momoniat reminded members that any assignment of powers or functions would always have an impact on the future division of revenue. He also said that the word 'staff' should be inserted after 'transfer of'-.

3. On page 3 in line 5 after 'measures' insert 'contemplated in (I), (ii) and (III) of paragraph (C)'

Clause 4

1. on page 4 at line five substitute the rest of the sentence after 'statements' with as required by the Public Finance Management Act, 1999 (Act no.1 of 1999).

Discussion
Ms J Fubbs said that Gauteng Province's concerns had been fully addressed and expressed her sincere thanks that they were taken seriously.

Mr Xaba (KZN) said he supported the proposed amendments as they substantially improve the Bill.

Mr Marais (ANC, Free State) asked if traditional leaders have been consulted given the fact that this Bill would affect different spheres of government. He said that there is a need for transparency because some of the functions handed over to municipalities may impact on Public-Private Partnerships (PPPs). It is important to involve the business sector as well. This Bill might give rise to the problem of unfunded mandates.

Mr Momoniat replied that traditional leaders would not be affected unless functions associated with traditional leaders are assigned to other structures. He also said that in terms of PPPs there is nothing to worry about, as people's contractual rights would still be respected. He did not think that it is necessary to deal with PPPs in this Bill.

The Chairperson said that Section 35 of the Public Finance Management Act deals with unfunded mandates and therefore Mr Marais had nothing to worry about.

Mr Marais said that the devolution of functions to municipalities would have different impact on different municipalities. He encouraged Treasury to research the capacity of different municipalities capacities and classify municipalities accordingly.

The meeting was adjourned.

Appendix 1:
The following provinces supported the Bill without amendments:
Mpumalanga
Limpopo
KwaZulu-Natal
Eastern Cape

The following provinces proposed amendments as follows:
Gauteng
1. NEGOTIATING POSITION ADOPTED BY THE COMMITTEE ON DETAIL OF BILL
The committee has studied the responses given by the FFC but notes that no response has been made in respect of the timeframe for the Minister to give notice of vacancies to the Premiers. Given a satisfactory conclusion of positions of Gauteng raised in Points 4.1.4.2 and 4.3 the committee would review its position in respect of the Financial and Fiscal Commission Amendment Bill [B21B-2003].

Report of the Guateng Legislature: Finance Committee Negotiating Mandate on Financial and Fiscal Commission Amendment Bill [B21B-2003] 18 August 2003

1.1. Amendment of section 3 Act 99 of 1997
In respect of any organ of state which intends assigning any power or function to an organ of state in another sphere of government to request the FFC's advice and or recommendation on any financial implications of the said assignment. When one considers this proposed amendment in relation to the (c) which insists that an assignment has no legal force until the organ of State assigning has indicated to the Commission the extent to which it has given consideration to the Commission's advice. Then (e) which sets aside this obligation detracts from the intentions of (a) (b) and (c) Given that the purpose of this amendment is to directly address those occasions when such assignments may result in unfounded mandates for provincial or local governments then in the opinion of Gauteng Provincial Legislature (e) should be rewarded to avoid the dilution of the primary Intentions of the amendments to which this refers.

1.2. Amendment of section 5 Of Act 99 of 1997.5 (1)(b)
in respect of (1) (b) Gauteng Supports the amendment which brings the composition into line with the Constitution (as amended ~ amendment Act, 2001 (Act No. 61 of 2001)]. Which reduces the number of members of the FFC from 22 to nine.

In Gauteng opinion this reduction of composition will promote greater cohesion within the FFC Commission and underpin its responsibilities of making recommendations that inform intergovernmental policy-making processes while avoiding any tendency to skew such advice towards an individual provincial and or vertical government sphere. The purpose of the FFC may well be enhanced and not diminished by the reduction of the members to ensure the selection of provinces of four members is achieved by consensus given that the financial and fiscal advice should take account of the country as whole.

1.3. Amendment of section 50, Act 99 of 1997. (2)(a).
In respect of (2)(a) and in relation to (3) which insists "the appointment to any vacancy on the Commission he made not later than 90 days from the date when such a vacancy occurs", Gauteng believes it would be equally important to indicate the time frames under (2)(a) related to the responsibility of the Minister to "notify each premier accordingly" of the vacancy.

1.4. Amendment of Section 26 of Act 99 of 1997
Gauteng fully supports this amendment to ensure FFC compliance with the PMFA, which underpins the principle of accountability and sound financial management.

2. RECOMMENDATIONS
2.1. Amendment of section 3 Act 99 of 1997. Section 1(a)(b)(e) Section 2(6)
Given that the purpose of this amendment is 10 directly address those occasions when such assignments may result in unfounded mandates for provincial or local governments then in the opinion of Gauteng Provincial Legislature (e) should be reworded to avoid the dilution of the primary intentions of the amendments to which this refers.

2.2. Amendment of section 5 of Act 990,1997, (2)(a).
Gauteng believes it would be equally Important to indicate the time frames under (2)(a) related to the responsibility of the Minister 10 notify each Premier accordingly' of the vacancy.

2.3. Amendment of section 5 of Act 99 of i997 5 (1)(b
The reduction of the FFC composition will promote greater cohesion within the FFC Commission and underpin its responsibilities of making recommendations that inform intergovernmental policy-making processes while taking in account the country as a whole.

3. PRINCIPLE AND DETAIL OF THE BILL
The Finance Committee supports the principle of the Financial and Fiscal Commission Amendment Bill IB21B - 2003]. However with respect to the detail the Bill, concerns have been raised and recommendations have been proposed in this negotiating mandate. Given a satisfactory conclusion of positions of Gauteng raised in Points 4.1, 4.2 and 4.3 the committee would review its position in the voting mandate.

Western Cape
1 That in Clause 3 on page 3, in line 51 to omit "5(b" and to substitute "5(1)(b)".
That in Clause 3, on page 3, in line 53, to omit "5(c" and to substitute "5(1)(c)".

Free State
Clause 7
Page 4, in line 22 after the word "section", to delete "2" and to substitute "5".

Motivation: Whilst section 2 deals with the 'status' of the Financial and Fiscal Commission, 'Members of the Financial and Fiscal Commission are contemplated in section 5'

Appendix 2:
FFC BILL, 2003
On 5 August 2003 a briefing was made to the Select Committee and most questions raised by the committee were, with the assistance of the representatives of the FFC answered. However, the following could not be addressed to the satisfaction of the committee -

Whether the FFC has the necessary capacity to deal with the requests for recommendation and or advice that will be requested by the assigning organs of state. The Bill has financial implications.

Response:
This is a matter that first requires Parliament to determine whether it wants the FFC to be more involved in the process of assigning functions between organs of state in different spheres of government. Such assignments always have an impact on the division of revenue between the three spheres of government, and often result in unfunded mandates. It is therefore critical that the FFC always assesses such assignments before they are effected, and develops such capacity should it not have it. Any financial implications for the FFC will be subject to the normal budget allocation process, but the FFC could also consider charging transferring departments for such requests not anticipated at the time of the budget.

Whether the new formula of appointment of commissioners to the FFC will not undermine the authority of the weaker provinces. The fact that the President will now appoint three from a list of four commissioners might affect the weaker provinces because the President might select only the stronger provinces. It was explained that firstly, the Premiers would have reached consensus on the shortlist but most importantly that when the commissioners are appointed to the FFC, they are in terms of the FFC, there to do the work of the FFC and must be impartial. They are not in the FFC to promote the interests of their respective provinces.
Response: I think the response above deals with the concern. Further, the FFC is not a decision-making body, and only makes recommendations to Parliament and the executive. Weaker provinces are free to raise specific instances of neglect during Parliamentary hearings or through the NCOP.

Why is the FFC Bill being dealt with at this late stage in the year?

Response: This Bill is the result of constitutional amendments effected at the end of 2001, and signed into law on 14 December 2001. The need for this Bill arose as a result of an amendment initiated by Parliament itself, and could not be in time for the 2002 parliamentary year, given the heavy legislative work programme in 2002 for both the department and the Portfolio Committee of Finance. The specific constitutional provision will only take effect after the Bill is enacted. It was tabled this year, and took into account the heavy work programme in the National Assembly, as section 76(4) of the Constitution requires the Bill to be tabled and passed in the National Assembly before it may be tabled in the NCOP.

What is the intention of section 2A(e)?
It would seem to be that, whilst an assignment of a power or function has no legal force or effect if the provisions of section 2A(c) are not carried out, if the FFC has not made it's recommendation or advice within the prescribed or agreed to period, after consultation with the National Treasury, the assigning organ of state can proceed with the assignment. It was felt that section 2A(e) is in contradiction with the rest of section 2A.
Response: (2)(A) (e) does not contradict the rest of 2(A), as it only deals with the case where the FFC fails to respond within the 90 day period or another period as may be agreed with the relevant transferring organ of state. In this instance, the transferring organ of state must still comply with the latter provisions of (2)(A)(c), ie that the assignment "has taken into account measures established in national legislation to promote and enforce transparency and effective financial and fiscal management" - this means that other legislation like the PFMA, MFM Bill and Intergovernmental Fiscal Relations Act must still be taken into account.

The FFC indicated that it will submit its comments to the Select Committee should it have comments any further comments to make.

Appendix 3:
AMENDMENTS OF THE SELECT COMMITTEE ON FINANCE N THE FINANCIAL FISCAL COMMISSION AMENDMENT BILL, 2003 (B21 B - 2003)

Clause 1
1. On page 2 after line 12 insert the following subsections

(2C) If the Commission fails to respond to any request within 90 days from the date of receipt of the notification and request contemplated in section 2(A) (a) or such period agreed with the relevant organ of state, the Commission must provide reasons to Parliament and any appropriate legislature for such failure.

2. (2D) Before requesting the recommendation or advice of the Commission, the organ of state seeking to assign such power or function must seek the written approval of the Treasury in that relevant sphere of government.

2. On page 2 at line 21 insert the following subsections after "has taken account"-

the impact of the assignment on the future division of revenue between the spheres of government including the Act and criteria required in terms of section 214 of the Constitution;
the impact of the assignment on fiscal powers, capacity and efficiency of he provinces and municipalities receiving the new power or function;
the impact of the assignment on the transfer of assets and liabilities; and
the measures established in terms of national legislation to promote and enforce transparency and effective financial and fiscal management.

3. On page 3 in line 5 after 'measures' insert ' contemplated in (i) (ii) and (iii) of paragraph (c)'

Clause 4
On page 4 at line 5 substitute the rest of the sentence after 'statements 'with as required by the Public Finance Management Act, 1999 (Act No.1 of 1999)