Appropriation Bill 2018: input from Human Sciences Research Council & DA

Meeting report

The Chairperson welcomed everyone and acknowledged that the Human Sciences Research Council (HSRC) is an important and valued partner to the Committee as stakeholders work together to ensure that the socio-economic benefits of the scarce resources available to the people are maximised.

Briefing by HSRC

Prof Ivan Turok, Executive Director: Economic Performance and Development Unit, HSRC, gave the socio-economic context of HSRC’s assessments. Economic slowdown during the last five years meant lower tax revenues and a need for spending reductions. The main issues of concern were: high government debt (24% of GDP (2009) up to 53% in 2018); large budget deficit (4.3% of GDP); growth of debt servicing (10% per annum since 2009); growth of public sector wages and low investment. This implied government had little room for manoeuvre. Overall, there had been a shift in approach from counter-cyclical spending.

The Committee was advised to holistically assess cost efficiencies and whether public spending is worthwhile. The Committee could set some criteria to judge whether current spending is appropriate and beneficial. It could further ask public entities what criteria they use to monitor and evaluate their policies and programmes. The Committee should further interrogate government entities on whether economic considerations feature in their M&E frameworks, and if social protection for people living in poverty feature. Also, areas of inessential or non-priority expenditure needed to be explored and the Committee could put information on spending criteria and impacts into the public domain - for wider public oversight/accountability.

In its efforts to assess the trajectories of economic growth, investment and jobs, it should be noted that there is no simple formula for government to stimulate growth. Economic growth is the outcome of many different factors and decisions, including intangibles such as business and consumer confidence. The broad composition of public spending may not be one of the main factors that determine economic growth. Therefore, how decisions are made, and how priorities are selected was paramount. Different forms of spending also impact on economic growth over different timescales – some in the short-term (like housing construction) but others only over the long-term (like education or infrastructure). Key issues to be interrogated would include: the balance between investment in economic infrastructure; spending on social services; and spending on public administration (government employees); whether there is an appropriate balance between spending on the maintenance and repair of existing infrastructure and investment in new infrastructure; and whether economic considerations influence the detailed pattern of spending. Further, the risks posed by State Owned Enterprises (SOEs) on the fiscal outlook were a big issue and there were significant difficulties. The Committee could demand more information from the relevant SOEs to justify requests for extra resources, and insist on conditions being attached to any approvals.

Prof Modimowabarwa Kanyane, Acting Research Director: Democracy, Governance and Service Delivery, HSRC, identified critical areas, on Vote 4, which the Committee should give attention to. Cooperative Governance and Traditional Affairs (Vote 4) affects the lives of more than 16 million citizens in rural traditional communities, living in low-level economic areas (former Bantustans). 23 years into democracy, the relationship between local municipalities, traditional leaders, traditional councils and communities fails to fully realise constitutional and socio-economic rights of communities, especially access to basic services to ensure better lives. Rural local municipalities continue to experience capacity constraints to deliver services to distant communities due to spatial transformation challenges. Ward councillors and ward committees are generally ineffective, exacerbated by the low level of traditional leaders’ cooperation and participation. Traditional leaders have constitutional recognition and local power, and demand acknowledgement of their perceived mandate including decision-making on land allocation and usage as well as development. There is increased dispute about traditional leaders’ legitimate leadership which remain under-resourced. Communities suffer from high levels of poverty and unemployment; they have split loyalties and must navigate between local municipalities, traditional leaders and traditional councils for livelihoods. All these issues raised need to be appropriately prioritised through adequate appropriation to ensure that service delivery and development in communities is effectively enhanced. There is therefore a need to reprioritise Vote 4 appropriations to allow more funding to execute applied research to inform transformative governance and attaining better lives in relation to the Constitution.

Dr Vijay Reddy, Executive Director: Education and Skills Development Research Programme, HSRC, said that the 2018/19 budget does not address Grades R and RR. She told the Committee that Grade R is currently not compulsory, that resources and conditions for Grade R teachers are not consistent with other teachers in the schooling sector and that a key challenge is programming for the first 1 000 days of school, which should address not only the needs of high-risk families, but also maternal mental health and its effect on child development. Solid educational foundations are key to any future educational, labour market and societal success. Investments in early years to build solid foundations means less need to play catch up later. Therefore, HSRC proposed prioritising first five years of school/first 1000 days of school (Grade RR, R, 1, 2, 3) to improve the pace of educational outcome changes.

Food security remains a cause for concern worth much attention. Notably, almost half (45.1%) of 1961 surveyed households faced food shortage problems that are severe enough to be affecting everyone in the household, including young children on a weekly basis. Food is frequently unavailable and when it is, most commonly it is starchy carbohydrates and fats that are high in energy but low in nutrition. Unlike many of the published studies that identify overweight and obesity emerging in adolescents, this data points to both under and over nutrition in children as young as seven years old. Implications are dire. The most significant health consequences of childhood overweight and obesity, that often do not become apparent until adulthood, include: cardiovascular diseases; diabetes; and certain types of cancer (endometrial, breast and colon). Chronic malnutrition (which causes stunting) is devastating to young children and results in impaired brain development, lower IQ, weakened immune systems and greater risk of serious diseases like diabetes and cancer later in life. Therefore, HSRC recommended as follows: all infants and children aged less than five years presenting to primary health-care facilities should have both weight and height measured in order to determine their weight-for-height and their nutritional status according to child growth standards. Also, these facilities should provide counselling to parents and caregivers on nutrition and physical activity including promotion and support for exclusive breastfeeding in the first six months and continued breastfeeding until 24 months or beyond.

Prof Heidi Van Rooyen, Executive Director: Human and Social Development Programme, HSRC, said post-school education remains a highly unequal area in South Africa. Fee-free education will fix the inequity in enrolment rates, but will not address the 55% failure rate among students or the fact that white students’ completion rate is 50% higher than that of black students. Therefore, HSRC recommended investments in university-bound school learners, student-teacher dialogues, mentoring and accountability strategies, and easily accessible psycho-social and writing/computing services. Further consideration should be put towards investments in university bound school learners – student learner dialogues; mentoring and accountability strategies (peer, professional, using technology); upgraded orientation– compulsory, two opportunities a year, focus on equity and self-guided learning; strategy to make psychosocial and writing/computing services accessible; establishment of a race and gender ombud on all campuses; and training lecturers and admin staff to offer help.

Prof Khangelani Zuma, Executive Director; Research Methodology and Data Centre, HSRC, outlined Department of Health-related issues (Vote 16) which the Committee should reflect upon, particularly on HIV/AIDS, Tuberculosis, and non-communicable diseases (NCDs). South Africa had more people living with HIV - estimated at 7.1 million in 2017 - than any other country, with a prevalence of 19% among adults aged 15-49 years. These estimates were expected to increase partly due to reduced HIV/AIDS related mortality and consistent incidence that is greater than 1%. Prevalence for adults aged 25 years and older continues to increase albeit an ageing epidemic. The HSRC and its partners are currently conducting the 2017 national population-based HIV survey among 60,000 people and the first-ever national TB survey among 55,000 people. SA has one of the world’s worst TB epidemics driven by HIV, with an estimated 349,582 (1% of population) new cases in 2012 or 1,003/100,000 population in 2012. The results of HIV survey were expected in July 2018 and those of TB survey in early 2019. On NCD costing and economic impact assessment, there is very limited comprehensive and systematic data on costs and economic impact of NCDs in South Africa. This data is critical to understanding the investment and budget needs for NCD control, and thus the need to prioritise availing funds to carry out such assessments.

Prof Turok said political pressure to fast-track land transfers have increased over the past 24 months and striking a balance between the demand for equitable land reform, as entrenched in the Constitution, and the need for macroeconomic stability has been difficult. The HSRC believed that policy revisions must be combined with a clear strategy of satisfying rural land needs that will sharply reduce asset (wealth) inequalities. Well-planned asset redistribution was critical to boost rural prosperity and standards of living.

Discussion

Mr N Gcwabaza (ANC) asked for the entity’s views on sprucing up efforts to lure private sector investment within the domestic economy. Would the government be doing the right thing by stimulating the economy through public spending?

Mr D Maynier (DA) said based on the quality of the presentation, Parliament should consider closing the HSRC down. The presentation was weak, and largely made use of recycled data from Treasury. The Committee expected concrete proposals about how the budget should be amended. HSRC’s work was amateur at best.

Ms D Senokoanyane (ANC) asked for the HSRC’s proposals on how government could deal with debt servicing.

Mr N Paulsen (EFF) asked whether there had been a reduction in HIV/AIDS prevalence given the huge spend by the Department of Health on the fight against the scourge. Insights on the statistics would shed some light on whether government efforts to combat the scourge were successful. He assured HSRC that Parliament would not consider closing it down as suggested by Mr Maynier.

Prof Turok, in response, said investor confidence is fundamental in stimulating all forms of investment, and domestic investment is fundamental to growth. Answers to the challenges confronting the country currently were not straightforward. There is a whole spectrum of ideas and willingness by government to engage with the private sector is crucial as business is one of the key stakeholders in society. He emphasised the need for a synoptic view on various regulations and to have them streamlined. Also, the best debt servicing strategy would be to grow the economy as a means of reducing borrowing. 

Prof Zuma said the country needed to exert much effort in fighting against HIV/AIDS as well as NCDs. Although mortality owing to HIV-related complications was on the decline due to the uptake of antiretroviral treatment, the incidence of NCDs was on the rise and this was a cause for concern. Government had taken great strides to fight against these epidemics but a lot still had to be done.

The Chairperson appreciated the quality exchanges and indicated that HSRC’s inputs on early childhood development, the interface between municipalities and traditional authorities, streamlining and deepening public participation in development projects, ensuring effectiveness in healthcare, and improving completion rates in higher education and NSFAS monitoring systems will form an important part of the Committee’s oversight over the budget allocation and department’s service delivery performance.

DA submission on the 2018 Appropriation Bill

Mr Maynier took the Committee through DA proposals on the 2018 Appropriation Bill. He noted that on February 2018, the former Minister of Finance announced an increase in the Child Support Grant in Parliament. The announcement included: an increase from R380 per month to R400 per month from 01 April 2018; and an increase from R400 per month to R410 per month from 01 October 2018 in the Child Support Grant. However, the increase in the Child Support Grant remains below the “food poverty line” of R441 per month in South Africa. As the Money Bills Amendment Procedure and Related Matters Act makes provision for the amendment of the Appropriation Bill by Parliament, the DA therefore, proposed 170 amendments to provide for an adjustment in the amount of R5.36 billion to the Appropriations Bill, to provide for an increase in the Child Support Grant to a level that is in line with the “food poverty line” in South Africa. The proposed amendments were “budget neutral” and will be funded by reprioritising expenditure within the existing budget, and will have no effect on the fiscal deficit for 2018/19.

The DA further proposed an amendment to the Appropriations Bill, to increase the appropriation of Vote 17: Social Development, by R5.36 billon to provide for an increase in the Child Support Grant, to a level that is in line with the “food poverty line”, in 2018/19. The following savings were proposed to fund the proposed R5.36 billion adjustment to the Appropriation Bill:

• A “spending freeze” on VIP Protection Services [Vote 23, Police, Programme 5, Sub-Programme 1], Prestige Policy [Vote 11, Public Works, Programme 5] and International Relations [Vote 6, International Relations and Cooperation, Programme 2], which will generate a saving of R 17.4 million;
• a 5% “haircut” on cost containment items including advertising, communications, entertainment, travel & subsistence and venue & facilities, except national departments “firewalled” from spending cuts, which will generate a saving of R708 million.
• a “general spending freeze” on current spending not included in the cost containment “haircut”, in all national departments, except national departments “firewalled” from spending cuts, which will generate a saving of R4.6 billion in 2018/19.

The DA proposed that the savings do not apply to twelve national departments which it believed should be “firewalled” from spending cuts, including Basic Education [Vote 14], Higher Education and Training [Vote 15], Health [Vote 16], Social Develoipment [Vote 17], Correctional Services [Vote 18], Independent Police Investigative Directorate [Vote 20], Justice and Constitutional Development [Vote 21], Office of the Chief Justice and Justice Administration [Vote 22], Police [Vote 23]1,, Water and Sanitation [Vote 36], Human Settlements [Vote 38] and Rural Development and Land Reform [Vote 39]. The DA also proposed that the savings do not apply to four specified programmes, which it believed should be “firewalled” from spending cuts, including National Disaster Management Centre [Vote 4, Programme 4], Community Work Programme [Vote 4, Programme 6], the Expanded Public Works Programme [Vote 11, Programme 3] and the Citizen Affairs Programme [Vote 5, Programme 2].

The DA believed the 170 amendments to provide for an adjustment in the amount of R5.36 billion to the Appropriations Bill, will provide significant relief to the poor by increasing the Child Support Grant to a level that is in line with the “food poverty line” in South Africa.

Discussion

Ms Senokoanyane pointed out that the DA was in the habit of tabling its proposals very late into Committee processes; which could be seen as a means of frustrating and delaying the work of the Committee.

Mr Gcwabaza said most of the DA proposals were pre-empting the medium-term expenditure framework (MTEF). Pre-empting processes which would unfold during the course of the year was uncalled for. The DA’s proposal to cut funding for the country’s international obligations was unrealistic as it meant SA would have to abort its diplomatic missions; something which could not surely be done. Also, the spending freezes identified were vague. In addition, it was patronising and undermining the integrity of the poor for the DA to seek to entice these communities with social grants, which was only just one aspect- among many- of government efforts to address poverty.  

Mr J Maswanganyi (ANC) commented on the proposal to reduce allocation towards corporate governance and traditional affairs. Such a proposal at a time when there were such huge challenges within municipalities could not be understood. He added most of the expenditure reprioritisations suggested by the DA were not feasible in the current conjuncture.  

Mr Maynier replied that there had not been any delay in submitting DA proposals as the party wrote to the Chairperson in good faith to indicate its intention to make a submission way before. Also, there was enough time to consider the proposals as set out by the timeframes in the Money Bills. It was not a correct interpretation to say the proposals were pre-empting the MTEF as Treasury had already proposed a lower social grant increase, to be effected after MTEF presentation. The DA proposals were not undermining the dignity of the poor, the contrary was true as the proposed increase in social grants would actually enhance people’s dignity.

The Chairperson noted the majority of Members’ concerns and added the proposals would mean undoing the whole Appropriation Bill processes and essentially starting afresh. She emphasised the importance of extensive public participation in the budget process and the value of consulting widely and broadly on all issues pertaining to the 2018 Appropriations Bill. She put the proposals up to a vote.

The majority of Members rejected the DA proposals.

The meeting was adjourned.