Public Hearings on the MTBPS and 2023 Division of Revenue Amendment Bill

Meeting report

The Committees received submissions from several organisations on the Medium Term Budget Policy Statement and the 2023 Division of Revenue Amendment Bill.

SA Local Government Association (SALGA)

SALGA said that local government was facing increased pressure to deliver more services with declining budgets. This would lead to delays in service delivery and deteriorating service quality. It recommended that the national government design a comprehensive social security programme to protect vulnerable communities impacted by the negative global economic outlook.

National Treasury should note the financial impact of power outages and consider compensating municipalities for unintended costs associated with the energy crisis. Local government should be allocated funding for rehabilitating roads damaged due to the failure of the rail system.

SALGA said it did not accept the R3.3 billion downward revision of the gross allocation to local government for the 2023/24 financial year. It took note of the marginal increase of R8.6 billion in the allocation to local government from 2023/24 to 2024/25. However, these allocations decreased over the MTEF cycle.

See attached for full submission

TB Accountability Consortium

TB was a national emergency. Linkage to care should be improved to 90 percent. There was a need for coordinated action, prioritising and transparency. Community outreach should be strengthened with focused investment in priority districts.

There was a need for community health workers that were well-trained and for well-staffed clinics and efficient collection of results. There should be better use of the SMS notification system.
Given uncertainty about future funding flows, it was essential that Parliament consider how existing publicly funded healthcare capacity could be optimised and prioritise those with the greatest need.

See attached for full submission

Section27

Education and health care systems were underfunded. The MTBPS worsened this by proposing harsh nominal budget cuts to these areas, further reducing the resources available to provide quality public services and infringing on the constitutional rights of all, particularly the most marginalised communities in the country.

Parliament should insist on transparent and participatory human rights impact assessments in budget policymaking, ensuring that revenue-raising mechanisms do not increase inequality and undermine people's rights to quality basic education and healthcare services.

See attached for full submission

Rural Health Advocacy Project

Lower tax revenues, budget cuts and public sector wage negotiations would strain already fragile health services further.

Access to healthcare for rural communities should be prioritised. Young girls and women still had challenges in accessing family planning and immunisation services. 

There should be a joint sitting of the Portfolio Committees on Health, Finance and Appropriations to consider the impact of budget cuts on the state’s ability to meet its constitutional mandates. All provinces should present plans on what they were doing to protect health services against budget cuts.

See attached for full submission

National Union of Metalworkers of Southern Africa

NUMSA firmly believed that austerity measures and increased taxes would not fix a critically failing state. What was needed was to rather improve efficiency by having functional departments and institutions capable of delivering basic services.

The education crisis would only worsen with the R3 billion cut in funding for the National Student Financial Aid Scheme (NSFAS). Funding for programmes that increased skills and job opportunities was needed to bring the country back to a state where its citizens were no longer dependent on social security.

There needed to be urgent interventions in Transnet and MetroRail to rescue the freight and passenger railway network and modernise the ports. The government approach should improve the efficiency of the public sector through digitisation, modernisation of services and deploying artificial intelligence (AI).

There should be a basic income grant for the sea of unemployed people unable to survive in the current economic climate, together with the enhancement of social grants to meet the rising cost of fuel and food prices. 

See attached for full submission

Ilifa Labantwana

Continued neglect of the early childhood development (ECD) sector by the government was incompatible with South Africa’s development goals. Well-planned and managed increases to ECD funding were necessary to tackle intergenerational poverty and economic and gender inequality.

Ilifa Labantwana’s modelling showed that increases in funding amounting to an initial R700 million and R2.9 billion per year would yield tremendous impacts in time. It would improve skills and working conditions of 200 000 mainly female ECD workers; create 300 00 new job opportunities for women in low-income communities; relieve childcare burdens for up to two million caregivers; and close the school-readiness gap which by age 10, resulted in 80 percent of SA children being unable to read for meaning. It would stimulate township and rural economies through employment, higher incomes, skills, auxiliary services and infrastructure investment.

See attached for full submission

COSATU
COSATU appreciated the fiscal constraints and the need to cut fat and reprioritise expenditure, but Treasury’s blunt expenditure cuts in an economy desperately needing stimulus and well-oiled public services would only choke the economy and weaken already enfeebled public and municipal services. 
Government needed to signal a shift from Treasury’s “tried and tired” macro-economic policies and table an aggressive Budget in Parliament that protected the poor, rebuilt the state and grew the economy.

It should provide additional support to Eskom, which was turning the corner and making considerable progress to end loadshedding and ensure reliable and affordable electricity. It should urgently intervene at Transnet and MetroRail to rebuild the freight and passenger railway network and modernise the ports.

It should stabilise dysfunctional municipalities and restore basic services.  Debt relief provided for various municipalities was positive but needed to be accompanied by capacity building interventions.
It should allocate additional resources to the SA Revenue Service (SARS) to tackle tax and customs evasion, conduct lifestyle audits of the wealthy and generate badly needed state revenue. SARS had proven itself to be remarkably efficient and needed to be given further funding to increase tax compliance from 64 to 70 percent over the next two years, generating an additional R120 billion in state revenue.

See attached for full submission
Amandla Mobi
Amandla Mobi welcomed the extension of the R350 social relief of distress (SRD) grant and the year-long extension of the Presidential Youth Employment Initiative (PYEI). Also welcome was the decision not to hike VAT. The marginalised millions who struggled to put food on the table would not have survived an increase in the cost of living.
Personal income tax should be increased for those earning over R1 million annually. There should be a commitment to introducing an annual net wealth tax at a higher rate of three percent for those with a wealth of more than R3.8 million, seven percent for those with a wealth of more than R30 million and nine percent for those with a wealth of more than R146 million. Tax breaks should be stopped and corporate income tax should be increased.

See attached for full submission
Discussion

Chairperson Buthelezi said the presentations covered issues that affected the country’s youth, children and rural communities.

Mr A Shaik Emam (NFP) noted that all the presenters had raised the issue of budget cuts and their negative effects. He understood that because of decreased revenue, budget cuts were necessary. Economic growth was needed to increase revenue. High levels of TB were attributed to poverty in the country.

He had recently learnt that every contract had been given to the highest bidder within one municipality. Could SALGA work with the Committees to ensure that corruption was eradicated in the municipalities?
 
In the previous year, 91 000 children gave birth. What could be done about this?

Regarding the wage bill, he had learnt that South Africa’s public sector was the highest paid in the world. The unions should ensure there were competent staff to obtain value for money. Perhaps the example of Ireland should be followed by employing an independent body to hire everyone. This would ensure capacitated government structures. What could COSATU do to rectify the high costs of conducting business and the high amounts of imports, as this was costing many jobs?

Mr D Ryder (DA, Gauteng) said he was concerned about insufficient budget consultation. He always heard about the excellent function of the Budget Forum, but this was not showing. How did the balance of power work in the Budget Forum?

He noted that SALGA rejected the budget reductions. He urged SALGA to watch the previous night’s Appropriations meeting where National Treasury claimed that there was an over-supply of Treasury programmes to support local government. Could SALGA comment on these programmes and their impact?

There were instances of switching grant funding from direct to indirect funding, which removed the spending from local government. Could SALGA comment on this? He agreed that the funding model should be re-evaluated. Many assumptions were made but never came to light.

He commented on the cost of providing healthcare in different environments. He had recently done research on the Provincial Equitable Share (PES) per capita for the provinces. It was alarming to see the Northern Cape receiving R30 000 per head whilst other provinces received between R8 000 and R10 000 and the North West received R4 000. Could National Treasury explain these large discrepancies? He noted that some recommendations about health care concerned matters that the Committee could do very little about from a financial perspective. These should be directed to the Department of Health.

Chairperson Mahlangu asked SALGA about the difference they saw between comprehensive social security and the existing social compact. What was the difference between what SALGA recommended and what was already in place? How was SALGA assisting the National Government to address inequality, unemployment and poverty? She referred to the previous night’s meeting, where there was mention of the importance of local government. She suggested that SALGA look at the reports presented to the House, and consider the input by SALGA and their stakeholders. The SRD grant made a huge difference. She suggested that it be made permanent. She suggested that they not make demands but propose solutions regarding what could be done.

Ilifa Labantwana was an important entity. Had they shared their views with the sector committees on basic education? If so, what was the response? She reiterated that the stakeholders should go through the reports. Most of the issues raised were in those reports.

Mr W Aucamp (DA, Northern Cape) brought up the issue of municipal revenue collection and people not having enough money to pay their bills. Any company would be destroyed if it did not issue invoices timeously. In his hometown, municipal bills were not sent out timeously. Could SALGA indicate the percentage of municipalities in the country who did send out their bills on time every month? What was SALGA doing to ensure that municipalities were capacitated? Without services in place, they would not get anywhere.

Municipalities were at the coalface. Cadre deployment affected service delivery. It led to wage bills which had to be paid while services were cut. Competent people should be employed. Could COSATU comment on this? He acknowledged that COSATU felt that the wage bill should increase.

Mr X Qayiso (ANC) said the presentations highlighted the ongoing struggles in the economy. Would the R350 SRD grant be extended beyond the current year? If so, this amount was no longer sufficient and would require an increase. He hoped COSATU would discuss the basic income grant.

The culprits in the budget cuts were those who did not spend their money. If a department did not spend its funds, its budget would be cut and services would also be cut. Underspending led to cutting of services. Could the organisations comment on this? Unpaid invoices for water and sanitation services were very concerning as it indicated that no services were provided.

He asked SALGA about vandalism of infrastructure at the local level. He thought municipalities had the capacity to deal with this. The scrap metal trade invited vandalism. If there was no infrastructure to deal with vandalism at the local level, this would be an issue. How would SALGA handle this? Was there a legislative gap in dealing with scrap metal?

SALGA had mentioned issues of contractors and overtime. He asked for clarity on what was meant by ‘contractors’. What led to the over-time? What were the benefits of continued outsourcing? The Auditor-General (AG) picked up that people were employed to do auditing. What then was the need for outsourcing? Was this a problematic operational issue? Could it be resolved by the unit or department?

On the issue of implementing the Transport Infrastructure Grant, how would this correlate with the Road Infrastructure Grant? Road maintenance was a burden on municipalities because of the collapse of the railways.

Chairperson Buthelezi said SALGA spoke about the impact of inflation on households and the impact of interest rates on debt. What could be done about this? What did SALGA have to say about municipalities who failed to spend the infrastructure grants? What conditions for revoking electricity distribution licences was SALGA dissatisfied with? Had they engaged with the Treasury on how to handle such a matter?

SALGA was very quiet about resources available to them. What were the issues in this regard and how were they being resolved to increase revenue? What should be done to ensure economic growth in the near future?

On the issue of diagnosing more people who had contracted TB, he noted that Botswana had achieved the target of 95 percent with even fewer resources. 

SALGA responses  

Ms Phindiwe Gida, Chief Officer: Human Capital and Corporate Services, SALGA, said they would submit written answers to the questions about late invoices, vandalism and underspending on the Road Infrastructure Grant.  

There was budget consultation and it was not ineffective. SALGA’s comments at these consultations were not always considered. They were consulted by National Treasury and other organs of state. When legislation was finalised, they did not see their comments there.

Local governments had backlogs in investment in infrastructure for basic services. SALGA did not accept the budget reductions as that would worsen the problem.

They supported switching from direct to indirect funding, so that communities could receive investment in infrastructure and other services.

SALGA invested a lot in capacity building for councillors and officials in various areas such as asset management and revenue.

They partially agreed on the issue of current accounts and maintaining an 80 percent payment rate. Municipalities were unable to sustain payment rates for many years due to structural challenges. The current Eskom accounts could not as yet be paid. The liquidity status of these municipalities was not looking good. What was purchased was not being sold by municipalities; ageing infrastructure contributed to this.

Other responses

Mr Daniel McLaren, Public Finance Economist, Ilifa Labantwana, said they planned to engage with education committees on the Budgetary Review and Recommendations Reports (BRRRs). They also engaged with the national executive departments on ECD. The capacity of ECD was very low. The Committees should be very wary of any reductions impacting early learning because the sector was already underfunded.

Underspending could be a legitimate reason to reduce the budget but only under certain conditions such as mismanagement of funds. If the budget was to be reduced, there also had to be a turnaround plan in place. He was grateful for the rigorous budget process in South Africa. When budgets were allocated after years of research and those funds were then unspent, this was often due to a lack of capacity. Underspending was often used to justify a broader fiscal consolidation agenda. The data on underspending was not being provided. He had filled in requests for information on the underspending.

Better access to education, transport, housing, and security were essential for growth. The country’s long term growth prospects should be considered.

Ms Zimbini Madikiza, Community Liaison Officer, Rural Health Advocacy Project, said they had empathetic leaders who assisted with their projects. Well-functioning committees which were well-trained would also bring about change and social justice.

Ms Sihle Mahonga, Project Officer, TB Advocacy and Accountability Consortium, said their recommendations were to be handed over to the Department of Health. What they wanted to achieve was improved accountability for programme performances. Their focus was on engagements with Portfolio Committees on Finance and Health.

To achieve the objective of diagnosing 95 percent of people with TB, they require more than money. There should be a multi-sectoral and multi-disciplinary approach. They ultimately wanted to engage with all spheres of governance. They should focus on how the money should be used.
 
She agreed on having more engagements with civil society. When there was underspending, there was no way for civil society to engage on such matters, and this impacted accountability and transparency. She would look at the BRRRs as suggested.

Ms Matshidiso Lencoasa, Budget Researcher, Section27, said spending on healthcare, education and social services should be seen as investments rather than expenses because they had long term benefits. They would advance economic growth and protect the rights of the people.

The cost containment measures threatened to cause underspending in various areas. What prevented health programmes from collapsing in the Eastern Cape and KwaZulu-Natal was the monitoring of the programmes. When there was a reduction in investments and monitoring, this increased corruption and wasteful expenditure. The healthcare users ended up being punished.

She welcomed the recommendations made by the Committees and looked forward to hearing more in the budget speech.

Mr Matthew Parks, Parliamentary Coordinator, COSATU, said Treasury had mentioned that they had an expenditure crisis, hence the need for budget cuts.

There were many crises. Regarding practical interventions, good work was being done at Eskom. The biggest crisis was Transnet. It threatened to kill the mining industry, with many job losses. Clothing factories were struggling to sell their goods. Transnet had to be prioritised.

Local government was in free fall. About 36 municipalities struggled to pay their staff. The average resident did not care about having a mayor; they cared about having water, electricity and sanitation. The country tended to wait for everything to implode before picking up the pieces. There was a need to give infrastructure to businesses to operate and pay staff.

The SRD grant was not perfect but it provided many benefits to communities in need. It had not once been adjusted for inflation and this was an injustice. The Presidential Youth Employment Initiative was a positive intervention. The budget cuts made their operations difficult.

Why did the police headcount decrease from 208 000 in 2010 to 172 000? COSATU was engaging on how to rebuild frontline public services such as Home Affairs. They tried to assist government and business. Qualified engineers should be tasked to manage the pipelines and roads. Many municipalities were skirting around the issue of providing free electricity and water and the poor suffered in this regard. The issue of shifting budgets needed to be resolved.

Closing remarks

The Chairperson thanked everyone for their time and participation, saying it was a good engagement. He advised the organisations to continue engaging with other committees and with local government on the issues raised. He was encouraged to see youth dealing with the issues. He expressed his sorrow about the Proteas being defeated in the previous night’s game.

The meeting was adjourned.