Financial and Fiscal Commission briefing: Members' Orientation

Meeting report

Financial and Fiscal Commission: Budget oversight

Prof Daniel Plaatjies, Chairperson: Financial and Fiscal Commission (FFC) he welcomed this opportunity to present as he believed it would help the FFC understand the challenges the Appropriations Committee would face over the next five years. This committee was similar to the Standing Committee on Public Accounts and the Finance Committee, which were the most hard-working committees. It was one of the pillars of financial management accounting within Parliament. It was involve in the financial administration and accounting of the country. If the FFC missed anything during the presentation, the Committee was welcome to contact it for help as long as enough notice was given .

The presentation was to answer the question posed regarding South African budget oversight: How could legislatures improve oversight over the executive branch, associated administrations, agencies and entities within national, provincial and local government? How could Parliament strengthen its intergovernmental oversight and its collaborations?

 Role and Functions of the legislature

The Commission highlighted that the legislature plays a central role in facilitating access to and delivery of public services through the following:

• Passing legislation;
• Overseeing government actions and implementation of government’s programmes by departments and public entities;
• Facilitating public participation and international participation.

Other roles of Parliament included the promotion of the values of human dignity, equality, non-racialism and non-sexism, and upholding citizens’ political rights, basic values and good principles for governing public administration and overseeing the implementation of constitutional imperatives.

Professor Plaatjies said that the oversight role of the legislature was a constitutionally mandated function of legislative organs of state, to scrutinise and oversee executive actions and any organ of state in terms of section 42(3) and 55(2)(b) of the constitution. Oversight of the legislature entailed the informal and formal strategic and structured scrutiny in respect of implementation of laws, the application and implementation of the budget and appropriations, and compliance with the statutes and the constitution.

Parliament and the legislatures must exercise oversight to achieve country outcomes (outcome 1,2,3 and 4), improve citizens’ wellbeing, detect and prevent abuse, prevent illegal conduct, safeguard the country’s resources and increase public trust.

The view of the FFC was that whenever a Parliamentary committee engaged with a member of the executive branch, agencies or administrations of various entities, it should look at what the priorities were that had been set in the State of the Nation Address (SONA) and in the different manifestos. To achieve the country’s outcomes was a long-term matter, because one had to look at how the inputs related to the outcomes. Outcomes were measured over five to 15 years. One could not see outcomes immediately.

A key thing that the FFC had learned over the years through various works was that it was easy to look at the issue of inputs. There was a whole debate around the nature of inputs. Departments and entities talked about inputs in terms of staffing, the number of human resources required, the financial resources (budget) and the other range of inputs that needed to be put into the system. What often happened in the Parliamentary process over the last 20 years was that there was always a measure about whether those inputs had been delivered correctly and fairly, and whether one could see what the administration was doing.

What was not measured adequately and consistently was outputs. For example, many years ago a road had been built in one municipality. The road was supposed to be 120 kilometres long. After five years, the municipality said they had built the road, but when the FFC asked how long the road was, they were informed that it was 70 kilometres . The input and agreement was that a road of 120 kilometres was going to be built, but only 70 kilometres had been built. The 70 kilometres of road that had been build did not have a spillover effect in terms of the economic benefit, schooling, or goods and services. The road was not even close to the main road, freeways, other rural areas, provincial roads or municipal roads. The issue was what the inputs and outputs were that needed to be delivered on.

The department had never looked at the throughput. It was the throughput that needed to be delivered to ensure what needed to be achieved was achieved. One of the throughputs deals with the end goal that needs to be achieved. For example, taking education, all children must have a good understanding of language and the ability to understand maths. If a child was able to do these two things, then the others were subsequential issues that happened. The throughput issue was for the child understanding the language and maths in order to understand the other subjects better.

Sometimes the country uses outcomes wrongly because it puts input first, and then output and throughput. Outcomes therefore come ten to 15 years down the line. The wrong questions are asked, which leads to wrong answers being provided. No department could give the Committee the outcome if their policy was not implemented two years ago. If the question was, what had been the effect of our constitution in 1994 on government and education, one would be able to answer and say one had a better educational system and also a health sector. Those were the outcomes.

The FFC was of the view that Parliament and the legislature’s oversight was not always timely or well synchronised with the government’s planning and budget cycle.

When the Chairperson was part of the Finance Committee, he and Mr Yunus Carrim had argued that the programme of Parliament could not be an executive-driven programme. He had interpreted this statement by asking who drove Parliament’s committees. What were the policies that needed to be tabled, and the time framework? Mr Collins Chabane had said Members of Parliament must not forget that he was also a Member of Parliament, even if he was a member of the executive. This required the Members to ask themselves how they exercised their role of oversight.

The Committee needed tp know which function to prioritise and why to prioritise. For example, how far was the Committee looking at the broader planning of the government relative to their own planning, and relative to how the budget cycle worked? Success in South Africa had to do with stability. One thing that did not change and was consistent was the budget cycle. This Committee needed to figure out how to stay on top of this.

Different parts of the accountability chain were not well aligned with Parliament, the Presidency, Ministers, provincial legislatures, premieres, members of executive councils (MECs), mayors and local councils. Former Presidents Mandela and Thabo Mbeki used to attend Committee meetings which they felt were important. Sometimes they would catch out a Minister that was supposed to be at the meeting but was absent, or sometimes the Minister would say a certain thing that differed from a Parliamentary report.

Mr N Kwankwa (UDM) agreed with the Prof Plaatjies regarding the importance of presidents attending certain sessiona. Another example was former President Zuma, who used to attend ordinary meetings. He would not participate in the meeting, but during debates when he got an opportunity, he would refer to certain issues that had been raised by Members at those meetings. He did that several times from between 2009 and 2014.

Prof Plaatjies commented that the importance of that was that it condoned a separation of powers and also created a soft form of accountability when the President sat in on a meeting.

The accountability chain was also not aligned with performance agreements the premiers sign with the President over outputs for which resources are appropriated by legislatures, and the outcomes for which accountability lies with national Ministers, administration, Heads of Departments, and chief executive officers (CEOs) of public entities and agencies. The signing of performance agreements was implemented after some departmental officials had gone to Malaysia to learn from the Malaysian government. The Malaysian process had shown them how to prioritise. If a department tells the Committee they do not have enough money, but there is money, the question is where the fat in their budget is. If the department will not say where the fat is, the Committee needs to check the inputs and outputs, and the performance agreement needs to be checked.

The Committee needed to look at the executive authority and the accounting officer, which was the Director General (DG) and the executive officer. The DG was the CEO of a company or government department, which meant they were responsible for the administration, running and implementation of services. The executive authority was responsible for policies, because the policy came from the politicians, and the Minister or Deputy Minister introduces the policies inside Parliament, which would eventually become legislation.

Over the years, the practice was that the DG would introduce the legislation to Parliament, whether it was the legislation of the majority political party or not. It was going to be the same with the appropriation involving different policies. Policy was the responsibility of the Minister, not of the DG. He hoped that he would not get into trouble for making this statement.

The Chairperson asked why he thought anyone would be in trouble, because the statement was true.

Prof Plaatjies replied that he was not always sure whether the policy originated out of the party, from the party, or within the party to be tabled, because sometimes the policies were in contravention with the policy imperatives, the values and principles of the majority party that tabled the policy. When questions were asked about policies, officials often could not answer regarding the origins of the policies, even to help solidify the values of the policies, and they struggled to connect the policies to the majority party’s election manifesto. Even when the Opposition Members and committees in Parliament asked the party questions regarding the policies, they could not answer because the policy implemented was not the policy understood to have been introduced. This was a serious problem. It was an old issue surrounding the political economy around policies, legislation and bills.

If the Committee asked about the policy, and what the implementation plan, pricing and costing of the policy was, the Minister would not be able to answer. Before going to policy implementation, the Committee would need to know the total cost and pricing of the policy in order to know the conditions surrounding it.

When dealing with the National Health Insurance bill that would come to this Committee, it would be nice to implement and approve these policies, but the Committee needed to know the risks to the overall fiscus and how to mitigate interventions.

For instance, with the appropriation for Eskom, a key question would be the value of guarantees that had been given over the years -- close to R400 billion, if not more. The Committee could not just deal with the appropriation that was in front of them, it needed to reflect on previous government guarantees. There had to be a report as to what had happened with the previous guarantees, how they had dealt with the liabilities of those guarantees, the repayment schedule, debt management questions regarding those guarantees, and what the risks within those guarantees were. The government guarantee to Eskom was linked to the sovereign debt. If Eskom collapsed, then the International Monetary Fund (IMF) would come to our country, and South Africa did not want the IMF coming because it would not want to make the structural changes the IMF would want.

There were sets of questions that the Committee needed to ask. They might not be politically popular, but what was the use of popularity if one could not manage the risk to society in the future? The Committee needed to protect the sovereign debt. The questions had to be answered before the Committee agreed to something.

The biggest question the FFC had for the National Treasury was how it approved government guarantees. Was there a government guarantee framework? If so, what did it say? Otherwise, it meant that there was no framework to make billion rand decisions based on the use of subjective judgments. It should not be subjective -- there were fiscal and debt questions that needed to be asked.

Mr A Sarupen (DA) referred to the statement made about where policies came from. After an election, officials begin to circle around the people that just won, regardless of the party. The party that won would go to the officials and say they have a manifesto, and ask for the manifesto to be implemented. However, there were officials who would say they could not implement the manifesto by producing a legal opinion stating the reason why. The legal opinion was completely distorted and they would find any reason not to implement the manifesto. Eventually one ends up with a situation where instead of having politicians who tell the officials what the manifesto says and what they had been elected to do, they end up defending officials to the public. This was a major distortion in South Africa’s democracy, and had happened with previous and current administrations. These officials begin to use the politicians as a defence mechanism for their poor work performance. When policy making has been taken away from the officials, one might have space for good governance, but that space was being manipulated by people who did not want to perform. The Committee needed to be honest about that.

The Chairperson agreed that it was a valid point to raise, and was something that had to be addressed and be open about it.

One of the problems was why the executive should depend on a DG’s legal opinion of what he wanted. Sometimes what was written on the legal opinion depended on how senior council had been briefed. Executives needed to do something about that so that they did not find themselves defending something they did not understand.

Mr Z Mlenzana ( ANC) said that the whole presentation was interesting, but what was important for this Committee was for the Members across the political divide to conduct oversight on what the government had promised to the people. It was the responsibility of this Committee to say “yes” when it had to say “yes,” and to say “no” when it have to say “no” while representing the Appropriation Committee, regardless of the political divide.

He said he had deliberately walked in on a standing committee of a municipal council. The members in the meeting had been surprised by the presence of the MP, and he had informed them that he was only there as an ordinary member of South Africa. He had wanted to teach that particular municipality a lesson -- that all meetings were open. This tied to what Prof Plaatjies had said regarding the President sitting in on meetings. It was not only the Presidents that were allowed to attend whatever meeting, but the Committee was also free to sit in on any other committee meetings as the Appropriation Committee. It could take note to what happened at the meeting In order to establish whether there was a challenge it was facing.

The Chairperson said that regardless of the different political parties that the Committee was made up of, everyone was interested in service delivery. Anything that concerned their political responsibility was a concern for all of them. If the Committee did not ask questions, they would end up compromising the role they were meant to play. They did not want to find themselves in a situation where there was a buffer against officials.

He commented that the people who had to answer on the irregular and wasteful expenditure, fraud and corruption, were the politicians. Executives did not approve even one cent of procurement, but ended up being accountable for it. The executive authority had political oversight over their department, but it was how they exercised that role that was crucial.

The politicians should be able to be frank with the Committee, and say that this was what they had done, what they had tried to achieve and what they had not done. They should not come to be a buffer, because they may end up compromising what the Committee was supposed to do.

He said that before he joined Parliament, there had been no water in his village for three months during Christmas time. He had called a radio station to report this situation, and the station had announced this and started to call actively upon the mayor. After that, the municipality had fixed the problem, which had turned out to be a missing valve. Service delivery was not about political colours, as they were all concerned about the same thing and it was their responsibility to keep officials accountable. They should not defend the indefensible If people were not doing their work, so that there could be corrective measures.

Prof Plaatjies said it was critical, when dealing with the annual reports and financial statements, that the person who had to take the material responsibility was the DG or CEO, not the Minister. The Minister needed to be present in order to respond to policy questions and give answers when the department had not done what it was supposed to have done in terms of the policies.

In his experience, Ministers were involved in the appointment of positions from Director General to Chief Director.

The Chairperson said that the DG got involved only as part of the interview panel, but it was the President who appointed the DG. The Deputy Director General (DDG) was involved in the appointment of the Chief Director.

Prof Plaatjies replied that the Ministers’ involvement stopped at the chief director level in terms of the appointment, and anything above that went to Cabinet, even though they were part of the interview process. When the administration went wrong, sometimes the Ministers found themselves in a “Catch 22” situation, because on the one hand they had the executive authority function and on the other they were a political officer. It was important to be able to manage that.

There were essentially three pieces of legislation which were related to this Committee. These were the 1996 Constitution of South Africa, the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA). That was why he had said earlier that the Appropriation Committee had more work than other committees, as they did not sit with the same challenges this Committee had to deal with. Whatever passed through this Committee became the financial legislation, which was a huge responsibility.

Prof Plaatjies referred to the issues around failures in the government system of performance management which confounded legislative accountability. There were two levels. One was the policy and legislative performance, the second was the administration and the institutional performance. When one talked about institutional performance, one was referring to three things – the rules of law part of the institution, leadership at the administrative and executive level, and lastly systems and processes.

The FFC highlighted that conflicting interests distorted the effectiveness of the oversight function. The Committee would find the administration coming to them to complain and not taking reasonable accountability. An interesting development in recent months had been when the constitutional court had made a ruling stating that the Public Protector must take personal responsibility for her decisions. This was quite critical, because who took responsibility for the success of departments? How did Parliament pursue that? How did the Appropriations Committee pursue that? How did Parliament pursue culpability when the accounting officers were responsible for it? If the accounting officer made the wrong decision, they must feel the consequences of making the wrong decision. The question was how this Committee would place culpability and accountability where it was supposed to be, because the departments could not have only the Public Protector taking responsibility. That needed to be looked at.

The lack of information symmetry between government and the legislature prevented effective oversight. The ministers were the principals, but sometimes one got a story of officials saying something that their ministers were not aware of. One of this Committee’s roles was to help maintain an institutional memory, to remind departments what had been agreed upon. An issue that sometimes that arose was that the principals know less than their agents, because the agents were on the ground and knew about the issue and had the information. The agencies end up telling the principals what they needed to know, rather than what the principals were asking. The Committee needed to ask the right questions in order to find out the right answers.

Dealing with fraud, corruption, irregular and wasteful expenditure were part of this Committee’s mandate. A key question that was never asked was the cost of the irregular and wasteful spending, and the cost of fraud and corruption.

People tended to forget about human error. Government administrations were run by human beings who make errors. The questions that needed to be asked regarding these errors involved their intent. For example, when Prof Plaatjies had been a treasurer in 1996/7, he had transferred R22 billion from the old financial year into the new financial year. This had been wrong, but if that had not happened citizens would have not received their social grants as back pay. If the money had not been transferred, there would have been a social protest. The intention behind this error had been good for this reason.

The FFC was of the view that all the committees’ researchers had to be checked because the research in Parliament had become like a research administration. Both old and new researchers had to go through a thorough training of what needed to be done. Why did Parliament not send researchers to FFC offices that understand the legal implications and the financial fiscal way, because finance follows function. The researchers needed to give the Committee a legal perspective. For example, this Committee needed a researcher that understands the legislation and the financial and economic questions. This was not a Committee that dealt with politics only, but with the politics that were related to financial management and fiscal work. There should be a formal and informal relationship with spending departments, but that could occur only if the researcher provided good content advice for the Committee.

If a department came to the Appropriations Committee and said they were under-funded, the question to ask was where the department was over-funded. The second question to ask was if the policies had been costed. What was the collateral effect of the administration function, and where could the department reprioritise within their own budget? Where did the department’s priorities link with the country’s priorities? South African citizens were interested in the departments that were going to create jobs for them. Why was the department outsourcing when things could be done inside the department? Why were young people with degrees not being employed?

He commented that in Britain, the universities understood their public role before their private role. Were SA’s universities serving the departments?

An issue that disturbed the FFC was the Section 100 interventions in the provinces. Section 100 was applied mostly when there was a huge irregular and wasteful expenditure or fraud occurring in the provincial administrations. The s100 intervention in Northwest Province had not been formally revoked in Parliament, but it was under s100 and their Minister had been put under section 139 intervention. That was a most archaic way of constitutional prudence to impose constitutional administration and monitoring. It was unheard of when a province under s100 invoked section 139. Was Parliament asleep, or what?

The Chairperson argued that the administration was already under section 100, and the executive authority had invoked s139.

Prof Plaatjies agreed that this was partly the case. S139 could be evoked by the national government and provinces. However, only section 100 could be invoked by the national government. A province could invoke S139, but the Northwest Province was currently under S100, and was unable to run the administration of the province. The new executive in Parliament knew that, but no one was doing anything about this issue. Section 100 first had to be invoked to rescind S100 in Northwest to give authority for the province to invoke S139 interventions and run the province on their own, as the constitution required. The constitution required an intervention to be made. The question was whether it was an institutional memory that needed to be held together because Minister Nkosazana Zuma was no longer responsible for the running of the province, or there had been a lapse of judgment.

When Parliament elects the President, during the period between that day and when the President gets sworn in there are no ministers. What was the role of the Appropriation Committee in relation to Section 100 interventions into provinces? Someone needed to find an appropriation. The reason the FFC was raising this point was because it indicated how to help Parliament and the Appropriation Committee.

This Committee approves the divisions of revenue, the appropriations and management policy, but its job did not stop there. It had to make sure that the appropriation was used if the province wasfully capacitated in terms of what the constitution required, had the administration in place and had dealt with the S100 issues, even though the S100 was also a National Council of Provinces (NCOP) matter. The Committee had to look at whether the province’s administration was in place and reflect on what needed to be done.

The FFC was of the view that this Committee should consider additional oversight mechanisms which included Chapter 9 and 13 institutions, school governing bodies, stakeholders and clinic committees, performance management agreements, annual performance plans and reports, and ward committees.

They must not allow departments to make this Committee break the law. Any legislation introduced to Parliament must be costed.

Prof Plaatjies commented that school governing bodies were sometime alright, but at other times they were standing in the way of access to quality education. There was a need to look at the role and function of the school governing bodies when it came to education.

Discussion

The Chairperson said that the since Prof Plaatjies had started with the institutional mechanism for effective oversight, he would allow Members to reflect on the presentation regarding the oversight function.

Mr Mlenzana referred to Prof Plaatjies comments on the role that the Committee should play, indicating that in his political point of view there was intervention and there was interference. He said that in one province, where he had gone with Members of Parliament to see what was happening, the premier had asked who they were and then said he had not invited them and that they must leave, while knowing full well the implications. The Appropriation Committee had a responsibility towards departments, but was there any documentation in its mandate to avoid situations where people could say they were interfering? The Committee could continue appropriating, but at the end of the day they were pouring water into a leaking bucket.

Mr Sarupen said an important role of this Committee was the production of recommendations and reports provided by the FFC. What was the experience of the FFC regarding the recommendations -- had they been taken seriously? Had there been any legal rulings when recommendations had been ignored? Had they had any impact on the National Treasury and on the way budgetary processes were managed at the executive and committee level?

Mr Kwankwa agreed with Professor Plaatjies regarding the social impact of the policies and programmes, saying that politicians failed to prepare properly at times. Maybe a framework should be developed at some point to give guidance as to how some of the issues had to be looked at, because the level of experience among the Members was different, especially when it came to the critical issues involving the portfolios. When giving out government guarantees, performance and accountability should be scrutinised. Were there ever meetings in the past when departments had to make a presentation and be assessed regarding previous guarantees granted, before more bail outs and hand outs were approved?

Another issue to consider was that the finance committees in particular were in a privileged position. They had the Parliamentary Budget Office (PBO) to do the analysis on their budget, as well as the FFC. This Committee had the internal unit to provide the research. Other committees did not have that luxury, and this affected the quality of their input and recommendations. Other departments coming to present also depended on the internal research capacity of Parliament. If there were limitations and weakness in this area, they would not be able to plan for effective oversight.

Mr X Qayiso ( ANC) said that this had been an eye opening presentation. Everyone was looking to this Committee to provide direction for the budgets of the departments. He raised the issue of the Public Protector being taken to task about her personal responsibility, and asked how the Committee would be involved with the cost implications. He also sought further feedback on the FFC’s experience of the government guarantee framework.

The Chairperson commented that the Committee had to accept that the FFC were professionals and their objectives were scientific, but not necessarily politically correct. The Committee was made up of politicians, so they would deal with that side.

He said not all legislation came before the Committee, but there was some responsibility on the Committee to look at it, as every policy had some financial implications. What was their charter that would provide them with guidance on what path to follow? The Committee should plan how to go about this.

One of the biggest problems raised by Prof Plaatjies involved the time constraints when the Committee and Parliament interacted over the budget. With the previous budget, for instance, there were so many things that the Committee would have wanted to do, even in the normal cycle, to try to influence the budget, irrespective of political party affiliations. He did not know why the Committee had failed with regard to the participation of provinces of municipalities. When a minister presents a budget, it is actually a proposal to Parliament, and they do not expect Parliament and this Committee to start changing it. There was a mind shift that this Committee needed to deal with through an educational process as part of Parliament.

Looking at the Committee’s mandate, there was nothing it could not touch because it appropriated money to the departments. It was important to be selective to avoid being less effective. There were high impact areas, irrespective of how budgets were defined. However, whenever budgets are presented, they are characterised as a “progressive” budget or a “procurement budget,” etc, without looking at indicators that everyone was familiar with, like inequality. The characterisation of budgets was not making things better, but worse.

The unemployment rate and poverty levels were getting worse, not better, despite increasing expenditure levels over the medium term expenditure framework (MTEF). The departments were not making a dent, but no one had sat down and looked at what the actual problem was that was causing this deterioration. Very little goes to the poor, even though the government says it wants to alleviate poverty. One could not continue sitting and spending countless hours talking about the issue while the people that needed to benefit from the budget were not being impacted.

He said the Procurement Amendment Act had important implications for the Committee, as where the money ended up was its concern. It also had to take into consideration the Preferential Procurement Policy Framework Act (PPPFA). There was also the impact of price changes during the lifespan of projects, which could be affected by factors such as the exchange rate, and where changes could bring one into conflict with the PFMA. At the end of the day, they were approving or progressing a procurement budget instead of dealing with unemployment, poverty and inequality. It should be considering how it would impact on the indicators. Having defined the problem, what were they going to do about it?

FFC

Prof Plaatjies said there were two ways to make policy in South Africa. The first was to reintroduce a former policy via documentation, and the other was when the President or a Minister makes a public statement which becomes policy. When the President speaks, he sets the policy. In his first SONA last year, he had said ministers would account to Parliament and be subjected to oversight and accountability. He said that when he started at the FFC, someone had written that he was an “iron fist” who would stand against fraud and corruption. That becme the narrative -- that fraud and corruption would not be allowed in FFC. When the President made the above statement, he was saying to the Members of Parliament that they needed to exercise their constitutional responsibility of keeping the ministers accountable.

He referred to the media, and said if this Committee pushed for greater forms of accountability in reporting, it would implement the laws of Parliament and the convention of what the citizens had invested in, because people wanted the Committee to be their public representative and keep the administration, public servants and the elected accountable.

He asked the Committee what type of questions they were asking. What information did they require to be able to understand the task at hand?

There had been a time when he had argued that one of the strongest committees ought to be the Social Development Committee, because ultimately they dealt with about R40 billion of social grants, and making sure people were getting their money on time. That Committee was not been strong, so when this Committee deals with social development, the researcher and content adviser need to get a report from their counterparts in the Social Development Committee so that they can inform the Committee about what issues had been raised there. This would allow for consistency between what this Committee wanted and what the other committee needed to address. The Finance Committee needed to share reports with this Committee in order for it to know what was happening there.

Parliamentary committees do not indicate whether they agree with FFC recommendations or not. If Parliament had listened to its recommendations, there would have not been the “Fees must Fall” protests. The FFC would have provided answers before the protests happened.

The policy making became difficult to create an impact if Parliament did not communicate what they agreed and did not agree on. The FFC does not even know what Parliament thinks about the recommendations it provides. If Parliament does not like or does not want what the FFC is saying then it should change the constitution in order for the FFC not to exist anymore. The FFC’s goal was to make the Committee smarter, making sure that the right questions were being asked.

Prof Plaatjies said Member should ask the right questions based on social economic values. Trevor Manual always use to ask why was it that ANC Members never asked him the hard questions when he appeared in Parliament, but allowed the Opposition to ask the hard questions. If one’s ego was that fragile, then don’t be a politician!

Responding to the question of about impact, he said it was a difficult issue because impact did not get measured in one year, there was a longevity factor involved. It required time and clear questions. When talking about outcomes based what was being done, the impact on policy was measured within ten to 15 years.

The Chairperson said that poverty, unemployment and inequality had been identified as the three biggest challenges the country was facing. He asked Professor Plaatjies to comment on these challenges, and not necessarily the solution.

Prof Plaatjies said that poverty was quite stubborn in South Africa. It involved income poverty, assets and security, and this was related to the type of interventions required. In 1994, when Treasury had gone to President Mandela when the country was bankrupt and said that there was no money for expansion of the child support grant, Mandela had said, “I do not care what you do -- go find that money!” There needed to be interventions like that. The interventions made to date on social grants need to be reviewed, because although there was a high risk to the fiscus, they visibly brought relief to some households. South Africa was spending more than any other country on the education of children, from free education to nutrition programmes.

The country was struggling with unemployment, and part of the role of this Committee could play was to ask departments about their budgets in order to show productive outcomes. It should ask where they were creating greater opportunities for employment in the budget -- not employment inside the administration, but outside the administration. When new policies were being implemented then new administration personnel were brought in, but they needed to look at what the jobs were being created by the implementation of policies.

The other link was the expanded public works programme (EPWP). Once upon a time, there used to be people cleaning the streets for the councils, and looking after the infrastructure, sewerage, electricity supply and fencing. All these were jobs within the municipality. What had happened to those jobs? They had been outsourced, and that had not improved anything. Hillbrow was still as dirty as it could be. How could one push back against the whole issue of outsourcing, as it created opportunities for fraud and corruption? Departments must be asked directly how many jobs they were creating so that the government could stop making embarrassing statements like 50 000 jobs were being created. Those were not jobs. Jobs should be at least permanent for three to five years. If one dealt with unemployment and were able to make a dent on poverty then the question of inequality would be dealt with.

He advised the Committee to ask Prof Chris Mululeki to come speak about the question of inequality. Inequality ran deep in the country. We were facing with a situation where there were the more than three million who were not in employment, or an education or training facility. This was enough people to start a revolution. He believed there were two opportunities for job creation -- giving the stimuli to create job opportunities, and government creating public employment. It was not going to help to expand current opportunities, as these had already been saturated. There was a need to be innovative. One could not use examples from other countries without knowing their history. South Africa did not have what China has. It was a constitutional democracy and need to operate within the confines of its own environment.

Land appropriation without compensation was not a new thing. It had happened in 1913 with the Land Appropriation Act, where 80% of the land had been taken from black people. The brutality of that Act had thrown everyone into the reserves and townships that had sprung up after this. One did not have to rewrite history.

He thought there were tax interventions that had to be made, the land reform question that needed to be dealt with, the import of certain goods and services should be looked at, a review of the list of VAT-exampt goods and services. A stimulus also needed to be given by government to new industries, not to the old ones, to create new jobs. There had to be new thinking.

The Chairperson suggested the debate on poverty and inequality should continue so that they got to know how they manifested themselves. These were the things they lived with on a daily basis. They needed to correctly diagnose the problems in order not to just scratch the surface when dealing with these issues.

Mr Kwankwa said the issue of alternative budgets may not be entirely useful in some context, and in many instances an alternative budget was just a political tactic. Many of the alternatives proposed were really for ideological reasons. Current discussions on budgets pick on certain issues and lose sight of the bigger picture. As long as discussion around these issues tends to be superficial, the Committee would not be able to move to a point where they were able to exercise its mandate on matters that were very important.

The Chairperson said that the Committee agreed with the principle. The main thing, however, was the ‘how’ and ‘when’ part of it. 

Prof Plaatjies responded by challenging the Committee Members to start watching the Parliamentary TV channel. They should listen to the debat in Committees and the questions on extending the role of oversight and accountability in the country. The Committee would be surprised that an issue on the table that was being debated was not being addressed by the different people who stood on the podium. It had to do with the nature and extent of how Parliament operated. He sometimes wondered whether his representative was really saying that!

He commented on how Ms Lindiwe Sisulu, when she was a Member of the Health Committee, had praised the development of the Health Act at that time, and in the same speech had raised the issue of the accountability of the Minister on issues related to consulting, implementing, and financing the act, and how to do all these things. This was one of the speeches where a Member of Parliament had addressed what was in the public interest -- criticising her own party via the executive minister and also taking on the Opposition. 

When watching the Parliamentary channel, sometimes he did not see the national interest flowing through in the way it should. Sometimes the majority party did not want accountability to flow through. That protected individuals. He had never seen a party or committee protect the CEO of an institution. If one protected the CEO and chastised the minister, then there was something wrong. He would rather protect the minister and chastise the CEO.

Parliament should be the apex of reporting and accountability. The matter that the FFC wanted to raise was that the Committee needed to increase its visibility by repeat site visits to the big infrastructure products that had consequences for economic growth and social/ human development. The Committee must not visit the sites once, and should not warn the project managers that it would be making a visit. The Committee did not have to make prior arrangements.

The Committee had to strengthen its engagement with other key institutions such as the FFC, the Auditor General of South Africa (AGSA), the Public Service Commission (PSC) and other research institutions. He also recommended using liberal and new liberal perspectives. People in government never engaged with people who were on the left side of things. Prof Maluleki was a special adviser to a minister, and the whole world had attacked him for what he said. He was a professor of economics who wrote a paper responding to a book on capitalism in the twenty-first century. He was a black professor from Wits, and if a white professor had said the same thing, it would have been alright. How did one fight of non-racialism if one needed condonment and being validated by a white academic? Even in the minds of black people, it was considered right to listen only to white people when they spoke about the economy, finances and policies. It should not be so bad that they were so indoctrinated by Bantu education that they did not see the devil in front of them. He recommended the Committee should open up the space for black academics who could provide better advice than the the FFC could give the Committee --people like Prof Maluleki -- in order to get a real set of views of what was going on with the country’s economy and what was wrong with it. It needed to have access to new liberal views. 

There was a brief interchange between the Chairperson and the professor over aspects of imperialism and Marxism.

Prof Plaatjies said Parliament was supposed to be a very empowering place, but it needed to make sure people understood what it was talking about. Parliament did abbreviations, and its acronyms were the greatest form of post democracy disempowerment – they were used if one did not want people to know what one was talking about.

The Money Bills Procedures and Related Matters Act (MBPARMA) provided the financial and fiscal status of an institution in terms of revenue, budget and income generation, spending, investments and liabilities of departments, entities and agencies, given both direct and indirect appropriation.

He commented that South Africa had four school holidays. Why should children pay during these holidays to go to the planetarium, game farms, swimming pools, etc? Charging school children entrance fees could not be a revenue element. If the government could give tax relief to businesses, why could they not give tax relief to the children? 

Mr Kwankwa agreed that the system was very elitist in that sense. One had to have a student card in order to qualify for a discount. Only university students had a student card. Students at high schools were in the education system, but had no student cards and did not qualify for a discount. 

Prof Plaatjies replied that indirectly through its policies, the government was saying that people were dishonest. Widowed home owners could no longer afford to pay for electricity or taxes. They could not get access to a grant, not understanding their house was the asset of the family. They had invested and worked for it, and now they had to pay property taxes. Municipalities and provinces got away with property tax increases. Something was wrong with system, especially in the lower and middle income areas. Houses that were given to people by the apartheid government, especially in the coloured communities, were now being taxed. Other households did not have income coming in other than the social grant. Sometimes the government policies were working in the opposite direction. 

The Committee had to look at spending, what investments were being made and the return on the investments, as well as the liabilities of departments’ entities and agencies. 

The President had announced that the state needs to be reorganised, which provided an opportunity for this Committee. Why could it not use the budget appropriation process to start influencing the reorganization of the state? Some departments get established by legislation, and others by Presidential proclamation. Why must the provinces follow the same route as the national government? They needed to reorganised around their constitutional functions, not like the Presidency the national government supervises. The Appropriation Committee could use the system, the processes and the target of the appropriation and division of revenue to influence the reorganisation of the state. One of the classic issues this Committee would have to deal with was the special appropriations for Eskom’s reorganisation into transmission, generation and distribution entities. 

Finance policy drives changes in countries. South Africa was past the agricultural and manufacturing stage. It was now the financial services which were holding the power of change. The Committee needed it’s researchers and content advisers to dig deep and not be stuck at the micro level. All the reports to date were currently scratching the surface.

There had to be a solid link between what the President, the Minister and the budget vote say, and how they all link to the priorities -- especially the priorities the Appropriation Committee was chasing. The Committee had to consider that because if they raised those priorities in terms of the policies and outputs that needed to be delivered, including the proof that was required, there could not be a push back. The Committee must look at the substantial part of the strategic plan of a department, which was probably one-third, while the rest was just stories. Consider what that one-third aims at -- what were the deliverables that the country was paying for, and that the department said they were going to deliver on. By looking at the deliverables, one could ask how they contribute to economic growth and employment, and reduce poverty and inequality. It was the role of Parliament and of the Appropriation Committee to change the story line. 

The Committee also had the opportunity to look at the reports on public accounts relating to the departments, entities and agencies. When assessing the budgetary review and recommendation reports (BRRR) against the statutory obligations, that there was a need to look at civil society input from academia, non-governmental organisations (NGOs) and community-based organisations (CBO’s). There was insufficient use of section 32 reports on actual quarterly expenditures and the in-year adjustment budget, retrospective rather than prospective, and insufficient attention to conditional allocations and suggestions for savings, and reprioritisation and efficiency gains. Committee researchers should do more reaserch on section 32 reports, because they provide the spending trends of each department and agency in government.

Financial and Fiscal Commission action plan

Mr Chen Tseng, Research Specialist, FFC, presented the Commission’s action plan.

He highlighted the comparison between the MTEF budgets for the 2019/20 and 2020/21 financial years and showed a table that focused on the how the fiscal measurement tools could be applied. The table showed how the money flowed in accordance with the policy positions of the government. This was the FFC’s national framework.

He indicated the provincial cash reserves at year-end as a share of the main budget. The cash sitting in the Treasury accounted for the provinces. The inequality of provinces regarding their cash reserves at year-end was depicted.

The Chairperson asked if this was good or bad.

Mr Tseng said it was a bad question because the DGs and MECs would say that they needed to keep some money in case the province suddenly needed it to pay for some infrastructure bill. It did indicate a form of inefficiency, also in the sense of intergovernmental relations of the constitution. The provinces were social services driven. The money kept in the accounts should have gone to the people, especially to the social services. The Western Cape was always complaining about backlogs, but 12% of their money was sitting in the bank. The Free State and Northern Cape were hanging to their budget by a thin thread.

The Chairperson asked Mr Chen not proceed with the last part of the presentation as it required engagement with the National Treasury, and it contained a lot of information. They were talking about the 30-day payment of invoices, which might not be happening. Provincial governments were not paying their municipalities. National government operated on a cash budget.

Ms E Peters (ANC) said that in other countries, particularly the USA, this type of committee was seen as the most powerful of all committees and its members were supposed to be the most influential. She asked Prof Plaatjies for his view on the relationship between this Committee and the other committees, and the work it had done over the years.

Prof Plaatjies replied that Members had to ensure the Committee got recognised for its work that is accomplished. This Committee and the Finance Committee were the most two powerful committees in Parliament that dealt with economics, social policy matters, administration and real accountability. A committee could approve of a particular policy, but it would depend on costing and appropriation. It was easy to have an engagement with committees in order to have a nice work flow.

The Committee had important power for influencing spending and making sure the priorities dealt with the poverty, unemployment, inequality and money growth. The MBPRAA was a substantive authority. The question was how one made sure the administration appeared before the Committee. If they stepped up to the plate of what the Appropriation Committee was all about, then there would be oversight in the country.

Ms Peters referred to increasing visibility by repeat site visits, particularly on big infrastructure projects, and asked about the balance between this Committee and the relevant portfolio committees. The municipal managers did not want the committees in the provinces to make site visits. The reality was that this Committee had the power but how to exercise it was a bit challenging

Prof Plaatjies said he had worked in the National Treasury for nine to ten years and during that period there had never been a visit from the Appropriations Committee or the Finance Committee. The Treasury use to deal with everything, managing the money, but no one had come to ask how they made certain decisions. This Committee should be asking for the National Treasury’s mandate. Chapter 2 of the Public Finance Act says the head of the Treasury was the Minister of Finance. Why did the Committee not ask the hard questions? Other Committees fulfilled delegated mandatory roles within the National Treasury, based on that mandate.

The Chairperson commented that this was quite a provision that they needed to deal with, but they should also deal with the PFMA. It had been drafted at a particular time, and they would have to go through it and review it, and ask if the information in there still served a purpose. They should not be scared to revisit the PFMA “bible,” because now the Committee knew what their objectives were.

The meeting was adjourned.