Adjustments Appropriation Bill, Special Appropriation Bill & MTBPS: Public Input

Meeting report

Public submissions on MTBPS and Appropriation Bills

Chairperson Mahlangu remarked that this meeting was part of an important process and she trusted that Members had read the presentations.

COSATU submission

Mr Matthew Parks, Parliamentary Coordinator, Congress of South African Trade Unions (COSATU), said the Federation found the MTBPS and the accompanying Special Appropriation and Adjustments Appropriation Bills lukewarm. However, it welcomed the e-toll settlement and the Transnet and DENEL relief packages as positive aspects of the Special Appropriation Bill. The positive allocation in the Adjustment Appropriation Bill, including disaster management emergency housing and infrastructure repairs, and additional funding for the National Student Financial Aid Scheme (NSFAS), Technical and Vocational Education and Training (TVET) colleges, the South African National Defence Force (SANDF) and the South African Police Service (SAPS), was welcomed.

However, COSATU was concerned about the lack of support for ESKOM, Metrorail, the Post Office and other key state-owned entities (SOEs). Key aspects of the Adjustments Appropriation Bill, such as cuts in export incentives, continuous shifting of the school infrastructure backlog, cuts to the SAPS budget, and the decline in the SAPS headcount, were of concern. COSATU found certain elements in the Medium Term Budget Policy Statement (MTBPS) deeply problematic, including the below-inflation increases for public services and social grants, the lack of plans to stabilise municipalities, the lack of economic growth, and lack of support for industrialisation. It urged government to return to Parliament in February 2023 with a sweeping budget to deal with the multiple crises of the unfolding capitalist system.

See submission for further details

PSAM submission

Ms Zukiswa Kota, Head: Monitoring and Advocacy Programme (MAP), Public Service Accountability Monitor (PSAM), remarked that the continued under-spending by national service delivery departments and local government entities undermined service delivery. Under-spending by the Department of Social Development (DSD) was impacting the non-profit organisation (NPO) sector and had resulted in lost opportunities to deliver services at the community level. The transfer of social spending to the SANDF and Transnet was concerning.

The PSAM recommended that the conditions and plan of the transfer should be made publicly available. Democracy-supporting institutions, including the National Prosecuting Authority (NPA) and Special Investigating Unit (SIU), as well as the Financial Intelligence Centre (FIC) and the South African Revenue Service (SARS), should be adequately funded to fulfil their mandates. The PSAM reiterated the call of the Auditor-General of South Africa (AGSA) for departments to design controls that would enable citizens and community groups to hold government accountable.

See submission for further details

OUTA submission

Adv Stefanie Fick, Executive Director, Accountability Division, Organisation Undoing Tax Abuse (OUTA), said that the focus of OUTA’s submission was on the debt of the South African National Roads Agency Limited (SANRAL) and the Gauteng Freeway Improvement Project (GFIP). The breakdown of the debt between SANRAL and GFIP should be clarified before the Bills are finalised. The 2022 MTBPS included two SANRAL allocations -- the R3.74 billion transferred to SANRAL in the 2022 Adjustments Appropriation Bill, and the R23.736 billion through the 2022 Special Appropriation Bill. Due to the lack of transparency, it was difficult to determine the split of the debt between SANRAL and the GFIP.

She said Parliament should consider consequence management for departments and SOEs that had not been spending funds responsibly. Eradicating corruption would mean more money available to address important societal needs.

See submission for further details

Discussion

Mr S Du Toit (FF+, North West) found OUTA’s presentation insightful and food for thought. He asked why KwaZulu-Natal (KZN) was not contributing to SANRAL’s debt. He questioned the deployment of the SANDF in Africa, considering its scarce resources, and felt that the focus should rather be on resourcing the SANDF.

Mr W Aucamp (DA, Northern Cape) remarked that although he agreed with COSATU on most issues, he had a big problem with the proposed new model and turnaround plans for SOEs. He suggested that it was time to consider the privatisation of SOEs, instead of the continuous bailouts while leaving the entities in government hands. He argued that privatisation should be the new model.

The R64 million budget cut in export incentives would become more significant if grey listing became a reality. The R1.8 billion budget cut for land reform indicated that government was not serious about land reform. The budget cut to the SAPS was worrying. He questioned how the successful prosecution of criminality could be achieved without adequate funding. The Presidential Employment Stimulus Package was expecting the private sector to increase its support for interns, but the private sector was finding it difficult to thrive in the current economic climate. He questioned the lack of consequence management for departments that failed to meet their targets. The responsible persons must be fired, otherwise the situation would remain unchanged.

The PSAM was referring to transparency at SOEs, but the blocked visit to the Kusile Power Station by the DA leader was a slap in the face of transparency. He found it ridiculous that the permission of the Minister was needed to hold him accountable. The information reported by OUTA presented a shift in the goalposts since 2012, which he found confusing. The different amounts paid over any given period indicated the shambles at SANRAL. He asked why SANRAL did not offset the GFIP debt with the grants.

Mr D Ryder (DA, Gauteng) appreciated the efforts to compile the presentations and the written submissions. COSATU was critical of the below-inflation increases, while PSAM believed that the increase in the social budget would not result in better outcomes. He aligned himself with the latter view. Instead of granting incremental increases, projects should be evaluated and those found not beneficial should be discarded. He questioned the fact that some departments spent 100% of their budgets, but had not achieved all of their targets, and called for consequence management in this regard.

He asked when the outcomes of the 2022 census conducted by StatsSA could be expected, because the information would be helpful for future planning. He questioned the shifting of the school infrastructure backlog in the Adjustments Appropriation Bill, and said the eradication of pit latrines, instead of the unisex bathroom scheme, should be prioritised. The budgeting process had been described as the most transparent public participation process, but in his experience in provinces, few ordinary or business people had come forward with new ideas. He asked how meaningful discussions could be achieved through the public participation process.

He said SANRAL had erected a big palace and was now creating unnecessary small, miniature palaces. Being in control of their own spending created the problem of irresponsible spending. He had been informed that SANRAL needed to pay R9 billion immediately to protect its going concern status. People of Gauteng had been rejecting the e-toll system from the start, but were now expected to pay 30% of the debt. It seemed there was no final decision nor a proper way forward to resolve the e-toll mess. He was not convinced that a solution was going to be found in the near future.

Mr X Qayiso (ANC) shared COSATU’s concerns about the declining headcount in the public sector. The Department of Health (DoH) had raised the issue of the 10 000 vacancies that may negatively impact service delivery if underfunding was allowed to continue. He argued that the Committee needed to pay close attention to this matter. He felt it was not a good model to involve the private sector in the mandate of the SOEs. Struggling SOEs should be assisted to help the economy perform. He argued that this meeting was not the relevant platform for Mr Ryder to raise the oversight issue.

Mr E Njadu (ANC, Western Cape) welcomed the informative presentations. Equal Education has raised the issue of equal and quality basic education as a key service delivery concern. He asked what should be done to reverse irregular and wasteful expenditure in the basic education system because it impeded the provision of equal education to learners.

He wanted to know from COSATU what the best approach would be for the state to engage in good faith in future bargaining negotiations. He asked what the Department of Social Development should do to ensure that deserving beneficiaries received grants, and to eliminate the corrupt element of "double-dipping" by some people. He agreed with Mr Qayiso that the platform must be used only for relevant matters.

Co-Chairperson Buthelezi asked what the permanent solution to the GFIP problem should be. He wanted to know what further support COSATU was expecting from government, considering the R264 billion that was approved for ESKOM, while Metrorail and PRASA had an under-spent budget of R14 billion. He asked why the small, medium and micro enterprise (SMME) Bounce Back Scheme had not been working and how it could be turned around.

He took comfort in the Standing Committee on Appropriations (SCOA) report, which dealt with the Appropriations Bill in June 2022. At the time, he had cautioned that the Portfolio Committee should pay close attention to the content. The Chair of Chairs was addressing the matter of the stagnating economy and of businesses not being given the opportunity to operate. He asked if OUTA had been engaging SANRAL about their concerns, and what the outcome of the engagements had been.

He took issue with OUTA’s comment that Gauteng and the Western Cape contributed more to the fiscus but received less when the budget was redistributed. He asked if the suggestion was being made that rural provinces must fend for themselves. He did not share the view that the private sector was the panacea. The private sector counted on getting government assets for next to nothing instead of starting their own businesses. The biggest manifestation of crime in the private sector was when Steinhoff went bankrupt with pensioners' money. Tongaat Hulett was taking down the whole KwaZulu-Natal economy. He urged government to intervene and engage the shareholders and board of Tongaat Hulett to save the economy and jobs in that area.

In an engagement the previous day, Members of the SCOA had questioned the Minister of Public Enterprises about the DA leadership being stopped from performing oversight responsibilities. He agreed with the Minister that oversight visits should be properly arranged.

Ms D Peters (ANC) announced that today -- 25 November -- was the launch of the 16 Days of Activism Campaign against gender-based violence and femicide (GBVF). She appealed to Members to do their part in advocating for the end of violence against women and children perpetrated by men. She was encouraged by the information shared the previous day in the Women’s Caucus meeting, and invited Members to participate in the activities.

She appealed to OUTA and PSAM to make their presentations more legible and easier to follow.

She said the DA leader was prevented from visiting Kusile because he went as a DA member and not as part of a committee. Parliament had an organised procedure to visit entities. She hinted that Kusile was not Ukraine.

She asked if OUTA was taking any responsibility for encouraging people not to pay e-tolls. She explained that the budget provided for non-toll roads and that some of the KZN roads fell into this category. Gauteng had initiated the GFIP, but SANRAL had been left with the debt, which she described as a funding-related problem.

She asked what OUTA’s view was on the user-pay principle and about the idea of the rich being taxed to fund the basic income grant (BIG) to address income inequality in society. The Department of Social Development and National Treasury was working on the initiative of a basic income support system. She asked what OUTA’s view was on extending the social relief of distress (SRD) grant.

Chairperson Mahlangu asked COSATU to elaborate on the steps that should be taken to address the effectiveness of disaster response efforts, in light of the recent floods. The matter had been raised as a concern in the ‘Taking Parliament to the People’ programme and in all other debates on this matter. She asked what COSATU could recommend in terms of the time lapse between the processing of relief funding and the provision of assistance to victims affected by disasters.

The matter of National Treasury jumping the gun by proposing a wage allocation for salary increases, was a concern in the Select Committee of Appropriations meeting. Negotiations should inform the decision on the level of increases.

It was impractical to have the latest machines and medicine at hospitals without the health professionals to deliver the services. She welcomed OUTA’s passion and asked what the best way was for government to address the problem, given the rising debt levels. She asked the PSAM representative to explain how government could strike a balance when the sources of funding were not growing.

COSATU's response

Mr Parks said it was important for government to support the Mozambique deployment to maintain peace in the region. Investment in the capacity of the Defence Force was needed. The new model to support struggling SOEs must be supported, because the time for bailouts was over. Corruption was being allowed to take place. The state must be empowered to intervene and deploy proper management to SOEs. The turnaround at SARS proved that it was possible to rebuild a word class organisation with proper management. It would be devastating should the country be greylisted. He appreciated the efforts to fast-track the Bill and was hopeful that it would come into effect in February 2023.

It was impractical to talk about land reform while the budget for land reform had been cut. It was important to support emerging farmers, despite the slow progress on the legal front. He found the SAPS budget cut worrying, considering the complaints about the high crime and corruption levels. The conditions at police stations were deteriorating and the delays in court cases had been frustrating.

Discussions for a progressive tax regime for SMMEs were needed. According to mid-year reports, many departments were behind with their targets. He was expecting reporting on fiscal dumping in February and March 2023. Consequence management must be exercised for under-expenditure. He found it bizarre that pit latrines were acceptable in the Basic Education system. The vacancy levels at service delivery departments and entities were alarming and negatively impacted the quality of services delivered. He supported the DENEL relief package and urged the SANDF and SAPS to use DENEL as a supplier of goods.

Government needed to respect collective bargaining and honour agreements. The wage bill had been stagnant for the past few years. He acknowledged that the wage bill was the largest item in the budget, but he was optimistic about a win-win solution. Disaster management was in need of adequate resources. Government needed to invest in infrastructure to prevent citizens from building on slopes and cutting down trees. A discussion on a sustainable e-toll funding model was needed. Intervention was needed at PRASA, where 100 carriages were recently destroyed due to vandalism. He was hopeful that the ESKOM debt relief would materialise in February 2023. National Treasury had been silent on the Bounce Back Scheme, which was key to supporting SMMEs. The scheme must be made attractive to gain the support of all five banks. He agreed that Tongaat Hulett was key to the value chain of the KZN economy, and stated that government must crack the whip on companies that abused public money.

PSAM response

Ms Kota said that the oversight of SOEs must be strengthened. She was encouraged by the appointment of the new SOE boards. The Presidential commitment to bolstering the NPA's independence was welcomed. Public participation was vital to better understand the financial implications of the budget, but much more needed to be done. Parliament must help people to understand parliamentary processes. The introduction of online platforms during the Covid-19 pandemic created access and opened opportunities for meaningful engagements. Civil activists had a role to play in simplifying the budgeting process for civil society. Departments needed to simplify the information they presented. National Treasury was a key stakeholder.

She drew attention to the space created for pensioners to discuss the VAT increase, but said much more needed to be done. In response to the question about the need for government to strike a balance, she explained that the budget should be used to meet developmental objectives. The focus should be on pro-poor budgeting. The trade-off should be the extent to which public funds, and not schemes, were being used. The cost of corruption to the fiscus was unclear, but it was important to safeguard public resources. She joined the call to fight GBVF.

OUTA's response

Adv Fick said provinces should not be requested to contribute towards SANRAL's debt, because maintenance for roadworks should come from the fiscus. OUTA had been engaging various Transport Ministers over time to find a resolution, and would want to continue discussions before a decision was made. She did not mean to suggest that Gauteng did not have to contribute to the fiscus, but indicated that Gauteng contributed more than other provinces. She found nothing wrong with the user-pay principle, but the manner in which it was being applied was problematic. The core mandate of SANRAL was funded through the fiscus. The payment of e-tolls in Gauteng would have boiled down to double pay. The buy-in of the public was an important consideration. A more effective funding model for road maintenance must be considered.

The ten cent increase in the fuel levy which OUTA had recommended at the time, was no longer a solution. The user-pay principle should be in the best interests of society and should not be used to fund corruption and maladministration. The user-pay principle required transparency. SANRAL’s finances had not been transparent, and had resulted in mistrust. SANRAL’s billing was based on the Electronic National Administration Traffic Information System (E-NaTIS), which she described as a mess. The role of government was to make life easier for citizens, and not to make money. The GFIP debt was largely funded by the Public Investment Corporation (PIC), but government was not in a position to renegotiate the terms.

OUTA focuses on how taxes were being spent and whether this was being done in the best interest of South Africans. Most of the problems in the country could be resolved by stopping the loss of income due to corruption. She was not willing to respond to the question about wealth tax, for fear of being misinterpreted. The tax base consisted of about two million people paying 80% of the income tax. Introducing a wealth tax might result in more people from this small group leaving the country. Overburdening the small tax base would create more problems. It was important to allow the private sector the platform to create more jobs.

The Chairperson appreciated the engagement and thanked the stakeholders for enriching the thinking of Members as they would be dealing with the report that would be presented to both Houses. She called on National Treasury to comment on the submissions.

National Treasury's response

Mr Edgar Sishi, Head: Budget Office, National Treasury, said the adjusted appropriations were accounting for significant unforeseen events, such as the floods in KZN and the Eastern Cape, and other interventions such as the continued deployment of the SANDF in Mozambique. The long-standing risks to the fiscus were becoming a reality. Risks related to the high debt burden were materialising. A proposal had been made for R6 billion to cover interest on debt, which was the second largest item after the flood provisions. Past actions were contributing to the significant service delivery needs. The balancing act made it difficult to do more on the spending side.

National Treasury recognised the need to do more about the situation in the Health and Education sectors, hence the gradual improvement to protect the social wage. However, the fiscal risks could not be avoided. The budget was a balancing act between the obligations of the state versus the risks to the fiscus. National Treasury continued to support the collective bargaining process and engaged with the Department of Public Service and Administration (DPSA). He drew attention to the complex out-of-line remuneration packages and perks at SOEs which were driven by the independence of the boards.

National Treasury held the view that the user-pay principle was driven by the need to address fiscal risks. Without the mechanism to collect revenue, the roads would fall apart. He disagreed with OUTA’s position, because the principle was an effective way for road users who had been using the roads, to pay. The non-implementation of e-tolls meant that poor people who were using taxis as a mode of transport were not benefiting from the relief.

National Treasury was committed to providing responses in writing should it be required.

Committee matters

Chairperson Mahlangu said that after consultation with the Secretariat, it had been decided to change the date for the submission of the Appropriations Bill from Thursday 1 December, to Friday 2 December. The new date and time would be formally communicated to Members after the meeting.

Mr Ryder said it was becoming difficult to keep up with the changes. It must be considered that Members had duties at other committees. He asked if the time could be confirmed, because the Finance Committee meeting was scheduled for 2 December.

Chairperson Mahlangu said she shared the same frustration as Mr Ryder, because the Select Committee meeting was also scheduled for 08:00 on 2 December. She requested the Secretariat to work more collaboratively.

A member of the Secretariat said the meeting was scheduled to start at 13:00, after the Select Committee meeting.

Mr Ryder said he needed a break between the end of one and the start of the next meeting, because it was not constructive to have six-hour meetings consecutively. He asked why the Programming Committee could not have foreseen the problem.

Chairperson Mahlangu replied that Members should try to accommodate each other.

Mr Njadu said it was incorrect to make attacking statements. The programmes of both the Select and Appropriations Committees had been tabled in the presence of this Committee. There was no need to involve the Programming Committee.

Chairperson Mahlangu said the platform should not be used to debate internal issues.

A member of the Secretariat announced that the last SCOA meeting was scheduled for Tuesday 29 November. Members could expect to receive the study tour itinerary over the weekend.

Co-Chairperson Buthelezi thanked the Chairperson for chairing the meeting. He thanked the support staff for their services over the year. He said that interaction in the chat group was discouraged in the SCOA meetings because it had the tendency to easily deteriorate. He thanked National Treasury, and asked the officials to extend his gratitude to the Minister and the DG. He thanked civil society organisations for sharing their views with the Committee.

Chairperson Mahlangu appreciated the kind words of the Co-Chairperson, and noted his comments about the abuse of the chat group. She thanked the stakeholders for their participation and National Treasury for availing themselves.

The meeting was adjourned.