Adjustments Appropriation Bill: briefing & adoption

Meeting report

FINANCE PORTFOLIO COMMITTEE; FINANCE SELECT COMMITTEE
5 November 2001
ADJUSTMENTS APPROPRIATION BILL: BRIEFING & ADOPTION

Co Chairpersons: Ms Hogan (NA), Ms Mahlangu (NCOP)

Documents handed out:
Adjustments Appropriation Bill [B82 – 2001]
Briefing by National Treasury (incorporated in the minutes)
Adjusted Estimates of National Expenditure – 2001 [Electronic version available at www.treasury.gov.za]

SUMMARY
The Committees were briefed on the Adjusted Estimates of National Expenditure by the National Treasury. The Adjustments Appropriation Bill was unanimously adopted by both Committees.

MINUTES
Briefing on 2001 Adjusted Estimates
National Treasury was represented by Mr Theron, Director of the National Budget, and Mr Naidoo, a Director in the Budget Office.

Mr Theron said that this year there is a revised format for the 2001 adjusted estimates. It combines the explanatory memoranda tabled by all the departments and National Treasury. It follows the format of the Estimated National Expenditure. And aims to extend the scope and quality of the information provided.

The expenditure included in the adjusted estimates is in terms of section 30(2) of the Public Finance Management Act and is made up of:
- Unforeseeable and unavoidable expenditure approved by the Treasury and Cabinet in consultation with Departments.
- Amounts already announced by the Minister
- Roll-overs (amounts not spent by departments in previous years)
- Shifting of funds between Votes

The format of information included in the Votes are under the following headings:
- key objectives and programmes which is a short explanation of activities of departments and for what they need the money
- adjusted 2001/2002 estimates
- changes to 2001 estimates of national expenditure that relate to roll-overs
- unforeseeable/unavoidable expenditure, virement and other adjustments.

Mr Theron briefly referred to a few figures of the revised budget framework for 2001/02 and how the unforeseeable and unavoidable expenditure is split between the different spheres of government.

REVISED BUDGET FRAMEWORK 2001/02
Budget Revised
Rbn Rbn
Expenditure 256.3 256.3
Contingency Reserve 2.0 4.6
Roll-Overs 2.2
Projected underspent (2.0)
Total Expenditure 258.3 261.1
Revenue 233.5 238.3
Deficit (24.9) (22.8)
Deficit as a % of GDP 2.5 2.3

It can be seen that the deficit as a % of GDP has gone down.

SPLIT BETWEEN SPHERES
Rm
National 2 814
Provincial 1 500
Local 328

Total 4 642

The figures are available in the Adjusted Estimates of National Expenditure on the Treasury website.

Discussion
Mr Andrew (DP) said that he had a few questions relating to different votes:
Vote 8: Public Enterprises
He referred to the additional R70 million allocated for the Telkom IPO and wanted to know if this figure was still correct since the IPO will not take place in this financial year. He wanted to know who is being held accountable for this money. The paragraph in the adjusted estimate dealing with the IPO suggests that the Department only started taking proper advice after the February budget.

Mr Naidoo said that the IPO is scheduled for the 2002/03 fiscal year but the expenses will be incurred this year. The IPO is still on track and the actual date will be set by Cabinet taking into regard the market conditions. The Minister for Public Enterprises is responsible for the Telkom IPO and is accountable for the money placed in the budget. The Department of Public Enterprises had not expected that the cost of presenting the IPO to foreign investors would be so expensive. Also many consultants are paid in dollars. A large domestic education campaign was embarked on that was not anticipated earlier.

Mr Andrew asked what the original amount budgeted for the Telkom IPO was. What expenses will be for Telkom's account and for the account of the other shareholders? Who are the government advisors and when were they appointed? He asked this because the impression is given that the advisors were appointed long ago so it is surprising that government is saying that the costs are unexpectedly high.

Mr Naidoo replied that the original amount budgeted for was R76 million. The other shareholders will pay the costs equal to their shareholding. They are STC and Malaysia Telecom. Mr Naidoo did no know when the external advisors were appointed but would find out and get back to the Committee.

Vote 12 – Statistics SA
Mr Andrew referred to the R140 million unforeseeable and unavoidable expenditure. He said that the cost is more than 29% than budgeted for.

Mr Naidoo said that it was a mistake to use the 1996 cost of the census and inflate it to 2001 and therefore there was an underestimate in the budget.

Vote 20 - Defence
Mr Andrew pointed to programme 8 and to the total of R88.2 million. He asked if the R50 million for the participation in the peacekeeping force in the DRC is part of the R88.2 million or if it must still be added. He also questioned the UN paying back R19 million for participation because he thought that the UN pays for South Africa's participation. Mr Andrew also wanted to know what the estimated expenditure is for next financial year to participate in peacekeeping in the DRC.

Mr Naidoo said the R50 million is included. Further, the UN uses a complicated formula to pay back the cost and it is related to the GDP per capita of a country. SA would receive far less than India or Pakistan but the OECD countries do not receive any reimbursement. Cabinet agreed to the involvement in the DRC and also knew the formula that the UN uses.

Vote 22 – Justice and Constitutional Development
Mr Andrew referred to programme 2 under unforeseeable and unavoidable expenditure. He asked what department was responsible for the cost related to the psychiatric observation ordered by courts because it seems that it has been transferred from another department so why does this part of the budget not move with the transfer of function.

Mr Theron indicated that he was not sure but would find out and get back to the Committee.

Ms Hogan suggested that it was the Department of Health.

Vote 27 – Labour
Mr Andrew referred to the skills development levy and wanted to know how much exactly had been spent on training because it looked like a surplus was being built up when actual training was needed.

Mr Naidoo said that he did not know how much had been spent on training. The Department of Labour is in the process of compiling a report on how much was spent.

Mr Andrew commented that it looked like "we are taxing faster than we can spend the money".

Ms Hogan understood the concerns of Mr Andrews but said that the program is a new one and that the start-up costs were huge.

Mr Andrew pointed to the social insurance program and asked why the R605 million for the UIF is an unforeseeable expense because everyone knew for years that UIF was in trouble.

Mr Naidoo explained that the UIF is indebted to the Department of Labour which has been paying UIF benefits. Mr Naidoo’s view was that the Treasury Committee has put up the R605 million to get rid of the debt now because a legislative and administrative framework is being put in place to make the UIF self sufficient in the future.

Dr. Conroy (NNP) asked if the R215 million allocated to the Foreign Service dispensation would be recovered by the income tax that will be paid.

Mr Naidoo replied that civil servants working abroad will earn less but government will have to pay more because of the income tax that the civil servants will have to pay. The money coming back in the form of income tax will be more than the R215 million.

Prof. Turok (ANC) said that he was looking at roll-overs and unspent money but does not know the difference and cannot find an explanation in the text. He wanted to know the difference between the two.

Mt Theron said that there must be a prior commitment to spend the money. The money is then rolled over to honour commitments of the previous year. The unspent funds have not been committed and cannot be rolled over.

Adoption of Adjustments Appropriation Bill
The Adjustments Appropriation Bill was unanimously adopted by first the Portfolio Committee and then the Select Committee on Finance.

The meeting was closed.