2022 Revised Fiscal Framework: Committee Report

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Finance Standing Committee

08 November 2022
Chairperson: Mr M Maswanganyi (ANC) and Co-Chairperson: Mr Y Carrim (ANC, KZN)
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Meeting Summary

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2022 Revised Fiscal Framework and Revenue Proposals

Tabled Committee Report

The Select Committee on Finance and Standing Committee on Finance held a joint meeting to consider the 2022 Revised Fiscal Framework.

Members made a few technical additions. Other additions included an accurate reflection of unemployment and the need for an engendered approach to budgeting. Members agreed that a joint meeting should be held with the Standing Committee on Appropriations, Portfolio Committee on Minerals and Energy and all other relevant persons and entities to be briefed by Eskom on their current challenges.

The DA expressed concern that one of the paragraphs interfered with the mandate of the Committee. The ANC disagreed and pointed out that both National Treasury and the Financial and Fiscal Commission had raised concerns about monetary policy in their submissions to the Committee.

The 2022 Revised Fiscal Framework was adopted with additions and separately by both Committees. The FF+ and DA reserved their positions on the Report.

Meeting report

Chairperson Maswanganyi welcomed the media, stakeholders, and everyone in attendance.

No apologies were received.

The Select Committee on Finance and Standing Committee on Finance were meeting jointly to consider and adopt the 2022 Revised Fiscal Framework.

He indicated that the report would be considered as read and they will focus on the observations and recommendations.

He said that in the future reports would be sent out more timeously to afford Members sufficient time to work through them.

2022 Revised Fiscal Framework

Committee Observations and Recommendations

Chairperson Maswanganyi took the Members through the relevant paragraph and asked for input.

Ms P Abraham (ANC) made the addition to point 7.2 that the unemployment figure of 8 million should actually reflect a total of 12 million unemployed people in South Africa under the expanded definition.

She made a further addition, paragraph 7.1 should state that the Committee recommends that National Treasury (NT) consider the arguments raised by stakeholders regarding the Fiscal Framework. She felt the use of the word some was not necessary. She also added that the fiscal consolidation path of government has been informed by stakeholders since February 2013.

Continuing on 7.1, she made the addition that it was important that this section emphasise the general need to provide economic growth, not just due to requirements of the Fiscal Framework.

On point 7.3, Ms Abraham felt it was unnecessary to include the trade-offs to be made as there was an understanding between NT and stakeholders.

Chairperson Carrim agreed that the point could be excluded if necessary. He felt that the issue was that people advocating for the Basic Income Grant (BIG) failed to take into account the necessary trade-offs. This was a matter that fell under the scope of the Appropriations Committee. For this reason, he felt the issue could still be raised under point 7.3.

Chairperson Maswanganyi asked that the point be drafted in a manner to accommodate both of these views. He said that the matter was raised sharply by NT and the governing party’s social transformation resolution.

Dr D George (DA) said that the DA did not support bailing out of any state-owned enterprises, with regard to point 7.9.

Chairperson Maswanganyi said the matter of Eskom cuts across three committees. He asked Co-Chairperson Carrim whether a joint meeting could be held with the Portfolio Committee on Public Enterprises and the Portfolio Committee on Minerals and Energy on Eskom. Members need to have a better understanding of what the real problem is: is there a power shortage, capacity shortage, or management shortage? He suggested that a full briefing be given in 2023 regarding Eskom’s current status and the challenges faced. It was important to understand given the R400 billion owed by the utility, which threatens the fiscus.

Ms Abraham supported the need for a meeting with Eskom to be informed of their challenges and to get to the bottom of the problem. Otherwise, Members get surprised like the general public.

Mr E Njadu (ANC, Western Cape) concurred that a joint meeting should be held with the National Assembly (NA) and National Council of Provinces (NCOP) on the matter in 2023.

Chairperson Carrim felt it was important to establish clarity on the purpose of the meeting, especially since it involved so many Committees. He asked that the content advisors prepare a brief to inform the other Committees on the framework of the meeting.

He added that it was important for the Standing Committee on Appropriations to be present. He also felt it was important for the respective Ministers of all relevant Committees to be present at the meeting in the first quarter of 2023.

Chairperson Maswanganyi agreed that all relevant entities and persons must be briefed timeously on the importance of the meeting.

Dr George referred to point 7.14 and said he had a problem with the paragraph. He admitted that he was not present when this conversation was had in the Committee regarding the South African Reserve Bank (SARB). It was important to remember that it is independent and focuses on monetary policy whereas the government focuses on fiscal policy. It is not the Committees’ function to interfere with the mandate of the SARB. The SARB has a mandate and has to act on certain things within this mandate. The government’s fiscal response may not be the right one under the circumstances and as was seen in the UK, if something goes terribly wrong fiscally, then the reserve bank does something on its side. It works in that way. In his view, the Committee is outside of its mandate if it wants to engage with SARB on the decisions that it makes and its mandate. He did not think this belongs in the realm of the Committee and it is not a fiscal policy matter.

[Chairperson Carrim chaired the meeting in Chairperson Maswanganyi’s absence]. 

On the same point, Mr D Ryder (DA, Gauteng) said that the November 2021 interest rate in isolation failed to consider the COVID period when rates had a sharp decline. It should be noted that this may well be a correction but it is not the Committee’s space to “dabble in and get involved”.

Mr Ryder further had an issue with the way the matter was introduced to the Committee. It had not been raised by the stakeholders nor was it raised at a time when the Committee could discuss the matter. It was introduced by the Chairperson in his closing remarks. There was an opportunity to discuss it.

He felt that it would be disingenuous to put this forward as the view of the Committee. It was a new idea thrown in at the end. It should be removed from the report and agreed that it would be an overreach of the Committee’s responsibilities. Perhaps a discussion can be held in this regard and the Committee could seek other input.

Ms Abraham agreed that the Committee did not have the capacity to interfere with the Reserve Bank’s mandate. However, fiscal and monetary policies had to be reinforcing and this did not mean that there can not be a discussion with the Reserve Bank. Mr Ryder was correct. The point of the chairperson was to say that the Reserve Bank has to be engaged so that “we are on the same page in terms of saying do we protect the Rand or do we protect the people of this country without really changing what the Reserve Bank wants to do but an engagement because of fiscal and monetary policies”.

Chairperson Carrim said the matter could be deferred when Chairperson Maswanganyi returned and could explain further.

He could not see what was interfering with SARB’s independence. He understood the DA’s view and it was shared by some in the ANC. It was not for Members to get involved in that right now. Nor is it for the ANC to push for a particular position that has not been properly debated. As he knew it, the issue keeps coming up every now and again and the Reserve Bank Governor has been willing to engage. He did not see this as intruding on the Reserve Bank. The fact that it was said at the end of the meeting and it was not discussed did not mean it can not be discussed here. The report is meant to reflect the views of the Committee so if it was not raised by the stakeholders there is no rule that prevents the committee from taking up something that is relevant to the fiscal policy. That issue did not apply and has been done before.

He asked whether there was anything mentioned in the rules about when concerns are raised in the meeting.

Dr Zakhele Hlope, Content Advisor, Standing Committee on Finance, said that on 27 October the issue of tightening monetary policy was also raised by NT. It was mentioned during their presentation that the pace and scale of monetary policy tightening could negatively affect economic output. It was not only raised by Chairperson Maswanganyi but also National Treasury.

Chairperson Carrim deferred the matter for when the Chairperson returned.

The Committee continued going through the observations and recommendations.

On his return, Chairperson Carrim summarised the issues raised in Chairperson Maswanganyi’s absence.

Chairperson Maswanganyi said that the issue had been raised by the Financial and Fiscal Commission (FFC) in their Report concerning the increase of repo and interest rates. He did not feel that the Committee was interfering with SARB operations.

He said that SARB derived its existence and powers from the Constitution. The Constitution also states that SARB should consult with the Member of the Cabinet responsible for national financial matters. Does it mean when the Minister engages with the Reserve Bank he is interfering with it? The Reserve Bank does not operate in isolation from society and government as they are a state organ.

He agreed with the FFC observation that the Committee should be briefed on how monetary policy is decided and the manner they do things, which impacts the economy, especially poor individuals. He said that Committees had a responsibility to voice the concerns of the public.

He explained that the independence of SARB would only be infringed if the Committee were to be involved in the decisions of the Monetary Policy Committee. He said that numerous independent institutions still accounted to Parliament.

He said it was important for the Committee to be informed so that they could explain the matter to their constituencies. He mentioned how previously the Governor explained to the students at WITS regarding the affairs of SARB and rising rates. An impression should not be created that the Reserve Bank is untouchable.  This was not a new issue as it was raised by the FFC.

Chairperson Carrim said the paragraph is fine; however, a paragraph could be crafted to reflect the DA’s position.

Dr George said that the DA would, in any event, reserve their position on the Report.

Ms Abraham made an addition to point 7.16. The paragraph needs to be reworded to say that the Committee notes the concern of certain stakeholders for the need for an engendered approach to budgeting which the 2022 Medium-Term Budget Policy Statement (MTBPS) did not reflect. The stakeholders complained that the MTBPS was not explicit on issues of gender-based violence and that it should be reflected in the Report.

Chairperson Carrim said that the proposed wording should be sent to the Content Advisor. He suggested that it further be added that the Committee recommends that NT in the future reflect gender budgeting across the MTBPS. Gender budgeting used to be brought up in meetings quite often previously.

Ms Abraham said that it should be explicitly stated to NT. On 7.18, she felt that the wording should indicate that there was some lack of understanding of the future of the Gauteng -tolls, as opposed to the word total.

Chairperson Carrim suggested that it be phrased that the Committee was concerned that there appears to be inadequate understanding.

Ms Abraham referred to 7.21 and proposed that the point be removed completely. However, she said that if the Committee felt strongly they could recommend that NT consult stakeholders occasionally. She felt that the point implies that only the concerns of HEALA have been noted by the Committee, which would be unfair to other stakeholders.

Chairperson said that HEALA was mentioned specifically as they wrote to NT and failed to receive a reply. The Committee then asked NT to meet HEALA on this specific issue which was later completed.

He agreed that the implication of point 7.21 is damaging and should be changed to avoid indicating biases. It should rather reflect the work done by NT with HEALA on this specific issue.

Ms Abraham agreed with Chairperson Carrim. She said that it was not the best way to end the Committee Recommendations by spotlighting one particular stakeholder.

Mr I Morolong (ANC) agreed strongly that no particular interventions with stakeholders should be singled out. This would set a precedent of interventions for all stakeholders being spotlighted in the reports.

Chairperson felt it was important as it showed successful follow-through of interventions. However, he conceded his point.

Standing Committee on Finance Report Adoption

Chairperson Maswanganyi asked the Committee to move for the adoption of the 2022 Revised Fiscal Framework.

Mr Morolong moved for its adoption.

Ms M Mabeletsa (ANC) seconded the adoption.

Dr George said that the DA reserved their position on the Report.

Mr W Wessels (FF+) said that the FF+ also reserved their position.

The report was adopted with amendments by the NA.

Read:

ATC221108: Report of the Standing Committee on Finance on the 2022 Revised and Proposed Fiscal Framework, Dated 08 November 2022

 

Select Committee on Finance Report Adoption

Chairperson Carim asked the Select Committee to move for the adoption of the Report.

Mr Njadu moved for the adoption of the Report.

Ms M Mamarengane (ANC, Limpopo) seconded the adoption.

Mr Ryder said that the DA reserved their position on the Report.

Mr S Du Toit (FF+, North West) said that the FF+ also reserved their position.

The 2022 Revised Fiscal Framework was adopted by the NCOP.

Read: ATC221108: Report of the Select Committee on Finance on the 2022 Revised and Proposed Fiscal Framework, Dated 08 November 2022

The meeting was adjourned.

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