Public Finance Management Amendment Bills: response to submissions

Meeting report

The Chairperson said the meeting would be a response by Mr Lees and Mr Cachalia to the public submissions received on the Public Finance Amendment Bills [B41-2018] and [B13-2020].

Mr A Lees (DA) said that he had just received the Parliamentary Legal Services document and he did not get a chance to have a good look at it. Its submission was slightly different from that of National Treasury, although both acknowledged the desirability of the proposals. According to National Treasury, these proposals should not be included as changes to the Act. To his understanding, Parliamentary Legal Services has a different view on the matter.

He asked if it would be possible to get input from both Parliamentary Legal Services and National Treasury. Thereafter he would formulate his comments.

Parliamentary Legal Services input on the two PFMA Bills
Adv Charmaine van der Merwe, Senior Parliamentary Legal Advisor, summarised the National Treasury inputs on the two Private Member Bills. The National Treasury response does not provide the Committee with a final answer. However, there are features of urgency that Treasury felt the Committee needed to be aware of when making a decision on two Private Member Bills and it gave workable solutions for the concerns of the two Bills.

B41-2018 states that there should be an extension of Parliament’s oversight capacity for decisions on granting or refusing guarantees, indemnities, and securities by the Executive.

B13-2020 states that if a government entity cannot submit its annual report or financial statements due to delays, it tables a written explanation for lateness. However, there is no express obligation placed on the executive authority to table these within a specified time period. The Bill gives a time period of 60 days within which these must be tabled after the written explanation for lateness.

National Treasury’s agreed that the "mischief" could be valid and there is a need for transparency and a specified timeframe. However, it was of the view that it should be contained through instructions.

National Treasury’s proposed solution was to use secondary legislation as section 76(4)(g) states that "The National Treasury may make regulations or issue instructions".

Guarantees, indemnities and securities:
There could be a section 76 instruction that requires the Minister of Finance to report on section 70(1) guarantees dealt with, once a quarter; and sets out the details of what should be reported.
The application of the instruction to indemnities and securities to be considered in light of general concurrence the Minister of Finance may grant for these.

Late reports and statements:
There could be a section 76 instruction that gives 60 days to table the instruments after the written explanation is filed. Can be issued by August 2022 or annually. Treasury raised a concern about having a specified time period to submit in the Act, without the option to extend that time period, as it may result in non-compliance if not possible to do so.

Ms van der Merwe noted the importance of the role played by Parliament through its Committees in the development of legislation. She quoted from the judgment of the Mario Oriani-Ambrosini court case explaining the significance of Bills introduced by MPs.

Instead of using primary legislation, Treasury's proposal was for secondary legislation by the Executive. Section 76 of the PFMA does not specifically provide for regulations or instructions to be made on the concern raised by either Bill. She cautioned against this secondary legislation as it would be an omnibus regulatory power delegated to the Minister.

With the adoption of the Constitution, the nation turned to constitutional supremacy instead of parliamentary sovereignty. With parliamentary sovereignty, parliament could delegate the power to amend or appeal an Act to the executive. This is no longer possible because there needs to be compliance with the Constitution. The Constitution gives Parliament plenary / absolute power and requires that the legislation must be prepared in a certain manner.

The Committee needs to consider the progress of Treasury in issuing instructions in response to the proposals as these Bills were tabled in 2018 and 2020. Although Parliament can ask for more information on guarantees, securities and indemnities at any stage, without it being reflected in legislation, why have instructions not been forthcoming? Legislation is one of the ways in which Parliament can strengthen its oversight function by spelling out what is required from the Executive.

In terms of omnibus regulations, the risk would be that the executive may go broader than what was intended by the legislature and tread on the plenary powers of Parliament.

Omnibus regulation clauses such as section 76(4)(g) must be approached with caution as there is a risk of regulations interfering with Parliament’s plenary power. If the instruction is regarded as an amendment to the PFMA as there is currently no provision for such oversight in the Act, it could be seen as interfering with plenary powers. Considering that the purpose of both Bills is to ensure increased oversight by Parliament, allowing the Minister to prescribe how Parliament may do such oversight, could be argued to compromise the principle of delegating plenary power.

The concerns raised by Treasury can be addressed by minor amendments to the two Bills:
[B41-2018]:
• Policy decision: reporting per quarter, or per incident? If the decision is per quarter, the Bill can be amended to reflect that.
• Policy decision: Should reporting only be on guarantees? Should another avenue be provided for securities and indemnities? The Bill can be amended to delete securities and indemnities as a whole, or to provide another avenue.

[B13-2020]:
• Policy decision: Should an institution be afforded more than eight months to submit reports/statements? Or should it be a matter of non-compliance recorded against that institution? If the decision is to allow an extension, the Bill can be amended to add an avenue for extension such as by way of a House resolution following a report tabled by the Minister of Finance.

Policy decisions required:
Does Parliament want increased oversight on decisions taken on guarantees, securities and indemnities?
Does Parliament want tighter controls on the late submission of reports/statements?
If so, would Parliament then not be delegating plenary power if it is left to the Executive to issue an instruction?

National Treasury input on the two PFMA Bills
Adv Empie van Schoor, National Treasury Chief Director: Legislation, said that there are existing powers in the Public Finance Management Act (PFMA) passed by Parliament. It is not a post-Constitution law; however the understanding is that powers should be applied in accordance with the Constitution. The view of the National Treasury was that the Minister or delegate issues the instructions. Another proposed option would be to issue regulations.

National Treasury acknowledges that there is a need to enhance transparency in ensuring that Parliament receives reports and financial statements from the executive. Currently, there is no provision when these should be tabled once a written explanation is provided about a delay. She gave the example of the unrest in the previous year which made it impossible for the timeous tabling of the annual report.

In the case of the guarantees, indemnities and securities, she raised concern about applying the provision widely, because indemnities and securities appear in many commercial contracts for goods and services.

Mr Lees response
Mr Lees thanked National Treasury and Parliamentary Legal Services for their useful inputs which should assist the Committee to make a decision.

Mr Lees noted Adv van der Merwe's comment that the Committee can make the request for this information. He pointed out that from his own experience that information takes a long time to come back and there are no clear answers. This should not be the solution to the mischief.

Using secondary legislation instructions puts this in the hands of the executive / National Treasury and that becomes a challenge because it would be up to it to decide whether to issue the instruction – although there have been obvious cases of mischief. It would be important that each Member accepts that the mischief is real. Parliament should not rely on the executive to make decisions about how the mischief should be dealt with.

He questioned what would happen in six months' time when the executive says these are not appropriate instructions anymore.

Mr Lees suggested that it should reside in the hands of primary legislation. If there are proposed amendments to B41-2018 that would be better, and he would be open to considering those amendments.

He expressed disappointment that National Treasury did not wish to have it in the legislation. There are arguments on why it should not be in the Act but the arguments on why there may be mischief do not exist. He is convinced even more now that it should be a part of the Act and not an instruction or a regulation.

He urged the Committee to either state that it would be going ahead with B41-2018 as it is or it would give National Treasury an opportunity to propose amendments that should be considered.

The Chairperson said that the proposal cannot come from National Treasury because it is the executive and the Bill is a Private Members Bill. The Committee's assistance is from Parliamentary Legal Services. He asked Adv Jenkins to respond.

Parliamentary Legal Services response
Adv Frank Jenkins, Senior Parliamentary Legal Advisor, said that the Committee has the Bill and the proposed amendments to tighten up the Bill. This would be for the Committee to decide and not the political sponsors (with reference to Mr Lees and Mr Cachalia). His team would assist wherever necessary.

In 2009 it was the first time Parliament took a stance on state-owned enterprises and it required that the SOE strategic plan, annual performance plan and budget must come to Parliament prior to approving budgets. The PFMA did not provide for that so there was a gap in fixing that mischief.

The National Development Plan highlights the non-performance of SOEs and their drain on the fiscus. Parliament should not be blindsided by what is happening with guarantees.

From a legal viewpoint remedying the mischief is necessary. There has been a lack of oversight over the SOEs from Parliament, as seen in the Zondo Commission.

Mr Cachalia response
Mr G Cachalia (DA) said that he had received the National Treasury input and he understands the comments made on its willingness to incorporate the proposal into the PFMA. However, the recommendations by National Treasury leave loopholes that the Bill was trying to close.

He was not sure in terms of process what he should do, but he was willing to write a response to the Chairperson. He asked for advice on the matter. If his recommendations are met as proposed, he would be happy for it to be part of the PFMA.

Discussion and way forward
The Chairperson asked for clarity from the Parliamentary Legal Advisors on the amendments that should be made by the Committee.

Adv van der Merwe confirmed that the Bill is now before the Committee and the process is for the Committee to consider the adoption of the motion of desirability on the content of both the Bills.

The Chairperson said that the Committee would meet on 15 June to consider a motion of desirability on both Bills.

Mr I Morolong (ANC) asked if the suggestion is that the Bills be discussed in the current meeting and the 15 June meeting should only be consideration of the motion of desirability.

The Chairperson replied that if there are issues the Member would like to raise, the platform is open. The 15 June meeting would also give an opportunity for Members to raise concerns.

Mr Morolong opted to use the following meeting's platform to raise concerns.

Mr G Skosana (ANC) asked for clarity if the proposed amendments would be covered if they form part of the regulations as opposed to being part of the principal Act.

Ms P Abraham (ANC) said that as the ANC they would like to move towards a motion of desirability. The ANC agrees with the advocacy in saying that it is up to the Committee members to make the necessary amendments as suggested by both Treasury and Parliament.

Meeting adjourned.